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    Revised Corp. Code PDF

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    Mikaela Samonte

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    © All Rights Reserved
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    The Revised Corporation Code of the Philippines: Changes and Developments in Corporation Law by Atty. Nico B. Valderrama, CPA, MPM. Posted on February 22, 2019; Updated on July 12, 2019 The long-anticipated revision and update of the corporation law have now been realized. With the passayé Of the Revised Corporation Code of the Philippines (RCC) or RA 11232, the rules governing corporations\may now address the current concerns of corporations and would-be corporations. It aims to further ease the formation of corporations and filing of applications and reports which have frustrated those who deal with the’bufeaucracy. It empowers the SEC to fully enforce the new law, It also introduced new rules that aligh with developments in technology and new laws that came after the old Corporation Code or BP 68 like the Philippine Deposit Insurance Corporation Charter or RA 3594, the New Central Bank Act or RA 7653, the Rules'of Court, the Intellectual Property Code or RA 8293, the Securities Regulation Code or RA 8799, the Data Privacy Act or RA 10173, and the Philippine Competition Act or RA 10667. Some established rules and“practices of the SEC have been institutionalized by their incorporation in the RCC. The updates on corporation law presented herein are divided into two categories: (i) Changes and (ii) Innovations. Changes shall refer to'thdse rules already existing under the old Corporation Cade (OCC), but later refined or amended by ROC. Inidvations shall refer to those rules not provided under the OCC which are first introduced by RCC. At thelatter portion, items retained by the RCC are likewise listed. The corresponding sections in the RCC are provided at the end of each item for easy reference. CHANGES: revision (reference in the RCC; provision ip’ t@ OCC amended) 1. Corporations prohibited from issuing no-par” \/ Person Corporation (OPC). (Section 10; Section value shares now includes other corporations’ 10) th in or. inds from the’ 7. As a general rule, corporations shall have Bublic, whether publicly listed or not. (Section’6 perpetual _existence, unless its articles of of the RCC; Section 6 of the OCC) incorporation provide for a specific term. 2. Exclusive right of holders of fourideh shares to Corporations formed prior to RCC shall vote and be voted for in the election of directors automatically have perpetual existence without shall not exceed 5 years from date of prejudice to its right to elect to retain its specific incorporation. (Section 7; Section 7) corporate term through a majority vote of its 3. The terms and conditionS“foF the issuance of Stockholders. (Section 11; Section 11) redeemable shares must not only be stated in the 8, Amendment on the corporate term may now be articles of incorporationbut in the certificate of made within 3 years prior to the expiration of the stock as welll (Section 8; Section 8) corporate term. (Section 11; Section 11) 4, Majority Of the-incorporators need not_be 9, The number of trustees indicated in the articles residents~of the Philippines. (Section 10; of incorporation may now be more than 15. Section 10) — (Section 13; Section 14) 5. Juridical_persons such as_ partnerships, 10. The authorized capital stock no longer needs to ‘associations, and corporation may now be at least 25% subscribed. (Section 14; incorporate a corporation. There is no more Sections 13 and 15) minimum number of incorporators, but the 11, The Treasurer's Affidavit_is_no longer maximum number remains at 15. (Section 10; recuited since the cerification conceming the Section 10) amount of capital subscribed and/or paid is 6. A corporation with a single stockholder may already included in the articles of incorporation. now be formed and shall be considered a One (Section 14; Section 14) ‘THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA | 1 1 13. 14, 15. 16. 17 18. 20. 21 22. There is no_more minimum paid-up capital. (Section 14; Section 14) Ealse certification conceming the amount of capital subscribed and/or paid is a new ground to disapprove articles of incorporation or amendments thereto. (Section 16; Section 17) Failure of a corporation to formally organize and ‘commence its business within 5 years from the date of its incorporation shall be render the certificate of incorporation deemed revoked as of the day following the end of the 5-year period. (Section 21; Section 22) After commencing its business, failure of the corporation to operate for at least 5 consecutive years may be placed under delinquent status by SEC after due notice and hearing. A delinquent corporation shall have 2 years to resume operations and comply with all SEC- prescribed requirements. Failure to comply shall be a cause for revocation of the certificate of incorporation. (Section 21) Majority of the directors or trustees need not be: residents of the Philippines. (Section 22; Section 23) : Trustees elected shall have a term not exceeding) Syears. (Section 22; Section 23) A treasurer to be elected must be a resident of the Philippines. (Section 24; Section'26) The election of an officer no longer expressly requires absolute majority of the-number of directorsitrustees fixed jin\wthe articles of incorporation. (Section 24; Section 25) The duties of elected' offices may be provided not only in the bylaws, but also as resolved by the board of directors (Section 24; Section 25) The death, resignation, or cessation to hold office of any difector, trustee, or officer shall be ‘reported inwriting to the SEC within 7 days from knowledge thereof. (Section 25; Section 26) DisqUalification of directors, trustees, or officers for Violations of the RCC and Securities Regulation Code or RA 8799, now clearly requires conviction by final judgment. It also adds two additional disqualifications: finding ‘of administrative liability for any offense involving fraudulent acts and judgment or finding of a foreign court or equivalent foreign regulatory for acts similar to the aforementioned grounds. The 23. 24, 25. 26. 28. 29. 30. 3 ‘SEC and the Philippine Competition Commission or PCC may impose additional qualifications or other disqualifications. (Section 26; Section 27) Elections to fill vacancies in directorships and trusteeships due to term expiration must be held no later than the day of such expiration. in case of removal, vacancy may be filled during the same meeting, In all other cases, it must Bevilled later than 4! from thestime_th vacancy arose. (Section 28; Section'29) Dealings of directors, trustees, or officers now include their spouses and relatives within the 4° civil degree of «Consanguinity or affinity. (Section 31; Sectiof 32), The prohibition™om, domestic corporations against _aiving_\donations for _ political purposes has beén removed. Now, only foreign corporations ‘ére prohibited to give such donations, (Article 35; Section 36) Notice about the meeting on the proposed jextension or shortening of corporate term may ‘NOW be given to the stockholders and members slectronically. (Section 36; Section 37) Notice about the meeting on the proposed increase or decrease of capital stock or increase of bonded indebtedness may nowbe given to the stockholders electronically. (Section 37; Section 38) The certificate executed in case of increase or decrease of capital stock or increase of bonded indebtedness need _not_set forth the actual indebtedness of the corporation on the day of the meeting. (Section 37; Section 38) The application for increase or decrease of capital stock or increase of bonded indebtedness shall require prior approval of SEC and where appropriate, of the Philippine Competition Commission (PEC). (Section 37; Section 38) The application for increase or decrease of capital stock or increase of bonded indebtedness shall be filed with the SEC within ‘months from the date of approval of the board of directors and stockholders, which may be extended for justifiable reasons. (Section 37; Section 38) ‘The treasurer's sworn statement accompanying the application for increase of capital stock now ‘THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA | 2, 32, 33 36. 36, 3. 38 38 clearly provides that the required 25% subscription is of the “increase in_capital stock” instead of “increased capital stock”. The new rule is consistent with the current policy of the SEC, (Section 37; Section 38) Notice about the meeting on the proposed sale cor other disposition of all or substantially all of the corporate assets may now be given to the stockholders electronically. (Section 39; Section 40) Notice about the meeting on the proposed investment of corporate funds in another corporation may now be given to the stockholders electronically. (Section 41; Section 42) Bylaws must now be filed together with the articles of incorporation. It can no longer be fled within one month from notice of issuance of the certificate of incorporation. (Section 45; Section 46) Bylaws may provide for the maximum number of other board representations that an independent director or trustee may have. (Section 46; Section 47) Bylaws may provide other matters for the proper’ ‘or convenient transaction ofits corporate affairs for the promotion of good governance and anti: graft and corruption measures. (Section 46; Section 47) Ss If the date of regular meeting of Stockholders is not fixed in the bylaws, it shalbe held on any date after April 15 of every year‘as determined by the board provided that.a written notice shall be sent to all stockholders,or member: Je 21 days prior tothe. meeting, unless a different period is required: ‘Notice of regular meetings may now be\sent electronically. (Section 49; Section 50), There is.an exhaustive list of matters (which may/be expanded through proposal) required to be presented at each regular meeting of ‘stockholders or members. (Section 49; Section 50) General waivers of notice in the articles of incorporation or the bylaws shall not be allowed. Attendance at a meeting shall not constitute a waiver of notice of such meeting when the ‘express purpose of attendance is to abject to the transaction of any business because the meeting is not lawlully called or convened. (Section 49; Section 50) 40, Metro Cebu, Metro_Davao, and _other Metropolitan areas (in addition to Metro Manila) are now considered a city or municipality for purposes of places where stockholders’ or members’ meetings may be held. (Section 50; Section 51) Notices of stockholders’ or members*méetings now require certain information _and a accompanying proxy forms™(Section 50; Section 51) 42, All proceedings and @ny.business transacted at the stockholders’ or members’ meetings shall be valid even if improperly held or called, provided that no one Of the present stockholders or members expressly states at the beginning of the meeting\sthat’ the express purpose _of attendance is to object to the transaction of any™business because the meeting is not Jawfully called or convened. (Section 50; Section 51) 43, Notice of board meetings must be sent to every director or trustee at least 2 days prior to the scheduled meeting, unless a longer period is provided in the bylaws. (Section 52; Section 53) 44, It is now expressly provided that directors or trustees who cannot physically attend or vote at board meetings can participate and vote through remote communication that allow them reasonable opportunities to participate. (Section 52; Section 53) 45, Pledgors and mortgagors are now identified as ured creditors to include other persons granted with security interest over the shares. (Section 54; Section 55) 46, No voting trust agreement shall be entered into which are anti-competitive and violative of nationality _and_capital_reauirements in addition to for purposes for the perpetuation of fraud. (Section 58; Section 59) 47, Additional consideration for stocks: shares of stock in another corporation and other generally accepted form of consideration. (Section 61; Section 62) 48, Notice of the sale of delinquent stocks may be sent through other_means provided in the ‘THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA | 3 48, 50. 51 52, 53. 54, 55. 56. 57. 58. There is an exhaustive list of corporate books and records that must be preserved at the principal office and made available to the stockholders or members. (Section 73; Section 74) The financial statements furnished to the requesting stockholder or member shall be in the form and substance of the financial reporting required by the SEC. (Section 74; Section 75) If the total assets or total liabilities of the corporation are less than P600,000 or such ‘other amount as may be determined by the Department of Finance, the financial statements required to be presented to the stockholders or members may be certified under oath by the treasurer and the president. (Section 74; Section 75) The notice required for meetings to approve merger or consolidation shall be given in the same manner as giving notice of regular or special meetings. (Section 76; Section 77) There are four additional items that must be set forth in the articles of merger or consolidation, (Section 77; Section 78) There is appraisal right in case of investment.of» corporate funds for any purpose other thar the primary purpose of the corporation. (Section 60; Section 81) The first trustees elected .in\a_non-stock corporation does not have to serve their initial terms partially (1 year for 1/3)of the board, 2 years for the other 1/3,and.3 years for the rest). (Section 91; Section'92) Incorporation of edutational institutions no. longe the favourable recommendation’ of the Department of Education \(Section 107 of OCC was not reprodtucadin RCC) The\Voting requirement in case of voluntary issolution where no creditors are affected now only requires majority vote of the board and affirmative vote of stockholders owning at least majority of the outstanding capital stock or majority of the members. (Section 134; Section 118) Notice on the meeting to vote on the voluntary dissolution must be given to each stockholder or 59, 60, 6. 62. 63. 65. 66. 67. 68. member at least 20 days prior to the meeting and must be published once prior to the meeting in a newspaper. Notice may now be given electronically. (Section 134; Section 118) A verified request for voluntary dissolution shall be filed with the SEC containing required information and accompanied by required documents. (Section 134; Section 118) The SEC must approve the. request for dissolution within 15 days from receipt and issue the certificate of dissolutions(Section 134; Section 118) For corporations régulatéd by government agencies, applications for dissolution must be government agency. (Section 134; Section 118) In case of voluhtary dissolutions where creditors are_affected, the petition must contain certain information and accompanied by required documents. (Section 135; Section 119) t) is now clearly provided that voluntary dissolution shall take effect only upon the issuance by the SEC of a certificate of dissolution, (Sections 134 and 135; Sections 118 and 119) In case of expiration of corporate term, dissolution shall automatically take effect on the day following the last day of the corporate term stated in the articles of incorporation ‘without need for the issuance of the certificate of dissolution, (Section 136; Section 120) The grounds for involuntary dissolution are now listed down. (Section 138; Section 121) Banks are excluded from the provision on corporate liquidation. (Section 139, Section 122) Upon the winding up of corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannat be found shall be escheated in favour of the national government. (Section 139; Section 122) The threshold for bonds or securities required for foreign corporations applying for license to do business in the Philippines has been adjusted 100,000 to PS00.000 (as initial bond or security) and 5,000,000 to P40,000,000 (licensee's gross income for the fiscal year that ‘THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA | 4 69 70. INNOVATION: 4 will require additional securities). (Section 143; Section 126) If a domestic corporation is appointed as a resident agent of a foreign corporation, it must be of sound financial standing and must show proof that it in good standing as certified by the SEC. (Section 144; Section 127) ‘Administrative sanctions. such as fines for the violations of the RCC or of a rule, regulation, or ‘order of the SEC have been increased. Aside from fines, the SEC may issue permanent cease Revival of corporations whose terms have expired is now allowed subject to all of its duties, debts, and liabiities existing prior ta its revival (Section 11 of the RCC) An arbitration agreement may now be provided in the articles of incorporation. (Section 13) Filing of the articles of incorporation and amendments thereto may now be filed electronically. (Section 13) ‘One Person Corporations must bear “OPC” at end of its corporate name. (Section 14) The form of articles of incorporation..now includes the undertaking to change the name ‘of the corporation when there exists prior right or if it is contrary to law, publi¢’ mérals, good customs, or public policy. (Section14) Rules on distinquishabili if 108 names are provided. (Settion 17) SEC now has the authority to cause the removal of all” visible signages, marks, advertisementsrlabels, prints, and other effects bearing a disallowed corporate name. (Section 7) ‘ Failurést6 eomply with SEC’s order related to disallawed: corporate mame may hold the corporation and its responsible directors or ‘officers in contempt and/or hold them administratively, civily, and/or criminally liable andior revoke the registration of the corporation. (Section 17) Verification of intended corporate name prior to registration is now expressly provided, (Section 18) and_desist_ orders, or suspend or revoke certificates of incorporation, or dissolve corporations and forfeit its assets. (Section 158; Sections 143 and 144) Reportorial requirements for every corporation are now listed down, with a right to redact confidential information. (Section 177; Section 141) 72, The of the SEC are now listed down. (Section.179; Section 143) n 10, Corporations vested with public interest shall have independent directors constituting 20% of such board. They must be elected by the shareholders\present or entitled to vote in absentia\during the election of directors. (Section 22) 1fStockholders and members may vote through Temote communication or in absentia, if authorized in the bylaws or by a majority of the board. Such modes are available to corporations vested with public interest, even in the absence of a provision in the bylaws. Stockholders or members who participate through remote communication or in absentia shall be deemed present for purposes of quorum. (Section 23) 12. Directors and trustees elected are now required to observe the governance. (Section 23) 13. Corporations vested with public interest are required to elect a compliance officer, (Section 24) 14. Non-holding if_electic ind_thi mn therefor shall be reported to the SEC within 30 days from date of the scheduled election. The new date of the election must not be later than 60 days from the scheduled date. If no new date has been designed or if the rescheduled date is not held, the SEC may summarily order the holding of an election upon application of a stockholder, member, director, or trustee. (Section 25) 15. The SEC has now the authority to order the removal of a disqualified director or trustee ‘motu proprio or upon verified complaint, without Prejudice to the sanctions that the SEC may ‘THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA | 5 16. 7, 18, 19, 20. 21, 22, 23. impose on directors or trustees who knew of the disqualification but failed to remove such director or trustee. (Section 27) “Emergency board”: When a vacancy 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, the vacancy may be temporarily filled among the officers of the corporation by unanimous vote of the remaining directors or trustees. The action by the designated director or trustee shall be limited to the emergency action necessary, and the term shall cease within a reasonable time from the termination of the emergency or upon election of the replacement director. The creation af the ‘emergency board shall be reported to the SEC within 3 days from creation stating the reason for its creation. (Section 28) Directors or trustees shall not participate in the determination of their own per diems or compensation. (Section 29) Corporations vested with public interest shall submit to their shareholders and the SEC an annual report of the total compensation of ‘each of the directors or trustees. (Section 29) Validity of dealinas of directors, trustees-or officers with corporations vested with public interest require approval by at least 2/3 of the entire membership of the board, with'al'least a majority of the independent directors’ voting to approve the material contract(Section 31) The board is now empowered t6 create special mit f_tem: manent nature and detérmine the members’ term, ‘composition, compensation, powers, and responsibilitids. (Section 34) Corporations have now the express power to enter into partnership or joint venture with any(person. (Section 35) The ale or other disposition of assets of a Corporation is now Phil Competition Act or RA 10667. (Section 39) In non-stock corporations where there are no members with voting rights, the vote of at least ‘a majority of the trustees in office will be sufficient authorization for the corporation to enter into any transaction involving sale or other disposition of corporate assets. (Section 39) 24, The determination of whether or not the sale involves all or substantially all of the corporation's properties and assets must be computed based on its net asset value, as shown in its latest financial statements. (Section 39) 25, Management contracts shall be entered into for a period not longer than § years.for anyone term. (Section 43) 26. The modes by wi a stockholder, member, director, or trustee may attend’meetings and cast their votes must now.be>provided in the bylaws. (Section 46) 27. The maximum

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