Atty. Manuel R. Singson

October 29, 2001 SEC OPINION Atty. Manuel R. Singson Singson Valdez and Associates 3rd Floor, LCS Bldg. South Superhighway, San Andres Cor. Diamante Sts. Manila, Philippines Dear Atty. Singson, This refers to your letter dated September 25, 2001, requesting opinion as to the validity of amendments made in the by-laws of Baguio Country Club Corporation (BCC) and a special limited power of attorney form which will be used to amend the by-laws of BCC and for electing board members in any future election. Particularly, the questioned amendments, as stated, provide for the following: (1) The election of the members of the Board of Directors was changed from yearly to every (2) years on any date of November set at the sole option of the Board. (2) A nominating committee was created composed of three (3) stockholders appointed by the President with the approval of the Board of Directors. The committee is to determine who are the eligible candidates to the Board and will submit a list of such candidates not later than seven (7) days before the election. (3) The submission of proxies shall be made not later than seven (7) days prior to the date of the election. Firstly, as to the term of office of the board members, Section 23 of the Corporation Code is explicit in fixing the term of office to only one (1) year. The rationale . . . is to protect the corporation, as well as its creditors and the public dealing with it so that if an improvident or wrongful act is committed by a board of directors, the subsequent board can redress or prevent the perpetuation of the wrong, and thereby protect its stockholders, creditors and the public having dealings with it. (Lopez, Corporation C od e of the Philippines, p. 387) The said provision can not be voided by the mere expedient of providing otherwise in the by-laws. The by-laws is subordinate to the articles of incorporation as well as to the Corporation Code and related statutes and should therefore not be inconsistent with any of these. ( supra ) Secondly, on the creation of a nominating committee to determine who are the eligible candidates to the board, we are of the opinion that the same is valid. Sections 23 and 24 of the Corporation Code which primarily govern elections of directors and trustees do not prohibit the aforementioned scheme in the election of directors. In fact, the SEC, in an opinion, allowed a similar scheme whereby the board members were to be nominated by different groups but the nominated members were to be elected by the entire members of the corporation in accordance with Sections 23 and 24 of the Code. (De Leon, Corporation C od e, p. 213) The same does not contravene the Code which provides that the directors must be elected from among the holders of stock. Pursuant to Section 47(7) of the Corporation Code, the corporation/association may adopt a manner of electing the members of the board of directors in accordance with Section 24 thereof. Finally, on the validity of the special limited power of attorney form, Sec. 58 of the Corporation Code is applicable. It provides, thus: "Sec. 58. Proxies . Stockholders and members may vote in person or by proxy in all meetings of stockholders or members. Proxies shall be in writing signed by the stockholder or member and filed before the scheduled meeting with the corporate secretary. Unless otherwise provided in the proxy it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any one time." The Corporation Code has no specific provision on the form of proxies but instead leaves it to the corporation to provide for the form of proxies in its by-laws. In the case of BCC, Article IV, Section 7 of its by-laws only requires the following. (1) that it must be in writing, (2) signed by the stockholder and (3) filed with the Secretary at least seven (7) days prior to any meeting at which such proxies will be used. There is no specific form required by it. All that is necessary is that the writing shall show the intent and the extent of authority to attend and vote. Based on the foregoing, we uphold the validity of the Special Power of Attorney form in question. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner