Important Rules to Follow for Validity of any Corporate Meeting

Requirements for a Corporate Meeting to be Valid

Corporate Meetings in General

In the context of an enterprise or business, a “meeting” refers to any officially organized gathering of stakeholders, stockholder, members, directors, trustees, or managers, convened for a lawful purpose or to conduct business of mutual interest. It could be a small congregation of managers or employees to discuss internal concerns in a company, or a large annual gathering of stockholders of a publicly listed company for the purpose of electing incoming directors and officers of the corporation. The former may be governed by the company’s internal rules. However, where a meeting is specifically between stockholders or directors of a stock corporation, or members or trustees of a non-stock corporation, the company’s internal rules must strictly comply with the requirements of Republic Act No. 11232 also known as the Revised Corporation Code of the Philippines, for its validity.

Rule Governing Corporate Meetings in the Philippines

Section 48 of the Revised Corporation Code defines two (2) types of meetings – a special meeting and a regular meeting. By its very context, a regular meeting is one which is held annually or on a date fixed by the company’s By-Laws, or as otherwise scheduled by the Board of Directors or Trustees of a company. On the other hand, a special meeting is one held by either the board or directors or trustees on the one hand, or by stockholders or members of a corporation, on the other hand, at any time deemed necessary, or as provided in the company’s By-Laws.

 For validity of any such meeting, whether regular or special, the following provision of the Revised Corporation Code of the Philippines must be complied with:

SEC. 49. Regular and Special Meetings of Stockholders or Members. – Regular meetings of stockholders or members shall be held annually on a date fixed in the bylaws, or if not so fixed, on any date after April 15 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 twenty-one (21) days prior to the meeting, unless a different period is required in the bylaws, law, or regulation: Provided, further, That written notice of regular meetings may be sent to all stockholders or members of record through electronic mail or such other manner as the Commission shall allow under its guidelines.

At each regular meeting of stockholders or members, the board of directors or trustees shall endeavor to present to stockholders or members the following:

  1. The minutes of the most recent regular meeting which shall include, among others:
  2. A members’ list for nonstock corporations and, for stock corporations, material information on the current stockholders, and their voting rights;
  3. A detailed, descriptive, balanced and comprehensible assessment of the corporation’s performance, which shall include information on any material change in the corporation’s business, strategy, and other affairs;
  4. A financial report for the preceding year, which shall include financial statements duly signed and certified in accordance with this Code and the rules the Commission may prescribe, a statement on the adequacy of the corporation’s internal controls or risk management systems, and a statement of all external audit and non-audit fees;
  5. An explanation of the dividend policy and the fact of payment of dividends or the reasons for nonpayment thereof;
  6. Director or trustee profiles which shall include, among others, their qualifications and relevant experience, length of service in the corporation, trainings and continuing education attended, and their board representations in other corporations;
  7. A director or trustee attendance report, indicating the attendance of each director or trustee at each of the meetings of the board and its committees and in regular or special stockholder meetings;
  8. Appraisals and performance reports for the board and the criteria and procedure for assessment;
  9. A director or trustee compensation report prepared in accordance with this Code and the rules the Commission may prescribe;
  10. Director disclosures on self-dealings and related party transactions; and/or
  11. The profiles of directors nominated or seeking election or reelection.
  12. A description of the voting and vote tabulation procedures used in the previous meeting;
  13. A description of the opportunity given to stockholders or members to ask questions and a record of the questions asked and answers given;The matters
  14. discussed and resolutions reached;A record of the voting results for each agenda item;
  15. A list of the directors or trustees, officers and stockholders or members who attended the meeting; and

A director, trustee, stockholder, or member may propose any other matter for inclusion in the agenda at any regular meeting of stockholders or members.

Special meetings of stockholders or members shall be held at any time deemed necessary or as provided in the bylaws: Provided, however, That at least one (1) week written notice shall be sent to all stockholders or members, unless a different period is provided in the bylaws, law or regulation.

A stockholder or member may propose the holding of a special meeting and items to be included in the agenda.

Notice of any meeting may be waived, expressly or impliedly, by any stockholder or member: Provided, That general waivers of notice in the articles of incorporation or the bylaws shall not be allowed: Provided, further, That attendance at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.

Whenever for any cause, there is no person authorized or the person authorized unjustly refuses to call a meeting, the Commission, upon petition of a stockholder or member on a showing of good cause therefor, may issue an order directing the petitioning stockholder or member to call a meeting of the corporation by giving proper notice required by this Code or the bylaws. The petitioning stockholder or member shall preside thereat until at least a majority of the stockholders or members present have chosen from among themselves, a presiding officer.

Unless the bylaws provide for a longer period, the stock and transfer book or membership book shall be closed at least twenty (20) days for regular meetings and seven (7) days for special meetings before the scheduled date of the meeting.

In case of postponement of stockholders’ or members’ regular meetings, written notice thereof and the reason therefor shall be sent to all stockholders or members of record at least two (2) weeks prior to the date of the meeting, unless a different period is required under the bylaws, law or regulation.

The right to vote of stockholders or members may be exercised in person, through a proxy, or when so authorized in the bylaws, through remote communication or in absentia. The Commission shall issue the rules and regulations governing participation and voting through remote communication or in absentia, taking into account the company’s scale, number of shareholders or members, structure, and other factors consistent with the protection and promotion of shareholders’ or member’s meetings.”

Requirements for Validity of Corporate Meetings in the Philippines

In the case of Lim vs. Moldex Land, Inc., et al., G.R. No. 206038. 25 January 2017, the Supreme Court gave emphasis on the following requirements for the validity of corporate meetings involving shareholders, members, directors or trustees of a corporation:

“Under Philippine corporate laws, meetings may either be regular or special. A stockholders’ or members’ meeting must comply with the following requisites to be valid:

  1. The meeting must be held on the date fixed in the By­ Laws or in accordance with law;
  2. Prior written notice of such meeting must be sent to all stockholders/members of record;
  3. It must be called by the proper party;
  4. It must be held at the proper place; and
  5.  Quorum and voting requirements must be met.”

The case of Lim also highlighted the most crucial requirement for the validity of the meeting, which is the existence of a quorum. The Supreme Court expounded that even if all the other requirements of the law are complied with, any decision made during a meeting without a quorum renders the meeting invalid, such that corporate actions and transactions are rendered without force and effect, and therefore not binding on the corporation of the parties concerned.

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