DIFFERENCES OF COOPERATIVE AND CORPORATION

COOPERATIVE is an organization owned and controlled by a group of people who

come together voluntarily for their mutual benefits and who used the rendered products
and services of the business. It also differ from other form of businesses because
cooperative are not just about the money, they exist to serve and benefit their members,
rather than to earn profits from investors.

One of the greatest benefit of Cooperative is the democratic style of management.

Members has the right to vote for their coop leader to lead their programs and the needs of
members can be met without a single person dominating the decision making process and
this kind typically makes the organization more stable.

Members have a voluntarily and open membership, they can come and go without
having a serious implications in the business and because of the ‘one-member-one-vote’
policy, all the members stand on equal footing regardless of the member of shares they
own. Since cooperative are members owned and controlled, they enjoy more autonomy
compared to business controlled by investors.

CORPORATION a legal entity formed by a group of people who contribute their

capital, but exists as a separate legal entity having its own privileges and liabilities distinct
from of its members. These members of corporation are often termed the shareholders and
share of stock represent their ownership interests and corporation must at least have one
owner

A corporation has limited liability meaning that if it fails and has to close down, the
shareholders only stand to lose their investment while the employees lose their jobs, but
neither of them will remain liability for the debts that remain owing to the corporation’s
creditors.

A corporation is normally formed as a business organization to make profits;

therefore, it must deliver returns on the investment by the member. A corporation is run by
a centralized management under a board structure, and the members of the board are
appointed by the shareholders. This board is entrusted by the shareholders to make
decisions on the running of the business on their behalf and can be changed after a given
period of time. Members of a corporation can transfer their shares to other members who
then take their position in the organization unlike the members of cooperative cannot
transfer their share of the organization, and death of one partner can lead to the
dissolution of the partnership.
AMENDMENTS TO THE CORPORATION CODE OF THE PHILIPPINES

On 20 February 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.

The New Code aims to improve ease of doing business and modernize procedures to
improve and elevate the standards in the country’s corporate setting in line with existing
international best practices. According to Senator Franklin M. Drilon, the principal sponsor
and author of the Code, the amendments are focused on “removing barriers hindering the
entry of both small and large enterprises into the Philippine market” as it aims to foster
smoother transactions in pursuing business in the Philippines.

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 (5) 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 OPC. 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, as provided by the New Code (unless a special law
requires otherwise), 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.

It is important to note though that the New Code requires the single stockholder to prove
that the OPC is sufficiently financed, and its assets are independent from his personal
property, in order to claim limited liability. Otherwise, he shall be jointly and severally
liable for the liabilities of the OPC.
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 affectivity 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.

In this connection, the New Code incorporates a “Lazarus” provision which allows the
revival of a corporation whose term has expired by filing an application with the SEC. Upon
approval, the corporation shall be deemed revived together with all the rights and
privileges under its certificate of incorporation and subject to all of its duties, debts, and
liabilities existing prior to its revival, giving it perpetual existence unless otherwise
specified.

MINIMUM CAPITAL STOCK

The Old Code required that at least 25% of the authorized capital stock must be subscribed,
and at least 25% of the total subscription must be paid by the stockholders, provided that
the minimum paid-up capital shall not be lower than Php5,000.00.

The New Code removed the aforementioned 25% subscription, payment and minimum
paid-up capital requirements. 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 (5) 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 fifteen (15) in number, may
organize 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 such as: (a) public companies, (b) banks and
quasi-banks, non-stock savings loan associations, etc., and (c) other corporations as may be
determined by the SEC. The independent directors shall constitute at least 20% of the
entire board membership.

The New Code also allows the creation of an “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.
During an emergency, the remaining directors or trustees may fill the vacancy temporarily
from among the officers of the corporation to pass the necessary emergency action.

Section 24 of the New Code retained the officers and its qualifications under the Old Code,
except for the treasurer, who is now required to be a resident of the Philippines. In
addition, corporations vested with public interest are now obliged 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 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.

Existing corporations affected by certain provisions of the New Code are given a period of
two (2) years from its affectivity within which to comply with the requirements thereon.
AMENDMENTS TO THE CORPORATION CODE OF THE PHILIPPINES

The Revised Code initiates significant changes to the legal framework for the registration
and operation of private corporations in the Philippines, including the following:

A. Simplifying Corporate Registration

The Revised Code simplifies the requirements to set-up and register a corporation with the
SEC. The provisions of the new law likewise expressly recognize the importance of
technology and its use to facilitate government and internal corporate processes.

1. Removal of minimum number of shareholders, directors, trustees, and minimum

capitalization requirements

The Revised Code no longer requires five shareholders to establish a new corporation. It
has also removed, subject to compliance with special laws, the minimum subscribed and
paid-up capital requirement for stock corporations.

2. One Person Corporation

The new law permits natural persons, trusts or estates to form One Person Corporations,
with the single shareholder becoming, by default, the sole director and president.

3. Perpetual existence

Under the Revised Code, a corporation shall have perpetual existence unless its articles of
incorporation provide otherwise. This new law repeals the prior 50 year maximum
corporate term.

The new law grants perpetual existence to corporations whose corporate terms have not
yet expired. Corporations who intend to be bound by a specific corporate term must notify
the SEC.

A corporation whose corporate term has expired may submit an application to the SEC for
a revival of its corporate existence, together with all the rights and privileges under its
certificate of incorporation and subject to all of its duties, debts, and liabilities existing
prior to its revival.

4. Electronic Filing and Monitoring System

In line with the government's drive to eliminate red tape and streamline government
procedures, the Revised Code mandates the SEC to develop and implement a system to
enable electronic submission of applications, reports and other documents, as well as the
sharing of pertinent information with other government agencies.
5. Electronic notices and remote communication

Shareholders and directors are expressly allowed to participate in meetings through

remote communication.

To encourage efficient communication of notices to the shareholders, members, directors

or trustees, the Revised Code permits sending of notices by electronic means.

B. Strengthening Corporate Governance

The Revised Code also aims to improve corporate governance and protection of minority
shareholders, through the following provisions:

1. Appointment of Independent Directors and Compliance Officer

The new law requires a corporation vested with public interest[1] to have (i) a board with
independent directors occupying at least 20% of its board seats, and (ii) a compliance
officer.

An independent director is one, who, apart from shareholdings and fees received from the
corporation, is independent of management and free from any business or relationship
which could (or could reasonably be perceived to) materially interfere with the exercise of
independent judgment in carrying out the responsibilities as a director.

2. Additional reporting requirements

Apart from the annual financial statements and general information sheets required for all
corporations, a corporation vested with public interest must also submit (i) a director
compensation report; and (ii) a director appraisal or performance report, which should
include the standards or criteria used to assess each director.

3. Emergency Board

In the event an emergency action is required to prevent grave, substantial and irreparable
loss or damage to the corporation, and the current number of directors is not enough to
constitute a quorum, the Revised Code permits the appointment of a temporary director to
fill in the vacancy, by the unanimous vote of the remaining directors.

The action by the temporary director shall be limited to the emergency action necessary,
and his term shall cease within a reasonable time from the termination of the emergency or
upon election of the replacement director, whichever comes earlier.
C. Other Important Provisions

Other notable amendments introduced by the new law include the following:

1. The corporate articles of incorporation and/or bylaws may include an arbitration

agreement for intra-corporate disputes. In order to be valid, the provision must specifically
mention the number of arbitrators and manner of their appointment.

2. The minimum amount of security deposit required for foreign corporations doing
business in the Philippines is increased from PhP 100,000 to PhP 500,000.

3. A person required to file a report with the SEC may redact confidential information from
such report. The confidential information shall be filed in a supplemental report labeled
"confidential", together with a request for confidential treatment of the report and the
specific grounds for the grant thereof.