Email notice of meetings for corporations-A A +A
By Kelvin Lee
Question of Law
Wednesday, May 28, 2014
HERE'S an interesting innovation. It seems that some companies have been using email to send notice of meetings to their directors and their stockholders. Whether or not this form of notice is valid was the recent subject of a legal opinion (SEC-OGC Opinion No. 13-10, dated 25 October 2013) by the Office of the General Counsel of the Securities and Exchange Commission (SEC).
You will recall that under the Corporation Code, written notice of regular meetings of stockholders or members of the corporation shall be sent two weeks prior to the meeting unless otherwise stated in the corporation's by-laws. On the other hand, in the event of a special meeting of the stockholders or members, written notice at least one week prior to the schedule of the meeting is required. (See Sec. 50, Corporation Code; See also SEC-OGC Opinion No. 13-10, 25 October 2013).
Furthermore, it is specifically provided in Section 51 of the Corporation Code that the "notices of meetings shall be in writing, and the time and place thereof stated therein."
For meetings of board of directors or trustees on the other hand, the Corporation Code requires that regular meetings be held on a monthly basis except when the by-laws or the corporation provides otherwise. Special meetings of the board of directors or trustees may be held at any time upon the call of the president or as provided by the by laws. Whether regular or special, notice to each director or trustee must be given at least one day prior to the scheduled meeting. (See Sec. 53 of the Corporation Code; See also SEC-OGC Opinion No. 13-10, 25 October 2013).
Based on those provisions of the Corporation Code, the SEC through its Office of the General Counsel, has opined that "as a default rule, written notice of the meeting, sent through postal mail, must be given to stockholders/directors/trustees in relation to the holding of meetings within the periods provided in the Corporation Code. However, Section 47(1) (2) and (6) allows the corporation to provide a different mode of notices in its by-laws." (SEC-OGC Opinion No. 13-10, 25 October 2013).
Thus, according to the SEC, an email notice may be included as a mode of notice in the by-laws of a corporation, since an e-mail is considered to be "in writing." However, the SEC Opinion states that "the by-laws, must, likewise, provide for the mechanics of such sending of notices through e-mail, including the indication, recording, changing and recognition of e-mail addresses of each stockholder/director." (See SEC-OGC Opinion No. 13-10, 25 October 2013).
In short, if the by-laws of a corporation allow for e-mail notices to stockholders/members, directors/trustees, then the SEC will allow and recognize it.
However, as further explained by the SEC, "it must be stressed that absent such specific provisions on notice requirements in a corporation's current and standing by-laws, the general/default rule- written notices sent through regular postal mail - applies." (See SEC-OGC Opinion No. 13-10, 25 October 2013).
Thus, if the by-laws do not provide for the mechanism or provisions for e-mail notices, a corporation should not use e-mails as a form of notice of meetings under the Corporation Code. Otherwise, the validity of the notice and of the meeting itself may be questioned.
However, the SEC Legal Opinion further provides that since the Corporation Code allows for the waiver of the notice requirements (See Sec. 50 and 53 of the Corporation Code), it "may be conjectured that a signature of a stockholder/director/trustee acknowledging receipt of a notice of meeting sent through e-mail may be considered a waiver." (See SEC-OGC Opinion No. 13-10, 25 October 2013).
In other words, e-mail notices may be considered valid even if the by-laws do not provide for it, so long as the director/stockholder/trustee acknowledges receipt of a notice of meeting by e-mail with his signature.
As a result, according to the SEC, if you want to use e-mails as your mode of notice of meetings, then you either amend the corporation's by-laws, or ensure that the recipient of the e-mails will acknowledge and waive the notice of meeting.
The opinions expressed herein are solely of Atty. Lee. This column does not constitute legal advice nor does it create a lawyer-client relationship with any party. You can reach Atty. Lee at firstname.lastname@example.org
Published in the Sun.Star Davao newspaper on May 29, 2014.