Mr. Florentino Quartz P. Requinta IV

December 16, 1993 Mr. Florentino Quartz P. Requinta IV Requinta Development Foundation 111 Yakal St.,Camella V Pulanglupa, Las Pias 1701 Metro Manila S i r : This refers to your letter of November 25, 1993 requesting opinion on whether Requinta Development Foundation (RDF),a non-stock, non-profit corporation, may be allowed to operate and maintain for commercial purposes a CATV System as one of RDF's countryside/rural urban enterprise projects/programs. As stated, the National Telecommunications Commission (NTC) deferred action on the company's application for a Certificate of Authority to install, construct, operate and maintain commercially a CATV System until such time that a favorable opinion from the Securities and Exchange Commission shall have been sought. Section 87 of 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 operations 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) Under the foregoing provision, non-stock, non-profit corporations are not empowered to venture on economic business activities . However, as incident to its purpose(s), it may engage in business activities which are reasonably necessary to carry out the purpose(s) for which the corporation was organized. Any such power which is reasonably necessary to enable a corporation to carry out its express powers granted and the purposes of its creation is to be deemed implied or incidental purpose. (SEC Opinion dated February 18, 1993 addressed to Erlinda B. Ahoro, citing previous SEC opinion and Am. Jur., sec. 740) However, activities merely convenient or useful are not implied if they are not essential, having in view the nature and object of incorporation . (Ibid, citing Planters Bank v. Sharp, 6 How (VS) 301, 121, ED. 447) Thus, while non-stock corporations in general are not empowered to venture on economic business activities they may, as incident to their purposes, engage in economic business activities which are reasonably necessary or essential to carry out the purpose(s) for which they are organized, but unlike stock corporations, any profit that may be derived from such business activities are not distributable to the members, but are used for the furtherance of corporate purposes, and in case of dissolution, the corporate assets of non-stock corporations shall be distributed in accordance with Sections 94 and 95 of the Corporation Code. cdlex Therefore, in determining whether a non-stock corporation can engage in commercial business activities, much would depend on the purpose clause provision in its articles of incorporation. If the business activity is not incidental, necessary or essential to carry out the express objectives of the corporation as appearing in its articles of incorporation, the same cannot be undertaken by a non-stock corporation. A perusal of the articles of incorporation of subject corporation disclosed that the above mentioned commercial business activity is not necessary or essential to carry out the purpose for which the corporation was organized as appearing in its articles of incorporation, quoted hereunder: "To help in the growth campaign and development of health, education, food sufficiency, countryside/urban enterprises, community institutions, appropriate information dissemination, rural agro-industrial advancement, environmental peace/preservation/safety, and livelihood generation projects and programs." Therefore, it cannot be legally undertaken by the corporation. Please be advised accordingly Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman