Mr. Juan B. Francisco

March 8, 1993 Mr. Juan B. Francisco Philippine Stock Exchange, Inc. Metro Manila S i r : This refers to your letter of March 2, 1993 requesting opinion/ruling on the following issues: 1. The validity of the acceptance of the members of the Makati and Manila Stock Exchanges to become members of the Philippine Stock Exchange, Inc. notwithstanding the provisions of its Articles of Incorporation stating that the original incorporators are the members thereof and that additional members may be accepted pursuant to the By-laws of the Corporation and the fact that the said By-laws has not been adopted. 2. Considering that a corporate member has to act through a nominee, and considering further the provisions of the Corporation Law that a Trustee must be a member of the non-stock corporation, can the by-laws of the PSE clothe the nominee of the Corporate member with a membership status only for the purpose of voting and being voted upon and to exercise the rights and prerogatives of his principal, the corporate member? If this is possible, then it is proposed that the nominee whose name will be submitted by the corporate members, shall be given a membership share with no monetary value and will only exercise one vote (corporate membership's vote). Under Section 19 of the Corporation Code "a private corporation formed or organized under this Code commences to have corporate existence and juridical personality and is deemed incorporated from the date the Securities and Exchange Commission issues a certificate of incorporation . Furthermore, under Section 36 of the same Code it is clear that a corporation duly incorporated under the Code is vested with the power to accept members. Said provision provides, thus: "SECTION 36. Corporate powers and capacity . Every corporation incorporated under this Code has the power and capacity: xxx xxx xxx (6) In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a non-stock corporation; (Emphasis supplied) xxx xxx xxx." The above provisions do not require the adoption of corporate by-laws before a corporation can commence its operation by accepting membership. Accordingly, in the case of the Philippine Stock Exchange, Inc., it may accept additional members in addition to the incorporating members even before the adoption of its by-laws, notwithstanding a provision in its articles of incorporation stating that additional members may be accepted pursuant to the By-laws of the Corporation. Regarding the second issue, please be advised that it has been the policy of the Commission not to render opinions on matters sub-judice. Considering that there is a pending case with our Securities Investigation and Clearing Department bearing a similar issue raised in your letter, the Commission refrains from commenting thereon so as not to pre-empt the outcome of said pending case. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman