The powers of a corporation are vested in the board of directors and the stockholders as a body and not as individuals (see Corporation Code of the Philippines Annotated, p. 465). Hence, corporate actions can generally be taken and approved only in properly convened meetings of the stockholders or directors of the corporation.
A meeting of stockholders can either be regular or special. A regular meeting refers to the yearly meeting of the stockholders on the 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. A special meeting of stockholders is one held at any time deemed necessary (as may be provided in the by-laws).
Similarly, a meeting of the board of directors can either be regular or special. The regular meeting of the board of directors refers to one held on a monthly basis as provided in the Corporation Code (unless the by-laws provide otherwise). On the other hand, a special meeting of the board is one held at any time upon the call of the President (or as may be provided in the by-laws). (Corporation Code, sec. 53)
The by-laws normally state who are authorized to call meetings of the corporation. The by-laws typically provide that stockholders’ meetings may be called by the President, the Board of Directors or at the written request of stockholders representing a majority of the outstanding capital stock. For directors’ meetings, by-laws typically provide that the meeting may be called by the Chairman, the President or at the request of a majority of the directors. If there is no person authorized to call a meeting, the SEC, upon petition of a stockholder and upon showing of good cause, may issue an order to the petitioning stockholder directing him to call a meeting of the corporation by giving proper notice of the meeting. (Corporation Code, sec. 50)
Prior to the holding of a stockholders’ meeting, the Corporate Secretary must first send notices of meetings to the stockholders (Corporation Code, sec. 50). Unless otherwise provided in the by-laws, written notice of regular meetings must be sent to all stockholders of record at least 2 weeks prior to a regular meeting or at least 1 week prior to a special meeting. With respect to board meetings, notice of the regular or special meeting of the board of directors must be sent to every director at least 1 day prior to the scheduled meeting (unless otherwise provided in the by-laws).
Among the items included in the notice of meeting are the following:
(a) the date and time of the meeting;
(b) the place of the meeting (which, in the case of a stockholders’ meeting must be in the city or municipality where the principal office of the corporation is located, and if practicable, in the principal office of the corporation; in the case of a board meeting, the meeting may be held anywhere in or outside the Philippines);
(c) the agenda for the meeting (i.e., the matters that will be taken up during the meeting).
For stockholders’ meetings, the notice of meeting would generally include, as an attachment, a proxy form that a stockholder can execute in the event that he cannot attend the stockholders’ meeting and he wishes to authorize another person to attend on his behalf. The notice of stockholders’ meeting usually states the deadline for filing the signed proxy forms with the Corporate Secretary. Under Section 192 of the Tax Code, a stamp tax of PhP15 must be paid on “each proxy for voting at any election for officers of any company or association, or for any other purpose, except proxies issued affecting the affairs of associations or corporations organized for religious, charitable or literary purposes. . . .” In addition to the proxy form, there may be other attachments to the notice of stockholders’ meeting (particularly if the company is a public or a listed company).
Proxy forms are not attached to a notice of meeting of directors since the law does not allow directors to designate a proxy for directors’ meeting.
In case the notice of meeting is sent late such that the relevant notice period provided in the Corporation Code or in the by-laws will not be complied with, the notice of meeting generally includes a waiver form that the stockholder or the director can sign. In that waiver form, the stockholder or director consents to the holding of the meeting and waives formal call and notice of meeting, whether required under the law or the by-laws. Under the Corporation Code, notice of meeting may be waived, expressly or impliedly, by any stockholder or director. (Corporation Code, secs. 50, 53).
It is important the meetings are properly called and held since business transacted at an improperly called or held meeting may be questioned. Under the Corporation Code, all proceedings transacted at a stockholders’ meeting will be valid even if the meeting is improperly called or held if the following requisites are present: (a) the business transacted is within the power or authority of the corporation; and (b) all stockholders or members of the corporation are present or duly represented. (Corporation Code, sec. 51). In case of an improperly held board meeting, resolutions and acts approved in said meeting may be questioned unless subsequently ratified expressly by the board of directors in a duly convened meeting or impliedly by the corporation’s course of conduct. (Lopez Realty vs. Fontecha, 247 SCRA 183 )
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