Soledad Cagambang-De Castro

April 23, 1993 Soledad Cagambang-De Castro De Castro & Cagampang Law Offices 7th Floor, LTA Bldg.,118 Perea St. Legaspi Village Makati, Metro Manila M a d a m : This refers to your letter of April 21, 1993 requesting opinion/pre-clearance of the proposed amendment to the By-laws of your client company prescribing a provision disqualifying stockholders with interest adverse to the business of the corporation, to be a director. A provision in the by-laws prescribing a qualification/disqualification of a director as a device to protect the interest of the corporation, like disqualifying a stockholder who controls another enterprise which is a competitor of the corporation from being elected as director, had been upheld as valid by-laws. (Gokongwei v. SEC, Soriano, San Miguel, et al, G.R. L-45911, April 11, 1979) Likewise, Section 47(5) of the Corporation Code expressly empowers the corporation to provide in its by-laws for the qualifications of its directors. On the basis of the foregoing, a corporation may provide in its by-laws certain disqualification for the election of directors. However, in the proposed amendments introduced in your letter, it appears that the disqualifications are subject to the judgment or determination by the majority vote of the Directors. Unless the qualifications or disqualifications are clearly or specifically spelled out in the by-laws without the necessity of being subject to the judgment of the Board, such provisions are dangerous and may cause possible future conflicts which may adversely affect the right of stockholders to participate in the management of the business. We, therefore, suggest that you revise the proposed By-law provisions enumerated in your letter, such that the qualifications or disqualifications are clearly and specifically spelled out and automatically applicable without the need of concurrence or judgment by the Board of Directors. LibLex Please be guided accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman