Mr. Charlie C. Jayco

September 6, 1988 Mr. Charlie C. Jayco Grassroots-Philippines Services, Inc. P.O. Box 10457 Broadway Centrum Quezon City Sir : This refers to your letter dated July 29, 1988, requesting opinion of the Commission on the query posed therein. Grassroots-Philippines Services, Inc. is a non-stock corporation whose main objective is "to create parallel economic and social mechanisms that will link community based cooperatives, responsible producers, small business with national and international consumers and marketing organizations through exchange of goods and services." To carry out this objective the corporation intends to engage in actual buying and selling of goods (trading/marketing) as a form of service to small producers and consumers to prevent them from being taken advantaged of by unscrupulous middlemen. Whatever income is derived from this activity shall be plowed back to operations to expand the corporation's services and better assist its clients. Your query is whether or not such activity is covered by the purpose & modus operandi of the corporation . The pertinent provision of the Corporation Code provides: "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 operation 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 non-stock corporation has the power, among others, to engage in such activities where it can derive income or profit reasonably necessary to carry out the purpose for which the corporation was organized. Many such corporations obtain profits as an incident to its operations, but unlike in stock corporations, such profits are not distributable to its members, but are used for the furtherance of its purposes. A distinction therefore should be made whether or not the corporation will undertake the proposed activity with the end in view of making profits for distribution to members. If the activity is pursued purely for the purposes 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 such activity. However, it is well-settled that a corporation has only such powers as are expressly granted in its charter or in the statutes under which it is created or such powers as are necessary for the purpose of carrying out its express powers. (13 Am. Jur. Sec. 739) The court ruled thus: "In the determination of what business may be carried on by a corporation, reference must be had to its charter ,and unless the power to carry on a particular business in either expressly or impliedly conferred thereby, it does not exist." (Chiwacla Line v. Disnukes, 87 Ala. 344, 6 SO, 122, 5 LRA 100, cited in Am. Jur. sec. 743). Accordingly, for the corporation to validly pursue the activity raised in your basic letter, it is advised that the corporation should first amend its articles of incorporation in accordance with Section 16 of the Corporation Code; likewise it should amend its "Modus Operandi" to reflect the proposed activity therein and to clearly indicate that no income or profits derived therefrom should ever be distributed to the members or officers of the corporation. Please be guided accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman