Iñaki Mendezona

April 18, 1985 Iaki Mendezona Vice President Siari Valley Estate, Inc. Siari, Sindangan Zamboanga del Norte Sir : This relates to your letters dated March 4 and 26, 1985, requesting the ruling of this Commission on the queries posed therein. cdlex It appears therein that on June 25, 1984, a stockholders' meeting of Siari Valley Estates, Inc. was held wherein the following were elected to the board of directors, namely: Hilda Puth, George Puth, Vicky Ysasi, John Mendezona, and yourself. Subsequently, on June 29, 1984, an organizational meeting of the board of directors was held; electing the following, among others, as officers: President and Chief Executive Officer Hilda Puth; and yourself as Vice President. You alleged in your letter that Hilda Puth is an American citizen and permanently resides in the United States, consequently, since her election as president, she has failed to effectively discharge the duties, responsibilities and functions of her office to the detriment of the company. Hence, your queries are: May a non-resident alien be elected as president and chief executive officer of a corporation engaged in agricultural activities? May the Vice President assume and discharge the functions of the President in her absence or inability to act as such? A perusal of the amended articles of incorporation of Siari Valley Estates, Inc.,on file in this Commission, shows that subject corporation was organized for the purpose of engaging in "agriculture, planting, cultivating, producing, and harvesting coconuts, corn, and other crops as well as the breeding of cattle, carabaos, horses and other animals, and the marketing of the same. In this connection, Section 9, Article XIV of the New * Philippine Constitution provides, thus: "The disposition, exploration, development exploitation, or utilization of any of the natural resources of the Philippines shall be limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens ...." The Commission, on several occasions, has ruled that "In firms engaged in wholly or partially nationalized activities, aliens are banned from being appointed to management positions as president, vice-president, treasurer, auditor, etc., of the same companies pursuant to a ruling of the Ministry of Justice, although they can be elected directors in proportion to their allowable participation or share in the capital of such activities in accordance with the Anti-Dummy Law, as amended by Presidential Decree No. 715". Corporations engaged in partially nationalized activities, which include agriculture, are those organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines. (Letters to Judge Pio Marcos & Associates, and Ulrich Volkel ,dated July 01, 1983 and June 14, 1982, respectively.) In reply therefore to your first query, the Commission hereby reiterates its previous ruling that a non-resident alien cannot be elected as president of a corporation engaged in wholly or partially nationalized activities. Anent your second query, please be informed that "as a general rule, in the absence of the President, or if the office of the president becomes vacant, the vice-president, if one has been elected or appointed by the shareholders or directors, has authority to act in his stead, or to perform any duties of the office." (Ballantine on Corporations, sec. 53, at 142, citing Smith v. Smith, 62 Ill. 493). Likewise, the by-laws ordinarily assign to the vice-president or vice-presidents the duty of succession to the chief executive officership in the absence or disability of the president or the chairman of the board and such other duties as the board may assign. (Ballantine & Sterling, California Corporation Laws, 1982 ed.,Vol. 1, sec. 88.03 at 5-42). Conformably thereto, Section 15, Article VIII of the by-laws of Siari Valley Estates, Inc. is quoted hereunder: "SECTION 15. Vice-President's Duties : (a) ... (b) He shall, in the absence of the President or his inability to act, have such duties of the President as are prescribed by these by-laws." Accordingly, our ruling on your second query is in the affirmative. Please be guided accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .