Chapter 9: Meetings

Sections 49 to 55 govern meetings. There are two types, of course, we have the
stockholders and/or members meeting and the directors or trustees meeting. And whether it
be stockholders or members meetings, there are two kinds: the 1) regular; and the 2) special
meetings. Let us take up first the stockholders or members meeting. Whether it be
stockholders or directors meetings, there are 5 essential requisites for a valid meeting:

First is that it must be held at the date fixed in the by-laws or in accordance with law.
That is Sec. 50. Meaning, that if there is no provision in the By-laws as to when meetings are to
be held or conducted, then the law will supplement the same and it says, on any date of April as
may be fixed by the BOD. The law chose April – on any date of April – because that would be
the time when the audited financial statements of the corporation or corporations involved
would have already been prepared and signed by their external auditors. During annual
meetings of the stockholders or members, the financial statements are handed to them so that
they may be go over the financials of the corporation. That is one of the agenda that is
normally included in the meetings of stockholders or members because that would also be the
day or the month when the said financial statements are submitted to the BIR for the payment
of appropriate taxes. That is why if there is no specific date in the By-laws as to when meetings
are to be held, the law chose April, any date of April, as may be determined by the BOD.

Second essential requisite, prior notice must be given. The stockholders meetings, if it is
the regular meetings ( if we speak of regular meetings of the stockholders that would refer to
the annual meetings of the stockholders). If it is the annual or the regular meeting, the notice
requirement is at least 2 weeks before the scheduled meeting. If it is the special meeting, at
least 1 week before the said meeting. But please note that the law says, under Sec. 50, unless
the By-laws require a different period. That is 2 weeks for regular and 1 week for special
meetings. Thus, by virtue of this provision in the law “unless the By-laws require a different

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period” the corporation may provide in their By-laws for more time or of a shorter duration to
send out the said notices. We take note of the case of Directors v. Tan for instance where the
By-laws of the corporation there involve provided for a 5-day notice rule. Not 2 weeks, it's a By-
law provision. And the notices were posted only 2 days before the scheduled meeting. At the
objection of one of the stockholders, the resolutions passed during that particular meeting – it
was election of directors at that point in time – were invalidated because the notice
requirement was not complied with. Of course, it's only 5 days, but the law says unless the By-
law requires a different period. The By-laws should govern if there is a provision regarding the
sending out of notices.

Third, it must be held at the proper place. Under Sec. 51 of the Corporation Code,
“meetings of the stockholders or members shall be held in the city or municipality where the
principal office of the corporation is located or is established.” It goes further stating that “and
as far as practicable at the principal office of the corporation.” We were saying a while back
that under Sec. 93, however, it empowers non-stock corporations to validly provide in their By-
laws that members meetings may be held anywhere in the Philippines provided that proper
notice is sent to all members. There is no such grant of statutory authority in favor of a stock
corporation. Thus, a stock corporation cannot validly provide in the articles or By-laws that
meetings of the stockholders shall be held anywhere in the Philippines. It can only be held
within the territorial boundaries of the city or municipality where it has its principal office. But
note likewise that Sec. 51 provides that Metro Manila shall be considered one single city or
municipality. So, whether or not it is a stock or non-stock corporation, if the principal office is
located anywhere within Metro Manila, they can hold their meetings also anywhere within
Metro Manila. Just like the case of San Miguel. San Miguel has its principal office in
Mandaluyong. But they normally hold their meetings here at the PICC Ground. It is valid. It is
properly held or the venue is properly laid because Metro Manila is considered one single city
or municipality.

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 Fourth, it must be called by the proper person or officer. Under Sec. 54 and our
jurisprudence, the President or the Secretary on order of the President, unless the By-laws
provide for a different person – so again, the By-laws will govern if that be the case. If the By-
laws says that meetings of the stockholders shall be called by the Chairman of the Board then so
be it. The law says, “the President or the Secretary on order of the President unless the By-laws
provide for a different person.” The question is if there is a person authorized to call the
meeting but he fails, refuses or neglects to call one, may a stockholder petition the proper
forum for an authority to call the same? I said proper forum because if it is intra-corporate, it is
the Special Commercial Court that would have jurisdiction over the case. But meetings may
also be called by the SEC if it is not intra-corporate like for instance under Sec. 5 of the Securities
Regulation Code, the SEC can call meetings to elect the BOD on the petition of let's say a
creditor. Wala ng Board di na sila nag eelect. Eh hindi sila makakolekta dahil walang mag
authorize ng disbursement of funds, it will not be intra-corporate and it will be the SEC that will
have jurisdiction. Kaya sabi ko the proper forum. Speaking of the stockholder's right to demand
the corporate officer to call a meeting if there is a person authorized to call but he fails, refuses
or neglects to do so. The stockholder cannot go to the Special Commercial Court in order to
apply for an authority to call one and preside thereat until a majority of them shall have elected
a presiding officer. The resolution of the High Court in Ponce v. Encarnacion no longer applies
today. The last paragraph of Sec. 50 deleted the phrase “if the officer fails or refuses to call the
same” in the old law. Dati, under the old law, “if there is no person authorized to call the
meeting or the person authorized to call the same fails, refuses, or neglects to call one, a
stockholder concerned may petition the court to call the meeting and preside thereat until
majority of them shall have elected or appointed a presiding officer” is no longer applicable
today because that phrase “if the officer fails or refuses to call the same” in the old law has been
deliberately omitted by the legislature showing their clear intent that if there is an officer
authorized to call the same, the stockholders cannot petition the proper forum for an authority
granting them, or the particular shareholder, to call the meeting. The appropriate remedy
therefore would be mandamus – for a writ of mandamus, as held by the SEC and as sustained

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by the Court of Appeals in the case of Afable v. Aguellon. Of course, the exception to this rule
would be in the case of removal of directors or trustees under Sec. 28 where the stockholder
may still be authorized to call a meeting to remove or oust a director if the proper officer fails or
refuses to call the same.

The fifth requisite for a valid meeting is that the quorum and voting requirements must
be met. Under Sec. 52, majority of the outstanding capital stock or majority of the members in
case it is a non-stock corporation, unless the By-laws provide otherwise. Sec. 6. you have to
consider Sec. 6. Non-voting shares, as we were saying earlier on, are not included in
determining the voting requirements imposed by the law in order to have a valid corporate act
or transaction unless they are nonetheless entitled to vote under the penultimate paragraph of
the said Sec. 6. We were saying then that for instance in cases of entering into management
contract, the general rule obtaining is majority of the outstanding capital stock must approve of
the same. Now, if there are non-voting shares, your majority of the outstanding capital stock
would not be based on the entire outstanding stocks but only to the voting stocks. So if you
have 1 Million shares for instance; 200,000 are non-voting shares, 800,000 are voting shares,
your majority will be based on the 800,000 shares and not the 1 Million shares because non-
voting shares are not included in the determination of the voting requirements imposed by the
Code.

Now, what would be the effect of a stockholders or members meeting improperly held
or called. Like for instance it was not held on the date fixed in the By-laws or the notice
requirement was not complied with. Sabi ng notice requirement nila 1 week. Ang notice lang
na sinend out nila 5 days before the scheduled meeting. Or it was held in an improper place –
principal office, Metro Manila; meeting nila, Baguio City. Or called by an improper person or
officer – the By-laws says, President ang mag cacall ng meeting, ang nag call, treasurer. What
will happen to the resolutions passed during a stockholders or members meeting improperly
held and/or called? As we noted a while back, notice requirement pa lang under the case of

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Directors v. Tan, the resolution passed during that meeting was declared null and void by the
Court because the notice requirement was not complied with. Ngayon, almost all of them
except, of course the quorum and voting requirement, will it have any valid force and effect?
Again, we have to qualify because under the last paragraph of Sec. 51, “any meeting of the
stockholders or members improperly held or called shall nonetheless be valid if ALL of the
stockholders or members are PRESENT or DULY REPRESENTED.” Kung nandun silang lahat o
kaya'y nagpadala sila ng proxy nila, any resolution passed during that meeting improperly held
and/or called will nonetheless be valid and binding. Hindi nga nag attend yung stockholders,
nagpadala naman ng proxy. Nakalagay naman sa batas eh “will be valid if all stockholders are
present or duly represented.”

Secs. 53 and 54 speak of directors or trustees meetings. Again, there are two types: 1)
regular, and 2) special. Regular meetings are those that are held monthly or as may be provided
for in the By-laws. Special meetings are those held at anytime upon call by the President or as
provided for in the By-Laws.

The venue of meeting in directors or trustees meetings is anywhere within or without

the Philippines, unless otherwise provided for in the By-Laws. This was a consequence of the
meeting held by SMC during the effectivity of the old Corporation Law where the BOD of SMC
went to Hongkong to check on the facility of what is called now the San Miguel Brewery in
Hongkong. SMC bought a brewery in Hongkong during that time. What the BOD did was to go
to Hongkong and take a look at the facility of the plant that they are intending to purchase.
Right there and then they held a meeting and decided to buy that particular brewery in
Hongkong. It was questioned but nonetheless it was subsequently ratified by the stockholders.
There is this propensity of SMC to indicate or to include in their minutes of meeting of the
stockholders “approval and confirmation of the previous acts of the Board” and they are
normally and usually approved and ratified by the stockholders. Thus, despite the fact that it
might have been improperly held or the venue improperly laid, it was subsequently ratified by

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the stockholders. To prevent such an instance again, BP 68 now provides that meetings of the
BOD or Trustees may be held anywhere within or without the Philippines, unless otherwise
provided for in the By-laws. Absent any provision in the By-laws, then that rule would apply.
They can hold meetings anywhere within or without the Philippines.

Of course, because there may be instances when the need arises that they have to go in
a certain place. Eh gusto nilang mag-expand like for instance Jollibee, nag-expand – Saudi
Arabia, pumunta sa San Francisco, Los Angeles, baka naman gusto nilang tingnan yung
pagtatayuan ng Jollibee nila, baka nasa anu na yan.. lugar na hindi kanais-nais.. nasa slums na
pala yun, di natural they can do that. But of course it must have something to do with the
operations of the corporation itself. Otherwise, that would be constitutive of spoilation or
wastage of corporate assets and/or properties of the corporation. Mag-aabroad sila, mag
memeeting sila abroad sa Switzerland eh ang business nila planting of kamote. O eh pwede ba
naman yun? Eh di magrereklamo mga stockholders. It must have something to do with the
business of the corporation itself.

Quorum and voting requirement, as we were saying a while back, Sec. 25 of the
Corporation Code – quorum requirement in directors or trustees meetings is majority of their
numbers as fixed in the articles of incorporation. If there are 9 members of the Board, the
quorum requirement would therefore be 5. Majority is divided by 2 plus 1, irrespective of the
absence, death or resignation or otherwise of any or some of them. It is the majority of their
numbers as fixed in the articles of incorporation. Namatay yung dalawa, kasama sila sa crash sa
Syria, eh anung basis mo, pito nalang? Hindi, siyam pa rin. Because as fixed in the articles of
incorporation. Eh kung lima sila, namatay yung dalawa, anung quorum mo? Tatlo pa rin
because it is fixed in the articles that there shall be 5 members of the BOD. And we were saying
likewise, may the vote of 2 members of a 5-man governing board pass a valid corporate act or
transaction? Yes. Dahil ang quorum requirement is majority of their numbers as fixed in the
articles of incorporation. The voting requirement, however, is majority of those present at

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which there is a quorum. Lima sila, tatlo nag attend, may quorum ka. Yung dalawa sa tatlong
nag attend bumoto sa particular act or transaction, you have a valid corporate act or
transaction. Except in the election of corporate officers like the President, Secretary and
Treasurer which would require the vote of at least the majority of their entire number and/or
unless the articles of incorporation or By-laws require a greater majority because the By-laws
may validly provide for a greater voting and quorum requirement in directors or trustees
meetings. We were likewise saying a while back that generally, the BOD must sit and act as a
body at a validly constituted meeting. And we were saying likewise that their physical presence
is not necessary. They need not be physically present, hard bodies, at the place where the
meeting is being held or conducted because the E-commerce law allows the BOD to meet via
teleconference or audio conference. Note that this is not yet allowed in cases of stockholders
meetings. It is only allowed in cases of directors or trustees meetings. However, in a non-stock
corporations; again, corporations govern by different provisions of laws; it may be allowed also
in non-stock corporations. Under Sec. 89, voting by mail or similar means may be allowed in a
non-stock corporation subject to the conditions that may be set by the SEC.

Of course, in the stockholders or members meetings, the stockholders may vote by

proxy. It cannot be denied by a provision in the articles of incorporation. It is a right granted by
law to stockholders. In a non-stock corporation, as we were saying a while back, the articles of
incorporation or By-laws may be broaden, limit or deny voting rights of the members. So, the
non-stock corporation may prohibit proxy voting also, which cannot be done in a stock
corporation. May directors vote by proxy? No, by specific provision of Sec. 25. Why not? They
were elected precisely because of their supposed expertise in the management of corporate
affairs. So much so that they should cast their votes personally. Imagine if Manny Pangilinan
for instance, pupunta sa opisina niya para pag usapan nila ang supposed merger or
consolidation. Biglang sumakit ang tyan niya sabi niya sa driver niya ihatid mo nalang ako sa
bahay ikaw na lang mag attend ng meeting. Eh ang driver niya high school graduate. What
does he know about merger or consolidation? That is why the law requires that they should

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cast their votes personally. They cannot vote by proxy. Again, that would be an abdication of
the powers and functions granted to them by those who elected them in office. What is the
effect of directors meeting, just like the stockholders meeting, if it is improperly held or called?
Generally, it is without any force and effect but it may be ratified expressly, impliedly or even by
estoppel. We take the case of Lopez Realty v. Fontecha. In that particular case, a director's
meeting was held and conducted for the purpose of passing a resolution granting the
employees of Lopez Realty Corporation to grant gratuity pays to employees. One of the
directors was abroad at that time and she was not notified of the meeting. Kasi alam nilang
nasa abroad siya. Hindi na siya pinadalhan ng notice of meeting sa bahay niya. So when she
came back home, she questioned the validity of the resolution of the board granting the
gratuity pay of the employees. But it appears that she was aware of the questioned board
resolution. And in fact she signed the two vouchers for the first two payments of the gratuity
pay arising out of the questioned board resolution. Ruling of the Court – she is now in estoppel.
Pwedeng ma-ratify ang resolution by the board in an improperly held or called meeting
expressly, impliedly or even by estoppel.

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