Legality
A column
that appeared on the Philippine Daily Inquirer Corporate Securities Info
Section dated January 9, 2009 written by Associate Commissioner of the
Securities and Exchange Commission Raul J. Palabrica entitled Jailhouse
Corporation, clearly addressed the many issues involving inmates.
As
quoted, “Contrary to popular impression, conviction and imprisonment for a
crime do not disqualify a person from becoming an incorporator or stockholder
of a corporation. While it is true that a convicted felon forfeits certain
civil and political rights once he’s thrown into the slammer, his right to form
or join a corporation for lawful purposes is not one of those withheld or
suspended by law. Although eligible to be an incorporator, a prisoner cannot be
a director or officer of the corporation if he was convicted of an offense
punishable by imprisonment for more than six years, or has committed a
violation of the Corporation Code within five years prior to the date of his
election. With regards to violation of the Code, its mere commission (even if
no final judgment is rendered for such act) is sufficient to bar a stockholder
from being elected director or appointed officer of the corporation. The
objective of the disqualification is to prevent unworthy persons from holding
positions that require fidelity and trust in handling the corporation’s funds
and assets. If an incorporator-prisoner is not covered by any of the
disqualifications mentioned, then there is no legal obstacle to his becoming a director
or officer. But the fact that an incorporator-prisoner is barred from assuming
any of those positions should not be reason to give up the idea of organizing a
corporation that aims to undertake livelihood training programs for the
convicts. With the prisoners listed simply as incorporators, the corporation
can be managed by directors and officers who may or may not also be prisoners,
but are not disqualified from assuming those two corporate portfolios.”
SEC
Associate Commissioner Palabrica ended his column with a note of encouragement;
“The important thing is, the corporation is able to engage in projects that
will smoothen the return of convicts to their communities after they have
served their sentence.”
[Note:
Special thanks to Director Luisito Ucab of the Central Bank who forwarded the
email to Associate Commission Raul J. Palabrica.]
Jailhouse corporation
Philippine Daily Inquirer
Last week, amid reports that 2009 would be a difficult year, I got an email from someone who wrote on behalf of a sector of our society that would otherwise have simply resigned themselves to their fate: inmates of the National Penitentiary. According to the writer, a group of prisoners would like to organize a corporation, preferably a foundation that would provide livelihood training programs inside the prison compound for fellow convicts. Rather than make the prisoners brood about their misery, the project aims to put to productive use their idle hours and, at the same time, prepare them for their eventual return to mainstream society. Although the email did not give a description of the inmates behind the plan, I surmise they are college graduates or former entrepreneurs who, despite their painful brush with the law, remain optimistic about the future. They probably believe their stint behind bars is an unexpected tragedy in their lives that should not deter them from picking up the pieces after paying their debt to society. And what better why to prepare for a new lease in life than to relearn or teach skills that will enable the participants to earn their keep without having to depend on other people’s generosity.
Qualification
Contrary to
popular impression, conviction and imprisonment for a crime do not disqualify a
person from becoming an incorporator or stockholder of a corporation. Under the
law, any natural person who is of legal age can be an incorporator. There is no
gender or educational requirement. Neither is the incorporator’s nationality of
any consequence, unless the corporation sought to be organized is partially or
totally nationalized, or where ownership by foreigners is limited by law. The
incorporator’s place of residence becomes material only for purposes of
determining the corporation’s compliance with the requirement that majority of
them should be residents of the
While it is true
that a convicted felon forfeits certain civil and political rights once he’s
thrown into the slammer, his right to form or join a corporation for lawful
purposes is not one of those withheld or suspended by law. As long as a
prisoner is of legal age (and obviously a resident of the
Disqualification
Although eligible
to be an incorporator, a prisoner cannot be a director or officer of the
corporation if he was convicted of an offense punishable by imprisonment for
more than six years, or has committed a violation of the Corporation Code
within five years prior to the date of his election. The nature or
classification of the offense committed is immaterial. It need not involve
moral turpitude, i.e., relates to the honesty or integrity of the offender, or
the use of force, violence or intimidation. What matters is, the person who
committed the offense was punished by a jail term in excess of six years. With
regard to violation of the Code, its mere commission (even if no final judgment
is rendered for such act) is sufficient to bar a stockholder from being elected
director or appointed officer of the corporation. The objective of the
disqualification is to prevent unworthy persons from holding positions that
require fidelity and trust in handling the corporation’s funds and assets.
If an
incorporator-prisoner is not covered by any of the disqualifications mentioned,
then there is no legal obstacle to his becoming a director or officer.
But the fact that an incorporator-prisoner is barred from assuming any of those positions should not be reason to give up the idea of organizing a corporation that aims to undertake livelihood training programs for the convicts.
Membership
The Code provides
that the incorporators should not be less than five but not more than 15, the
majority of whom must be Philippine residents. The same numerical configuration
applies to membership in the board of directors. But there is no rule or law
which requires that all the incorporators should serve as directors of the
corporation. It’s up to the incorporators, through their articles of
incorporation and by-laws, to decide on the number of directors they want to
sit in the board as long as it is not less than five but not more than 15. Thus,
if there are 15 incorporators, they can agree among themselves, in spite of
their number, to elect only five or six directors, although an odd number is
preferable to avoid voting deadlocks.
In a situation
where the incorporator-prisoners are ineligible for election as directors for
any of the reasons earlier mentioned, the possible solution is to include in
their roster such number of other persons who are qualified to be directors.
With the
prisoners listed simply as incorporators, the corporation can be managed by
directors and officers who may or may not also be prisoners, but are not
disqualified from assuming those two corporate portfolios.
What’s in a name
or position, anyway? The important thing is, the corporation is able to engage
in projects that will smoothen the return of convicts to their communities
after they have served their sentence.
* * *
For feedback, please
write to rpalabrica@inquirer.com.ph.
