Corporation Law: The Revised Corporation Code of the Philippines - Sec 51

THE REVISED CORPORATION CODE  OF THE PHILIPPINES

Republic Act No. 11232 

TITLE VI - MEETINGS

Section 51. Quorum in Meetings. 

Unless otherwise provided in this Code or in the bylaws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock pr a majority of the members in the case of nonstock corporations.

1. Concept.

  • Quorum means the number of stockholders/members of the corporation, board, or committee who must be present in order to take action.
    • The meeting is void if there is no quorum.
  • The quorum for stockholders' or members' meeting generally consists of the stockholders representing a majority of the outstanding capital stock entitled to vote in a stock corporation or a majority of the members entitled to vote in the case of non-stock corporations. 
  • A different quorum may also be provided for in the By-Laws. 
    • For instance, the By-Laws may provide that the quorum is 2/3 of the outstanding capital. 
    • In this case, a majority of the outstanding capital would be insufficient to establish a quorum. The SEC opined that a corporation could state in its By-Laws that a quorum shall be less than the majority or greater than what was provided for in the Corporation Code unless the Code specifically provides otherwise. 
    • For example, the quorum may be only 30% of all members in good standing.
    • It is submitted that the same SEC opinion would still be applicable under the RCCP. 
  • It is noted that the RCCP provides for certain corporate actions/resolutions that must be approved by at least 2/3 of the outstanding capital.
    • If the meeting is specifically called to decide on matters requiring 2/3 vote of the outstanding capital stock, then the presence of stockholders representing a majority only of the outstanding capital is insufficient to act on the proposed resolution. 
    • The presence of stockholders representing at least 2/3 of the outstanding capital is necessary for such purpose.
    • If a majority of the members or stockholders representing the majority of the outstanding capital is necessary for the approval of the act, then a majority is necessary to be present or represented at the meeting even if the By-Laws provide only for 30% as the quorum.
  • In other words, the provision in the By-Laws relative to quorum will not necessarily hold true in those instances when the RCCP or applicable special law explicitly prescribes the proportion of stockholders or members necessary to resolve or carry out a particular corporate proposal. 
    • Where the only matter set in the agenda is a matter that can, by law, be decided only by stockholders representing 2/3 of the outstanding capital stock, the presence of such stockholders is necessary to vote on the matter. 
    • In such cases, a quorum shall effectively consist of such ratio of stockholders or members as may be declared by statutory provision that is necessary to approve the resolution.
  • Where the number of stockholders or members necessary to constitute a quorum is prescribed by statute in a mandatory manner, a By-Laws provision requiring less than the proportion required by the particular legislation is subordinate to the statute. 
2. Fees not Precondition. 
  • All stockholders have the right to attend the stockholders' meeting. 
  • They cannot be barred from attending the meeting by imposing restrictions. 
    • For example, there is nothing in the Corporation Code, now the RCCP that authorizes, expressly or impliedly, the payment of registration fees for the attendance in the regular meeting.
  • Imposition of registration fees as a precondition for the exercise of the right to attend the meeting unduly restricts such right. 
3. Bases of Quorum. 
  • In stock corporations, the presence of a quorum is ascertained and counted on the basis of the outstanding capital stock. 
    • If the intention of the lawmakers was to base the quorum in the meetings of stockholders or members on their absolute number as fixed in the articles of incorporation, it would have expressly specified so. Otherwise, the only logical conclusion is that the legislature did not have that intention. 
    • Taken in conjunction with Section 137 (now Section 173 of the RCCP), the last paragraph of Section 6 (now the fourth paragraph of Section 6 of the RCCP) shows that the intention of the lawmakers was to base the quorum mentioned in Section 52 (now Section 51, RCCP) on the number of outstanding voting stocks.
  • In non-stock corporations, the voting rights attach to membership. 
    • Members vote as persons, in accordance with the law and the By-Laws of the corporation. Each member shall be entitled to one vote unless so limited, broadened, or denied in the Articles of Incorporation or By-Laws. 
    • The Supreme Court held that when the principle for determining the quorum for stock corporations is applied by analogy to non-stock corporations, only those who are actual members with voting rights should be counted.
  • Under Section 52 of the Corporation Code (Section 51, RCCP), the majority of the members representing the actual number of voting rights, not the number or numerical constant that may originally be specified in the articles of incorporation, constitutes the quorum
  • Consistently, delinquent shareholders or members should not be included in determining the existence of the required quorum.
    • The rule is that no stock delinquent for unpaid subscription shall be voted or entitled to vote or represented at any stockholders' meeting or for any corporate purpose. 
  • Similarly, non-voting shares shall not be included in the determination of a quorum
    • It is submitted that, by way of exception, the non-voting shares shall be included in the quorum if the matter to be taken up is one of the matters provided for under Section 6 of the Corporation Code and the RCCP. e. Likewise, Section 48 of the Corporation Code (Section 47, RCCP) refers to the number of registered members of the association mentioned therein plus one. 
    • The best evidence of who are the present members of the corporation is the "membership book"; in the case of stock corporations, it is the stock and transfer book. 
  • A corporation cannot exclude the stockholder or member from the computation of the required quorum should such stockholder or member fail to give a feedback or answer after three attempts of being notified or a meeting. 
    • This is an undue restriction on the right to vote.

PROBLEM:
Q: Triple A Corporation (Triple A) was incorporated in 1960, with 500 founders' shares and 78 common shares as its initial capital stock subscription. However, Triple A registered its stock and transfer book only in 1978, and recorded merely 33 common shares as the corporation's issued and outstanding shares. On May 6, 1992, a special stockholders' meeting was held. At this meeting, what would have constituted a quorum? Explain.
The presence of stockholders holding 290 shares constitutes a quorum during the stockholders' meeting. Section 52 of the Corporation Code, now Section 51 of the RCCP, provides that unless otherwise provided, quorum in the stockholders' meeting shall consist of the stockholders representing a majority of the capital stock. 
Since there is nothing in the problem that indicates that there are non-voting shares, the outstanding capital is the total of the founding shares and the common shares of 578 shares and the quorum is 50% plus one of such number of shares (or 289 + 1). The number of shares appearing in the Articles of Incorporation is controlling and binding on the corporation and its shareholders. The recorded 33 shares are not the only outstanding shares. (Lanuza v. Court of Appeals, G.R. No. 131394, March 28, 2005). (2009 Bar) 

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