Corporate Meetings and Stockholder Actions

Meetings of Stockholders/Members

• In corporation law, stockholders or members can only act in properly convened and assembled meetings unless the law specifies otherwise.
• A written consent by a majority of stockholders or members is not enough for actions requiring majority approval.

Exceptions to the Rule

• Amending Articles of Incorporation (Sec. 15):
  • Corporations can amend articles with a majority vote of the board of directors/trustees and written consent of stockholders holding at least 2/3 of the outstanding capital stock.
  • For non-stock corporations, a majority vote of trustees and a 2/3 written consent of members is sufficient.
  • No meeting is required.
• Unanimous Agreement Outside a Formal Meeting:
  • Corporations are bound by unanimous action or agreement of stockholders/members, even if not in a formal meeting.
• Close Corporations (Sec. 100):
  • Actions by directors of a close corporation without a meeting are valid unless by-laws state otherwise.
• One-Person Corporations (Sec. 128):
  • Meetings are not required.

Requisites for a Valid Meeting of Stockholders or Members

• Proper Place: The meeting must be held in the correct location.
• Proper Time: The meeting must occur on the stated date and time or within a reasonable period afterward.
• Called by Proper Person: Only authorized individuals can call a meeting.
• Previous Notice: Proper notice must be given in advance.
• Quorum: A sufficient number of attendees is required.

Proper Person to Call a Meeting

• As Specified in By-Laws: The person(s) named in the by-laws can call a meeting.
• In the Absence of By-Law Provision: A director, trustee, or officer managing the corporation can call a meeting unless otherwise stated by law.
• If No Authorized Person or Refusal to Call: The SEC may order a meeting, upon petition by a stockholder/member.

Proper Notice (Section 49)

• A written notice must be sent to all stockholders or members of record within the period prescribed by law.
• The notice may be sent through email or other SEC-approved methods.

Notice of Every Meeting Required (Section 50)

• Notices must be sent using methods specified in by-laws.
• The notice must include the time, place, and purpose of the meeting.

Rules on Waiver of Notice to Stockholders (Section 49)

• General waivers of notice are not allowed in articles of incorporation or by-laws.
• A stockholder or member may waive notice expressly or impliedly.
• Attendance at the meeting constitutes a waiver unless the attendee objects to its validity at the start.

Effect of Failure to Comply with Meeting Requisites (Section 50)

• If a meeting is improperly held or called, its proceedings and transactions are still valid if:
  • The actions taken are within the corporation's powers.
  • All stockholders or members are present or represented, and no one objects at the start that it was improperly called or convened.

Matters to Be Presented by the Board During the Regular Meeting of Stockholders or Members (Section 49)

• Minutes of the Most Recent Regular Meeting (details about the most recent meeting):
  • Description of voting and vote-counting procedures.
  • Details on how stockholders or members could ask questions, including a record of questions and answers.

Summary and Reports (Page 4)

• Summary of topics discussed and decisions made.
• Voting results.
• List of attendees.
• Other issues as required in corporate governance for minority stockholders.
• Member's list, or stock-holder information (for non-stock & stock companies)
• Performance reports, detailed and balanced report on corporation's performance with changes
• Financial report for previous year
  • Financial statements signed and certified
  • Adequate internal controls or risk management systems documentation
  • Details of external audit fees
• Dividend policy explanation for dividend payments/reasons for non-payment
• Director or trustee profiles
  • Includes qualifications, experience, service length,training, etc.
• Attendance report (board, committee, stockholder meetings)
• Appraisals and performance reports
• Compensation report
• Disclosures on self-dealings
• Transactions involving directors/trustees with related parties
• Nominee profiles
• Information about directors seeking election or re-election

Agenda (Section 49)

• Addition and inclusion of items by directors, trustees, stockholders or members.
• Special meetings and agenda items.

Postponement of Meetings (Section 49)

• Written notice with a reason for postponement sent 2 weeks before the date, unless by-laws, law, or regulations state otherwise.

Closing of Stock and Transfer Books (Section 49)

• The stock and transfer book or membership book must be closed at least 20 days before regular meetings and 7 days before special meetings; only stockholders or members of record can attend and vote.

Right to Vote of Stockholders or Members (Section 49)

• Votes can be cast in person, by proxy, or via remote communication or in absentia.

Quorum Requirements (Section 51)

• Corporations may define quorum requirements in their by-laws (without a quorum no action is allowed).
• For Stock Corporations: quorum is based on a number of outstanding voting stocks, excluding treasury shares (Section 173).
• For Non-Stock Corporations: quorum is a majority of the registered members unless stated otherwise by by-laws or code.

Place of Meetings (Section 50)

• Meetings must be held in the corporation's principal office or, if not practical, the city or municipality where the principal office is located.

Necessity of Meetings of Directors or Trustees

• Directors/trustees manage the corporation's affairs as a group, not individually.
• They can only exercise powers during lawful board meetings.

Requisites for a Valid Board Meeting

• Meeting must involve directors/trustees assembled as a board in a lawful manner.
• A quorum must be present.
• Decisions require majority of the quorum, or a majority of the board in specific cases.
• The meeting must follow the time, place, and manner specified in the by-laws.

Rules Regarding Quorum (Section 52)

• Quorum is typically a majority of the directors/trustees (stated in articles of incorporation, unless otherwise stipulated by by-laws).

Approval of Corporate Acts (Section 52)

• Approval generally requires a majority vote of the quorum, except as specified by the RCCP.

Election of Officers (Section 52)

• Electing officers needs a majority vote of all board members.
• Higher Quorum Requirements:
  • The RCCP allows corporations to require a greater number of board members to constitute a quorum for business transactions.

Proxy and Constructive Presence in Board Meetings (Section 52)

• No proxies allowed: directors/trustees cannot act by proxy.
• Remote Participation: directors/trustees can participate remotely.

Notice of Every Meeting Required

• A meeting without proper notice is invalid unless:
  • The absent directors ratify, explicitly or implicitly.
  • The rights of innocent third parties is acquired, so the corporation is estopped.
  • Resolutions or actions are subsequently ratified.
• A director or trustee can waive the notice requirement.

Recusal of a Director or Trustee (Section 52)

• A director or trustee with a related interest in a party transaction must abstain from voting on that matter, and comply with Section 31 requirements.

Presiding Officer at Meetings (Section 53)

• The officer designated by By-laws, Chairperson, or President is the presiding officer. A temporary officer will preside if the Chairperson/President is absent.

Manner of Voting/Voting for Stockholders or Members

• Direct Voting: Voting in person.
• Indirect Voting: Voting through representatives (like executors/administrators), via proxy, or trustee voting trust agreements.

Representative Voting (Section 54)

• Legal Representatives: Allowed in place of stockholders to vote without written proxy (executors, administrators, or court-appointed representatives).
• Secured Creditors (Shares as Security): The stockholder/debtor retains voting rights unless transferred to the creditor. This transfer must be recorded in corporate books.
• Corporation-Owned Shares: Shares are voted by its officer, agent, or proxy, as defined by bylaws or board.
• Proxy Voting: Stockholder/member grants a proxy to vote on one's behalf; the proxy is the instrument evidencing the authority.

Requisites for Validity of Proxies (Section 57)

• Proxies must be written, signed, submitted to by-laws, and received by the corporate secretary before the scheduled meeting.
• Proxies are generally revocable, except if coupled with interest.
• Proxies are valid for the specific meeting stated, otherwise, they expire after 5 years.

Voting Through Remote Communication or In Absentia (Section 57)

• Authorization required by by-laws or a majority vote of the board.
• Votes received before the tally concludes.
• Remote presence counts toward quorum.
• Proper procedures are required to comply.

Voting Trusts (Section 58)

• A written agreement between stockholders transferring shares to a trustee. The trustee is granted voting and related rights for a period of 5 years.

Voting for Jointly Owned Shares (Section 55)

• Consent of all co-owners required for voting unless exceptions are stipulated.

Voting Rights for Treasury Shares (Section 56)

• Treasury shares held in the treasury have no voting rights and are ineligible for dividends.
• Preventing directors from using shares to circumvent majority stockholder wishes.
• Upon reissue Treasury shares regain their original voting and dividend rights.