Opinion No. 14-35 RE: Remittance of Donations of a Domestic Corporation to that of a Foreign Foundation

SEC BuildingEDSAGreenhillMandaluyong City Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

27 November 2014

SEC-OGC Opinion No. 14-35 Remittance of Donations of a Domestic Corporation to that of a Foreign Foundation

6th Floor Strata 2000 Building TANADA VIVO AND TAN F.Ortigas Road,Ortigas Center 1605 Pasig City ATTY.WIGBERTO R.TANADA JR

Sr:

the furtherance of their objective in supporting indigent children worldwide. to Children International CI-US, a non-profit,United States-based organization for concerning questions as to whether or not your client, Children International Inc.CI- PHLis permitted by its Articles of Incorporation to remit some or all of its donations This refers to your letter-request for legal opinion dated October 25, 2013

Missouri, United States of America, dedicated to improving the lives of children living in dire poverty in nine countries around the world, including the Philippines. CN201215838. CI-US, on the other hand, is an organization based in Kansas City You disclosed that CI-PHL is a domestic corporation, under SEC Registration No.

follows: You stated in your letter that the purposes for which CI-PHL was created are as

nutritional trainings, among others, without regard to race, color, creed religion, national origin sex and physical condition and to perform other charitable or social service activities nationwide; provide for the socio-economic development of indigent children such as giving them access to healthcare, educational assistance, feeding and 1To support and conduct projects and programs which

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any persons, whether natural or juridical, here and abroad, in the form of cash financial instruments, personal properties; ( To receive donations, bequests, gifts, contributions from

association to carry out its objectives; and undertakings and collect income derived therefrom in order for the (3 To invest such donations in financial instrumentsor such

organizations for the purpose of carrying out the association's objective. () To affiliate or contract with other local and international

to CI-US,which shall then pool remittances from CI-PHL together with other donations from around the world, including other related companies, to fund CI-US international programs for indigent children worldwide,including the Philippines.As such,it will be CI-US that will have the final determination as to which program for indigent children will be funded from the donations received from CI-PHL You further stated that CI-PHL would remit some or all of its received donations

some or all of its received donations with a foreign non-profit entity like CI-US. Simply put, the query is whether or not CI-PHL, under its purposes, may remit

itself an act of donation, considering that CI-PHL would give such amounts, gratuitously recognition to the growing tendency to regard charitable gifts as within the scope of scientific, civic, or similar purposes xxx Section 36(9 of the Corporation Code gives conditions in the community in which such corporations are doing business. and with all liberality,in favor of CI-US.Pursuant to Section 369 the Corporation corporate authority. It is based on the modern view that business corporations are not organized solely as profit-making enterprises but also as economic and social institutions with corresponding public responsibility to aid the betterment of economic and social Code, among the powers of a corporation include the power "to make reasonable donations, including those for the public welfare or for hospital, charitable, cultural. The remittance of CI-PHL in favor of CI-US is, for all intents and purposes,by

in your letter reveal that they do not expressly state the specific purpose of remitting but can be impliedly included therein. A cursory reading of the purposes you mentioned with its corporate purposes as stated in its Articles of Incorporation. It has been previously opined by the Commission that a purpose clause can be reasonably stretched or construed to cover matters or objects which could not have been expressly enumerated at the time of incorporation due to their huge number or changes in economic conditions Moreover, CI-PHL's act of remitting and/or donating to CI-US is in accordance

De Leon, Corporation Code of the Philippines (2002 ed.), p. 332. SEC-OGC Opinion No.11-47November 25,2011,addressed to Comm. Carlos L. AgustinAFP Ret. Corporation Code of the Philippines 1994 ed.,p.206.See also SEC Opinion dated December 17,1999, addressed to Director Gia Marie C. Andres;and SEC Opinion dated September 12,2002,addressed to Hon Amado D. Valdez. SEC Opinion dated April 12,1991, addresscd to Mr.Libertad Lagman-Sy cited in I Lopez The

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their donations to CI-US can be considered as an act of contracting with other international organizations." fourth purpose of CI-PHL's Articles of Incorporation shows that it may affiliate or contract with other local and international organizations for the purpose of carrying out the association's objectiveThe intended act of CI-PHL of remitting some or all of the donations to other persons, whether natural or juridical. However, a reading of the

to other organizations: Accordingly, the CI-PHL may be allowed to remit donation proceeds to CI-US, because CI-US will use such funds to carry out the purposes and transaction creating contractual relations, including donations or submission of proceeds objectives for which CI-PHL was incorporated. The term "contracting" is a term of wide latitude, encompassing any kind of

Implementing Rules and Regulations of the Securities Regulation Code,as amended by SEC Memorandum Circular No.4, Series of 2013 dated March 7,2013, regarding Reportorial Requirements of Non-Stock Corporations.The remittance by CI-PHL to CI- US of its donation is a disbursement of funds, which CI-PHL should appropriately report to the Commission together with its Audited Financial Statements. However, please take into consideration Rule 68, Part I, paragraph A of the

it will be disclosed that the facts relied upon are different, this opinion shall be rendered shall not be used in the nature of a standing rule binding upon the courts, or upon the facts disclosed in the query and relevant solely to the particular issues raised therein and Commission in other cases of similar or dissimilar circumstances. If upon investigation null and void. It shall be understood that the foregoing opinion is rendered based solely on the

CAMMOOSNCORREA General Counsel

4 4. OTHER DOCUMENTS TO BE FILED WITH THE FINANCIAL STATEMENTS SEC Memorandum Circular 2003-15No.7 The following documents shall be filed with the annual audited financial statements and in the interim financial statements, if required herein: "A.Non-stock and non-profit organizations completeness of the following schedules "A sworn statement of the organization's President and Treasurer on the accuracy and provide the naturc and amount of each item. If material in amount (10% or more of the total), the details of such disbursement shall likewise be indicated. Emphasis and underscoring supplied i Schedule of Receipts or Income Other Than Contributions and Donations.This schedule ii. Schedule oContributions and Donations that is prepared in accordance with the prescribed form per AnnexA"and shall provide the nature and amount of each item "ii. Schedule of Disbursements according to sources and activities, This schedule shall