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Republic Act No.

11232: REVISED CORPORATION CODE One-person corporation


The Old Code required at least five (5) stockholders to form a
President Rodrigo R. Duterte has signed into law The Revised corporation.
Corporation Code of the Philippines, aimed at improving ease of
doing business in the country, affording more protection to Under the New Code, a one person corporation (“OPC”) may now be
corporations and stockholders and promoting good corporate formed by a single stockholder, who may be a natural person, trust
governance. or an estate. However, banks and quasi-banks, pre-need, trust,
insurance, public and publicly listed companies, and non-chartered
The measure, which amended the almost four-decade-old Batas government-owned and controlled corporations may not
Pambansa Blg. 68, forms part of the present administration's incorporate as OPC. Further, as defined, it appears that a juridical
legislative priorities. It aligns with the 10- point economic agenda of entity, such as a corporation, may not be the stockholder in an OPC.
the President, specifically on increasing the economy's
competitiveness and improving the ease of doing business in the Similar to all other corporations, as provided by the New Code
country. (unless a special law requires otherwise), an OPC is not required to
have a minimum capital stock. It does not need to adopt corporate
The New Code aims to improve ease of doing business and by-laws unlike an ordinary corporation. In lieu of the meetings, an
modernize procedures to improve and elevate the standards in the OPC may simply prepare written resolutions, signed and dated by
country’s corporate setting in line with existing international best the single stockholder.
practices. According to Senator Franklin M. Drilon, the principal The single stockholder will act as the president and sole director of
sponsor and author of the Code, the amendments are focused on the OPC. He may also act as its treasurer, upon submission of a bond
“removing barriers hindering the entry of both small and large to the Securities and Exchange Commission (“SEC”) and a written
enterprises into the Philippine market” as it aims to foster smoother undertaking to faithfully administer its funds, disburse and invest
transactions in pursuing business in the Philippines. the same according to its registration. However, he may not act as
its corporate secretary.
Some notable amendments under the Code are: (1) One Person
Corporation; (2) Perpetual Existence; (3) Minimum Capital Stock; (4) It is important to note though that the New Code requires the single
Incorporators, Directors, Trustees, and Officers; and (5) Remote stockholder to prove that the OPC is sufficiently financed, and its
Communication and In-Absentia Voting. assets are independent from his personal property, in order to claim
limited liability. Otherwise, he shall be jointly and severally liable for
Perpetual corporate term the liabilities of the OPC.
Among the notable amendments to the Corporation Code is the __________
grant of a perpetual corporate term for existing and future The Revised Corporation Code also allows for the formation of one-
corporations unless provided otherwise in their articles of person corporation, a corporation with a single stockholder and
incorporation. without a minimum authorized capital stock required. Forming a
one-person corporation instead of a corporation with several
Allowing corporations to exist beyond the 50-year term provided stockholders and a board of directors allows for more flexibility in
under the old Code will eliminate the possibility of legitimate and pursuing business because the lone stockholder can make decisions
productive businesses prematurely closing down only because they without having to seek board consensus.
failed to renew their registration. It will also foster a sense of
longevity that can translate to long-term and sustainable projects It also affords greater protection to the stockholder by limiting
and investments. liability to the corporate entity. In contrast, the old Code required at
least five stockholders in the formation of corporations.
As part of the shift to a perpetual corporate term, the Revised
Corporation Code mandated the SEC to allow corporations with Emergency board
expired registration papers to apply for the revival of their corporate Another salient feature of the Revised Corporation Code is the
existence together with all the rights and privileges under their provision for an emergency board when a vacancy in a corporation's
certificates of incorporation. board of directors prevents the remaining directors from
constituting a quorum and consequently from making emergency
PERPETUAL EXISTENCE actions required to prevent grave, substantial and irreparable loss or
Under the Old Code, a corporation has a term limit of 50 years, damage.
unless extended. Its existence is deemed dissolved upon expiration
of the term. In such situations, the vacancy may be temporarily filled from
Under the New Code, the default rule is that a corporation shall among the officers of the corporation by a unanimous vote of the
have perpetual existence, unless otherwise specified in the Articles remaining directors or trustees. The corporation must then notify
of Incorporation. As transition, corporations existing prior to the the Commission within three days from the creation of the
effectivity of the New Code shall have a perpetual term unless the emergency board. The action by the designated director or trustee
corporation, upon the required vote of its stockholders, notifies the shall be limited to the emergency action necessary, and his or her
SEC that it elects to retain its specified term. term shall cease within a reasonable time from the termination of
In this connection, the New Code incorporates a “Lazarus” provision the emergency or upon the election of the replacement director or
which allows the revival of a corporation whose term has expired by trustee.
filing an application with the SEC. Upon approval, the corporation
shall be deemed revived together with all the rights and privileges Alternative dispute resolution
under its certificate of incorporation and subject to all of its duties, The Revised Corporation Code also allows corporations to adopt
debts, and liabilities existing prior to its revival, giving it perpetual alternative dispute resolution mechanisms for intra-corporate issues
existence unless otherwise specified. except those involving criminal offenses and interests of third
parties.
Existing corporations affected by certain provisions of the New Code
An arbitration agreement may be provided in the articles of are given a period of two (2) years from its effectivity within which
incorporation or bylaws of a corporation. To be enforceable, the to comply with the requirements thereon.
arbitration agreement should indicate the number of arbitrators and With the aforementioned significant changes introduced under the
the procedure for their appointment. The power to appoint the New Code, we anticipate that the SEC will issue supplemental
arbitrators forming the arbitral tribunal shall be granted to a regulation specifying the requirements and detailed procedure to
designated independent third party. comply with its provisions.

Should the third party fail to appoint the arbitrators in the manner MINIMUM CAPITAL STOCK
and within the period specified in the arbitration agreement, the The Old Code required that at least 25% of the authorized capital
parties may request the Commission to appoint the arbitrators. In stock must be subscribed, and at least 25% of the total subscription
any case, arbitrators must be accredited or must belong to must be paid by the stockholders, provided that the minimum paid-
organizations accredited for the purpose of arbitration. up capital shall not be lower than Php5,000.00.

Electronic filing and monitoring system The New Code removed the aforementioned 25% subscription,
As part of efforts to improve ease of doing business in the country, payment and minimum paid-up capital requirements. The New Code
the Revised Corporation Code mandated the Commission to develop states that “stock corporations shall not be required to have a
and implement an electronic filing and monitoring system. minimum capital stock, except as otherwise specifically provided by
special law.”
The SEC is mandated to promulgate rules to facilitate and expedite,
among others, corporate name reservation and registration, INCORPORATORS, DIRECTORS, TRUSTEES, AND OFFICERS
incorporation, submission of reports, notices, documents required The New Code removed the minimum number of incorporators,
under the Code, and sharing of pertinent information with other directors and trustees, which stood as five (5) under the Old Code.
government agencies. Section 10 of the New Code states that “any person, partnership,
association or corporation, singly or jointly with others but not more
So far, the Commission has implemented a fully automated and than fifteen (15) in number, may organize a corporation for any
online company registration system for the pre-processing of lawful purpose or purposes.” It appears that the New Code allows
corporations and partnerships, licensing of foreign corporations, juridical persons to act as incorporators unlike the Old Code which
amendments of the articles of incorporation and other corporate limits incorporators to natural persons.
applications requiring its approval.
Moreover, the New Code reiterated the requirement to elect
Participation via remote communication, in absentia independent directors in corporations vested with public interest
To ensure optimal stockholder participation, meanwhile, the Revised such as: (a) public companies, (b) banks and quasi-banks, non-stock
Corporation Code will allow the use of remote communication such savings loan associations, etc., and (c) other corporations as may be
as such as videoconferencing and teleconferencing during determined by the SEC. The independent directors shall constitute
stockholder meetings. Stockholders may also participate and vote in at least 20% of the entire board membership.
absentia.
The New Code also allows the creation of an “emergency board”
The Commission shall issue the rules and regulations governing when the vacancy in the board prevents the remaining directors
participation and voting through remote communication or in from constituting a quorum and emergency action is required to
absentia, taking into account the company's scale, number of prevent grave, substantial, and irreparable loss or damage to the
shareholders or members, structure, and other factors consistent corporation. During an emergency, the remaining directors or
with the protection and promotion of shareholders' or members' trustees may fill the vacancy temporarily from among the officers of
meetings. Directors or trustees may also participate and vote in the corporation to pass the necessary emergency action.
regular and special meetings through remote communication.
However, they cannot join or cast their votes by proxy at board Section 24 of the New Code retained the officers and its
meetings. qualifications under the Old Code, except for the treasurer, who is
now required to be a resident of the Philippines. In addition,
"Collectively, the amendments are aimed at encouraging corporations vested with public interest are now obliged to appoint
entrepreneurship and the formation of new businesses, improving a compliance officer.
the ease of doing business in the country, promoting good corporate
governance, increasing protection afforded to corporations and
stockholders, and deterring corporate abuses and fraud," Mr.
Aquino noted.
___________
REMOTE COMMUNICATION AND IN ABSENTIA VOTING
Following the concept of allowing board meetings by way of
videoconferencing, teleconferencing, or other alternative modes of
communication which have been made explicit under the New Code,
the New Code took a step further by allowing stockholders or
members to exercise their right to vote through remote
communication or in absentia when authorized under the by-laws,
subject to the rules and regulations to be issued by the SEC. With
this amendment, it appears that the stockholders and members
need not be physically present or represented by proxies in
meetings, as required in the past.
The Revised Corporation Code otherwise known as “The Securities Regulation Code”; being
(Republic Act No. 11232, February 20, 2019) found administratively liable for any offenses involving
fraudulent acts; and being found liable by foreign court or
 Introduction of a new corporate vehicle – the one-person equivalent foreign regulatory authority for acts, violations or
corporation (OPC). Under the new law, a single shareholder, misconduct similar to those enumerated in paragraphs (a) and
who may be an individual, a trust or an estate may form an (b) of the new Section 26. The five-year limit on the violation of
OPC. The single stockholder becomes the sole director and the Corporation Code has been removed. The SEC or the
president of the OPC. However, banks and quasi-banks, Philippine Competition Commission may also provide additional
preneed, trust, insurance, public and publicly-listed companies, qualification and disqualification of directors, trustees and
and non-chartered government-owned and –controlled officers.
corporations may not incorporate as an OPC.
 Removal of Directors. A disqualified director or trustee can be
 Requirement for incorporators. RCC now allows one (1) person removed by the SEC motu propio (on its own initiative) or upon
to register a business as a corporation by oneself, thus, a verified complaint, and after due notice and hearing. The SEC
removing the requirement of minimum 5 incorporators. may also impose sanctions on directors or trustees who failed
Moreover, while the old Corporation Code required to remove the disqualified director or trustee despite their
incorporators to be natural persons, the RCC provides that knowledge of the disqualification.
incorporators may be any person, partnership, association or
corporation.  Emergency boards. When vacancy prevents the remaining
directors from constituting a quorum and there is a need for
 Removal of the maximum 50-year corporate term. Corporations emergency action to prevent damage to the corporation, the
shall now have perpetual existence unless their Articles of remaining directors may fill up the vacancy from among the
Incorporation provide otherwise. Even corporations existing officers of the corporation by unanimous vote of the remaining
prior to the effectivity of the RCC shall have perpetual directors or trustees. However, the action by the designated
existence, unless majority of the stockholders elect to retain director or trustee shall be limited to the emergency action
the specific corporate term in their articles of incorporation. necessary, and the term shall cease within a reasonable time
from the termination of the emergency or upon election of the
 Revival of existence. A corporation whose term has expired may replacement, whichever comes earlier. A notification for the
apply for revival of corporate existence. Upon approval by the creation of emergency board must be done with SEC within 3
SEC, the corporation shall be deemed revived and shall also be days from creation of the emergency board.
deemed to have perpetual existence, unless its application for
revival provides otherwise.  Compensation of Directors/Trustees. The RCC now requires the
submission to the shareholders and SEC of an annual report on
 Issuance of no-par value shares of stocks. The corporations not the total compensation of each director or trustees.
allowed to issue no-par value shares now include preneed
corporations and other corporations authorized to obtain or  Dealings of Directors, Trustees or Officers with the
access funds from the public. The restriction applies to the Corporation. Limitation on the dealings of directors, trustees or
covered corporations, whether publicly listed or not. officers with the corporation now includes contracts with the
corporation of their spouses and relatives within the fourth civil
 Removal of subscribed and paid-up capital requirements. The degree of consanguinity or affinity. Such contracts are voidable
RCC removed the requirement of 25%-25% subscription and unless all the requirements and conditions set forth in Sec. 31
paid-up capitalization requirement, except as specifically of the Revised Corporation Code are complied.
provided in special laws.
 Donations to Political Party/Activity. Domestic corporations are
 Right to vote by stockholders/members. The stockholders or now allowed to give donations in aid of any political party or
members may now exercise their right to vote via remote candidate or for purposes of partisan political activity. Under
communication or in absentia (previously through presence or the RCC, only foreign corporations are not allowed to give
representative only). A stockholder or member who political donations.
participates via remote communication or in absentia shall be
deemed present for purposes of quorum. Rules and regulations  Mode of Notices to Stockholders. Electronic sending of notices
governing this shall be issued by SEC. for stockholder’s meetings is now allowed provided the same is
provided in the by-laws and in accordance with SEC’s rules on
 Officers. The RCC now requires the treasurer to be a resident of the use of electronic messages.
the Philippines. While corporations vested with public interest
must elect a compliance officer.  Regular and special meetings of stockholders/members. If date
for the annual stockholders’ meeting is not fixed, it may be held
 Board of Directors/Trustees. Corporations vested with public on any date after April 15 of every year (previously any date in
interest are now required to have independent directors April only). Written notices must be sent to stockholders not
constituting at least twenty percent (20%) of the board. later than 21 days prior to the meeting.
Trustees shall be elected for a term not exceeding three (3)
years.  Consideration for Stocks. Shares of stock in another corporation
and other generally accepted form of consideration are now
 Disqualification of Directors, Trustees or Officers. The RCC considered acceptable consideration for the issuance of stocks.
provided additional grounds for disqualification of directors,
trustees, and officers of a corporation: violating RA 8799,
 Financial Statements. Financial statements of corporations with
total assets or total liabilities amounting to less than P600,000
or such other amount as may be determined by DOF, is now
not required to be certified by an independent auditor. It may
just be certified under oath by the treasurer and the president
of the corporation.

 Merger or Consolidation. Additional information such as the


carrying amounts and fair values of the assets and liabilities of
the parties to the merger or consolidation as of the agreed cut-
off date, method of merger or consolidation of accounts, and
provisional or pro-forma values as merged or consolidated, are
now required to be included in the articles of merger or
consolidation.

 Trustees. Non-stock corporations vested with public interest


are now required to have independent trustees who are not
members of the non-stock corporation.

 Dissolution. For voluntary dissolutions where no creditors are


affected, the RCC now requires only a majority vote of the
board of directors and the vote of the stockholders owning at
least majority of the outstanding capital stock. Previously,
affirmative votes of stockholders owning 2/3 of the outstanding
capital stock are required.

However, the RCC added strict requirements for dissolution such as


the need for a verified request for dissolution, stating: the reason for
the dissolution; the form, manner, and time when notices were
given; names of those stockholders and directors who approved the
dissolution; date, place and time of the meeting in which the vote
was made; and the details of publication.

 Securities deposit of branches. The required initial minimum


actual market value of securities deposit of branches was
increased from P100,000 to P500,000. Also, under the RCC,
within six months from the close of the fiscal year of the
branch, it is required to deposit additional securities equivalent
in actual market value to two percent (2%) of the amount by
which the branch’s gross income for the fiscal year exceeds P10
million (previously P5 million). Deductions from gross income in
accordance with SEC rules, shall be allowed in computing the
securities deposit amount.

 Penal Provisions. While the old Corporation Code only has one
penal provision (Section 144), the RCC added an entire title
on “Investigations, Offenses and Penalties”. The title provides
penal provisions for violations of the RCC.