Mr. Agustin N. Tanco

June 21, 1985 Mr. Agustin N. Tanco 4842 Valenzuela cor. V. Mapa Sts. Sta. Mesa, Manila Sir : This refers to your letter dated June 14, 1985 requesting opinion on the queries posed therein. It appears that Overland Hosiery Mills, Inc. is a corporation which has not been in operation for sometime due to the absence of its directors and one of its principal stockholders, Mr. Kim Ka Ping. Among its nine (9) members of the Board of Directors only five (5) are in the Philippines and they are willing to resume operations of the corporation. Your queries are: 1. May the five (5) members of the Board convene a meeting to reorganize and appoint a new Chairman of the Board; 2. If in the affirmative, can the number of the members of the Board be reduced from nine (9) to five (5); 3. May the acts of the said reorganized board be deemed valid, binding and legal for all purposes and be recognized as such by the succeeding boards. Generally, there must be an annual election of directors and officers. However, in case of failure of the corporation to elect new set of directors due to any justifiable reason, the incumbent Board may hold over their office until their successors are duly elected and qualified in accordance with Section 23 of the Corporation Code. Said Section provides: "SECTION 23. The Board of Directors or Trustees . ...who shall hold office for one year and until their successors are elected and qualified" Since hold over of positions of directors are allowed under the said provision of the law, the Board may reorganize by the election of new set of officers provided majority of all the members of the Board concur as required under Section 25 of the Corporation Code. llcd Thus, subject to the foregoing conditions, query No. 1 is legally feasible. As regards your second query, in order to legally effect the decrease in the number of board of directors, Section 16 of the Corporation Code must be complied with. The law provides: "SECTION 16. Amendment of articles of incorporation . Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code, or the vote or written assent of two-thirds (2/3) of the members if it be a non-stock corporation. The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Such articles of incorporation shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees stating the fact that said amendment or amendments have been duly approved by the required vote of the stockholders or members, shall be submitted to the Securities and Exchange Commission. The amendment shall take effect upon its approval by the Securities and Exchange Commission or from the date of filing with the said Commission if not acted upon within six (6) months from the date of filing for a cause not attributable to the corporation." (emphasis supplied) Regarding your last query, subject to the aforementioned requirements of law, the acts to be done by the reorganized board may be considered as valid and binding. Please be guided accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman