May 5, 2021 [embedded content] THE Securities and Exchange Commission (SEC), in line with its duty to promote good corporate governance and the protection of minority investors pursuant to its regulatory powers under Republic Act 11232, or the “Revised Corporation Code of the Philippines” (RCC), and Administrative Order 38, Series of 2013 (also known as Creating an Inter-Agency Task Force to Initiate, Implement and Monitor Ease of Doing Business Reforms), has issued SEC Memorandum Circular 7, Series of 2021 (MC7, S. of 2021) last April 23 to allow minority shareholders in publicly listed companies (PLC) to call special stockholders’ meetings. MC7, S. of 2021 states that any number of shareholders holding at least 10 percent of the outstanding capital stock of a PLC shall have the right to call for a special stockholders’ meeting, subject to the guidelines provided under Section 49 of the RCC, and other relevant laws, rules and regulations (Item 1, MC7, S. of 2021). The shareholders should have continuously held the shares for at least one year prior to the receipt by the corporate secretary of the written call for a special meeting (Item 2, MC7, S. of 2021). The call for a special meeting should be in writing, addressed to the company’s board of directors and transmitted through the corporate secretary at least 45 days prior to the proposed date of the meeting (Item 3, MC7, S. of 2021). The written request for the meeting must include the name of the stockholders and their respective percentage of shareholdings, which must constitute at least 10 percent of the outstanding capital stock of the corporation. The letter must be duly signed by all requesting shareholders [Item 3(i), MC7, S. of 2021]. The request should also provide the purpose, date and time, as well as proposed agenda items for the meeting. The proposed agenda items should be matters that affect the legitimate interests of the shareholders on corporate actions where stockholders’ approval is required under the RCC, except the right to remove a director [Item 3 (ii)(iii)(iv), MC7, S. of 2021]. No stockholder may likewise call for a special meeting within 60 days from the previous meeting of the same nature where the same matter was discussed, unless allowed in the bylaws of the corporation or approved by the board [Item 3 (iii), MC7, S. of 2021]. Also, a special stockholders’ meeting cannot be called if the agenda will be covered in the next regular or special meeting scheduled not later than 30 days from the date of the request or if the agenda has already been discussed and resolved with finality in previous meetings [Item 3 (iv)(b)(c), MC7, S. of 2021]. If the board of directors determines that the call for the special meeting is compliant with MC7, s. of 2021, they shall issue a notice to convene the meeting at least seven days prior to the proposed date (Item 4, MC7, S. of 2021). Should the call for a special meeting be inconsistent with the purpose of and conditions set under MC7, S. of 2021, the board must send a written notice to the requesting stockholders within 20 days from receipt of the request indicating the reasons and grounds for the denial of the request (Item 4, MC7, S. of 2021). If the board fails to respond to the call for a special meeting within 20 days from the receipt of the request, the qualifying shareholders may avail of the remedy provided under paragraph 7, Section 49 of the RCC (Item 5, MC7, S. of 2021). Any officer or agent of a corporation who refuses to allow a qualifying shareholder to exercise his/her right to call a meeting shall be made liable under Section 158 of the RCC, which allows the SEC to impose a fine ranging from P5,000 to P2 million, issue a permanent cease and desist order, suspend a corporation, revoke the corporation’s certificate of incorporation and dissolve the corporation (Item 6, MC7, S. of 2021). As SEC Chairman Emilio B. Aquino noted on the SEC’s move in the issuance of MC7, S. of 2021: “The newly issued rules empower minority shareholders to better protect and advance their interests, as well as help listed firms have a wider perspective and be more inclusive in their decision-making process.” “The greater protection afforded to minority shareholders should encourage increased participation in the stock market and, in turn, further deepen our capital market to support business expansions, jobs creation and overall economic growth.” With the new rules in place, the commission anticipates the role of shareholders in exercising their rights and having a greater voice in the governance of corporations. We hope that this would ultimately redound to the benefit of all stakeholders. The rules already took effect, following its publication in two newspapers of general circulation last April 24. The circular has also been posted on the SEC website. I encourage the public to check the full details of MC7, S. of 2021 through the commission’s official website at www.sec.gov.ph. Kelvin Lester K. Lee is a commissioner of the Securities and Exchange Commission (SEC). The views and opinions stated herein are his own. You may email your comments and questions to [email protected]. OTHER STORIES