Philippine Association of Realtors Boards, Inc.

January 29, 1996 Philippine Association of Realtors Boards, Inc. Mezzanine Flr.,Mariwasa Bldg. 717 Aurora Boulevard, Quezon City Attention : Atty . Rogelio M . Quiambao Corporate Secretary S i r : This refers to your letter dated November 21, 1995 requesting guidance in resolving the following queries: 1. Who shall have possession of the proxies and who shall determine whether the same are in order? What is the effect if the proxies are not submitted to the Corporate Secretary as required by law? 2. What is the effect if the elected Directors is more than the required number in the Articles of Incorporation and a member questioned the validity of their acts? 3. What is the effect of a Special Board Meeting called by a majority of the Board Members without the required notices and time as prescribed in the by-laws? The manner and procedure to be followed in the execution and acceptance of proxies are usually embodied in the By-laws. The pertinent provision of the Corporation Code provides: "SECTION 47. Contents of by-laws . Subject to the provisions of the Constitution, this Code, other special laws, and the articles of incorporation, a private corporation may provide in its by-laws for: xxx xxx xxx. 4. The form for proxies of stockholders and members and the manner of voting them ; ..." (Emphasis supplied) Therefore the corporate By-laws would be controlling in determining the proper procedure to be followed in the execution and acceptance of proxies. It has to be emphasized, however, that the first requisite of validity of By-law provisions is that they must be in consonance with and not repugnant to or in contravention with the Corporation Code. Thus, while a corporation is allowed to provide in its by-laws provisions pertaining to the execution and acceptance of proxies, the same must not be inconsistent with the provisions of the Corporation Code. Otherwise, they would have no binding effect. Should the procedure embodied in the By-laws prove inadequate, the applicable provisions of the Corporation Code will have to be resorted to in order to remedy the deficiency. In the absence of a provision in the By-laws, the proxies should be perceived in relation to their compliance with the following provision of the Corporation Code. "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 schedule 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 that five (5) years at any one time." (Emphasis supplied) Relative to your second query, the number of directors that a corporation can legally have is that which is fixed in the articles of incorporation. Any increase thereof can only be legally effected by amending the Articles of Incorporation pursuant to Section 16 of the Corporation Code. Thus, an election of a greater number of directors than what is provided for and allowed in the articles of incorporation is irregular and voidable at the instance of any person aggrieved thereby. (2 Fletcher, sec. 291, citing several authorities) Anent your third query, Section 53 of the Corporation Code provides: SECTION 53. Regular and Special meetings of directors or trustees . ... "Meetings of directors or trustees of corporations may be held anywhere in or outside of the Philippines, unless the by-laws provide otherwise. Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or trustee at least one (1) day prior to the scheduled meeting, unless otherwise provided by the by-laws. A director or trustee may waive this requirement, either expressly or impliedly ." (Emphasis provided) Further, the Commission previously opined that the Board of Trustees of a corporation cannot hold an emergency meeting or special meeting without proper notice to the members thereof. " Notice of a special meeting must be given to every director, unless there is an express provision in the charter or by-laws or established usage to the contrary or unless it is useless, impossible or impracticable to do so .Except in these cases, a special meeting held in the absence of some of the directors, and without any notice to them ,is illegal ,and the action at such a meeting, although by a majority of the directors, is invalid, unless subsequently ratified or unless rights have been acquired by innocent third persons, as against whom the corporation must be held estopped to set up the failure to observe formalities." ( Ltr. to Atty. Angel F. Lobatan, Sr.,dtd. March 10, 1972 ,citing Ballantine on Corporation) prcd Please be guided accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner