Dean Remedios L. Fernandez

December 7, 1995 Dean Remedios L. Fernandez House of Delegates Philippine Nurses Association, Inc. 1663 F.T. Benitez St. Malate, Manila Madam: This refers to your letter dated November 28, 1995 requesting opinion on the legality of the procedure followed by the Philippine Nurses Association, Inc. in determining the required quorum, the adoption of the amendments of its by-laws and the approval of its proposed budget for 1996. Please be advised that the Commission does not, as a matter of settled policy, render opinions on the legality of corporate acts or transactions if they involve justiciable issues which could only be clarified and determined in a proper proceeding such as those presented in your letter. The opinions 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 statements on the legality of the issues raised in your letter so that it will not be estopped to resolve any controversy pertaining thereto if brought before it in a proceeding. However, for purposes of information only , the following are imparted. prcd The pertinent provision of the Corporation Code provides: "SECTION 47. Contents of by-laws . Subject to the provisions of the Constitution this Code, other special laws, and the articles of incorporation, a private corporation may provide in its by-laws for: xxx xxx xxx 3. The required quorum in meetings of stockholders or members and the manner of voting therein; xxx xxx xxx 10. Such other matters as may be necessary for the proper or convenient transaction of its corporate business and affairs ." (Emphasis supplied) Thus, the corporate by-laws shall be controlling in determining what should be the proper procedure to be followed by the corporation. By-laws are the private laws of the corporation. Hence, the provisions thereof must be construed and applied in accordance with the intent of its own makers . Such self-imposed private laws, when valid have substantially the same force and effect as laws of the corporation as have the provisions of its charter insofar as the corporation and persons within it are concerned. "They are in effect written into the charter and in this sense, they become part of the fundamental law of the corporation. Accordingly, the corporation, its directors, officers and members are bound by and must comply with the same ." ( SEC Letter to Atty. Victor Africa dated November 24, 1992 , citing 8 Fletcher Cyc. Corp. Sec. 4197) It has to be emphasized, however, that the first requisite of validity of by-law provisions is that they must be in consonance with and not repugnant to or in contravention with the laws of the land. (Ibid, citing 8 Fletcher Sec. 4185). Thus, while a corporation is allowed to provide in its by-laws matters which may be necessary or convenient in its operation or corporate affairs, the same must not be inconsistent with the provisions of the Corporation Code . Otherwise, they would have no binding effect. In addition to the by-laws, a corporation may adopt other rules and regulations to govern its operations. However, a corporation cannot adopt rules and regulations or procedures different from or inconsistent with what is specifically provided for in the by-laws or Corporation Code . Finally, any member of your Association, who may have a cause of action against a director or officer for violation of the corporate by-laws, may file a verified complaint with the Securities Investigation and Clearing Department of this Commission pursuant to PD 902-A, as amended and the SEC Revised Rules of Procedure . Unless a formal complaint is filed, the Commission will adhere to the hands-off policy on the matter of interpretation and application of the provisions of the by-laws of your Association. prcd Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner