Ms. Carina Z. Gregorio

June 16, 1995 Ms. Carina Z. Gregorio Greenhills East Association, Inc. GEA Community Hall, Buffalo St., Mandaluyong, Metro Manila M a d a m : This refers to your letter of June 16, 1995 requesting opinion on the legality of the issues raised therein summarized as follows: 1. Creation by the Board of Directors of a committee and appointment of the members thereof to supervise the election of members of the board even in the absence of a provision in the by-laws authorizing the same. cdll 2. Assessment/collection of dues/charges from the members who have not built houses on their lots, even in the absence of a provision in the by-laws authorizing the same. 3. Disqualification of a member who has not paid the fees/charges assessed on the vacant lots owned by him to run as member of the Board of Directors. Please be advised that the Commission does not, as a matter of settled policy, render opinions on queries or transactions which may eventually develop into a case to be litigated before this Commission. The opinion which may be rendered thereon would not be binding upon private parties who would in all probability, if the opinion happens to be adverse to their interest, take issue therewith and contest it before the proper forum. The Commission, therefore, has to refrain from giving categorical answers to your queries so that it will not be estopped to resolve any controversy pertaining thereto if brought before it in a proper proceeding. However ,for purposes of information only, the following are imparted. It is well-settled that the by-laws are the private laws of the corporation. They are in effect written into the charter and in this sense, they become part of the fundamental law of the corporation, and therefore, the corporation, its directors, officers and members must be guided by them in running the affairs of the corporation. However, to meet situations which are not governed by the by-laws ,the members of the Board, in their best judgment and for the best interest of the corporation may, in addition to the by-laws, adopt rules and regulations which may be in the form of board resolutions. The authority of the Board to formulate rules and regulations in the form of resolutions, other than the by-laws, is based upon the premise that it is the governing body of the corporation with whom the management of the corporate affairs is vested. However ,to be valid and enforceable, any Board Resolution must not be contrary to the provisions in the by-laws, articles of incorporation and Corporation Code ; must be reasonable, does not discriminate against any particular member ; not arbitrary or oppressive, and must not affect the rights of the members . The moment it affects the rights of the members, it must be submitted to them for approval or ratification prior to implementation . Relative to the second issue, the manner of assessing membership dues should be done in accordance with the provisions of the by-laws. In the absence of a provision of the by-laws on the matter, a corporation may collect only reasonable membership dues and only for purposes of accomplishing the purposes or objectives of which the corporation was organized . The power to assess reasonable dues may be exercised by the Board pursuant to the following provisions of the Corporation Code. "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 its articles of incorporation. (Emphasis supplied) Thus, in the absence of a provision in the by-laws, all the members officially listed in the membership book, without any discrimination ,shall be assessed only reasonable fees .Any assessment which appears to be unaffordable or exorbitant should be submitted to the members for approval. Anent the third issue, the only mandatory qualification prescribed for a director under the Corporation Code is that he should appear in the corporate books as a stockholder or member of the corporation (Sec. 23 and 92). However, pursuant to Section 47(5) of the Corporation Code, additional qualifications may be imposed in the by-laws. Thus, in the absence of a provision in the by-laws, a corporation cannot require additional qualification for directors other than the mandatory requirement under Sections 23 and 92 of the Corporation Code. LibLex Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner