Opinion No. 16-01 Re: Teleconferencing for Stockholder's Meeting

Republic of the Philippines Department of Finance Securities and Exchange Commission SEC Building, EDSA, Greenhills, Mandaluyong City

Office of the General Counsel

19 January 2016

SEC Opinion No. 16 - 01 Stockholder's Meetings Teleconferencing for

Atty. Althea F. Acas SEDLEX PROFESSIONAL PARTNERSHIP CO. 7B 7th Floor OPL Building 100 C.Palanca St. Legaspi Village, Makati City

Dear Attorney Acas:

allowed in stockholders' meetings. whether or not appearance and voting via teleconferencing and videoconferencing are This pertains to your letter dated 16 April 2014 requesting an opinion on

May 1, 1980, a time when teleconferencing or videoconferencing was not yet an established business practice. It has been almost 34 years since the Corporation Code decades. Nowadays, information and communications technology is an integral part was enacted and the business landscape has change dramatically in the course of three of the conduct of business and commercial transactions. You point out, among others, that the Corporation Code was passed back in

include attending and voting done by actual person, despite not being physically present in the meeting. You further argue that E-Commerce Act apply similarly to the SEC Memorandum Circular No.15. conduct of a stockholder's meeting as it was applied to board meetings in relation to Furthermore, you posit that the term "in person" may be construed as to

(three or more people in two or more locations) through an electronic medium. In general terms, teleconferencing can bring people together under one roof even though they are separated by hundreds of miles. The term "Teleconferencing" means an interactive group communication

communication are in different places. This type of group communication may be Teleconferencing presupposes that the participants to such mode of

Carroll, Teleconferencing, CIX Dun's Business Month, 1 (1982), pp. 130-34 Expertravel & Tours vs. Court of Appeals, G.R. No. 152392, 26 May 2005, citing J.

Re: Teleconferencing for SEC Opinion 16 - 01 Stockholders Page 2 of 3

used in a number of ways, and have three basic types: (1) video conferencing television-like communication augmented with sound; (2) computer conferencing printed communication through keyboard terminals, and (3) audio-conferencing

telecopying. verbal communication via the telephone with optional capacity for telewriting or

alter the complexity of group communication. Although it may be easier to communicate via teleconferencing, it may also be easier to miscommunicate. Teleconferencing cannot satisfy the individual needs of every type of meeting. However, teleconferencing can only facilitate the linking of people; it does not

Section 51 of the Corporation Code4 provides that "stockholder's or member's meetings, whether regular or special, shall be held in the city or municipality where the principal office of the corporation is located, and if practicable in the

a stockholders' or members' meeting are in the same place during the meeting. This is principal office of the corporation." This provision presupposes that the attendees to

in contrast to teleconferencing, where the participants are in different places although their communication with each other is facilitated through an electronic medium, making their presence in the meeting merely "virtual" or electronic.

The Commission previously opined' that:

duly called meeting to carry out a corporate transaction. 'constructive' or electronic presence' is not a substitute for 'actual "xxx xxx xxx. xx xxx xxx in cases where the law requires a

presence'.

On the other hand, the conduct of a meeting of the board of directors or trustees may be held anywhere in or outside the Philippines per Section 53 of the Corporation Code. The aforementioned provision does not limit the attendees to such meeting be in different places, with the attendees communication being facilitated through an electronic medium. In this regard, the Commission issued SEC Memorandum Circular No. 15 Series of 2001, providing the guidelines for the conduct of board meetings through teleconferencing.

For the foregoing reasons, Section 47 of the Corporation Code permits the "place" of the directors' meeting to be stipulated in the corporations by laws, but not in case of stockholders' meetings.

Complex Realities, The Futurist,XII (No. 5,1978), 313-19; L. Parker, M.Baird, and M. 2 Ibid Ms. Ma. Pelita B. Dotado-Viliran, citing SEC Opinion dated 25 March 1981, addressed to Atty. Victor Monson, Introduction to Teleconferencing (Madison: University of Wisconsin-Extension, Center for Interactive Programs, 1982); and Sonneville, Teleconferencing Enters Its Growth Stage. 5 Ltr. to Wilma M. Valdemoro-Cua dtd. 9/10/93; SEC Opinion dated 4 August 1998, addressed tc Africa. Ibid., citing R. Johansen, J. Vallee, and K. Spangler, Electronic Meetings: Utopian Dreams and Batas Pambansa Blg.68 (1980)

Re: Teleconferencing for SEC Opinion 16 - 01 Stockholders Page 3 of 3

Thus, under the present Corporation Code, a stockholder's voting and appearance cannot be conducted via teleconferencing or videoconferencing.

that proposed amendments to the Corporation Code. This includes permitting the conduct of stockholders meetings through electronic means. It may be of interest to you however that there are pending bills' in Congress

solely on the facts and circumstances disclosed and relevant solely to the particular It shall be understood, however, that the foregoing opinion is rendered based

issue raised therein and shall not be used in the nature of a standing rule binding upon the Commission in other cases or upon the courts whether of similar or dissimilar facts relied upon are different, this opinion shall be rendered void. circumstances. If, upon further inquiry and investigation, it will be disclosed that the

Please be guided accordingly.

Very truly yours,

AMMMO^S CORREA General Counsel

7 House Bill No. 4407 of the 16th Congress; and Senate Bill 2194 of the 16th Congress Section 47. Contents of by-laws -- Subject to the provisions of the Constitution, this Code, other special laws and articles of incorporation, a private corporation may provide in its by-laws for: 8 Paragraph 7, SEC Memorandum Circular No.15, Series of 2003 2. The time, place and manner of calling and conducting regular or special meetings of the The time and manner of calling and conducting regular or special meetings of the directors or trustees; stockholders or members;