The recent enactment of Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines, introduced substantial changes to the laws governing corporations operating in the Philippines.
In line with the Firm’s commitment to client care and education, we provide below a summary of the salient changes:
I. Changes in the Incorporation Process
A. What is the number of incorporators needed to set up a corporation?
Any number not exceeding fifteen. One Person Corporations are now recognized.
B. Can juridical entities be incorporators?
Yes. Partnerships, associations, and other corporations may now be incorporators.
C. Is there a minimum capital required to set up a corporation?
No. There is no required minimum subscribed and paid-up capital stock, except when special laws require it.
II. One Person Corporations
A. Who can set up a One Person Corporation (OPC)?
Natural persons, trusts or estates.
B. Do OPCs need to submit By-Laws to the SEC?
No, they are not required.
C. Who are the officers in an OPC?
The single stockholder shall be the sole director and president.
The OPC shall appoint a treasurer, corporate secretary, and other officers as it may deem necessary. The single stockholder cannot be appointed the corporate secretary. If the single-stockholder is also the self-appointed treasurer, he/she must give a bond to the SEC.
D. Can the single stockholder claim limited liability just like in an ordinary stock corporation?
Yes. However, the single stockholder must prove that the corporation was adequately financed. If the single stockholder cannot prove that the property of the OPC is independent of the stockholder’s personal property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the OPC.
*Read more about One Person Corporations here.
III. Changes in the Operations of Corporations
A. What is the term limit of a corporation?
Perpetual corporate existence, unless a shorter term is provided in the articles of incorporation.
B. Conduct of Meetings
Do directors have to personally attend meetings?
No. Attendance and voting through videoconferencing, teleconferencing, and other alternative modes of communication in directors’ meetings are allowed.
Do shareholders have to personally attend meetings?
Shareholders may participate in meetings and exercise their right to vote in person, through a proxy, or when so authorized in the bylaws, through remote communication or in absentia.
Can the corporation require its directors and shareholders to attend meetings in person or in any other mode?
Yes. A corporation must include in its by-laws the modes by which a stockholder, member, director, or trustee may attend meetings and cast their votes.
C. Directors
Can directors determine their own compensation?
No. Directors and Trustees are prohibited from participating in the determination of their own per diems or compensation.
Can directors or their relatives enter into contracts with the corporation?
Contracts of the corporation with any of its directors or their spouses and relatives up to the fourth (4th) degree of consanguinity or affinity are voidable, but may be ratified by the shareholders comprising 2/3 of the outstanding voting stock.
What is the remedy when there is a vacancy in the board which prevents it from constituting a quorum and there is a serious emergency that must be addressed by the board?
The directors may, by unanimous vote, fill the vacancy temporarily from among the officers of the corporation. The temporary director can only act on the emergency action necessary and shall serve until the termination of the emergency or upon election of the replacement director, whichever is earlier.
D. What is the security deposit required for foreign corporations doing business in the Philippines?
The minimum amount of security deposit required for foreign corporations doing business in the Philippines is increased from Php 100,000 to Php 500,000. Within 6 months after each fiscal year, the SEC may require the deposit of additional securities equivalent to 2% of the amount by which the licensee’s gross income for that fiscal year exceeds Php 10 Million.
All foreign corporations that are operating under an existing license, shall operate under the terms of such license, except as otherwise provided by the Revised Corporation Code. For existing corporations, there is no requirement to comply with the Php 500,000 security deposit.
E. Can corporations require that disputes within the corporation be referred to arbitration?
Yes. An arbitration agreement may be provided in the articles of incorporation or bylaws of an unlisted corporation in case of intra-corporate disputes or disputes involving the implementation of the articles of incorporation or the by-laws. However, a dispute shall be non-arbitrable when it involves criminal offenses and interests of third parties.
F. Can corporations enter into partnerships?
Yes. Corporations may now enter into partnerships with other natural and juridical persons.
G. Can expired corporations be revived?
Yes. Corporations whose terms have expired may apply for the revival of its corporate existence, together with all the rights and privileges under its certificate of incorporation and subject to all of its duties, debts and liabilities existing prior to its revival.
The revived corporation will be issued a Certificate of Revival and shall enjoy perpetual existence, unless its application for revival provides otherwise.
Should you have any questions on the Revised Corporation Code, kindly contact us here.
Read the Revised Corporation Code in full here.