Corporation Law: The Revised Corporation Code of the Philippines - Sec 57

THE REVISED CORPORATION CODE  OF THE PHILIPPINES

Republic Act No. 11232 

TITLE VI - MEETINGS

Section 57. Manner of Voting; Proxies.

Stockholders and members may vote in person or proxy in all meetings of stockholders or members.

When so authorized in the bylaws or by a majority of the board of directors, the stockholders or members of corporations may also vote through remote communication or in absentia: Provided, That the votes are received before the corporation finishes the tally of votes.

A stockholder or member who participates through remote communication or in absentia shall be deemed present for purposes of quorum.

The corporation shall establish the appropriate requirements and procedures for voting through remote communication and in absentia, taking into account the company's scale, number of shareholders or members, structure and other factors consistent with the basic right of corporate suffrage.

Proxies shall be in writing, signed and filed, by the stockholder or member, in any form authorized in the bylaws and received by the corporate secretary within a reasonable time before the scheduled meeting. Unless otherwise provided in the proxy form, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any one time.

1. Right to Vote.

• The right to vote at a stockholders' meeting depends upon the ownership of the stock as disclosed by the Stock and Transfer Book of the corporation and a registered stockholder must be allowed to vote irrespective of any question of bona fides.
• Nevertheless, the By-Laws may provide for a record date. 
• For example, the By-Laws may provide that the Stock and Transfer Book shall be closed five days before each meeting of the stockholders. 
• In such a case, only stockholders of record before the closing of the book shall have the right to vote. 
• With respect to non-stock corporations, the member must necessarily be a member of record. 
• In one case, it was observed that just because the shareholder is not recorded as such in the Stock and Transfer Book does not mean that his right to vote will not be recognized.
•  The Court said that there are other documents and/or ways of establishing the fact that a person is a shareholder like the Articles of Incorporation. 

2. Modes of Voting. 

• Section 57 of the RCCP provides for the following ways by which a stockholder/member may vote in stockholders' or members' meetings: 

1. The stockholder/member may vote in person; or
2. He/she/it may vote by proxy or through a representative authorized to act by written proxy; or
3. He/she/it may vote through remote communication or in absentia
1. when so authorized in the By-Laws or by a majority vote of the Board, and 
2. provided that the corporation receives the votes before the tally of votes is finished. 

3. Proxy. 

• It is not required that the shareholder must vote in person. 
• Section 57 provides that the shareholder may vote in person or by proxy. 
•  A proxy is a written authorization given by one person to another so that the second person can act for the first, such as that given by the shareholder to someone else to represent him and vote his shares at a shareholders' meeting. 
• "A proxy is a form of agency created in instances when a person is unable to personally cast his or her vote; hence, the act of voting is delegated to another person."
• In another sense, a proxy may also refer to the person who is so authorized to act or vote in a stockholders'/members' meeting as representative of the stockholder/member. 
• The following requirements for proxies are mandated by Section 57, viz.:
1. The proxy shall be in writing;
2. It shall be signed and filed by the stockholder or member;
3. It shall be in any form authorized in the By-Laws; 
4. It must be received by the corporate secretary within a reasonable time before the scheduled meeting;
5. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended; and
6. No proxy shall be valid and effective for a period longer than five years at any one time.
• The formalities of a proxy may be specified in the By-Laws.
• Thus, Section 46(e) of the RCCP provides for among other contents of the By-Laws, "the form for proxies of stockholders and members and the manner of voting them." 
• In the absence of any provision in the By-Laws, the proxy need only comply with the minimum requirements provided for in Section 57. 
• For example, in the absence of provision in the By-Laws, the proxy need not be notarized because all that is required by Section 57 is that it be in writing.
• All that is necessary is that the writing shows the intention to empower the person to whom it is given to act as agent in voting the stock, and to enable the officers to know that such authority is given.
• Note that the additional formalities must be required by the By-Laws. 
• The Board cannot prescribe the form of the proxies other than what is provided for in Section 57. 
• The power of the proxy is merely to vote. 
• He does not have legal title over the shares. 
• Hence, the proxy cannot be elected as director .
• The By-Laws of the corporation may also provide for the submission and validation of proxies. 
• In this regard, Section 57 of the RCCP requires that proxies be received by the corporate secretary within a reasonable time before the scheduled meeting. 
• This is to give the corporation ample time to validate the proxies and to determine the existence of a quorum at the meeting. 
• Moreover, the 2015 Implementing Rules and Regulations of the Securities Regulations Code (2015 IRR-SRC) provides in its Rule 20.11.2.8 that "if the By-Laws provide for a cut-off date for the submission of the proxies the same should be strictly followed. In the absence of a provision in the By-Laws fixing a deadline, proxies shall be submitted not later than 10 days prior to the date of the stockholders meeting." 
• On other hand, Rule 20.11.2.21 provides that "in the validation of proxies, a special committee of inspectors shall be designated or appointed by the Board of Directors which shall be empowered to pass on the validity of proxies."
• The validation of proxies serves a number of purposes, including the determination of the existence of a quorum and to give a chance to the corporation to ascertain the authenticity of the proxies.
• An action involving the validation of proxies is considered an election contest under the Interim Rules of Procedure Governing Intra-Corporate Controversies.
• The formalities of a proxy must be complied with. It is illegal for a corporation to adopt a rule that a stockholder who fails to attend a meeting or to appoint a proxy is deemed to have appointed the Chairman as his or her proxy. 
• The appointment of a proxy is purely personal and the right to vote inseparable from the ownership of the share.
• Hence, the proxy must be given by the shareholder and cannot be imposed by the corporation. 

4. Duration of Proxy.

• A proxy may be a specific proxy or a continuing proxy. However, unless otherwise stated, the proxy is deemed to be a specific proxy. 
• Specific proxy
• It refers to one where the authority granted the proxy holder is merely for a particular meeting on a specific date, such as when said proxy speaks of "annual meeting of stockholders on January 5, 2011 or any adjournment, communications or postponement thereof." 
• A specific proxy can only be used on the date and purpose specified in the proxy.
• Continuing proxy
• A continuing proxy is not limited to a specific meeting and it continues for a certain period. Under Section 57, the period for a continuing proxy is not more than- five years at any one time. 
• The five-year period can be extended provided that the extension period is not more than five years. 
• The By-Laws may provide for a shorter duration of a continuing proxy. 
• Thus, the By-Laws may provide for a restriction of 60 days. 
• This restriction is a reasonable restriction that is not in conflict with existing laws.

5. Personal Right. 

• The power to appoint a proxy is purely personal. 
• The right to vote is inseparable from the right of ownership of stock. 
• Therefore, to be valid, a proxy must have been given by the person who is the legal owner of the stock and is entitled to vote.

6. Number. 

• The By-Laws may impose restrictions as to the persons who can be proxies and the manner of voting them. 
• In the absence of such provision, anybody can be appointed as proxy without limitation as to the number of members to be represented. 
• A proxy can be given to two or more persons jointly. 
• It is customary to authorize the majority of those appointed but if only one attends, he will be deemed authorized to exercise the powers of a proxy. 
• Thus, if three persons are appointed and all of them attended, the three of them must agree upon the vote and in case of conflict, the rule of the majority governs. 

7. Quorum.

• The proxy should be filed or registered with and received by the Corporate Secretary before the meeting. After proper registration of the proxy, the same shall be counted in determining the existence of the quorum.

8. Revocation.

• As a general rule, one who has given a proxy· the right to vote may revoke the same at anytime, unless said proxy is coupled with interest, even though it may appear by its terms to be irrevocable. 
• It may be revoked in writing, orally, or by conduct.
• Where two or more persons are given separate proxies but they are not intended to be joint proxies, the giving of the last proxy is to be deemed a revocation of all former proxies. 
• The last proxy given revokes all previous proxies. 
• Thus, when two or more proxies are submitted, the proxy that is received latest or appears from the evidence to have been last executed will be accepted and counted. 
• If both proxies are undated and are both mailed to the Corporate Secretary, the one bearing the latest time of day of postmark is counted. If the undated proxies are not mailed, then the time of their actual presentation is considered.

9. Documentary Stamp. 

• Documentary stamps should, as a rule, be affixed on proxies of corporations. 
• However, failure to affix the same does not affect the validity of the proxy.
• The only adverse effect of such failure is that the same cannot be recorded as a public document and cannot be admitted and used as evidence in court until the required documentary stamp is affixed and cancelled.

10. Voting by Mail. 

• SEC Memorandum Circular No. 4, Series of 2004, issued on March 1 7, 2004 expressly allows voting by mail. 
• The pertinent provisions of the said Circular states: 
• a. Stockholders attending stockholders' meetings shall vote their shares as provided by existing laws. 
• b. Stockholders shall have the right to vote at all stockholders' meetings in person or by proxy. The stockholder may deliver, in person or by mail, his proxy vote directly to the corporation. 
• c. In cases provided in Section 16 of the Corporation Code of the Philippines [now Section 15 of the RCCP] where written assent is allowed, the same number of votes shall be observed and voting can likewise be done by proxy.
• d. The stockholder may designate any person of his choice to act as his proxy. Absent such designation, the Chairman of the meeting shall be deemed authorized and hereby directed to cast the vote as indicated by the voting stockholder or his proxy. 
• e. The proxy must be dated. If a duly accomplished and executed proxy is undated, the postmark or ·date of dispatch indicated in the electronic mail or, if not mailed, its actual date of presentation, shall be considered as the date of the proxy. 
• f. Where the corporation receives more than one proxy from the same stockholder and they are all undated, the postmark or electronic dates shall be considered. If the proxies are mailed on the same date, the one bearing the latest time of day indicated in the postmark or latest time of dispatch appearing in the electronic mail shall prevail. If the proxies are not mailed, then the time of their  actual presentation is considered. That which is presented last will be recognized. 
• g. If the stockholder intends to designate several proxies, the number of shares of stock to be represented by each proxy shall be specifically indicated in the proxy form. If some of the proxy forms do not indicate the number of shares, the total shareholding of the stockholder shall be tallied and the balance thereof, if any, shall be allotted to the holder of the proxy form without the number of shares. If all are in blank, the stocks shall be distributed equally among the proxies. The number of persons to be designated as proxies may be limited by the By-laws.

11. Securities Regulations Code.

• The widespread distribution of corporate securities in public companies, "with the concomitant separation of ownership and management, puts the entire concept of the stockholders' meeting at the mercy of proxy instrument. This makes the corporate proxy a tremendous force for good or evil in our economic scheme. Unregulated, it is an open invitation to self-perpetuation and irresponsibility of management. Properly circumscribed, it may well turn out to be the salvation of the modern corporate system." 127 Section 20 of the Securities Regulation Code prescribes rules on proxy solicitation. Section 20 provides: 

SEC. 20. Proxy Solicitations. — 

20.1. Proxies must be issued and proxy solicitation must be made in accordance with rules and regulations to be issued by the Commission; 

20.2. Proxies must be in writing, signed by the stockholder or his duly authorized representative and filed before the scheduled meeting with the corporate secretary. 

20.3. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at one time. 

20.4. No broker or dealer shall give any proxy, consent or authorization, in respect of any security carried for the account of a customer, to a person other than the customer, without the express written authorization of such customer. 

20.5. A broker or dealer who holds or acquires the proxy for at least ten per centum (10%) or such percentage as the Commission may prescribe of the outstanding share of the issuer, shall submit a report identifying the beneficial owner within ten (10) days after such acquisition, for its own account or customer, to the issuer of the security, to the Exchange where the security is traded and to the Commission.

• The provisions of the amended rules that implement Section 20 of the Securities Regulation Code are embodied in SRC Rule 20, which applies to covered corporations. 
• These rules are designed to make "the proxy device the closest practicable substitute for attendance at the meeting."
• These apply to public companies defined in Section 17.2 of the SRC that is subject to the reporting requirements of Section 17 thereof and to any person who shall solicit votes for a stockholders' meeting of a particular corporation. 
• Proxy regulations include full and fair disclosure of all material facts. 
• Disclosure is through the Information Statement, Management Report and Proxy Form to be furnished to voting shareholders and submitted to SEC by the registrant of the security. 
• In the election of directors, the nominee should be named in the materials sent to the shareholder, otherwise, no authority to vote an unnamed person is conferred. 
• The regulations likewise prohibit false and misleading statements of a material fact at the time and in the light of circumstances at the time they were made.

12. Voting by Remote Communication or In Absentia. 

• Under Section 57 of the RCCP, a stockholder/member who cannot physically attend the stockholders'/members' meeting is now expressly allowed to participate therein through remote communication or in absentia. 
• For purposes of determining the quorum, the stockholder/member who participates by remote communication or in absentia shall be deemed present. 
• The corporation has authority under Section 57 to establish the requirements and procedures for voting through remote communication or in absentia, taking into consideration the following:
1. company's scale
2. number of stockholders/members
3. company structure, and 
4. other factors consistent with the basic right of corporate suffrage.