Mr. Arthur Mar O. Alivio

May 29, 2003 SEC OPINION NO. 27-03 Mr. Arthur Mar O. Alivio 817 M. Velez Street Cebu City, Philippines 6000 S i r : This refers to your letter dated 27 January 2003, posing the queries quoted hereunder: "1. Can a trustee, who is in a foreign country, of a non-stock corporation validly and legally vote through the internet; 2. If yes, what procedures shall the secretary of the corporation do to validate his vote; and 3. If not, is there a legal way of casting his vote without necessarily coming over to the country?" It was also stated in your letter that the foregoing "inquiries are founded on a requirement under Section 93 of the Corporation Code of the Philippines which provides, among others, that the place of meeting (of non-stock corporations) shall be within the Philippines." Relative thereto, please be advised that Section 93 of the Corporation Code is not applicable to the situation at hand. Said provision refers to meetings of members and not to meetings of the board of trustees. The applicable provision of the Corporation Code as regards the place of meetings of trustees is the ultimate paragraph of Section 53 thereof, which provides: "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." Furthermore, SEC Opinion dated 09 August 2001 addressed to Atty. Victor P. Lazatin of ACCRA Law Offices is quoted hereunder: ECcaDT ". . ., the Commission En Banc has ruled that the Commission must respond to the exigencies of the times and the technological developments of the 21st Century thereby modifying its previous opinion requiring 'actual presence' of directors or trustees during board meetings. In view of the foregoing and in accordance with Section 16 of the Electronic Commerce Act (RA 8792), which provides in part that, '. . . no contract shall be denied validity or enforceability on the sole ground that it is in the form of an electronic data message or electronic document or that any or all of the elements required under existing laws for the formation of contracts is expressed, demonstrated or proved by means of electronic documents', the Commission, likewise is of the opinion that the intended benefits of the above-referenced law may be made to apply to Section 25 of the Corporation Code, which conversely requires the presence of the directors in board meetings. However, we would like to emphasize that participation of directors in meetings through teleconferencing and videoconferencing may be deemed acceptable only when adequate safeguards have been accordingly set in place. Meetings of this nature should be properly recorded and the appropriate tapes and discs properly stored for safekeeping." On the basis of the aforequoted opinion, a trustee may now be allowed to vote through the internet, provided that the internet medium to be used is akin to or similar to the one being used in video-conferencing or tele-conferencing (i.e. Video streaming with voice packet or video over the internet), where a participant can see or hear the actual proceedings of a board meeting and actively participate in the deliberation of the board. As it is, voting by e-mail alone is not adequate because a user-participant's role in such case is passive considering that his access to the entire proceedings is limited to the information in print transmitted through the internet. It should always be emphasized however that voting through the internet using the medium just described may be allowed only after adequate safeguards have been set in place in accordance with SEC Memorandum Circular No. 15, Series of 2001 ( Published in Malaya, December 8, 2001 and Manila Standard, November 27, 2001 ). Anent your second and third queries, please find enclosed SEC Opinion dated 23 May 2002 addressed to Attys. Cesar P. Manalaysay and Edgardo G. Balois of Siguion Reyna, Montecillo & Ongsiako which is pertinent to the issues raised therein. Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel