Philippines

Screen Shot 2019-04-12 at 4.42.23 PMBy Renz J Pagayanan, ACCRA Law

 

 

On February 20, 2019, President Rodrigo Duterte signed into law Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines (the New Code), which may be considered as a landmark legislation updating the 38-year-old Corporation Code of the Philippines (the Old Code) to adjust to modern times.

Some notable amendments under the Code are: (1) One-person corporation; (2) perpetual existence; (3) minimum capital stock; (4) incorporators, directors, trustees and officers; and (5) remote communication and in-absentia voting.

One-person corporation

The Old Code required at least five stockholders to form a corporation.

Under the New Code, a one-person corporation (OPC) may now be formed by a single stockholder, who may be a natural person, trust or an estate. However, banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and non-chartered government-owned and controlled corporations may not incorporate as OPCs. Further, as defined, it appears that a juridical entity, such as a corporation, may not be the stockholder in an OPC.

Similar to all other corporations, an OPC is not required to have a minimum capital stock. It does not need to adopt corporate by-laws unlike an ordinary corporation. In lieu of the meetings, an OPC may simply prepare written resolutions, signed and dated by the single stockholder.

The single stockholder will act as the president and sole director of the OPC. He may also act as its treasurer, upon submission of a bond to the Securities and Exchange Commission (SEC) and a written undertaking to faithfully administer its funds, disburse and invest the same according to its registration. However, he may not act as its corporate secretary.

Perpetual existence

Under the Old Code, a corporation has a term limit of 50 years, unless extended. Its existence is deemed dissolved upon expiration of the term.

Under the New Code, the default rule is that a corporation shall have perpetual existence, unless otherwise specified in the Articles of Incorporation. As transition, corporations existing prior to the effectivity of the New Code shall have a perpetual term unless the corporation, upon the required vote of its stockholders, notifies the SEC that it elects to retain its specified term. The New Code also allows the revival of corporation whose term has expired by filing an application with the SEC.

Minimum capital stock

The New Code removed the 25 percent subscription, payment and minimum paid-up capital requirements provided under the Old Code. The New Code states that “stock corporations shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law”.

Incorporators, directors, trustees and officers

The New Code removed the minimum number of incorporators, directors and trustees, which stood as five under the Old Code.

Section 10 of the New Code states that “any person, partnership, association or corporation, singly or jointly with others but not more than 15 in number, may organise a corporation for any lawful purpose or purposes”. It appears that the New Code allows juridical persons to act as incorporators unlike the Old Code which limits incorporators to natural persons.

Moreover, the New Code reiterated the requirement to elect independent directors in corporations vested with public interest as may be determined by the SEC. The independent directors shall constitute at least 20 percent of the entire board membership.

The New Code also allows the creation of “emergency board” when the vacancy in the board prevents the remaining directors from constituting a quorum and emergency action is required to prevent grave, substantial, and irreparable loss or damage to the corporation.

With respect to corporate officers, Section 24 of the New Code now requires the treasurer to be a resident of the Philippines, and corporations vested with public interest to appoint a compliance officer.

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 a remote communication or in absentia when authorised 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 which is required in the past.

Existing corporations affected by certain provisions of the New Code are given a period of two years from its effectivity within which to comply with the requirements thereon.

With the aforementioned significant changes introduced under the New Code, we anticipate that the SEC will issue supplemental regulation specifying the requirements and detailed procedure to comply with its provisions.

 

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.

(Note: This article first appeared in Business World, a newspaper of general circulation in the Philippines.)

 

ACCRALAW LOGO

 

 

 

 

 

W: www.accralaw.com

E: rjpagayanan@accralaw.com

T: (632) 830 8000

Related Articles by Firm
Developments in the Philippine Competition Commission’s enforcement activities
Early this year, the Philippine Competition Commission (PCC) Enforcement Office launched a leniency/whistleblower programme offering immunity from suit and reduction of fines to cartel members who will provide information that will help the PCC investigate and prosecute cartels ...
Revisiting the AMLA in light of transnational money laundering
For several decades, money laundering has extended the reach of transnational organised crime throughout various nations ...
Revisiting important concepts in arbitration
Philippine courts are keen on making arbitration and other modes of ADR the staple in settling disputes domestically.
Keeping your mobile number for a lifetime
A new law facilitates the easy movement of subscribers from one service provider to another.
The right to know: Freedom of information in the Supreme Court
Like all other rights, the “right to know” is not an absolute right.
The Philippines 11th Foreign Investment Negative List and its impact on online businesses
A more liberalised foreign participation may change the internet-based business landscape in the Philippines ...
The Philippine Competition Commission bares its teeth
For the first time since its inception in 2015, the Commission has blocked a merger after conducting its review.
Philippines: Protecting indigenous knowledge systems and practices in intellectual property rights registration
Indigenous peoples (IPs) and indigenous cultural communities (ICCs), though explicitly protected under the constitution itself, sadly remain one of the most marginalised and forgotten sectors in Philippine society ...
Philippines: The right to know – Freedom of information in the Supreme Court
Freedom of Information is a right enshrined in our fundamental law ...
Investments for the environment
In a recent report released by the leading international body for assessment of climate change, the UN Intergovernmental Panel on Climate Change (UN IPCC), established a target global warming limit of 1.5°C ...
The PCC’s Joint Venture Guidelines
The Philippine Competition Commission must strive to strike a balance ...
How the Mental Health Act affects employees
Mental health conditions, which include anxiety and panic disorders, depression, eating disorders, substance abuse and addictions, have become a pervasive issue which permeates our present society ...
The Ease of Doing Business Act tapers red tape
RA 11032 is a welcome step towards achieving the quality government services that Filipinos deserve.
Much EndO about nothing
President Duterte says he has put an end to the “Endo” or the practice of engaging employees on a contractual basis. But has he?
Philippines: Proposed rules and regulations on crowdfunding
Crowdfunding (CF) platforms have proven to be a popular way to solicit charitable donations and to raise funds for projects or business ventures ...
Virtual currency in the Philippines: Recognition and regulation
Bitcoin is essentially a virtual currency (VC), which is any type of digital unit that is used as a medium of exchange — a veritable currency that exists in the digital world. Since it is electronic currency, VC is easily transferable ...
Protection of women employees in the Philippines
According to the World Economic Forum’s Global Gender Gap (GGG) Report conducted in 2016, the Philippines is the most gender-equal country in the Asia-Pacific region, having closed nearly 79 percent of its gender gap ...
Anti-Trust & Competition: Philippines - Towards robust yet balanced competition in the Philippines
The state of Philippine competition regulation has been slowly taking shape barely over two years after the passage of the Philippine Competition Act (RA 10667) ...
PHILIPPINES: The internet and doing business in the Philippines
Earlier this year, the Philippines Securities and Exchange Commission (SEC) issued an opinion stating that an online gaming system with absolutely no physical presence in the Philippines shall be considered as “doing business” in the Philippines and was thus required ...
Philippines: Psychological disorders in the workplace
The problem of mental health presents a particular conundrum under labour relations and standards ...
Clarifying the role of contractors and subcontractors
Recent changes to labour laws in the Philippines attempt to clarify the status of contractors and subcontractors in certain industries ...
Fake news and its web of legal issues in the post-truth era
Oxford Dictionaries’ Word of the Year for 2016 is “post-truth” — an adjective defined as “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. ...
Dollar-denominated securities in relation to Corporation Code’s provisions on capital
The Philippines Stock Exchange (PSE) issued rules on December 2, 2016 governing the listing, trading and settlement of US dollar-denominated securities (DDS)....
Cyber bullying in the Philippines
The pen is mightier than the sword or so the adage goes. When this was once said, it was to highlight the power of thoughts and ideas over brute force and violence as a way to effect change. Today, the ...
Uber/GrabCar drivers: Independent contractors or employees?
The buzz about the legality of Uber and GrabCar operating in the Philippines might have died down, but now there is another legal issue surrounding them: whether their drivers are employees or ...
Price fixing in the context of the Philippine Competition Act
In light of the enactment of the Philippine Competition Act (PCA) in 2015, competitors, manufacturers, retailers and sellers or suppliers, in general, should be ...
Implementation of the data privacy act in Philippines now in full swing
Since 2012, the Philippines has had a comprehensive law governing personal data privacy. However, full implementation ...
Taxability of service fees received by non-resident foreign companies from online advertising in the Philippines
The use of the internet for the promotion of goods and services, particularly social media (Facebook, Twitter and ...
Levelling the playing field in the Philippines
Before the enactment of the Philippine Competition Act in 2015, the Philippines was the only founding member of Asean that did not have a comprehensive competition law in place. Francisco Ed Lim, Patricia-Ann T Prodigalidad, Eric R Recalde of <...
Age discrimination in the workplace
Republic Act No. 10911 (also known as the ‘Anti-Age Discrimination in Employment Act’) lapsed into law on 21 July ...
Green jobs: greening the Philippine labour sector
With the threat of climate change, the international community created the Paris Agreement which aims to stop global warming and preserve ...
Interplay of domestic law on compulsory licensing and international agreements on medicine prices
The price of pharmaceutical products in the Philippines appears to be on the high side compared to that in other Asian ...
Restrictive covenants in employment contracts
One of the means of keeping afloat in today’s competitive market is to hire employees who are ‘fit’ for a particular job. However, before employers ...
Make our system work: litigation practice expedited
The perception that litigation is a slow and arduous process has drawn many of us closer to the idea of alternative modes of dispute resolution. ...
Department of Labor and Employment (DOLE) Department Order No. 18-A: The Rules and Regulations on Contracting
On December 4, 2011, Department of Labor and Employment (DOLE) Department Order No. 18-A (D.O. 18-A), the new Rules Implementing Articles 106 to 109 ...
An overview of Philippine Data Privacy Law
Republic Act No. 10173, or the Philippine Data Privacy Act of 2012 (RA10173), was signed into law on August 15, 2012. This is the ...
New competition law for the Philippines
The Philippine Competition Act (PCA) went into effect on August 5, 2015. The law applies not only to acts committed in the Philippines but ...
Related Articles
New Decree on special preferential import/export tariffs under the CPTPP
Plus recent Vietnam updates on insurance, public investment and minimum wages.
SCA issues guidelines for financial institutions on anti-money laundering
The advent of AML and ATF guidance is a welcome step for businesses in the UAE.
Update on Stamp Duty regulating electronic transactions
A new notification requires parties who enter certain electronic transactions to pay stamp duty in cash.
Related Articles by Jurisdiction
Taxability of service fees received by non-resident foreign companies from online advertising in the Philippines
The use of the internet for the promotion of goods and services, particularly social media (Facebook, Twitter and ...
Defeatist data security cultures no more
Organisations need to recognise that information security is a question of risk and step up defences now ..
Islamic banking and finance in the Philippines
The recent passage of Republic Act No. 11054 augurs well for the development of Islamic banking and finance in the Philippines ...
Latest Articles
New Decree on special preferential import/export tariffs under the CPTPP
Plus recent Vietnam updates on insurance, public investment and minimum wages.
SCA issues guidelines for financial institutions on anti-money laundering
The advent of AML and ATF guidance is a welcome step for businesses in the UAE.
Update on Stamp Duty regulating electronic transactions
A new notification requires parties who enter certain electronic transactions to pay stamp duty in cash.