Atty. Rolando P. Nonato

August 4, 1993 Atty. Rolando P. Nonato Cebu Business and Investments Consultants Ground Flr.,CRM Bldg.,Escario cor. Molave Sts. Lahug, Cebu City S i r : This refers to your letter of July 26, 1993 requesting opinion on the validity of the provision in the by-laws of Agvid Construction Co., Inc. granting 40% bonus to the members of the board/officers of the corporation which is in violation of Section 30 of the Corporation Code and requesting confirmation that excess bonuses paid on the basis of illegal provisions in the by-laws should be refunded to the corporation. It is the first requisite of validity that by-laws must be consonant with, and not repugnant to or in contravention of the law of the land. (8 Fletcher Sec. 4185) The by-laws are subordinate to the articles of incorporation as well as to the Corporation Code and related statutes, and should therefore not be inconsistent with any of these. Otherwise, they would have no binding effect. (Campos and Lopez-Campos, Corporation Code citing Fleischer v. Botica Nolasco, G.R. No. 23241, March 14, 1925, 47 Phil. 854 (1925). Thus, in case of conflict between the Corporation Code and the by-laws, the former shall prevail. Any compensation to directors and/or officers made without proper authorization, may ordinarily be recoverable in a stockholders suit. Where action by the corporation is prevented by the control of the majority stockholders, relief may be at the instance of minority stockholders themselves. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman