How Stockholders’ Meetings Are Conducted

In general, all corporate powers are exercised by the board of directors;  stockholders’ approval for corporate acts is usually not required. However, the Corporation Code requires (and the by-laws of the corporation may require) stockholders’ approval for certain corporate acts. Stockholders’ approval is usually given during a stockholders’ meeting where the matter is submitted to the stockholders for approval.

Let’s run through a typical agenda for a stockholders’ meeting:

1.     Call to Order

During this part of the meeting, the person authorized to call the meeting states that he is calling the meeting to order. Unless otherwise provided in the by-laws, the President of the corporation has authority to preside at all meetings of stockholders (Corporation Code, sec. 54). Hence, the President would normally call the meeting to order.

If the person entitled to preside is not present at the time the meeting is convened, the stockholders present may request a stockholder to temporarily preside at the meeting (Corporation Code of the Philippines Annotated, p. 480).

After the presiding officer calls the meeting to order, the presiding officer will usually note that the Corporate Secretary will record the proceedings. The Corporate Secretary prepares the minutes of meeting, which he will co-sign with the presiding officer of the meeting.

2.      Certification of Quorum

A quorum is necessary in order that business can be transacted during the stockholders’ meeting. During this part of the meeting, Corporate Secretary certifies that a quorum exists for the transaction of business by the stockholders. Unless otherwise provided in the Corporation Code or in the by-laws, a quorum consists of stockholders representing a majority of the outstanding capital stock.

If notice of the meeting was not given within the period provided in the by-laws, the Corporate Secretary will also certify whether the stockholders have waived the notice requirement.

3.     Election of Directors/Approval of corporate acts

During the annual or regular meeting of stockholders, the stockholders would normally proceed to elect the directors for the current year.

Management may also submit to stockholders for approval matters requiring stockholders’ approval. In general, all corporate powers are exercised by the board of directors and stockholders’ approval is usually not required. However, the Corporation Code requires (and the by-laws of the corporation may require) stockholders’ approval for certain corporate acts. Listed below are the corporate acts that require stockholders’ approval under the Corporation Code (as well as the required vote for approval under the Corporation Code):

(a)      amendment of articles of incorporation – vote (or written assent) of at least 2/3 of outstanding capital stock (Corporation Code, sec. 16);

(b)     election of directors – vote of stockholders representing at least a majority of the outstanding capital stock (Corporation Code, sec. 24);

(c)     removal of directors – vote of stockholders holding or representing 2/3 of the outstanding capital stock (Corporation Code, sec. 28);

(d)     ratifying a contract of a director/officer with the corporation – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 32);

(e)     extending or shortening the corporate term – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 37);

(f)      increase or decrease of the capital stock – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 38);

(g)     incurring, creating or increasing bonded indebtedness – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 38);

(h)     sale, lease, exchange, mortgage, pledge of all or substantially all the corporate assets – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 40);

(i)     investment of corporate funds in another corporation or for any purpose other than the primary purpose for which the corporation was organized – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 42);

(j)      issuance of stock dividends – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 43);

(k)     execution of management contracts – vote of stockholders representing at least a majority of the outstanding capital stock (Corporation Code, sec. 44);

(l)      adoption of by-laws – vote of stockholders representing at least a majority of the outstanding capital stock (Corporation Code, sec. 46);

(m)    amendment or repeal of by-laws – vote of stockholders representing at least a majority of the outstanding capital stock (Corporation Code, sec. 48);

(n)     delegation to board of the power to amend or repeal the by-laws or adopt new by-laws – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 48);

(o)     revocation of the power given to the board to amend or repeal the bu-laws or to adopt new by-laws – vote of stockholders representing at least a majority of the outstanding capital stock (Corporation Code, sec. 48);

(p)     fixing issue price of no par value shares – a majority of the quorum of the board of directors if authorized by the articles of incorporation, or in the absence of such authority, by a majority of the outstanding capital stock (Corporation Code, sec. 62);

(q)     approval or amendment of a plan of merger or consolidation – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 77);

(r)      dissolution of a corporation – vote of stockholders representing at least 2/3 of the outstanding capital stock (Corporation Code, sec. 77);

(s)      adoption of plan of distribution of assets of a non-stock corporation -vote of 2/3 of members having voting rights (Corporation Code, sec. 95).

During meetings, only stockholders who hold voting shares may vote. Thus, holders of non-voting shares generally cannot vote. However, the Corporation Code allows holders of non-voting shares to vote on the following matters:

(a)     amendment of the articles of incorporation;

(b)     adoption and amendment of by-laws;

(c)     sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;

(d)     incurring, creating or increasing bonded indebtedness;

(e)      increase or decrease of capital stock;

(f)       merger or consolidation of the corporation with another corporation or other corporations;

(g)      investment of corporate funds in another corporation or business in accordance with the Corporation Code; and

(h)     dissolution of the corporation.

A stockholder may vote: (1) directly (i.e., in person); or (2) indirectly through a representative. This representative may be a proxy, a trustee under a voting trust agreement, or an executor or other legal representative appointed by the court. With respect to shares of stock that have been pledged, the pledgor still has the right to attend and vote at stockholders’ meetings unless the pledgee is expressly given such right in writing which is recorded on the appropriate books by the pledgor. (Corporation Code, sec. 55). In case of shares of stock owned jointly by 2 or more persons, in order to vote the same, the consent of all the co-owners is necessary, unless there is a written proxy signed by all co-owners authorizing one or some of them or any other person to vote such share. Where the shares are owned in an “and/or” capacity, any one of the joint owners can vote said shares or appoint a proxy to vote the shares. (Corporation Code, sec. 56).

4.     Adjournment

This is the part of the meeting where the presiding officer adjourns the meeting.

Advertisements