Voting by Remote Communication Based on a Board Resolution

In an opinion dated 08 May 2024, the Securities and Exchange Commission (“SEC”) Office of the General Counsel (“OGC”) issued an opinion stating that that the election of the board of directors of a corporation may be made through remote communication if the same is provided for in a board resolution approved by majority of the board of directors of such corporation. Further, such approval will only be applicable to that particular meeting. 

The SEC OGC issued SEC OGC Opinion No. 12-2024 in response to the letter of Philippine Society of Mechanical Engineers, Inc. (“PSME”) requesting for an opinion on whether it can conduct the election of its national board of directors through remote communication on the sole basis of a duly passed board resolution. It is worth noting that PSME’s by-laws only allow manual voting system for purposes of election of its board of directors. 

The SEC cited Section 12 of SEC Memorandum Circular (“MC”) No. 6, series of 2020, which states:

“Section 12. Voting in the Election of Directors, Trustees, and Officer Through Remote Communication.

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The right to vote of stockholders or members may be exercised also through remote communication or in absentia when authorized by a resolution of the majority of the board of directors; Provided, that the resolution shall only be applicable for a particular meeting.”

Additionally, the SEC cited SEC OGC Opinion No. 09-21 where the SEC resolved a similar issue and held that members may validly vote through remote communication on the basis of a resolution issued by the majority of the board of trustees. However, voting through remote communication is only applicable for that particular meeting based on Section 12 of MC No. 6, series of 2020.

Based on the above, the SEC confirmed that PSME may conduct its meeting and election of board of directors through remote communication based only a board resolution issued by a majority of its board of directors authorizing such mode. However, this is subject to the condition that such resolution shall only be applicable for that particular meeting and that internal procedures or controls are adopted. 

Finally, the SEC encouraged corporations to amend their by-laws if attendance and voting via remote communication is not yet specifically provided therein, to ensure that the right of stockholders to participate and vote in meetings are recognized and protected.