Ms. Concepcion Blaylock

August 13, 1990 Ms. Concepcion Blaylock Diamond Motor Corporation Ortigas Ave., cor. Roosevelt Greenhills, San Juan Metro Manila M a d a m : This refers to your letter dated August 9, 1990 inquiring as to how many members of the Board of Directors should be elected in the forthcoming annual stockholders meeting of Diamond Motor Corporation. You stated that the Articles of Incorporation and By-Laws of subject corporation provide for only five (5) members of the Board of Directors. However, the corporation for several years had been electing seven (7) members of the Board. You stated further that your corporate records and the Commission's records do not show any certificate of increase in the number of directors. Hence, your query. To legally effect the change in the number of the board members, it is necessary that the articles of incorporation be amended in accordance with Section 16 of the Corporation Code. Said provision requires that any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock. As to the effectivity of the amendment, while Section 16 of the Corporation Code provides that amendments to the articles of incorporation are effective only upon approval by the Commission, Section 29 of the Code allows the filling up of the increase in the number of directors even before the approval of the same by the Commission. The Code provides thus: "Any director or trusteeship to be filled by reason of an increase in the number of directors or trustees shall be filled only by an election at a regular or special meeting of stockholders or members duly called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the notice of the meeting ." (Emphasis supplied) Therefore, in reply to your query, the corporation may elect or fill up the increase in the number of the board from five (5) to seven (7) during the forthcoming annual stockholders meeting provided the following conditions are complied with: 1. That the increase in the number of the board members be approved by a majority vote of the board of directors and the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, and 2. That the filling up of the increase in the number of directors be stated in the notice of the meeting. However, while the increase in the board may be effected immediately after the approval by the board and stockholders, the Code requires that the amended articles of incorporation reflecting the increase be filed with the Commission. Section 16 of the Corporation Code further provides thus: "The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Such articles, as amended, shall be indicated by underscoring the change, or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees stating the fact that said amendment or amendments have been duly approved by the required vote of the stockholders or members, shall be submitted to the Securities and Exchange Commission ." (Emphasis supplied) If the conditions above-mentioned cannot be complied with, the corporation should elect only the number of the board members as fixed in its articles of incorporation. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner