Opinion No. 22-15 Re: Election of Representatives of Corporate Unit Owners as Trustees and Officers of Condominium Corporations

Securities ana Exchange Commission

OFFICE OF THE GENERAL COUNSEL

SEC-OGC Opinion No.22-15 Re: Election of Representatives of Corporate Unit Owners as Trustees and Officers of Condominium Corporations

19 October 2022

LAW OFFICES (CCPC LAW) Unit 1102,The Centerpoint Building Ortigas CenterPasig City,1605 CUSTODIO CRUZ PUNO AND CAMARA Julia Vargas Avenue corner Garnet Road info@ccpclaw.org

Attention: Atty.Niersen C.Custodio Atty.Ineandro Pedro P.Tolentino

Dear Gentlemen

the election of representatives of corporate unit owners as trustees and officers of your client condominium corporation registered with the Commission. Amara en Terrazas Condominium Corporation ("AETCC"). which is a non-stock, non-profit This refers to your letter requesting the Commission's opinion on questions regarding

Declaration of Restrictions have no restriction as to the membership in AETCC to be solely natural and/or juridical persons/entities. Thus, AETCC's membership is composed of natural and activities. AETCC's Articles of Incorporation (AO), Amended By-Laws (BL), and Master Deed with juridical persons. As stated in your letter, AETCC is not engaged in wholly or partially nationalized

Relative thereto, you are requesting the Commission's opinion on the following queries: Firstly,in the case of our clientAETCC,who has a mixed composition of natural and juridical or corporate unit owners and/or members: 1 Are juridical/corporate unit owners and/or members allowed to be elected in the Board of Trustees based on said set up?

Is (sic SEC Opinion No.05-06 and other cited opinions of the same,during the current implementation of 2

the RCC,are sic still consideredgood opinions Secondy in case of theffirmative in the firt st [of] quere 3 May a juridical or corporate unit owner and/or members representative, as Trustee,be eected as a corporate officer e.g,President) 4. If so, what are the required steps or policies to be followed for the corporation to achieve soundly the same?" 14/F TheSECHead cedo Vill e.7907 Makall Avenue D www.sec.gov.ph [ogc_piccsec.gov.ph O

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First and Second Queries

We answer the first query in the negative, with a qualification.

Generally, directors or trustees must either be elected from among the shareholders of a

stock corporation or from the general membership of the corporation in case of a non-stock

corporationi Simply stated, no person shall be elected as trustee unless he is a member of a

nonstock corporation.

An exception to this rule is when the stockholder/member is a corporate unit-

owner/member of a condominium corporation, to wit:

"In this connection,it is worth mentioning that beneficial ownership is not necessary for one to become a director,and that a person who holds the legal tite to a stock on thebooks of the corporation is qualified, although the beneficial ownership thereof may be in another.(2 FletcherCy of Corps.1982 rev.vol.sec 300 at 93,citing Transamerica Corp.v.Parrington115 Cal App.2d 346,252P 2d385,12 USC 72Hence,a trustee may be eligible as director notwithstanding

absence of beneficial right, title, or interest in the stock.

It is therefore logical and practical to apply the foregoing principle in the case of condominium corporations. While a corporation cannot act by itselfbeing a uridical personit can act through its officers and authorized agent Accordingly,an officer or duly authorized agent or trustee who

has been designated in the Board Resolution of the corporate unit owner or member as its

representative for the express purpose of qualifying him as director and whose appointment

as such has been recorded in the corporate booksmay be eligible to be elected as director To rule otherwise would create a situation where there would be no Board of Directors of the

CorporationEmphasis supplied

In fact,the BL of AETCC authorizes the appointment of a representative to be elected as a

director or trustee. Article II, Section 2 of AETCC's BL allows a member, which is a juridical

person, to designate a representative through an appropriate resolution issued by its governing

board. The same Section also requires the submission of a certified copy of the said resolution to

AETCC's corporate secretary.

Thus, while a corporate unit owner cannot itself be elected as a trustee of the

condominium corporation because it is not a natural person, and hence cannot attend board

meetings,t its representative duly designated and recognized as above-stated may do so.

As to your second query, and in view of the foregoing, we answer in the affirmative. SEC

Opinion No. 05-06 and its cited SEC opinions are still applicable with respect to the subject issue.

SEC Memorandum Circular No. 16,Series of 2019 (SEC MC 16-19 does not reverse the

said opinions as it was only issued for the clear and proper implementation of Section 107 of the

Revised Corporation Code (RCC that is, to provide guidelines on the composition of

SEC-OGC Opinio be 19-30d 05-06 d to Atty.Victor P.ta to Att 30d in and AttyEdon yron K.Sy armSEC Opinion dated16 April 199 Augusto B

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purpose for which the guidelines were implemented, the designation of incorporators as incorporators for the registration of domestic corporations under the RCC. Considering the directors or trustees refers to the mandated qualifications applicable to the representatives of juridical incorporators only incorporation/organization. while the corporation is being formed, and not after its

Third and Fourth Queries

As to your third query, we answer in the affirmative.

provides that immediately after the election of the board, the corporation must formally organize and elect: (a) a president. who must be a director: (b) a treasurer, who must be a resident; (c) a secretary, who must be a citizen and resident of the Philippines; and (d such others officers as may be provided in the BL. The same person may hold two (2) or more positions concurrently. except that no one shall act as president and secretary or as president and treasurer at the same time, unless otherwise allowed in the RCC.s The BL may, however, include other qualifications/disqualifications of an officer. Section 24 of the RCC provides the minimum qualifications of corporate officers. It

or trustee. In other words, the other corporate officers, such as the Secretary and Treasurer, of the corporation need not be directors or trustees, absent any qualification in the BL which states Thus, the President is the only corporate officer required under the RCC to be a director

otherwise.

the condominium corporation may become the President thereof. Accordingly, a representative of a corporate unit owner who was elected as a trustee of

thereto, considering our discussion on your first three queries. As to your fourth query, we no longer deem it necessary to provide a separate answer

facts, circumstances and documents disclosed/submitted, and should be considered relevant solely to the particular issue raised therein. It shall not be used in the nature of a standing rule binding upon the Commission in other cases or upon the courts whether of similar or dissimilar circumstances.1o If upon investigation it will be disclosed that the facts relied upon are different, this opinion shall be rendered null and void. It shall be understood that the foregoing opinion is rendered solely on the basis of the

Very truly yours

ROMUALD C. PADILLA Lasfmma/l eneral Counsel Cm

Section7SECM er200

(63 2) 818 548 /(32) 818 518 14/f The SEC Headquarters.7907 Makaft Avenue D www.sec.gov.ph ogc_piccsec.gov.ph 0c