Mr. Jose A. Rivera, Jr.

July 30, 1999 Mr. Jose A. Rivera, Jr. 25 Zalamea Street, DBP Village Las Pias City S i r : This refers to your letter dated July 29, 1999 requesting opinion on whether or not a corporation, whose by-laws has not been approved by the SEC, has the juridical personality to enter into any contract/agreement/ purchase/sale of properties with its members, subsidiaries, and any private/public entities. llcd The Commission had previously opined that the existence of power in the corporation to adopt by-laws does not ordinarily and of necessity make the exercise of such power essential to its corporate life, or to the validity of any of its acts. ( SEC letter to Mr. D.C. Cobalida, Jr. dated June 10, 1986 , citing 8 Fletcher Cyc. Corps., sec. 4170 citing Powell Bros. v. McMullan Lumber Co., 153 N. C. 52, 68 S. E. 926; etc.) By-laws are for the benefit of the stockholders (members) to regulate the manner of conducting the internal affairs of the corporation, and in the absence of some inquiry to the rights of the public arising therefrom, it is not absolutely essential to the continued exercise of the corporate franchise that by-laws be enacted. (Ibid, citing Voorhies v. Walker, 227 Mich. 291. 198 N.W. 994, cited in Fletcher, supra.) Strangers are not bound to know the by-laws which are merely provisions for the government of a corporation and notice of them will not be presumed. (Ibid, citing Am. Jur., sec 162, citing First Nat. Bank v. Briggs, 69 Vt. 12, 37 A. 231, 37 L.R.A. 845, 60 am. St. Rep. 922) Said by-laws merely operates as internal rules among the stockholders (members). They cannot affect or prejudice those persons who deal with the corporation, unless they have knowledge of the same. (Ibid, citing Campos, Campos, the Corporation Code, Comments, Notes and Selected Cases, p. 78) Accordingly, your query is answered in the affirmative, subject to the applicable provisions of the Civil Code on the essential requisites of contracts. Very truly yours, (SGD.) SONIA M. BALLO Director Corporate and Legal Department