DEVICES AFFECTING CONTROL

PROXY
Sec. 58. Proxies- Stockholders and members may vote in person or by
proxy in all meetings of stockholders or members. Proxies shall be in
writing, signed by the stockholder or member, and filed before the
scheduled meeting before the corporate secretary. Unless otherwise
provided in the proxy, it shall be valid only for the meeting for which
it is intended. No proxy shall be valid and effective for a period
longer than five (5) years at any one time.

Definition
The term proxy may be used to designate the authority given by the owner of
holder of the stock, who has a right to vote it, or by a member, as principal,
to another person, as agent, to exercise the voting rights of the former. The
term is also used to refer to the holder of the authority or person authorized
by an absent stockholder or member to vote for him at a stockholders or
members meeting or the instrument which evidences the authority of the
agent. A proxy is thus a special form of agency.

Purpose and Use of Proxies

A proxy may be used in any kind of corporation as a device of control. It is
useful in widely held corporations where the stockholders are numerous and
widely dispersed. Proxies assure the presence of quorum in meetings of
stockholders of larger corporations. It enables those who do not wish to
attend a stockholders meeting to protect their interests by exercising their
right to vote through a representative.

Proxy as a form of agency

A proxy is a special form of agency and the proxy is an agent and fiduciary.
The proxy is an agent of the stockholder, clothed with the authority to
exercise the latters rights. As the stockholders agent, the proxy must vote in
accordance with the instructions given him by the stockholder. Consequently,
since an agency is essentially revocable, a proxy is in essence revocable.

Kinds of proxy
According to duration, as recognized by Section 58, a proxy may either be a
specific proxy wherein the authority granted is only for a specific meeting or

a continuing proxy wherein the authority given is to represent the

stockholders at any and all regular or special stockholders meetings for a
fixed or definite period until the stockholder revokes the same.
Proxies depending on the authority conferred may also be a general proxy
which confers a general discretionary power to attend and vote at annual
meetings as well as exercise all powers of the stockholder or member as if he
were personally present; or a limited proxy which restricts the authority to
vote to specified matters only and may direct the manner in which the vote
shall be cast.

Form and execution of proxies

Section 58 of the Corporation Code provides that Proxies shall be in writing,
signed by the stockholder or member, and filed before the scheduled meeting
before the corporate secretary.
Section 20.2 of the Securities Regulation Code similarly provides that Proxies
must be in writing, signed by the stockholder or his duly authorized
representative and filed before the scheduled meeting with the corporate
secretary.
There is a presumption of regularity of proxies. As a rule, they shall be
accepted if they have the appearance of prima facie authenticity in the
absence of a timely and valid challenge and are signed as the names appear
in the record of the corporation. No particular form or words are necessary to
constitute a proxy or extend the authority thereof. All that is necessary is that
it shall be in writing, signed by the stockholder or member and shall show an
intention to empower the person to whom it is given to act as an agent in
voting the stock so as to enable the election officers to know who is
authorized.

Limitations on Proxies of stockholders or members

Section 58 of the Code states that Proxies shall be in writing, signed by the
stockholder or member and filed before the scheduled meeting with the
corporate secretary.
Oral proxies are therefor, not valid. The proxy is also generally valid only for
the meeting for which it is intended and a continuing proxy must be for a
period not exceeding five (5) years. The Corporation Code also requires the
filing of the proxy with the corporate secretary before the stockholders
meeting. Generally, proxies may be submitted before the meeting. A
restriction as to the deadline may be provided for but the same must be in in
the articles of incorporation or by-laws. The corporation, actiong through its
board may not, through a resolution, fix such deadline.

Section 25 of the Code also prohibits directors or trustees to attend or vote

by proxy at board meetings.

By-law restrictions on the right to vote by proxy

The by-laws of stock corporations may impose reasonable restrictions on the
right to vote by proxy so long as the restrictions do not conflict with the law
or deprive the stockholder of the right given them. Restrictions on the right to
vote by proxy shall be void where they operate unjustly unreasonably and
oppressively so as to work the disenfranchisement of a majority of the legal
voters.

Who may be a proxy

Since the appointment of proxy is purely personal and the right to vote is
inseparable from the right of ownership of stock, a proxy to vote, to be valid,
must have been given by the stockholder himself or his duly authorized
representative.
Section 58 imposes no limitation as to who may be appointed as proxy.
Hence, a stockholder or member may appoint any person he sees fit to
represent him. Any person appointed by the stockholder may act as proxy.
The same person may act as proxy for one or several stockholders or
members.

Proxy given to two or more persons

A proxy in favor of several persons is presumed by the action of the majority
to represent the givers will. The dissenting minority of them cannot withdraw
and break up the quorum and meeting to effectuate their dissent. A proxy
however, may be revoked when it runs to several proxies who cannot agree
on a vote.
Where a proxy is given to three (3) proxies in one instrument, the three must
agree upon the vote. In case of conflict, the rule of majority governs.
Where two or more persons are designated in the alternative, the alternate
proxy can act as proxy in the event of non-attendance of the other
designated person.
Where the corporation receives more than one proxy from the same
stockholder and they are all undated, the postmark or electronic date shall be
considered.

Who may give a proxy

The right to vote is inseparable from the right of ownership of stock. A proxy
to vote stock must be given by the person who is the legal owner of the stock
and who must be entitled to vote at the time it is to be voted.
In the case of joint owners, the consent of all shall be necessary unless there
is a written proxy signed by all authorizing one or some of them to vote such
shares. When the shares are owned in an and/or capacity, any one of the
joint owners can vote said shares or appoint a proxy.
Minors cannot give proxy unless emancipated. Where the books of the
corporation bear only the minors name and address without indication of the
fact of minority, the minor can give a proxy which will be deemed prima facie
valid.
Where stock is registered in the corporate name, the proxy for the stock, if
executed in the most formal way, should be signed in the corporate name by
the president or vice president with his own name signed and capacity
indicated beneath the corporate name, and attested by the corporate
secretary or an assistant secretary. If a person other than the president or
vice- president or person authorized to do so under the by-laws signs the
proxy, he must be authorized through board resolution and a special power of
attorney. The rules on corporations apply to partnership.

Duration of proxy
The Code states: Unless otherwise provided in the proxy, it shall be valid
only for the meeting for which it is intended. No proxy shall be valid and
effective for a period longer than five (5) years at any one time. The proxy
may fix the duration during which it may be used but it cannot exceed five
(5) years. Where the proxy does not fix any period, it expires after the
meeting for which it was intended and cannot be used again for a subsequent
meeting unless renewed.
A proxy may be renewed for not more than five (5) years for each renewal.

Denial of righto vote by proxy

In stock corporations, the appointment of proxy is purely personal and an
incident of ownership. Hence, a denial of the right to vote by proxy by the
stockholders is contrary to law and thus, null and void.
On the other hand, in non-stock corporations, the right to vote by proxy may
be denied to members in the articles of incorporation or by-laws.
Section 89 of the Corporation Code provides that The right of the members
of any class to vote may be limited, broadened or denied to the extent
specified in the articles of incorporation or the by-laws. Unless so limited,

broadened or denied, each member, regardless of class, shall be entitled to

one vote.
Unless otherwise provided in the articles of incorporation or the by-laws, a
member may vote by proxy in accordance with the provisions of this Code.
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Revocation of proxies
A proxy is revocable at the will of the stockholder even though it is expressly
stated to be irrevocable unless coupled with interest. Revocation of proxy
may be express or implied through formal notice, orally or by conduct.
Revocation may be made by appearance of the giver to vote. However, mere
presence does not automatically revoke the proxy. The proxy is revoked only
if the stockholder himself votes.
As a general rule, the execution of a new proxy revokes the former without
the necessity of informing the attorney-in-fact. The later filing of the new
proxy is in itself notice of the revocation of the earlier proxy. The last proxy
given is deemed a revocation of all previous proxies.
Where the proxy is coupled with interest, it is irrevocable. It is said to be
coupled with interest where the proxy has already parted with value or
incurred liability at the stockholders request. The proxy is irrevocable even
though such irrevocability is not so stated and such is irrevocable for the
period fixed therein which shall not exceed five years.
At the end of the five year term, the proxy automatically loses its effectivity
whether it is coupled with interest or not.

Proxy Solicitation

Section 20 Proxy Solicitations.- 20.1 Proxies must be issued and proxy

solicitations must be made in accordance with rules and regulations to be
issued by the Commission.
20.2 Proxies must be in writing signed by the stockholder or his duly
authorized representative and filed before the scheduled meeting with the
corporate secretary.
20.3 Unless otherwise provided in the proxy, it shall be valid only for the
meeting for which it was intended. No proxy shall be valid and effective for a
period longer than five(5) years at one time.
20.4 No broker or dealer shall give any proxy, consent or authorization, in
respect of any security carried for the account of a customer, to a person

other than the customer, without the express written consent of such
customer.
20.5 A broker or dealer who holds or acquires the proxy for atleast ten per
centum (10%) or such percentage as the Commission may prescribe of the
outstanding capital share of the issuer, shall submit a report identifying the
beneficial owner within ten (10) days after such acquisition, for its own
account or customer, to the issuer of security, to the Exchange where the
security is traded and to the Commission.

Proxy solicitation involves the securing and submission of proxies, while proxy
validation concerns the validation of such secured and submitted proxies.
(GSIS vs. Court of Appeals), 585 SCRA 679 [2009]. )

Jurisdiction of SEC on proxies

The Securities and Exchange Commission has the power to regulate proxies.
However, an exception to such power is the power to pass upon the validity
of proxies in relation to election controversies.
According to the case of GSIS vs. Court of Appeals (G.R. No. 183905; 2009),
Under Section 5(c) of Presidential Decree No. 902-A, in relation to the SRC,
the jurisdiction of the regular trial courts with respect to election-related
controversies is specifically confined to controversies in the election or
appointment of directors, trustees, officers or managers of corporations,
partnerships, or associations. Evidently, the jurisdiction of the regular courts
over so-called election contests or controversies under Section 5(c) does not
extend to every potential subject that may be voted on by shareholders, but
only to the election of directors or trustees, in which stockholders are
authorized to participate under Section 24 of the Corporation Code.
This qualification allows for a useful distinction that gives due effect to the
statutory right of the SEC to regulate proxy solicitation, and the statutory
jurisdiction of regular courts over election contests or controversies. The
power of the SEC to investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters unrelated to the
cases enumerated under Section 5 of Presidential Decree No. 902A. However, when proxies are solicited in relation to the election of corporate
directors, the resulting controversy, even if it ostensibly raised the violation

of the SEC rules on proxy solicitation, should be properly seen as an election

controversy within the original and exclusive jurisdiction of the trial courts by
virtue of Section 5.2 of the SRC in relation to Section 5(c) of Presidential
Decree No. 902-A.