Ms. Ross S. Tipon

March 10, 1997 Ms. Ross S. Tipon Center for Corporate Democracy P.O. Box 1586 Baguio City M a d a m : This refers to your letter dated February 17, 1997 relative to Philex Mining Corporation questioning certain corporate transactions mentioned therein. LibLex It is well-settled that the Board of Directors is the governing body of the corporation with whom the management of the corporate affairs is vested. Section 23 of the Corporation Code provides: "SECTION 23. The board of directors or trustees . Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks or where there is no stock from among the members of the corporation, who shall hold office for one (1) year and until their successors are elected and qualified." (Emphasis supplied) It is thus within the duty and power of the Board to administer and manage the corporate affairs. Accordingly, in the absence of fraud, bad faith or negligence, so gross as to amount to a breach of trust, the stockholders/members cannot interfere with the exercise of corporate judgment by the Board relating to the management of the corporation .The Board has the power to bind the corporation by any contract which in its judgment is necessary or proper in order to carry out the purposes for which the corporation was created, and generally, to do or authorize any act which falls within what may properly be regarded as part of the management of corporate affairs without consulting with or obtaining consent of the stockholders/members. The dealings of the Board may be subjected to review and scrutiny only when the corporation's or stockholders' interests are prejudiced. However ,it is to be emphasized that the management powers conferred upon the board of directors usually refer only to the ordinary corporate transactions of the corporation and does not extend beyond the management of ordinary corporate affairs nor beyond the limits of its authority. There are some powers which are reserved to the shareholders/members and which cannot be exercised solely by the directors until they are approved or ratified by the stockholders/members. Thus, while the performance of the corporate functions pertaining to the management of the corporation is vested upon the Board of Directors. The Corporation Code has expressly restricted such Board authority and made certain corporate actions to rest for their validity upon the concurrence of the required statutory votes of the stockholders/members by prior action or subsequent ratification such, as: Amendments to the Articles of Incorporation (Section 16); Adoption of new amendments or repeal of by-laws (Sec. 48); Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate assets (Sec. 40); Investment of corporate funds in another corporation business or for any purpose other than the primary purpose (Sec. 42); However of the corporation to enter management contract with another corporation (Sec. 44); Incurring, creating or increasing bonded indebtedness (Sec. 38); Merger or consolidation of the corporation with other corporations (Sec. 76); Dissolution of the corporation (Secs. 118-120). Further, under Sections 74 and 75 of the Corporation Code a stockholder of a corporation has the right to inspect the corporate books and records and/or request for copies of financial statements. This right is based on the principle that a stockholder has the right to be fully informed as to the status and condition of the corporation, the manner its affairs are conducted, and how its capital to which they have contributed is employed or managed. However, the exercise of the right of inspection of corporate books and records should be for a legitimate purpose .In the event the exercise of the above right is wrongfully denied to the person entitled thereto, he may enforce his right by filing with the Commission a petition for a writ of mandamus to compel the officer having charge of the above-mentioned corporate documents to permit him an inspection, or in proper case maintain an action for damages which he may have sustained thereby. Any grievance or complaint of any irregularity committed by the directors or officers in the exercise of their functions may be filed by the aggrieved or interested party with the Securities Investigation and Clearing Department of this Commission pursuant to the provisions of PD 902-A as amended, and the Revised Rules of Procedure in the Securities and Exchange Commission . Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Chairman