Pfleider Batiller Ramos Bonifacio & Romero

July 15, 1996 Pfleider Batiller Ramos Bonifacio & Romero 204 A Fedman Suites, Salcedo Street Legaspi Village, Makati City Attention : Atty . Iris L . Bonifacio S i r : This refers to your letter dated June 4, 1996 requesting opinion relating to Sec. 75 of the Corporation Code, quoted hereunder: "SECTION 75. Right to financial statements . Within ten (10) days from receipt of a written request of any stockholder or member, the corporation shall furnish to him its most recent financial statement ,which shall include a balance sheet as of the end of the last taxable year and a profit or loss statement for said taxable year, showing in reasonable detail its assets and liabilities and the result of its operation. LexLib At the regular meeting of stockholders or members, the board of directors or trustees shall present to such stockholders or members a financial report of the operations of the corporation for the preceding year, which shall include financial statements ,duly signed and certified by an independent certified public accountant. ..." (Emphasis supplied) However, if the paid-up capital of the corporation is less than P50,000.00, if the financial statements may be certified under oath by the treasurer or any responsible officer of the corporation." (Emphasis provided) Your queries are. 1. Is the "presentation" of the financial report to the stockholders or members mandatory during the regular meeting/annual meeting? 2. Is such an annual "presentation" mandatory upon the board, such that it must be presented/submitted/furnished thereby to the stockholders if so demanded even if there is no annual meeting? 3. Is the mere "presentation" of the Audited Financial Statements already sufficient compliance with the requirement of presentation? or are other data required to be presented such as "President's Report" and such other report on operations marketing and sales? 4. Is the presentation limited to the act of presenting only or must the board present themselves to questions or explanations of the report? The use of the word " shall " in the aforecited provision indicates that the requirement is mandatory. Such requirement is based on the principle that all stockholders have the right to be fully informed as to the financial condition of the corporation, and how their investments (capital contribution) are employed or managed. As to whether or not the presentation of an Audited Financial Statements is a sufficient compliance of the above statutory mandate, it is clear from the above provision that the presentation of a financial report of the operations of the corporation is required, not only the financial statement of the corporation. The Corporation Code is, however, silent as to whether the Board of Directors must present themselves to questions or explanations of the report. Hence, they are not under obligation to answer questions pertaining to the financial statements being submitted. However, they may do so at their discretion as they are presumed to know the actual operation of the corporation. At any rate, the shareholders, under Section 74 of the Corporation Code, have the right to inspect other corporate books and records relative to the operation of the corporation from which they can derive additional information that will enable them to determine the actual financial condition of the corporation in order to protect their interest. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner