Revised Corporation Law FAQs Part 1

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 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 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.

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.
Revised Corporation Law FAQs Part 2

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.

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 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.

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 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.

Revised Corporation Law FAQs Part 3

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.

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 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 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.

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.

Revised Corporation Law FAQs Part 4

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 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. Such matters include the minutes of the most recent 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 profiles and attendance report, appraisals and performance reports, directors compensation
report, board disclosures on self-dealing and related party transactions, and profiles of directors
nominated or seeking 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.

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.

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.

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, 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.

Revised Corporation Law FAQs Part 5

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 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’ right to inspect corporate books. Corporate records 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, or is a competitor, director, officer, controlling stockholder 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 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, 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.

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 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.

Revised Corporation Law FAQs Part 5

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 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’ right to inspect corporate books. Corporate records 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, or is a competitor, director, officer, controlling stockholder 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 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, 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.
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 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.