Mr. Artemio M. Sevilla

April 24, 1995 Mr. Artemio M. Sevilla Barangay Captain Barangay Tinajeros Municipality of Malabon S i r : This refers to your letter of April 10, 1995 wherein you pose the following queries: 1. Whether the corporate officers of Tinajeros Electric Service Association, Inc. who have violated its articles of incorporation would legally remain as officers of the corporation'? 2. What should be done if the members would like to elect a new set of officers? 3. Who will assume the obligations of the current set of officers? 4. What guidelines are to be followed in order to have an effective non-profit electric service association? Violation by the corporate officers of the articles of incorporation may be a ground for their removal from office. Under Section 28 of the Corporation Code, a Director or Trustee of a non-stock corporation may be removed from office, with or without cause, by a vote of two-thirds of the members entitled to vote. Insofar as the corporate officers other than the members of the Board, the power to remove them is vested in the body or officer authorized to elect or appoint them. ( SEC Letter dated January 18, 1989 addressed to Efren L. Cordero , citing previous SEC Opinion dated September 29, 1987) Since under Section 25 of the Corporation Code, the corporate officers are elected by the Board, consequently, the right to remove them is vested in the same body. However, if the officers are directly elected by the members, as allowed under Section 92 of the Corporation Code, the power to remove them is vested directly in the latter. Unless they are formally removed from office or their term expires, the members cannot elect a new set of Directors and/or Officers. Relative to your third query, for as long as the corporate transaction/contract was undertaken or executed by an authorized officer, the succeeding Directors and/or Officers are duty bound to recognize the obligation arising therefrom. The acts of the Directors and duly authorized officers which are within the power of the corporation done in good faith and in the exercise of an honest judgment are valid and binding on the corporation. The dealings of the Board/ Officers may be subjected to review and scrutiny only where the corporation's/members' interest are prejudiced. Any grievance or complaint against a director/officers may be filed with the Securities Investigation and Clearing Department of this Commission pursuant to the provision of PD 902-A as amended, and the Revised Rules of Procedure in the Securities and Exchange Commission . Regarding your fourth query, the association is governed by its by-laws. "By-laws signifies the rules and regulations or private laws enacted by the corporation to regulate, govern and control its own actions, affairs and concerns and its stockholders or members and directors and officers with relation thereto and among themselves in their relation to it" ( Letter to Philippine Nurses Association Inc., dtd. Aug. 8, 1985 citing 9 Fletcher Cyc. Corp. Sec. 4166) Accordingly, in order to have an effective and better operation, the association may adopt relevant by-law provisions for the directors, officers and members to comply with and observe in the conduct and management of its affairs. In addition to the by-laws, your association may adopt other rules and regulations for its government which may be in the form of board resolutions. It has to be emphasized, however, that the Board cannot adopt rules and regulations different or inconsistent from that specifically provided for in the Corporation Code. Articles of Incorporation and the By-laws of the association. Finally, we would like to call your attention to the use of the term "cooperative" in one of the statement in your letter. Please be advised that an SEC registered " ordinary non-stock corporation " cannot at the same time be treated as a " cooperative ." Corporations organized in the form of a cooperative are now under the jurisdiction of the Cooperative Development Authority pursuant to Republic Act 6938, otherwise known as the Cooperative Code of the Philippines. LibLex Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner