Atty. A.C. Jarabata

July 31, 2002 SEC OPINION Atty. A.C. Jarabata Suite 101 Entrepreneur Center No. 2, Sampaloc Street, Gate 1 St. Anthony Subdivision, Ortigas Ave.,Cainta, Rizal S i r : This refers to your letter dated April 9, 2002 requesting that the opinion to disapprove the proposed amendment of Composite Wings savings and Loan Association, Inc. be set aside and a decision be rendered approving the proposed amendment quoted as follows: ARTICLE XVII. Amendment of By-laws. "Sec. 1. This By-laws may be amended by the affirmative vote of at least 2/3 of all the Directors in a general or special meeting, which may be called for the purpose." The issue raised at this instance calls for the application of the pertinent provision of the Corporation Code which reads and we quote: "SEC. 48. Amendments to by-laws. The board of directors or trustees, by a majority vote thereof, and the owners of at least a majority of the outstanding capital stock, or at least a majority of the members of a non-stock corporation, at a regular or special meeting duly called for the purpose, may amend or repeal any by-laws or adopt new by-laws. The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a non-stock corporation may delegate to the board of directors or trustees the power to amend or repeal any by-laws or adopt new by-laws; Provided, That any power delegated to the board of directors or trustees to amend or repeal any by-laws or adopt new by-laws shall be considered as revoked whenever stockholders owning or representing a majority of the outstanding capital stock or a majority of the members in non-stock corporations, shall so vote at a regular or special meeting. Whenever any amendment or new by-laws are adopted, such amendment or new by-laws shall be attached to the original by-laws in the office of the corporation, and a copy thereof, duly certified under oath by the corporate secretary and a majority of the directors or trustees, shall be filed with the Securities and Exchange Commission, the same to be attached to the original articles of incorporation and original by-laws. The amended or new by-laws shall only be effective upon the issuance by the Securities and Exchange Commission of a certification that the same are not inconsistent with this Code. (22a and 23a)." Equally applicable is the pronouncement in SEC Opinion dated October 25, 1965 cited in De Leon, The Corporation C od e of the Philippines, Annotated, p. 398) reading: "The delegation to the board of directors (or trustees) of the power to amend, alter or repeal by-laws or adopt new by-laws should not be embodied in the by-laws, but merely in a resolution adopted by 2/3 of the outstanding capital stock or of the members. This is for the reason that the delegated authority is temporary in nature and may be revoked anytime by a majority vote. Accordingly, if the power is provided in the by-laws, the power delegated may have been revoked already, but may still appear therein until the corresponding amendment is filed with the Securities and Exchange Commission." Applying the aforequoted provision and ruling, the Commission does not question the authority of the 2/3 of the members to delegate to the board of directors the power to amend or repeal any by-laws or adopt new by-laws. What is not allowable under the situation is the inclusion of the very provision on the delegated power in the by-laws. As aptly observed in the opinion cited, the delegated authority, being transitory in nature, may be revoked anytime by a majority vote of the members which may not be reflected in the by-laws until the corresponding amendment of the proviso has been effected. To do otherwise would render the very intention of the Corporation Code of the Philippines absurd. Hence, for practical consideration such a provision should not be embodied in the by-laws but only in a resolution adopted by 2/3 votes of the members in a meeting. Therefore, your request that the original opinion be altered/modified or set aside is consequently denied. Very truly yours, (SGD.) JESUS ENRIQUE G. MARTINEZ Commissioner