In general, a proxy means a person authorized to act or speak for another. In law, a proxy is an agent endowed with authority by the principal to act in the latter’s behalf. In corporations, a proxy has a distinct function, that is, to exercise the voting rights of the stockholder-principal; and this is so provided in the Revised Corporation Code stating that stockholders may vote in person or by proxy in all meetings of stockholders.
Proxy voting has several purposes. It may be availed of by a stockholder who wants to exercise his voting rights but who may not be able to attend the meeting on account of distance, ailment or other commitments. Proxies may also be solicited to attain a quorum which will thus assure the continuance of the meeting to take up for resolution the items in the agenda. Some stockholders may own shares so minimal that they may not be much interested to attend. With proxies executed by them, their shares can be counted in determining whether the required quorum is reached.
Proxy solicitation can also be resorted to for purposes of control and takeover. There can be proxy solicitation from passive or inactive stockholders until sufficient votes are gathered for the nomination and election of directors in the board. The party who initiates such solicitation is usually referred to as a “corporate raider.”
The bylaws of a corporation normally provide the manner for proxy voting and, possibly, even the forms therefor. The law limits the validity of a proxy for a specific meeting. However, a stockholder may authorize its use for meetings over a certain period, but no longer than five years at any one time. The law does not prescribe a specific form for proxies leaving the matter to be provided in the bylaws. The law merely requires that the proxy should be in writing, signed and filed by the stockholder and received by the corporate secretary within a reasonable time before the scheduled meeting.
While the law and principles on proxies appear plain and simple, corporate practice has seen a lot of issues on proxy validity such as the following: (1) defects in the authorization; (2) several proxies received from the same stockholder which conflict with each other; (3) proxies given to two or more persons in the alternative in one instrument; (4) lack of authentication for proxies executed abroad; (5) undated proxies; and (6) proxies issued by “and/or” owners.
To enable the resolution of any of the above issues which may arise before the stockholders’ meeting, the Securities and Exchange Commission (SEC) in its regulations for listed corporations, directs that the notice of stockholders meeting should set the date, time and place for the validation of proxies which should not be less than five days prior to the meeting. Moreover, the SEC requires that a special committee of inspectors should be designated by the board of directors which shall be empowered to pass on the validity of proxies.
Proxy issues, if not resolved at the corporation level, can reach the SEC or the courts. As may be noted, the SEC has the jurisdiction to regulate proxies. It has been clarified by jurisprudence, however, that when the issues relate to the election of the directors to the board, it is the regular courts, and not the SEC, which will have jurisdiction (GSIS vs. The Court of Appeals, et al., G. R. No. 183905, April 16, 2009).
The above comments are the personal views of the writer. His email address is [email protected]