SEC-OGC Opinion No. 21-09: Re: Annual Meeting via Remote Communication in Non-stock Corporations

The Securities and Exchange Commission (“Commission”) issued SEC Opinion No. 21-09, dated 22 June 2021 to discuss whether the members of a non-stock corporation may vote or participate in the annual meeting through remote communication if the same is not authorized under the non-stock corporation’s bylaws.   

Cyberone Condominium Corporation (“Cyberone”) sought confirmation from the Commission that in a non-stock corporation, the members’ participation and attendance for purposes of the quorum and voting in an annual meeting via remote communication and/or in absentia may be allowed only if authorized under the non-stock corporation’s bylaws.

Cyberone’s bylaws do not contain any provision that recognizes and/or allows remote communication as a valid means of conduction an annual members’ meeting. Cyberone posited that Section 88 of the Revised Corporation Code (“RCC”) is clear that for non-stock corporation, voting through remote communication and/or in absentia is only allowed as may be authorized under the bylaws, and that under Sections 10 and 12 of Memorandum Circular No. 6 series of 2020 (“SEC MC No. 6, s. 2020”), the phrase “When so provided in the bylaws or by a majority of the board of directors” does not apply to a non-stock corporation which has no directors, but trustees. 

The Commission posited that from wordings of Section 57 of the RCC, it can be inferred that the intention of the law is to cover both stock and non-stock corporations. This can be deduced from the inclusion of the word “members” in the same sentence which necessarily refers to non-stock corporations.

While Section 57 states “or by a majority of the board of directors,” a reading of the entire provision will show that the same is applicable to both stock and non-stock corporations. The omission of the phrase “or board of trustees” can be treated as an inadvertence rather than an intentional act to exclude the applicability to non-stock corporations of the voting via remote communication by virtue of the authority from the “board.”

This intention to apply Section 57 to both stock and non-stock corporations is also evident in Section 23 which deliberately mentions “trustees” in its heading and “members” in paragraph 2 thereof.

The law would not have been intended to favor stock corporations, without any substantial distinction, by allowing therein voting by remote communication or in absentia in two (2) instances in the case of stock corporations, but only one (1) instance in the case of non-stock corporations.

Further, in positing that Section 49 in relation to Sections 23 and 57 of the RCC recognize and allow members of non-stock corporations to participate and attend in a members’ meeting through remote communication or in absentia when so authorized in the bylaws or by a majority of the board of trustees, the Commission cited the case of Tan v. Sycip where the Supreme Court held that in the absence of an express charter or statutory provision to the contrary, the general rule is that every member of a nonstock corporation, and every legal owner of shares in stock corporation, has a right to be present and to vote in all corporate meetings. 

While Section 88 of the RCC is indeed a provision specifically pertaining to non-stock corporations, the same is not inconsistent with Sections 23 and 57. Section 88 is a provision on the exercise of the “right to vote” of members of non-stock corporations which may be defined in the by-laws, thus: “the bylaws may likewise authorize voting through remote communication and/or in absentia.” Absent any limiting term or phrase therein such as “only” or “exclusively,” Section 88 does not, in any way, restrict or negate the applicability of the phrase “by a majority of the board of directors” to non-stock corporations under Sections 23 and 57 of the RCC. It is a principle in statutory construction that the seemingly conflicting provisions of a law or of two laws must be harmonized to render each effective. It is only when harmonization is impossible that resort must be made to choosing which law to apply.

Thus, when the bylaws of the corporation do not have a provision which allows voting through remote communication, the members may still validly vote through remote communication on the basis of a resolution issued by the majority of the board of trustees authorizing such mode of voting. However, it should be noted that, in such case, voting through remote communication is only applicable for the particular meeting stated in the said resolution. Hence, corporations are highly encouraged to amend their bylaws, if attendance and voting via remote communication is not yet specifically provided therein, to allow corporations to be more adaptive to technological changes, and more importantly, to ensure that the right of stockholders/members to participate in meetings and to vote on matters presented therein are recognized and protected.