Philippines Corporate Meetings PDF

TITLE VI: MEETINGS Meetings of Stockholders/Members Necessity of Meetings In corporation law, stockholders or members can only act in properly convened and assembled meetings unless the law states otherwise. A written consent by the majority of stockholders or members is not en...

TITLE VI: MEETINGS Meetings of Stockholders/Members Necessity of Meetings In corporation law, stockholders or members can only act in properly convened and assembled meetings unless the law states otherwise. A written consent by the majority of stockholders or members is not enough for actions requiring their approval. Exceptions to the Rule: 1. Amending Articles of Incorporation (Sec. 15) ○ Corporations can amend their articles with: A majority vote of the board of directors or 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 2/3 written consent of members is sufficient. No meeting is required. 2. Unanimous Agreement Outside a Formal Meeting ○ Corporations are bound by the unanimous action or agreement of stockholders/members, even if not done in a formal meeting. 3. Close Corporations (Sec. 100) ○ Actions by directors of a close corporation without a meeting are valid unless the by-laws state otherwise. 4. One-Person Corporations (Sec. 128) ○ Meetings are not required. Requisites for a Valid Meeting of Stockholders or Members: 1. Proper Place: The meeting must be held in the correct location. 2. Proper Time: It must occur on the stated date and time or within a reasonable period afterward. 3. Called by Proper Person: Only authorized individuals can call a meeting. 4. Previous Notice: Proper notice must be given in advance. 5. Quorum: A sufficient number of attendees is required. Proper Person to Call a Meeting: 1. As Specified in By-Laws: ○ The person(s) named in the by-laws can call a meeting. 2. In the Absence of By-Law Provision: ○ A director, trustee, or an officer managing the corporation can call a meeting unless stated otherwise by law. 3. If No Authorized Person or Refusal to Call: ○ If no one is authorized, or the authorized person refuses to call a meeting, the SEC may, upon petition by a stockholder/member, order the meeting to be called. ○ The petitioning stockholder/member will preside until a majority elects a presiding officer (Sec. 49). 4. Special Meetings for Removal of Directors/Trustees (Sec. 27): ○ Can be called by the secretary upon the president's order or upon the written demand of: Stockholders holding at least a majority of the outstanding capital stock, or A majority of members entitled to vote. 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 methods allowed by the SEC under its guidelines. Notice of Every Meeting Required (Section 50) Notices must be sent using the methods specified in the by-laws. The notice must include the time, place, and purpose of the meeting. If the by-laws do not specify a method, the process in Section 50 (now Section 49 of the RCCP) must be followed (SEC Opinion, June 9, 1994). Requisites of Notice of Meeting (Sections 49 and 50) 1. Authority: The notice must be issued by someone authorized to do so. 2. Written Form: The notice must be in writing. 3. Details: It should state the date, time, and place of the meeting unless otherwise specified in the by-laws. 4. Timing: The notice must be sent within the time period required by law or the by-laws. 5. Agenda: It must include the agenda or the business to be discussed. 6. Attachments: ○ Proxy Form: To be submitted to the corporate secretary before the meeting. ○ Remote Participation: Requirements and procedures if attendance, voting, or participation will be done via remote communication or in absentia. ○ Election Requirements: For meetings involving the election of directors or trustees, the procedures for nomination and election must be provided. 7. Compliance: The notice must meet any additional requirements in the law or by-laws. Rules on Waiver of Notice to Stockholders (Section 49) 1. General waivers of notice in the articles of incorporation or by-laws are not allowed. 2. A stockholder or member may waive notice expressly or impliedly. 3. Attendance at the meeting constitutes a waiver of notice unless the attendee states at the start of the meeting that their purpose is to object to the meeting's validity. 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: 1. Authority: The actions taken are within the corporation’s powers (not ultra vires). 2. Attendance: All stockholders or members are present or represented, and none of them objects at the start of the meeting that it was improperly called or convened. Matters to Be Presented by the Board During the Regular Meeting of Stockholders or Members (Section 49) A. Minutes of the Most Recent Regular Meeting (talk about the recent meeting): 1. Description of voting and vote-counting procedures from the last meeting. 2. Details on how stockholders or members were allowed to ask questions, including a record of the questions and answers.  3. Summary of topics discussed and decisions made. 4. Voting results for each agenda item. 5. List of attendees, including directors, trustees, officers, and stockholders or members. 6. Other items required by the SEC to ensure good corporate governance and protect minority stockholders. B. Members’ List or Stockholder Information: For non-stock corporations: A members’ list. For stock corporations: Relevant information about current stockholders and their voting rights. C. Performance Report of the Corporation: A detailed and balanced report on the corporation’s performance, including any major changes in business, strategy, or other operations. D. Financial Report for the Previous Year: 1. Financial statements signed and certified according to the Code and SEC rules. 2. Statement on the adequacy of internal controls or risk management systems. 3. Details of external audit and non-audit fees. E. Dividend Policy Explanation: Information on dividend payments or reasons for non-payment. F. Profiles of Directors or Trustees: Includes qualifications, experience, service length, training, board roles in other corporations, and continuing education. G. Attendance Report: Attendance of directors or trustees at board meetings, committee meetings, and stockholder meetings. H. Appraisals and Performance Reports: Evaluation criteria and procedures for assessing board performance. I. Compensation Report: Details on director or trustee compensation following the Code and SEC rules. J. Disclosures on Self-Dealings:  Transactions involving directors or trustees with related parties. K. Nominee Profiles: Information about directors seeking election or re-election. Agenda (Section 49) In addition to listed matters, directors, trustees, stockholders, or members may propose items for inclusion in the agenda during regular meetings. Stockholders or members may also propose holding special meetings and include items in the agenda. Postponement of Meetings (Section 49) If a regular meeting is postponed, written notice with the reason must be sent to all stockholders or members at least two weeks before the meeting, unless the 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 may be cast: 1. In person 2. Through a proxy 3. Via remote communication or in absentia Quorum Requirements (Section 51)  Corporations may define quorum requirements in their by-laws. Without a quorum, no action can be taken except to adjourn. For Stock Corporations: Quorum is based on the number of outstanding voting stocks, excluding treasury shares (Section 173). For Non-Stock Corporations: Quorum is a majority of the registered members unless the by-laws or Code state otherwise. Place of Meetings (Section 50) Meetings must be held at the corporation’s principal office or, if not practical, in the city or municipality where the principal office is located. This rule is mandatory unless exceptions apply (e.g., Section 92 for non-stock corporations).(Can be held outside the corporation office as long as the meeting held within the Philippines) Necessity of Meetings of Directors or Trustees Directors or trustees manage the corporation’s affairs as a group, not individually. They can only exercise their powers during a lawful board meeting. Requisites for a Valid Board Meeting A. The meeting must involve directors or trustees assembled as a board in a lawful manner. B. A quorum must be present. C. Decisions require: A majority of the quorum, or In specific cases, a majority of the entire board. D. The meeting must follow the time, place, and manner specified in the by-laws. Rules Regarding Quorum (Section 52) A. Quorum Requirement for Meetings: A quorum is usually a majority of the directors or trustees as stated in the articles of incorporation unless a greater number is required by the by-laws. B. Approval of Corporate Acts: Approval generally requires a majority vote of the quorum, unless the RCCP specifies otherwise. C. Election of Officers: The election of officers needs a majority vote of all board members. D. 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) A. No Proxies Allowed: Directors or trustees cannot act by proxy because: ○ They are personally elected for their qualifications. ○ They must use their personal judgment in corporate decisions. ○ Their powers and duties cannot be delegated to others. B. Remote Participation:  Directors or trustees who cannot attend in person may participate and vote through remote communication (e.g., videoconferencing or teleconferencing). The corporate secretary must: ○ Ask if directors plan to attend physically or remotely in the meeting notice. ○ Require directors to notify their intent to participate remotely at least five days before the meeting. All proceedings must be recorded and securely stored by the corporate secretary (SEC Memorandum Circular No. 15, Series of 2001). Notice of Every Meeting Required A meeting without notice to some directors or trustees is invalid unless: ○ The absent directors ratify the actions taken, explicitly or implicitly. ○ Rights have been acquired by innocent third parties, making the corporation estopped from challenging the meeting's legality. Resolutions and actions from meetings without notice or quorum are invalid unless: ○ Ratified in a proper board meeting, or ○ Ratified implicitly through the corporation’s subsequent actions. Waiver of Notice of Meeting A director or trustee may waive the notice requirement, either explicitly or implicitly. Recusal of a Director or Trustee (Section 52) A director or trustee with a potential interest in a related party transaction must: ○ Abstain from voting on the matter. ○ Comply with Section 31 requirements. Presiding Officer at Meetings (Section 53) A. Designated by By-Laws: The person named in the by-laws presides over meetings. B. Chairman or President: The chairman presides; if absent, the president steps in. C. Temporary Presiding Officer:  If no officer is present, a stockholder/member may temporarily preside until a vote is held to select a presiding officer. D. SEC-Authorized Meetings: If no one is authorized to call a meeting, the SEC-appointed petitioning stockholder/member presides until a majority chooses an officer. Manner of Voting for Stockholders or Members A. Direct Voting – Voting personally. B. Indirect Voting: 1. Through legal representatives like executors or administrators. 2. By proxy. 3. Through trustees under a voting trust agreement. Representative Voting (Section 54) A. Legal Representatives: Executors, administrators, or court-appointed representatives can vote on behalf of stockholders or members without a written proxy. B. Secured Creditors (Shares as Security): The stockholder-debtor retains voting rights unless explicitly transferred in writing to the secured creditor. This transfer must be recorded in corporate books. C. Corporation-Owned Shares: Shares owned by a corporation can be voted by its officer, agent, or proxy, as defined by its by-laws or board. D. Proxy Voting: A proxy is: ○ Written authority given by a stockholder or member to someone else to vote on their behalf. ○ The person authorized to vote in place of the absent stockholder/member. ○ The instrument evidencing this authority. Requisites for Validity of Proxies (Section 57) 1. Written Form: Proxies must be written, signed, and submitted in accordance with the by-laws. 2. Submission Deadline: Must be received by the corporate secretary within a reasonable time before the scheduled meeting. 3. Validity: ○ Valid only for the intended meeting unless otherwise stated. ○ Continuing proxies cannot exceed five years; otherwise, they become invalid. Revocation of Proxies Proxies are generally revocable, even those stated as irrevocable, except if coupled with an interest. Revocation methods: ○ Formal notice. ○ Oral revocation or conduct (e.g., personal attendance of the stockholder). ○ Issuance of a subsequent proxy. ○ Sale of shares. E. Voting Through Remote Communication or In Absentia (Section 57) 1. Authorization Required: Allowed if authorized in the by-laws or by a majority of the board. 2. Timeliness: Votes must be received before the vote tally concludes. 3. Presence for Quorum: Participation via remote communication or in absentia counts toward quorum. 4. Procedures: Corporations must set requirements and procedures considering their scale, shareholder/member size, and other factors while respecting voting rights. F. Voting Trusts (Section 58) Definition: A written agreement where stockholders transfer shares to a trustee, granting voting and related rights for up to five years. Procedure:  1. Execution: Agreement signed by the stockholder and trustee(s). 2. Voting Trust Certificate: Issued to the stockholder. 3. Stock Cancellation: Original certificates canceled; new ones issued in the trustee’s name. 4. Corporate Record: Agreement noted in corporate books, accessible to stockholders for review. 5. Expiry: Rights expire after the agreed period unless renewed. Trust certificates and stock certificates revert to the transferor upon expiry. Powers/Rights of Voting Trustees: 1. Voting Rights: Trustees may vote and exercise other stock-related rights as outlined in the agreement. 2. Proxy Voting: Allowed unless restricted by the agreement. 3. Inspection Rights: Trustees can inspect corporate books like transferors. 4. Directorship Eligibility: Trustees, as legal titleholders, are qualified to serve as directors. Limitations on Voting Trust Agreements 1. Prohibited Scenarios: ○ Cannot exceed five years unless tied to a loan agreement, where it may extend but must expire upon full loan repayment. ○ Cannot be used to circumvent laws, including: Anti-competitive practices. Abuse of dominant position. Violations of nationality/capital requirements. Perpetuation of fraud. 2. Documentation Requirements: ○ Must be in writing, notarized, and specify terms/conditions. ○ Certified copy must be filed with the corporation and the SEC; otherwise, it is ineffective and unenforceable. 3. Transparency: ○ Subject to examination by stockholders like other corporate books/records. 4. Expiration: ○ Automatically expires after the agreed period unless renewed. ○ For loan agreements, the trust continues until loan repayment. Voting for Jointly-Owned Shares (Section 55) 1. General Rule: ○ Consent of all co-owners required for voting. 2. Exceptions:  ○ A written proxy signed by all co-owners authorizing one or more individuals to vote. ○ If shares are owned in an “and/or” capacity, any co-owner can vote or appoint a proxy. Voting Rights for Treasury Shares (Section 56) 1. Denied Rights: ○ Treasury shares have no voting rights and are ineligible for dividends while held in the treasury. 2. Purpose of Exclusion: ○ Prevent directors from using treasury shares to extend their tenure against majority stockholder wishes. 3. Reissuance: ○ Treasury shares can be reissued for valuable consideration. Upon reissue, they regain their original voting and dividend rights.