Mr. Greg Post

June 3, 1998 Mr. Greg Post Infocom Communications Network, Inc. 20th Floor, Centerpoint Bldg. Julia Vargas Avenue Corner Garnet Street Ortigas Center, Pasig City S i r : This refers to your letter dated May 20, 1998 requesting opinion on whether or not a "foreign national" can be elected as member of the " Executive Committee " created pursuant to the provisions of Section 35 of the Corporation Code and corporate by-laws. llcd As stated, Infocom Communication Network, Inc. is a domestic "public utility" corporation engaged in the business of " telecommunications ".Being engaged in a "partially-nationalized" economic business activity, it is covered by Commonwealth Act No. 108, as amended, otherwise known as the " Anti-Dummy Law " which prohibits foreign intervention in the management, administration, operation and control of wholly or partially nationalized business. At present, 40% of the outstanding capital stock of the Corporation is owned by two "foreign" corporations. Hence, the above query. The Commission, on several occasions, has ruled pursuant to the ruling of the Department of Justice Re : DOJ Opinion No. 37, series of 1976 ,that while in firms engaged in wholly or partially nationalized business activities, aliens are banned from being appointed/elected to management positions as corporate officers e.g. president, vice-president, treasurer, auditor, etc.,they can be elected as directors in proportion to their allowable participation or share in the capital of such entities in accordance with the Anti-Dummy Law, quoted in part hereunder: "SECTION 2-A. ...:And provided, finally, That the election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in capital of such entities ".(Emphasis supplied). Likewise, Section 11 of Article XII of the Constitution provides: "....The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital ,and all the executive and managing officers of such corporation or association must be citizens of the Philippines." (Emphasis supplied) Thus, while "foreigners" are disqualified to be elected/appointed as " corporate officers " in wholly or partially nationalized business activities, they are allowed representation in the " Board of Directors " or "governing body" of said entities in proportion to their shareholdings. The reason for the exception is that the Board of Directors/governing body performs specific duties as a " body ".Unlike corporate officers, each member of the Board of Directors/governing body has no individual power or authority to perform management function. The powers delegated to the Board of Directors/governing body can only be exercised by it acting as a body when a quorum is present. Hence, there can be no intervention in the management, operation, administration and control of the corporation by the members thereof in their individual capacity. The above authorities/arguments lead to the logical conclusion that the above exception extends to the " Executive Committee " which is authorized to act on such specific matters within the competence of the Board of Directors. Section 35 of the Corporation Code, quoted in part hereunder, clearly implies that the Executive Committee is a "governing body" which functions as the Board itself, and thus membership therein shall be governed by same laws/rules applicable to the Board of Directors. "SECTION 35. Executive committee . The by-laws of a corporation may create an executive committee ,composed of not less than three members of the Board, to be appointed by the board. Said committee may act by majority vote of all its members ,on such specific matters within the competence of the board as may be delegated to it in the by-laws or on a majority vote of the board, ...." (Emphasis supplied) Accordingly, a foreigner can be a member of the Executive Committee without violating the Anti-Dummy Law, provided ,however, that foreign representation in said governing body shall only be in proportion to the foreign shareholdings in the corporation, and provided further ,that the foreigners shall not be given specific individual managerial responsibility. Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Chairman