This is the second part of our breakdown of the salient changes put in effect by the Revised Corporation Code of the Philippines (Republic Act No. 11232).
In the previous guide, we discussed the following key amendments:
This time, we will cover five more pertinent changes:
Whereas the previous Code removed the corporate powers of a business if it does not formally organize or operate within two (2) years from the date of its corporation, the Revised Code gives corporations up to five (5) years. Failure to comply with this rule will result in the revocation of the company’s certificate of incorporation one day immediately following the end of the 5-year period.
On a related note, a functioning corporation that becomes inactive for five (5) consecutive years will be considered delinquent. Given this status, the corporation will be given two (2) years to resume operations. The Securities and Exchange Commission (SEC) will also prescribe requirements that the corporation must complete before the delinquent status can be lifted.
Should the corporation fail to comply, its certificate of incorporation will be revoked.
The Revised Code acknowledges alternative and remote methods of communication as valid means of participating in the election of the corporation’s directors or trustees. However, this arrangement must first be authorized in the company bylaws or by a majority of its Board of Directors.
The Revised Code adds a measure that will protect a corporation from potential “grave, substantial, and irreparable loss or damage” in the event of an unexpected or prolonged vacancy in the Board of Directors. If the remaining directors are unable to constitute a quorum, the Board is allowed to temporarily fill the vacancy by way of a unanimous vote. The temporary director must be chosen from among the officers of the corporation.
Foreign corporations that have been issued a license by the SEC to do business in the Philippines, a security deposit worth at least PhP 500,000 is required. This amount increased from PhP 100,000 as originally stipulated in the previous Code.
The foreign corporation will also be required to deposit additional securities within six (6) months after each fiscal year. The amount must be equivalent in market value to 2% of the amount by which the corporation’s gross income exceeds PhP 10 million.