40 1

determination that an arbitration agreement is in the corporation’s TABLE OF CONTENTS

articles or by-laws, or a separate agreement. The tribunal may grant
interim measures to ensure enforcement of the award, prevent a Page
miscarriage of justice, and otherwise protect the rights of the parties.
General Provisions 2
A final arbitral award shall be executory after the lapse of 15 days from
Dissolution 23
receipt by the parties and shall be stayed only by the filing of a bond or
issuance by the appellate court of an injunctive writ. The SEC shall thus One Person Corporation 27
formulate rules and regulations to govern such arbitration.
Specific Provisions on Investigations, Offenses and 31
Penalties
 2 39
What are the changes in the classifications of shares?
Designating different types of shares, with varying rights, privileges, and
restrictions, is still allowed. However, the founder shares given the
exclusive right to vote and be voted for are not allowed to exercise that
right in violation of the Anti-Dummy Law and the Foreign Investment
Act. As for the redeemable shares, their redemption shall now be
subject to any rules and regulations issued by the Securities and
Exchange Commission (SEC), in addition to terms and restrictions in the
Articles of Incorporation and certificate of stock.
What are the changes in incorporators?
Incorporators are any person, partnership, association, or corporation,
singly or jointly with others, not exceeding 15, may now be incorporators.
Incorporators are those persons who originally form a corporation and
are the first stakeholders. No minimum number is required, and the
majority of them need not be Philippine residents. Previously, a
minimum of 5 natural persons is necessary to create a corporation.
Since there is no longer any minimum number required for incorporators,
any single natural person is now allowed to form a corporation by
him/herself, known under the new Code as a One Person
Corporation.
What are the changes in the corporate term?
Perpetual corporate existence is now allowed. Those whose corporate
existence was limited by the 50-year rule in the Old Code will
automatically have perpetual existence unless they notify the SEC of
their desire to stick to the limited 50-year term.
What are the changes in the corporate term?
If a corporation wishes to change its corporate term, it may amend its
What are the changes in the electronic filing and monitoring system?
The new Code now specifically provides that the SEC shall develop and
implement an electronic filing and monitoring system. For this, it shall
promulgate rules to facilitate and expedite, among others, corporate
name reservation and registration, incorporation, submission of reports,
notices, and documents required by the Code, and sharing of pertinent
information with other government agencies.
What are the changes in arbitration for corporations?
Since the new Code now allows for arbitration in case of disputes
between the corporation, stockholders or members, an arbitration
agreement may be provided in the articles of incorporation or the by-
laws of a corporation when such is in place disputes which arise from the
implementation of the articles or by-laws, as from intra-corporate
relations shall be referred to arbitration. A dispute shall be nonarbitrable
when it involves criminal offenses of third parties. Any such arbitration
agreement is binding on the corporation, its directors, trustees, officers,
and executives and managers.
To be enforceable, the arbitration agreement should indicate the number
of arbitrators and the procedure for their appointment. The power to
appoint the arbitrators shall be granted to a designated independent third
party, and should such party fail to appoint the arbitrators in the manner
and within the period specified in the agreement, the parties may request
the SEC to appoint the arbitrators. In any case, arbitrators must be
accredited or must belong to an organization accredited for arbitration.
The arbitral tribunal shall have the power to rule on its jurisdiction and
questions relating to the validity of the arbitration agreement. When an
intra-corporate dispute is filed with the Regional Trial Court, the court
shall dismiss before the pre-trial conference is terminated upon its
 38
What are the changes in the other powers, functions, and jurisdiction of
the SEC?
In addition to its power to implement the Code and to promulgate rules
and regulations reasonably necessary to enable it to perform its duties,
the SEC now has the power and authority to do to following:
• Exercise supervision and jurisdiction over all corporations and
persons acting on their behalf;
• Retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution. It also retains jurisdiction
over pending suspension/rehabilitation cases filed as of June 30,
2000.
• Impose sanctions for violations of the Code, its implementing
rules, and SEC orders.
• Promote corporate governance and the protection of minority
investors, among others, issuance of rules and regulations
consistent with international best practices.
• Issue opinions to clarify the application of laws, rules, and
regulations
• Hold corporations in direct and indirect contempt
• Issue subpoena duces tecum and summon in witnesses to appear
in proceedings.
• Inappropriate cases, order the examination, search and seizure of
documents, papers, files and records, and books of accounts of
any entity or person under investigation as may be necessary for
the proper disposition of the cases.
Power, authority, and responsibility of the SEC over party-list
organizations have now been transferred to the COMELEC, to whom
monitoring, supervision and regulation will be automatically transferred
within six months from the effectivity of the new Code.
3
articles of incorporation at least three years before the expiration of its
term. Previously, such a change should be made at least five years
before the expiration.
If the term has already expired, the corporation may now ask the SEC to
revive its corporate existence, which option was not present in the old
Code. If the same is approved, the SEC will issue a certificate of revival
giving it perpetual existence unless it requests a limited term. However,
no revival is allowed for companies under the supervision of other
government agencies, such as banks, insurance and trust companies,
unless the appropriate government agency first approves the revival.
What are the changes in the minimum capital stock?
Though there has been no previously set minimum amount for a
corporation’s authorized capital stock, it was however required to have a
minimum subscription of 25% of the total stock, 25% of which must be
paid upon subscription. The minimum amount for such paid-up capital
should not be less than P5,000.
Under the new Code, no such minimum requirements are provided.
What are the changes in the articles of incorporation?
The new Code now recognizes that the Articles of Incorporation may
be authenticated, instead of merely being acknowledged before a notary
public. Its required contents are similar to those required under the old
Code; however, it may include an arbitration agreement to govern
intra corporate disputes and relations.
What are the changes in requirements for incorporation?
Though generally, the same documentary requirements are needed to
incorporate, the new Code provides that the Articles of Incorporation
may be filed with the SEC, and any application for amendments, in
 4 37
an electronic document. The old Code did not have any similar
provisions regarding electronic documents.
In addition to the articles of incorporation, another document previously
required was the treasurer’s affidavit attesting that the minimum amounts
of subscribed and paid-up capital have been met. Since the new Code no
longer requires such minimum amounts, the Treasurer need not issue
such an affidavit. Instead of this, the Articles should indicate that the
named Treasurer certifies that the information in the Articles regarding
authorized capital stock, and the subscription and paid-up amounts have
been duly received for an in behalf of the corporation.
What are the changes in a corporate name?
Previously, the old Code did not allow corporate names which are
identical, similar, or confusingly similar to another corporate name,
among others. Under the new Code, names which are “not
distinguishable” from reserved corporate names or names of an existing
corporation. Names are not distinguishable even if they contain the word
corporation, company, incorporated, limited o any abbreviation,
punctuation, article conjunction, contraction, preposition or abbreviation,
or is of different tenses, with spacing, or with a number of the same word
or phrase.
What are the changes in the power of SEC over corporate names?
Previously, the SEC only holds power to approve or deny proposed
corporate names and any change. Under the new Code, the SEC has the
power to summarily order a corporation to cease and desist from using a
name it finds to violate the requirements of the law. It may also now
cause the removal of all visible signs, marks, ads, labels, prints, and other
materials bearing the disapproved name.
What are the changes in failure to file and confidential information?
The new Code now provides that the SEC may place a corporation under
delinquent status in case of failure to submit the annual reportorial
requirements to the SEC three times, whether consecutively or
intermittently, within five years. The SEC shall give reasonable notice
and coordinate with the appropriate regulatory agency before placing on
delinquent status companies under special regulatory jurisdiction. Also,
any person required to file a report with the SEC may redact confidential
information from such a report, so long as such confidential information
is submitted in a supplemental report prominently labeled as confidential
together with a request for confidential treatment of the report and the
specific grounds for its grant.
What are the changes in the visitorial power of the SEC?
The old Code did not provide for SEC visitorial powers, but the same has
been included in the new Code. The SEC shall now exercise visitorial
powers over all corporations, which powers shall include the
examination and inspection of records, regulation, and supervision
of activities, enforcement of compliance, and the imposition of
sanctions by the Code.
If the corporation, without justifiable cause, refuses or obstructs the
SEC’s exercise of visitorial powers, its certification of incorporation may
be revoked by the SEC, without prejudice to other penalties and
sanctions which may be imposed.
Though interrogatories propounded by the SEC and answers are still
confidential, they will no longer be kept strictly confidential when
disclosure is necessary for the SEC to take action to protect the public
from issuing orders in the exercise of its powers under the Code.
 36
exceeding that imposed on the principal offenders at the discretion of the
court, after taking account their participation in the offense.
What are the changes in the collection and use of fees?
Previously, the SEC may only collect and receive fees, fines, and other
charges under the Code and its rules and regulations. The new Code
allows the SEC to retain and use the said fees, which shall be deposited
and maintained in a separate account which shall form a fund for SEC
modernization and to augment operational expenses such as, but not
limited to capital outlay, increase in compensation and benefits
comparable with prevailing rates in the private sector, reasonable
employee allowance, employee career advancement and
professionalization, legal assistance, seminars, and other professional
fees.
What are the changes in the reportorial requirements of corporations?
Under the old Code, all corporations lawfully doing business in the
Philippines were only required to submit the SEC financial statements of
assets and liabilities certified by an independent CPA, in appropriate
cases, and other reports required by the SEC. The new Code now
specifically provides that all corporations doing business in the
Philippines, even if now lawfully done, are required to submit annual
financial statements audited by an independent CPA if total
assets/liabilities are P600,000 or more. Otherwise, it shall be certified by
the treasurer or chief financial officer and a general information sheet. In
addition to these, the new Code requires corporations vested with the
public interest to submit a director/trustee compensation report, and a
director/trustee appraisal or performance report, and the standards or
criteria used to assess each.
5
If the corporation does not obey the order of the SEC, the SEC may hold
it and its responsible officers or directors in contempt, and hold them
administratively, civilly, and criminally liable, and revoke its registration
altogether.
What are the changes in the process of incorporation?
The old Code did not provide for a specific process to be followed when
incorporating a company. At most, it only stated when corporate
existence commences. Under the new Code, a specific process has been
laid down. First, the incorporators shall submit their intended corporate
name to the SEC for verification. Once approved, they shall then submit
their articles of incorporation and by-laws to the SEC. Once the SEC
determines that the documents submitted are duly compliant, then it shall
issue the certificate of incorporation. Upon issuance of such a certificate,
its corporate existence begins.
What are the changes in the non-use of the corporate charter?
Under the old Code, a new corporation must formally organize and
commence business or construction of its works within two years from
incorporation. Otherwise, it shall be deemed dissolved.
Under the new Code, a new corporation has five years from the date
of incorporation to commence business operations. If he fails to do so
within the said 5-year period, its certificate of incorporation will be
deemed revoked at the end of the five years.
What are the changes in continuous operation?
It may be possible that a corporation, even after it has initially
commenced business operation, may become inoperative. Under the old
Code, if it becomes inoperative continuously for five years, then the SEC
may revoke its certificate of incorporation.
 6 35
Under the new Code, the corporation may be placed by the SEC under
delinquent status, other after notice and hearing, for two years, to allow it
to resume operations. This will be lifted once the corporation resumes
business, but if it does not resume operations, then the SEC may revoke
its certificate of incorporation.
What are the changes in the board of directors (BOD) and trustees?
A corporation exercises its powers through a BOD if it is a stock
corporation, or through a board of trustees if it is a non-stock corporation.
Previously, directors hold office for a term of 1 year, and the majority of
whom should be Philippine residents. Trustees hold office in a way that
1/3 of the first board will hold office for one year, and then subsequent
ones will hold office for three years.
Under the new Code, directors hold office for one year, while trustees
hold office for three years. The majority of the Board is also no
longer required to be Philippine residents.
What are the changes in independent directors?
Previously, the old Code did not require the appointment of independent
directors and was only required for specific corporations such as those
falling under the Securities Regulation Code, and banks and institutions
under the supervision of BSP. Independent directors are persons who,
apart from shares and fees from the corporation, are independent of
management and free from any business or other relationship which
could materially interfere with independent judgment in carrying out
their responsibilities as a director.
Under the new Code, corporations vested with public interest should
have a board with independent directors constituting at least 20% of
the board, to be elected by their shareholders. Corporations vested
with public interest are corporations engaged on registered securities
livelihood of the whistle-blower. The violator will be punished with a
fine of P100,000 to P1,000,000.
What are the changes in other violations?
The old Code had a general provision on violations of the corporation
laws. The new Code adopts the same general provision, on top of the
other provisions on specific violations. Violations that are not penalized
under the Code are punishable by a fine of not less than P10,000 to
P1,000,000. If a corporation commits the violation, it may, after notice
and hearing, be dissolved in appropriate proceedings by the SEC, which
should not bar the institution of any action against the director, trustee or
officer or corporation responsible. Liability under this provision in the
new Code shall be separate from any other administrative, civil or
criminal liability under the law. The old Code only provided a fine of
P1,000 to P10,000, but included imprisonment as a penalty, for 30 days
to a maximum of 5 years, without any mention of dissolution as an
additional sanction.
What are the changes in the liability of directors, trustees, officers, and
employees?
The Code now specifically provides that if the offender is a corporation,
the penalty may, at the discretion of the court, be imposed upon such
corporation and upon its directors, trustees, stockholders, members,
officers, or employees responsible for the violation or indispensable to its
commission.
What are the changes in liability of aiders, abettors, and other secondary
liability?
The new Code provides that anyone who shall aid, abet, counsel,
command, induce, or cause any violation of the Code or any rule,
regulation, or order of the SEC shall be punished with a fine not
 34
What are the changes in graft and corruption intermediaries?
A corporation used for fraud, or for committing, concealing graft and
corrupt practices, is now subjected to a fine, in addition to other
sanctions, of P100,000 to P5,000,000. When it is found that any of its
directors, officers, employees, agents or representatives are engaged in
graft and corrupt practices, the corporation’s failure to install safeguards
for the transparent and lawful delivery of services and policies, code of
ethics, and procedures against graft and corruption shall be prima facie
evidence of corporate liability.
What are the changes in engaging intermediaries for graft and
corruption?
A corporation that appoints an intermediary who engages in graft and
corrupt practices for the benefit of the corporation shall now be punished
with a fine ranging from P100,000 to P1,000,000.
What are the changes in tolerating graft and corruption?
A director, trustee or officer who knowingly fails to sanction, report, or
file the appropriate action with proper agencies, allows or tolerates graft
and corrupt practices or fraudulent acts of corporate director, trustees,
officers or employees, shall now be punished with a fine ranging from
P500,000 to P1,000,000.
What are the changes in retaliation against whistleblowers?
To protect whistleblowers or those who provide truthful information
relating to the commission or possible commission of any offense or
violation of the Code, the new Code punishes any person who knowingly
and with intent to retaliate, commits acts detrimental to the
whistleblower such as interfering with the lawful employment or
7
activities, publicly listed companies which are those with assets of at
least P50 million and with 200 or more holders of shares, each with at
least 100 shares, banks, and quasi banks, NSSLAs, pawnshops, money
service companies, pre-need, trust and insurance companies, other
financial intermediaries, and other corporations vested with similar
public interests.
What are the changes in the election of directors or trustees?
Previously, the old Code provided for the manner of electing directors or
trustees, without any mention of nominations. Under the new Code,
Directors/Trustees are first nominated by the stockholders/members, and
the nominees receiving the highest number of votes will be elected.
Generally, the same process for an election still governs; however,
remote communication or voting in absentia may now be done, if
allowed in the by-laws or authorized by a majority of the board. These
two new modes for voting are not available for corporations vested with
the public interest.
What are the changes in the failure to hold elections of directors and
trustees?
The old Code did not provide for a specific process to be followed in
case no elections are held, or the required majority of the
stockholders/members were not present during the elections. Under the
new Code, even if no elections are held, the meeting will be adjourned
and the same will be reported to the SEC within 30 days from the date of
the elections. The report should include a new specific date when the
elections will be held which should not be more than 60 days from the
first date. In case no date was selected, the SEC may schedule it for the
corporation, and issue other orders.
 8 33
What are the changes in corporate officers?
Under the old Code, the directors were only required to elect a president,
who must be a director, a treasurer who need not be a director, and a
corporate secretary who must be a resident citizen of the Philippines. No
other officers are required to be elected; unless there are others listed in
the by-laws.
Under the new Code, the same officers are required; however, the
treasurer is now required to be a resident of the Philippines. In addition
to these officers, a compliance officer must also be elected for
corporations vested with the public interest.
What are the changes in death and resignation of a director, trustee, and
officer?
Though the old Code required that any death, resignation, or any other
circumstance causing a director, trustee, or officer to cease holding office
must be reported to the SEC, no period was provided. Under the new
Code, such a warranty should be reported to the SEC within seven days
from the time the secretary learns of such death, resignation, etc.
What are the changes in the disqualifications of directors, trustees, and
officers?
Under the old Code, only those who have been convicted by final
judgment of an offense punishable by imprisonment of more than six
years under the said Code, within five years from election or
appointment, are disqualified.
Under the new Code, additional disqualifications were included, such as
those who have been found, within the same 5-year period, to have
violated the Securities Regulation Code, made administratively liable for
offenses involving fraudulent acts, and found by a foreign court to have
What are the changes in incomplete, inaccurate, false, or misleading
statements and reports?
Any person who willfully certifies a report required under the Code
knowing that it contains incomplete, inaccurate, false, or misleading
information or statements shall now be punished with a fine of P20,000
to P200,000, which may be increased to P40,000 to P400,000 if the
certification is injurious or detrimental to the public.
What are the changes in independent auditor collusion?
An independent auditor who, in collusion with the directors or
representatives of the corporation, certifies the corporate financial
statements despite incompleteness or inaccuracy, or despite failure to
give a fair and accurate presentation of the corporate conditions, or
despite containing false or misleading statements, may now be published
with a fine between P80,000 to P800,000. When the statement or report
is fraudulent or has the effect of causing injury to the public, the fine is
increased to P100,000 to P600,000.
What are the changes in registration through fraud?
Those responsible for the formation of a corporation through fraud or
who assisted shall now be subject to a fine of P200,000 to P2,000,000
and may be increased to P400,000 to P5,000,000 if injurious or
detrimental to the public.
What are the changes in the fraudulent conduct of business?
A corporation that conducts business through fraud may now be
punished with a fine of P200,000 to P2,000,000, and if the violation is
injurious or detrimental to the public, the penalty is increased to
P400,000 to P5,000,000.
 32
a. Fine of P5,000 to P2,000,000 and a daily fine of P1,000 for
each day of violation, not exceed P2,000,000
b. Issuance of permanent ceases and desist order.
c. Suspension/revocation of certificate of incorporation; and
d. Dissolution and forfeiture of assets
What are the changes in the unauthorized use of the corporate name?
The unauthorized use of a corporate name is now punishable with a fine
ranging from P10,000 to P200,000.
What are the changes in violation of disqualification?
A person who has knowledge of ground for disqualification but who is
still elected and holds office as a director, trustee or officer, or who
willfully conceals such fact, may be punished with a fine of P10,000 to
P200,000 and will be permanently disqualified from being a director,
trustee, officer of a corporation. If the violation is injurious to the public,
the penalty will be increased to P20,000 to P400,000.
What are the changes in violation of the duty to maintain records and
allow inspection?
Unjustified refusal or failure to keep and maintain corporate books, and
to allow inspection and reproduction of corporate records are now
punishable with a fine ranging from P10,000 to P200,000. When the
violation is injurious or detrimental to the public, the penalty is increased
to P20,000 to P400,000, without prejudice to the exercise of the
contempt of the SEC.
9
violated or engaged in similar misconduct. Also, the SEC and the
Philippine Competition Commission may impose additional
qualifications/disqualifications.
What are the changes in the removal of directors and trustees?
Under the old Code, only the stockholders or members of a corporation
may remove any member of the board. Under the new Code, the SEC is
also given the power to motu proprio, upon a verified complaint,
after due notice and hearing, to order the removal of a disqualified
director/trustee. The said removal is without prejudice to any other
sanction the SEC may impose on the board member who, despite
knowledge of disqualification, failed to remove the director/trustee
involved.
What are the changes in the vacancies on the Board?
Under the old Code, though vacancies caused by removal or expiration
of term were required to be filed by the vote of a majority of the
stockholders or members, no procedure for such election was included.
Even for vacancies caused by other reasons, no mention is made as to the
time when they should be filled.
Under the new Code, elections for vacancies due to term expiration
should be held within one day from date of expiration in a meeting called
for that purpose. If the vacancy is due to removal, the election may be
held on the same day of the meeting authorizing removal, which fact of
removal should be indicated in the agenda and notice of the meeting. For
any other vacancy, elections should be within 45 days from the time
when the vacancy arose. The director/trustee to be elected will only be a
replacement and shall serve only for the unexpired term.
 10
What are the vacancies in the Board requiring emergency action?
The old Code did not have any provision on vacancies requiring
immediate emergency action. Under the said Code, even if emergency
action is needed, the general rules on vacancies should still be followed.
This is remedied by the new Code since it provides that any vacancy
which prevents the board from constituting a quorum to do business, and
there is a need to act to prevent grave, substantial, and irreparable loss or
damage to the corporation, may be temporarily filled from among the
officers of the corporation by a unanimous vote of the remaining
directors/trustees. The one designated will only be allowed to act on the
emergency action necessary at such time, since his/her term shall cease
within a reasonable time from the termination of the emergency or upon
the election of a replacement. Within three days from the creation of the
emergency board, the corporation is required to notify the SEC of such
matters.
What are the changes in the compensation of directors and trustees?
Similar to the old Code, the new Code provides that the board shall not
receive compensation to act as members of the board, except for
reasonable per diems, unless a majority of their stockholders/members
approve of giving them compensation. But, the new Code also provides
that corporations vested with public interest shall submit to the
shareholders/members and the SEC, an annual report of the total
compensation of each of their directors/trustees.
What are the changes in dealings of directors, trustees, and officers of
the corporation?
Under the old Code, only contracts of directors, trustees, and officers
with the corporation are voidable, unless certain conditions are present.
Under the new Code, even contracts with their spouses and relatives
31
SPECIFIC PROVISIONS ON INVESTIGATIONS, OFFENSES and
PENALTIES
What are the powers of the SEC?
The new code now specifically lays down all the powers of the SEC. It
may investigate an alleged violation of the Code, or a rule, regulation, or
any of its orders and publish its findings, orders, opinions, advisories or
information concerning such violations as may be relevant to the public
or concerned parties. If investigations concern companies under the
regulatory jurisdiction of other agencies, then they shall notify the
agencies and coordinate with them.
The SEC may also administer oaths and affirmations, issue subpoena and
subpoena duces tecum, take testimony, and perform other acts necessary
to proceedings and investigations.
It may issue cease and desist orders when it has a reasonable basis to
believe that a person has violated or is about to violate the Code. It may
be issued ex parte to enjoin fraudulent acts or those which would cause
significant, imminent and irreparable danger or injury to public safety or
welfare, which order is valid for 20 days. If the order is not obeyed, or if
for no reason, there is a failure to comply with any SEC order, decision,
or subpoena, the SEC may hold the person in contempt, after notice and
hearing, and subject him/her to a fine of P30,000. If there is clear and
open defiance, then a daily fine of P1,000 may be imposed by the SEC.
What are the changes in administrative sanctions?
The SEC may impose the following sanctions in case it finds, after due
notice and hearing, that the Code, its rule and regulations, or any of its
orders have been violated, depending on the extent of participation,
nature, effect, frequency and seriousness of the violations.
 30
stockholder dies, his/her legal heirs may choose to dissolve the OPC or
convert it into an ordinary corporation.
11
within the 4th civil degree of consanguinity are affinity is also
voidable. However, in addition to the conditions laid down in the old
Code to make such contracts valid, an additional condition was inserted:
in case of corporations vested with public interest, material contracts are
approved by at least 2/3 of the entire membership of the board, with at
least a majority of the independent directors voting to approve the
material contract.
What are the changes in special committees?
Even under the old Code, the Board may create an executive committee,
if they are allowed by the by-laws, to be composed of at least three
directors, to act on specific matters delegated by the Board.
In addition to the executive committee, the new Code allows for the
creation of special committees that are temporary or permanent, and the
board may determine the committee member’s term, compensation,
powers, and responsibilities.
What are the changes in extending and shortening the corporate term?
Extending or shortening the corporate term is still subject to the
requirement of sending notices to the stockholders/members of the
meeting when the corporate term will be extended or shortened. In
addition to being sent personally or by mail to the stockholders or
members, the new Code allows the notice of the meeting to be sent
electronically, so long as such electronic sending is allowed by the by-
laws or with the consent of the stockholder/member, by rules and
regulations of the SEC on the use of electronic data messages.
What are the changes in increasing and decreasing capital stock?
Similar to the notice requirement meetings called to extend/shorten the
corporate term, the new Code now allows for the notice to be sent by the
 12
electronic means, as may be recognized in the by-laws, and the SEC’s
rules and regulations on electronic data messages.
Also, any application to change the capital stock shall now be filed with
the SEC within six months from the approval of the Board and its
stockholders.
What are the changes in the dispositions of corporate assets?
The old Code was passed at a time when the Philippines still did not have
competition law. Thus, it is only in the new Code that the said law is
expressly mentioned, thereby subjecting dispositions of corporate assets
to its provisions.
A notable insertion in the new Code is the basis for determining whether
the disposition or sale covers all or substantially all assets or properties.
The new Code now specifically provides that the determination must
be based on the net assets values of the corporate assets, as shown in
the latest financial statements of the corporation. Another insertion
is the provision on allowing notice of the proposed sale and the
meeting called for such purpose to be sent electronically when such
is allowed by the by-laws or with the consent of the
stockholders/members. Under the old Code, notice can only be sent
personally or by mail.
What are the changes in investing in corporate funds?
Similar to the old Code, the new Code provides that when corporate
funds are invested in another corporation or business, a meeting should
be called to allow the stockholders to vote on the investment. Notices of
such meetings should be sent to them before the meeting, which, under
the new Code, may be sent electronically, by rules and regulations of the
SEC on electronic data messages and when allowed by the by-laws or
dine with the consent of the stockholders.
29
the stockholder, the nominee shall sit as director and stockholder until
the legal heirs of the stockholder are determined, and they designated one
of them or the estate as the single stockholder of the OPC. The alternate,
on the other hand, shall be nominee’s alternate, meaning he/she shall be
the director in case of death, incapacity or refusal of the nominee to
discharge his/her functions.
What are the records of meetings and reportorial requirements?
An OPC shall maintain a minute book containing all actions, decisions,
and resolutions of the OPC. If action is needed on any matter, a written
resolution, signed and dated by the single stockholder and recorded in the
minute book is sufficient for the validity of the corporate action, the date
of recording in the minute book is deemed the date of the meeting. Just
like a regular corporation, an OPC shall file with the SEC its financial
statements, certified by an independent CPA if assets/liabilities are
P600,000 or more, report of explanations/comments of the president on
qualifications, reservations or adverse remarks of the auditor, disclosure
of all self-dealing and related party transactions, and other reports
required by the SEC.
What is the conversion of OPC?
OPCs may be converted into an ordinary stock corporation, while
ordinary stock corporations may be converted into OPCs. When a
single stockholder acquires all stocks of an ordinary corporation, he/she
may apply for conversion into an OPC by submitting the necessary
documents to the SEC. Once approved, the SEC will issue a certificate
reflecting the conversion, at which point the OPC will assume the
outstanding liabilities of the ordinary corporation. On the other hand, an
OPC may be converted into an ordinary corporation by submitting to the
SEC notice of such conversion and the circumstances leading to it,
subject to the submission of all other requirements. Also, when the single
 28
Who are the officers and appointees of OPCs?
Within 15 days from incorporation, the OPC s shall appoint a treasurer, a
corporate secretary, and other officers it deems necessary and notifies the
SEC within 15 days from appointment. The single stockholder cannot be
appointed as secretary. If he/she is appointed as treasurer, he/she shall
give a bond to the SEC to be renewed every two years, and undertake in
writing to faithfully administer the funds of the OPC, and disburse and
invest the same according to its articles.
The secretary shall be responsible for maintaining the minute book and
regards of the OPC, notify the nominee/s and the SEC of
death/incapacity of the single stockholder, and call the nominee/s and
legal heirs of the stockholder to elect a new director, to amend the
articles, and for other matters.
The single stockholder shall also appoint a nominee and alternate
nominee, tasked to take his/her place as a director in case of death or
incapacity, and manage the corporation.
What are a nominee and alternate nominee?
The names of the designated nominee and alternate nominee shall be
stated in the articles, along with their address, contact details, and the
extent and limitations of their authority in managing the OPC. They
should consent to the designation in writing, which will be attached to
the application for incorporation of the OPC. If they wish, they may
withdraw their consent any time before the death or incapacity of the
single stockholder. The single stockholder may change the named
nominees by notifying the SEC, without need to amend the articles.
In case of temporary incapacity of the single stockholder, the nominee
shall sit as director and manage the affairs of the OPC until the
stockholder regains capacity. In case of death or permanent incapacity of
13
What are the changes in the adoption of by-laws?
Under the old Code, within one month from receipt of the certificate of
incorporation from the SEC, the corporation is mandated to adopt its by-
laws for its government. But, the same Code also allows for the by-laws
to be adapted before incorporation, which must then be signed by all
incorporators, to be filed with and approved by the SEC along with the
articles of incorporation.
Under the new Code, the 1 month to adopt the by-laws after
incorporation has been deleted. The Corporation now as more time to
adopt it’s bylaws, so long as it files its by-laws with the SEC once
adopted. It may also still choose to adopt the by-laws before
incorporation, following the same rules as provided in the old Code.
What are the changes in the contents of by-laws?
The new Code lays down the same contents as those provided in the old
Code, but it does require including two new matters:
1. By-laws must state the modes by which stockholders, member,
trustee, or director may attend the meeting and cast their votes
2. A maximum number of other board representations that an
independent director or trustee may have, which should not be
more than that prescribed by the SEC.
Similar to the Articles of Incorporation, the By-Laws may now
also provide for an arbitration agreement.
What are the changes in meetings of stockholders/members?
Under the old Code, written notice of regular stockholders/members
meetings should be sent to them at least two weeks before the meeting,
unless the by-laws state a different period. If the by-laws do not provide
 14
for a specific date, then the annual meeting should be held on any date in
April of every year.
The new Code now provides that if the annual meeting is not specifically
fixed in the by-laws, it shall be held on any date after April 15, and
notice should be sent to the stockholders/member at least 21 days before
the meeting. The new Code also now allows for the notice to be sent via
electronic mail or in any other manner as may be allowed by the SEC.
What are the changes in regular meetings of stockholders/members?
Under the new Code, during regular meetings, the board should strive to
present certain matters to the stockholders/members. Such matters
include the minutes of the most recent regular meeting, members’
list/material information on current stockholders and their voting rights,
detailed and comprehensible assessment of the corporation’s
performance, financial report for the preceding year, explanation of
dividend policy, director/trustees profiles and attendance report,
appraisals and performance reports, directors/trustee compensation report,
board disclosures on self-dealing and related party transactions, and
profiles of directors nominated or seeking election or re-election. Any
director, trustee, member, or stockholder may present any other matter to
be included in the meeting’s agenda. The stock and transfer
book/membership book should be closed at least 20 days before the
scheduled date of the regular meeting. If the regular meeting is
postponed, written notice of the postponement and the reason should be
sent to the stockholders/members at least two weeks before the date of
the meeting, unless the by-laws or the law requires a different period.
The old Code did not provide for such matters, and the same is new
insertions in the new Code.
27
ONE PERSON CORPORATIONS
Previously, stock corporations could only be established by at least five
natural persons, who are the first subscribers, and may serve as the first
Board of Directors. Under the new Code, a “one person corporation”
(OPC) may now be created with only one single stockholder, who
must be a natural person, estate or trust. Such a person will be the
sole director and president of the OPC.
Since they are vested with the public interest, banks and quasi-banks,
pre-need, trust, insurance, public and publicly-listed companies, and non-
chartered GOCCs cannot incorporate as an OPC. Likewise, a natural
person licensed to exercise a profession cannot create an OPC for
purposes of exercising such a profession.
A single stockholder is still a separate person from the OPC, and the
doctrine of piercing the corporate veil still applies, but if the single
stockholder cannot prove that the OPC is independent of his/her
personal property, then he/she shall be jointly and severally liable
for debts and other liabilities of the OPC. The single shareholder
claiming limited liability has the burden to prove that the OPC was
adequately financed.
What are the articles and by-laws of OPCs?
OPC articles shall be by the requirements laid down for regular
corporations, but shall substantially contain the name, nationality, and
residence of the trustee, administrator, executor, guardian or other person
exercising fiduciary duties, for trusts or estates, and the name, nationality
residence of the nominee and alternate nominee and the extent, coverage,
and limitation of their authority, OPCs do not need to file any by-laws.
 26
Philippine Deposit Insurance Corporation Charter. The new Code also
clarifies when the 3-year winding-up period beginnings, which is after
the effective date of liquidations. Previously, it began after the time when
it would have been so dissolved.
15
What are the changes in special meetings of stockholders/members?
The new Code now specifically provides that any stockholder/member
may propose the holding of a special meeting and indicate the items to be
included in the agenda. The new Code also indicates that though notice
of special meetings may still be waived, general waivers in the articles of
incorporation or the by-laws are not allowed, and even if there has been a
valid waiver, attendance in the meeting will be considered a waiver of
notice, unless the person who attended was present to object to any
business transaction for the reason that the meeting was not lawfully
called or convened. The new Code also requires that the stock and
transfer book should be closed at least seven days before the date of the
special meeting. Such matters were not provided in the old Code.
What is the manner of voting by stockholders and members?
The old Code did not specifically provide how stockholders/members
will vote. The new Code now specifically provides that
stockholder/members may vote in person through a proxy, or when so
authorized in the by-laws or by a majority of the board, through remote
communication or in absentia, subject to the rules to be issued by the
SEC and the corporation, regarding participation and voting through
remote communication or in absentia, taking into account the company’s
scale, number of stockholders/members, structure and other factors in
line with the protection and promotion of the meetings. When so
authorized, votes should be received before the corporation finishes the
tally of the votes. Anyone who votes by remote communication or in
absentia shall be deemed present for purposes of a quorum.
 16
What are the changes in the place of meetings of stockholders and
members?
Meetings are still to be held in the principal office of the corporation and,
if not practicable, in the city or municipality where the principal office is
located. The old Code provided that any city or municipality in Metro
Manila is considered as a city or municipality. Under the new Code,
cities and municipalities in Metro Cebu, Davao, and other Metropolitan
areas are now also considered as cities and municipalities for purposes of
stockholders’/members’ meetings.
What are the changes in the notice of meetings of stockholders and
members?
The new Code now specifically states that notice of any meeting will be
sent by what is provided in the by-laws, which notice shall state the time,
place and purpose of the meetings. The agenda shall accompany the
notice of meeting, a proxy form to be submitted to the secretary with a
reasonable time before the meeting, the requirements for attendance,
participation and voting in absentia or by remote communication, when
such is allowed, and the requirements and procedures for nomination and
election if the meeting is for such purpose. Such matters were not
specifically provided in the old Code.
Similar to the old Code, the new Code also provided that any business
transacted during the meeting, so long as within the powers or authority
of the corporation, shall be valid even the meeting was improperly called
or held, so long as the stockholders/members were all present or duly
represented. The new Code, however, requires that, as an additional
condition for the validity of the meeting, none of the
stockholders/members expressly state at the beginning of the meeting
that the purpose of their attendance is to object to the transaction of
business because the meeting was not lawfully called or convened.
25
may make pronouncement stating that the request for dissolution is
withdrawn, direct a joint meeting of the board and the
stockholders/members to ascertain whether to proceed with dissolution
or issue such other orders it deems appropriate.
What are the changes in involuntary dissolution?
Under the old Code, the involuntary dissolution of the corporation may
be done only upon a verified complaint, after due notice and hearing. The
new Code, on the other hand, gives the SEC the power to motu proprio
order dissolution, based on the following grounds:
a. non-use of corporate charter
b. continuous inoperation
c. upon receipt of a lawful order of a court dissolving the
corporation
d. upon finding by a final judgment that the corporation procured
incorporation through fraud,
e. upon finding by the final judgment that the corporation was
created to commit, conceal, or aid securities violations,
smuggling, tax evasion, money laundering, graft and corrupt
practice, or that is committed or aided in the commission of such
acts, or it repeatedly and knowingly tolerated the commission of
such acts and other fraudulent or illegal acts of directors, trustees,
officers or employees. Its assets may also be forfeited in favor of
the government.
What are the changes in corporate liquidation?
Under the old Code, corporate liquidation may be carried out for every
corporation; the new Code now specifically removes banks from the
coverage of the Code from provisions on liquidation since liquidation for
such entities are covered by the New Central Bank Act and the
 24
corporate affairs, but now, the only majority of the board are qualified to
sign the petition is still then verified by the president/secretary/one of the
directors/trustees. The new Code includes additional matters to be
included in the petition. Specifically, the petition should state the reason
for dissolution, the form, the manner and time when notices were given,
and the date, place, and time of the meeting when votes were cast. The
corporation must then submit to the SEC a copy of the resolution
authorizing dissolution certified by a majority of the board and
countersigned by the secretary and a list of all creditors. To do away with
confusion, the new Code now states that dissolution takes effect upon
issuance of a certificate of dissolution by the SEC.
What are the changes in shortening the corporate term?
Dissolution may still be done by shortening the corporate term, the
process for which is still substantially the same as that provided in the
old Code. However, under the new Code, the dissolution now takes
effect from the expiration of the shortened term, as stated in the approved
articles, without any further proceedings. Previously, it takes effect upon
approval by the SEC.
What are the changes in the request for dissolution may be withdrawn?
The old Code did not specifically provide for the withdrawal of any
request for dissolution with the SEC. The new Code now provides for it
and lays down the procedure for such withdrawal. The request should be
in writing in the form of a motion and similar in substance to the request
for dissolution, duly verified by any incorporator, director, trustee,
shareholder and signed by the same person/s. The request should be filed
with the SEC no later than 15 days from receipt of the SEC of the request
for dissolution, and before any deadline set by the SEC for filing
objections to the dissolution. Once received, the SEC shall then stop
acting on the dissolution and investigate the matter. After investigation, it
17
What are the changes in the meetings of directors and trustees?
Under the old Code, quorum in meetings was only defined for
stockholders/members’ meetings, but no mention was made regarding
quorum for board meetings. The new Code now specifically provides
that a majority of the members of the Board, as stated in the articles of
incorporation, shall constitute a quorum to transact corporate business,
unless a different quorum is provided in the articles or by-laws. Every
decision reached by the majority of the board constituting a quorum,
except for elections of the officers requiring a vote of a majority of all
members of the board, shall be valid as a corporate act. Also, the new
Code states that the chairman shall preside during the meeting and the
president will only preside if the chairman is absent.
What are the changes in the notice, attendance and voting by the Board?
Under the old Code, a notice of meetings, whether special or regular,
should be sent at least one day before the scheduled meeting, unless a
longer time is required in the by-laws. The new Code now requires that
notice should be sent at least two days before the meeting. Additionally,
the new Code now also provides for attendance and voting at board
meetings through remote communication, such as videoconferencing,
teleconferencing, or other alternative modes of communication, when the
directors/trustees cannot physically attend. Also, in case a director/trustee
has a potential interest in any related party transaction, he/she must
recuse from voting on the approval of the transaction.
What are the changes in consideration for shares of stock?
Similar to what was provided in the old Code, shares of stock cannot be
issued for any consideration less than its par or issued price. Different
kinds of consideration are acceptable under the corporation code, such as
cash, properties, labor performed or rendered for the corporation,
 18
previously incurred indebtedness amounts transferred from unrestricted
retained earnings to capital, and outstanding shares exchanged for stocks
in case of reclassification or conversion. However, the new Code
included some additional types of acceptable consideration, specifically,
shares to stock in another corporation, and other generally accepted
forms of consideration. These two are in addition to the acceptable forms
of consideration stated in the old Code.
What are the certificates of stock?
Under the old Code, only written certificates of stock, signed by the
President or Vice President, and countersigned by the Secretary or
Assistant Secretary, with of the corporation are recognized. Under the
new Code, the SEC may require corporations whose securities are traded
in trading markets and which can reasonably demonstrate their ability to
do so, to issue their securities or shares of stock in uncertificated or
scripless form by the rules of SEC.
What are the changes in corporate books to be kept?
Under the new Code, corporations were only required to keep a record of
all their business transactions and minutes of all meetings of the
stockholders/members and the directors/trustees. The new Code provides
a more comprehensive list of information required to be kept by
corporations. The new Code provides that corporations shall keep and
carefully preserve at its principal office all information relating to the
corporation, including but not limited to its articles of incorporation and
by-laws and any of their amendments, its current ownership structure and
voting right, list of stockholders/members, group structure, intra-group
relations, ownership data and beneficial ownership, the names addresses
of all members of its board, a record of all board resolutions, and
resolutions of stockholders/members and executive officers, record of all
business transactions, copiers of latest reportorial requirements submitted
23
DISSOLUTION
Like the old Corporation Code, corporations may be dissolved
voluntarily or involuntarily.
What are the changes in the voluntary dissolution with no creditors
affected?
Generally, the procedure under the old Code has been retained; however,
the new Code now requires that majority vote of the board and
majority vote of the stockholders/members to approve the
dissolution.
Previously, the voting requirements were a majority vote of the board
and 2/3 vote for the stockholders/members. Notice of the meeting when
voting will be held should be sent at least 20 days (lowered from 30
days) before the meetings by means which includes any means
authorized under the by-laws. Notice of the time, place, and object of the
meeting should also still be published, but such may be done any time
before the meeting, and need not be for three weeks. The new Code
provides that a verified request for dissolution be filed with the SEC
providing details of the dissolution, and submit certain documents
showing compliance with the requirements. The SEC shall approve
the request within 15 days from receipt, and dissolution shall take effect
only upon issuance of a certificate of dissolution. Banks, preneed,
insurance and trust companies, and other similar financial intermediaries
require the favourable recommendation of the appropriate government
agency before filing their application.
What are the changes in voluntary dissolution with affected creditors?
Voluntary dissolution under this type still requires the filing of a verified
petition with the SEC. Previously the petition may be signed by a
majority of the board or other officers having the management of
 22
country. In addition to the previous requirements for a license, the new
Code requires that a certificate under oath by the authorized official/s of
the jurisdiction of the foreign corporation be attached to the application
for a license. The certification should state that the laws of the country or
state of the applicant allow Filipino citizens and corporations to do
business and that the applicant is an existing corporation in good
standing. If the certificate is in a foreign language, it should include an
English translation under the oath of the translator.
What are the changes in security deposits for foreign corporations?
Once the SEC issues a license for the foreign corporation, it is still
required to put up a security deposit consisting of bonds/evidence of
indebtedness of the Philippine Government, its political subdivisions and
instrumentalities and GOCCs and entities, shares of stock/debt securities
in domestic corporations, or any financial instruments allowed by the
SEC. The market value of such has been increased from at least
P100,000 to P500,000. Within six months after each fiscal year,
additional securities still need to be deposited equivalent to 2% of the
amount by which the licensee’s gross income for that fiscal year exceeds
P10,000,000, as increased from just P5,000,000 under the old Code.
Computing the securities deposit, the composition of gross income and
allowable deductions will now be by the SEC rules.
What are the changes in resident agents?
Foreign corporations still need to appoint a resident agent to receive a
summons and legal processes on behalf of the corporation. They may
still be either resident individuals or domestic corporations. However, the
new Code now specifically requires that domestic corporations appointed
as resident agents must also be of sound financial standing and must
show proof that it is in good standing as certified by the SEC.
19
to the SEC, and minutes of meetings, which must provide specific details
such as the time and date of each meeting, the agenda, whether it was
special or regular, the attendance, and every act done or carried out
during each meeting.
What are the changes in the right to inspect corporate records?
The new Code still protects stockholders/members’ right to inspect
corporate books. Corporate records, regardless of the form in which they
are stored, shall still be subject to inspection by any director, trustee,
stockholder or member, who shall be bound by confidentiality rules
under prevailing laws, such as those relating to trade secrets and
processes and data privacy rights. However, to safeguard against abuses,
the new Code does not allow a requesting party who is not a
stockholder/member, or is a competitor, director, officer, controlling
stockholder or otherwise represents the interests of a competitor, to
inspect or demand reproduction of corporate records. Likewise, the new
Code provides that any stockholder who abuses the right to inspect
corporate records shall be penalized under Section 158, which governs
administrative sanctions for violations of the corporation code. Any
officer or agent, who refuses to allow inspection or reproduction of
records because the requesting party is a competitor, director, officer
controlling stockholder or otherwise represents the interests of a
competitor, cannot be held liable for such refusal.
What are the changes in refusal to allow inspection?
Though the old Code penalized unjustified refusal to allow inspection, no
procedure was laid down to enable an aggrieved party to seek redress.
The new Code now specifically provides for such a procedure. If the
corporation denies or does not act on demand for inspection and
reproduction of corporate records, the aggrieved party may report the
denial or inaction to the SEC. Within five days from receipt of such a
 20
report, the SEC shall conduct a summary investigation and issue an order
directing the inspection or reproduction of the requested records.
What are the changes in financial statements?
The new Code does away with the specific requirements of having a
balance sheet and a profit and loss statement in corporate financial
statements, which now need only to comply with the form and substance
required by the SEC. However, the SEC has yet to issue its rules on the
new form. The threshold used to determine whether financial statements
need to be signed and certified by an independent CPA has been
increased to P600,000. Thus if total assets or total liabilities of a
corporation are less than P600,000, its financial statements only need to
be certified under oath by its president and treasurer.
What are the changes in mergers and consolidations?
The procedure for mergers and consolidations in the new Code is similar
to that laid down in the old Code. The same still needs approval by the
stockholders/members in a meeting called for the purpose, and the
manner of giving notice of such a meeting is the same as calling for
regular or special meetings, which may now be done by electronic mail.
Once approved by the stockholders/members, the articles of
merger/consolidation shall be executed, which now needs to include the
carrying amount and fair values of the assets and liabilities of the
respective companies as of agreed cut-off date, the method to be used in
the merger/consolidation of company accounts, the provisional pro forma
values, as merged/consolidated using the accounting method, and such
other information as may be required by the SEC, in addition to the
existing items outlined in the old Code.
21
What are the changes in the right of the appraisal?
The new Code provides for an additional instance when dissenting
stockholders have the right to dissent and demand payment for the fair
market value of their shares. In addition to the instances laid down in the
old Code, dissenting stockholders may now exercise their right of
appraisal when the investment of corporate funds for any purpose other
than the primary purpose of the corporation is undertaken.
What are the changes in non-stock corporations?
Substantially the same provisions on non-stock corporations are retained
in the new Code. There are, however, a few changes introduced. First,
similar to stock corporations, by-laws of non-stock corporations may
now provide for voting through remote communication and in absentia.
Second, the requirement on the election of trustees being elected such
that 1/3 would have a term of 1 year, and subsequent elections would be
held annually has been deleted. Now, trustees need to hold office for a
term of 3 years until their successors are elected and qualified. Such
corporations are now also required to keep a list of members and their
proxies in such form as required by the SEC, which shall be updated to
reflect members and proxies 20 days before any scheduled elections.
What are the changes in educational corporations?
Previously, educational corporations were required to obtain the
favorable recommendation of the Department of Education before
incorporation, without which, the SEC will not approve their
incorporation. Under the new Code, such a requirement has been deleted.
What are the changes in foreign corporations?
Foreign corporations are still required to obtain a license to do business
in the Philippines from the SEC before transacting business in the