Mr. Geminiano R. Pineda

June 10, 1992 Mr. Geminiano R. Pineda San Miguel Corporation Employees Savings and Loan Association Third Floor 3D Montepino Building corner Amorsolo & Gamboa Streets Legaspi Village, Makati, M.M. S i r : This refers to your letter of June 8, 1992 requesting opinion on the queries posed therein. As stated, on January 10 & 30, 1990 ,the amendment of Article VI of the Articles of Incorporation of San Miguel Corporation Employees Savings and Loan Association was approved by the Board and stockholders, respectively, reducing the membership in the board of directors from seven (7) to six (6).On June 18, 1990 ,the amendments to the Articles of Incorporation and by-laws of the corporation was filed with the Central Bank pursuant to its directive that it must first be filed with CB and upon approval, it will endorse the same to the Securities and Exchange Commission. Up to now, the amendment has not been approved by the Central Bank for endorsement to the Securities and Exchange Commission. Your queries are: 1. Can the amendment be considered approved pursuant to the third paragraph of Section 16 of the Corporation Code? 2. Is the corporation legally mandated to elect the number of directors as provided for in the articles of incorporation or can a lesser number be elected without violating any provision of the Corporation Code? 3. If the corporation decided to elect seven (7) directors in its annual meeting of January 30, 1990, inspite of the approval by the members of the reduction of directors from seven (7) to six (6),is there any violation? Section 16, paragraph 3 of the Corporation Code provides: "The amendments 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 Commission. (Emphasis supplied) It is clear from the above provision that the six months period shall be counted from the date of filing with the SEC. Thus, if the amended articles of incorporation has not yet been filed with the Commission, the corporation cannot claim that the amendment is already effective by virtue thereof. llcd In connection with your second query, the number of directors that a corporation can legally have is that which is fixed in the articles of incorporation. Any decrease thereof can be effected only by amending the articles of incorporation pursuant to Section 16 of the Corporation Code. As to the effect of an election of less than the required number of directors, cited hereunder is a previous ruling which establishes a precedent on the matter: "An election of a less number of directors than the number which the meeting was called to elect is valid as to those actually elected." (In re: Excelsior Ins. Co.,38 Barb. 297; In re: Union Insurance Co.,22 Wend. 591, cited in 2 Fletcher, Cyc. Corp. 1969 Rev. Vol. sec. 291, p. 77) Thus the stockholders or members of a corporation may opt to elect a number of directors less than the number of directors as fixed in the articles of incorporation. Such a situation would merely give rise to vacancy in the board, which may be filled up in a subsequent special meeting duly called for the purpose. "The general rule is well-settled that the power of the board is not suspended by vacancies in the board unless the number is reduced below a quorum." (Fletcher, sec. 421, citing Porter v. Lassen Country Land & Cattle Co.,127 Cal 261, 59 p. 563).In a similar case, the Court likewise held that "if a certain number of directors is provided for by statute or the articles of incorporation, the failure of the stockholders to fill all the directorship does not invalidate the title of the directors who are elected or prevent them from legally representing the corporation so long as they constitute a quorum ." (Great Falls & T.C.R. Co. v. Ganong, 48 Mont. 54, 136 p. 390 cited in Fletcher, sec. 421, p. 270) Anent your third query, since the reduction of the number of the board from seven (7) to six (6) is not yet legally effective, the election of the seventh director may be deemed valid. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman