Opinion No. 24-21 Re: Non-Stock/Non-Profit Organization to Establish Income Generating Activity - Contact/Call Center

Exchange Securities and Commission

BAGONG PILIPINAS

e August 2024 SEC-OGC Opinion No.&- 2 RE: Non-Stock/Non-Profit Organization to Establish Income Generating Activity - Contact/ Call Center

ATTY.GENESES R.ABOT West Triangle Quezon City 389 Quezon Ave. corner West 6th St.

Dear Atty.Abot

Development Foundation, Inc. (WVDF, a non-stock, non-profit organization can establish a business process outsourcing ("BPO" service or contact/call center that will serve other World Vision affiliates in other countries, without amending its Article of Incorporation ("AOI). This refers to your letter dated 12 March 2019 requesting an opinion on whether World Vision

social development services all over the Philippines. You also averred that it is an international organization because it is affiliated with other organizations from around the world carrying the World 1995,is a Christian child focused emergency,relief,development, and advocacy organization providing Vision International trademark and doing the same ministry. In your letter, you stated that WVDF,established and registered with the Commission on 12 July

center services to its World Vison affiliates in other countries. Hence, your query. You further stated that to augment its programing costs, WVDF proposes to provide contact or call

Sections 86 and 87 of the Revised Corporation Code (RCC)provide

dissolution, profit which a non-stock corporationmay obtain incidental to its operations shall, distributable as dividends toits members trustees,or officers:Provided,That any whenever necessary or proper,be used for the furtherance of the purpose or purposes for which the corporation was organized,subject to Title. (Emphasis ours) SEC. 86. Definition. For purposes of this Code and subject to its provisions on a non-stock corporation is one where no part of its income is the provisions of this

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social, civic service, or similar purposes, like trade, industry, agricultural and like charitable religious, educational, professional, cultural, fraternal, literary, scientific, chambers, or any combination thereof, subject to the special provisions of this Title governing particular classes of non-stock corporations. "SEC. 87. Purposes. - Non-stock corporations may be formed or organized for

+63253227696 www.sec.gov.ph imessagemo@sec.gov.ph (essentially the same as Sections 87 and 88 of the Old Corporation Code) The SEC Headquarters,7907 Makati Avenue Republic Act No.1132Revised Corporation Code of the hlippine23February 2019 Salcedo Village,Bel-air,Makati City INVESTORS IN PEOPLE invest in peop TOVRhei I 005 De OMC

In this connection, Section 132 of the RCC provides:

"SEC.13.Contents of articles of incorporations.-xxx xxx xxx (b The specific purpose or purposes for which the corporation is being formed. Where a corporation has more than one stated purpose, the articles of would change or contradict its nature assuch; xxx. incorporation shall indicate purposes: Provided, That a non-stock the primary purpose and secondary purpose or corporation may not include a purpose which

empowered to venture on profitable business activities. By way of exception, the corporation may, as purpose(s) for which the corporation was organized. Any such power which is reasonably necessary to enable a corporation to carry out express powers granted and the purposes of its creation is to be deemed are not empowered to venture on profitable business activities, they may, as incident to their purposes. incident to its purpose(s), engage in business activities which are reasonably necessary to carry out the implied or incidental purpose. However, activities merely convenient or useful are not implied if they are not essential, having in view the nature and object of the corporation. Thus, while non-stock corporations engage in such business activities that are reasonably necessary or essential to carry out the purposes for which they were organized, provided that any profit that may be derived therefrom are not distributable to the members but are used for the furtherance of corporate purposes.3 (Emphasis and underscoring supplied) Under the foregoing provisions, non-stock, non-profit corporations, as a general rule, are not

company's operations, and that said funds shall be used for the furtherance of the purpose for which it was established. The fact that a non-profit corporation earns a profit as a legal entity as incorporation and is not distributed to its incorporators, members or officers, since mere intangible or distinguished from profit, gain or income to the incorporators or members, does not make it a profit- making corporation where such profit or income is used for the purposes set forth in the articles of pecuniary benefits to the members do not change the nature of the corporation.4 (Emphasis and underscoring supplied) The law clearly allows non-stock corporations to raise funds so long as it is incidental to the

incidental, necessary or essential to carry out the express objectives of the corporation as appearing in its profit, much would depend on the purpose clause provision in its AOI. If the business activity is not AOl, the same cannot be undertaken by a non-stock corporation.s Accordingly, in determining whether a non-stock corporation can engage in business activities for

processes to a third-party service providerIn the Philippines, this industry is generally divided into the following sectors; contact centers; back office services; data transcription; animation; software development; engineering development;and game development. The Department of Trade and Industry defines BPO as the "delegation of service-type business

(i.e. how the contact/call center will service other World Vision affiliates in other countries) which is necessary to categorically answer your query. Nevertheless, for purposes of this opinion, we assume and adopt the common concept of a contact /call center. Unfortunately,your letter does not clearly state the facts as to the business model that will be used

SEC Opinion No.11-11 dated 08 March 2011 addressed to Mr.James Yared Gaite,M.D. Senate Economic Planning Office. At A Glance 10-01tps//www.senate.gov.ph/publications/AG%202010-01%20 5 Supra, Note 3 %2BPO%2Industr,pflast visited15 August2024) SEC-OGC Opinion No.11-12 dated 09March 2011addressed toVELICARIAEGENIASLAWOFFiCES Essentially the same as Section 142of the Old Corporation Code. bid

comprise the contact center sector.s Thus, a call center is defined as a centralized department that handles inbound and outbound calls from current and potential customers.9 Inbound and outbound voice operation services for sale, customer services, and technical support

organization outsources its operations to a company in another country, often to save money on wages and provide services as well as to address language barrier among different countriesto. or client for tasks, including lead generation, telemarketing, customer retention, fundraising. surveying, collecting debts or scheduling appointments, while in offshore call centers. the For instance, in outbound call centers, call center agents make calls on behalf of the organization

attached to your letter, to wit: In relation to the above, we take note of the purposes of WVDF, as stated in its AOI, which you

SECOND To render emergency relief assistance to those affected by natural and man-made calamities.

2 To facilitate transformational development in the poorest communities by addressing the root causes of poverty in a Christian and holistic manner, leading to transformed lives and values of children, families and communities.

3. To undertake such activities that contribute to the awareness of poverty Foundation's mission in the Philippines and other countries. issues and provide opportunities for the public to become involved in the

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5 To promote the growth and dissemination of the knowledge and practice of Christian transformational development.

6 To promote and encourage ecumenical cooperation among the churches in the ministry of transformational development. 7.To enter into agreements, receive funds, implement projects and work with government and non-government organizations alike, whether foreign or local

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AoI, these Core Values: Towards the attainment of the afore-stated purposes, WVDF adopted in the Fourth Article of its

X XX X 2. WE ARE COMMITED TO THE POOR. We are called to serve the neediest people of earth; to relieve their suffering and to promote the transformation of their condition of life. We stand in solidarity in a common search for justice. We seek to understand the discovery ofeternal hope in Jesus Christ We seek to facilitate an engagement between Situation of the poor and work alongside them towards fullness of life. We share our

httwww.techtargt.om/earchustomerexperience/deinition/Calenterlast visited15 August 2024 8 bid to ibid

the poor and the affluent that opens both to transformation. We respect the poor as participants, not passive recipients, in this relationship. They are people from whom others may learn and receive, as well as give. The need for transformation is common to all. Together, we share a quest for justice, peace, reconciliation and healing in a broken world.

XX XX XXX 4. WE ARE STEWARDS. The resources at our disposal are not our own. They are sacred trust from God resources are given and manage them in a manner that brings maximum benefit the through donors on behalf of the poor. We are faithful to the purpose of which those poor We speak and act honestly. We are open and factual in our dealings with donor other. We endeavor to convey a public image confronting to reality. We strive for consistency between what we say and what we do. constituents, project communities, governments, the public at large and with each

5.WE ARE PARTNERS. We are members of International World Vision partnerships that transcends legal, structural and cultural boundaries. We accept the obligations of joint participation, shared goals and mutual accountability that true partnership requires. We affirm our inter-dependence and our willingness to yield autonomy as necessary for the common good. We commit ourselves to know, understand and love each other.

XXX XXX XXX We maintain a co-operative stance and spirit of openness towards other humanitarian organizations. We are willing to receive and consider honest opinions from others about our work.

the growth xxx of the knowledge and practice of Christian transformational development"to[address] the emergency relief assistance during natural and man-made calamities, but is also authorized to promote organizations." Of special importance in this duty to collaborate is its commitment, expressed in its Core Values, which must be read with its purposes, toaccept [its] obligations of joint participation,shared goals, and mutual accountability" as a "[member] of [the] International World Vision Partnerships" with its affiliates. root causes of poverty, in accordance with its "mission in the Philippines and other countries." To do this, it is empowered"to promote xxx ecumenical cooperation among the churches in the ministry"and"to enter into agreements, receive funds, implement projects and work with government and non-government To recall, WVDF is a Christian social development foundation that does not only undertake

concerns, e.g., climate change, uneven distribution of wealth, etc., and cross border or borderless transactions, organizations must now adopt and adapt to more efficient ways of doing things Viewed within the context of these mandates vis-a-vis the modern realities of common global

unit of an organization to handle client concerns. And since WVDF is a member of this international to achieve their common goals is practically in pursuits of its own purposes and mission. community of World Vision affiliates that share common goals,any form of help by the WVDF to the latter Nowadays, a contact or call center, whether outsourced or not, serves as a streamlined division or

said to be reasonably necessary and incidental to its purposes under its AOL. Further, while there may be an expectation of income from this activity, the same is for the purpose of augmenting its programming costs,in furtherance of its corporate purposes Thus, the rendering of contact or call center services by WVDF to its World Vision affiliates can be

parameters still obtain, to wit: Accordingly, we answer your query in the affirmative, for as long as the following restrictions and

1 The rendering of contact or call center services is reasonable and not primarily profit- making, and is limited to its World Vision affiliates; and

2 That any profit that may be derived therefrom are not distributable to the members but are used for the furtherance of corporate purposes.

the query and relevant solely to the particular issues raised therein and shall not be used in the nature of a standing rule binding upon the courts, or upon the Commission in other cases of similar or dissimilar circumstances. 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 based solely on the facts disclosed in

Please be guided accordingly.

Yours most respectfully,

ROMUALD C. PADILLA Notmaltgnt Seneral Coun sel

SEC Memorandum Circular No.15,Series of 2003,16December 2003