Ms. Aurora C. Recto, M.D.

May 14, 1991 Ms. Aurora C. Recto, M.D. The National Orthopedic Hospital & Rehabilitation Medicine Center Maria Clara St.,Quezon City M a d a m : This refers to your letter of May 10, 1991 requesting clarification whether the Philippine Orthopedic Center Auxiliary Board, Inc. a non-stock, non-profit organization can legally operate a sari-sari store, the earnings of which are utilized for its various projects. cdll The Corporation Code defines a non-stock corporation as follows: "SECTION 87. Definition . For the purposes of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution; Provided, That any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever necessary or proper ,be used for the furtherance of the purpose or purposes for which the corporation was organized, subject to the provisions of this title." (Emphasis supplied) It appears from the foregoing provision that while non-stock corporations are not empowered to venture on economic business activities, they may, as incident to their purpose(s) ,derive income or profit reasonably necessary to carry out the purposes for which they were organized. Many such corporations obtain profits as an incident to its operations, but unlike stock corporations, such profits are not distributable to their members, but are used for the furtherance of their purposes. Any such powers as are reasonably necessary to enable corporations to carry out the express powers granted and the purposes of creation are to be implied as are to be deemed incidental .(13 Am. Jur. sec. 740) The exercise of implied powers by a corporation is expressly recognized by law, particularly, under Section 36 (11) of the Corporation Code quoted hereunder: "SECTION 36. Corporate powers and capacity . Every Corporation incorporated under this Code has the power and capacity: xxx xxx xxx 11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in the articles of incorporation." (Emphasis supplied) A distinction, therefore, should be made whether or not the corporation undertakes the business activity with the end in view of making profits for distribution to members. If the activity is pursued purely for the purpose of carrying out the intended purposes for which the non-stock corporation was organized and without the end of making profits to be distributed to the members, the corporation may undertake a business venture. Under the articles of incorporation of subject corporation, the abovementioned business activity may be reasonably considered an implied or incidental power in the exercise of the objectives for which the corporation was organized as can be deduced from the following provision thereof: "Second That the purposes for which this corporation is formed are: xxx xxx xxx 3. To engage in projects and other activities necessary to raise funds needed to attain the goals of the Association with the spiritual and moral upliftment of the patients and employees in mind." (Emphasis supplied) Accordingly, the Corporation can validly pursue the activity raised in your letter on condition that the income, profit or gain that may be derived therefrom shall be purely used for the furtherance of the purpose(s) for which the Corporation was organized and in no case shall the profits be distributed or redound to the benefit of any of the corporate members, officers or directors. prcd Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman