Salient Changes under the Revised

Corporation Code

Republic Act No. 11232, otherwise known as

the “Revised Corporation Code of the
Philippines” or “RCC”, was signed into law by
President Rodrigo Duterte on 20 February
2019. The RCC took effect on 23 February
2019, following the completion of its
publication in the Manila Bulletin and the
Business Mirror. The new law updates the
almost 39-year old Corporation Code of the
Philippines with the aim of improving the ease
of doing business in the country. Existing
corporations affected by the new requirements
of the RCC are given a period of two (2) years
to comply (Sec. 185).

Some of the salient amendments to the

Corporation Code include:
1. Organization of Corporations

The RCC removed the absolute requirement

of having a minimum of five (5) individuals in
the formation of corporations.

The RCC removed the absolute requirement

of having a minimum of 5 individuals in the
formation of corporations (Sec. 10). The law
now allows the establishment of a One-Person
Corporation (OPC) composed of a single
shareholder, who may be a natural person, a
trust or an estate. A shareholder may acquire
all the stocks of an ordinary stock corporation
and apply for the conversion thereof into an
OPC. In terms of liability, the single
shareholder claiming limited liability has the
burden of affirmatively showing that the
corporation was adequately financed (Sec.
115, 116, 130, 131).

Stock corporations are still not required to

have a minimum capital stock, unless
specifically provided by special law. Notably, in
the revised form of the Articles of Incorporation
(AOI), it is no longer required that the
capitalization be in “lawful money of the
Philippines” (Sec. 14). Moreover, the RCC
removed the requirement that 25% of the
authorized capital stock be subscribed and
that 25% of the subscribed capital stock be
paid for purposes of incorporation as
previously mandated under Section 13 of the
Corporation Code, which was deleted in its
entirety (Sec. 12). However, the 25%-25%
requirement was retained for any increase in
the authorized capital stock (Sec. 27).

The corporate term limit of 50 years has been

removed such that a corporation can now
enjoy perpetual existence unless expressly
limited by its AOI. Such perpetual corporate
term shall also apply to corporations
incorporated prior to the RCC, unless said
corporations elect to retain a specific corporate
term. The new law also states that a
corporation whose term has expired can apply
with the Securities and Exchange Commission
(SEC) for the revival of its corporate existence,
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. Upon the SEC’s approval, the
corporation shall be deemed revived and a
certificate of revival of corporate existence
shall be issued giving it perpetual existence,
unless its application for revival provides
otherwise (Sec. 11). The RCC also extends
the allowable period for non-use of corporate
charter from 2 years to 5 years from the date
of incorporation. The certificate of
incorporation shall be deemed revoked as of
the day following the end of the 5-year period.
Meanwhile, a corporation which has
commenced its business but subsequently
becomes inoperative for a period of at least 5
years may be deemed a delinquent
corporation and shall have a period of 2 years
to resume operations. Failure to resume
operations within the period given by the SEC
shall cause the revocation of its certificate of
incorporation (Sec. 21).

2. New Classifications of “Corporations Vested

with Public Interest”

In lieu of the expansion of application of the

system of Independent Directors under the
Securities Regulation Code (SRC), the RCC
has classified the following corporations
vested with public interest, whose board shall
have independent directors constituting at
least 20% of such board:

a. Publicly-held corporations under the SRC

whose securities are registered with the SEC,
corporations listed with an exchange or with
assets of at least P50,000,000.00 and having
200 or more holders of shares, each holding at
least 100 shares of a class of its equity shares;

b. Banks and quasi-banks, non-stock savings

and loan associations, pawnshops,
corporations engaged in money service
business, preneed, trust and insurance
companies, and other financial intermediaries;
and

c. Other corporations engaged in businesses

vested with public interest similar to the above,
as may be determined by the SEC.

3. Board of Directors/Trustees

With the introduction of the OPC, the minimum

number of directors to incorporate is reduced
from 5 to 1, while the maximum is retained at
15 directors. For trustees, however, the RCC
has removed the maximum number which can
be elected. Some of the changes in the
qualification and term of the board of director
or trustees include the removal of the
residency requirement for a majority of the
board and the extension of the term of trustees
from 1 year to 3 years (Sec. 22).

The new law allows stockholders or members,

when authorized by the By-Laws or by a
majority of the board of directors, to vote
through remote communication methods or
inabsentia. A stockholder or member who
participates through remote communication or
inabsentia will still be considered present for
purposes of determining the existence of a
quorum (Sec. 23).

The RCC empowers the SEC, unilaterally or

upon a verified complaint, and after due notice
and hearing, to remove members of the Board
of Directors/Trustees who are determined to
be disqualified to be elected to or to hold such
position (Sec. 27).

When there is a vacancy in the Office of the

Director/Trustee which prevents the remaining
directors from constituting a quorum and
emergency action is required to prevent
irreparable loss or damage to the corporation,
the remaining directors are allowed to
temporarily fill the vacancy from among the
officers of the corporation, thereby constituting
an emergency board, subject to certain
requirements (Sec. 28).

4. Corporate Officers

The RCC mandates a corporation vested with

public interest to appoint a Compliance Officer,
in addition to the mandatory positions of
President, Treasurer and Corporate Secretary.
The law now also expressly requires that the
Treasurer be a resident of the Philippines
(Sec. 24).
The election or non-holding of election of the
directors, trustees and officers of the
corporation is required to be reported to the
SEC, which is empowered under certain
conditions to summarily order that an
election be held (Sec. 25).

5. Corporate Powers

Under Section 35 of the RCC, additional

powers are expressly granted to corporations,
namely: the power to enter into a partnership,
joint venture or any other commercial
agreement with a natural person or another
corporation [Sec. 35 (h)]; and, for domestic
corporations, the power to donate to a political
party or candidate or for purposes of partisan
political activity [Sec. 35 (j)].

6. Shareholder Actions
The RCC now provides that if the date of the
regular meeting of the stockholders or
members is not fixed in the By-Laws, the same
shall be held on any date after April 15 of
every year as determined by the Board of
Directors/Trustees. Written notices of regular
meetings may now be sent to stockholders
and members through electronic mail and
such other means as may be allowed by the
SEC. The right of stockholders or members to
vote may now also be exercised through
remote communication or in absentia, under
rules and regulations to be issued by the SEC
governing participation and voting through
remote communication or in absentia, taking
into account the company’s scale, number of
shareholders or members, structure, and other
factors consistent with the protection and
promotion of shareholders’ or members’
meetings (Sec. 49 and 57).

The law also allows an arbitration agreement

to be included in the AOI or By-Laws of a
corporation (Sec. 181).

7. Corporate Books and Records

If the corporation denies or does not act on a

demand for inspection and/or reproduction of
corporate records, the aggrieved stockholder
or member may report such denial or inaction
to the SEC, which shall, within 5 days from
receipt of such report, conduct a summary
investigation and issue an order directing the
inspection or reproduction of the requested
records. This right to inspect is expressly
made subject to confidentiality rules under
prevailing laws (Sec. 73).

With regard to the financial statements of a

corporation, the RCC provides that if the paid-
up capital of the corporation is less than
P600,000.00 or such other amount as may be
determined appropriate by the Department of
Finance, the financial statements may be
certified under oath by the President and the
Treasurer, and need not be certified by an
independent certified public accountant (Sec.
74).

8. Foreign Corporations

The new law provides that within 60 days from

issuance by the SEC of a license to transact
business to a branch office of a foreign
corporation, said branch must deposit
acceptable securities to the SEC with an
actual market value of at least P500,000.00 for
the benefit of present and future creditors of
the licensee. In addition, within 6 months after
the fiscal year of the licensee, the SEC may
require the licensee to deposit additional
securities or financial instruments equivalent in
market value to 2% of the amount by which
the licensee’s gross income exceeds
P10,000,000.00 (Sec. 143).
A domestic corporation who acts as a resident
agent of a foreign corporation must be of
sound financial standing and must show proof
that it is in good standing as certified by the
SEC (Sec. 144).

9.Investigations, Offenses and Penalties

Under the new law, jurisdiction over party-list

organizations is transferred from the SEC to
the Commission on Elections (COMELEC),
subject to the implementing rules to be jointly
promulgated by the SEC and the COMELEC
(Sec. 182).

The RCC also enumerates the various specific

offenses and their corresponding penalties,
with special emphasis on fraud and graft and
corrupt practices:

a. Unauthorized Use of Corporate Name (Sec.

159);
b. Violation of Disqualification Provision (Sec.
160);
c. Violation of Duty to Maintain Records, to
Allow Inspection or Reproduction (Sec. 161);
d. Willful Certification of Incomplete,
Inaccurate, False or Misleading Statements or
R*eports (Sec. 162);
e. Independent Auditor Collusion (Sec. 163);
f. Obtaining Corporate Registration Through
Fraud (Sec. 164);
g. Fraudulent Conduct of Business (Sec. 165);
h. Acting as Intermediaries for Graft and
Corrupt Practices (Sec. 166);
i. Engaging Intermediaries for Graft and
Corrupt Practices (Sec. 167);
j. Tolerating Graft and Corrupt Practices (Sec.
168);
k. Retaliation Against Whistleblowers (Sec.
169); and
l. Other Violations of the Code (Sec. 170).
10. Technological Updates

Aside from recognizing stockholder or member

votes cast in absentia via remote
communication methods, the new law also
allows the AOI and applications for
amendments thereto to be filed with the SEC
in the form of electronic documents, in
accordance with the rules on electronic filing
that the SEC will promulgate (Sec. 13). The
SEC is further mandated to implement an
electronic filing and monitoring system to
expedite corporate name reservation and
registration, incorporation, submission of
reports, notices and documents required by
the RCC (Sec. 180).