Call for special stockholders’ meeting
With the observance of the Holy Week over and done with, most listed and public companies would now be in the thick of preparations for their annual stockholders’ meeting (ASM) this month or the coming months.
It’s a ritual the law requires of corporations so their stockholders can be formally informed of the results of last year’s operations (whether positive or below expectations) and their plans for the rest of the year.
For individual stockholders of the country’s iconic corporations, the ASM is often the only opportunity for them to see and hear in person the corporate bigwigs.
In the past, it was common practice of listed companies to, in addition to sending a formal notice of the ASM to the stockholders, have the notice and agenda published in broadsheets.
The agenda format was usually the “vanilla” type, that is, it simply stated in short phrases the procedure that will be followed and the items that will be taken up for the consideration and approval of the stockholders.
But this time, the published agenda explains in detail those items and includes the accompanying resolutions that the company will ask the stockholders to approve, including orders of the Securities and Exchange Commission (SEC) that requires stockholder approval.
With the advance information, stockholders who may have some questions about the resolutions or want to propose changes in them can get in touch with the corporate secretary ahead of time.
This process helps avoid lengthy discussion on the floor and gives more time for the discussion of any issues that the stockholders may want to take up in the meeting.
The ASM is the traditional means through which the board of directors and management touch base or dialogue with the stockholders, but the law also allows any stockholder to ask that a special stockholders’ meeting (SSM) be called for whatever purpose he or she may have in mind.
Unless the bylaws of the corporation have made provisions for that kind of request, it’s up to the board to decide whether or not to grant it.
The rule, however, is different for publicly listed companies (PLC). In a 2021 memorandum circular, the SEC said stockholders who hold at least 10 percent of PLCs’ outstanding capital stock have the right to call for an SSM under certain conditions.
Notably, only stockholders who have continuously held their shares for a period of at least one year prior to serving notice of that request can avail of that right.
The circular is silent on the rationale behind that ownership holding period. It is reasonable to surmise that the SEC wants to make sure the request is made in good faith and for meritorious reasons.
Incidentally, in the United States, corporate raiders (who also go by the name “predatory stockholders”) buy shares in ailing, but lucrative, companies and then threaten to initiate a proxy war or other disruptive actions unless management buys them out at outrageous prices or pays “greenmail.”
In making the SSM request, the stockholders have to state with sufficient clarity the purpose of their request which must affect their legitimate interests.
Note, however, that the proposed agenda cannot include the following: (a) the removal of a director of the corporation because the law has specific provisions on how that action should be done; (b) matters that have been discussed and resolved in previous stockholders’ meeting; and (c) matters that will be taken up in the next regular or special meeting.
If the request meets the requirements of the circular, the board would be obliged to call the proposed SSM. If it does not, the board has to send a written denial of the request within 20 days from its receipt of the request.
In light of the rather anemic level of stockholder involvement in PLCs, other than corporate stockholders, it remains to be seen whether this right to call SSMs in PLCs outside of the traditional means would accomplish its objective of good corporate governance.
For comments, please send your email to raul.palabrica@inquirer.net.
