Mr. Edward Timothy P. Gavino

August 22, 1989 Mr. Edward Timothy P. Gavino Tradeforce US-EEC No. 118 Matimtiman, Sikatuna Village, Diliman Quezon City Sir : This refers to your letter dated July 28, 1989, requesting clarification on the queries posed therein relative to the proposed Economic-Trade Investment Programme wherein you have planned to register a non-profit, non-stock trade office/organization , funded exclusively by a foreign government committed to alleviate the present economic situation of the country through the encouragement of numerous joint venture undertakings between the Philippine-based corporations and private companies in the United States and members of E.E.C. The Corporation Code defines a non-stock corporation as follows: "SECTION 87. Definition . For the purpose 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) As to purposes of non-stock corporation, the law further provides: "SECTION 88. Purposes . Non-stock corporations may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultural, and like chambers , or any combination thereof, subject to the special provisions of this Title governing particular classes of non-stock corporations." (emphasis supplied). Considering that the contemplated objectives enumerated in the proposed program of the organization are among those enumerated purposes for which a non-stock corporation may be formed, the same may be organized and incorporated as a non-stock, non-profit organization. However, it should be emphasized that because of the nature of a non-stock corporation, it is not empowered to venture primarily in business activities. However, as an incident to the objects and purposes of the corporation, a non-stock, non-profit corporation may engage in certain economic activities as may be specified in its charter or articles of incorporation, provided however, that profits realized as an incident to its operation shall be used for the furtherance of the purpose or purposes for which the corporation was organized. It should be noted further that an organization which is not engaged in business and not desirous of acquiring juridical personality need not be registered with the Commission. However, an unregistered association, unlike a registered corporation, is not a juridical person and hence, denied the rights and privileges which are incident only to incorporation. "The principal distinction lies in the fact that a corporation is a legal entity deriving its existence from franchise, whereas, an association in the narrow sense of the term, is a creature of contract without legal personality separate and distinct from the individuals composing it." ( SEC Opinion, dated March 24, 1972, citing 7 C.J.S. p. 21 ). Thus, an unregistered association cannot sue and be sued, it cannot enter into contracts in the name of the association and neither can it acquire properties under its common name. Contracts entered into in its behalf make the persons signing or executing them liable to the other contracting party. It has been held also that it is not competent to act or create agents or confer upon another authority to act on its behalf, and those who act or purport to act as its representatives or agents do so at their own risk. (SEC Opinion, Supra, citing Vda. de Salvatierra v. Garlitos et al., L-11442, May 23, 1958). It is only when the association is incorporated under the Corporation Code of the Philippines that it acquires juridical personality, distinct and separate from its members. Such incorporation enables the association to exercise the powers which its charter and the Corporation Code grants to said association. Should you desire to register the organization in accordance with the Corporation Code, Section 10 and 14 thereof must be complied with. Under said provisions, any number of natural persons not less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes by filing with the Commission the articles of incorporation of the proposed corporation, duly signed and acknowledged by all the incorporators before a notary public, containing substantially the following matters: 1. The name of the corporation; 2. The specific purpose or purposes for which the corporation is being incorporated. ( Non-stock corporations should not include a purpose which would change or contradict its nature as such ); 3. The place where the principal office of the corporation is to be located, which must be within the Philippines; 4. The term for which the corporation is to exist; 5. The names, nationalities and residences of the incorporators ( majority of whom must be residents of the Philippines ); 6. The number of directors or trustees which shall not be less than five (5) ( majority of whom must be residents of the Philippines ); 7. The names, nationalities and residences of the persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified in accordance with the Code. 8. The amount of its initial operating capital , the names, nationalities and residences of the contributors and the amount contributed by each. 9. The name of the Treasurer elected by the members to act as such until his successor is duly elected and qualified in accordance with the by-laws, and that as such Treasurer, has been authorized to receive for and in the name and for the benefit of the corporation, all fees or contributions or donations paid or given by the members. 10. Such other matters as are not inconsistent with law and which the incorporators may deem necessary and convenient. Likewise, the following supporting documents shall be submitted: 1. Letter of undertaking signed by any responsible officer of the association, addressed to this Commission, to the effect that the association will change its corporate name in the event another person, entity or firm has acquired a prior right to use of the same name or one similar to it; 2. Modus Operandi or a detailed explanation as to how the association shall carry out its objectives signed by at least a majority of the incorporators or by duly authorized representative; LexLib 3. Resolution of the Board signed by at least a majority of the Directors or Trustees or certified under oath by the acting Secretary substantially of the following tenor to wit: "Be it resolved, as it is hereby resolved that (State the name of the corporation/organization) will comply with the SEC Requirements for non-stock corporation, dated May 24, 1963." 4. List of members duly certified under oath by the Corporate Secretary; 5. Registration Data Sheet (form enclosed); 6. List of contributors and amount they respectively contributed duly certified under oath by the Treasurer. The following amount must be paid to the Commission as registration fees: Articles of Incorporation P100.00 By-laws (If filed simultaneously with the articles 100 Legal Research fee 20 To expedite the registration of the organization, you may avail of the services of the new "express lane" project of the Commission. Printed forms of the articles and by-laws of non-stock corporations are available at the Commission at a nominal cost of P150.00 only. Under this project, application for registration are processed and approved within a period of one day. Anent your second and third queries relative to the funding of the proposed organization, the Commission does not impose any regulation fixing the amount of capital fund for non-stock, non-profit corporations. What the Commission requires is initial operating capital to enable the corporation to start operation (see page 3(8) of this letter). Suffice it, therefore, to state that the initial operating capital is of such rational amount as the incorporators/directors may deem sufficient. Additional funds may come later. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman