The Securities and Exchange Commission (SEC) has issued rules allowing minority shareholders in publicly-listed companies (PLC) to call special stockholders’ meetings.
In its April 22 meeting, the Commission En Banc approved the rules on the Calling of Special Stockholders’ Meetings, as embodied in SEC Memorandum Circular No. 7, Series of 2021.
“The newly issued rules empower minority shareholders to better protect and advance their interests, as well as help listed firms have a wider perspective and be more inclusive in their decision-making process,” SEC Chairperson Emilio B. Aquino said.
“The greater protection afforded to minority shareholders should encourage increased participation in the stock market and, in turn, further deepen our capital market to support business expansions, jobs creation and overall economic growth.”
Under the memorandum circular, any number of shareholders holding at least 10% of the outstanding capital stock of a PLC shall have the right to call for a special stockholders’ meeting, subject to the guidelines provided under Section 49 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC), and other relevant laws, rules and regulations.
The shareholders should have continuously held the shares for at least one year prior to the receipt by the corporate secretary of the written call for special meeting.
The call for special meeting should be in writing, addressed to the company’s board of directors and transmitted through the corporate secretary at least 45 days prior to the proposed date of the meeting.
The written request for the meeting must include the name of the stockholders and their respective percentage of shareholdings, which must constitute at least 10% of the outstanding capital stock of the corporation. The letter must be duly signed by all requesting shareholders.
The request should also provide the purpose, date and time, as well as proposed agenda items for the meeting.
The proposed agenda items should be matters that affect the legitimate interests of the shareholders on corporate actions where stockholders’ approval is required under the RCC, except the right to remove a director.
No stockholder may likewise call for a special meeting within 60 days from the previous meeting of the same nature where the same matter was discussed, unless allowed in the bylaws of the corporation or approved by the board.
Also, a special stockholders’ meeting cannot be called if the agenda will be covered in the next regular or special meeting scheduled not later than 30 days from the date of the request or if the agenda has already been discussed and resolved with finality in previous meetings.
If the board of directors determines that the call for the special meeting is compliant with the memorandum circular, they shall issue a notice to convene the meeting at least seven days prior to the proposed date.
Should the call for a special meeting be inconsistent with the purpose of and conditions set under the memorandum circular, the board must send a written notice to the requesting stockholders within 20 days from receipt of the request indicating the reasons and grounds for the denial of the request.
If the board fails to respond to the call for a special meeting within 20 days from the receipt of the request, the qualifying shareholders may avail of the remedy provided under paragraph 7, Section 49 of the RCC.
Any officer or agent of a corporation who refuses to allow a qualifying shareholder to exercise his/her right to call a meeting shall be made liable under Section 158 of the RCC, which allows the SEC to impose a fine ranging from P5,000 to P2 million, issue a permanent cease and desist order, suspend a corporation, revoke the corporation’s certificate of incorporation, and dissolve the corporation.
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