Salient Provisions of the Revised Corporation Code of the Philippines
On February 20, 2019, President Rodrigo Duterte signed into law the Republic Act (RA) 11232 or the Revised Corporation Code of the Philippines effectively repealing Batas Pambansa (BP) 68 or the Corporation Code of the Philippines. RA 11232 law took effect on February 23, 2019.
RA 11232 introduced many provisions drastically changing the process of organizing corporations, day to day activities, and compliance with regulatory requirements. The more distinct revisions made by the new law are the following:
First, there is no minimum number of incorporators unlike, BP 68 which mandated that the numbers of incorporators should not be less than five (5) [Section 10].
Second, the removal of the minimum number of incorporators also means that a one (1) person corporation can now be organized. In a one-person corporation, the said person/estate/trust who/which organized the same shall be the sole director and president. The impact of this new provision is apparent for people who want to form their own corporation on their own terms without thinking and cooperating with other stockholders.
Third, a corporation organized under the RA 11232 shall now have a perpetual existence (Section 11). BP 68 previously mandated that a corporation shall have a maximum period of only fifty (50) years. This amendment will be a great relief to corporations since they would be no longer in danger of being shut down by the SEC because of the failure to renew their registrations.
Fourth, the participation of stockholders and board of directors remotely in meetings and in absentia through teleconferencing and videoconferencing are now supported in RA 11232. To mention a few of the instances where remote or electronic notices are allowed by RA 11232.
- Notice to stockholders regarding extending or shortening the corporate term.
- Notice to stockholders regarding increasing or decreasing capital stock.
- Notice to stockholders for a meeting regarding the sale of assets.
- Notice to stockholders for a meeting regarding the investment of corporate funds in another business.
- Notice to stockholders regarding regular meetings.
Fifth, RA 11232 allows electronic filing and monitoring systems. Currently, the SEC has a system in place for online registration of corporations, partnerships, and trust. Now, the RA 11232 also mandates that the SEC must develop an electronic system where monitoring of registered entities may be done. This amendment is in line with the new technological developments, particularly, the increased in internet use in the Philippines. As a result, the ease of doing business in the Philippines will be further upgraded by this new and convenient way of establishing and maintaining a corporation.
Sixth, RA 11232 has a provision on electing an emergency director to prevent grave, substantial, and irreparable loss or damage to the corporation in case of a vacancy and the remaining board of directors could not constitute a quorum. This new provision is important to alleviate the difficulty faced by many corporations in cases of a sudden vacancy in the board and a pressing issue involving the corporation needs to be addressed promptly. (Sec. 28)
Written By: Atty. Jon Dominic Peñaranda