Atty. Rolando P. Navarro

July 26, 1988 Atty. Rolando P. Navarro Chemical Industries of the Philippines Chemphil Building, 851 Pasay Road Legaspi Village, Makati Sir : This refers to your letter dated June 21, 1988, requesting for opinion on the query posed therein. LLpr It appears that Chemical Industries of the Philippines, Inc. (CIP) is a holding and management company, owning shares of stocks in various subsidiaries. In a meeting held last year, the Board of Directors authorized either the Chairman of the Board or the President of the company to represent and vote the shares of stock of the company in the election of Directors in its various subsidiaries. Lately, certain stockholders would like to have the shares voted by the stockholders themselves. Your query is whether the Board of Directors is empowered to authorize the stockholders to vote in proportion to their respective shareholdings for the sole purpose of electing the directors of CIP subsidiaries. By virtue of statute in many jurisdictions, which generally follow the Model Business Corporation Act, shares standing in the name of another corporation whether domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such other corporation may prescribe or, in the absence of a by-laws provisions, as its board of directors may determine .(5 Fletcher Cyclopedia Corporations, Ch. 13, Sec 2040, 1976 Revised Volume, p. 172). A perusal of the By-laws of Chemical Industries of the Philippines failed to show any provision relative thereto. Considering the foregoing and it appearing that the by-laws of subject corporation do not contain any provision on the matter, the Board of Directors may, if it so desires, authorize the stockholders of the company to vote for and in behalf of the corporation. Hence, your query is answered in the affirmative, subject, however, to the provisions of the by-laws of the respective subsidiary corporations relative to proxy or representative voting. It is a well settled rule that the by-laws would be controlling insofar as the form of proxy and manner of voting of the company is concerned. LLjur Incidentally, it has to be emphasized that the authority granted to the stockholders to vote the stocks would in no way qualify anyone of them as eligible for membership in the Board. Under Section 23 of the Corporation Code, "every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation." Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman