Mr. Pio O. Dizon

August 5, 1992 Mr. Pio O. Dizon Bonifacio Street Camiling, Tarlac S i r : This refers to your letter of July 28, 1992 requesting opinion on the following queries which we answer in the order they were presented: llcd 1. Are the stockholders holding administrative or executive positions in a private school allowed to become members of the Board of Trustees of that school? The Corporation Code provides: "SECTION 23. The Board of directors or trustees . Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised; all business conducted and all property of such corporation controlled and held by the board of directors or trustees to be elected from among the holders of stock, or where there is no stock from among the members of corporation ,who shall hold office for one (1) year and until their successors are elected and qualified. Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. Trustees of non-stock corporation must members thereof . A majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines" (Emphasis supplied) Under the above provision, one must be a stockholder or member of the corporation in order to be qualified as director or trustee. Thus, persons holding administrative or executive positions in a school who are stockholders or members of the corporation, unless disqualified by law or corporate by-laws may, at the same time, be members of the board of directors. In this connection, however, it has to be emphasized that the election of the board of directors or trustees, precedes the election of executive officers of the corporation. The Corporation Code provides, thus: "SECTION 25. Corporate officer, quorum . Immediately after their election ,the directors of a corporation must formally organize by the election of a president ,who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except, that no one shall act as president and secretary or as president and treasurer at the same time. (Emphasis supplied) xxx xxx xxx" 2. What qualification should a stockholder possess to entitle him to board membership? As mentioned above, to be qualified as member of the Board, one must be a stockholder of record or member of the corporation. In addition to said qualification, a corporation, pursuant to Section 47 (5) of the Corporation Code, and subject to existing laws, may provide in its by-laws for additional qualifications. The Code provides, thus: LexLib "SECTION 47. Content of by-laws . Subject to the provisions of the Constitution, this Code, other special laws ,and the articles of incorporation, a private corporation may provide in its by-laws for: xxx xxx xxx (5) The qualification ,duties and compensation of directors or trustees ,officer and employees; ..." (Emphasis supplied) 3. What method or methods, other than by shares, can board members be elected? Raising hands, perhaps? If by shares, the big stockholders will always be elected or reelected? The manner of election of the Board is provided for under Section 24 of the Corporation Code quoted hereunder: "SECTION 24. Election of directors or trustees . At all elections of directors or trustees ,there must be present ,either in person or by representative authorized to act by written proxy, the owners of the majority of the outstanding capital stock ,or if there be no capital stock, a majority of the members entitled to vote. The election must be by ballot if requested by any voting stockholder or member. In stock corporations, every stockholder entitled to vote shall have the right to vote in person or by proxy the number of shares of stock standing, at the time fixed in the by-laws, in his own name on the stock books of the corporation, or where the by-laws are silent, at the time of the election; and said stockholder may vote such number of shares for as many persons as there are directors to be elected or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit: Provided, That the total number of votes cast by him shall exceed the number of shares owned by him as shown in the books of the corporation multiplied by the whole number of directors to be elected: Provided, however, That no delinquent stock shall be voted. Unless otherwise provided in the articles of incorporations which have no capital stock may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate. Candidates receiving the highest number of votes shall be declared elected .Any meeting of the stockholders or members called for an election may adjourn from day to day or from time to time but not sine die or indefinitely if, for a reason, no election is held, or if there are not present or represented by proxy, at the meeting, owners of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the member entitled to vote." (Emphasis supplied) Section 47 of the Corporation Code further provides: "SECTION 47. Contents of by-laws . Subject to the provisions of the Constitution, this Code, other special laws, and the articles of incorporation, a private corporation may provide in its by-laws for: xxx xxx xxx (7) The manner of election or appointment and the term of office of all officers other than directors or trustees ; xxx xxx xxx" Therefore, a corporation cannot adopt a manner of electing the members of the board other than what is provided for under the aforecited Section 24 of the Corporation Code. As to your last query on whether or not government employees of public school teachers are entitled to become members of the Board of Trustees, we suggest that said issue be addressed to the Civil Service Commission, the government agency in charge of implementing Presidential Decree No. 807, otherwise known as Civil Service Law. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman