Replacing Batas Pambansa Blg. 68, Republic Act No. 11232, or the Revised Corporation Code (RCC), was signed into law by President Rodrigo Duterte on February 20, 2019, and took effect on February 23, 2019. The new law introduces major changes to the 38-year-old Corporation Code, which aims to establish fresh and progressive concepts aimed at improving the ease of doing business in the country, promoting good corporate governance, and affording protection to corporations, investors, and consumers alike, amid a fast-evolving business landscape.
Here are the eight (8) key provisions of the new Code:
1. Perpetual Term
Sana all may forever! Worry no more because the RCC got you covered. Section 115 provides that corporations are now allowed to exist beyond the 50-year term provided in the old code unless otherwise stated in their Articles of Incorporation. Business owners no longer risk their company closing down prematurely, allowing them to create long-term value and investments.
The perpetual corporate term applies to both aspiring and existing corporations. Availability does not require any further paperwork. Expired corporations can file a petition with the Securities and Exchange Commission (SEC) to have their status reinstated.
2. One-Person Corporation
Build your corporation on your own, literally. Small and micro businesses can now register their businesses under a new legal structure known as the One-Person Corporation (OPC), thanks to the new code. The RCC eliminated the requirement for a minimum number of incorporators to form a corporation and allowed the formation of an OPC, which is a corporation with a single stockholder that does not have to submit or file bylaws and does not have to meet any minimum authorized capital stock requirements unless otherwise required by law.
The main benefit of an OPC is that it provides a legal entity apart from the business owner. “An OPC offers the agility and complete dominion of a sole proprietorship and the limited liability of a corporation,” according to SEC Chairperson Emilio Aquino. Hence, the owner is liable to the extent they invest in company shares. Personal assets are considered separate and protected from the liability of the business.
3. No minimum Capital Stock
Start your business with as little capital or funding as possible. The RCC removed the provision in the Old Corporation Code (OCC) requiring that at least 25% of the authorized capital stock stated in the Articles of Incorporation be subscribed and at least 25% of it be paid upon subscription. In this regard, the Treasurer’s sworn statement (Section 14, OCC) declaring that this has already been done has been removed. Section 12 of the new law states that corporations shall not be required to have minimum capital stock, unless otherwise specifically specified by special law.
4. Participation Via Remote Communications, in Absentia
Be involved in the decision-making process whenever and wherever you are. The revised code takes advantage of modern telecommunications. Notices of board meetings may be sent electronically (Section 49). Board members and trustees can participate in board meetings remotely via videoconferencing, teleconferencing, and other technologies. Shareholders will also be allowed to participate and vote in absentia.
5. Emergency Board
Be more decisive in times of emergency. The amendment also includes the provision of an emergency board when a vacancy in a corporation’s board of directors prevents the remaining directors from consulting a quorum and, consequently, from taking emergency action required to prevent grave, substantial, and irreparable loss or damage.
6. Electronic Filing and Monitoring System
Register, apply, or file online. To improve access and efficiency, the SEC is transitioning to an online registration system. The Department of Information and Communications Technology (DICT) has been tasked with developing an online platform for all business registrations, as well as related permits and authorizations that can be completed.
7. Issuance of a License
One of the notable amendments can be found in Section 143 of the RCC, which prescribes the amount of required securities deposit for branch offices of foreign corporations.
Foreign corporations must now deposit securities satisfactory to the SEC in the amount of at least P500,000 within 60 days after receiving a license to perform business in the Philippines (under OCC, the SEC required a deposit of at least P100,000). The securities deposit requirement is designed to benefit the foreign corporation’s current and future creditors as a fund for the protection of their claims. Furthermore, the SEC may require the licensee to deposit additional securities or financial instruments equivalent in market value to 2% of the amount by which the licensee’s gross income surpasses P10,000,000 within 6 months after the licensee’s fiscal year ends.
It must be noted, however, that certain foreign corporations are exempted from the investment requirement, particularly foreign banking corporations, including offshore banking units, foreign insurance corporations, foreign non-stock corporations, including foreign religious corporations, foreign corporations with representative offices in the Philippines, regional or area headquarters or operating regional headquarters of multinational companies.
8. Corporations Vested with Public Interest
Section 22 of RCC has classified the following corporations vested with the public interest, whose board shall have independent directors constituting at least 20% of the such board:
a. Publicly-held corporations under the Securities Regulation Code (SRC) whose securities are registered with the SEC, corporations listed with an exchange or with assets of at least P50,000,000.00 and having 200 or more holders of shares, each holding at least 100 shares of a class of its equity shares;
b. Banks and quasi-banks, non-stock savings and loan associations (NSSLAs), pawnshops, corporations engaged in the money service business, preneed, trust and insurance companies, and other financial intermediaries; and
c. Other corporations engaged in businesses vested with public interest similar to the above, as may be determined by the SEC.
For the full text of the law, please see the attachment from the Securities and Exchange Commission’s website.
