RFBT - RCC Pertinent Changes PDF

AN OVERVIEW OF THE CHANGES TO THE CORPORATION CODE OF THE PHILIPPINES | eLegal Philippines 22/08/2019, 3*48 PM
FEATURED
AN OVERVIEW OF THE
CHANGES TO THE
CORPORATION CODE OF
THE PHILIPPINES
! February 22, 2019 " by Disini & Disini Law Office # 0 comments
Even as laws have been enacted to address emerging markets in the

Philippines, the basic law on corporations – Batas Pambansa Blg. 68, or the
Corporation Code – has remained mostly intact since it went into effect in
1980. It had been noted that the Corporation Code had numerous stringent
incorporation and regulatory requirements which discouraged investors and
Filipino entrepreneurs to enter from entering the local market. [1] These
concerns have led to the enactment of the Revised Corporation Code of the
https://elegal.ph/an-overview-of-the-changes-to-the-corporation-c…lid=IwAR3kcVjl1eSwdMoBFCUavzlzc1B9UaRl-NjvsMLBHXIYIvw5MkulMhxrTCA Page 1 of 9
Philippines (Revised Code), signed into law as Republic Act No. 11232 in
February 2019. It has been asserted that this landmark legislation will
remove the barriers hindering the entry of both small and large enterprises in
the market, as well as strengthening and simplifying corporate governance
standards for a more streamlined business environment. [2]
Featured below are some of the key changes introduced by the Revised
Code.
FUNDAMENTAL CHANGES
Many of the provisions in the Revised Code introduce dramatic changes that
alter the rules for establishing and maintaining corporations.
One-person corporations. The Revised Code removes the minimum number

of incorporators required to establish a corporation; the old Code had
prescribed a minimum of Sve incorporators. The Revised Code goes as far
as to permit an individual to form a one-person corporation. The allowance of
one-person corporations make it easier for small to medium-sized business
owners to incorporate, thus providing a viable alternative for sole proprietors.
(Sec. 10)
Arbitration agreements embedded in articles of incorporation or bylaws. The

Revised Code allows for an arbitration agreement to be provided in the
articles of incorporation (AOI) or bylaws of a corporation. With such an
agreement in place, disputes between the corporation, its stockholders or
members that arise from the implementation of AOI or bylaws or from
intracorporate relations shall now be referred to arbitration. Disputes
involving criminal offenses or the interests of third parties remain non-
arbitrable. (Sec. 181)
https://elegal.ph/an-overview-of-the-changes-to-the-corporation-c…id=IwAR3kcVjl1eSwdMoBFCUavzlzc1B9UaRl-NjvsMLBHXIYIvw5MkulMhxrTCA Page 2 of 9
Corporations vested with public interest. The Revised Code refers to

corporations vested with public interest, which are subject to additional
regulatory conditions that do not apply to other corporations. Corporations
vested with public interest are required to elect a compliance o[cer upon
organization. (Sec. 24) They are required to submit additional annual reports
to the Securities and Exchange Commission (SEC), particularly a
director/trustee compensation report and a director/trustee appraisal or
performance report. (Sec. 177) Stockholders in such corporations have the
unequivocal right to vote to elect directors or trustees during stockholders
meetings through remote communications or in absentia. (Sec. 23)
Section 22 of Revised Code identiSes as corporations vested with public

interest those whose securities are registered with the SEC, those listed with
an exchange, those with assets of at least 50 Million Pesos and having 200
or more holders of shares (with each holding at least 100 shares of a class
of its equity shares), banks and quasi-banks, non-stock savings and loan
associations, pawnshops, corporations engaged in money service business,
preneed, trust and insurance companies, and Snancial intermediaries. The
provision requires that at least 20% composition of the boards of these
corporations be independent directors. The SEC is also authorized to
determine other corporations engaged in businesses vested with public
interest, after taking into account relevant factors which are germane to the
objective and purpose of requiring the election of an independent director.
Removal of minimum capital stock requirement. The Revised Code does

away with the minimum capital stock requirement for stock corporations,
except as otherwise speciScally provided by special law. The change again
works to the beneSt of small to medium-sized enterprises by making it easier
for them to incorporate. (Sec. 12)
Inde@nite corporate lifespan. The old Code had prescribed a maximum
corporate term of 50 years and required corporations to amend their articles

of incorporation (AOI) to extend the corporate life for another Sfty-year
period. The new Code now provides that a corporation shall have perpetual
existence unless its articles of incorporation provides otherwise. Existing
corporations are even presumed now to have perpetual existence unless the
stockholders vote to retain the original term provided in the AOI, (upon a vote
of the stockholders representing a majority of its outstanding capital stock)
or a new speciSc period (upon a vote to amend the articles of incorporation
by stockholders representing at least 2/3 of the outstanding capital stock.
(Sec. 11)
Revival of corporations whose term had already expired. The new Code
expressly allows a corporation whose term has expired to apply with the SEC
for a revival of its corporate existence, together with all the rights and
privileges under its certiScate of incorporation. Upon approval by the SEC, the
corporation is deemed revived. The corporation is also granted perpetual
existence unless its application for revival speciSes otherwise. (Sec. 11)
Extended period to commence corporate operations. Corporations are now

allowed Sve years from incorporation to commence operations; the old
Code had only allowed two years. (Sec. 21)
Delinquent corporations. A corporation that had commenced its business

may now be placed by the SEC under delinquent status if it had become
inoperative for a period of at least Sve years; previously such inactivity was
already cause for the revocation of the certiScate of incorporation. A
delinquent corporation has two years to resume operations; failure to do so
is cause for the SEC to revoke the certiScate of incorporation. (Sec. 21)
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
TECHNOLOGY-ENABLED CHANGES
The revision of the Corporation Code also integrates technological advances

over the last four decades into the rules governing corporations. The old
Code was enacted before the online age[3], or even the widespread use of
the personal computer in the 1980s.[4]
Electronic Notices. The Revised Code allows written notices of regular

stockholders meetings to be sent to all stockholders or members of record
through email or such other manner as the SEC shall allow under guidelines
it would prescribe. (Sec. 49) A corporation is also allowed to specify in its
bylaws the means of communications through which meetings would be
sent; these include regular or special stockholders meetings (Sec. 50),
meetings to increase or decrease capital stock (Sec. 37), to sell or dispose
assets (Sec. 39), or to invest corporate funds (Sec. 50)
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 videoconferencing,
teleconferencing or other alternative modes of communication that allow
them reasonable opportunities to participate. (Sec. 52) 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. (Sec. 49) The exception, as earlier
mentioned, is in the case of corporations vested with public interest, where
stockholders and members are entitled to vote to elect directors or trustees
through remote communication or in absentia even without a provision in the

bylaws that authorizes voting through those 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.
Electronic @ling and monitoring system. The Revised Code mandates the SEC
to develop and implement an electronic Sling and monitoring system. (Sec.
180) It should be noted that the SEC already has an existing electronic
Company Registration System (CRS) that allows for the online pre-
processing of corporations and partnerships, licensing of foreign
corporations, amendments of the articles of incorporation and other
corporate applications requiring SEC approval. [5]
___________________________
[1] http://www.senate.gov.ph/press_release/2018/1127_drilon1.asp
[2] Id.
[3] https://www.historyextra.com/period/20th-century/a-brave-new-world-
the-1980s-home-computer-boom/
[4] https://thenextweb.com/insider/2011/08/06/20-years-ago-today-the-
world-wide-web-opened-to-the-public/
[5] http://www.sec.gov.ph/online-services/sec-company-registration-system/
! " -373
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AN OVERVIEW OF THE CHANGES TO THE CORPORATION CODE OF THE PHILIPPINES | eLegal Philippines 22/08/2019, 3*48 PM

Even as laws have been enacted to address emerging markets in the

One-person corporations. The Revised Code removes the minimum number

Arbitration agreements embedded in articles of incorporation or bylaws. The

Corporations vested with public interest. The Revised Code refers to

Section 22 of Revised Code identiSes as corporations vested with public

Removal of minimum capital stock requirement. The Revised Code does

Inde@nite corporate lifespan. The old Code had prescribed a maximum

corporate term of 50 years and required corporations to amend their articles

Extended period to commence corporate operations. Corporations are now

Delinquent corporations. A corporation that had commenced its business

corporation, domestic or foreign, shall give donations in aid of any political

The revision of the Corporation Code also integrates technological advances

Electronic Notices. The Revised Code allows written notices of regular

through remote communication or in absentia even without a provision in the

4 Previous post Next post 5

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