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FEATURES OF THE REVISED CORPORATION CODE


Source: alburolaw.com/features-of-the-revised-corporation-code

Republic Act No. 11232, otherwise known as the REVISED CORPORATION CODE OF THE PHILIPPINES (RCC) was signed into law by the  President on February 20, 2019. RCC expressly repealed Batas Pambansa Blg. 68, otherwise known as “The Corporation Code of the Philippines (Old Code).”

Below is a comparative table of the two laws (RCC and Old Code) featuring notable amendments under the RCC.

Old CodeRevised Corporation Code  
1. Number of Incorporators (Sec. 10)
       – The required number of incorporators in organizing a corporation is at least five (5) but not more than fifteen (15) incorporators.      – The requirement as to minimum number of incorporators has been removed and retaining the maximum. Thus, ONE PERSON CORPORATION (which is governed by Section 115 – 132) is now allowed.
2. Corporate Term (Sec. 11)
      –  Corporations are allowed to exist for a period not exceeding fifty (50) years from the date of incorporation unless sooner dissolved or unless said period is extended.    – PERPETUAL EXISTENCE of a Corporation is now allowed unless its Articles of Incorporation provides otherwise. The only limitation as to the existence of a Corporation is its Articles of Incorporation. Thus, the Articles of Incorporation may limit the term of the Corporate term for a period not exceeding 70 years or 20 years etc. It is the Articles of Incorporation that controls the corporate term. If the Articles of Incorporation does not provide, or is silent as to the Corporate term, the RCC allows PERPETUAL EXISTENCE. (Sec. 11)  
3.    Amount of Capital Stock to be subscribed and paid for the purpose of incorporation (Sec. 13)
  – It requires that at least 25% of the authorized capital stock must be subscribed, and at least 25% of the total subscription must be paid by the stockholders, provided that the minimum paid-up capital shall not be lower than Php5,000.00.    – Stock corporations are NOT REQUIRED to have a minimum capital stock, EXCEPT when provided by special law. (Sec. 12)
4.                                            Arbitration Clause
  – It does not provide for the Arbitration of disputes. However, under Sec. 104 regarding Deadlocks, the Securities and Exchange Commission  has the power to arbitrate, notwithstanding any contrary provision in the articles of incorporation or by-laws or agreement of stockholders of a close corporation, if the directors or stockholders are so divided respecting the management of the corporation’s business and affairs that the votes required for any corporate action cannot be obtained.    Under Sec. 13, An Arbitration Agreement may now be included in the Articles of Incorporation or its by-laws pursuant to Sec. 181   Deadlocks may now be a subject for Arbitration EXCEPT when it involves criminal offenses or interests of third parties.
5. Non-use of Corporate Charter (Sec. 22)
  – A corporation must formally organize and commence the transaction of its businesses or the construction of its works within two (2) years from the date of its incorporation, otherwise, the corporation shall be deemed DISSOLVED.    – Sec. 21 provides a longer period of five (5) years, otherwise the certificate of incorporation shall be deemed REVOKED as of the day following the end of the 5-year period.
6. Continuous inoperation of a Corporation (Sec. 22)
  – If a corporation has commenced the transaction of its business but subsequently becomes inoperative for a period of at least five (5) years, the same shall be a ground for the SUSPENSION or REVOCATION of its corporate franchise or certificate of incorporation except when the failure to commence is due to causes beyond the control of the corporation as may be determined by the Securities and Exchange Commission.    – Sec. 21 provides that if the corporation becomes inoperative for a period of at least five (5) consecutive years, the Commission may, after due notice and hearing, place the corporation under DELINQUENT STATUS. The delinquent corporation has two (2) years within which to resume after complying with all the requirements the Commission has prescribed.
7. Corporations vested with public interest
  – Section 96 mentioned corporations vested with public interest.  Sec. 22 provides a better understanding of what corporations are vested with public interest. They are the following:   a. Corporations listed with an exchange or with assets of at least Fifty Million Pesos (50,000,000) and having two hundred (200) or more holders of shares, each holding at least one hundred (100) shares of a class of its equity shares;   b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, pre-need, 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 Commission.   The above enumerated corporations shall have independent directors constituting at least twenty percent (20%) of said corporation’s board of directors. 
8. Use of technology or electronic means.
  – Please note that the Old Code was signed into law way back in May 1, 1980 where the use of technology or electronic means was not perceived.    Written notices of stockholders meeting may now be sent through electronic mail or such other manner as the Commission shall allow under its guidelines (Section 49).    Voting may also be done through remote communication like videoconferencing or teleconferencing or the like if allowed by the by-laws.   Note: the SEC shall develop and implement an electronic filing and monitoring system (Section 180).
9. Treasurer
  – Sec. 23 is silent as to the residency of the Treasurer  Sec. 24 expressly provides that a Treasurer must be a resident. Meaning, a resident of the Philippines  
10.  Disqualification of Directors, Trustees, or Officers (Sec. 27)
  – persons convicted by final judgment of an offense punishable by imprisonment for a period exceeding (6) years; or – violated this Old code   Such conviction or violation must have occurred within five (5) years prior to the date of his election or appointment  Sec. 26 provides for an enumeration of grounds for disqualification from being a director, trustee or officer of any corporation if, within five (5) years prior to the election or appointment as such, the person was:   a. Convicted by final judgment:  –of an offense punishable by imprisonment for a period exceeding six (6) years; -for violating this Code; and -for violating Republic Act No. 8799, otherwise known as “The Securities Regulation Code”;   b. Found administratively liable for any offense involving fraudulent acts; and   c) By a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct similar to those enumerated in paragraphs (a) and (b) above.  
11. Reasonable Donations (Sec.36 [9])
  – Domestic or Foreign Corporations are NOT allowed to give donations in aid of any political party or candidate or for purposes of partisan political activity.      Sec. 35(i) – Only Foreign corporations are not allowed to give such donations. The prohibition against Domestic Corporations is now omitted. Thus, Domestic Corporations may now make reasonable donations in aid of any political party or candidate or for purposes of partisan political activity.  
12. Shares of stock in another corporation
     Sec. 61 now allows Shares of stock in another corporation as one among the considerations for stocks  
13.  Inspection of Corporate Books. Sec. 74
  – Any officer or agent of the corporation CANNOT refuse any director, trustees, stockholder or member of the corporation to examine the Corporate Books and copy excerpts from its records or minutes, otherwise, such person shall be punishable under Sec. 144.   Question 1: What if said refusal made by such person was pursuant to a resolution or order of the board of directors or trustees?   Answer 1: The liability provided for by the Old Code shall now be imposed upon the directors or trustees who voted for such refusal.   Question 2: Is there any defense to any action under this section?   Answer 2: Yes. A request for examination of corporate books may be refused the person requesting for such examination: – HAS IMPROPERLY USED any information secured through prior examination of the records or minutes of such corporation or any other corporation, or – was NOT acting in good faith or for legitimate purpose in making his demand    Sec. 73 provides for penalties to be imposed upon a stockholder in case there is ABUSE OF RIGHTS as to Inspection of Corporate Books.   He shall be penalized under Sec. 158 without prejudice to liabilities under other related laws such as:   – Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as amended, and    – Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”.
14. Withdrawal of Request for Petition for Dissolution
  – Old code is silent as to this matter  Sec. 137 provides thatCorporations who requested for Dissolution may request for its withdrawal provided all the necessary requirements are complied with.

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