Mr. Dominador K. Lopez

March 16, 1993 Mr. Dominador K. Lopez 12 Libertad Street Bacolod City S i r : This refers to your letter of February 22, 1993 requesting opinion on the queries posed therein. dctai As stated, the 1986 By-laws of PPSTA provides the following: ARTICLE VI BOARD OF DIRECTORS: "SECTION 4. The elected members of the Board of Directors shall have a term of two (2) years, or until their successors shall have been elected and qualified . All regular and life members in good standing shall be eligible for Board members, PROVIDED, HOWEVER, That no person may be elected to the Board of Directors as representative of a region, for more than two (2) terms, whether consecutive or otherwise ." ARTICLE IX BOARD OF VISITORS: SECTION 5. The members of the Board of Visitors shall have the same qualification and terms of office as well as causes and manner of removal or replacement as the Board of Directors, provided, That the same person may serve for no more than two (2) terms in aggregate as member of the Board of Directors and Board of Visitors. LexLib The members of incumbent Board of Directors/Visitors were elected in June, 1986, one for each of the thirteen (13) administrative regions, by the Regional Representative Assembly of each region (Article V, Sec. 3). Their first two (2)-year term expired in June, 1988. However, against the will of their respective regional association and in violation of the By-laws (Article V, Sec. 3), they refused and did not hold the regular Board elections in "April" 1988, 1990 and even in April, 1992 (after the effectivity of RA No. 7172 which repealed LOI No. 860) despite the fact that they are no longer vested with the mandate and authority of their respective constituents of their regional associations. In effect, they re-elected themselves in April, 1988, 1990 and 1992. They are, therefore, holding their positions, illegally. They have served the equivalent or in aggregate of more than three (3) terms, or more than six (6) years, consecutive or otherwise. QUESTIONS: 1. Is the extended period of more than six (6) years as of this date and more than two (2) terms still covered or justifiable under the provision "until their successors shall have been elected and qualified?" 2. Are the incumbent Board of Directors, under the foregoing By-law provisions, still qualified to run for re-election in the forthcoming election of the Board of Directors under the present 1986 PPSTA By-laws? 3. Can an amended or new By-laws be effected and implemented even without the benefit of its registration/and certification by the Securities and Exchange Commission? Please be advised that the Commission does not, as a matter of settled policy, render opinions on queries based on allegations involving justiciable issues which could only be clarified and determined in a proper proceeding, such as those presented in your letter. The opinion which may be rendered thereon would not be binding upon private parties who would, in all probability, if the opinion happens to be adverse to their interest, take issue therewith and contest it before the Court. For this reason, the Commission refrains from giving categorical answers to your first and second queries so that it will not be estopped to decide on the issues raised therein if brought before it in a proper proceeding. However, for purposes of information only, the following may be imparted. LLphil The general rule is that, there must be an election of directors on the date fixed in the by-laws. However, in case of failure of the corporation to hold a regular election, the incumbent members of the board may hold-over their office and continue their functions until their successors are duly elected and qualified. This hold-over principle is sanctioned under Section 23 of the Corporation Code. However, it has to be emphasized that hold-over is a situation that arises only when no successors are elected due to valid and justifiable reasons. The regular election of directors as stated in the By-laws cannot be dispensed with by the board or officers in order to extend their term of office. Thus, if you feel you have a cause of action against the corporation, its officers or directors you may file a verified complaint with the Securities Investigation and Clearing Department of this Commission pursuant to P.D. 902-A, as amended, which provides: "SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: xxx xxx xxx (c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations . xxx xxx xxx" (Emphasis supplied) Relative to your third query, the pertinent provision of the Corporation Code provides in part: "SECTION 48. Amendment of by-laws . . . . The amended or new by-laws shall only be effective upon the issuance by the Securities and Exchange Commission of a certification that the same are not inconsistent with this Code." (Emphasis supplied) It is clear from the aforecited provision that amendments to the by-laws shall be effective only upon approval by the Commission. Accordingly, your third query is answered in the negative. LibLex Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman