SEC-OGC Opinion No. 21-04: Quorum in By-Laws

The Infinity Condominium Corporation (“TICC”), sought clarification with the Securities and Exchange Commission (“SEC”) on whether it is authorized to amend its by-laws, particularly Section 5, Article VI, to provide and set the quorum for members’ meeting at “30% of the relevant number of units entitled to be represented and vote.” The old and proposed provisions of TICC’s by-laws are stated as follows:

Old provision

“The presence of members in good standing representing at least a majority of the relevant number of units entitled to be represented and vote at the meeting shall constitute a quorum. A majority of the quorum (50% +1) shall be competent to decide on any matter, unless the Corporation Code or the Condominium Act requires the affirmative vote of a greater proportion. A smaller number of votes insufficient to constitute a quorum may adjourn the meeting from time to time and may take up only social or ceremonial matters.”

Proposed Amendment

“The presence of members in good standing representing at least thirty percent (30%) of the relevant number of units entitled to be represented and vote at the meeting shall constitute a quorum. A majority of the quorum (50% +1) shall be competent to decide on any matter unless the Corporation Code or the Condominium Act requires the affirmative vote of a greater proportion. A smaller number of votes insufficient to constitute a quorum may adjourn the meeting from time to time and may take up only social or ceremonial matters.” (Emphasis supplied).

Given the wording of the proposed amendment to Section 5 of the By-laws of TICC, the SEC answered in the affirmative. 

The SEC, citing Section 51 of the Revised Corporation Code, opined that any corporation, whether stock or non-stock, is authorized to provide in its by-laws a specific number of stockholders or members necessary to constitute a quorum for the transaction of corporate business, except in those instances where the law explicitly prescribes the proportion of stockholders or members necessary to resolve or carry out a particular corporate proposal, to wit:

“Stock corporations or non-stock corporations are authorized to define what constitutes a quorum based on its by-laws. The Commission has opined that any corporation whether stock or non-stock is authorized to provide in its by-laws a specific number of stockholders or members necessary to constitute a quorum for the transaction of a corporate business.

x x x However, the provision in the by-laws relative to quorum will not hold true in those instances where the Corporation Code or applicable special law explicitly prescribes the proportion of stockholders or members necessary to resolve or carry out a particular corporate proposal. In such cases, a quorum shall consist of such ratio of stockholders or members as may be declared by statutory provisions.” 

Likewise, in Legrand Properties, Inc., it was opined:

“Thus, any corporation, whether stock or nonstock, is authorized to provide in its by-laws a specific number of stockholders or members necessary to constitute a quorum for the transaction of corporate business, except in cases where the law requires a minimum stockholders’ or members’ vote for a certain corporate action (xxx) which would in effect be the required quorum.”

The SEC Opinion may be accessed here.