SEC-OGC Opinion No. 23-01: Powers, Citizenship, Residency and Educational Requirements of the Board of Trustees of an Educational Institution

On 17 January 2023, the Office of the General Counsel (“OGC”) of the Securities and Exchange Commission (“SEC”) issued SEC-OGC Opinion No. 23-01, which addressed queries of the Philippine Women’s College of Davao (“PWC Davao”) on citizenship, residency, educational requirements, and powers of the board of trustees (“BOT”) and members of an educational institution. PWC Davao is a non-stock non-profit corporation engaged in the activities of an educational institution. 

We provide below a summary of some of the significant issues discussed. 

Qualifications of Directors or Trustees

The Revised Corporation Code (“RCC”) provides for the minimum qualifications of the board of directors or trustees of a corporation. A director must own at least 1 share while a trustee must be a member of the corporation. Aside from the qualifications provided for in the RCC, the by-laws of the corporation may also provide for additional qualifications.

While the RCC does not specifically mention any restriction on the citizenship of persons to be elected as member of the board of directors or trustees, the same shall be subject to the following: (i) the additional qualifications of a director or trustee that a private corporation may set forth in its by-laws; and (ii) the requirements under the 1987 Constitution, special laws such as Commonwealth Act No. 108 or the Anti-Dummy Law and/or special rules implemented by the regulatory authority of the industry such as the Manual of Regulations for Private Higher Education (“MORPHE”) issued by the Commission on Higher Education.

The 1987 Constitution requires “the control and administration of educational institutions to be vested in citizens of the Philippines.” Foreigners are not allowed any control and administration of educational institutions. Thus, they are barred from becoming members of the board of directors/trustees of educational institutions. This prohibition/restriction against foreigners applies to all persons who are not citizens of the Philippines, including natural-born citizens of the Philippines who have lost their Philippine citizenship by acquiring naturalized citizenship. Meanwhile, the MORPHE provides that “the control and administration of higher educational institutions shall be vested in citizens of the Philippines except those established by religious groups or foreign mission boards.”

There is also no specific requirement as to residency in the RCC. However, the corporation through its by-laws, may provide for such requirement. Here, pursuant to the provisions of PWC Davao’s by-laws, its members must be residents and citizens of the Philippines. 

Thus, the SEC-OGC opined that only citizens and residents of the Philippines may be members of the BOT of PWC Davao. Hence, a Filipino citizen who has lost his Philippine citizenship and has become an American citizen is disqualified from becoming a member of the BOT. However, dual citizens or persons carrying both Filipino and foreign citizenship, may be members of the BOT of PWC Davao as long as they do not lose their Filipino citizenship. 

Educational Requirement for Members of the BOT of Private Higher Educational Institutions 

There is no educational requirement for trustees in the RCC nor in the by-laws of PWC Davao; however, being an educational institution, it is subject to the provisions of the 1987 Constitution, special laws, and special rules by the concerned regulatory agency.

The MORPHE requires that “every member of the Board of Trustees or Directors of a private higher educational institution shall possess at least a bachelor’s degree.” Thus, it follows that members of the BOT of PWC Davao must possess at least a bachelor’s degree.