PPrinciple 13 of the Corporate Governance Code (CG) for Listed Companies (PLC) provides that “The company shall treat all shareholders fairly and equitably, and also recognize, protect and facilitate the exercise of their duties. rights ”.
There are five Recommendations under Principle 13, namely:
a.) Recommendation 13.1: Promote the fundamental rights of shareholders;
b.) Recommendation 13.2: Promote the active participation of shareholders in Shareholders’ Meetings by sending notices correctly;
c.) Recommendation 13.3: Communication of the results of the votes of the current shareholders and of the minutes of the General Meeting of shareholders;
d.) Recommendation 13.4: Provide an alternative dispute resolution mechanism for intra-company disputes; and
e.) Recommendation 13.5: Creation of an investor relations office.
The recommendations of Principle 13 were championed by the Institute for Corporate Directors (ICD) because their compliance increased the overall ratings of Philippine DFCs in the ASEAN CG scorecard. When revisions to the old Companies Code were debated in Congress, the Securities and Exchange Commission (SEC) and ICD argued for including the recommendations of Principle 13 in the amendments to the old Company Code. As it turned out, all of the recommendations except the last one found themselves expressed in the statutory language of the Revised Philippine Companies Code (RCCP).
RESPECT FOR THE BASIC RIGHTS OF SHAREHOLDERS
Recommendation 13.1 of the GE Code for Public Limited Companies provides that “the board of directors should ensure that the fundamental rights of shareholders are disclosed in the corporate governance manual and on the company’s website”. In the explanation of recommendation 13.1, the following shareholder rights are listed, which were not provided for in the old Companies Code, as follows:
• Dividend policies;
• Right to propose the holding of meetings and to include items on the agenda before the scheduled annual and extraordinary meeting of shareholders;
• Right to propose candidates to the board of directors;
• Nomination process; and
• Voting procedures that would govern the annual and special meeting of shareholders.
The RCCP has instituted, or at least in some cases, incorporated into its provisions the CG best practices listed above as follows:
a.) Article 49: Formally recognizing that: (i) “A shareholder or a member may propose the holding of a special meeting and items to be placed on the agenda”; and, (ii) “A director, trustee, shareholder or member may propose any other matter for inclusion on the agenda of any regular meeting of shareholders or members”.
b.) Section 23: Formally recognizing that “Except where the exclusive right is reserved for holders of founder’s shares … each shareholder or member has the right to appoint any director or trustee who has all the qualifications and none of the defined disqualifications in this Code.
c.) Section 49: Requiring that at the annual meeting of shareholders or members, “the board of directors or trust board shall endeavor to present to shareholders or members the following: (i) An explanation of the dividend policy and the fact of payment of dividends or the reasons for their non-payment; (ii) A list of members for public limited companies and, for public limited companies, important information about current shareholders and their voting rights; (iii) Profiles of directors appointed or nominated for election or re-election. “
d.) Section 23: Provide that in the election of directors or trustees: (i) Shareholders or members may be present either in person or by written proxy, but may also vote by remote communication or in absentia when the articles of association authorize it as such or by a majority of the Board of Directors; and, (ii) A shareholder or member participating by remote communication or by default, will be deemed to be present for quorum purposes.
e.) Article 49: By formally providing that – (i) “The voting rights of shareholders or members may be exercised in person, through a proxy, or when the articles of association so authorize, by communication at a distance or in absentia; and, (ii) The SEC will issue rules and regulations governing participation and voting by remote communication or in absentia, taking into account the size of the company, the number of shareholders or members, the structure and ‘other factors compatible with the protection and promotion of shareholders’ or meetings of members.
It should be noted that the “effort clause” for directors or trustees under Section 49 could be made into a binding commitment simply by the SEC by formally adopting them as a CG obligation of directors or trustees. to comply at annual meetings of shareholders or members. , and subjecting non-compliance with this disclosure obligation to an administrative sanction under Article 158 of the RCCP.
NOTICE OF SHAREHOLDER MEETINGS
Recommendation 13.2 of the GE Code for public limited companies provides that “The Board should encourage the active participation of shareholders by sending the notice to the Annual and Special General Meeting of Shareholders with sufficient and relevant information at least 28 days before the meeting.
Article 49 of the RCCP instituted the CG practices incorporated in recommendation 13.2 by introducing the following rules:
a.) Regular Meetings: Written notice of regular meetings must be sent to all shareholders or registered members: (i) by electronic mail or in any other manner authorized by the SEC under its guidelines; and, (ii) at least 21 days prior to the meeting, unless a different period is required by statute, law or regulation;
b.) Special meetings: Written notices to special meetings of shareholders or members must be sent at least one week before the meeting, unless a different deadline is provided for in the articles of association, law or regulation;
c.) Waiver of Notice: Any shareholder or member may waive, expressly or by implication, notice of any meeting: Provided that: (i) General waivers of notice in the articles or by-laws do not are not allowed; and, (ii) Attendance at a meeting constitutes a waiver of notice of such meeting, except where the person is attending a meeting for the express purpose of objecting to the settlement of any matter because the meeting is not legally convened or summoned.
d.) Closure of Inventory and Transfer Register: Unless the Articles of Association provide for a longer period, the Inventory and Transfer Register or Membership Book must be closed for at least 20 days for regular meetings and seven days for special meetings before the scheduled meeting date. .
e.) Postponement of a meeting: in the event of postponement of ordinary meetings of shareholders or members, a written notice stating the reason must be sent to all shareholders or registered members at least two weeks before the date of the meeting. meeting, unless a different period is required by statute, law or regulation.
In turn, article 50 of the The RCCP has introduced new elements that must be contained, included or attached to each invitation to meetings of shareholders or members, such as:
a.) Minimum content: The notice of meeting must be sent by the means of communication provided for in the statutes, which must indicate (i) the time, (ii) the place and (iii) the purpose of the meetings;
b.) Supporting documents: Each invitation must also be accompanied by the following elements: (i) The agenda of the meeting; (ii) A proxy form which must be submitted to the Secretary General within a reasonable time before the meeting; (iii) Where attendance, participation and voting are authorized by remote communication or in absentia, the requirements and procedures to be followed when a shareholder or member chooses either option; and, (iv) when the meeting is for the election of directors or trustees, the nomination and election requirements and procedure.
The SEC published on February 21, 2020, the SEC Memorandum Circular No. 3-2020 providing the following rules on notices of convening of ordinary meetings of shareholders / members, as follows:
1.) Which makes it a must and not subject to another deadline that may be provided for in the statutes: “A written notice of ordinary meeting must be sent to all shareholders / registered members at least 21 days before the date of the meeting. meeting. “
2.) “In the event of postponement of ordinary meetings of shareholders / members, a written notice and the reason will be sent to all registered shareholders / members at least two weeks before the date of the initially scheduled meeting. Shareholders / registered members will be informed of the new schedule of the ordinary meeting in accordance with the previous paragraph.
3.) “The written notice must contain all the information and deadlines relating to the participation of shareholders / members in the meeting and to the exercise of the right to vote by distance (in absentia or by proxy). “
The most important consideration for the publication by the SEC of Circular No. 3-2020 was to subject the violation of its provisions to its power to impose administrative sanctions, providing: of this Circular has been violated, the Commission may impose all or part of the penalties provided for in Article 158 of the RCCP.
This article reflects the personal opinion of the author and does not reflect the official position of the Management Association of the Philippines or the MAP.
Lawyer Cesar L. Villanueva is chairman of the corporate governance committee of MAP, trustee of the Institute of Corporate Directors (ICD), first chairman of the governance committee of GOCC (from August 2011 to June 2016) , former dean of Ateneo Law School (April 2004 to September 2011), and founding partner of Villanueva Gabionza & Dy Law Offices.