Atty. Maria Concepcion A.B. Uson-Noel

August 30, 1994 Atty. Maria Concepcion A.B. Uson-Noel Yulo Torres Tarriela & Bello Law Offices 8th Flr.,Strata 200 Bldg.,Emerald Ave., Ortigas Center Pasig, Metro Manila M a d a m : This refers to your letter of August 22, 1994 which was received by the Commission on August 26, 1994 requesting information on the issues raised therein relative to the proposed increase of proprietary regular membership of Canlubang Golf and Country Club, Inc.. As stated, subject corporation was organized as a non-stock, non-profit corporation in 1976. Its Articles of Incorporation provides that the proprietary membership in the corporation shall be divided into Founder Members and Regular Members. Its proprietary membership is divided into TWO HUNDRED (200) FOUNDER MEMBERSHIP and ONE THOUSAND (1,000) REGULAR MEMBERSHIP. The Board of Directors of the Club desires to increase the regular membership from 1,000 to 1,200 and the proceeds of the proposed 200 new membership will be used to finance the ongoing renovations of the Club. In connection with the foregoing proposed transaction, the following issues arose: (1) Whether or not the 25% subscription and 25% paid-up requirements for increase in authorized capital stock also apply to the proposed increase in regular membership; (2) Whether or not the existing members have a pre-emptive right to the proposed increase and issuance of membership certificates; (3) Whether or not the 2/3 conformity of members to the amendment of the Articles of Incorporation should be based on the general membership at large or only the active and non-delinquent members of the Club. (4) Whether or not the increase/new issuance should be registered under the Revised Securities Act. Please be advised that the 25% subscription and 25% paid-up capital requirement for increase in the authorized capital stock under Section 38 of the Corporation Code and the pre-emptive right granted under Section 39 thereof are applicable only to stock corporations. Relative to your third query, while Section 6 of the Corporation Code allows non-voting shares to vote on corporate transactions enumerated therein, which include among others, amendment of articles of incorporation, said provision does not apply to non-stock corporations. The Corporation Code has a separate provision relative to the right of the members of non-stock corporations to vote on corporate matters. The pertinent provision of the Corporation Code provides in part, thus: "SECTION 89. Right to vote . The right of the members of any class or classes to vote may be limited , broadened or denied to the extent specified in the articles of incorporation or the by-laws . Unless so limited, broadened or denied, each member; regardless of class, shall be entitled to one vote . ...." (Emphasis supplied) Anent your fourth query, the Revised Securities Act is explicit that no securities, except under any of the provisions of Section 5 thereof or unless sold in any transaction exempt under any of the provisions of Section 6 thereof, shall be sold or offered for sale or distribution to the public within the Philippines unless such securities have been registered and permitted to be sold as provided therein. Likewise, the SEC Rules on Registration and Sale of Proprietary Rights in Golf Courses and Clubs, Resort Facilities and Similar Projects provided that no contracts involving the sale of proprietary rights shall be sold to the public, that is, to twenty (20) or more persons, unless they are first registered with, and/or licensed by the Commission, except when exempted under Section 3 thereof. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner