Eastern Rizal-Laguna Investors League

June 13, 1991 Eastern Rizal-Laguna Investors League c/o Camacho Law Office 40 Sampaguita Street De Castro Subdivision Ortigas Avenue Extension Pasig, Metro Manila Gentlemen : This refers to your letter dated May 6, 1991, requesting confirmation of the following: cdll a) That the total yearly compensation of directors mentioned in Section 30 of the Corporation Code is not meant to include per diems; and b) That in any case, the ceiling provided for therein can be exceeded upon the unanimous votes of holders of all the outstanding shares of stock of the corporation. "Per diems" are allowances of money for expenses each day. (Webster Comprehensive Dictionary International Edition 1987) The term "per diem" is limited to pay for a day's services. (32 Words & Phrases, p. 17) On the other hand, the word "compensation" does not imply an immediate payment, an immediate or direct return, nor the payment of cash fare or its equivalent. (15 C.J.S. 652) Likewise, a reading of the Batasan proceedings on Section 30 of the Corporation Code shows that the terms "salary" and "compensation" were treated as synonymous and used interchangeably, and while "salary" connotes a fixed compensation, "per diems" relates to expense reimbursement. (SEC Opinion dated December 8, 1987) Thus, under Section 30 of the Corporation Code, "per diems" have been excluded from the coverage of compensation. The Law provides: "SECTION 30. Compensation of directors . In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation, as such directors, except for reasonable per diems :Provided, however, That any such compensation ( other than per diems ) may be granted to directors by the vote of the stockholders representing at least a majority of the outstanding capital stock at a regular or special meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) per cent of the net income before income tax of the corporation during the preceding year." (Emphasis supplied) The express exception in the above provision clarifies the intention of the law that "per diems" are not included in the limitation clause of yearly compensation of directors. It is a rule in the interpretation of statute that the appropriate and natural office of the exception is to exempt something from the scope of the general words of a statute which would otherwise be within the scope and meaning of such general words. However, there is a limitation that "per diems" must be reasonable .Thus, stockholders may review such board resolution fixing or increasing per diems of the members of the Board and may inquire into its reasonableness, and if found excessive, to afford adequate relief therefrom. Anent the second issue, the phrase "in no case shall ...exceed ..." in the above-cited provision connotes that the 10% limitation on the amount of compensation of directors does not admit an exception. The limitation is intended for the protection not only of the stockholders but also for the corporate creditors and prospective investors. Hence, the same should be strictly observed. In connection with your request for certified copies of the latest amended articles of incorporation and amended by-laws of the Rural Bank of Majayjay, Inc.,please come to the Records Division, Administrative and Finance Department, of the Commission for the filling up of the prescribed application form and the payment of the necessary fees therefor. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman