REVISED CORPORATION CODE OF THE PHILIPPINES

(Fundamental Changes)

 One-person corporation

The Revised Code removes the minimum number of incorporators required to establish a corporation; the
old Code had prescribed a minimum of five incorporators. The Revised Code goes as far as to permit an
individual to form a one-person corporation. The allowance of one-person corporations make it easier for small to
medium-sized business owners to incorporate, thus providing a viable alternative for sole proprietors. (Sec. 10)

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.
 Arbitration agreements embedded in articles of incorporation or bylaws

The Revised Code allows for an arbitration agreement to be provided in the articles of incorporation (AOI)
or bylaws of a corporation. With such an agreement in place, disputes between the corporation, its stockholders
or members that arise from the implementation of AOI or bylaws or from intracorporate relations shall now be
referred to arbitration. Disputes involving criminal offenses or the interests of third parties remain non-arbitrable.
(Sec. 181)

 Corporations vested with public interest

The Revised Code refers to corporations vested with public interest, which are subject to additional
regulatory conditions that do not apply to other corporations. Corporations vested with public interest are required
to elect a compliance officer upon organization. (Sec. 24) They are required to submit additional annual reports to
the Securities and Exchange Commission (SEC), particularly a director/trustee compensation report and a
director/trustee appraisal or performance report. (Sec. 177) Stockholders in such corporations have the
unequivocal right to vote to elect directors or trustees during stockholders meetings through remote
communications or in absentia. (Sec. 23)

Section 22 of Revised Code identifies as corporations vested with public interest those whose securities
are registered with the SEC, those listed with an exchange, those with assets of at least 50 Million Pesos and
having 200 or more holders of shares (with each holding at least 100 shares of a class of its equity shares), banks
and quasi-banks, non-stock savings and loan associations, pawnshops, corporations engaged in money service
business, preneed, trust and insurance companies, and financial intermediaries. The provision requires that at
least 20% composition of the boards of these corporations be independent directors. The SEC is also authorized
to determine other corporations engaged in businesses vested with public interest, after taking into account
relevant factors which are germane to the objective and purpose of requiring the election of an independent
director.
 Removal of minimum capital stock requirement

The Revised Code does away with the minimum capital stock requirement for stock corporations, except
as otherwise specifically provided by special law. The change again works to the benefit of small to medium-sized
enterprises by making it easier for them to incorporate. (Sec. 12)

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.

 Indefinite corporate lifespan

The old Code had prescribed a maximum corporate term of 50 years and required corporations to amend
their articles of incorporation (AOI) to extend the corporate life for another fifty-year period. The new Code now
provides that a corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
Existing corporations are even presumed now to have perpetual existence unless the stockholders vote to retain
the original term provided in the AOI, (upon a vote of the stockholders representing a majority of its outstanding
capital stock) or a new specific period (upon a vote to amend the articles of incorporation by stockholders
representing at least 2/3 of the outstanding capital stock. (Sec. 11)

 Revival of corporations whose term had already expired (“Lazarus” Provision)

The new Code expressly allows a corporation whose term has expired to apply with the SEC for a revival
of its corporate existence, together with all the rights and privileges under its certificate of incorporation. Upon
approval by the SEC, the corporation is 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.. The corporation is also granted perpetual existence unless its
application for revival specifies otherwise. (Sec. 11)

 Extended period to commence corporate operations

Corporations are now allowed five years from incorporation to commence operations; the old Code had
only allowed two years. (Sec. 21)

 Delinquent corporations

A corporation that had commenced its business may now be placed by the SEC under delinquent status if
it had become inoperative for a period of at least five years; previously such inactivity was already cause for the
revocation of the certificate of incorporation. A delinquent corporation has two years to resume operations; failure
to do so is cause for the SEC to revoke the certificate of incorporation. (Sec. 21)

 Lifting the ban on corporate donations for political parties or candidates

The Revised Code amends Section 36(9) of the Old Code, which stated that no corporation, domestic or
foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity.
The Revised Code now expressly bans only foreign corporations from giving such donations

 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.

TECHNOLOGY-ENABLED CHANGES
(REMOTE COMMUNICATION AND IN ABSENTIA VOTING)

The revision of the Corporation Code also integrates technological advances over the last four decades into the
rules governing corporations. The old Code was enacted before the online age[3], or even the widespread use of the
personal computer in the 1980s.[4]

 Electronic Notices
The Revised Code allows written notices of regular stockholders meetings to be sent to all stockholders
or members of record through email or such other manner as the SEC shall allow under guidelines it would
prescribe. (Sec. 49) A corporation is also allowed to specify in its bylaws the means of communications through
which meetings would be sent; these include regular or special stockholders meetings (Sec. 50), meetings to
increase or decrease capital stock (Sec. 37), to sell or dispose assets (Sec. 39), or to invest corporate funds (Sec.
50)

 Remote Participation
The Revised Code now allows members of the board of directors or trustees of every corporation to
participate in meetings through remote communication such as videoconferencing, teleconferencing or other
alternative modes of communication that allow them reasonable opportunities to participate. (Sec. 52)
Stockholders or members may also be allowed to vote during stockholders meetings through remote
communication or in absentia, but only if the corporate bylaws authorize voting through such means. (Sec. 49)
The exception, as earlier mentioned, is in the case of corporations vested with public interest, where stockholders
and members are entitled to vote to elect directors or trustees through remote communication or in absentia even
without a provision in the bylaws that authorizes voting through those means.

Section 49 of the Revised Code requires the SEC to issue the rules and regulations governing
participation and voting through remote communication or in absentia.

 Electronic filing and monitoring system

The Revised Code mandates the SEC to develop and implement an electronic filing and monitoring
system. (Sec. 180) It should be noted that the SEC already has an existing electronic Company Registration
System (CRS) that allows for the online pre-processing of corporations and partnerships, licensing of foreign
corporations, amendments of the articles of incorporation and other corporate applications requiring SEC
approval. [5]
uDOnOTe: 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.