Teleconferencing: The corporate world’s new normal

Published in Daily Tribune on July 03, 2020
by: Alfred H. Campañano

It’s like 2020 took a page from a pandemic novel, and we now live in it. To ensure public safety, most of the country were quarantined at the expense of the economy. Everyone, including corporations, needs to cope with the new reality. Corporations function only through their board and shareholders/members who, more than ever, need to meet and make collective decisions amid this pandemic. Fortunately, technology allows them to hold safe and cost-efficient meetings anytime, anywhere.

The Revised Corporation Code (RCC) allows the board and stockholders/members to meet via teleconferencing. However, for meetings by stockholders/members, teleconferencing must be expressly authorized by the by-laws for it be valid.

To promote teleconferencing during this pandemic, and to allow corporations whose by-laws do not provide for such, the Securities and Exchange Commission (SEC) issued Memorandum Circular 6, Series of 2020. It allows the board/stockholders/members to hold teleconferences by passing a resolution to that effect. There are two ways to do this.

First, by a board resolution permitting teleconferencing, approved in a meeting before the meeting of stockholders/members. Second, by a vote of the stockholders/members as an item on the agenda during the teleconference. This is faster than the first method, but it may be more difficult to reach a consensus this way because more people are involved.

The following, unless the corporation has better teleconference protocols, applies to all meetings.

The Secretary sends the agenda informing that attendees may attend via teleconferencing. Attendees intending to teleconference shall inform the Secretary beforehand; otherwise, his or her attendance may be questioned. If notices are properly sent, and a quorum is reached, the meeting proceeds as a matter of course.

The Secretary ensures the smooth flow of the meeting. He or she guarantees that suitable equipment and facilities are ready, discussions are uninterrupted, and the recording of the meeting is accurate. The mode of teleconferencing must be uniform during the meeting to avoid technical and authentication issues. If a connection is cut, the recording must resume from interruption. Once the body is called to vote, effective ways to verify and take votes must be in place.

The Secretary thereafter shall have the minutes of the meeting signed by the attendees to prove their attendance and conformity to resolutions. Proper documentation is crucial to avoid doubt on the attendance and to preclude deniability.

Failure to follow the guidelines may result in an intra-corporate dispute, so it’s best to consult your lawyer before holding a teleconference. Most law firms assist corporations in SEC compliances, or serve as the corporate secretary to prevent intra-corporate disputes and ensure corporate peace.

The regular board or stockholders’/members’ meeting may also be postponed, but under the RCC, there must be a valid reason for the postponement. In which case, the directors or stockholders/members must be advised in writing at least two weeks before the meeting, unless a different period is required under the by-laws.

For the postponement of a regular election, the SEC must also be notified in writing of the reason for the deferment. Once postponed, the corporation must inform the SEC, within 30 days from the date of the scheduled election, of the new date for the election, which shall not be later than 60 days from the original schedule.

Corporations cannot be complacent in the face of our economic state to ensure that it tides itself over this situation. Corporations should take advantage of teleconferencing, more so since it is affordable and accessible. COVID-19 adds to the reasons to support teleconferencing, making it a necessity and not just for convenience. Teleconferencing may not be ideal, but it is the safest way to continue business in this pandemic.

Daily Tribune welcomes lawyer Alfred H. Campañano in its roster of columnists. A junior associate at Parker Faustino Pagayatan Law Offices, he specializes in corporate and civil litigation and family law, labor and employment, and criminal prosecution and defense. He is a law graduate of Saint Louis University in Baguio City, where he also earned his undergraduate degree.

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