SEC OGC Opinion No. 22-15: Election of Representatives of Corporate Unit Owners as Trustees and Officers of Condominium Corporations

On 19 October 2022, the Securities and Exchange Commission (“SEC”) issued SEC-OGC Opinion No. 22-15 to address queries in connection to the membership in the Board of Trustees of Amara en Terrazas Condominium Corporation (“AETCC”), a non-stock, non-profit condominium corporation registered with the SEC. 

AETCC is not engaged in wholly or partially nationalized activities. Its Articles of Incorporation (“AOI”), Amended By-Laws (“BL”) and Master Deed with Declaration of Restrictions have no restriction as to the membership in AETCC to be solely natural and/or juridical persons/entities. Thus, AETCC’s membership is composed of natural and juridical persons. 

In this regard, considering the mixed composition of natural and juridical or corporate unit owners and/or members, the SEC was asked to address the following queries: 

1. Are juridical/corporate unit owners and/or members allowed to be elected in the Board of Trustees based?
2. Are SEC Opinion No. 05-06 and other cited opinions of the same, during the current implementation of the Revised Corporation Code (“RCC”), still considered “good opinions”?

In case of the affirmative in the first set of queries:

1. May a juridical or corporate unit owner and/or members’ representative, as Trustee, be elected as a corporate officer (e.g., President)?
2. If so, what are the required steps or policies to be followed for the corporation to achieve soundly the same?

While a corporate unit owner cannot itself be elected as a trustee of the condominium corporation because it is not a natural person, its representative may do so

Generally, directors or trustees must either be elected from among the shareholders of a stock corporation or from the general membership of the corporation in case of a non-stock corporation. Simply stated, no person shall be elected as trustee unless he is a member of a nonstock corporation.

An exception to this rule is when the stockholder/member is a corporate unit-owner/member of a condominium corporation. In this wise, the SEC cited its earlier opinions in SEC Opinion dated 16 April 1991 addressed to Atty. Augusto Sunico and in SEC-OGC Opinion 05-06, dated 08 June 2005, to wit:

In this connection, it is worth mentioning that beneficial ownership is not necessary for one to become a director, and that a person who holds the legal title to a stock on the books of the corporation is qualified, although the beneficial ownership thereof may be in another. Hence, a trustee may be eligible as director notwithstanding absence of beneficial right, title or interest in the stock. 

It is therefore logical and practical to apply the foregoing principle in the case of condominium corporations. While a corporation cannot act by itself being a juridical person, it can act through its officers and authorized agent. Accordingly, an officer or duly authorized agent or trustee who has been designated in the Board Resolution of the corporate unit owner or member as its representative for the express purpose of qualifying him as director and whose appointment as such has been recorded in the corporate books, may be eligible to be elected as director. To rule otherwise would create a situation where there would be no Board of Directors of the Corporation. (Emphasis supplied) 

In fact, the BL of AETCC authorizes the appointment of a representative to be elected as a director or trustee. Article II, Section 2 of AETCC’s BL allows a member, which is a juridical person, to designate a representative through an appropriate resolution issued by its governing board. The same Section also requires the submission of a certified copy of the said resolution to AETCC’s corporate secretary. 

Thus, while a corporate unit owner cannot itself be elected as a trustee of the condominium corporation because it is not a natural person, and hence cannot attend board meetings, its representative duly designated and recognized as above-stated may do so. 

SEC Opinion No. 05-06 and its cited SEC opinions are still applicable 

SEC Memorandum Circular No. 16, series of 2019 does not reverse the said opinions as it was issued for the clear and proper implementation of Section 10 of the RCC; that is, to provide guidelines on the composition of incorporators for the registration of domestic corporations under the RCC. Considering the purpose for which the guidelines were implemented, the designation of incorporators as directors or trustees refers to the mandated qualifications applicable to the representatives of juridical incorporators only while the corporation is being formed, and not after its incorporation/ organization.

A representative of a corporate unit owner who was elected as a Trustee of the condominium corporation may become the President thereof

Section 24 of the RCC provides the minimum qualifications for corporate officers. It provides that immediately after the election of the board, the corporation must formally organize and elect: a) a president, who must be a director; b) a treasurer, who must be a resident; c) a secretary, who must be a citizen and resident of the Philippines; and d) such other officers as may be provided in the BL. The same person may hold two (2) or more positions concurrently, except that no one shall act as president and secretary or as president and treasurer at the same time, unless otherwise allowed in the RCC. The BL may, however, include other qualifications/disqualifications of an officer. 

Thus, the President is the only corporate officer required under the RCC to be a director or trustee. In other words, the other corporate officers, such as the Secretary and Treasurer, of the corporation need not be directors or trustees, absent any qualification in the BL, which state otherwise. 

Accordingly, a representative of a corporate unit owner who was elected as a trustee of the condominium corporation may become the President thereof.