Key Notes on The Revised Corporation Code of The Philippines or Republic Act No. 11232 (Effectivity Date: February 23,2019)

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Published — March 8, 2019

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Read also: Corporation as Business Structure: Most Preferred for Your Growing Enterprise

1.On number of Incorporators. The requirement as to the minimum number of incorporators to organize a corporation has been removed. However, it should still not be more than fifteen (15) incorporators (Section 10).

2. Perpetual Existence. A corporation shall have perpetual existence unless its articles of incorporation provides otherwise (Section 11).

3. No Minimum Capital Stock Required. Stock corporations shall not be required to have minimum capital stock, except as otherwise specifically provided by special law (Section 12).

4. Arbitration Agreement. In Section 13 of the Revised Corporation Code, a corporation may include in its Articles of Incorporation a clause providing for arbitration agreement pursuant to Section 181 of the same Code. It may also be included in its by-laws. Disputes between the corporations, its stockholders or members, or from intra-corporate relations except when it involves interests of third parties shall be referred for arbitration.

5. Non-Use of Corporate Charter. Under Section 21, a corporation is given an ample time to organize and commence its business within five (5) years compared to the Old Code wherein it only provided for two (2) years. Further, a corporation who commenced its business, but becomes inoperative for five (5) years shall be considered as delinquent corporation unlike in the old Code that it will be a ground for revocation of license. It is given two (2) years to resume operations and comply with all the requirements the SEC prescribed.

6. Corporations vested with Public Interest defined. Section 22 provides for an enumeration of what are the corporations vested with Public Interest to wit:

(a) Corporations listed with an exchange or with assets of at least Fifty Million Pesos (50,000,000) and having two hundred (200) or more holders of shares, each holding at least one hundred (100) shares of a class of its equity shares;

(b) Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, pre-need, trust and insurance companies, and other financial intermediaries; and

(c) Other corporations engaged in businesses vested with public interest similar to the above, as may be determined by the Commission, after taking into account relevant factors which are germane to the objective and purpose of requiring the election of an independent director, such as the extent of minority ownership, type of financial products or securities issued or offered to investors, public interest involved in the nature of business operations, and other analogous factors.

The above enumerated corporations shall have independent directors constituting at least twenty percent (20%) of said corporation’s board of directors.  Further, Section 24 provides that for corporations vested with public interest, they shall elect a compliance officer.

7. Use of technology or electronic means. The Revised Code allows written notices of stockholders meeting to be sent through electronic mail or such other manner as the Commission shall allow under its guidelines (Section 49). Voting may also be done through remote communication like videoconferencing or teleconferencing or the like if allowed by the by-laws. Further, the SEC shall develop and implement an electronic filing and monitoring system (Section 180).

8. Treasurer must be a Resident. It is specifically stated that the Treasurer must be a Resident thereby clearing the qualification needed for such position unlike in the old Code wherein it was not mentioned (Section 24).

9. Disqualifications. Section 26 provides for an enumeration of grounds for disqualification from being a director, trustee or officer of any corporation if, within five (5) years prior to the election or appointment as such, the person was:

(a) Convicted by final judgment:

(i)Of an offense punishable by imprisonment for a period exceeding six (6) years;

(ii) For violating this Code; and

(iii) For violating Republic Act No. 8799, otherwise known as “The Securities Regulation Code”;

(b) Found administratively liable for any offense involving fraudulent acts; an

(c) By a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct similar to those enumerated in paragraphs (a) and (b) above.

The old Code only provides for par. (a) both (i) and (ii) as stated above.

10. Reasonable Donations. The ban on corporations giving donations to political parties has been lifted by the passage of this Revised Corporation Code as Section 35 provides that one of the powers of a corporation is “to make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, that no foreign corporation shall give donations in aid of any political party or candidate or for purposes of partisan political activity”. Only foreign corporations are banned.

11. Shares of stocks in another corporation. It is expressly provided in Section 61 as consideration for the issuance of stock.

12. Inspection of Corporate Books. Section 73 provides for penalties to be imposed upon a stockholder in case there is Abuse of Rights as to Inspection of Corporate Books. He shall be penalized under Section 158 of this Code without prejudice to the provisions of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as amended, and Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”.

13. One Person Corporation. Title XIII, Chapter III, Sections 115-132 laid down all the provisions pertinent to One Person Corporation or a corporation with only a single stockholder, who shall only be a natural person, trust, or an estate.  With this, a viable option is given for those who may want to put up business solely.

14. Withdrawal from Dissolution. Corporations who requested for Dissolution may request for its withdrawal provided all the necessary requirements pertinent thereto are provided (Section 137).

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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