Philippine Corporations in the

Modern Times
A contemporary Corporation Code for contemporary times

By Eric R. Recalde
Has our corporation law truly been modernized?
How does the
Revised
Corporation Code
contribute in
modernizing our
corporation
laws?
What will you expect?
The ABC of Corporate Law
The ABC of Corporate Law
Partly Nationalized Businesses
 PCAB v. Manila Water Company, Inc.
(2020)
• PCAB special nationalization requirement, invalid
• PCAB Law does not sanction equity limit
• Only Congress has statutory authority to do so, upon NEDA
recommendation
• Contractor, not the same as a PRC-regulated profession
• Private construction contracts, no longer in FINL negative list (1996 to
2018)
• PCC intervened as amicus curiae
• Restriction is barrier to entry
• Barriers to entry violate state policy against unfair competition
• Miniscule rate of foreign contractors’ participation in construction industry
• Decision, subject of MR
• SC Decision, an En Banc case
• Unanimous decision, with no dissenting opinion
Formation, Term, Capital Structure
The birth of a corporation
Formation, Term, Capital Structure
The birth of a corporation
Directors, Officers, Special Committees
Managing a corporation
 Election, Term, Removal of Directors
Choosing the corporation’s leaders…and how to remove them
Requisition, Conduct of Meetings, Manner of Voting
FAQS on One Person
Corporations What are the
rights of
stakeholders
What are the ?
requirement Who may
s for incorporate
conversion? ?

What are
the What is the
operational prescribed
requirement capital?
s? Who may
manage?
Special Topics
Mergers and Acquisitions
Special Considerations
 Issues in Restructuring Businesses

Restructuring the business involves:

 Tax-free exchanges!
 BIR confirmation!
 Tax risks!

Now, IPO tax no more!

17
 On tax-free exchanges, it is amazing:

 CREATE recognizes “reorganizations”!

 Reorganization includes “merger or
consolidation”!
 Reorganization includes “transfers to a
controlled corporation”!
 Reorganization includes “recapitalization”
and “reincorporation”!

(Ref: US IRC, Sec. 368; NIRC, Sec. 40, par. C, 2)

18
 The PCA, its reach?

In the Philippines Anywhere

Persons/Entities/Trades
AL /Industries/Businesses
Direct Substantial Reasonable
L

EXCEP Labor Relations

T
Philippine Competition Act
 Notification Thresholds (As of 1 March 2020)
Size of Person Test - Php 6.0 billion
Subject Ultimate parent of “at least one of acquiring or acquired parties”
Reference Phil Revenues Directly or indirectly thru affiliated controlled entities
O
Value of Phil Assets R
AND Size of Transaction Test - Php 2.4 billion (BARO 2- P50B exemption Threshold)
Asset Purchase Share Purchase Joint Venture (Test: Joint Control Post
Transaction; Controlling interest immaterial)

All In Phil Assets O Phil Revenues Enterprise Control Test Assets Phil Revenues of
R
Value Test Combined in the Assets Combined in
Phils. or the Phils. or
All Phil Assets of Phil Revenues Phil Assets Initial 35% / Contributed in Contributed in the
Out Acquiring Party AN of Acquired 50% the JV JV
D AN
Assets O D
R O
In and Phil Assets of Phil Revenues R
Gains further
Out Acquiring Party AN of Acquired control
D Assets in and Phil Revenues
outside the
Phils
Bayanihan Act (RA 11494)
 Merger Review Process

15
Days 30 Days 15 60 Days
Days

Max 90 Days
Submission

Phase 1 Phase 2
Initial Review Submit Review
Initial

Closing
Review Info
On Good Governance and Anti-Graft and Corruption Measures:

The company Bylaws may provide

“such other matters as may be necessary
for the proper or convenient transaction
of its corporate affairs for the promotion of
good governance and anti-graft and
corruption measures.”

24
 On Transfer of Shares; Disclosure of Beneficial
Owners

The law and rules require:

 STB registration within 30 days!

 BIR Clearance!
 Disclosure of Beneficial Owners!

25
 On Extraction of Corporate Earnings:

A shareholder may extract corporate earnings through:

 Dividends!

 Capital gains!

There are issues on non-distribution of excess

earnings!
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 Issuances

• Revision of GIS of Foreign Corporations to include Beneficial

Ownership Information (MC No. 30 s.2020)

• Requirement for Corporations, etc. to Create and/or

Designate Email Account Address and Cellphone Number for
Transactions with SEC (MC No. 28 s.2020)

• Guidelines for the Conversion of Corporations either to OPC

or Ordinary Stock Corporation (MC No. 27 s.2020)

• Guidelines in the Filing, Investigation and Resolution of

Complaints for Violation of the Right to Inspect and/or
Reproduce Corporate Records (MC No. 25 s. 2020)
 Issuances

• Guidelines on Posting of:

1. Additional Securities Deposit
2. Substitution of Securities Deposit and
3. Change of Resident Agent (MC No. 24 s.2020)

• Rules on Corporate Debt Vehicle (MC No. 23 s.2020)

• Guidelines on Corporate Term (MC No. 22 s.2020)

• Guidelines on Authentication of Articles of Incorporation in

Applications for Registration of New Domestic Corporations
(MC No. 16 s.2020)

• Shareholders’ right to put items on the Agenda for Regular/

Special Stockholders’ meetings (MC No. 14 s.2020)
 Issuances
• Shareholders’ approval on Sale of Corporate Assets (MC No.
12 s.2020)

• Guidelines on the Attendance and Participation of Directors,

Trustees, Stockholders, Members, and Other Persons of
Corporations in Regular and Special Meetings Through
Teleconferencing, Video Conferencing and Other Remote or
Electronic Means of Communication (MC No. 06 s. 2020)

• Notice of Regular Meetings of the Stockholders/Members

(MC No. 03 s.2020)

• Guidelines on the Revival of Expired Corporations (MC No.

23 s.2019)
 Issuances
• Revised Guidelines on Securities Deposit of Branch Offices
of Foreign Corporations (MC No. 17 s.2019)

• Guidelines on the Number and Qualifications of

Incorporators Under the Revised Corporation Code (MC No.
16 s.2019)

• Amended Guidelines and Procedures on the Use of

Corporate and Partnership Names (MC No. 13 s.2019)

• Rules on Material Related Party Transactions for Publicly-

Listed Companies (MC No. 10 s.2019)

• Guidelines on the Establishment of a One Person

Corporation (OPC) (MC No. 07 s.2019)
Thank you.