By: Diega V. Webster
The Revised Corporation Code (Republic Act No. 11232) authorizes stockholders or members and directors or trustees who cannot physically attend or vote at stockholders or members meetings and board or trustees meetings, respectively, to participate and vote through remote communication. This has now proven to be very useful during this difficult time when social and physical distancing has become the new norm, and most businesses have to operate at less than 100% capacity.
The Securities and Exchange Commission (SEC) has issued its own guidelines under SEC Memorandum Circular No. 6, series of 2020, approved on March 12, 2020 just a few days before the declaration of the enhanced community quarantine (ECQ) in the entire island of Luzon. With this, many corporations suspended operations, and while some continued operating, employees were directed to work from home in compliance with the rules on ECQ.
Despite the lifting of the ECQ and the transition to a modified ECQ, corporations are still at a quandary on how to schedule their regular meetings of the board, stockholders and members. Through the teleconferencing guidelines, they should now be able to conduct their meetings remotely.
Directors or trustees who cannot physically attend or vote at board meetings can participate and vote remotely through teleconferencing, videoconferencing, or other alternative modes of communication, as long as they do so personally. Proxies are not allowed in these alternative modes.
To do this, a director or trustee only has to notify the presiding officer and the corporate secretary of the intention to participate remotely.
The rule is the same for stockholders’ and members’ meetings, as long as the by-laws allow remote participation. If the by-laws are silent, a majority of the board may authorize the remote participation through a board resolution.
Quorum. The quorum will still be based on the by-laws of the corporation or the Revised Corporation Code. The general rule is that for board meetings, a majority of the directors or trustees as stated in the corporation’s articles of incorporation constitutes a quorum. The same is true for stockholders or members meetings, i.e. a quorum shall consist of a majority of the stockholders or members.
Attendees who are participating remotely shall be deemed present for the purpose of attaining quorum.
Notice of meeting. In a board meeting, aside from the usual requirements for a notice of meeting, when the meeting allows for remote participation and voting, the corporate secretary shall also add the fact that there will be a visual and/or audio recording of the meeting, and the instructions to facilitate participation in the meeting through remote communications. The corporation thus has to ensure that internal procedures have already been put in place prior to sending out the notices.
For stockholders’ and members’ meetings, notices of regular meetings should be sent at least 21 days prior to the scheduled meeting, unless the by-laws provide a longer time. However, in case of postponement of regular meetings, a notice of at least 2 weeks prior to the date of meeting shall suffice.
If it is a special stockholders’ or members’ meeting, at least 1 week notice is sufficient, unless the by-laws provide a longer time.
Note that in a stockholders’ or members’ meeting, the notice shall further include: 1) the requirements and procedures to be followed when a person elects to attend, participate, or vote remotely, 2) the manner of casting of votes and the period during which vote by remote communication or in absentia will be accepted, 3) contact information of the secretary or office staff who will accept notifications from the stockholder or member, 4) the requirements and procedure for nomination and election, if any, and 5) the fact that there will be visual and audio recording of the meetings.
Roll call. For board meetings, the corporate secretary shall make a roll call, where every attendee has to state for the record his/her 1) full name and position, 2) location, 3) confirmation that he/she can clearly hear and/or see the other attendees, 4) confirmation that he/she has received the notice of the meeting including the agenda and materials, and 5) specify the device being used.
Note, however, that the roll call only applies to board meetings. There is no need to do a roll call for meetings among stockholders or members of the corporation.
Voting. The corporation shall establish a manner of voting that accommodates attendees participating remotely. This shall be provided in the internal procedures to be drafted by the corporation.
In a stockholders’ or members’ meeting, the right to vote may be exercised remotely when authorized by a resolution of the majority of the board, provided that the resolution shall only be applicable for that particular meeting.
Internal procedures. The corporation must establish mechanisms for remote participation and voting, including, but not limited to: 1) verifying the identity of the stockholders or members and who among them have the right to vote during the meeting, 2) ensuring that all stockholders or members have the opportunity to participate, read and hear the discussion substantially, 3) enabling the voting and ensuring the integrity and secrecy of the votes, and 4) procedures for documenting the meeting and making the record thereof available to stockholders or members.
Duties of the corporate secretary. The corporate secretary shall ensure the 1) availability of suitable equipment and facilities, such as reliable internet connection, 2) ability of the attendees to hear and see the other participants clearly during the course of the meeting and that they understand each other, and 3) uninterrupted and secured recording of the meeting.
For board meetings, those who attended the meeting remotely must also sign the minutes of the meeting whenever the act of signing if practicable. The corporate secretary will have to ensure that this is done.
This recent issuance of the SEC is indeed a welcome development as it now enables corporations, both stock and non-stock, to continue to conduct their corporate meetings without any disruption in this new norm. It would serve corporate entities well if they availed of this mechanism and adjust to the demands of the times.