RE : UPRIIS Confederation of Irrigators Association (UCFIA)

February 26, 2004 SEC OPINION NO. 12-04 Re : 1. Amendment without SEC Approval 2. Maximum Term of Office in a Non- Stock Corporation Mr. Proceso T. Domingo Operations Manager National Irrigation Administration Upper Pampanga River Integrated Irrigation System (UPRIIS) Office of the Operations Manager Cabanatuan City RE : UPRIIS Confederation of Irrigators Association (UCFIA) Sir : This pertains to your letter inquiring on the following matters: 1. "Whether the five (5) year term of office of the corporate officers of UPRIIS Confederation of Irrigators Association (UCFIA) which was approved by the General Assembly binding despite the associations failure to seek approval of the Commission; 2. Whether the proposed amendment (five year term of the officers) is valid notwithstanding that the same is currently implemented since 06 April 2001; 3. Whether the election of the new set of officers held in a general Assembly last 2003 constitute a violation of the associations by-laws fixing the term of officers for five years; 4. Whether NIA-UPRIIS which is directly responsible for the formation and development of UCFIA can call for a General Assembly meeting for the election or reorganization based on the association's existing by-laws" What is the procedure, if any? 5. For a non-stock organization like UCFIA, what is the authorized minimum and maximum term of office of the officers as provided by-law?" Referring to your first, second and third queries, the by-laws of UPRIIS Confederation of Irrigators Association (UCFIA) provides: 'TUNTUNIN IV Pangkat B-Panahon ng Panunungkulan ng BOD Ang mga kagawad ng Lupon ay manunungkulan sa loob ng isang (1) taon mula sa pagkakahalal. Ang sinuman ay may karapatang mahalal at manungkulan ng dalawang magkasunod na termino lamang. Maaari lamang siyang maging kandidatong muli sa ikatlong pagkakataon makalipas ang isang terminong pagitan pagkatapos ng ikalawa niyang pagkakaupo." Section 16 of the Corporation Code provides: " The amendment shall take effect upon its approval by the Securities and Exchange Commission or from the date of filing with the said Commission if not acted upon within six (6) months from the date of filing for a cause not attributable to the corporation ." 1 Moreover, amendments shall only be effective upon the issuance by this Commission of a certification that the same are not inconsistent with the Code. 2 There is nothing in the records that would show that, to date, such certification had been issued. Thus, the amendment referring to the term of office of the corporate officers remains unenforceable and ineffective. To render such amendments valid and effective, the amendment needs to be approved by the SEC and the certificate of filing duly issued. " Conditio praecedens adimplere debet prius quam sequator effectus " (A condition precedent must be fulfilled before the effect can follow). Consequently, any and all acts proceeding from the unapproved amendments having been done in contravention of the above-cited provision of the Corporation Code is void and can produce no legal effect whatsoever. 3 The fact that the proposed amendment of five- year term of the officers was implemented since 06 April 2001 or more than two (2) years thereafter does not make the illegal act legal and valid. It is a fundamental maxim in law that which was void originally does not by lapse of time become valid. " Quod ab initio non valet in tractu temporis non convalescit . 4 Anent your fourth query, the by-laws of herein subject association states: IDTHcA "Tuntunin VIII, Pagpupulong Pangkat A Pagpupulong ng Pangkalahatang Kasapian Lahat ng Pangulo ng mga kasapiang Samahan Magpapatubig ay magtitipon sa isang lugar o gusali at petsa tatlumpong (30) araw bago o makaraan ang buwan ng Abril ng bawat taon upang doon ganapin ang taunang pulong ng pangkalahatang kasapian. Maaring doon at noon din gaganapin ang pangkalahatang halalan ng mga pamunuan at pagtatalaga ng mga kagawad ng mga lupon ng Kalipunan. Matutuloy lamang ang pangkalahatang pulong at paghahalalan kung dumalo ang may payak na kahigitan (simple majority 50% + 1) sa kabuuang bilang ng mga pangulong dapat dumalo ang may payak na kahigitan (simple majority 50% 1) sa kabuuang bilang ng mga pangulong dapat dumalo. Bago maghalalan, ang pamunuan ay dapat mag-ulat sa kapulungan ng taunang-ulat tungkol sa mga nagampanang gawain at pananalapi ng Kalipunan. Bibigyan ng limitadong oras upang pag-aralan at pagtatanong ang mga kasapi tungkol sa mga bagay na naiulat. Pagkatapos ng pag-uulat at pagtatalakayan ay tutuloy na sa halalan. Magtatalaga ng mga namamahala sa halalan (election committee) na siyang magpapaliwanag sa tuntunin ng halalan, katangian ng mga kandidato at mga pangalan ng opisyal na kandidato." In addition, to the afore-cited provision of the association's by- laws, Sec. 50, par. 4 of the Corporation Code also provides: Whenever, for any cause, there is no person authorized to call a meeting, the Securities and Exchange Commission, upon petition of a stockholder or member on a showing of good cause therefor, may issue an order to the petitioning stockholder or member directing him to call a meeting, of the corporation by giving proper notice required by this Code or by the by-laws. The petitioning stockholder or member shall preside thereat until at least a majority of the stockholders or members present have chosen one of their number as presiding officer. Subject to the rules, regulations and procedure of NIA-UPRIIS and it being the juridical entity responsible for the formation and development of UCFIA, NIA-UPRIIS may assist UCFIA in the latter's General Assembly for election, conciliation/mediation 6 or may intervene between contending members of the association to promote reconciliation, settlement, or compromise. The term of office of trustees may vary under the articles of incorporation or by-laws. However, the Commission limits the term of the members of the Board of non-stock corporations to only three (3) years. 6 Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel Footnotes 1. Sec. 16, par. 3, Corporation Code of the Philippines. 2. Sec. 48, par. 3, ibid. 3. Edon T. Yap, Petitioners, Vs. North Greenhills Association, et al ., [Sec Case No. 4088, December 23, 1992.] 4. Ibid. 5. Conciliation process whereby a third party (conciliator) brings the parties together, encourages them to discuss their differences and assists them in developing their own proposed solutions. Mediation process whereby a third party (mediator) is more active in assisting the parties reach acceptable solutions to the problem/s and helps the disputing parties develop or come out with an acceptable solution. The mediator can even submit his own proposal/s for the settlement of disputes. 6. Sec. 92, Corporation Code provides: Election and term of trustees. Unless otherwise provided in the articles of incorporation or the by-laws, the board of trustees of non-stock corporations, which may be more than fifteen (15) in number as may be fixed in their articles of incorporation or by-laws, shall, as soon as organized, so classify themselves that the term of office of one-third (1/3) of their number shall expire every year; and subsequent elections of trustees comprising one-third (1/3) of the board of trustees shall be held annually and trustees so elected shall have a term of three (3) years. Trustees thereafter elected to fill vacancies occurring before the expiration of a particular term shall hold office only for the unexpired period. No person shall be elected as trustee unless he is a member of the corporation. Unless otherwise provided in the articles of incorporation or the by-laws, officers of a non-stock corporation may be directly elected by the members.