Benefits Of The Revised Corporation Code To The Philippines
In these recent years, Philippines is one of the developing countries in the whole world and though we are ‘developing’, it seems that our motherland is still falling on the scale of the global competitiveness and the introduction and signing of Republic Act No. 11232 or otherwise known as the Revised Corporation Code of the Philippines (the ‘New Code) on February 20, 2019 by the current President of the Philippines, President Rodrigo Roa Duterte, appears to be one of the stepping stone for the country to climb its way on one of the top in the business world and welcome development and modernization in the country.
According to Senator Franklin M. Drilon, the principal sponsor and author of the code, the new code will focus on removing barriers that hinders the entry of both small and large enterprises into the Philippine market because the new code aims to ease doing business transaction and to modernize the procedure to improve the country’s corporate setting in line with the existing international practices.
Since the code is effective three days after it is signed, changes are expected that alter the rules for establishing and maintaining a corporation. Some of the notable changes are the following.
- One-Person Corporation (OPC). Since the Revised Code removes the minimum number of incorporators required to establish a corporation, OPC come into existence, in which a single stockholder can already form a corporation, who may be a natural person, trust or an estate provided that he/she is sufficiently financed and its assets are independent from his personal property in order to claim limited liability because if not, he/she will be liable for all liabilities of the One-Person Corporation. And additional, that single stockholder is the President and Director of the OPC and he/she can act as a treasurer but not as a corporate secretary. Unlike in the old code, which requires a minimum of five incoporators but not more than fifteen to form a corporation.
- Perpetual existence. Under the old code, a corporation has a term limit of 50 years and subject to renewal, but in the new code, a corporation has a perpetual existence unless the Article of Incorporation filed declares otherwise.
- Revival of corporation whose term had already expired. This change is in connection with the Corporation’s perpetual existence which paves the way for that corporation whose term had already expired to revive the corporation by filing an application with the Securities and Exchange Commission (SEC). Upon approval, the corporation shall be deemed revived together with all the rights and privileges under its certificate of incorporation.
- Removal of minimum capital stock requirement. The old code prescribes that at the time of incorporation, at least twenty-five percent of the authorized capital stock as stated in the articles of incorporation must be subscribed and at least twenty-five percent of the total subscription must be paid upon subscription, provided that the minimum paid-up capital shall not be less than five thousand pesos. The Revised Code removes this requirement and states that ‘stock corporations shall not require to have a minimum capital stock, except as otherwise specifically provided by special law.”
- Extended period to commence corporate operation. A corporation is now allowed to commence its operation after five years from the date of its incorporation while the old code had only allowed two years.
- Delinquent corporation. A corporation that is inoperative for at least five years may now be placed by the SEC under delinquent status. A delinquent corporation is given two years to resume its operation but if they failed to do so, the SEC will revoke the certificate of incorporation.
- Lifting the ban on corporate donations for political parties or candidates. The Revised Code amends Section 36(9) of the Old Code, which stated that no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity. The Revised Code now expressly bans only foreign corporations from giving such donations.
- Emergency board. This emergency board is developed so that such issue such as the required quorum to start a meeting due to unplanned vacancies of absences of some of the members and the board may be filled provided that a corporation immediately informed the SEC of its creation not more than three days.
- Changes in corporate officer title. Chief Executive Officer is made the alternative title to President and Chief Financial Officer is made the alternative title to Treasurer. Also, the inclusion of Compliance Officer as a mandatory corporate officer on top of the President/CEO, Treasurer/CFO, and a corporate Secretary.
- Electronic filing and monitoring system. The new code take into consideration the existence of technological advances that make way to electronic filing and monitoring unlike in the old code that was enacted before the online age or even before the widespread of technology that requires manual application. It allows online processing of corporations and partnerships, licensing of foreign corporations, amendments of the article of incorporation and other corporate applications requiring the approval of SEC.
- Electronic Notices. The New Code allows the written notices to be sent online to the stockholders of the company through e-mail or other form of electronic app prescribes by the SEC.
- Remote Participation. The Revised Code now allows members of the board of directors or trustees of every corporation to participate in meetings through remote communication such as video conferencing, teleconferencing or other alternative modes of communication that allow them reasonable opportunities to participate. Stockholders or members may also be allowed to vote during stockholders meetings through remote communication or in absentia, but only if the corporate bylaws authorize voting through such means.
Section 49 of the Revised Code requires the SEC to issue the rules and regulations governing participation and voting through remote communication or in absentia, among others – that were not recognized in the old corporate law.
Taking everything into consideration, I am pleased that the government do something with the old code of the corporation because the amendments made to the 38-years-old corporation code makes the Philippines a more attractive market in which to operate. The changes to its corporate governance standard would make business transaction easier for business owners and foreign investors to register their new business in the Securities and Exchange Commission (SEC) making the economy more competitive with the rest of the world. I am hoping that aside form smooth transaction in doing business in the Philippines, this Revised Corporation Code will reap a positive result that will benefit both local business community and foreign investors. I am expecting that the simplification of the corporate governance standards (as mentioned above) will establish a more business-friendly environment that would help corporations to thrive and will also open more opportunities to its country’s citizen.
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