THE REVISED CORPORATION CODE OF THE
PHILIPPINES
RA 11232
Topic 1: Changes and Developments in Corporation Law
INTRODUCTION
Republic Act 11232 or the Revised Corporation Code
(RCC) was signed into law on the 20th of February 2019.
It has introduced significant changes to Batas Pambansa
68 or what is now known as the Old Corporation Code
(OCC).
With the passage of the Revised Corporation Code of the
Philippines (RCC) or RA 11232, the rules governing
corporations may now address the current concerns of
corporations and would-be corporations. It aims to further
ease the formation of corporations and the filing of
applications and reports which have frustrated those who
deal with the bureaucracy. It empowers the SEC to fully
enforce the new law. It also introduced new rules that
align with developments in technology and new laws that
came after the old Corporation Code or BP 68 like the
Philippine Deposit Insurance Corporation Charter or RA
3591, the New Central Bank Act or RA 7653, the Rules of
Court, the Intellectual Property Code or RA 8293, the
Securities Regulation Code or RA 8799, the Data Privacy
Act or RA 10173, and the Philippine Competition Act or
RA 10667. Some established rules and practices of the
SEC have been institutionalized by their incorporation in
the RCC. The updates on corporation law presented
herein are divided into two categories: (i) Changes and (ii)
Innovations. Changes shall refer to those rules already
existing under the old Corporation Code (OCC) but later
refined or amended by RCC. Innovations shall refer to
those rules not provided under the OCC which are first
introduced by RCC.
CHANGES
Changes shall refer to those rules already existing under
the old Corporation Code (OCC) but later refined or
amended by RCC.
1. The terms and conditions for the issuance of
redeemable shares must not only be stated in the articles
of incorporation but also in the certificate of stock.
(Section 7 of the RCC; Section 8 of the OCC).
2. Juridical persons such as partnerships, associations,
and corporations may now incorporate a corporation.
There is no more minimum number of incorporators, but
the maximum number remains at 15. (Section 10; Section
10).
3. A corporation with a single stockholder may now be
formed and shall be considered a One-Person
Corporation (OPC). (Section 10; Section 10)
4. As a general rule, corporations shall have perpetual
existence, unless its articles of incorporation provide for a
specific term. Corporations formed prior to RCC shall
automatically have perpetual existence without prejudice
to its right to elect to retain its specific corporate term
through a majority vote of its stockholders. (Section 11;
Section 11)
5. Amendment on the corporate term may now be made
within 3 years prior to the expiration of the corporate term.
(Section 11; Section 11)
6. The number of trustees indicated in the articles of
incorporation may now be more than 15. (Section 13;
Section 14)
7. Filing of the articles of incorporation and amendments
thereto may now be filed electronically. (Section 13;
Section 14)
8. The authorized capital stock no longer needs to be at
least 25% subscribed. (Section 14; Sections 13 and 15)
9. The Treasurer’s Affidavit is no longer required since the
certification concerning the amount of capital subscribed
and/or paid is already included in the articles of
incorporation. (Section 14; Section 14)
10. There is no more minimum paid-up capital. (Section
14; Section 14)
11. False certification concerning the amount of capital
subscribed and/or paid is a new ground to disapprove
articles of incorporation or amendments thereto. (Section
16; Section 17)
12. Failure of a corporation to formally organize and
commence its business within 5 years from the date of its
incorporation shall render the certificate of incorporation
deemed revoked as of the day following the end of the 5year period. (Section 21; Section 22)
13. Trustees elected shall have a term not exceeding 3
years. (Section 22; Section 23)
14. A treasurer to be elected must be a resident of the
Philippines. (Section 24; Section 25)
15. The duties of elected officers may be provided not only
in the bylaws but also as resolved by the board of
directors. (Section 24; Section 25)
16. The death, resignation, or cessation to hold the office
of any director, trustee, or officer shall be reported in
writing to the SEC within 7 days from knowledge thereof.
(Section 25; Section 26)
17. Disqualification of directors, trustees, or officers for
violations of the RCC and Securities Regulation Code or
RA 8799, now clearly requires conviction by final
judgment. It also adds two additional disqualifications:
finding administrative liability for any offense involving
fraudulent acts and judgment or finding of a foreign court
or equivalent foreign regulatory for acts similar to the
aforementioned grounds. The SEC and the Philippine
Competition Commission or PCC may impose additional
qualifications or other disqualifications. (Section 26;
Section 27)
18. Elections to fill vacancies in directorships and
trusteeships due to term expiration must be held no later
than the day of such expiration. In case of removal,
vacancies may be filled during the same meeting. In all
other cases, it must be filled no later than 45 days from
the time the vacancy arose. (Section 28; Section 29)
19. Dealings of directors, trustees, or officers now include
their spouses and relatives within the 4th civil degree of
consanguinity or affinity. (Section 31; Section 32)
26. Notice about the meeting on the proposed sale or
other disposition of all or substantially all of the corporate
assets may now be given to the stockholders
electronically. (Section 39; Section 40)
27. Notice about the meeting on the proposed investment
of corporate funds in another corporation may now be
given to the stockholders electronically. (Section 41;
Section 42)
28. Bylaws must now be filed together with the articles of
incorporation. It can no longer be filed within one month
from the notice of issuance of the certificate of
incorporation. (Section 45; Section 46)
29. Bylaws may provide other matters for the proper or
convenient transaction of its corporate affairs for the
promotion of good governance and antigraft and
corruption measures. (Section 46; Section 47)
20. The prohibition on domestic corporations from giving
donations for political purposes has been removed. Now,
only foreign corporations are prohibited to give such
donations. (Article 35; Section 36)
30. If the date of the regular meeting of stockholders is not
fixed in the bylaws, it shall be held on any date after April
15 of every year as determined by the board provided that
written notice shall be sent to all stockholders or members
at least 21 days prior to the meeting, unless a different
period is required. Notice of regular meetings may now be
sent electronically. (Section 49; Section 50)
21. Notice about the meeting on the proposed extension
or shortening of corporate term may now be given to the
stockholders and members electronically. (Section 36;
Section 37)
31. There is an exhaustive list of matters (which may be
expanded through the proposal) required to be presented
at each regular meeting of stockholders or members.
(Section 49; Section 50)
22. Notice about the meeting on the proposed increase or
decrease of capital stock or increase of bonded
indebtedness may now be given to the stockholders
electronically. (Section 37; Section 38)
32. General waivers of notice in the articles of
incorporation or the bylaws shall not be allowed.
Attendance at a meeting shall not constitute a waiver of
notice of such meeting when the express purpose of
attendance is to object to the transaction of any business
because the meeting is not lawfully called or convened.
(Section 49; Section 50)
23. The certificate executed in case of an increase or
decrease of capital stock, or an increase of bonded
indebtedness need not set forth the actual indebtedness
of the corporation on the day of the meeting. (Section 37;
Section 38)
24. The application for an increase or decrease of capital
stock or increase of bonded indebtedness shall be filed
with the SEC within 6 months from the date of approval of
the board of directors and stockholders, which may be
extended for justifiable reasons. (Section 37; Section 38)
25. The treasurer’s sworn statement accompanying the
application for an increase of capital stock now clearly
provides that the required 25% subscription is of the
“increase in capital stock” instead of “increased capital
stock”. The new rule is consistent with the current policy
of the SEC. (Section 37; Section 38)
33. Metro Cebu, Metro Davao, and other Metropolitan
areas (in addition to Metro Manila) are now considered a
city or municipality for purposes of places where
stockholders’ or members’ meetings may be held.
(Section 50)
34. Notices of stockholders’ or members’ meetings now
require certain information and accompanying proxy
forms. (Section 50; Section 51)
35. All proceedings and any business transacted at the
stockholders’ or members’ meetings shall be valid even if
improperly held or called, provided that no one of the
present stockholders or members expressly states at the
beginning of the meeting that the express purpose of
attendance is to object to the transaction of any business
because the meeting is not lawfully called or convened.
(Section 50; Section 51)
36. Notice of board meetings must be sent to every
director or trustee at least 2 days prior to the scheduled
meeting unless a longer period is provided in the bylaws.
(Section 52; Section 53)
37. It is now expressly provided that directors or trustees
who cannot physically attend or vote at board meetings
can participate and vote through remote communication
that allow them reasonable opportunities to participate.
(Section 52; Section 53)
38. Pledgors and mortgagors are now identified as
secured creditors including other persons granted a
security interest over the shares. (Section 54; Section 55)
39. No voting trust agreement shall be entered into which
is anti-competitive and violative of nationality and capital
requirements in addition to for purposes for the
perpetuation of fraud. (Section 58; Section 59)
40. Additional consideration for stocks: shares of stock in
another corporation and other generally accepted forms
of consideration. (Section 61; Section 62)
41. Notice of the sale of delinquent stocks may be sent
through other means provided in the bylaws. (Section 67;
Section 68)
42. There is an exhaustive list of corporate books and
records that must be preserved at the principal office and
made available to the stockholders or members. (Section
73; Section 74)
43. The financial statements furnished to the requesting
stockholder or member shall be in the form and substance
of the financial reporting required by the SEC. (Section
74; Section 75)
44. If the total assets or total liabilities of the corporation
are less than P600,000 or such other amount as may be
determined by the Department of Finance, the financial
statements required to be presented to the stockholders
or members may be certified under oath by the treasurer
and the president. (Section 74; Section 75)
45. The notice required for meetings to approve merger
or consolidation shall be given in the same manner as
giving notice of regular or special meetings. (Section 76;
Section 77)
46. There are four additional items that must be set forth
in the articles of merger or consolidation. (Section 77;
Section 78)
47. There is an appraisal right in case of investment of
corporate funds for any purpose other than the primary
purpose of the corporation. (Section 80; Section 81)
48. The first trustees elected in a non-stock corporation
do not have to serve their initial terms partially (1 year for
1/3 of the board, 2 years for the other 1/3, and 3 years for
the rest). (Section 91; Section 92)
49. Incorporation of educational institutions no longer
requires the favorable recommendation of the
Department of Education, Culture, and Sports. (Section
107 of OCC was not reproduced in RCC)
50. The voting requirement in case of voluntary
dissolution where no creditors are affected now only
requires a majority vote of the board and an affirmative
vote of stockholders owning at least a majority of the
outstanding capital stock or a majority of the members.
(Section 134; Section 118)
51. Notice on the meeting to vote on the voluntary
dissolution must be given to each stockholder or member
at least 20 days prior to the meeting. Notice may now be
given electronically. (Section 134; Section 118)
52. A verified request for voluntary dissolution shall be
filed with the SEC containing the required information and
accompanied by required documents. (Section 134;
Section 118)
53. The SEC must approve the request for dissolution
within 15 days from receipt and issue the certificate of
dissolution. (Section 134; Section 118)
54. For corporations regulated by government agencies,
applications for dissolution must be favorably
recommended by the appropriate government agency.
(Section 134; Section 118)
55. In case of voluntary dissolutions where creditors are
affected, the petition must contain certain information and
be accompanied by required documents. (Section 135;
Section 119)
56. It is now clearly provided that voluntary dissolution
shall take effect only upon the issuance by the SEC of a
certificate of dissolution. (Sections 134 and 135; Sections
118 and 119)
57. In case of expiration of the corporate term, dissolution
shall automatically take effect on the day following the last
day of the corporate term stated in the articles of
incorporation without the need for the issuance of the
certificate of dissolution. (Section 136; Section 120)
58. The grounds for involuntary dissolution are now listed.
(Section 138; Section 121)
59. Banks are excluded from the provision on corporate
liquidation. (Section 139, Section 122)
5. Rules on the distinguishability of corporate names are
provided. (Section 17)
60. Upon the winding up of corporate affairs, any asset
distributable to any creditor or stockholder, or member
who is unknown or cannot be found shall be escheated in
favor of the national government. (Section 139; Section
122)
6. SEC now has the authority to cause the removal of all
visible signages, marks, advertisements, labels, prints,
and other effects bearing a disallowed corporate name.
(Section 17)
61. The threshold for bonds or securities required for
foreign corporations applying for a license to do business
in the Philippines has been adjusted from P100,000 to
P500,000 (as initial bond or security) and P5,000,000 to
P10,000,000 (licensee’s gross income for the fiscal year
that will require additional securities). (Section 143;
Section 126)
62. If a domestic corporation is appointed as a resident
agent of a foreign corporation, it must be of sound
financial standing and must show proof that it is in good
standing as certified by the SEC. (Section 144; Section
127)
63. Administrative sanctions such as fines for violations of
the RCC or of a rule, regulation, or order of the SEC have
been increased. Aside from fines, the SEC may issue
permanent cease and desist orders, or suspend or revoke
certificates of incorporation, or dissolve corporations and
forfeit their assets. (Section 158; Sections 143 and 144)
64. Reportorial requirements for every corporation are
now listed down, with a right to redact confidential
information. (Section 177; Section 141)
65. The powers, functions, and jurisdiction of the SEC are
now listed down. (Section 179; Section 143)
INNOVATIONS
Changes shall refer to those rules already existing under
the old Corporation Code (OCC) but later refined or
amended by RCC
1. Revival of corporations whose terms have expired is
now allowed subject to all of its duties, debts, and
liabilities existing prior to its revival. (Section 11 of the
RCC)
7. Failure to comply with SEC’s order related to the
disallowed corporate name may hold the corporation and
its responsible directors or officers in contempt and/or
hold them administratively, civilly, and/or criminally liable
and/or revoke the registration of the corporation. (Section
17)
8. Verification of intended corporate name prior to
registration is now expressly provided. (Section 18)
9. After commencing its business, failure of the
corporation to operate for at least 5 consecutive years
may be placed under delinquent status by SEC after due
notice and hearing. A delinquent corporation shall have 2
years to resume operations and comply with all SEC
prescribed requirements. Failure to comply shall be a
cause for revocation of the certificate of incorporation.
(Section 21)
10. Corporations vested with public interest shall have
independent directors constituting 20% of such board.
They must be elected by the shareholders present or
entitled to vote in absentia during the election of directors.
(Section 22)
11. Stockholders and members may vote through remote
communication or in absentia, if authorized in the bylaws
or by a majority of the board. Such modes are available to
corporations vested with public interest, even in the
absence of a provision in the bylaws. Stockholders or
members who participate through remote communication
or in absentia shall be deemed present for purposes of
quorum. (Section 23)
12. Directors and trustees elected are now required to
observe the rules of good corporate governance. (Section
23)
13. Corporations vested with public interest are required
to elect a compliance officer. (Section 24)
2. An arbitration agreement may now be provided in the
articles of incorporation. (Section 13)
3. One-Person Corporations must bear “OPC” at end of
their corporate name. (Section 14)
4. The form of articles of incorporation now includes the
undertaking to change the name of the corporation when
there exists a prior right or if it is contrary to law, public
morals, good customs, or public policy. (Section 14)
15. The SEC has now the authority to order the removal
of a disqualified director or trustee motu proprio or upon a
verified complaint, without prejudice to the sanctions that
the SEC may impose on directors or trustees who knew
of the disqualification but failed to remove a such director
or trustee. (Section 27)
16. “Emergency board”: When a vacancy prevents the
remaining directors from constituting a quorum and
emergency action is required to prevent grave,
substantial, and irreparable loss or damage to the
corporation, the vacancy may be temporarily filled among
the officers of the corporation by unanimous vote of the
remaining directors or trustees. The action by the
designated director or trustee shall be limited to the
emergency action necessary, and the term shall cease
within a reasonable time from the termination of the
emergency or upon the election of the replacement
director. The creation of the emergency board shall be
reported to the SEC within 3 days from creation stating
the reason for its creation. (Section 28)
17. Directors or trustees shall not participate in the
determination of their own per diems or compensation.
(Section 29)
18. Corporations vested with public interest shall submit
to their shareholders and the SEC an annual report of the
total compensation of each of the directors or trustees.
(Section 29)
19. Validity of dealings of directors, trustees, or officers
with corporations vested with public interest requires
approval by at least 2/3 of the entire membership of the
board, with at least a majority of the independent directors
voting to approve the material contract. (Section 31)
26. The modes by which a stockholder, member, director,
or trustee may attend meetings and cast their votes must
now be provided in the bylaws. (Section 46)
27. The maximum number of other board representations
that an independent director or trustee may have shall, in
no case, be more than the number prescribed by the SEC.
(Section 46)
28. An arbitration agreement may now be provided in the
bylaws. (Article 46)
29. A stockholder or member may now propose the
holding of a special meeting and items to be included in
the agenda. (Section 46)
30. The stock and transfer book or membership book shall
be closed at least 20 days for regular meetings and 7 days
for special meetings before the scheduled date of the
meeting unless the bylaws provide for a longer period.
(Section 49)
31. In case of postponement of stockholders’ or members’
regular meetings, written notice shall be sent 2 weeks
prior to the date of the meeting unless a different period is
required. (Section 49)
20. The board is now empowered to create special
committees of temporary or permanent nature and
determine
the
members’
terms,
composition,
compensation, powers, and responsibilities. (Section 34)
32. The right to vote of stockholders and members may
now be exercised through remote communication or in
absentia when so authorized in the bylaws. The SEC shall
issue rules governing such participation. (Sections 49, 57,
and 88)
21. Corporations have now the express power to enter
into a partnership or joint venture with any person.
(Section 35)
33. The articles of incorporation or bylaws may provide for
a greater majority to determine the quorum during board
meetings. (Section 52)
22. The sale or other disposition of assets of a corporation
is now subject to the Philippine Competition Act or RA
10667. (Section 39)
34. A director or trustee who has a potential interest in any
related party transaction must recuse from voting on the
approval of the related party transaction. (Section 52)
23. In non-stock corporations where there are no
members with voting rights, the vote of at least a majority
of the trustees in office will be sufficient authorization for
the corporation to enter into any transaction involving the
sale or other disposition of corporate assets. (Section 39)
35. The SEC may require corporation whose securities
are traded in trading markets and which can reasonably
demonstrate their capability to do so to issue their
securities or shares of stocks in uncertificated or scripless
form. (Section 62)
24. The determination of whether or not the sale involves
all or substantially all of the corporation’s properties and
assets must be computed based on its net asset value, as
shown in its latest financial statements. (Section 39)
36. The inspecting or reproducing party of corporate
books or records shall remain bound by confidentiality
rules. (Section 73)
25. Management contracts shall be entered into for a
period not longer than 5 years for any one term. (Section
43)
37. A requesting party who is not a stockholder or member
of record, or is a competitor, director, officer, controlling
stockholder or otherwise represents the interests of a
competitor shall have no right to inspect or demand
reproduction of corporate records. (Section 73)
38. Abuse of the right of inspection shall be penalized
without prejudice to liabilities under the Intellectual
Property Code and Data Privacy Act. (Section 73)
39. If the corporation denies or does not act on a demand
for inspection and/or reproduction of corporate records,
the aggrieved party may report such denial or inaction to
the SEC. The SEC may issue an order directing the
inspection or reproduction of the requested records after
a summary investigation is conducted within 5 days from
receipt of such report. (Section 73)
40. The SEC may require stock corporations that transfer
and/or trade stocks in secondary markets to have an
independent transfer agent. (Section 73)
41. Independent trustees of non-stock corporations
vested with public interest need not be a member of the
non-stock corporation. (Section 91)
42. A non-stock corporation shall, at all times, keep a list
of its members and their proxies in the form the SEC may
require. The list shall be updated to reflect the members
and proxies of record 20 days prior to any scheduled
election. (Section 92)
h. Acting as intermediaries for graft and corrupt practices
i. Engaging intermediaries for graft and corrupt practices
j. Tolerating graft and corrupt practices
k. Retaliation against whistleblowers
50. There exists a liability for all directors, trustees,
officers, and other employees, including aiders and
abettors who commit any violation of the RCC, any rule,
regulation, or order of the SEC. (Sections 171 and 172)
51. The amount collected by the SEC shall be deposited
and maintained in a separate account to fund its
modernization and to augment its operational expenses.
(Section 175)
52. The SEC shall exercise visitorial powers over all
corporations. (Section 178)
53. The SEC shall develop and implement an electronic
filing and monitoring system. (Section 180)
54. An arbitration procedure is laid down to govern
arbitration agreements provided in the articles of
incorporation or bylaws. (Section 181)
43. Allowing One-Person Corporations (OPCs)
55. Jurisdiction over party-list organizations are
transferred to the Commission on Elections or
COMELEC. (Section 182)
44. A request for dissolution may now be withdrawn
through a motion duly verified by any incorporator,
director, trustee, shareholder, or member. (Section 137)
56. Corporations affected by the new requirements are
given 2 years from the effectivity of the RCC within which
to comply.
45. The SEC has regulatory jurisdiction to investigate an
alleged violation of the RCC, or of a rule, regulation, or
order of the SEC. (Section 154)
46. The SEC, through its designated officer, has
subpoena powers. (Section 155)
47. The SEC may issue cease and desist orders (even ex
parte) to persons reasonably believed to have violated or
about to violate the RCC, or a rule, regulation, or order of
the SEC. (Section 156)
48. The SEC has contempt powers subject to due notice
and hearing. (Section 157)
49. Specific acts are punishable with a corresponding
fine: (Sections 159 to 169)
a. Unauthorized use of a corporate name
b. Violation of disqualification provision
c. Violation of duty to maintain records and to allow their
inspection or reproduction
d. Willful certification of incomplete, inaccurate, false, or
misleading statements or reports
e. Independent auditor collusion
f. Obtaining corporate registration through fraud
g. Fraudulent conduct of business