Polyphosphates, Inc.

April 25, 1985 Polyphosphates, Inc. c/o Atty. Rolando P. Navarro Chemphil Building 851 Pasay Road, Makati Metro Manila Gentlemen: This refers to your letter dated April 10, 1985 inquiring as to whether the proposal for an alternate director as mentioned therein is legally feasible. It appears that the Board of Directors of Polyphosphates, Inc. is composed of eleven (11) members, four (4) of which are nominees of Albright & Wilson (A & W),a company incorporated in the United Kingdom, which owns 40% of the company's equity. Because of the difficulty of securing the attendance in Board meetings of all A & W Directors, their Head Office in London is proposing that an officer of their subsidiary based in Singapore be elected as an alternate director in replacement of any one of the 4 directors who fails to attend a meeting , and that the absent director shall forthwith be considered resigned in that particular meeting. It was likewise proposed that the newly elected alternate director be considered resigned in the subsequent meeting should the director who was earlier replaced shall be elected in a subsequent meeting. You would like to know if the foregoing arrangement can legally be done in the light of Section 29 of the Corporation Code. The Corporation Code provides: cdlex "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 ." ...(emphasis supplied) The Board of Directors, therefore, is the governing body of the corporation with whom the management of the corporation is vested, and on account of their responsibility, they are supposed to exercise their own judgment and discretion in running the affairs of the corporation. Therefore, they cannot be substituted by others. Likewise, the pertinent provision of Section 25 of the Corporation Code provides, thus: xxx xxx xxx "Directors or trustees cannot attend or vote by proxy at board meetings." Accordingly, it is a requirement for directors to attend and vote in person . They or anyone of them can only be replaced during their term upon their resignation or removal or when their positions are otherwise lawfully vacated. It is to be noted that "temporary absence" does not result to "vacancy" as contemplated under Section 29 of the Corporation Code. Thus, the Commission, in a previous opinion, has ruled that: "No one can be elected to take the place of an incumbent director, even as an alternate, in the absence of any vacancy. To allow such an alternate, would be to have two directors for the same position, one permanent and the other temporary, a situation that the law does not permit." ( SEC Opinion dated October 5, 1960 ) In view thereof, your proposal is not legally feasible. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman