Philippine SEC Passes Guidelines on Conduct of Corporate Meetings through Remote Communication
On 12 March 2020, the Philippine Securities and Exchange Commission (“SEC”) issued SEC Memorandum Circular No. 6, series of 2020, providing for 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 (“Guidelines”).
The Guidelines operationalise the provisions in the Revised Corporation Code explicitly allowing directors and stockholders (for stock corporations) or trustees and members (for non-stock corporations) to participate and vote in meetings through remote communication. The Guidelines became effective immediately.
Implications for business in the Philippines
On the day of the issuance of the Guidelines, the Philippine government announced that it would impose stringent social distancing measures in Metro Manila in order to tackle COVID-19. Days later, the entire island of Luzon, the biggest group of islands in the Philippines, was placed under an Enhanced Community Quarantine (“ECQ”). The timing of the issuance of the Guidelines is seen as a way of helping companies to continue their operations during the ECQ while encouraging them to adopt measures in order to mitigate the spread of COVID-19.
Significant provisions of the Guidelines
Applicable to all corporations registered with the SEC, the Guidelines provide these corporations with pointers on how to formulate their own internal procedures governing the participation in corporate meetings and voting in absentia or through remote modes of communication. In fact, the Guidelines already allow corporations to conduct their meetings through remote communication for the specific purpose of approving such internal procedures.
Below is a summary of the significant provisions of the Guidelines applicable to both the meetings of the directors or trustees and stockholders or members.
|Board Meetings of Directors or Trustees||Meetings of Stockholders or Members|
|Participation||If a director or trustee cannot physically attend or vote at a board meeting and intends to participate in such meeting through remote communication, s/he shall notify in advance the Presiding Officer and the Corporate Secretary of such intention.|
The Corporate Secretary shall note such fact in the minutes of the meeting.
At the start of the meeting, the Presiding Officer shall instruct the Corporate Secretary to make a roll call.
|The participation in a stockholders’ or members’ meeting thorough remote communication shall be allowed when so provided in the by-laws or in a resolution by the majority of the board of directors.|
If a stockholder or member intends to participate in a meeting through remote communication, s/he shall notify in advance the Presiding Officer and the Corporate Secretary of such intention.
The Corporate Secretary shall note such fact in the minutes of the meeting.
|Quorum||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 by-laws provide for a greater majority.||A quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members, unless otherwise provided in the Revised Corporation Code or in the by-laws.|
|Notice||The manner of giving the notice of the meeting, including sending out the written notice through electronic mail or other manner, shall be based on the by-laws or by a board resolution.|
Notice of regular or special meetings shall state the date, time and place of the meeting, and shall be sent out at least two days prior to the scheduled meeting, unless the by-laws provide a longer time. However, a director or trustee may waive the notice requirement, either expressly or impliedly.
|The manner of giving the notice of the election/meeting, including sending out the written notice through electronic mail or such other similar manner, shall be based on the by-laws.|
The notice of regular meetings shall state the date, time and place of the meeting, and shall be sent out at least 21 days prior to the scheduled meeting, unless a longer time is provided in the by-laws. For special meetings, the notice shall be sent out at least one week prior to the scheduled meeting, unless the by-laws provide a longer period.
|Voting||The Presiding Officer shall direct the Corporate Secretary to note the vote of each director or trustee.|
The director or trustee participating in the meeting through remote communication may cast his/her vote through electronic mail, messaging service or such other manner as may be provided in the internal procedures. In such a case, the vote shall be sent to both the Presiding Officer and the Corporate Secretary.
|The right to vote of stockholders or members in the election of directors, trustees or officers may be exercised in person, through a proxy, or when so authorised in the by-laws or by a resolution of the majority of the board of directors, through remote communication or in absentia. If authorised in a board resolution, 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 and members may vote through remote communication or in absentia, notwithstanding the absence of a provision in the by-laws.
Duties of the Corporate Secretary
In addition to duties of the Corporate Secretary indicated above, s/he shall also assume the following responsibilities:
- ensure that suitable equipment and facilities are available for the conduct of meeting by remote communication;
- 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 be understood by the other party;
- ensure that the visual and audio recordings of the meeting are secured;
- ensure that the visual and audio recordings of the election/meeting are current and ongoing 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 in time;
- ensure to safe-keep and perpetuate in updated data storage equipment or facility the visual and audio recordings; and
- require those who attended the board 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.
The wording of the Guidelines implies that the implementation of internal procedures for the conduct of board meetings through remote modes of communication is allowed, but not required, if only to address administrative, technical and logistical issues. However, for the convenience of stockholders or members, internal procedures with respect to the mechanisms for their participation and voting in meetings through remote communication or in absentia shall be issued by corporations.
In formulating the internal procedures, the following may be provided:
- mechanism to verify the identity of the stockholders or members and who among them have the right to vote during the meeting;
- measures to ensure that all stockholders or members have the opportunity to participate in the meeting, including an opportunity to read or hear the discussion substantially;
- mechanism to enable stockholders or members to vote during the meeting, including ensuring that the integrity and secrecy of the votes are protected;
- procedures for documenting the meeting and any process/motion that may be done afterwards;
- mechanism in making the record of the meeting, either video or audio recording, available to the stockholders or members; and
- other matters to address administrative, technical and logistical issues.
The issuance of the Guidelines shows SEC’s initiative in strengthening corporate regulatory frameworks by promoting the widespread use of digital and electronic transaction. Through the implementation of the Guidelines, competitiveness and the ease of doing business in the Philippines will improve despite, and even beyond, the COVID-19 situation.
This alert is for general information only and is not a substitute for legal advice.
 The Guidelines expressly specifies teleconferencing, videoconferencing, computer conferencing and audio conferencing as allowable modes of remote communication. However, corporations may adopt other alternative modes of communication that allow participation in the corporate meetings.
 Nevertheless, it should be noted that the Revised Corporation Code prohibits directors or trustees from attending and voting in board meetings by proxy.
 Every attendee shall state for the record the following:
- Full name and position;
- Confirmation that s/he can clearly hear and/or see the other attendees;
- Confirmation that s/he received the notice of the meeting including the agenda and materials; and
- Specify the device being used.
Afterwards, the Corporate Secretary shall confirm and note the participants and certify the existence of a quorum.
 Attendees who participate through remote communication shall be deemed present for purposes of attaining quorum.
 The notice of board meetings shall include the following information:
- Date, time and place of meeting;
- Agenda of the meeting;
- All pertinent materials for discussion which shall be marked and numbered to allow easy reference by the director or trustee;
- That a director or trustee may participate via remote communication;
- Contact information of the Corporate Secretary;
- Requirements and procedure for the nomination and election of directors or trustees or officers, if the meeting is called for such purpose;
- The fact that there will be visual and/or audio recording of the meeting; and
- Other instructions to facilitate participation in the meeting through remote communication.
 The Presiding Officer shall call and preside the meetings, whether regular or special, at the principal office of the corporation as provided in the articles of incorporation, or, if not applicable, in the city or municipality where the principal office of the corporation is located.
 The notice shall also provide for other relevant matters, such as the agenda of the meeting, requirements and schedules to be followed for attendance and voting by remote communication, contact information of the Corporate Secretary, among others.