Atty. Gregorio F. Ortega

August 22, 2002 SEC OPINION Attys. Gregorio F. Ortega and Judy Anne C. Abat Ortega, Del Castillo, Bacorro Alpap I Bldg.,5th & 6th floors 140 L.P. Leviste St.,Salcedo Village 1227 Makati City Sir/Madam : This pertains to your letter requesting opinion on the validity and manner in which the proxy must be submitted. Pertinent to the issue are the terms "proxy" and "power of attorney." The term "proxy" refers to the person authorized by the stockholder or member to vote for him at stockholders' or members' meeting ( Corporation C od e annotated by Rosario N. Lopez, p. 724 ). A power of attorney is an instrument in writing whereby one person, as principal, appoints another as his agent and confers authority to perform certain specific acts or kinds of acts on behalf of the principal. As per SEC Memorandum Circular No. 5 Series of 1996, the corporate by-laws shall be controlling in determining the proper procedure to be followed in the execution and acceptance of proxies, provided that the minimum required formalities prescribed under Section 58 of the Corporation Code and RSA Rule 34(a) (now Section 20 of the SRC and its implementing rules) shall be complied with. aTcHIC In the absence of any provision in the by-laws, the minimum requirement for a proxy is set forth under Section 58 of the Corporation Code which provides: 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 scheduled meeting with the corporate secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any one time. Hence, we answer your first query in the affirmative. A power of attorney, either general or special, can be used a valid proxy as long as it complies with the requirement of Section 58 of the Corporation Code. Without prejudice to the rules on admissibility of foreign documents under our Rules of Court, the above cited Section of the Corporation Code does not require that a proxy executed by the stockholder or member abroad should bear the signature of the Philippine Consul on the authentication page. If by-laws mandate that the corporate secretary should determine and post the list of stockholders qualified to vote at least five (5) days before the annual meeting, the same is not a ground for rejection of proxies. Section 58 of the Corporation Code provides for a simple requirement that proxies shall be "filed before the scheduled meeting." Thus, in the absence of any provision in the by-laws, any proxy filed before the scheduled meeting should be accepted by the corporate secretary. Referring to your third question, where a protest is filed during the proceeding, the same shall be treated as an objection and shall be disposed of or ruled upon accordingly; in the event it shall be held adverse to the party raising said objection, said party shall have other remedies provided by law wherewith to ventilate the same. Relative to your fourth question, the premise you submit involves evidence and the appreciation thereon relative to the fraudulent act; as such it is a litigious issue properly ventilated before a court of law. Finally, as to the validity of the SPA, the majority of the stockholders although vested with dominant rights over the corporation may legitimately question the validity of the SPA as presented but this question must be ventilated before the proper court; to deny the SPAs' effectivity for the purpose of voting the shares of the issuer thereof is invalid and disallowed by law. The well entrenched corporate principle is that the right of a stockholder to vote upon his stock at all meetings of shareholders is a right inherent in and incidental to the ownership of the corporate stock and as such is a property right ( Corporation C od e annotated by Rosario N. Lopez citing Brown vs. McLanahan 128 F (2d) 703 ).It is therefore a vital and valuable right which a stockholder cannot be deprived of, nor can such right be essentially impaired by either the legislature or by the corporation without his consent, through the amendment of the charter or the articles of incorporation or the by-laws ( Corporation C od e annotated by Rosario Lopez citing 13 Am. Jur., Sec 2025 ). We hope that we had fully addressed your query. Very truly yours, (SGD.) JESUS ENRIQUE G. MARTINEZ Commissioner