Ms. Erlinda B. Ahorro

February 18, 1993 Ms. Erlinda B. Ahorro Saint Luke's Nurses Alumni Asso.,Inc. Saint Luke's Hospital Compound E. Rodriguez Sr.,Boulevard, Quezon City S i r : This refers to your letter of February 16, 1993 inquiring whether there are restrictions for a non-stock, non profit association, like St. Luke's Nurses Alumni Association, Inc.,if it operates a business enterprise, where the income will be appropriated only for the project of the association, such as upgrading the facilities of the members' alma mater and providing scholarships to deserving students. Section 87 of the Corporation Code defines a non-stock corporation as follows: "SECTION 87. Definition . For the purpose of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution: Provided, That any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever necessary or proper, to be used for the furtherance of the purpose or purposes for which the corporation was organized, subject to the provisions of this Title." (Emphasis supplied) The Corporation Code likewise provides: "SECTION 14. Contents of the articles of incorporation . xxx xxx xxx 2. ...Provided, That a non-stock corporation may not include a purpose which would change or contradict its nature as such ;...(Emphasis supplied) Under the foregoing provisions, non-stock, non-profit corporations are not empowered to venture on economic business activities . However, as incident to its purpose[s], it may engage in such activities which are reasonably necessary to carry out the purpose[s] for which the corporation was organized. Any such powers as are reasonably necessary to enable corporations to carry out the express powers granted and purposes of the creation are to be implied as are to be deemed incidental. (SEC Opinion dated January 25, 1988 citing Am. Jur., sec. 740) However, activities merely convenient or useful are not implied if they are not essential, having in view the nature and object of incorporation . (Ibid, citing Planters Bank v. Sharp, 6 How (VS) 301, 12L, ed. 447) Thus, while non-stock corporations are not empowered to venture on economic business activities, they may, as incident to their purpose[s] engage in business activities which are reasonably necessary or essential to carry out the purpose[s] for which they are organized, but unlike stock corporations, any profit that may be derived from such business activities are not distributable to their members, but are used for the furtherance of corporate purposes, and in case of dissolution, the corporate assets of non-stock corporations shall be distributed in accordance with Sections 94 & 95 of the Corporation Code. Therefore, in determining whether the above-mentioned non-stock corporation can operate a business enterprise, much would depend on the purpose clause provision in its articles of incorporation. If the proposed business venture is neither incidental nor necessary or essential to carry out the objectives of the corporation as appearing in its articles of incorporation, it cannot undertake such activity. prcd Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman