THE CORPORATION CODE
OF THE PHILIPPINES
TITLE XI
NON-STOCK CORPORATIONS
(Sections 87-95)
Section 87. Definition. –
For the purposes of this Code, a non-stock
corporation is one where no part of its income is
distributable as dividends to its members,
trustees, or officers, subject to the provisions of
this Code on dissolution: Provided, That any profit
which a non-stock corporation may obtain as an
incident to its operations shall, whenever
necessary or proper, be used for the furtherance of
the purpose or purposes for which the corporation
was organized, subject to the provisions of this
Title.
The provisions governing stock corporation,
when pertinent, shall be applicable to non-
stock corporations, except as may be covered
by specific provisions of this Title. (n)
The non-existence of capital stock
is not determinative under the
definition on whether the entity is
a non-stock corporation; and it is
legally possible for a corporation
having capital stock to still be
considered a non-stock
corporation.
The non-incurring of profit is not
determinative for an entity to be
classified as non-profit corporation.
Non-stock and non-profit
corporations may earn profits as an
incident to their operations, and so
long as the profits are devoted for
their eleemosynary purpose
(Villanueva at pp. 883-884).
The fact that a non-profit corporation
earns a profit, gain or income for the
corporation or members does not make
it a profit-making corporation where
such profit or income is used for the
purpose set forth in the articles of
incorporation and is not distributable to
its incorporators, members or officers,
since mere intangible or pecuniary
benefits of the members does not
change the nature of the corporation.
Even if a corporation has capital
stock divided into shares, it is
considered as non-stock so long
as it does not distribute dividends
to its members and officers (CIR
vs. The Club Filipino, Inc. de
Cebu, G.R. No. L-12719, May 31,
1962).
Section 88. Purposes. –
Non-stock corporations may be formed or
organized for charitable, religious,
educational, professional, cultural, fraternal,
literary, scientific, social, civic service, or
similar purposes, like trade, industry,
agricultural and like chambers, or any
combination thereof, subject to the special
provisions of this Title governing particular
classes of non-stock corporations. (n)
CHAPTER I
MEMBERS
Section 89. Right to vote. –
The right of the members of any class or classes
to vote may be limited, broadened or denied to
the extent specified in the articles of
incorporation or the by-laws. Unless so limited,
broadened or denied, each member, regardless
of class, shall be entitled to one vote.
Unless otherwise provided in the articles of
incorporation or the by-laws, a member may
vote by proxy in accordance with the
provisions of this Code. (n)
Voting by mail or other similar means by
members of non-stock corporations may be
authorized by the by-laws of non-stock
corporations with the approval of, and under
such conditions which may be prescribed by,
the Securities and Exchange Commission.
General Rule:
Each member, regardless of class, shall be
entitled to one vote.
Exception:
The right to vote is limited, broadened or
denied in the articles of incorporation or the
by-laws.
Section 90. Non-transferability of
membership. –
Membership in a non-stock corporation
and all rights arising therefrom are
personal and non-transferable, unless
the articles of incorporation or the by-
laws otherwise provide. (n)
General Rule:
Membership in a non-stock corporation and
all rights arising therefrom are personal and
non-transferable.
Exception:
The articles of incorporation or the by-laws
provide otherwise.
Section 91. Termination of membership. –
Membership shall be terminated in the
manner and for the causes provided in the
articles of incorporation or the by-laws.
Termination of membership shall have the
effect of extinguishing all rights of a
member in the corporation or in its
property, unless otherwise provided in the
articles of incorporation or the by-laws. (n)
Membership in non-stock corporations may
be acquired by complying with the provisions
of its rules prescribed in the by-laws.
In absence of restrictions, a non-stock
corporation may act arbitrarily and exclude
any persons it may see unfit, and the courts
have no power to interfere.
It is free to fix qualifications for membership
and to provide for termination of
membership.
General Rule:
Termination of membership shall have the
effect of extinguishing all rights of a member
in the corporation or in its property.
Exception:
The articles of incorporation or the by-laws
provide otherwise.
In those cases when the loss of
membership also entails loss of
property rights, the manner of
termination must be in accordance
with substantial justice (Calatagan
Golf Club vs. Clemente, Jr., G.R. No.
165443, April 16, 2009).
In terminating membership, strict
compliance with the manner and
procedure laid down in the by-
laws must be observed,
otherwise it may render the
expulsion ineffective and invalid
(Carmoan vs. PED).
Requirements for Validity of
Termination:
1. Reasonable notice to the
member concerned; and
2. Fair opportunity to be heard.
(Calatagan Golf Club vs. Clemente,
Jr., G.R. No. 165443, April 16, 2009).
In the absence of any provision in the
articles of incorporation or by-laws
relative to the manner and causes of
termination, the power is nonetheless
inherent in the following situations:
1. When an offense is committed which,
although it has no immediate relation to a
member’s duty as such, it is so infamous as
to render him unfit for society of honest men,
and which is indictable at common law;
2. When the offense is a violation of his
duty as a member of the corporation; and
3. When the offense is of a mixed nature,
being both against his duty as a member
of the corporation, and also indictable at
common law.
CHAPTER II
TRUSTEES AND OFFICES
Section 92. Election and term of trustees. –
Unless otherwise provided in the articles of incorporation
or the by-laws, the board of trustees of non-stock
corporations, which may be more than fifteen (15) in
number as may be fixed in their articles of incorporation
or by-laws, shall, as soon as organized, so classify
themselves that the term of office of one-third (1/3) of
their number shall expire every year; and subsequent
elections of trustees comprising one-third (1/3) of the
board of trustees shall be held annually and trustees so
elected shall have a term of three (3) years. Trustees
thereafter elected to fill vacancies occurring before the
expiration of a particular term shall hold office only for
the unexpired period.
No person shall be elected as trustee
unless he is a member of the
corporation.
Unless otherwise provided in the
articles of incorporation or the by-
laws, officers of a non-stock
corporation may be directly elected by
the members. (n)
General Rule (Number of Trustees):
The number of trustees in a non-stock
corporation may exceed 15.
Exception:
The articles of incorporation or the by-laws
provide otherwise.
General Rule (Term of Office):
The term of office of the board of trustees may
be staggered. They shall classify themselves in
order that 1/3 of their number shall expire every
year and subsequent elections of trustees
comprising 1/3 shall be held annually.
Exception:
The articles of incorporation or the by-laws
provide otherwise.
General Rule (Election of Officers):
The officers of a non-stock corporation may be
directly elected by the members.
Exception:
The articles of incorporation or the by-laws
provide otherwise.
Section 93. Place of meetings. –
The by-laws may provide that the members of
a non-stock corporation may hold their
regular or special meetings at any place even
outside the place where the principal office
of the corporation is located: Provided, That
proper notice is sent to all members
indicating the date, time and place of the
meeting: and Provided, further, That the
place of meeting shall be within the
Philippines. (n)
General Rule:
Regular or special meetings of members of a
non-stock corporation shall be held at any place
even outside the place where the principal
office of the corporation is located.
Exception:
The by-laws of the corporation provide
otherwise.
CHAPTER III
DISTRIBUTION OF ASSETS
IN NON-STOCK
CORPORATIONS
Section 94. Rules of distribution. –
In case dissolution of a non-stock
corporation in accordance with the
provisions of this Code, its assets shall be
applied and distributed as follows:
1. All liabilities and obligations of the
corporation shall be paid, satisfied and
discharged, or adequate provision shall be
made therefore;
2. Assets held by the corporation
upon a condition requiring return,
transfer or conveyance, and which
condition occurs by reason of the
dissolution, shall be returned,
transferred or conveyed in accordance
with such requirements;
3. Assets received and held by the corporation
subject to limitations permitting their use only
for charitable, religious, benevolent, educational
or similar purposes, but not held upon a
condition requiring return, transfer or
conveyance by reason of the dissolution, shall
be transferred or conveyed to one or more
corporations, societies or organizations engaged
in activities in the Philippines substantially
similar to those of the dissolving corporation
according to a plan of distribution adopted
pursuant to this Chapter;
4. Assets other than those mentioned in
the preceding paragraphs, if any, shall
be distributed in accordance with the
provisions of the articles of
incorporation or the by-laws, to the
extent that the articles of incorporation
or the by-laws, determine the distributive
rights of members, or any class or
classes of members, or provide for
distribution; and
5. In any other case, assets may be
distributed to such persons,
societies, organizations or
corporations, whether or not
organized for profit, as may be
specified in a plan of distribution
adopted pursuant to this Chapter.
(n)
Section 95. Plan of distribution of
assets. –
A plan providing for the distribution of
assets, not inconsistent with the
provisions of this Title, may be adopted
by a non-stock corporation in the
process of dissolution in the following
manner:
The board of trustees shall, by majority vote, adopt a
resolution recommending a plan of distribution and
directing the submission thereof to a vote at a regular or
special meeting of members having voting rights. Written
notice setting forth the proposed plan of distribution or a
summary thereof and the date, time and place of such
meeting shall be given to each member entitled to vote,
within the time and in the manner provided in this Code
for the giving of notice of meetings to members. Such
plan of distribution shall be adopted upon approval of at
least two-thirds (2/3) of the members having voting
rights present or represented by proxy at such meeting.
(n)
Procedure and requirements for a
plan of distribution of assets:
1. Majority vote of the board of trustees
adopting a plan of distribution;
2. Approval of such plan by atleast 2/3
of the members having voting rights
presents or represented by proxy at a
regular or special meeting; and
Procedure and requirements for a
plan of distribution of assets:
3. Prior written notice setting forth the
proposed plan of distribution.
