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When a quorum can't be reached to elect the board

Updated: Jan 15, 2020

SEC issues an Opinion on what action a corporation can take when it cannot reach the required quorum for election of the board of trustees or directors.

The Revised Corporation Code of the Philippines ("RCC") or Republic Act No. 11232 took effect February 23, 2019. While no implementing rules and regulations have been or will be issued for it, some provisions of the law are not self-executory and require the Securities and Exchange Commission ("SEC") to issue guidelines before enforcement. One such provision is Section 49 of the RCC on meetings of stockholders or members.

Section 49 partly states that the stockholders or members of a corporation, when so authorized by the bylaws, may exercise their right to vote through remote communication or in absentia.

In a November 29, 2019 Opinion (SEC-OGC Opinion No. 19-56), the SEC emphasized that it has not issued any rule, regulation, circular, or guideline for voting remotely or in absentia. Hence, this portion of Section 49 may not yet be enforced. This is so even if it is already allowed in the corporation's bylaws.

What can a corporation do when, despite numerous failed attempts, it cannot gather sufficient quorum to elect the next members of the board of trustees or directors?

As provided in Section 25 of the RCC, the members or stockholders may file the appropriate Petition to Conduct an Election before the SEC.

The corporation cannot just exclude the members or stockholders who fail to attend or provide feedback to their notices, without an explicit waiver by the stockholder or member concerned.

After a finding that the non-holding of election was unjustified, the SEC may order that the Corporation hold an election and issue such orders as may be appropriate.

For purposes of Section 25, the attendants of the election summarily ordered by the SEC who are entitled to vote shall constitute a quorum, regardless of the required number of attendants stated in the Articles of Incorporation or bylaws of the corporation.

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