July 10, 1998

Mr. Crismel F. Verano

Valley Golf & Country Club, Inc.
Antipolo Rizal

Sir:

This refers to your letter dated June 25, 1998 requesting advice on what
course of action to take on the existing situation where the Club allegedly failed to
muster the required quorum in several meeting called for the election of a new set
of Directors. prcd

Under a situation where a corporation encounters several unsuccessful

attempts or if it would be impossible for the corporation to get the required
quorum of the stockholders/members necessary to transact business, it may,
pursuant to the provisions of Presidential Decree No. 902-A, as amended, quoted
hereunder, petition the SEC for the appointment of a management committee to
undertake the management thereof.

"SECTION 6. In order to effectively exercise such jurisdiction,

the Commission shall possess the following powers:

xxx xxx xxx

d. To create and appoint a management committee, board, or

body upon petition or motu proprio to undertake the management of
corporations, partnerships or other associations not supervised or regulated
by other government agencies in appropriate cases when there is imminent
danger of dissipation, loss, wastage or destruction of assets or other
properties or paralization of business operations of such corporations or
entities which may be prejudicial to the interest of minority stockholders,
parties-litigants or the general public. . . . .

The management committee or rehabilitation receiver, board or body

shall have the power to take custody of, and control over, all the existing
assets and properties of such entities under management; to evaluate the
existing assets and liabilities, earnings and operations of such corporations,
partnerships or other associations; to determine the best way to salvage and
protect the interest of the investors and creditors: to study, review and
evaluate the feasibility of continuing operations and restructure and
rehabilitate such entities if determined to be feasible by the Commission
until dissolved by order of the Commission. . . . ." (Emphasis supplied)

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 Please be advised accordingly. cdphil

Very truly yours,

(SGD.) PERFECTO R. YASAY, JR.

Chairman

August 9, 1991

Mr. Benjamin A. Bautista

President
Innovative Service Specialist
Development, Inc.
2nd Floor Pelaez Building
771 J. P. Rizal Street
Makati , Metro Manila

Sir:

This refers to your letter dated July 4, 1991 requesting opinion relative to
the plan of Innovative Services Specialist, Inc. to reduce the number and
composition of its Board of Trustees from ten (10) to seven (7) or even five (5)
due to the difficulty of mustering a quorum during trustees meetings. LibLex

In connection therewith, please be advised that to effect a change in any

provision or matter stated in the articles of incorporation which in your case is the
decrease of the number of the members of the board, compliance with Section 16
of the Corporation Code is necessary. The law provides, to wit:

"SECTION 16. Amendment of articles of incorporation. —

Unless otherwise prescribed by this code or by special law, and for
legitimate purpose, any provision or matter stated in the articles of
incorporation may be amended by a majority vote of the board of directors
or trustees and the vote or written assent of the stockholders representing at
least "two-third (2/3)" of the outstanding capital stock without prejudice to
the appraisal right of dissenting stockholders in accordance with the
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 provision of the of this Code, or the vote or written assent of two thirds (2/3)
of the members if it be a non-stock corporation.

The original and amended articles together shall contain all

provisions required by law to be set out in the articles of incorporation. Such
articles, as amended shall be indicated by underscoring the change or
changes made and a copy thereof duly certified under oath by the corporate
secretary and a majority of the directors or trustees stating the facts that said
amendment or amendments have been duly approved by the required vote of
the stockholders or members shall be submitted to the Securities and
Exchange Commission.

The amendments 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. (Emphasis supplied)

If the amendment of the articles of incorporation is not possible because the

required majority of the Board cannot be obtained due to always lack of quorum,
the members of the Corporation, as an alternative, may replace the present
members of the Board who are no longer interested in their posts pursuant to
Section 28 of the Corporation Code which provides: cdtai

"SECTION 28. Removal of directors and trustees. — Any

directors or trustee of a corporation may be removed from office by a vote of
the stockholders holding or representing two-third (2/3) of the outstanding
capital stock, or if the corporation be a non-stock corporation, by a vote
two-third (2/3) of the members entitled to vote: Provided, That such removal
shall take place either at a regular meeting of the corporation or at a special,
meeting called for the purpose, and in either case, after previous notice to
stockholders or members of the corporation of the intention to propose such
removal at the meeting. A special meeting of the stockholders or members
of a corporation for the purpose of removal of directors or trustees ,or any of
them, must be called by the secretary on orders of the president or on the
written demand of the stockholders representing or holding at least a
majority of the outstanding capital stock, or if it be a non-stock corporation,
on the written demands of a majority of the members entitled to vote. Should
the secretary fail or refuse to call the special meeting upon such demands or
fail to give the notice, or if there is no secretary, the call for the meeting may
be addressed directly to the stockholders or members by any stockholder or
member of the corporation signing the demand. Notice of the time and place
of such meeting, as well as the intention to propose such removal, must be
given by publication or by written notice as prescribed in this Code. The
vacancy resulting from removal pursuant to this section may be filled by
election at the same meeting without further notice, or at any regular or at
any special meeting called for the purpose, after giving notice as prescribed
in this Code. Removal may be with or without cause: Provided, that removal
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 without cause may not be used to deprive minority stockholders or members
of the right of representation to which they may be entitled under Section 24
of this Code.

Thereafter, the newly elected members of the Board may convene, and by
majority vote thereof, proceed with the plan to reduce the number of the Board in
accordance with Section 16 of the Corporation Code.

Please be advised accordingly. cda

Very truly yours,

(SGD.) ROSARIO N. LOPEZ

Chairman

April 4, 1991

Mr. Jose Ma. Nieto

3rd Floor, La Paz Centre
Salcedo cor. Herrera Sts.
Legaspi Vill., Makati

Sir:

This refers to your letter of February 26, 1991 requesting opinion on the
queries posed therein. cdphil

As stated your client, Isabela Golf Club, Inc. has a problem on the
procurement of quorum in the sense that for a number of years the stockholders'
meeting of the corporation have been short of the quorum required by law and its
by-laws. As a consequence, the incumbent members of the board have always
been holding over their position as directors. Majority of the stockholders have
became indifferent to the detriment of other stockholders. Hence, the corporation
cannot act on matters which require prior approval by the stockholders. Moreover,
some stockholders have passed away and the required quorum becomes more
difficult to achieve. The heirs of some stockholders appear to have no interest in
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executing the transfer of the shares of their deceased predecessors.

Your queries are:

1. What actions, steps or measures can the corporation or the

active stockholders take under such circumstances?

2. In the absence of a quorum, may the Board approve and

proceed with the sale of its only asset, which is the piece of
land where the golf course is situated?

Relative to the hold-over status of its present directors, generally there must
be an annual election of directors. However, in case of failure of the corporation to
hold an election due to any justifiable reason, the incumbent members of the board
may hold-over their office and continue their function until their successors are
duly elected and qualified. This hold-over principle is sanctioned under Section 23
of the Corporation Code which provides that the Board of Directors shall hold
office for one (1) year and until their successors are elected and qualified. Since in
the present case no election has been possible due to luck of quorum, the
incumbent Board may hold-over until a new Board is chose and qualified.

Anent the plan of the present Board to sell the land where the golf course is
located, Section 40 of the Corporation code provides:

"SECTION 40. Sale or other disposition of assets. — Subject to

the provisions of existing laws on illegal combinations and monopolies, a
corporation may, by a majority vote of its board of directors or trustees, sell,
lease, exchange, mortgage, pledge or otherwise dispose of all or
substantially all of its property and assets, including its goodwill, upon such
terms and conditions and for such consideration, which may be money,
stocks, bonds or other instruments for the payment of money or other
property, or consideration as its board of directors or trustees may deem
expedient, when authorized by the vote of stockholders representing at least
two-thirds (2/3) of the outstanding capital stock; or in case of non-stock
corporation, by the vote of at least two-thirds (2/3) of the members, in a
stockholders' or members' meeting duly called for the purpose. Written
notice of the proposed action and of the time and place of the meeting shall
be addressed to each stockholder or member at his place of residence as
shown on the books of the corporation and deposited to the addressee in the
post office with postage prepaid, or serve personally: Provided, That any
dissenting stockholder may exercise his appraisal right under the conditions
provided in this Code.

A sale or other disposition shall be deemed to cover substantially all

the corporate property and assets if thereby the corporation would be
rendered incapable of continuing the business or accomplishing the purpose

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 for which it was incorporated. cdlex

After such authorization or approval by the stockholders or

members, the board of directors or trustees may, nevertheless, in its
discretion, abandon such sale, lease, exchange, mortgage, pledge or other
disposition of property and assets, subject to the rights of third parties under
any contract relating thereto, without further action or approval by the
stockholders or members.

Nothing in this section is intended to restrict the power of any

corporation without the authorization by the stockholders or members, to
sell, lease, exchange, mortgage, pledge, or otherwise dispose of any of its
property and assets if the same is necessary in the usual and regular course
of business of said corporation or if the proceeds of the sale or other
disposition of such property and assets be appropriated for the conduct of its
remaining business.

In non-stock corporations, where there are no members with voting

rights, the vote of at least a majority of the trustees in office will be
sufficient authorization for the corporation to enter into any transaction
authorized by this section." (Emphasis supplied)

It is clear from the aforecited provision that the stockholders' vote necessary
to approve the sale of all or substantially all of the corporate assets is two-thirds
(2/3) of the outstanding capital stock, or in the case of a non-stock corporation, by
the vote of at least two-thirds of the members. Thus, the sale of the golf-course
short of this legal requirement cannot be validly effected by the corporation.

Under the above-situation, due to the unsuccessful attempt of the

corporation to muster the required quorum in all stockholders' meeting, the
corporation may petition the SEC for the appointment of a management of the
committee/receiver to undertake the management of the corporation pursuant to
the provisions of Presidential Decree 902-A, as amended. llcd

Very truly yours,

(SGD.) RODOLFO L. SAMARISTA

Associate Commissioner

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