Mr. Carlos S. Nocon

November 23, 1992 Mr. Carlos S. Nocon Emerald Square Builders Corporation 11 Kanlaon Street, Sta. Mesa Heights Quezon City S i r : This refers to your letter of November 19, 1992 requesting opinion on the queries posed therein summarized as follows: 1. Can a stockholder assign a share to a nominee for purposes of qualifying the latter for the election of the Board of Directors without violating the "right of first refusal" provision in the Articles of Incorporation? 2. Is it a requirement for a qualified nominee to be physically present during the stockholder's meeting to be elected as director? Relative to the first query, the Commission on several occasions has opined that if the purpose of the transfer of stock is only to qualify the transferee for the election in the Board of Directors without giving him the beneficial ownership thereof, the transfer is not violative of the transfer restriction clause in the articles of incorporation. Said transfer would be more of a "trust" and not a transfer of "ownership", hence, the beneficial interest in such share will remain with the assignor while the assignee will hold only the legal title to the stock. (SEC Opinion dated March 5, 1980, citing Fisher, the Philippine Law of Stock Corporations, p. 234; Letter to PEFTOK Integrated Services, Inc. dated February 12, 1985 ; Letter to Atty. Victor Africa dated May 21, 1991 ) In this case, the transferee should be described in the Deed of Assignment, corporate books and certificate of stock to be issued merely as qualifying shareholder of nominee of the transferor. The fact that the stock standing on the corporate books is in the name of the person only as a qualifying shareholder or that the holder of the stock certificate is described merely as nominee serves as a notice to the corporation and third parties that the holder thereof does not hold the share in his own right, but holds it only as a nominee for the benefit of the real owner. Anent the second query, 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. Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation . Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. Trustees of non-stock corporations must be members thereof. A majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines. (Emphasis supplied) It appears from the aforecited provision that the only qualification prescribed for a director under the Corporation Code is that he should appear as a stockholder in the books of the corporation. The Code does not require that he must be physically present at the time of his election. Thus, if the by-laws of the corporation carry no special qualification or requirement for the election of directors, to be eligible, the candidate shall only meet the above qualification prescribed by the Corporation Code. Hence, a stockholder who is absent may be nominated and elected as member of the Board of Directors. However, it has to be emphasized that under Section 25 of the Code, "Directors cannot attend or vote by proxy at board meetings". Accordingly, it is a requirement for the elected directors to attend and vote in person. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman