SEC Opinion dated 24 February 2003

The SEC Opinion pertains to the reply given by Director Benito Cataran, in behalf of
the Commission, with regard to the following issues forwarded by one Benedicta Bello
(President, Regis Benedictine Academy, Inc.):

1. WON it is legally feasible to convert a non-stock educational institution into a

stock corporation – NO

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 (Sec. 87, Corporation Code.) Inline with this, the Commission has
previously ruled that a non-stock corporation cannot be converted into a stock
corporation by mere amendment of the articles of incorporation. For purposes of
transformation, it is fundamental that the non-stock corporation be dissolved first
under the methods specified in Title XIV of the Corporation Code. Thereafter, the
members may organize a stock corporation directed to bring profits or pecuniary
gains to themselves (SEC Opinion dated Dec. 10, 1992.)

2. WON members of a non-stock corporation (NSC) are entitled to any beneficial or

vested interest over the assets of the NSC – NO (general rule)

Non-stock, non-profit corporations hold their funds in trust for the carrying out of the
objectives and purposes expressed in its charter and unless it is so provided in the
AOI or by-laws, the members are not entitled to any beneficial or vested interest over
the assets of the NSC.

3. WON membership in a NSC is transferable – NO

Section 90 of the Corporation Code provides that membership in a NSC and all rights
arising therefrom are personal and non-transferable, unless the articles of
incorporation or the by-laws otherwise provide.

Unlike shares of stock in a stock corporation, which are bought at a fixed value, there
is no such valuation in the case of membership in ordinary NSC. In the case of the
latter, the money put in the corporation are merely contributions or donations, not
investments which would entitle the members to dividends. Such funds are held
mainly to carry out the purposes for which it is organized.