Updated: Feb 20, 2021
By. Atty. Nikko G. Lagmay
Foreword: Barrista Solutions highlights the impact of the Pandemic on the study and practice of law in the Philippines. In this article, we have sought the expertise of Atty. Nikko G. Lagmay, founder and managing partner of Lagmay Olavere Rae Dino (LORD LAW) to delve into an aspect of corporate law practice, how it was hit during the time of COVID 19 and what adjustments were done to remain faithful to the provisions of the law and cope with this pandemic.
As a result of the COVID-19 pandemic and related legislation, it is now unsafe, impractical, and even illegal under certain circumstances to hold gatherings.
Potentially affected by the novel virus and current government safety measures are corporate meetings. This is owing to the fact that despite more than a year from the enactment of the Republic Act 11232, or the Revised Corporation Code, it is still of common perception that participants in corporate meetings must be physically present in the designated venue of the meeting.
Causing the above misconception is continued reliance in Batas Pambansa Bilang 68 or the old corporation code, which has been our corporate yardstick for the last 40 years. In the old corporation code, stockholders and directors who wish to participate in corporate meetings must be physically present in the designated venue, or at least, in the case of stockholders, represented by proxies (who must also be physically present).
Unknown to some is with the effectivity of the Revised Corporation Code early last year, as well as recent circulars of the Securities and Exchange Commission (SEC), stockholders and directors may now attend corporate meetings and cast their votes in absentia through remote communication such as phone calls, video calls, email, other messaging software, and the like. In other words, a stockholder or director not physically present in the venue of the meeting may partake in said meeting and vote on a matter tackled therein.
For stockholders, Section 49 of the Revised Corporation Code states that “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.” Under this provision, it appears that the right of stockholders to vote in absentia may be exercised only if the corporate bylaws allow it.
Interestingly in SEC Memorandum Circular No. 6-2020, which is 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”, the right of stockholders to vote in absentia may be vested by the board through a mere board resolution, even if such right is not expressly conferred to the stockholders in the bylaws. Section 10 of said circular states “When so provided in the bylaws or by majority of the board of directors, stockholders or members who cannot physically attend at stockholders' or members' meetings may participate in such meetings through remote communications or other alternative modes of communication.”
With respect to meetings of the board of directors, Section 52 of the Revised Corporation Code provides, among others, that “Directors or trustees 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.”
Both in the above provision and Section 4 of SEC Memorandum Circular No. 6-2020, directors may partake and vote in absentia in board meetings although such right is not expressly granted to them in the corporate bylaws.
Corollarily, a director or stockholder who attends a meeting in absentia shall be included in determining the existence of a quorum. (Section 5 and 11 of SEC Memorandum Circular No. 6-2020)
Finally, it must be noted that notices of meetings of stockholders and directors may be sent through electronic communication as well (Section 6 and 14 of SEC Memorandum Circular No. 6-2020).
In enabling participation in corporate meetings via remote communication, our legislators and the SEC could not have possibly predicted the pandemic we are currently facing. But this development in corporate law comes in practical as we embrace the new normal.
*Atty. Nikko Lagmay specializes in corporate, family, and real estate law. Atty. Lagmay has set up and provided legal advice to various companies such as hospitals, energy providers, online gaming operators, educational institutions, BPOs, financial institutions, food chains, resorts, and various construction firms. Atty. Lagmay was previously commissioned by a Singaporean-Malaysian real estate firm to conduct lectures abroad on Philippine real estate investment.