Mr. Roger G. Mercado

July 8, 1993 Mr. Roger G. Mercado House of Representatives Quezon City, Metro Manila S i r : This refers to your letter requesting comments on the following House Bills: 1. H.B. No. 9141, entitled: An Act Amending Section 12 and 65 of Republic Act No. 6657 Otherwise Known As The Comprehensive Agrarian Reform Law of 1988 and For Other Purposes. 2. H.B. No. 2941, entitled: An Act Exempting Lands Actually Cultivated By Religious Associations Or Denominations Living and Working Together in Communities From The Coverage Of The Comprehensive Agrarian Reform Law, Amending For The Purpose Republic Act No. 6657, entitled "An Act Instituting A Comprehensive Agrarian Reform Program to Promote Social Justice And Industrialization, Providing The Mechanism For Its Implementation, And For Other Purposes." Regarding House Bill No. 9149, hereunder are our comments: 1. No . 2 of Sec . 2 (Sec . 65) Representation in the Board by the beneficiaries appears to be automatic. In this connection, it is worth mentioning that automatic membership in the Board of private stock corporation is not allowed. It is always subject to election by the stockholders and it is mandatory that election of the Board shall be held annually. Thus, if the land referred to in the Bill is converted into a corporation organized under the general law on corporations, the Corporation Code, all its corporate transactions, including the election of directors/officers shall be governed by the latter law. It is, therefore, suggested that the proposed amendments be modified to conform with the foregoing settled principles on corporate practice. 2. No . 3 of Sec . 2 (Sec . 65) It is well-settled in corporate jurisprudence that a corporation has a personality separate and distinct from that of each shareholder. This is an attribute or privilege most characteristics of a corporation. It means that the stockholders of a corporation are different from the corporation itself. Consequently, the corporate property is owned by the corporation as a distinct legal person, and the stockholder have only an indirect interest in the assets and business. For that matter, the property belonging to a corporation cannot be attached nor held answerable for the debts of a stockholder thereof. (Wise & Co., Inc. vs. Man Sun Long, G.R. No. 46997, Enero 11, 1940, 69 Phil. 309) Otherwise stated, the debt of a stockholder is not the debt of the corporation of which he is a stockholder; and conversely, the debt of the corporation is not the debt of any of its stockholders. Accordingly, a corporation cannot assume the obligations of stockholders. Moreover, there is no assurance that the corporation will be always earning. and if ever there are profits, the same do not belong to the stockholders of the corporation, unless they are actually received by them in the form of dividends declared after complying with the statutory requirements for declaration of dividends. Relative to H.B. No. 2941, the Commission need not comment thereon, it appearing that the subject matter treated in the amendment merely involves additional exception of CARP coverage of which the Commission has no jurisdiction. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman