Date of Effectivity/Repeal of Old Corporation Code

The Revised Corporation Code of the Philippines, Act No. 11232 (the

“Revised Corp. Code” or the “Law”) became effective on February 23, 2019
following its publication in 2 newspapers of general circulation, as declared
by the Securities and Exchange Commission (SEC) on February 28, 2019.
President Rodrigo Duterte signed the Law on February 20, 2019 after it was
passed by the Senate and the House of Representatives on November 28, 2018.
It was also earlier published in the Official Gazette on February 21, 2019 but
the SEC did not consider this as the effectivity date.
In its Repealing Clause, the Revised Corp. Code expressly repealed the 1980
Corporation Code (the “Old Corp. Code”) which had no amendments for
almost 39 years. The Old Corp. Code had over the years been deemed not
attuned to the changing business environment and requirements, thus, the need
for a change was recognized.
The enactment of the Revised Corporation Code is a welcome development in
light of the requirements of modern technology and business. The facilitation
and easing up of procedural requirements for incorporating corporations and
extension of corporate existence to maintain business continuity and stability
provides a significant assistance to investors and the public. The requirement
for more consciousness about and compliance with a good corporate
governance framework for corporations bodes well for an ever growing
Philippine economy. The challenge is for the SEC and the business community
to work towards achieving the goals of this new law through an efficient
implementation and faithful adherence.
Unchanged Corporate Principles and Concepts
While the Revised Corp. Code now contains 188 sections compared to the 149
sections of the Old Corp. Code, it maintains the definition of a corporation,
the classes of corporations, classification of shares, the management structure
of corporations, corporate powers and capacity, dissolution process, mergers
and consolidations, and licensing of foreign corporations. The main principle
of having a corporation with a separate and distinct legal personality from
those of its stockholders/member, directors/trustee, officers and employees
remains albeit a recognition of the need for corporate governance and minority
protection is now a recurring theme in this new Law.
Significant Changes and Introductions
But there are significant changes on corporation law and principles introduced
by the Revised Corp. Code. The substantive changes in the Revised Corp.
Code may be classified into the following main categories:
 Ease in doing business;
 Process improvements in corporate activities;
 Corporate continuity and stability;
 Corporate Governance; Directors’ and officers’ accountability;
 SEC jurisdiction and authority expansion.
Contributions to Ease in Doing Business
 Incorporation facilitated:
 Partnerships, associations or corporations, singly or jointly with
others but not more than 15 may now be incorporators –  10; but if
singly or to be a One Person Corporation (“OPC”), incorporator
must be a natural person, trust or an estate – Sec. 116;
 No more residency requirement for incorporators and
directors – 10 and 22
 Professionals or partnerships or associations organized for the
practice of a profession are not allowed to organize as a corporation
– 10
 Changes in the contents of the Articles of Incorporation  (AOI)
– 13 and 14 and related sections
 Corporate Name – must be distinguishable from a name that is
already reserved or registered for the use of another corporation, or
is not protected by law; or is not contrary to existing law, rules and
regulations. –  17
 Requires online verification –  18
 If a One Person Corporation (“OPC”), the letters “OPC” must be
indicated either below or at the end of its corporate name –   120
 Principal Office Address – now allows general reference to city or
municipality and not a specific office address;
 Corporate Term – now with a perpetual existence unless its AOI
provides otherwise –  11
 For existing corporations – automatically now have perpetual
existence, unless by a majority vote of its stockholders, notifies the
SEC that it elects to retain its specific corporate term under its
present AOI –  11, 2   par.
nd

 Effect of non-use of corporate charter, failure to organize or

commence business is now for a period of five (5) years (no longer
for 2 years) from its date of incorporation –  deemed
revoked  certificate of registration –  21
 Incorporators – May be partnerships, associations or corporations;
may be only one (1) incorporator but still not more than 15; and no
more residency requirement –  10
 Directors/Trustees – No more minimum number of five (5) and no
more residency requirement –  22
 If a corporation vested with public interest – at least 20% of the
Board must be independent directors, i.e. independent of
management and free from any business or relationship that could
affect exercise of independent judgment –  22 –
  No required minimum capital stock except if required by special
law – 12; – see, e.g. FIA on minimum paid up capital of foreign
corporations in the domestic market.
 No more required 25% minimum subscription and paid up
capital stock at incorporation – previous Sec. 13 deleted – but in
an increase of authorized capital stock the 25% subscription and
25% paid up requirements are still imposed – 37
 Arbitration Agreement – to govern dispute resolution between the
corporation, its stockholders or members arising out of the
implementation of the AOI or by-laws, or from intra-corporate
relations; criminal offenses and interests of third parties are not
arbitrable; binding on the corporation, its directors, trustees,
officers, executives and managers; should indicate number of
arbitrators and procedure for appointment; power to appoint
granted to a designated independent third party; or failing which,
the SEC; other usual arbitration provisions  – 181
 Treasurer’s Certification in Article Ninth of the AOI, the
Treasurer is named and he is a signatory to the AOI thereby
certifying the information in the seventh and eighth clauses of the
AOI –  14. – seems to imply no need for Treasurer’s Affidavit.
 Treasurer must be a resident – Sec. 40
 Tenth Article – contains undertaking to change the name of the
corporation
 Electronic filing – in accordance with SEC rules Sec. 13
 The requirement for “favorable recommendation of appropriate
government agency to the effect such articles or amendment is in
accordance with law” for incorporation or amendment for  public
utilities, educational institution and other corporations governed by
special law was deleted
 Adoption of By-laws – no longer required to be done within one (1)
month from the incorporation, may still be adopted and filed prior to
incorporation (along with the AOI)- 45
 By-laws may provide for the modes by which a stockholder,
member, director, or trustee may attend meetings and cast their
votes – in person; by proxy; by remote communication or  in
absentia –  46
 May provide for arbitration agreement – 46
Introduction of OPC as a type of corporation 
Secs. 115 to 132 – corporation with a single stockholder; stock corporation;
cannot be a non-stock corporation;
 Who may form – only natural persons, trust, or an estate may form
an OPC; banks; quasi-banks, preneed, trust, insurance, public and
 publicly-listed companies, and non-chartered GOCCs may NOT
incorporate an OPC; professionals wanting to exercise their
profession cannot form an OPC; foreigners and non-residents may
form an OPC.
 How much capital – no minimum authorized capital stock except as
otherwise required by special law; open to foreigners but need to
comply with FIA requirement of US$200,000 for domestic market
enterprise.
 What should be filed – AOI; no need for By-laws; name should
indicate “OPC” either below or at the end of the corporate name.
 Who constitute the OPC –
 the single stockholder shall be the sole director and president of the
OPC;
 within 15 days from issuance of certificate of incorporation, the
OPC shall appoint a treasurer, corporate secretary, and other
officers as necessary, and SEC is notified of appointments within 5
days;
 single stockholder cannot be corporate secretary;
 but can be treasurer, provided, he posts a bond to the SEC in a sum
required by SEC, with a written undertaking to faithfully administer
the OPC’s funds, and to invest and disburse the same according to
the AOI; bond is renewed every 2 years or as often required by
SEC;
 nominee and alternate nominee stockholders are required to be
designated who shall take the place of the single stockholder as
director and manage the corporation’s affairs in the event of death
of the single stockholder. Written consent of the nominee or
alternate nominee is attached to the application for incorporation;
consent may be withdrawn in writing before death or incapacity of
the single stockholder; may be changed at any time.
 Corporate secretary has special functions to maintain minutes and
notify in case of death of single stockholder.
 Reports to be filed by OPC – AFS; disclosure of self-dealings and
related party transactions; others required; failure to file for 3
consecutive times or intermittently within a period of 5 years will
result in delinquent status.
 Liability of OPC – Sole shareholder has burden of proving that the
OPC was adequately financed; and that the property of the OPC is
independent of the stockholder’s personal property – otherwise, the
sole shareholder shall be jointly and severally liable for the debts
and other liabilities of the OPC. Principle of piercing the veil of
corporate fiction applies.
  Conversion from an Ordinary Corporation to an OPC – when a
single stockholder acquires all the stocks of an ordinary stock
corporation, he may apply for conversion into an OPC; thus, a
certificate of filing of amended articles of incorporation is issued by
the SEC to reflect the conversion. OPC becomes legally responsible
for the latter’s outstanding liabilities as of the date of conversion.
 Conversion from an OPC to an Ordinary Stock Corporation
– may also be applied for and granted through an amendment of the
AOI.
 Effect of death of single shareholder – the nominee or alternate
nominee transfers the shares to the duly designated legal heir or
estate within 7 days from receipt of either an Affidavit of heirship or
self-adjudication executed by the sole heir; then the heirs shall
notify the SEC of the decision to either wind up and dissolve the
OPC or to convert into an ordinary stock corporation.  
Process improvements in corporate activities
 Stockholders/Members Meetings – Written notice of  regular
meetings  may be sent through the means of communications
provided by bylaws, by electronic mail or other SEC allowed
manner  – 49 – at least 21 days (instead of 2 weeks)
 Notice of meeting is now required to be accompanied by:
1. Agenda;
2. Proxy form to be submitted to corporate secretary prior to meeting;
3. When attendance, participation, and voting are allowed by remote
communication or in absentia, the requirements and procedures to be
followed when a stockholder or member elects either option; and
4. When the meeting is for the election of directors or trustees, the
requirements and procedure for nomination and election.
 Voting of Stockholders/Members – stockholders or members are
allowed to vote through remote communication or in absentia in
election of directors, and in shareholders meetings  Shareholders
who participate through remote communication or   in absentia  are
deemed present for purposes of quorum. The right of a stockholder
to vote by remote communications or in absentia is recognized in
corporations vested with public interest, even if provision is absent
in its by-laws. – 23.–  SEC to issue rules and regulations re
participation and voting through remote communication or in
absentia, taking into account the company’s scale, number of
shareholders or members, structure and other factors consistent
with the protection and promotion of shareholders’ or members’
meetings.
  Notice of Special Meetings – may be sent electronically when
allowed by the bylaws or done with the consent of the stockholders,
and in accordance with the rules and regulations of the SEC  –
following purposes to: extend or shorten corporate term –  36,
increase or decrease its capital stock, or incur, create or increase any
bonded indebtedness – Sec. 37, approve the sale of all or
substantially assets of the corporation – Sec. 39, or invest the
corporate funds in another corporation or business –  Sec. 41.
 Directors/Trustees Meetings – Notice of meetings must be sent at
least two (2)days prior to the scheduled meeting – no longer one (1)
day
 Directors or trustees who cannot physically attend or vote at board
meetings can participate and vote through  remote communication
such as videoconferencing, teleconferencing, or other alternative
modes of communication.  Directors or trustees cannot attend or
vote by proxy at board meetings. – Sec. 52
 Electronic Filing of AOI and applications for
amendments – 13 The SEC is required to develop and implement an
electronic filing and monitoring system. It shall promulgate rules to
facilitate and expedite corporate name reservation and registration,
incorporation, submission of reports, notices, and documents
required under the Revised Corp. Code, and sharing of pertinent
information with other government agencies – Sec. 180
Corporate continuity and stability 
 Perpetual Existence – Corporations now have a perpetual existence
or corporate term, unless the AOI provides otherwise, or in the case
of existing corporations, unless majority of the stockholders elect to
retain the specific corporate term provided in its AOI and advised
the SEC – 11
 Revival of Corporate Term – A corporation whose term has
expired may apply for a 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. Upon approval by the SEC, the
corporation shall be deemed revived and a certificate of revival of
existence shall be issued – 11
 Election of Replacement Directors/Trustees  – when vacancy due
to term expiration, the election should be held no later than the day
of such expiration; when vacancy is due to a removal, the election
may be held on the same day as the removal; but in both cases, no
later than 45 days from the vacancy; term of replacement director
or trustee is only for the unexpired term –  28
  Election of an emergency director/emergency board  – is now
allowed when there is no quorum in the board of directors due to
resignation, death or disqualification and emergency action is
required to prevent grave, substantial, and irreparable loss or
damage to the corporation, the vacancy may be temporarily filled
from among the officers of the corporation by unanimous vote of the
remaining directors. The emergency director serves only to address
the emergency and ceases when a replacement director is elected.
The SEC must be notified – 28
 Corporations are empowered to enter into partnerships , joint
venture or any commercial agreements – 35(h) – expands rule in
jurisprudence that corporations can only enter into joint ventures
and not partnerships.

Corporate Governance
– introduced as a new concept and recurring theme; also strengthens
minority protection; Directors’ and officers’ accountability;
While the term “corporate governance” is not defined in the Revised Corp.
Code, it is used significantly and new provisions were added so that
corporation can practice good governance and in the process, protect minority
stockholders. Directed at corporations vested with public interest such as
listed companies, banks, quasi-banks, pawnshops, money service business,
preneed, trust and insurance companies, and other financial intermediaries.
SEC Memorandum Circular No. 9, s. 2014 – defined corporate governance as:
“the framework of rules, systems and processes in the corporation that governs
the performance of the Board of Directors and management of their respective
duties and responsibilities to stockholders and other stakeholders which
include, among others, customers, employees, suppliers, financiers,
government and community in which it operates.”
1. SEC Mandate – The SEC is granted the authority to promote
corporate governance and the protection of minority investors
through, among others, the issuance of rules and regulations
consistent with international best practices – 179
2. Independent Directors – required for corporations vested with
public interest – 22
3. Duties of Directors – The directors or trustees elected shall
perform their duties as prescribed by law, rules of good corporate
governance, and by-laws of the corporation – 23
4. Voting by shareholders through remote communication or  in
absentia  –  is now allowed – 23 and Sec. 49.
5. Compliance officer – required for corporations vested with public
interest – 24
6. Adds grounds for disqualification of
Directors/Trustees/Officers – (a) for violating Republic Act No.
8799, otherwise known as “The Securities Regulation Code”; (b)
found administratively liable for any offense involving fraud acts;
and (c) by a foreign court or equivalent foreign regulatory authority
for similar acts, violations or misconduct resulting in conviction by
final judgment. 26
7. Total compensation of each director – of corporations vested with
public interest are required to be disclosed –   29.
8. Compensation of Directors – Directors are prohibited from
participating in the determination of their own per diems or
compensation –  29.
9. The rule on self-dealing Directors – is  expanded  to cover
contracts of the corporation with spouses and relatives within the
fourth civil degree of consanguinity or affinity of a director of
officer –  31; A director who has potential interest in any related
party transaction must recuse from voting on the approval of the
related party transaction – Sec. 52
10. Higher voting threshold – including the vote of a majority of the
independent directors, is required for certain contracts of directors
or officers in a corporation vested with public interest –   31 (d)
11. Foreign corporations are not allowed to give donations in aid of
any political party or candidate or for purposes of partisan political
activity –  35 (i)
12. Reference is made to the required approval of the Philippine
Competition Commission for sale or disposition of corporate assets
– 39; increase or decrease in capital or incurring or increasing any
bonded indebtedness – Sec. 37; or merger or consolidation, of
corporations – Sec. 78 – threshold of P5.2B for Party Size and
P2.2B for Transaction Size.
13. The bylaws may provide matters – necessary for the promotion of
good governance and anti-graft and corruption measures –  46 (k).
14. Expanded Information to be provided by directors/trustees to
stockholders at their regular meetings – minutes of stockholders
meeting should now include additional information; items in the
interest of good corporate governance and the protection of
minority stockholders; list of stockholders/members with voting
rights; assessment of corporation’s performance; financial report;
dividend policy; directors/trustees profiles; directors/trustees
 attendance report; appraisal and performance reports for the
board; compensation report; self-dealing directors and
transactions – 49
15. The notice of stockholders’ meeting – is required to be
accompanied by: (i) the agenda for the meeting; (ii) a proxy form;
(iii) the requirement and procedures to be followed by a stockholder
who elects to participate by remote communication or in absentia, if
such is allowed; (iv) the requirements and procedure for nomination
and election, if the meeting is for election of directors  – 50
16. Chairman as Presiding Officer, unless the bylaws provide
otherwise – 53 – previously, it was the President that was
recognized by the old Corp. Code.
17. Right of Inspection Expanded – 73 – (a) AOI, By-laws and
amendments; (b) Current ownership structure and voting rights of
the corporation, including lists of stockholders or members, group
structures, intra-group relations, ownership data, and beneficial
ownership; (c) Names and Addresses of the board of directors or
trustees and the executive officers; (d) A record of all business
transactions; (e) A record of the board and stockholders
resolutions; (f) Copies of the latest reportorial requirements
submitted to the SEC; and (g) The minutes of all meetings of
stockholders or members, or of the board of directors or trustees –
with more details required.  The inspecting or reproducing party
shall remain bound by confidentiality rules for trade secrets or
processes under R.A. No. 8293 – the “Intellectual Property Code of
the Philippines”, as amended, R.A. No. 10173 – the “Data Privacy
Act of 2012”, R.A. No. 8799, otherwise known as “The Securities
Regulation Code”, and the Rules of Court.  Right of Inspection is
NOT open to  a non-stockholder or non-member, or a competitor,
director, officer, controlling stockholder or otherwise represents the
interests of a competitor.
18. Identifies and penalizes new offenses
o Unauthorized use of corporate name – 159
o Violation of disqualification provision – 160
o Violation of duty to maintain records – 161
o Willful certification of incomplete, inaccurate, false or
misleading statements or reports – 161
o Collusion of an independent auditor – 163
o Obtaining corporate registration through fraud – Sec. 164
o Fraudulent conduct of business – Sec. 165
o Acting as intermediaries for graft and corrupt practices
– Sec. 166
 o Engaging intermediaries for graft and corrupt practices
– 167
o Tolerating graft and corrupt practices- 168
2. Retaliation against whistleblowers – 169 – persons who provide
truthful information relating to the commission or possible
commission of any offense or violation of the Revised Corp. Code
– a person who retaliates against a whistleblower by interfering
with his livelihood, etc. may be penalized with fine from P100,000
to P1,000,000 –  Sec. 169
3. The deposit for issuance of license to a foreign corporation  is
increased to P 500,000 and in subsequent fiscal years, 2% of the
amount by which the licensee’s gross income for that fiscal year
exceeds P 10 Million – 143 – from P100,000 and P5 Million
4. Increased fine as a penalty for violation of other provisions of the
Revised Corp. to a minimum of P 10,000 to a maximum of P
1,000,000. It was a minimum of P 1,000 and a maximum of P 10,000
under the old Code – 170 and Sec. 144
5. Imprisonment as a penalty was removed. The corporation may be
dissolved in a proceedings before the SEC, as part of the penalty.
6. Corporation as Offender – penalty may be imposed upon such
corporation and/or upon its directors, stockholders, officers or
employees responsible for the violation or indispensable to its
commission, at the discretion of the court – 171
7. Anyone who shall aid, abet, counsel, command, induce, or cause any
violation of the Revised Corp. Code, or any rule, regulation, or order
of the SEC shall be punished with a fine not exceeding that imposed
on the principal offenders, at the discretion of the court, after taking
into account their participation in the offense –  172
8. A judgment finding that the corporation: (i) was created for
committing, concealing or aiding the commission of, or (ii) with the
knowledge of its stockholders had committed or aided in the
commission of: securities violation, smuggling, tax evasion, money
laundering, or graft and corrupt practices; or (iii) repeatedly and
knowingly tolerated the commission of graft and corrupt practices or
other fraudulent or illegal acts of its directors, officers, or
employees, are grounds for dissolution of the corporation . In such
case its assets shall be forfeited in favor of the national government
– 138
9. Reportorial Requirements – Annual Submission – now
specifically stated – Sec. 177
o  Audited Financial Statements
o General Information Sheet – new form use is suspended
until June 30, 2019
  if corporation is vested with public interest –
need for
 a director compensation report; and
 a director appraisal or performance report
 delinquent status – if reports are not submitted 3
times consecutively or intermittently within a
period of 5 years.
 Confidential information may be redacted
SEC jurisdiction and authority expansion
1. Visitorial powers over all corporations – examine and inspect
records, regulate and supervise activities; enforce compliance; and
impose sanctions; may revoke certificates of incorporation if a
corporation refuses or obstructs the SEC, without justifiable cause.
2. Authority over certain intra-corporate disputes
o Summary order to hold an election of directors if the
election is not held unjustifiably. The SEC may issue
orders directing the issuance of a notice stating the time
and place of the election, designated presiding officer, and
record date or dates for determination of stockholders
entitled to vote – 25
o After notice and hearing, removal of a director elected
despite a disqualification – 27
o Disputes pertaining to a denial of the right of inspection or
reproduction of corporate records – 73
o Motu proprio or upon verified complaint, dissolution of a
corporation on grounds provided in Section 138 of the
Revised Corp. Code.
o Alleged violation of the Revised Corporation Code, or of
its rule, regulation or order – 154 – subpoena powers
– Sec. 155; and contempt powers – Sec. 157 issuance of a
permanent cease and desist order, suspension or revocation
of the certificate of incorporation; and dissolution of the
corporation and forfeiture of its assets – for violations of
Revised Corp. Code, rules or regulations, or any of SEC’s
orders – Sec. 159
2. Transmittal of evidence to the Department of Justice  for
preliminary investigation or criminal prosecution and/or initiate
criminal prosecution for any violation of the Revised Corp. Code,
rule, or regulation – 156
3. SEC Fiscal Autonomy under the Revised Corp. Code . Collected
fees, fines and other charges shall form part of its modernization,
and will augment its operational expenses – 175.
4. No court below the Court of Appeals shall have jurisdiction to
issue a restraining order, preliminary injunction , preliminary
mandatory injunction in any case, dispute, or controversy what
directly interferes with the exercise of the powers, duties and
responsibilities of the SEC that falls exclusively within its
jurisdiction – 179.