SEC Requires Corporations to Indicate a Definite Number of Directors in their Articles of Incorporation

In an Opinion dated 9 August 2023, the Securities and Exchange Commission (“SEC”) answered an inquiry regarding whether or not a corporation’s Articles of Incorporation can be amended to indicate a range of number of directors (i.e., “at least 2 directors” or “2 to 5 directors”), instead of a definite number of directors (i.e. “5 directors”).

The SEC decided in the negative stating the Revised Corporation Code (“RCC”) is clear in its mandate that the Articles of Incorporation must indicate the number of directors, and not the range. Section 13 of the RCC is clear in its use of the word “number”, denoting that there is a fixed quantity. This is opposed to indicating a range, which would denote that there is a variation between the upper and lower limits of a particular measure. 

The need to indicate a fixed number of directors is also in line with the definition of quorum in the RCC which provides that a quorum is majority of the number of directors or trustees as indicated in the Articles of Incorporation.

The SEC also reiterated in this Opinion the formula for determining quorum, which is 1/2 plus 1 of the number of directors indicated in the Articles of Incorporation. Applying the formula to a case where there are 2 directors, the result would be 1/2 of 2 plus 1 which is equals to 2. Thus, in cases where there are 2 directors, the attendance of all 2 directors is required to transact corporate business.