Regular and special meetings of stockholders or directors can be done by means of electronic communications. In Memorandum Circular No. 6, series of 2020, the Securities and Exchange Commission (SEC) provided the guidelines on the attendance and participation of directors, trustees, stockholders, members and other persons of corporations in regular and special meetings through teleconferencing, video conferencing and other remote or electronic means of communication. These guidelines apply to all corporations registered with the SEC.
The Guidelines provides guidance for corporations in formulating their internal procedures and bylaws which will allow their directors, trustees, stockholders, members and other persons to participate and vote in meetings in absentia or through remote modes of communication.
- Remote Communication means the transfer of data between two or more devices not located at the same site.
- Teleconferencing is the holding of a conference among people remote from one another by means of telecommunication devices such as telephone or computer terminals. It refers to an interactive group communication (three or more people in two or more locations) through an electronic medium. In general terms, teleconferencing can bring people together under one roof even though they are separated by hundred miles.
- Videoconferencing is the holding of a conference among people in remote locations by means of transmitted audio and video signals.
- Computer Conferencing is teleconferencing supported b one or more computers.
- Audio Conferencing is a conference in which people at different locations speak to each other via telephone or Internet connections.
II. AMENDING THE BYLAWS
In order to immediately operationalize the Guidelines, corporations may already conduct their board meetings and stockholders’ and members’ meetings through remote communication or other alternative modes of communication for the limited purpose of approving the provisions of their bylaws or internal procedures which will govern participation in board meetings and stockholders’ and members’ meetings by means of remote communication or other alternative modes of communication.
[On the other hand, if there is no urgency, the corporation may wait until the enhanced community quarantine is lifted and effect the necessary amendments through the usual face-to-face meetings.]
III. PARTICIPATION THROUGH REMOTE COMMUNICATION
Individuals who cannot physically attend or vote at board meetings can participate and vote through remote communication such as videoconferencing, teleconferencing, or other alternative modes of communication that allow them reasonable opportunities to participate.
If the individual intends to participate in a meeting through remote communication, he/she shall notify in advance the Presiding Officer and the Corporate Secretary of his/her intention. The Corporate Secretary shall note such fact in the Minutes of the meeting.
The foregoing rules equally apply to any meeting of directors, trustees, stockholders, members.
IV. NOTICE OF MEETING
The Corporate Secretary shall send the notice of the meeting in accordance with the manner of giving notice (through electronic email, messaging service or such other manner) as provided in:
- bylaws, for stockholders or members.
- bylaws or by board resolution, for directors / trustees.
For directors / trustees, notice of regular or special meetings stating the date, time and place of the meeting must be sent at least two (2) days prior to the scheduled meeting, unless a longer time is provided in the bylaws. A director or trustee may waive this requirement, either expressly or impliedly.
For stockholders / members, prior notice depends on the nature of the meeting:
- For regular meetings, the notice must be sent at least twenty one (21) days prior to the scheduled meeting, unless a longer time is provided in the bylaws. The notice must state the date, time and place of the meeting.
- For special meetings, the notice must be sent at least one (1) week prior to the scheduled meeting, unless a longer time is provided in the bylaws.
In case of postponement of meeting, there is no provision with respect to directors / trustees. For the regular meetings of stockholders / trustees, however, written notice must be sent at least two (2) weeks prior to the date of the meeting. There is no provision on notice for special meetings of stockholders / trustees.
The notice of meetings shall include the following information:
- a. The date, time and place of the meeting. It is interesting that the notice for regular meetings for stockholders / members must state the date, time and place of the meeting, but there is no such express requirement for their special meetings. Nevertheless, this can be included in the “other relevant matters” for special meetings.]
- b. The agenda of the meeting.
- c. All pertinent materials for discussion which shall be numbered and marked in such manner that the individual participating through remote communication can easily follow and participate.
- d. That a Director or trustee may participate via remote communication. This is not the exact phrasing for stockholders / members: “When attendance, participation, and voting by remote communication or in absentia, are authorized, the requirements and procedures to be followed when a stockholder or member elects either option.”
- e. Contact information of the Corporate Secretary or office staff whom the director or trustee may communicate. The rules use “Secretary” for meetings of stockholders / members, and is more specific that the communication is for notification “about his or her option”.
- f. When the meeting is for the election of directors or trustees or officers, the requirements and procedure for nomination and election. This is the same rule for stockholders / trustees, with the obvious omission of “officers”.
- g. The fact that there will be a visual and/or audio recording of the meeting. The rule for stockholders / members include an additional phrase: “The fact that there will be a visual and/or audio recording of the meetings (for future reference).”
- h. Other instructions to facilitate participation in the meeting through remove communications. This is expressly provided for meetings of directors / trustees, but not in meetings of stockholders / members.
For meetings of stockholders / members, the Guidelines also provides that: “In case the election or meeting was conducted through teleconferencing or any other similar means, a visual and audio recording of the election or meeting should be secured. The Secretary is duty-bound to safe-keep and perpetuate in updated data storage equipment or facility the visual and audio recordings.” This is not expressly provided in the provisions for directors / trustees, but this is immaterial in elections because there are no directors / trustees to speak of. This is, however, not the same case for other meetings.
Moreover, the notice for stockholders / members must include the: “Manner of casting of votes and the period during which vote by remote communication or in absentia will be accepted”.
V. ROLL CALL
At the start of meetings of directors / trustees, the Presiding Officer shall instruct the Corporate Secretary to make a roll call. Every attendee shall state for the record the following:
- 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 received the Notice of the Meeting including the agenda and materials; and
- 5. Specify the device being used (ie., smartphone, tablet, laptop, desktop, television, etc.)
Thereafter, the Corporate Secretary shall confirm and note the participants and certify the existence of quorum.
For meetings of directors / trustees, a majority of the directors or trustees as stated in the articles of incorporation shall constitute a quorum, unless the Revised Corporation Code or the articles of incorporation or bylaws of a corporation provide for a greater majority.
For meetings of stockholders / members, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in the case of nonstock corporations, unless the Revised Corporation Code or in the bylaws,
A director or trustee, stockholder or member, who participates through remote communication, shall be deemed present for the purpose of attaining quorum.
For directors / trustees, in case of a need to vote in any item or matter in the agenda, the Presiding Officer shall direct the Corporate Secretary to note the vote of each director or trustee. The director / trustee participating in the meeting via remote communication may cast his vote through electronic mail, messaging service or such other manner as may be provided in the internal procedures. The vote shall be sent to the Presiding Officer and the Corporate Secretary for notation.
For stockholders / members, the right to vote may be exercised in person, through proxy, or when so authorized by the bylaws, through remote communication or in absentia.
The right to vote of stockholders / members may be exercised also through remote communication or in absentia when authorized by a resolution of the majority of the board of directors; Provided, That the resolution shall only be applicable for a particular meeting.
In the election of directors, trustees and officers of corporations vested with public interest, stockholders or members may vote through remote communication or in absentia, notwithstanding the absence of a provision in the bylaws of such corporations.
VIII. INTERNAL PROCEDURES
Fore directors / trustees, the Guidelines simply states that corporations may issue their own internal procedures for the conduct of board meetings through remote communication or other alternative modes of communication to address administrative, technical and logistical issues.
For stockholders / members, the Guidelines has more extensive provisions. For the convenience of their stockholders and members, corporations shall issue their own internal procedures embodying the mechanisms for participation in meetings and voting through remote communication or in absentia.
The internal procedures may take into account the corporations number of stockholders and members, location of stockholders or members, importance of the matters to be discussed and voted upon in the meeting, promotion of minority rights and other factors consistent with the protection and promotion of stockholders’ or members’ rights.
The internal procedures may provide for the following:
a. Mechanism to verify the identity of the stockholders or members and who among them have the right to vote during the meeting;
b. Measures to ensure that all stockholder or members have the opportunity to participate in the meeting including an opportunity to read or hear the discussion substantially;
c. Mechanism to enable stockholders or members to vote during the meeting including ensuring that the integrity and secrecy of the votes are protected;
d. Procedures for documenting the meeting and any process/motion which may be done afterwards; and
e. Mechanism in making the record of the meeting, either video or audio recording, available to the stockholders or members.
f. Other matters to address administrative, technical and logistical issues.
IX. OTHER DUTIES OF THE CORPORATE SECRETARY
The Corporate Secretary shall also assume the following responsibilities:
1. Ensure that suitable equipment and facilities are available for the conduct of meeting by remote communication (i.e. reliable internet connection, high bandwidth availability capable of supporting numerous simultaneous connections, etc.);
2. Ensure that the attendees are able to hear and see the other participants clearly during the course of the meeting and that attendees should be able to communicate and understood by the other party;
3. Ensure that the visual and audio recordings of the meeting are secured;
4. Ensure that the visual and audio recordings of the election/meeting are current and on-going and that there is no stoppage or interruption. Should an interruption or stoppage occur, the recording shall restart from the point where it was stopped or interrupted with proper statement of points of time;
5. Ensure to safe-keep and perpetuate in updated data storage equipment or facility the visual and audio recordings; and
6. Require those who attended the meeting through remote communication, to sign the minutes of the meeting whenever the act of signing is practicable, on a reasonable time after the meeting.
- Twin-Notice Rule and Procedural Requirements in Employment Termination Proceedings - June 3, 2020
- When Travel Pass is Needed for Interzonal Travel during Community Quarantine - June 1, 2020
- Can Companies Compel Employees to Work during the General Community Quarantine (GCQ) and Impose Disciplinary Sanctions - May 29, 2020