Recent developments and implications for companies

The Philippine Securities and Exchange Commission (SEC) has recently issued SEC Memorandum Circular No. 6 Series of 2020 (SEC MC No. 6) to implement the provisions of the Revised Corporation Code, which recognizes that meetings of stockholders and of the board of directors (board) may be held by remote communication, under certain conditions. SEC MC No. 6 contains guidelines on the use of remote communication, such as videoconferencing, teleconferencing, and other alternative modes of communication, in the conduct of board of and stockholder meetings.

SEC MC No. 6 also implements the objectives of Republic Act No. 8792 (otherwise known as the Electronic Commerce Act) to facilitate domestic and international dealings, transactions, arrangements, and agreements through the utilization of electronic, optical and similar medium, mode, instrumentality and technology and to promote the universal use of electronic transactions.

SEC MC No. 6 was issued at this time as it is also intended to mitigate the impact of the temporary cessation of business operations of private establishments, and other measures imposed in response to the Coronavirus Disease 2019 (COVID-19) outbreak.

What the regulation says

SEC MC No. 6 allows the attendance and participation of directors, trustees, stockholders, members and other officers of companies in regular and special meetings through remote communication. Remote communication is defined as the transfer of data between two or more devices not located at the same site. Remote communication includes but is not limited to teleconferencing, videoconferencing, computer conferencing, and audio conferencing.

Board meetings of directors or trustees

Directors or trustees who cannot physically attend or vote at board meetings can participate and vote through remote communication. Companies' may issue their own internal procedures for the conduct of board meetings through remote communication, provided that directors or trustees cannot attend or vote by proxy at such board meetings.

Notices of meetings may be sent to all directors, trustees, or other officers through electronic mail, messaging service or such other manner provided in a company's by laws or by board resolution. If a director, trustee, or other officer intends to participate in a meeting through remote communication, advance notice should be given to the presiding officer and corporate secretary of the company.

A director or trustee participating in a board meeting via remote communication may cast his or her vote through electronic mail, messaging service or such other manner provided in the internal procedures of the company, provided that the vote shall be sent to the presiding officer and the corporate secretary for notation.

The corporate secretary is required to secure an audio or video recording of all board meetings, and ensure that such recordings are kept in updated storage equipment or facility.

Stockholders meetings

Stockholders who cannot physically attend stockholders meetings may also participate in such meetings through remote communication, provided that the same is expressly allowed in the company's by-laws or by a vote of a majority of the board of directors. Companies may adopt and issue their own internal procedures for the conduct of stockholders meetings through remote communication, provided that the same takes into account the number and location of stockholders, the importance of the matters to be discussed and voted upon in the meeting, protection of minority rights, and other factors consistent with the protection and promotion of stockholders' or member's rights.

Notices of meetings may be sent to all stockholders or other officers through electronic mail, messaging service or such other manner provided in a company's by-laws, provided that:

  • notices of regular meetings must be sent to every stockholder or member at least 21 days prior to the scheduled meeting, unless a longer time is provided in the company's by-laws; and

  • notices of special meetings must be sent to every stockholder or member at least one week prior to the scheduled meeting, unless a longer time is provided in the company's by-laws.

If a stockholder, member or other officer intends to participate in a meeting through remote communication, advance notice should be given to the presiding officer and corporate secretary of the company.

The right to vote of stockholders may be exercised in person, through a proxy, or when authorized in the by-laws, through remote communication or in absentia (i.e., through an absentee ballot). The right to vote of stockholders may also be exercised for a particular meeting through remote communication or in absentia, if authorized by a resolution of the majority of the board of directors.

SEC MC No. 6 also states that the presiding officer shall call and preside over the stockholders' meetings, whether regular or special, at the principal office of the corporation as provided in the articles of incorporation, or, if this is not practicable, in the same city or municipality where the principal office of the corporation is located.

The corporate secretary is also required to secure an audio or video recording of all stockholders' and member's meetings, and ensure that such recordings are kept in updated storage equipment or facility.

Actions to consider

To operationalize the guidelines for remote attendance in board and stockholders' meetings, SEC MC No. 6 allows companies to conduct their board meetings and stockholders meetings through remote communication, solely for the limited purpose of approving the provisions in their by-laws, or the internal procedures, that would govern participation in board and stockholders meetings by means of remote communication.

Companies who wish to conduct board meetings and stockholders meetings through remote communication, should therefore convene a board meeting and a stockholders meeting, as the case may be, to approve resolutions amending the relevant provisions in their by-laws, or to approve the internal procedures governing participation in board meetings and stockholders meetings by means of remote communication.

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