Angara Concepcion Regala & Cruz

February 20, 1984 Angara Concepcion Regala & Cruz 5th Floor, ACCRA Building 122 Gamboa Street, Legaspi Village Makati, Metro Manila Attention : Tadeo F . Hilado Gentlemen: This has reference to your letter dated February 15, 1984 requesting opinion on the interpretation of the word "officers" as stated in a certain provision of the proposed by-laws of Sanitary Wares Manufacturing Corporation (Saniwares). It appears that in a joint venture agreement entered into in 1962 among American Standard, Inc.,Saniwares and the latter's Filipino shareholders, the proposed by-laws for Saniwares which was not approved by the Securities and Exchange Commission was attached as an Annex thereto. Section 5, Article IV of the By-laws provides that the vote of at least seven (7) directors out of the nine (9) member-Board is required for the approval of certain actions, among which is "any payment of compensation, bonus or other distribution to directors and/or officers out of the net profits of the Corporation." Your query is whether you can interpret the word "officers" in the abovequoted provision as referring only to the officers mentioned in the By-Laws of the Corporation, such as the President, Executive Vice-President, Plant Manager, Treasurer and Secretary. As we understand it, your concern is that if the word "officers" is interpreted to include all officers of the corporation even the lowest ranking officer will not be able to receive any bonus or extra compensation if, for one reason or another, the extraordinary seven out of nine voting requirement in the Board is not met. It is our opinion that it is reasonable to limit the word "officers" in the cited By-law provision to the officers mentioned in the-By-laws. It has been held that "the only officers of a corporation are those given that character either by the Corporation Law or by its By-laws. The rest can be considered merely as employees or subordinate officials" (Gurrea vs. Lezama, GR No. L-10556, April 30, 1958, 103 Phil. 533, SEC Opinion dated 15 May 1969 ). "It is sometimes important to determine whether a person representing a corporation is to be classed as an officer of the company or merely as an agent or employee, especially in construing statutes relating only to "officers" of corporations. Generally, the officers of a corporation are enumerated in its charter or by-laws, and include a president, vice-president, secretary, treasurer and sometimes others." (Fletcher Cyclopedia Corporations, Vol. 2, p. 30) LexLib In view of the abovequoted interpretation, the term "officers" may be limited to those mentioned in the By-laws of the Corporation. Thus, the payment of compensation, bonuses or other distributions to subordinate officials or agents of the corporation may be approved by an ordinary majority vote of the directors. Very truly yours, (SGD.) GONZALO T. SANTOS, JR. Associate Commissioner