More on quorum and corporate meetings, read: BOARD MEETINGS THROUGH TELECONFERENCING AND OTHER REMOTE OR ELECTRONIC MEANS OF COMMUNICATION
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A quorum may be provided in the bylaws of a corporation
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If there is none, a quorum consists of stockholders representing a majority of the outstanding capital stock
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In case of nonstock corporations, a quorum consists of a majority of the members
Make meetings work.
This is because meetings are necessary if a corporation decides to do or not to do something.
In stock corporations, meetings of the board of directors are either regular or special. The same goes with stockholders’ meeting, it is either regular or special. Please see kinds of corporate meetings under Philippine law for reference.
What is a meeting?
The Supreme Court says:
The term “meeting” applies to every duly convened assembly either of stockholders, members, directors, trustees, or managers for any legal purpose, or the transaction of business of a common interest. In one case decided by the Supreme Court, to be valid, a meeting must comply with the following requisites:
- The meeting must be held on the date fixed in the By-Laws or in accordance with law;
- Prior written notice of such meeting must be sent to all stockholders/members of record;
- It must be called by the proper party;
- It must be held at the proper place; and
- Quorum and voting requirements must be met.
Of the above-mentioned five (5) requirements, the existence of quorum is crucial. This is because any act or transaction made during a meeting without quorum is rendered of no force and effect. This means that whatever agreed and voted upon during such meeting is not binding on the corporation or parties concerned. Thus, it connotes a wasted time and resources among others.
How then should a quorum be determined?
The law says:
Unless otherwise provided in the Revised Corporation Code or in the bylaws, a quorum consists of the stockholders representing a majority of the outstanding capital stock or a majority of the members in case of nonstock corporations.
Thus, for stock corporations, the quorum is based on the number of outstanding voting stocks while for nonstock corporations, only those who are actual, living members with voting rights are counted in determining the existence of a quorum.
To be clear, the basis in determining the presence of quorum in nonstock corporations is the numerical equivalent of all members who are entitled to vote, unless some other basis is provided by the bylaws of the corporation.
Lastly, where the effects of an absence of a quorum in a meeting was raised, SEC-OGC Opinion No. 1-25 dated July 22, 2019 regarding Quorum in Meetings of a Condominium Corporation opined that no action can be taken except to adjourn.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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