Corporation Law: The Revised Corporation Code of the Philippines - Sec 52

 THE REVISED CORPORATION CODE  OF THE PHILIPPINES

Republic Act No. 11232 

TITLE VI - MEETINGS

Section 52. Regular and Special Meetings of Directors or Trustees; Quorum. 

Unless the articles of incorporation or the bylaws provides for a greater majority, a majority of the directors or trustees as stated in the articles of incorporation shall constitute a quorum to transact corporate business, and every decision reached by at least a majority of the directors or trustees constituting a quorum, except for the election of officers which shall require the vote of a majority of all the members of the board, shall be valid as a corporate act.

Regular meetings of the board of directors or trustees of every corporation shall be held monthly, unless the bylaws provide otherwise.

Special meetings of the board of directors or trustees may be held at any time upon the call of the president or as provided in the bylaws.

Meetings of directors or trustees of corporations may be held anywhere in or outside the Philippines, unless the bylaws provide otherwise. Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or trustee at least two (2) days prior to the scheduled meeting, unless a longer time is provided in the bylaws. A director or trustee may waive this requirement, either expressly or impliedly.

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. Directors or trustees cannot attend or vote by proxy at board meetings.

A director or trustee who has a potential interest in any related party transaction must recuse from voting on the approval of the related party transaction without prejudice to compliance with the requirements of Section 31 of this Code.

1. Compliance with Rules.

• A corporation, through its Board of Directors, should act in the manner and within the formalities, prescribed by law, its charter and its By-Laws. 
• The Board must comply with the required quorum, notice and other similar formalities. 
• The directors must act as a body in a meeting called pursuant to law, or the corporation's By-Laws, otherwise, any objecting director or shareholder may question any action taken therein. 
• The directors are generally required to meet monthly. 
• However, the RCCP allows corporations to specify the frequency of the regular meetings of their directors as they may deem necessary. The corporation may specify in its By-Laws that the regular meeting of its Board of Directors shall be held quarterly instead of monthly as directed by Section 53 of the Corporation Code (now Section 52, RCCP).

2. Quorum of the Board.

• The majority of the directors or trustees constitutes the quorum to do business. 
• The majority of the directors shall be determined by the formula 1/2 plus one of the total number of directors as fixed in the Articles of the Incorporation notwithstanding the existence of vacancies in the Board.
• However, the By-Laws may require a quorum that is higher than the majority of the Board members. 
• The first paragraph of Section 52 of the RCCP (which provision was previously in Section 25 of the Corporation Code) specifically provides that a majority of the directors or trustees, as fixed in the Articles of Incorporation, shall constitute a quorum for the transaction of corporate business unless the Articles of Incorporation or the By-Laws provides for a greater majority. 
• While a greater number than simple majority can be fixed in the Articles or By-Laws, neither the Articles nor the By-Laws can provide for a quorum that is less than majority of the number of directors as fixed in the Articles of Incorporation. 
• For example, if there are six members of the Board, it cannot be provided in the Articles or By-Laws that the quorum consists of three members only.
• The quorum is the same even if there is a vacancy in the Board. 
• If the required quorum cannot be satisfied because of the vacancy, the remedy is for the stockholders to fill the vacancy.
• If there is a quorum at the start of the meeting, the meeting can still continue even if some of the directors will leave thereafter.

3. Proxy Not Allowed. 

• A director cannot participate in a meeting by proxy or any representative or alternate. While voting by proxy is allowed in all meetings of stockholders/members, the same is explicitly prohibited under Section 52 with respect to directors/ trustees. 

4. Notice. 

• Section 52 provides that notice of regular or special meetings stating the date, time, and place of the meeting must be sent to every director or trustee at least two (2) days before the scheduled meeting, unless a longer time is provided in the By-Laws. 
• A special meeting, conducted without notice, is invalid.
• However, a director or trustee may waive the notice requirement, either expressly or impliedly.
• For instance, the meeting is valid if all the directors are present and nobody objected to the absence of notice.
• Similarly, an action of the Board during a meeting which was irregular for lack of notice, may be ratified either expressly, by the action of the directors in a subsequent legal meeting or impliedly, by the corporation's subsequent course of conduct.

5. Agenda. 

• Unless an extraordinary measure shall be passed during the regular meeting, the notice need not indicate the "agenda" or the matters to be taken up during the regular meeting. 
• However, the agenda should be included in the notice of special meeting.

6. Place. 

• Unlike the meetings of stockholders/members, meetings of directors or trustees of corporations may be held anywhere in or outside the Philippines, unless the By-Laws provides otherwise. 
• Thus, in the absence of a provision in the By-Laws fixing the place of the Board meeting, a Board meeting in another country is valid.

7. Participation through Remote Communication.

• By express provision of Section 52 of the RCCP, directors or trustees, while still prohibited from attending and voting by proxy in Board meetings, can now participate and vote at Board meetings through remote communication such as teleconferencing, videoconferencing, or some other mode of communication. It is provided, however, that the mode of communication chosen should allow the Board members "reasonable opportunities to participate." 

a. Teleconference or Videoconference. 

• Teleconferencing and videoconferencing of members of the Board of Directors of private corporations has long been a reality in this jurisdiction even before the enactment of the RCCP, in light of Republic Act No. 8792. After the RCCP took effect, the SEC issued SEC Memorandum Circular No. 6, Series of 2020 providing for the guidelines to be complied with n meeting by teleconference or videoconference and other remote or electronic means of communication. 
• Justice Callejo observed in Expertravel & Tours, Inc. v. Court of Appeals that in this age of modern technology, the courts may take judicial notice that business transactions may be made by individuals through teleconferencing. Teleconferencing is an interactive group communication (three or more people in two or more locations) through an electronic medium. 
• In general terms, teleconferencing can bring people together under one roof even though they are separated by hundreds of miles. 
• This type of group communication may be used in a number of ways, and have three basic types: 
1. video conferencing - television-like communication augmented with sound;
2. computer conferencing - printed communication through keyboard terminals; and 
3. audio-conferencing-verbal communication via the telephone with optional capacity for telewriting or telecopying. 
•  A teleconference represents a unique alternative to face-to-face (FTF) meetings.
• It was first introduced in the 1960's with American Telephone and Telegraph's Picturephone. 
• At that time, however, no demand existed for the new technology. 
• Travel costs were reasonable and consumers were unwilling to pay the monthly service charge for using the picturephone, which was regarded as more of a novelty than as an actual means for everyday communication. In time, people found it advantageous to hold teleconferencing in the course of business and corporate governance, because of the money saved. 
• The advantages include:
1. People (including outside guest speakers) who would not normally attend a distant FTF meeting can participate.
2. Follow-up to earlier meetings can be done with relative ease and little expense.
3. Socializing is minimal compared to an FTF meeting; therefore, meetings are shorter and more oriented to the primary purpose of the meeting.
4. Some routine meetings are more effective since one can audio-conference from any location equipped with a telephone.
5. Communication between the home office and field staffs is maximized.
6. Severe climate and/or unreliable transportation may necessitate teleconferencing. 
7. Participants are generally better prepared than for FTF meetings. 
8. It is particularly satisfactory for simple problem-solving, information exchange, and procedural tasks. 
9.  Group members participate more equally in well-moderated teleconferences than an FTF meeting.
• On the other hand, other private corporations opt not to hold teleconferences because of the following disadvantages: 
1. Technical failures with equipment, including connections that are not made.
2.  Unsatisfactory for complex interpersonal communication, such as negotiation or bargaining. 
3. Impersonal, less easy to create an atmosphere of group rapport.
4. Lack of participant familiarity with the equipment, the medium itself, and meeting skills. 
5. Acoustical problems within the teleconferencing rooms.
6. Difficulty in determining participant speaking order; frequently one person monopolizes the meeting.
7. Greater participant preparation time needed.
8. Informal, one-to-one, social interaction not possible.
• Read Memorandum Circular No. 6, Series of 2020 which was passed by the SEC on March 12, 2020 here.
• Note that under the previous regulation, Memorandum Circular No. 15, electronic or tape recording of the proceedings was mandatory. In this connection, it was opined that there would be no violation of the Anti-Wire Tapping Act (Republic Act No. 4200) because all the parties to the board meeting are aware that all the communications are recorded. 
• Hence, there is implied consent on the part of the participants who do not object. 
• Moreover, if the recording is in existence, it can be produced and can serve as a prima facie evidence of the events that transpired. Mere reliance on the minutes may give room to abuse, manipulation and/or alteration of the electronic data. 
• Thus, electronic or tape recording of the proceedings enhances the transparency, authenticity and reliability of the video/teleconferencing.
• The electronic meeting allowed under SEC rules contemplates a meeting where the directors still participate or are capable of participating in the deliberations. Under previous rules (Memorandum Circular No. 15, Series issued on November 20, 2001) voting by e-mail was not allowed.
• However, under SEC Memorandum Circular No. 6, Series of 2020 issued on March 12, 2020, it is expressly provided in Section 8 that "the director or trustee participating in the meeting via remote communication may cast his vote through electronic mail, messaging service or such other manner as may be provided in the internal procedures.

PROBLEM:

Q: Under the Articles of Incorporation of Manila Industrial Corporation, its principal place of business shall be in Pasig, Metro Manila. The principal corporate offices are at the Ortigas Center, Pasig, Metro Manila while its factory processing leather products, is in Manila. The corporation holds its annual stockholders' meeting at the Manila Hotel in Manila, and its Board of Directors' meeting at a hotel in Makati, Metro Manila. The By-Laws are silent as to the place of meetings of the stockholders and directors.

Who shall preside at the meeting of the directors?

The Chairman or, in his absence, the President shall preside at the meeting of the directors, unless the By-Laws provide otherwise (Section 53, RCCP). 

Can Ting, a stockholder, who did not attend the stockholders' meeting in Manila question the validity of the corporate resolutions passed at such meeting? 

Yes. Section 50 of the RCCP (previously Section 51 of the Corporation Code), provides that stockholders' meetings, whether regular or special, shall be held in the principal office of the corporation, or, if not practicable, in the city or municipality where the principal office of the corporation is located. The Articles of Incorporation in the present case is specific that the principal place of business of Manila Industrial Corporation is in Pasig, Metro Manila. Hence, the meeting should be held in the principal office or if not practicable, in the city where the principal office is located, which is in Pasig. However, if the corporation shows that it is not practicable to hold the meeting m the prmcipal office or in Pasig, then the holding of the meeting in Manila, which is a city in Metro Manila like Pasig, is valid also under Section 50."

Can the same stockholder question the validity of the resolutions adopted by the Board of Directors at the meeting held in Makati? 

No. Section 52 of the RCCP (previously Section 53 of the Corporation Code) allows the Board of Directors to hold its meetings anywhere in or outside the Philippines. The holding of the Board meeting in Makati was therefore proper and the validity of the resolutions adopted by the Board in that meeting cannot be questioned.