The Securities and Exchange Commission (“SEC”) issued on 23 April 2021 SEC Memorandum Circular No. 7, series of 2021 (“MC 7-21”), which provides for the rules on calling for Special Stockholders’ Meetings for Publicly Listed Companies (“PLCs”).
Right to Call for a Special Stockholders’ Meeting
Any number of shareholders of a PLC (“Qualifying Shareholders”) who hold at least ten percent (10%) or more of its outstanding capital stock (“Qualifying Shares”) shall have the right to call for a Special Stockholders’ Meeting, which may be done physically or remotely through allowable means of remote communication.
Such Qualifying Shareholders should have continuously held the Qualifying Shares for a period of at least one (1) year prior to the receipt by the Corporate Secretary of a written Call for a Special Stockholders’ Meeting.
Form and Contents of the Call for Special Stockholders’ Meeting
The Call for a Special Stockholder’s Meeting shall be in writing, signed by all Qualifying Shareholders, addressed to the Board of Directors, transmitted through the Corporate Secretary at least forty-five (45) days prior to the proposed date of the special meeting, and shall contain the following:
- Names of the Qualifying Shareholders, and respective percentage shareholdings (with proof of shareholding and one government-issued ID);
- Purpose of the Call, stated with sufficient clarity, which affects the legitimate interest of the stockholders and is germane to the stockholders’ interest, but should not include the removal of any director under Section 27 of the RCC;
- Proposed date and time of the Special Stockholders’ Meeting, provided, that no stockholder may call a special meeting within sixty (60) days from the previous meeting of the same nature and discussing the same matter, unless the PLC’s by-laws provide otherwise, or the special meeting is approved by the Board of Directors; and
- Proposed agenda items, affecting the legitimate interests of the shareholders on corporate actions where stockholders’ approval is required under the RCC, except the right to remove a director.
A Special Stockholders’ Meeting cannot be called if the proposed agenda:
- covers the same matter/s discussed and resolved in a previous meeting of the stockholders, unless the sixty (60)-day holding-off period had lapsed, the company by-laws provide otherwise, or the special meeting is approved by the Board;
- will be covered in the next regular or special meeting, provided, that the next regular or special meeting is scheduled not later than thirty (30) days from the date of the request; or
- has already been discussed and resolved with finality in the previous meetings.
Powers and Responsibilities of the Board of Directors
MC 7-21 also provides for the following powers and responsibilities of the Board of Directors:
- To set the Special Stockholders’ Meeting earlier than forty-five (45) days, if it determines that the matters raised by the Qualifying Shareholders necessitate a quick resolution to prevent undue damage to the PLC;
- To determine if the objectives and conditions in the Call for Special Stockholders’ Meeting are consistent with the requirements of MC 7-21;
- If the Call for Special Stockholders’ Meeting is consistent with the requirements of MC 7-21, to issue the Notice to convene the Special Stockholders’ Meeting at least seven (7) days prior to the proposed date of special meeting; and
- If the Call for Special Stockholders’ Meeting is inconsistent with the requirements, to send a written notice to the requesting stockholders that a meeting cannot be called due to their failure to comply with the requirements of MC 7-21, clearly setting forth the basis thereof, within twenty (20) days from receipt of the request.
Should the Board of Directors fail to respond to the Call for Special Stockholders’ Meeting within twenty (20) days from receipt of the request, or refuse to call a meeting, the Qualifying Shareholders may avail of the remedy provided under paragraph 7, Section 49 of the RCC.
Liabilities under MC 7-21
Any officer or agent of the PLC who shall refuse, or any of directors of the PLC, who upon a resolution, votes to refuse to allow a Qualifying Shareholder to exercise his/her right to call a meeting shall be liable under Section 158 of the RCC. The delay in the processing of the requests shall be equivalent to refusal if the delay is solely caused by negligence on the part of the PLC. However, it shall be a defense to such action that the shareholder exercising any of these rights was not acting in good faith or in accordance with the requirements of MC 7-21.