Is a by-law provision required for board meetings via tele/video conferencing call?

A few weeks ago, I wrote about board meetings done through telephone or video conferencing. Such medium has been allowed, under certain conditions, as early as Aug. 9, 2001. The authority had been formalized under SEC Memorandum Circular No. 15, series 2001, promulgated by the Securities and Exchange Commission (SEC) on Nov. 20, 2001.

On Jan. 24, 2002, the Siguion Reyna, Montecillo & Ongsiako Law Offices (SRMO) sent a query to the SEC on whether or not electronic or tape recording is a sine qua non for the validity of tele/video conferencing. SRMO took the position that it should not, citing, among others, the Anti-Wiretapping Act. This law makes it unlawful for any person, not being authorized by all parties to any private communication, to secretly overhear or record such communication by using dictaphone, tape recorder or similar devices. Any communication recorded in violation of the law not only makes the recording inadmissible in evidence, but also exposes the person guilty of the violation to criminal liability.

The SEC responded to the SRMO query in a letter dated May 23, 2002. The corporate watchdog opined that the "recording of the tele/video conference proceedings of the board of directors should be a condition sine qua non" for the validity of the tele/video conferencing." In response to the Anti-Wiretapping argument of SRMO, the SEC pointed out that Circular No. 15 requires the corporate secretary, among others, to send out notices to all the directors in accordance with the by-laws of the company; inquire in said notice whether the directors will attend physically or through tele/video conferencing; and if any director chooses teleconferencing, he shall give notice five days prior to the scheduled meeting to the secretary. Notably, Circular No. 15 requires the secretary of the meeting "to record the proceedings" and "store for safekeeping and mark the tape recording/s and/or other electronic recording mechanism as part of the records of the corporation."

In short, the SEC said that, under SEC Circular No. 15, "all the parties to the board meeting are aware that all the communications are recorded" which means that, unless any of them objects, they are deemed to have given their authority to the recording of the board proceedings by means of tape recording or other electronic recording mechanism.

A disturbing feature of the opinion to the SRMO Law Office is that the SEC has suggested that Circular No. 15 requires "amendment of the corporate by-laws approved by the commission [as] a necessary requisite for video/teleconferencing." No by-law provision, no tele/video conferencing, so to speak.

I patiently went over Circular No. 15 time and again to check whether there is such a requirement. The circular does not prescribe a by-law provision specifically authorizing board meetings via telephone or video conferencing for the validity of the board meeting. I also went over SEC’s letter-opinion dated Aug. 9, 2001, which was the very first SEC opinion that authorized board meetings via telephone or video conferencing. I found no such requirement either.

There may be another SEC opinion requiring a by-law provision specifically authorizing board meetings via telephone or video conferencing before a corporation can conduct board meetings through said medium. I may have missed it despite diligent research and inquiry. Whatever it is, the SEC must clarify this issue once and for all for the guidance of all concerned. A clarification is extremely important because the validity of corporate acts, some of which may run into billions of pesos, may be affected one way or the other.

(The author is a senior partner and the co-managing partner of the Angara Abello Concepcion Regala & Cruz Law Offices or ACCRALAW. He may be contacted at tel: 830-8000)