Opinion No. 06-37 RE : Quorum consisting of less than majority

.. Republic of the Philippines Department of Finance Securities and Exchange Commission SEC Bldg. EDSA, Greenhills, Mandaluyong City OFFICE OF THE GENERAL COUNSEL 09 November 2006 SEC-DGe Opinion No. 06-37 Quorum consisting of less than majority SANIDAD ABA YA TE VITERBO ENRIQUEZ & TAN 2nd Floor, Eastside Building 77 Malakas Street Brgy. Pinyahan, Diliman Quezon City Attention: ATTY. ALEXES M. ENRIQUEZ Gentlemen: This refers to your letter dated 03 November 2006 requesting OpInIOn on whether it is permissible for the by-laws to provide quorum which is less than a majority. Pertinent to your query is the provision of Section 52 in ;relation to Section 42 (3) of the Corporation Code of the Philippinesl, which reads as follows: "Sec. 52. Quorum in meetings. Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in the case of non-stock corporations," The term "quorum" has been defined as "that number of members of the body which, when legally assembled in their proper places, will enable the body to transact its proper business, or, in other words, that number that makes a lawful body and gives it power to pass a law or ordinance or do any other valid corporate act. "2 As a rule, a majority of members or stockholders is a quorum for the transaction of a corporation's business and other corporate acts. A careful reading of the afore- quoted provision would, however, show that corporations are authorized to define what 1 Batas Pambansa BIg. 68. 2 People v. Ebio, G.R. No. 147450,29 Sept. 2004 citing Gavellana v. Tayo, 6 SeRA 1042 (1962).

.. • constitutes a quorum. In fact, the Commission had the occasion to opine that any corporation whether stock or non-stock is authorized to provide in its by-laws a specific number of stockholders or members necessary to constitute a quorum for the transaction of a corporate business.3 Thus, a corporation can state in its by-laws that a quorum shall be less than majority or greater than what was provided for in the Corporation Code unless the Code specifically provides otherwise. Worthy of note also is that the by-laws provision on quorum will not apply in instances where the Corporation Code explicitly requires a specific number of stockholders or members necessary to resolve or carry out a particular corporate proposal. Some of these instances are: 1. Amendment of articles of incorporation4- by a vote or written assent of at least two-thirds (213) of the member or stockholders representing at least two-thirds (2/3) of the outstanding capital stock and a majority of the board of directors or trustees; 2. Removal of directors or trustees5- by a vote of at least 2/3 of the outstanding capital stock or of the members entitled to vote; 3. Extension or shortening of corporate term6-by a majority vote of the board of directors or trustees and at least 2/3 vote of the outstanding capital stock or of the members; and 4. Sale, lease, exchange, mortgage, pledge or any disposition of all or substantially all of the corporate assets 7 - by a majority vote of the board of directors or trustees and at least 2/3 vote of the outstanding capital stock or of the members. In view of the foregoing, this Office is of the .opinion that Paragon Plaza Condominium Corporation can specify in its by-laws that members representing forty (40%) percent of the entire membership will suffice to constitute a quorum unless otherwise provided by the Corporation Code. The foregoing opinion is based solely on the facts disclosed in the query and it shall not be used in the nature of a standing rule binding upon the Commission in other cases.s VERNETTEG. UMALI-PACO General Counsel paragon plaza condo assn.opinion.sxw 3 SEC Summary of Advisory Opinions (1982-1994), p. 194 citing Letter dated 03 March 1986 addressed to Fernando Ma. Alberto, SQB March and June 1986, p. 34. 4 Sec. 16, Corporation Code. / 5 Section 28, Ibid. 6 Sec. 37, Ibid. 7 Sec. 40, Ibid. 8 SEC Memorandum Circular No. 15, series of 2003.