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Electronic Notices of Meetings to Stockholders and Boards

Dolly J. Chotrani
May 15, 2014

EVERYTHING can be done with a click of a button. If I want to shop, all I have to do is
browse through the online shop of my favorite store. If I want to get lunch, I can just order
through a restaurants website. If I want to make an appointment for a massage, I just
have to send a text. So why cant sending notices of meetings to stockholders or directors
be that easy?

In an effort to adapt to the realities of an ever changing technological world, the Securities and
Exchange Commission (SEC) in SEC-OGC Opinion No. 13-10 dated Oct. 25, 2013 recognized
the validity of e-mail as a mode of sending notices of meetings to stockholders and directors.
However, certain requirements were set by the Opinion in order for e-mailed notices of
meetings to be considered valid.

REQUIREMENTS OF THE LAW

Section 50 of the Corporation Code of the Philippines requires that notice in writing of the
meeting be sent to the stockholders at least two weeks prior to a regular meeting and at least
one week prior to a special meeting, unless the by-laws of the corporation provide otherwise.
Under Section 53 of the Corporation Code, notice of regular or special meetings must be sent
to a director at least one day prior to the scheduled meeting. These requirements are mandatory
and are therefore an essential requisite for the validity of a stockholders and board of directors
meeting. The SEC has declared that the proceeding and the resolutions passed during meetings
with defective notices are null and void. Accordingly, a corporation cannot do away with
written notice to the stockholders and directors, unless the by-laws of the corporation allow
another mode of giving notice to directors.

In both cases, the law provides that the notice of any meeting may be waived, expressly or
impliedly by a stockholder or director. Express waiver is made by written or oral notice to the
Corporate Secretary while implicit waiver is made, when even without proper notice given to
the director or stockholder, he or she attends the meeting.

E-MAIL CONSIDERED AS IN WRITING


An electronic document was recognized by the Electronic Commerce Act of 2002 to have the
same legal effect, validity and enforceability as any other document or legal writing. According
to the Electronic Commerce Act of 2002, an electronic document refers to information or the
representation of information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an obligation extinguished,
or by which a fact may be proved and affirmed, which is received, recorded, transmitted, stored,
processed, retrieved or produced electronically. Based on this definition, e-mails, which are
modes of written expression transmitted electronically, are electronic documents.
REQUIREMENTS OF THE OPINION
The Opinion was issued in response to the inquiry made by Stelsen Corp. regarding the validity
of resolutions passed by corporations in meetings held wherein only e-mail notices were sent
and acknowledged by the recipients.

The SEC stated that as a general rule, written notice of meetings, sent through regular postal
mail, must be given to stockholders or directors, unless the by-laws provide otherwise. Further,
since an e-mail is considered to be in writing, a notice sent via e- mail may be a valid mode
of notice of meeting to stockholders or directors if the same is provided for in the by-laws of
the corporation. Besides stating that notices to stockholders or directors may be sent by e-mail,
the by-laws should also provide for the mechanics of sending said notices and the mechanics
for the indication, recording, changing and recognition of e-mail addresses of each stockholder
and director.

Thus, it is the duty of the Corporate Secretary to maintain a record of all the e-mail addresses
of each of the stockholders and directors and to update the same accordingly. Conversely, it is
the duty of the stockholders and directors to notify the Corporate Secretary regarding any
change in their e-mail address.

The Opinion maintained that if the by-laws do not provide for the said mechanics of sending
notices by e-mail and maintenance of a record of all the e-mails of the stockholders and
directors, then the general rule of sending notices by regular postal mail must apply.

Consequently, those corporations who would want to send their notice of meeting through e-
mail must first amend their by-laws to comply with the foregoing requirements. In the
meantime, while the amendment of the by-laws is ongoing, if the corporation wishes to send
notices via e-mail, it should procure the express waiver of the stockholders and directors after
every notice of meeting is sent to them.

It is of note that a blanket waiver is not legally tenable. For a waiver to be validly made, the
person waiving his right must be fully aware of the facts. A stockholder or a director may not
give a waiver to any and all future notice of meetings as at the time that he will be making the
waiver he would not know all the essential facts: a. the type of meeting, b. the time and place
of the meeting, and c. the purpose of the meeting, all of which are indicated in the notice of
meetings.

WEIGHT OF SEC OPINIONS


SEC opinions are opinions issued by the SEC addressed to a particular person who requested
such an opinion and are applicable only to the facts and circumstances presented in such letter
request. The Opinion is not by itself a law, rule, or regulation. It is an interpretation by the SEC
of the requirement under the Corporation Code to send notices of meetings to the stockholders
and directors before any stockholders meeting or directors meeting. In the case of Heirs of
Wilson Gamboa vs. Secretary of Finance, et al. the Supreme Court had the occasion to state
that, The opinions issued by SEC legal officers do not have the force and effect of SEC rules
and regulations because only the SEC en banc can adopt rules and regulations.

Thus, considering that the SEC opinion is not a law, rule or regulation, its practical use is to
serve as a guide to all corporations covered by the law, rule or regulation being interpreted by
the SEC. After all, such interpretations of the SEC are presumed to be correct since the SEC is
the government agency tasked with enforcing the Corporation Code.

In sum, sending notices of meetings by e-mail is a legally viable option Philippine corporations
may consider adopting. In doing so, it would be prudent for corporations to ensure that their
by-laws conform to the requirements stated in the Opinion.

(The author is an associate of the Corporate and Special Projects Department of the Angara
Abello Concepcion Regala & Cruz Law Offices [ACCRALAW]. She may be contacted
at djchotrani@accralaw.com or 830-8000. The views and opinions expressed in this article are
those of the author. This article is for general informational and educational purposes only and
not offered as and does not constitute legal advice or legal opinion).