I wonder of the SEC gave approval to the change in the by-laws? I didn't get my ballot, did any of you? Was the CEO or Board of Directors elected by any of you? This is not a trick question. The following are the rules.
How to amend articles of incorporation
Posted on June 30, 2010 by Hector M. de Leon Jr. • Posted in Commercial Law • Tagged corporation •
After its incorporation, a corporation may wish to make changes to its articles of incorporation. These changes may include, for example, a change in the corporate name, a change in the principal place of business of the corporation, or a change in the number of directors.
The major steps for making changes to the articles of incorporation are:
1. The board of directors approves the amendments in a meeting called for the purpose;
2. The stockholders approve the amendments in a meeting called for the purpose (or in cases allowed by law, by giving their written assent to the amendment);
3. The SEC approves the amendment.
Let’s discuss each of these steps:
1. Approval by the board of directors
Under the Corporation Code, an amendment of the articles of incorporation must be approved by a majority of the board of directors in a meeting called for the purpose (sec. 16). A higher vote requirement may be required in the articles of incorporation/by-laws or pursuant to provisions of special laws.
2. [i]Approval by the stockholders
Under the Corporation Code, an amendment of the articles of incorporation requires the vote or written assent of the stockholders representing at least 2/3 of the outstanding capital stock (sec. 16). A higher vote requirement may also be required in the articles of incorporation/by-laws or pursuant to provisions of special laws.
The Corporation Code provides that the stockholders may approve by “written assent”, meaning that such vote need not be taken at a stockholders’ meeting. In certain cases, the Corporation Code requires a meeting of the stockholders for the approval of an amendment, such as when the amendment consists of extending or shortening the corporate term (sec. 37) or increasing or decreasing the authorized capital stock (sec. 38).
The articles of incorporation is deemed a contract between the corporation and its stockholders. Thus, the Corporation Code provides that holders of non-voting shares will nevertheless be entitled to vote on any proposal to amend the articles of incorporation (sec. 16).
3. Approval by the SEC
The following documents must be submitted to the SEC for the amendment of the articles of incorporation:
(a) the Amended Articles of Incorporation (where changes to the articles are underscored);
(b) a Directors’ Certificate, which is a notarized document signed by the Corporate Secretary and a majority of the directors. The Directors’ Certificate certifies the amendment of the Articles of Incorporation and indicates, among others, the amended provisions, the vote of the directors and the stockholders, and the date and place of the meetings. The SEC requires that the tax identification number of the signatories must be indicated below their names.
Depending on the nature of the provisions amended, the corporation may also need to submit other documents to the SEC. For example, if there is a change in the corporate name, the corporation must also submit a name verification slip. Similarly, there are special documentary requirements for an increase or decrease of authorized capital stock, or the reclassification, declassification or conversion of shares.
The SEC will not allow the amendment of the articles if, among others, the amendment will be contrary to law or is not for a “legitimate purpose” (sec. 16; see sec. 17).
When the SEC is satisfied that the amendment should be allowed, the SEC will issue a certificate indicating its approval. Under the Corporation Code, the amendment shall take effect upon approval by the SEC or from the date of filing with the SEC if not acted upon within 6 months from the date of filing for a cause not attributable to the corporation (sec. 16).
