Corporation Code (Batas Blg. 68 ) Revised Corporation Code (R.A 11232) 1. Classification of Shares Designating different types of shares, with Designating different types of shares, with varying rights, privileges and restrictions is varying rights, privileges and restriction. still allowed. However, Founder’s share s given the exclusive right to vote and be voted for are not allowed to exercise that right in violation of the Anti-Dummy Law and the Foreign Investments Act. As for Redeemable shares, their redemption shall now be subject to any rules and regulations issued by the SEC, in addition to terms and restrictions in the Articles of Incorporation. 2. Incorporators A minimum of 5 natural persons is Any person, partnership, association, or corporation, singly or jointly with others, not necessary to create a corporation. exceeding 15, may now be incorporators. Incorporators are those persons who originally forma corporation and are the first stockholders thereof. No minimum is required, and majority of them need not be Philippine residents. Since there is no longer any minimum number required for incorporators, any single natural person is now allowed to form a corporation by him/herself, known under the New code as One Person Corporation. 3. Corporate Term The Corporate existence should not exceed Perpetual existence is now allowed. Those whose corporate existence were limited by 50 years. the 50 year rule in the old code will automatically have perpetual existence, unless they notify the SEC of their desire to stick to the limited 50 year term. 4. Changes in Corporate Term If corporation wishes to change its If a corporation wishes to change its corporate term, it may amend the articles of corporate term, the change should be incorporation at least 3 years prior to the expiration of the term. made at least 5 years prior to the expiration. If the term has already expired, the corporation may now ask the SEC to revive their corporate existence. If the same is approved, the SEC will issue a certificate of revival giving it perpetual existence, unless it requests for a limited term. However, no revival No revival of corporate existence if the is allowed for companies under the supervision of other government agencies, such as term expires. banks and insurance and trust companies, unless the revival is first approved by the appropriate government agency. 5. Minimum Capital Stock Though there really has been no set No such minimum requirements are provided, subject however to any contrary minimum amount for a corporation’s provision in other laws. authorized capital stock. It was however required to have a minimum subscription of 25% of the total capital stock, 25% of which must be paid up upon subscription. The minimum amount for such paid up capital should not be less than P5, 000. 6. Articles of Incorporation Articles of Incorporation are merely Recognizes AOI to be authenticated, instead of being merely acknowledged before acknowledge before notary public. notary public. Its required contents are similar to those required under the old code, however, it may now include arbitration agreement to govern intra-corporate disputes and relations. 7. Requirements for Incorporation No provision documents. 8. Corporate Name Old code did not allow corporate names which are identical, similar, or confusingly similar with another corporate name, among others. regarding electronic Articles of Incorporation may be filed with SEC, and any application for amendments thereto, in an electronic document. In addition to the articles of incorporation, another document previously required was the treasurer’s affidavit attesting that the minimum amounts of subscribed and paidup capital have been met. Since the new Code no longer requires minimum amounts, the treasurer need not issue such affidavits. In lieu of this, the Articles should just indicate that the named treasurer certifies that the information in the Articles regarding Authorized Capital Stock, and the subscription and paid-up amounts have been duly received for and in behalf of the corporation. Names which are “not distinguishable” from reserved corporate names or names of existing corporations. Names are not distinguishable even if they contain the word corporation, company, incorporated, limited or any abbreviation, thereof, or any punctuation, article conjunction, contraction, preposition or abbreviation or is of a different tenses with spacing or with a number of the same word or phrase. 9. Power of SEC over Corporate Names SEC had the power to approve or deny SEC has the power to summarily order a corporation to cease and desist from using a proposed corporate names any change name it finds to be in violation of the requirements of the law. It may now cause the thereto removal of all visible signs, mars, ads, labels, prints and other materials bearing the disapproved name. If the corporation does not obey the order of the SEC, the SEC may hold it and its responsible officers or directors in contempt, and/or hold them administratively, civilly and/or criminally liable, and/or revoke its registration altogether. 10. The Process of Incorporation The old code did not provide for a specific process to be followed when incorporating a company. At most, it only stated when corporate existence commences. Specific process has been laid down. First, the incorporators shall submit their intended corporate name to the SEC for verification. Once approved, they shall then submit their articles of incorporation and by-laws to the SEC. Once the SEC determines that the documents submitted fully compliant, then it shall issue the certificate of incorporation. Upon issuance of such certificate, its corporate existence begins. 11. Non- Use of Corporate Charter A new corporation must formally organize A new corporation has 5 years from the date of incorporation to commence business and commence business or construction of operations. If it fails to do so within the said 5-year period, its certificate of its works within 2 years from incorporation, incorporation will be deemed revoked at the end of 5year period otherwise, it shall be deemed dissolved. 12. Continuous Inoperation Under the old code, if the corporation becomes inoperative continuously for 5 years, then the SEC may revoke its certificate of incorporation. 13. Board of Directors A corporation exercises its powers through Directors hold office for a period of one year while trustees hold office for 3years. a board of directors, if it is a stock Majority of the board is no longer required to be Philippine residents. corporation, or through a board of trustees, if it is a non-stock corporation. The corporation may be placed by the SEC under delinquent status, after notice and hearing, for a period of 2 years, to allow it to resume operations. This will be lifted once the corporation resumes business, but if it does not resume operations, then the SEC may revoke its certificate of incorporation. The directors hold office for a term of one year and majority of whom should be Philippine residents. Trustees hold office in a way that 1/3 of the first board will hold office for 1 year, then subsequent ones will hold office for 3 years. 14. Independent Directors Old code did not require the appointment of independent directors and was only required for specific corporations such as those following under the Securities Regulation Code and banks and institutions under the supervision of BSP. Corporations vested with public interest should have a board with independent directors constituting at least 20% of the board to be elected by their shareholders. Corporations vested with public interest are corporations engaged in registered securities activities, publicly listed companies, public companies which are those with assets of at least P50, 000.00 and with 200 or more holders of shares, each with at least 100 shares, banks and quasi-banks, NSSLAs, pawnshops, money service companies, pre need, trust and insurance companies, other financial intermediaries and other Independent directors are persons who, companies vested with similar public interests. apart from shares and fees from the corporation, are independent of management and free from any business or other relationship which could materially interfere with independent judgment in carrying out their responsibilities as directors 15. Election of Directors and Trustees Old code provided for the manner of Directors/Trustees are first nominated by the stockholders/shareholders/members, electing directors or trustees without any and the nominees receiving the highest number of votes will be elected. Remote mention of nominations. communication or voting in absentia may now be done, if allowed in the by-laws or authorized by the majority of the board. These two new modes of voting are not available corporations vested with public interest. 16. Failure to hold elections of Old code did not provide for a specific Even if no elections are held, the meeting will be adjourned and same will be reported process to be followed in case no election to the SEC within 30 days from the date of elections. The report should include a new are held or the required majority of the specific date when the elections will be held which should not be more than 60 days directors and trustees stockholders/members were not present from the 1st date. In case no date was selected, the SEC may schedule it for the during the elections. corporation and issue other orders in relation thereto. 17. Corporate Officers The directors are only required to elect a The same officers are required, however, the treasurer is now required to be a resident president, who must be a director, a of the Philippines. In addition to these officers, a compliance officer must also be treasurer who need not be a director and a elected for corporations vested with public interest. corporate secretary who must be a resident citizen of the Philippines. No other officers are required to be elected, unless there are others listed in the by-laws. 18. Death and Resignation of Director, trustee and officer Old code required that any death, Such vacancy should be reported to the SEC within 7 days from the time the secretary resignation or any other circumstances learns of such death or resignation. causing a director, trustee, or officer to create holding office must be reported to the SEC, no period was provided thereof. 19. Disqualification of Directors, Trustees & Officers Only those convicted by final judgment of an offense punishable by imprisonment of more than 6 years under the said code within 5 years from election or appointment are disqualified. 20. Removal of Directors and trustees Only stockholders or members of a corporation may remove any member of The SEC also given the power to motu proprio, upon verified complaint, after due the Board. notice and hearing, to order the removal of a disqualified director/trustee. The said removal is without prejudice to any other sanction the SEC may impose on the board member who despite knowledge of disqualification, failed to remove the director/trustee involved. Additional disqualification were included, such as those who have been found within the same five period to have violated the Securities Regulation Code, made administratively liable for offenses involving fraudulent acts, and found by a foreign court to have violated or engage in similar misconduct. In addition, the SEC and the Philippine Competition Commission may impose additional qualification. 21. Vacancies in the board Old Code, through vacancies caused by removal or expiration of term were required to be filed by the vote of majority of the stockholders or members, no procedure for such election was included. Even from vacancies caused by other reasons, no mention is made as to the time when they should be filed. Elections for vacancies due to term expiration should be held within one day from date of expiration in a meeting called for that purpose. If the vacancy is due to removal, the election may be held on the same day of the meeting authorizing removal which fact of removal should be indicated in the agenda and notice of the meeting. For any other vacancy should be held within 45 days from the time when the vacancy arose. The director/trustee to be elected will only be a replacement and shall serve only for the unexpired term 22. Vacancies in the board requiring emergency action Do not have any provision on vacancies requiring immediate emergency action. Under this code, even if emergency action is needed, the general rules on vacancies should still be followed. This is remedied by the new code since it provides that any vacancy which prevents the board from constituting a quorum to do business and there is a need to act in order to prevent grave, substantial and irreparable loss or damage to the corporation, may be temporarily filed from among the officers of the corporation by unanimous vote of the remaining directors/trustees. The one designated will only be allowed to act on the emergency action necessary at such time since his/her term shall cease within a reasonable time from the termination of the emergency or upon election of a replacement. Within 3 days from the creation of the emergency board the corporation is required to notify the SEC of such matter. 23. Compensation of Directors & Trustees Provides that the board shall not receive Also provides the corporation vested with public interest shall submit to the compensation to act as members of the shareholders/stockholders/members and the SEC, an annual report of the total board except for reasonable per diems compensation of each of their directors/trustees unless majority of their stockholders /members approve to give them compensation. 24. Dealings of Directors, trustees and officers with the corporation Only contract of directors, trustees and Even contracts with their spouses and relatives within the 4th civil degree of officers with the corporation are voidable, consanguinity or affinity are also voidable. However, in addition to the conditions laid unless circumstances are present. down in the old code to make such contracts valid, an additional condition was inserted in case of corporations vested with public interest, material contracts are approved 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. 25. Special Committees Under the Old code, the board may crate In addition to the executive committee, the new code allows for the creation of special executive committee, if they are allowed committees which are temporary or permanent in nature and the board may by the by-laws, to be composed of at least determine the committee members’ term, compensation, powers and responsibilities. 3 directors, to act on specific matters delegated by the board. 26. Extending and shortening the term Extending and shortening the corporate term is subject to the requirement of sending notices to the stockholders/members of the meeting when the corporate term will be extended or shortened. 27. Increasing/Decreas ing Capital Stock Same rule in extending and shortening the Allows for the notice to be sent by electronic means, as may be recognized in the byterm laws and the SEC’s rules and regulations on electronic data messages. In addition, any application to change the capital stock shall now be filed with the SEC 6months from approval of the board and its stockholders. 28. Disposition of Corporate Assets The old code was passed at a time when the Philippines still did not have a competition law. Thus, it is only in the new code that the said law is expressly mentioned, thereby subjecting dispositions of corporate assets to its provisions It allows the notice of the meeting to be sent electronically so long as such electronic sending is allowed by the by-laws or the consent of the stockholders/members, in accordance with rules and regulations of the SEC on the use of electronic data messages. A notable insertion of the new code is the basis of determining whether the disposition or sale covers all or substantially all assets or properties. The new code now specifically provides that the determination must be based on the net assets and/or properties as shown in the latest financial statements of the corporation. Another insertion is the provision on allowing notice of the proposed sale and the meeting called for such purpose to be sent electronically, when such is allowed by the by-laws or with the consent of the stockholders/members. 29. Investing Corporate Funds The new code provides that when corporate funds will be invested in another corporation or business, a meeting should be called to allow the stockholders to vote on the investment. Notice of such meeting should be sent to them prior to the meeting which under the new code, may be sent electronically in accordance with rules and regulations of the SEC an electronic data messages and when allowed by the by-laws or done with the consent of the stockholders.
