Roles of Incorporators and Board of Trustees in NGOs

I. Legal Framework

In the Philippines, the vast majority of non-governmental organizations (NGOs) that possess separate juridical personality are organized and registered as non-stock, non-profit corporations under the Revised Corporation Code of the Philippines (Republic Act No. 11232, effective 23 February 2019).

The Revised Corporation Code governs both stock and non-stock corporations, but Title X (Sections 86–108) contains the special rules applicable to non-stock corporations. NGOs organized for charitable, educational, scientific, cultural, social welfare, developmental, or similar purposes almost invariably adopt the non-stock form because it prohibits the distribution of profits or income to members, trustees, or officers (Section 86).

The Securities and Exchange Commission (SEC) is the primary registering authority. Once registered, the NGO acquires juridical personality and may sue and be sued, acquire property, receive donations, and apply for tax exemption or donee institution status with the Bureau of Internal Revenue (BIR).

II. Incorporators

A. Definition and Nature

Incorporators are the natural persons (minimum of one, maximum of fifteen under Section 5 of the Revised Corporation Code) who sign and acknowledge the Articles of Incorporation and who originally form the corporation. In practice, NGOs almost always have at least five incorporators because the law requires a minimum of five trustees (Section 91), and the incorporators are customarily named as the initial trustees.

B. Qualifications

• Must be natural persons (corporations or partnerships may no longer be incorporators under the Revised Code);
• Of legal age;
• No residency or citizenship requirement for purely domestic non-stock corporations intended for charitable/religious purposes, but majority must be residents of the Philippines if the corporation will own land (Section 150);
• No disqualification under Section 27 (conviction of offense involving moral turpitude, etc.).

C. Role and Functions During Formation

1. Execute and file the Articles of Incorporation with the SEC together with the required Treasurer’s Affidavit, By-Laws (if simultaneously adopted), and other documentary requirements;
2. Pay the filing fees and secure the SEC Certificate of Incorporation;
3. Adopt the initial By-Laws (may be done simultaneously with the Articles or within one month after incorporation);
4. Elect the initial officers (usually done in the organizational meeting immediately after incorporation);
5. Authorize the opening of bank accounts, acceptance of initial donations, and other pre-operational acts.

D. Rights of Incorporators

• To be named in the Articles of Incorporation;
• To be considered the original members of the corporation unless the Articles provide otherwise;
• To participate in the organizational meeting and vote for the initial trustees and officers.

E. Liabilities of Incorporators

1. Solidary liability for damages suffered by third persons if they acted in the name of the corporation before incorporation without disclosing that it was not yet registered (de facto corporation doctrine is limited; most pre-incorporation contracts bind the incorporators personally unless novated);
2. Liability for false statements in the Articles of Incorporation (Section 170);
3. If the NGO is later found to be a mere alter ego or instrumentality of the incorporators, the corporate veil may be pierced and personal liability imposed.

F. Cessation of Status as Incorporator

The status of incorporator ceases upon the issuance of the Certificate of Incorporation. The incorporators then become members (and usually the initial trustees). They no longer act as “incorporators” once the corporation is born.

III. Board of Trustees

A. Definition and Distinction from Board of Directors

In non-stock corporations, the governing body is called the Board of Trustees (Section 90). The term “trustees” emphasizes that they hold the assets and powers of the corporation in trust for the accomplishment of its non-profit purposes.

B. Number and Composition

• Fixed in the Articles of Incorporation or By-Laws;
• Minimum five (5), maximum fifteen (15) (Section 91);
• Must all be natural persons;
• No residency requirement except when the corporation owns land (majority must be Philippine residents or citizens under the Constitution and FIA).

C. Qualifications and Disqualifications

The By-Laws may prescribe additional qualifications, but the following are absolutely disqualified under Section 27 (as made applicable by Section 90):

• Persons convicted by final judgment of offenses involving moral turpitude or carrying penalty of civil interdiction;
• Persons judicially declared insolvent;
• Persons convicted of offenses under the Revised Corporation Code or Securities Regulation Code.

D. Election and Term of Office

1. Elected by the members at large in the annual members’ meeting (Section 92);
2. Term is one (1) year in membership-type NGOs, or up to three (3) years with staggered terms if expressly allowed by the By-Laws (common in foundation-type NGOs);
3. Hold-over is permitted until successors are elected and qualified;
4. In foundation-type or self-perpetuating boards, the trustees themselves elect their successors (perpetual or self-elective trusteeship is valid as long as stated in the Articles).

E. Powers and Functions of the Board of Trustees (Section 90)

The Board of Trustees is the supreme authority in matters of governance and management. Express powers include:

1. Formulate policies and strategic plans;
2. Amend the Articles of Incorporation and By-Laws (subject to members’ ratification in membership-type NGOs);
3. Approve budgets, projects, and programs;
4. Appoint and remove officers and employees;
5. Accept or reject members (if membership is not open);
6. Enter into contracts, borrow money, mortgage property (with members’ approval for fundamental acts under Section 97);
7. Invest corporate funds (Section 99);
8. Dissolve the corporation and distribute residual assets to similar non-profit organizations (Section 94);
9. Exercise all powers necessary or incidental to carry out the purposes of the NGO.

F. Fiduciary Duties of Trustees (Section 30, by analogy)

Every trustee stands in a fiduciary relation to the corporation and its members and must observe the following duties:

1. Duty of Obedience – must act within the scope of the corporation’s purposes and comply with laws;
2. Duty of Diligence – must exercise the care that an ordinarily prudent person would in similar circumstances; attendance at meetings is required (absence from three consecutive meetings may be ground for disqualification if By-Laws so provide);
3. Duty of Loyalty – must act in the best interest of the corporation; conflicts of interest must be disclosed; self-dealing transactions are voidable unless ratified and fair (Section 31);
4. Business Judgment Rule – courts will not interfere with honest business decisions made in good faith.

G. Compensation

Trustees, as a general rule, serve without compensation (Section 29). However, they may receive:

• Reasonable per diems for attendance at board meetings;
• Reimbursement for actual expenses;
• Compensation if they render special services (e.g., as executive director, legal counsel) and the By-Laws expressly allow it.

H. Meetings

• Regular meetings: as fixed in the By-Laws (monthly or quarterly);
• Special meetings: called by the President or upon request of 1/3 of the trustees;
• Quorum: majority of the entire board unless By-Laws provide otherwise (Section 52);
• Voting: majority of those present if quorum exists;
• Meetings may now be held via videoconferencing or other remote means (Section 52 as amended).

I. Committees

The Board may create an Executive Committee (with full powers when board is not in session, except certain reserved powers under Section 35) and other committees (Audit, Governance, Nomination, Finance, etc.). This is now expressly allowed for non-stock corporations under the Revised Code.

J. Removal and Vacancies

• Removal: by vote of two-thirds (2/3) of the members entitled to vote (Section 28), or by the board itself if the trustee has been declared of unsound mind or convicted of a crime;
• Vacancies: filled by the board if the remaining trustees still constitute a quorum; otherwise, by the members.

K. Personal Liability of Trustees

Trustees are solidarily liable for damages if they:

1. Willfully and knowingly vote for or assent to patently unlawful acts (Section 30);
2. Are guilty of gross negligence or bad faith in directing the affairs of the corporation;
3. Acquire personal or pecuniary interest in conflict with their duty;
4. Consent to the issuance of watered stock (not applicable to non-stock) or cause corporate injury through self-dealing.

The liability is joint and several with the corporation and co-trustees.

IV. Relationship Between Incorporators and Board of Trustees

In almost all Philippine NGOs, the incorporators are identical to the initial trustees listed in the Articles of Incorporation. Upon incorporation, the incorporators automatically become the first Board of Trustees and hold office until the first regular election (usually within the same year). The shift is seamless: the founders transition from being “incorporators” to “trustees/members.”

V. Special Considerations for Tax-Exempt NGOs

While not strictly part of corporate governance, trustees and incorporators must ensure compliance with BIR requirements for tax exemption under Section 30(E) and (G) of the Tax Code (as amended by the TRAIN Law and CREATE Act). Failure to comply (e.g., private inurement, substantial political activity) may result in revocation of exemption and personal surcharge liability on trustees for unpaid taxes.

VI. Conclusion

The incorporators are the creators; their role is transitory and ends upon the birth of the corporation. The Board of Trustees is the continuing guardian of the NGO’s mission, holding its assets and powers in trust for the public benefit. The Revised Corporation Code has modernized governance rules while preserving the fundamental principle that non-stock, non-profit corporations exist not for private gain but for the accomplishment of their declared benevolent purposes. Strong, ethical trusteeship is therefore not merely a legal requirement—it is the very soul of Philippine civil society organizations.