Minority stakeholders can now call for special meeting

By Keren Concepcion G. Valmonte

SHAREHOLDERS who own at least 10% of a publicly listed company’s outstanding capital stock for at least a year can call for a special stockholders’ meeting, according to new guidelines issued by the Securities and Exchange Commission (SEC).

In Memorandum Circular No. 7, the SEC said the new rules on the calling of special stockholders’ meetings aim “to promote good corporate governance and the protection of minority investors.”

Timson Securities, Inc. trader Darren Blaine T. Pangan said the new rules “somehow give minority investors a voice that can be heard by the controlling or major stockholders.”

Under the rules, any number of shareholders that hold at least 10% of outstanding shares of a publicly listed company have the right to call for a special stockholders’ meeting, whether in-person or through remote communication.

The shareholders should have held the shares for at least one year. They should send a written call for a special stockholder’s meeting to the board of directors through the corporate secretary at least 45 days before the proposed meeting date.

The document should include names of the qualifying stockholders and the percentage of shares they own respectively; purpose and agenda of the meeting; and proposed time and date.

The special meeting should not be scheduled within 60 days from the previous meeting of a similar nature, which also had the same agenda unless the company’s by-laws allow this. Otherwise, approval from the company’s board of directors will be needed.

The board of directors may also set the special meeting at an earlier date, “if it determines that the matters raised by the qualifying shareholders necessitate a quick resolution to prevent undue damage to the company,” the SEC said.

However, the agenda of the special stockholder’s meeting should not include the removal of a board director and issues that have already been resolved with finality in previous meetings.

If the stockholders’ request for the special meeting does not meet the requirements or is proven to be acted upon in bad faith, the board of directors will have to inform the requesting stockholders within 20 days from receiving the request that the call for a meeting was denied due to their noncompliance.

If the requirements are all met, the company’s board of directors must issue a notice to convene the special stockholders’ meeting at least a week before it is scheduled.

“Delay in the processing of such requests shall be equivalent to refusal if the delay is solely caused by negligence on the part of the corporation,” the SEC said.

Summit Securities, Inc. President Harry G. Liu said the new order is “a good move” to make management more conscious of running listed companies properly, as well as protect investors.

“I always believe that all the shareholders, whether small or big, [are] very important,” Mr. Liu said on a phone call on Sunday.

“If there’s a legitimate reason for the minority to be of concern and the [board] thinks it’s a proper concern, I think it’s but due for the company to hear [them] out,” he added.

Any company executive who denies qualified shareholders their right to call for a meeting may face fines, a permanent cease and desist order, possible suspension or revocation of the corporation’s certificate of incorporation, and dissolution and forfeiture of assets.