Republic Act No.
11232: REVISED CORPORATION CODE
President Rodrigo R. Duterte has signed into law The Revised
Corporation Code of the Philippines, aimed at improving ease of
doing business in the country, affording more protection to
corporations and stockholders and promoting good corporate
governance.
The measure, which amended the almost four-decade-old Batas
Pambansa Blg. 68, forms part of the present administration's
legislative priorities. It aligns with the 10- point economic agenda of
the President, specifically on increasing the economy's
competitiveness and improving the ease of doing business in the
country.
The New Code aims to improve ease of doing business and
modernize procedures to improve and elevate the standards in the
country’s corporate setting in line with existing international best
practices. According to Senator Franklin M. Drilon, the principal
sponsor and author of the Code, the amendments are focused on
“removing barriers hindering the entry of both small and large
enterprises into the Philippine market” as it aims to foster smoother
transactions in pursuing business in the Philippines.
Some notable amendments under the Code are: (1) One Person
Corporation; (2) Perpetual Existence; (3) Minimum Capital Stock; (4)
Incorporators, Directors, Trustees, and Officers; and (5) Remote
Communication and In-Absentia Voting.
Perpetual corporate term
Among the notable amendments to the Corporation Code is the
grant of a perpetual corporate term for existing and future
corporations unless provided otherwise in their articles of
incorporation.
Allowing corporations to exist beyond the 50-year term provided
under the old Code will eliminate the possibility of legitimate and
productive businesses prematurely closing down only because they
failed to renew their registration. It will also foster a sense of
longevity that can translate to long-term and sustainable projects
and investments.
As part of the shift to a perpetual corporate term, the Revised
Corporation Code mandated the SEC to allow corporations with
expired registration papers to apply for the revival of their corporate
existence together with all the rights and privileges under their
certificates of incorporation.
PERPETUAL EXISTENCE
Under the Old Code, a corporation has a term limit of 50 years,
unless extended. Its existence is deemed dissolved upon expiration
of the term.
Under the New Code, the default rule is that a corporation shall
have perpetual existence, unless otherwise specified in the Articles
of Incorporation. As transition, corporations existing prior to the
effectivity of the New Code shall have a perpetual term unless the
corporation, upon the required vote of its stockholders, notifies the
SEC that it elects to retain its specified term.
In this connection, the New Code incorporates a “Lazarus” provision
which allows the revival of a corporation whose term has expired by
filing an application with the SEC. Upon approval, the corporation
shall be deemed revived together with all the rights and privileges
under its certificate of incorporation and subject to all of its duties,
debts, and liabilities existing prior to its revival, giving it perpetual
existence unless otherwise specified.
One-person corporation
The Old Code required at least five (5) stockholders to form a
corporation.
Under the New Code, a one person corporation (“OPC”) may now be
formed by a single stockholder, who may be a natural person, trust
or an estate. However, banks and quasi-banks, pre-need, trust,
insurance, public and publicly listed companies, and non-chartered
government-owned and controlled corporations may not
incorporate as OPC. Further, as defined, it appears that a juridical
entity, such as a corporation, may not be the stockholder in an OPC.
Similar to all other corporations, as provided by the New Code
(unless a special law requires otherwise), an OPC is not required to
have a minimum capital stock. It does not need to adopt corporate
by-laws unlike an ordinary corporation. In lieu of the meetings, an
OPC may simply prepare written resolutions, signed and dated by
the single stockholder.
The single stockholder will act as the president and sole director of
the OPC. He may also act as its treasurer, upon submission of a bond
to the Securities and Exchange Commission (“SEC”) and a written
undertaking to faithfully administer its funds, disburse and invest
the same according to its registration. However, he may not act as
its corporate secretary.
It is important to note though that the New Code requires the single
stockholder to prove that the OPC is sufficiently financed, and its
assets are independent from his personal property, in order to claim
limited liability. Otherwise, he shall be jointly and severally liable for
the liabilities of the OPC.
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The Revised Corporation Code also allows for the formation of one-
person corporation, a corporation with a single stockholder and
without a minimum authorized capital stock required. Forming a
one-person corporation instead of a corporation with several
stockholders and a board of directors allows for more flexibility in
pursuing business because the lone stockholder can make decisions
without having to seek board consensus.
It also affords greater protection to the stockholder by limiting
liability to the corporate entity. In contrast, the old Code required at
least five stockholders in the formation of corporations.
Emergency board
Another salient feature of the Revised Corporation Code is the
provision for an emergency board when a vacancy in a corporation's
board of directors prevents the remaining directors from
constituting a quorum and consequently from making emergency
actions required to prevent grave, substantial and irreparable loss or
damage.
In such situations, the vacancy may be temporarily filled from
among the officers of the corporation by a unanimous vote of the
remaining directors or trustees. The corporation must then notify
the Commission within three days from the creation of the
emergency board. The action by the designated director or trustee
shall be limited to the emergency action necessary, and his or her
term shall cease within a reasonable time from the termination of
the emergency or upon the election of the replacement director or
trustee.
Alternative dispute resolution
The Revised Corporation Code also allows corporations to adopt
alternative dispute resolution mechanisms for intra-corporate issues
except those involving criminal offenses and interests of third
parties.

An arbitration agreement may be provided in the articles of
incorporation or bylaws of a corporation. To be enforceable, the
arbitration agreement should indicate the number of arbitrators and
the procedure for their appointment. The power to appoint the
arbitrators forming the arbitral tribunal shall be granted to a
designated independent third party.
Should the third party fail to appoint the arbitrators in the manner
and within the period specified in the arbitration agreement, the
parties may request the Commission to appoint the arbitrators. In
any case, arbitrators must be accredited or must belong to
organizations accredited for the purpose of arbitration.
Electronic filing and monitoring system
As part of efforts to improve ease of doing business in the country,
the Revised Corporation Code mandated the Commission to develop
and implement an electronic filing and monitoring system.
The SEC is mandated to promulgate rules to facilitate and expedite,
among others, corporate name reservation and registration,
incorporation, submission of reports, notices, documents required
under the Code, and sharing of pertinent information with other
government agencies.
So far, the Commission has implemented a fully automated and
online company registration system for the pre-processing of
corporations and partnerships, licensing of foreign corporations,
amendments of the articles of incorporation and other corporate
applications requiring its approval.
Participation via remote communication, in absentia
To ensure optimal stockholder participation, meanwhile, the Revised
Corporation Code will allow the use of remote communication such
as such as videoconferencing and teleconferencing during
stockholder meetings. Stockholders may also participate and vote in
absentia.
The Commission shall issue the rules and regulations governing
participation and voting through remote communication or in
absentia, taking into account the company's scale, number of
shareholders or members, structure, and other factors consistent
with the protection and promotion of shareholders' or members'
meetings. Directors or trustees may also participate and vote in
regular and special meetings through remote communication.
However, they cannot join or cast their votes by proxy at board
meetings.
"Collectively, the amendments are aimed at encouraging
entrepreneurship and the formation of new businesses, improving
the ease of doing business in the country, promoting good corporate
governance, increasing protection afforded to corporations and
stockholders, and deterring corporate abuses and fraud," Mr.
Aquino noted.
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REMOTE COMMUNICATION AND IN ABSENTIA VOTING
Following the concept of allowing board meetings by way of
videoconferencing, teleconferencing, or other alternative modes of
communication which have been made explicit under the New Code,
the New Code took a step further by allowing stockholders or
members to exercise their right to vote through remote
communication or in absentia when authorized under the by-laws,
subject to the rules and regulations to be issued by the SEC. With
this amendment, it appears that the stockholders and members
need not be physically present or represented by proxies in
meetings, as required in the past.
Existing corporations affected by certain provisions of the New Code
are given a period of two (2) years from its effectivity within which
to comply with the requirements thereon.
With the aforementioned significant changes introduced under the
New Code, we anticipate that the SEC will issue supplemental
regulation specifying the requirements and detailed procedure to
comply with its provisions.
MINIMUM CAPITAL STOCK
The Old Code required 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.
The New Code removed the aforementioned 25% subscription,
payment and minimum paid-up capital requirements. The New Code
states that “stock corporations shall not be required to have a
minimum capital stock, except as otherwise specifically provided by
special law.”
INCORPORATORS, DIRECTORS, TRUSTEES, AND OFFICERS
The New Code removed the minimum number of incorporators,
directors and trustees, which stood as five (5) under the Old Code.
Section 10 of the New Code states that “any person, partnership,
association or corporation, singly or jointly with others but not more
than fifteen (15) in number, may organize a corporation for any
lawful purpose or purposes.” It appears that the New Code allows
juridical persons to act as incorporators unlike the Old Code which
limits incorporators to natural persons.
Moreover, the New Code reiterated the requirement to elect
independent directors in corporations vested with public interest
such as: (a) public companies, (b) banks and quasi-banks, non-stock
savings loan associations, etc., and (c) other corporations as may be
determined by the SEC. The independent directors shall constitute
at least 20% of the entire board membership.
The New Code also allows the creation of an “emergency board”
when the vacancy in the board 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. During an emergency, the remaining directors or
trustees may fill the vacancy temporarily from among the officers of
the corporation to pass the necessary emergency action.
Section 24 of the New Code retained the officers and its
qualifications under the Old Code, except for the treasurer, who is
now required to be a resident of the Philippines. In addition,
corporations vested with public interest are now obliged to appoint
a compliance officer.
The Revised Corporation Code
(Republic Act No. 11232, February 20, 2019)
 Introduction of a new corporate vehicle – the one-person
corporation (OPC). Under the new law, a single shareholder,
who may be an individual, a trust or an estate may form an
OPC. The single stockholder becomes the sole director and
president of the OPC. However, banks and quasi-banks,
preneed, trust, insurance, public and publicly-listed companies,
and non-chartered government-owned and –controlled
corporations may not incorporate as an OPC.
 Requirement for incorporators. RCC now allows one (1) person
to register a business as a corporation by oneself, thus,
removing the requirement of minimum 5 incorporators.
Moreover, while the old Corporation Code required
incorporators to be natural persons, the RCC provides that
incorporators may be any person, partnership, association or
corporation.
 Removal of the maximum 50-year corporate term. Corporations
shall now have perpetual existence unless their Articles of
Incorporation provide otherwise. Even corporations existing
prior to the effectivity of the RCC shall have perpetual
existence, unless majority of the stockholders elect to retain
the specific corporate term in their articles of incorporation.
 Revival of existence. A corporation whose term has expired may
apply for revival of corporate existence. Upon approval by the
SEC, the corporation shall be deemed revived and shall also be
deemed to have perpetual existence, unless its application for
revival provides otherwise.
 Issuance of no-par value shares of stocks. The corporations not
allowed to issue no-par value shares now include preneed
corporations and other corporations authorized to obtain or
access funds from the public. The restriction applies to the
covered corporations, whether publicly listed or not.
 Removal of subscribed and paid-up capital requirements. The
RCC removed the requirement of 25%-25% subscription and
paid-up capitalization requirement, except as specifically
provided in special laws.
 Right to vote by stockholders/members. The stockholders or
members may now exercise their right to vote via remote
communication or in absentia (previously through presence or
representative only). A stockholder or member who
participates via remote communication or in absentia shall be
deemed present for purposes of quorum. Rules and regulations
governing this shall be issued by SEC.
 Officers. The RCC now requires the treasurer to be a resident of
the Philippines. While corporations vested with public interest
must elect a compliance officer.
 Board of Directors/Trustees. Corporations vested with public
interest are now required to have independent directors
constituting at least twenty percent (20%) of the board.
Trustees shall be elected for a term not exceeding three (3)
years.
 Disqualification of Directors, Trustees or Officers. The RCC
provided additional grounds for disqualification of directors,
trustees, and officers of a corporation: violating RA 8799,
otherwise known as “The Securities Regulation Code”; being
found administratively liable for any offenses involving
fraudulent acts; and being found liable by foreign court or
equivalent foreign regulatory authority for acts, violations or
misconduct similar to those enumerated in paragraphs (a) and
(b) of the new Section 26. The five-year limit on the violation of
the Corporation Code has been removed. The SEC or the
Philippine Competition Commission may also provide additional
qualification and disqualification of directors, trustees and
officers.
 Removal of Directors. A disqualified director or trustee can be
removed by the SEC motu propio (on its own initiative) or upon
a verified complaint, and after due notice and hearing. The SEC
may also impose sanctions on directors or trustees who failed
to remove the disqualified director or trustee despite their
knowledge of the disqualification.
 Emergency boards. When vacancy prevents the remaining
directors from constituting a quorum and there is a need for
emergency action to prevent damage to the corporation, the
remaining directors may fill up the vacancy from among the
officers of the corporation by unanimous vote of the remaining
directors or trustees. However, 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 election of the
replacement, whichever comes earlier. A notification for the
creation of emergency board must be done with SEC within 3
days from creation of the emergency board.
 Compensation of Directors/Trustees. The RCC now requires the
submission to the shareholders and SEC of an annual report on
the total compensation of each director or trustees.
 Dealings of Directors, Trustees or Officers with the
Corporation. Limitation on the dealings of directors, trustees or
officers with the corporation now includes contracts with the
corporation of their spouses and relatives within the fourth civil
degree of consanguinity or affinity. Such contracts are voidable
unless all the requirements and conditions set forth in Sec. 31
of the Revised Corporation Code are complied.
 Donations to Political Party/Activity. Domestic corporations are
now allowed to give donations in aid of any political party or
candidate or for purposes of partisan political activity. Under
the RCC, only foreign corporations are not allowed to give
political donations.
 Mode of Notices to Stockholders. Electronic sending of notices
for stockholder’s meetings is now allowed provided the same is
provided in the by-laws and in accordance with SEC’s rules on
the use of electronic messages.
 Regular and special meetings of stockholders/members. If date
for the annual stockholders’ meeting is not fixed, it may be held
on any date after April 15 of every year (previously any date in
April only). Written notices must be sent to stockholders not
later than 21 days prior to the meeting.
 Consideration for Stocks. Shares of stock in another corporation
and other generally accepted form of consideration are now
considered acceptable consideration for the issuance of stocks.
 Financial Statements. Financial statements of corporations with
total assets or total liabilities amounting to less than P600,000
or such other amount as may be determined by DOF, is now
not required to be certified by an independent auditor. It may
just be certified under oath by the treasurer and the president
of the corporation.

 Merger or Consolidation. Additional information such as the

carrying amounts and fair values of the assets and liabilities of
the parties to the merger or consolidation as of the agreed cut-
off date, method of merger or consolidation of accounts, and
provisional or pro-forma values as merged or consolidated, are
now required to be included in the articles of merger or
consolidation.

 Trustees. Non-stock corporations vested with public interest

are now required to have independent trustees who are not
members of the non-stock corporation.

 Dissolution. For voluntary dissolutions where no creditors are

affected, the RCC now requires only a majority vote of the
board of directors and the vote of the stockholders owning at
least majority of the outstanding capital stock. Previously,
affirmative votes of stockholders owning 2/3 of the outstanding
capital stock are required.

However, the RCC added strict requirements for dissolution such as

the need for a verified request for dissolution, stating: the reason for
the dissolution; the form, manner, and time when notices were
given; names of those stockholders and directors who approved the
dissolution; date, place and time of the meeting in which the vote
was made; and the details of publication.

 Securities deposit of branches. The required initial minimum

actual market value of securities deposit of branches was
increased from P100,000 to P500,000. Also, under the RCC,
within six months from the close of the fiscal year of the
branch, it is required to deposit additional securities equivalent
in actual market value to two percent (2%) of the amount by
which the branch’s gross income for the fiscal year exceeds P10
million (previously P5 million). Deductions from gross income in
accordance with SEC rules, shall be allowed in computing the
securities deposit amount.

 Penal Provisions. While the old Corporation Code only has one
penal provision (Section 144), the RCC added an entire title
on “Investigations, Offenses and Penalties”. The title provides
penal provisions for violations of the RCC.