A. Kinds of Corporate Meetings
Sec. 49 of the Corporation Code provides that: “Meetings of directors, trustees, stockholders, or members may be regular or special.”
Kinds:
a. Stockholders/Members:
1. Regular meeting 2. Special meeting b. Directors/Trustees:
1. Regular meeting 2. Special meeting
Sec. 50 of the Corporation Code provides that: “Regular meetings of stockholders or members shall be held annually on a date fixed in the
by-laws, or if not so fixed, on any date in April of every year as determined by the board of directors or trustees:
Provided, That written notice of regular meetings shall be sent to all stockholders or members of record at least 2 weeks prior to the meeting, unless a different period is required by the by-laws. Special meetings of stockholders or members shall be held at any time deemed necessary or as provided in the by-laws: Provided, however, That at least 1 week written notice shall be sent to all stockholders or members, unless otherwise provided in the by-laws. Notice of any meeting may be waived, expressly or impliedly, by any stockholder or member. Whenever, for any cause, there is no person authorized to call a meeting, the SEC, upon petition of a stockholder or member on a showing of good cause therefor, may issue an order to the petitioning stockholder or member directing him to call a meeting of the corporation by giving proper notice required by this Code or by the by-laws. The petitioning stockholder or member shall preside thereat until at least a majority of the stockholders or members present have been chosen one of their number as presiding officer.”
*Regular meeting of
stockholders/members shall be held annually on a date fixed in the by-laws or if not so fixed, on any date in April of every year. Written notice of regular meetings shall be sent 2 weeks prior to the meeting unless a different period is required by the by-laws.
** Special meeting of
stockholders/members shall be held at any time deemed necessary or as provided in the by-laws. Written notice shall be sent to all stockholders or members at least one week or unless otherwise provided in the by-laws.
Sec. 53 of the Corporation Code provides that: “Regular meetings of the board of directors or trustees of
every corporation shall be held monthly, unless the by-laws provide otherwise. Special meetings of the board of directors or trustees may be held at any time upon the call of the president or as provided in the by-laws. Meetings of directors or trustees of corporations may be held anywhere in or outside of the Philippines, unless the by-laws provide otherwise. Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or trustee at least 1 day prior to the scheduled meeting, unless otherwise provided by the by-laws. A director or trustee may waive this requirement, either expressly or impliedly.”
*Regular meetings of
directors/trustees shall be held monthly unless the by-laws provide otherwise.
*Special meetings of directors/trustees may be held at any time upon the call of the president or as provided in the by-laws.
*Meetings of directors or trustees may be held anywhere in or outside of the Philippines unless the by-laws provide otherwise.
*Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or trustee at least 1 day prior to the scheduled meeting unless otherwise provided by the by-laws.
B. Requirements of a Meeting
1. It must be held at the proper place.
2. It must be held at the stated date and at the appointed time or at a reasonable time thereafter.
3. It must be called by the proper person.
4. There must be a previous notice.
5. There must be a quorum.
Sec. 51 of the Corporation Code provides that: “Stockholders’ or members’ meetings, whether regular or special, shall be held in the city or municipality where the principal office of the corporation is located, and if practicable in the principal office of the corporation: Provided, That Metro Manila shall, for purposes of this section, be considered a city or municipality. Notice of meetings shall be in writing, and the time and place thereof stated therein. All proceedings had and any business transacted at any meeting of the stockholders or members, if within the powers or authority of the corporation, shall be valid even if the meeting be improperly held or called, provided all the stockholders or members of the corporation are present or duly represented at the meeting.”
*Applies to both stock and non-stock corporations.
General Rule: The meeting must be held in the city or municipality where the principal office is located.
Exception: Sec. 93 on non-stock corporations, the By-Laws may provide different venue for their meeting.
*A casual reading of section 51 would say that a corporation cannot provide any other place for the meeting of stockholders. But in case of a non-stock corporation, Section 93 of the Corporation provides that the by-laws could provide any place for the meeting of its members provided that it is within the Philippines and proper notice has been given.
Q: Is there a conflict between Section 51 and Section 93?
A: YES. There is conflict but this conflict may be reconciled. As a rule, the by-laws may provide a different place of meeting provided that it is within the Philippines and notice has been given. As an exception, if the by-laws is silent of the place of the meeting, section 51 applies.
Sec. 52 of the Corporation Code provides that: “Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in the case of non-stock corporations.”
General Rule: Majority of the OCS or Majority of the members
Exception: Unless otherwise provided by the Code or by the By-Laws.
*In Tan v Sycip, deceased member is not entitled to vote
Sec. 54 of the Corporation Code provides that: “The president shall preside at all meetings of the directors or trustees as well as of the stockholders or members, unless the by-laws provide otherwise.”
C. Right to Vote of Stockholders
• Instances when voting right not available
Sec. 6 of the Corporation Code provides that: “Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights.”
Instances when voting right is not available:
1. Delinquent shares 2. Treasury shares 3. Fractional shares 4. Escrow shares
• Rules on:
1. Delinquent Shares
Sec. 71 of the Corporation Code provides that: “No delinquent stock shall be voted for or be entitled to vote or to
representation at any
stockholders’ meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except the right to dividends in accordance with the provisions of this Code, until and unless he pays the amount due on his subscription with accrued interest, and the costs and expenses of advertisement, if any.”
*Delinquency arises upon default in payment of subscription.
Q: Are they included for quorum and voting purposes?
A: NO.
Q: Even if there are proxies?
A: YES.
Q: Shares not yet fully paid but not yet delinquent, are they entitled to vote?
A: YES.
*Delinquent stock is not entitled to vote and his presence would not be taken for purposes of quorum.
*The only right remain is the right to receive dividends subject to the provision of Section 43.
2. Escrow Shares
*Escrow shares are not entitled to vote before the fulfillment of the condition imposed thereon.
3. Unpaid Shares
Sec. 72 of the Corporation Code provides that: “Holders of subscribed shares not fully paid which are not delinquent shall
have all the rights of a stockholder.”
General Rule: The holder of unpaid shares can exercise the right to vote.
Exception: If it is provided in the subscription contract that such right cannot be exercised until the subscription is fully paid.
4. Sequestered Shares
Q: What is the reason for sequestration process?
A: For investigative purposes;
To avoid wastage dissipation of assets.
Q: Is PCGG authorized to vote for the sequestered shares?
A: General Rule: No. PCGG cannot vote for the sequestered shares because being a conservator/administrator, it should only perform acts of administration and not acts of ownership.
Exception: If there is a strong evidence that indeed the shares have been purchased through public funds.
Requisites:
1. Strong evidence or prima facie evidence that the shares are ill-gotten.
2. There is an imminent danger that the shares will be dissipated.
Case: Transmiddle East v CA
Q: During the pendency of sequestration process, are the sequestered shares included for quorum purposes?
A: General Rule: YES.
Q: Who can vote them?
A: General Rule: Stockholder of record.
*In Republic of the Philippines v COCOFED, the SC held that there is a prima facie evidence that the shares are purchased with the use of public funds.
5. Pledgor, Mortgagor or Administrator of Shares
Sec. 55 of the Corporation Code provides that: “In case of pledged or mortgaged shares in stock corporations, the pledgor or mortgagor shall have the right to attend and vote at meetings of stockholders, unless the pledgee or mortgagee is expressly given by the pledgor or mortgagor such right in writing which is recorded on the appropriate corporate books. Executors, administrators, receivers, and other legal representatives duly appointed by the court may attend and vote in behalf of the stockholders or members without need of any written proxy.”
Q: Can the pledgee/mortgagee exercise the right to vote?
A: General Rule: No. The right to vote remains to the owner thus, it is the pledgor/mortgagor that can exercise it.
Exception: If there is an
agreement that the
pledgee/mortgagee can
exercise the right to vote.
Case: Calapatia
*Administrator/executor/heirs have the right to vote even without prior proxy. But the SEC requires them to submit letters of appointment or documents showing that he has been duly
instituted as
executor/administrator of the deceased.
6. Shares Jointly Owned
Sec. 56 of the Corporation Code provides that: “In case of shares of stock owned jointly by two or more persons, in order to vote the same, the consent of all the co-owners shall be necessary, unless there is a written proxy, signed by all the co-owners, authorizing one or some of them or any other person to vote such share or shares: Provided, That when the shares are owned in an “and/or”
capacity by the holders thereof, any one of the joint owners can vote said shares or appoint a proxy therefor.”
D. Concept of Proxy and Voting Trust Agreement
Proxy is a written authorization given by one person to another so that the second person can act for the first.
*Proxy is a representative.
*Relationship: Principal-Agent.
*Proxy is authorized to vote and also authorized to be present in a meeting.
Functions: For quorum purposes; for voting purposes.
*In Board meeting, proxy is not allowed (Sec. 25 of the Corporation Code).
Sec. 58 of the Corporation Code provides that: “Stockholders and
members may vote in person or by proxy in all meetings of stockholders or members. Proxies shall be in writing, signed by the stockholder or member and filed before the scheduled meeting with the corporate secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended.
No proxy shall be valid and effective for a period longer than 5 years at any one time.”
Requisites:
1. Must be in writing
2. Filed before the scheduled meeting; under the SEC rule, 10 days before the scheduled meeting
*Proxy ensures presence of a quorum and also approval of corporate acts.
General Rule: Proxy is revocable.
Exception: If proxy is coupled with interest.
Ways to revoke proxy:
1. By execution of subsequent proxy.
2. If the stockholder concerned would appear in the scheduled meeting.
Voting Trust Agreement is an agreement whereby one or more stockholders transfer their shares of stocks to a trustee, who thereby acquires for a period of time the voting rights (and/or any other rights) over such shares; and in return, trust certificates are given to the stockholders, which are transferable like stock certificates, subject however, to the trust agreement.
PROXY VOTING TRUST
AGREEMENT