SEC OGC OPINION NO. 10-2024: Re: Perpetual Term of Officers

On 25 April 2024, the Securities and Exchange Commission Office of the General Counsel (“SEC OGC”) issued SEC OGC Opinion No. 10-2024 in response to the request of the Members Church of God International, Inc. (“MCGI”) for an opinion on whether they can amend their Articles of Incorporation (“AOI”) or their by-laws to indicate a perpetual term for its key elders as officers. MCGI is a religious organization registered with the SEC as a non-stock, non-profit organization. Moreover, MCGI also inquired whether as a religious organization, it can be exempt from the requirement of election of officers provided under the Revised Corporation Code (“RCC”) for non-stock, non-profit organizations.

Perpetual term of office of corporate officers is not allowed

The SEC said that while the term of trustees of non-stock corporations may vary, a provision which provides for a lifetime or unlimited term is not allowed. The rationale is that such a provision will bind the hands of future board of directors. It will absolutely deprive other members of the corporation to become officers in the future. Thus, the SEC said that it has been its long-standing policy to disallow such provisions in the AOI and to avoid possible abuse of persons in power. In support of the above, the SEC cited Section 24 of the RCC which states that immediately after their election, the directors of the corporation must formally organize and elect the corporate officers such as the president, treasurer, secretary and such other officers as may be provided in the by-laws. Therefore, since the election of the board of trustees precedes the election of corporate officers, the term of the officers cannot extend beyond that of the directors. The SEC further stated that the relationship between the corporation (and its board of trustees) and the duly authorized corporate officers is that of principal-agent, it is fiduciary in character, and thus, essentially revocable. 

The by-laws of MCGI state that the board of trustees shall have a term of one (1) year. Therefore, the term of key elders of MCGI, who are its officers, cannot have a lifetime term as it would be contrary to the RCC and MCGI’s by-laws.

MCGI is not exempt from the requirement of election of officers under the RCC

As stated above, MCGI is registered with the SEC as a non-stock, non-profit organization organized for religious purposes. In line with this, the SEC said that by submitting their AOI to the SEC, they signified their consent to be registered with the SEC and comply with all relevant laws, rules and regulations.

Under Section 107 of the RCC, religious corporations shall be governed by the general provisions on non-stock corporations. Further, Section 86 of the RCC states that the provisions governing stock corporations, when pertinent, shall be applicable to non-stock corporations. Hence, MCGI must comply with the requirement of election of officers under the RCC.