RODERICK R. C.

SALAZAR III SPOTLIGHT

Highlights of the Revised Corporation Code:

Part I
03/21/2019

By: Roderick R.C. Salazar III

[Editor’s note: This is the first of a two-part article on the provisions of the
Revised Corp. Code of the Philippines (R. A. 11232). The continuation can be
read  here. ]
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 Code expressly repealed the 1980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 revokedcertificate 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.
(Senior Partner Dicky Salazar  leads the Corporate and Commercial Law
practice group of the Firm and represents foreign and Filipino mining
companies involved in all aspects of mining from exploration, project
financing, construction, development and processing. Dicky’s existing foreign
and domestic mining clients range from operating companies to exploration
entities. He can be reached at rrcsalazar@fnslaw.com.ph .)

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.