Opinion No. 08-09 RE : Proxy Requirements

Re~\l\)\\c.0\ tne \In\\\:\l~\\\e~ \)~~~~\'\\\~"\\\ \)\ '-\\\~\\~~ ~~c\\n\\~sann~xcnange Commission SEC Bldg. EDSA, Greenhills, Mandaluyong City OFFICE OF THE GENERAL COUNSEL 27 March 2008 SEC-OGC Opinion No. C'~ -09 Re: Proxy Requirements BERNAD & ASSOCIATES 94 Road 1, Project 6, Quezon City, Metro Manila, Philippines Attention: Atty. Ana Celeste P. Bernad Madam: This refers to your letter of 29 January 2008 requesting opinion on the interpretation of the word "acknowledged" used in, and relative to the proxy requirements of, the by-laws of the Rural Bank of Rizal (K. A.), Inc. ("corporation", for brevity), of wh ich your clients are stockholders. You mentioned that your clients' representatives were not allowed to attend, much less observe, the corporation's 2005 stockholders' meeting and election of board of directors on the ground that their proxies were not "notarized" as is meant by the word "acknowledged" in the corporation's by-laws. Your clients maintain, however. that "acknowledged" is used in its ordinary or dictionary sense, i.e. "to make known the receipt oJ"'; therefore, the proxies should only be shown to have been received by the Corporate Secretary. Section 58 of the Corporation Code ("the Code") reads: "Section 58. Proxies. -- Stockholders and members may vote in person or by proxy in all meetings of stockholders or members. Proxies shall be in writing, signed by the stockholder or member and filed before the sch~duled meeting with the corporate secretary. xxx." Hence, in the absence of a provision in the articles of incorporation or. by-laws requiring a particular form for proxy, the board of directors cannot prescribe any other form; otherwise, the imposition thereof would be void, making it perfectly valid for any stockholder to use other forms of proxy as long as it is compliant. with the minimum requirements of Section 58.2 I Random House Webster's Modem Office Dictionary. 1999. l SEC Opinion. 14 June 1995. XXIX SEC Quarterly Bulletin 36 (No.4. Dec. 1995); SEC Opinion. 4 October 1987.

From the foregoing, the corporation's articles of incorporation and by-laws must be consulted. The former has no pertinent provision but the latter has3, to wit: "Sec. 6. Right to Vote by Proxies. - Every stockholder entitled to vote shall have the right to vote in person or by proxy. A proxy may be entitled to vote provided he is authorized by the stockholder in writing, properly witnessed, acknowledged, and filed with the records of the corporation." The problem, however, is the afore-mentioned differing interpretations of the word "acknowledged"o Please be informed that Section 5 of SECMemorandum Circular NO.5, Series of 2003 ("Memo NO.5"), provides that: "5. As a matter of policy, the Commission shall refrain from rendering opinion on the following: xxx xxx xxx; 5.2 Matters which involve the substantive and contractual rights of private parties wh 0 wou ld, in all probability, contest the same in court if the opinion turns out to be adverse to their interest; 5.3 Matters which would necessarily require a review and interpretation of contracts or an opinion on the validity of contracts since interpretation of contract is justiciable in nature and contract review calls for legal examination of contract on a general basis and not on specific legal issues; xxx xxx xxx." Considering that your query affects substantive and contractual ri parties. i.e. voting rights of stockholders vis-'a-vis proxy J: . corporation, and entails interpretation and ascertaining th your By-Laws4 in using the word "acknowledged", we re answering your query. However. for purposes of information, imparted: 3 Article III, Section 6, By-Laws. . 0 • 4Essentially, By-Laws are in themselves contracts in that they are rules?f action .ado~ted by the corporatIon for Its own government and for the government of its members and those havmg ~he dlre.ctlO.n,~anagement and control f its affairs. (Agbayani, Commercial Laws of the Philippines po 1470). TheIr functl~,n IS [t]9 regulate the conduct d define the duties of the members towards the corporation and among themselves (8 Fletcher, 634). 2