Opinion No. 05-05 RE : Voting Rights of a Delinquent Member

. ' L. I.J " Republic of the Philippines SECURITIES AND EXCI-IANGE COMMISSION SEC Building, EDSA, Greenhills Mandaluyong City Metro Manila Philippines 08 June 2005 SEC Opinion No. 05-05 . Re: Voting Rights of a Delinquent Member MR. RIZAL D. LA YUGAN 814 C Antel Seaview Towers 2626 Roxas Blvd., Pasay City Sir: This refers to your letter dated 14 April 2005 requesting the interpretation of Article I, Section 5 of the amended. by-laws of Antel Sea View Tmvers Condominium Association, Inc. Article I, Sections 5 of the by-laws provides and we quote: "Section 5. Voting Power - Each member shall be entitled to such number of votes as shall correspond to his membership interest or participation in the corporation as provided in the Amended master Deed and Declaration of Restl-ictions of the Project: Provided: however, that any member who is delinquent in the payment of any assessment levied upon him by the Board of Directors pursuant to the powers granted by these by-laws shall not be qualified to cast its vote in any meeting of the corporation and his voting rights shall be exercised by the corporation, while those of the amortizing owners shall be exercised by the developer, Sea View Properties, Inc. until such time as the defaulting merilbers and amortizing owners shall have fully settled their respective obligations to the corporation and developer and or until the title to the uriit of the. Project is transferred in the name of theowner thereof. (as al11endedon H) March 2001)" !

" ~.' . ' The issue that should be raised before the Commission is whether or not . the voting rights of a delinquent member in a non-stock, non profit corporation' may be assigned and represented by the Condominium Corporation in any meeting of the corporation. The Corporation Code of the Philippines under Title Xl, Non Stock Corporation has no provision on the rights and obligations of a delinquent member. In such event, the provision governing stock corporations, when pertinent, shall be applicable to non-stock corpOl'ations, except as may be covered by specific provision of Title Xl, Non-Stock Corporation of the .Corporation Code of the Philippines. A corollary provision can be found under Section 24 of the Corporation Code which categorically provides that: "Section 24. Election of directors or trustees - At all elections of directors or trustees, there must be present, either in person or by Tepresentative authorized to act by written proxy, the owners of the majority of the outstanding capital stock, or if. there he 110 capital stock, a majnrity nf t1,e lllemlJers entitled to 7'ote. Provided, however, tllat nn delinquent stock sImlllle 7'oteil. xxx" In a ptevious opinion~ the Commission ruled that "no stock delinquent for unpaid subscription shall be voted'or entitled to vote or represented at any stockholders' or directors meeting, or for any corporate purpose whatsoever."l Considering the applicability of the above-cited provision on the delinquency of a member in a condominium corporation, the voting rights of a delinquent member cannot ,be assigned or represented by the condominium corporation. Moreover, for purposes of determining a quorum, it is clear that the required quorum for the election of the board of trustees of non-stock corporation is majority of the members entitled to vote. Accordingly, only members in good standing are entitled to vote. "Delinquent members should not be included in determining th'e existence of the required quorum."2 I SEC Opinion dated.16 November 1982 addressed to Philippine Overseas Drilling and Oil Exploration Development Corpl)ration. 2 SEC Opinion dated 23 Febmary 1993 addressed to Mr. Ponciano Marql1ez. J

e ••• In. view of the foregoing, you are l1ereby directed to amend' Article 1, Section 5 of the by-laws of the condominium association to conform \,vith the . provisions of the Corporation Code. Very h°ltly yours, VERNETTE G. UMALI-PACO General Counsel