The Revised Corporation Code of the Philippines came into effect on February 23rd, 2019.
The Salient Features of the Revised Corporation Code of the Philippines, among many, include the creation of One Person Corporation (OPC), the removal of minimum capital, the removal of 50 years of the life of a corporation, the exercise of remote participation and Voting in Absentia, and the increase in security deposit for foreign corporations licensed to do business in the Philippines.
The Corporation Code of the Philippines was signed into law in 1980 and required corporations to incorporate before the Securities and Exchange Commission (SEC) under its guidelines. It also established what a corporation is and its functions, and has defined how many directors should be appointed/elected by shareholders. It also prescribed a minimum capital requirement for corporations with variable capital (i.e., revenue-generating activities), provided for limited liability protection of stockholders’ funds invested in a corporation’s business or property (including corporate bonds), established the right to sue or be sued, among others.
The old code, however, was effective only from 1980 to 2019.
The new version is more comprehensive than its predecessor, as it incorporates amendments to conform with the international standards of corporate law and governance, as well as provisions regarding management succession and shareholder rights in a corporation’s liquidation or winding up proceedings.
The salient features of the Revised Corporation Code of the Philippines include:
R.A. 11232 allows a One-Person Corporation (OPC) under certain conditions.
In accordance with Section 115 of the Revised Corporation Code, an OPC is a one-person corporation that may be incorporated under the Revised Corporation Code of the Philippines. It must be organized for the purpose of engaging in business, trading or profession and must comply with all other requirements to qualify as a corporation.
Removal of Minimum Capital
Previously, Section 13 of the old Corporation Code states that “[a]t least twenty-five percent (25%) of the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation, and at least twenty-five (25%) percent of the total subscription must be paid upon subscription.”
In the amended code, this provision is no longer present. It now states that “[s]tock corporations shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law.”
Removal of 50 years of the Life of a Corporation
Among others, one of the most significant amendments done to the Corporation Code is changing the maximum Corporate Term or life of the corporation.
In accordance with Section 115 of the Revised Corporation Code, the new amendment now allows corporations to exist beyond the 50-year term that was once stated in the old code. The reason for its amendment is to eliminate the risk and danger of corporations prematurely closing down due to failure of renewing their registration.
Remote Participation and Voting in Absentia
Another salient feature introduced by the new Revised Corporation Code is the leeway of participation given to board members or trustees of a corporation.
Pursuant to Section 49 and Section 57, with the coming age of modern technology being widely incorporated, notices of board meetings may be sent electronically – moreover, board members and trustees of a corporation may now attend and participate remotely via teleconferencing, videoconferencing, and other similar technologies. Additionally, stockholders will also now be allowed to participate during regular and special meetings and are allowed to vote through remote participation or in absentia.
Increase in Security Deposit for Foreign Corporations licensed to do business in the Philippines
Among others, one of the significant changes imposed on the Revised Corporation Code of the Philippines was the increase of the minimum security deposit required for foreign corporations – where the cap of PhP 100,000 is now amended to PhP 500,000. This must be completed within sixty (60) days after the issuance by the SEC of the license to transact business in the Philippines.
The reason for its increase is to ensure that international corporations meet their obligations by paying their accumulated debt or outstanding balances incurred in the Philippines.
For those that are already existing and/or with a license to do business in the Philippines, however, these existing corporations must provide additional securities to complete the Php 500,000 from the initial Php 100,000 securities that they have previously provided.
Further, adjustments must be made within six (6) months after the end of the fiscal year, if:
Corporations that are exempt from Security Deposit are as follows:
In summary, the Revised Corporation Code of the Philippines is a major amendment to the existing law, which requires corporations in this country to follow certain rules on how they operate.
We encourage you to follow these changes closely as they come into effect in the next few years to come.
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