YEARS after the proposed amendments were first presented in Congress, we finally have Republic Act (RA0 11232, the Revised Corporation Code (RCC), approved on February 20, 2019, and considered in effect as of February 23, 2019.
Then proposed amendments (now part of the RCC) were drafted to advance the business climate and improve ease of doing business, thereby encouraging more investments both from domestic and foreign investors. The RCC as approved also seeks to strengthen the corporate governance system and incorporate the best global practices to keep our economy, as well as our domestic corporations, globally competitive and progressive.
Among the salient provisions of the RCC are those affecting incorporation (number and nature of incorporators, paid-up capital requirement), corporate term, formal organization (qualifications and term of members of the board, compensation of directors/trustees), among others.
On incorporation
Under the RCC (Chapter III), a single individual (natural person, estate or trust) may incorporate as a One Person Corporation (OPC) and exercise corporate powers as such. The RCC also allows incorporation with less than 5 (but not more than 15) incorporators, as well as the incorporation of entities with juridical persons (partnerships, associations, corporations) as incorporators (Sec. 10). For those interested to register OPCs or corporations with less than 5 incorporators, we have an online system in place for these applications here: https://apps004.sec.gov.ph:8001/application. Applications therein submitted may be processed in less than 3 days, in consonance with the Ease of Doing Business Act.
Further, the RCC has removed the minimum paid-up capital requirement for most corporations, which means that incorporators no longer have to subscribe to at least 25% of the authorized capital stock nor comply with a paid-up capital of 25% of the subscribed capital stock upon incorporation. Take note, however, that exceptions for this application to corporations required by special laws to have a minimum paid-up capital, or in compliance with existing guidelines of foreign investments.
On corporate term
Whenever we get invited to talk about the salient features of the RCC, we stress the fact that "At SEC, may forever." Under the revised Code, corporations are no longer limited to a maximum corporate term of 50 years, but upon effectivity of the RCC now enjoy perpetual existence. Of course, this does not make such perpetual term mandatory, as corporations still have the option to stick with the 50-year maximum term, or less. Guidelines for this are available on our website: https://www.sec.gov.ph/mc-2020/mc-no-22-s-2020guidelines-on-corporate-term/.
Not only that, but the RCC now allows for the revival of expired corporations (Sec. 11), subject to the limitations and requirements set down in https://www.sec.gov.ph/wp-content/uploads/2019/11/2019MCNo23.pdf.
More on formal organization, independent directors and other salient features of the RCC in the next feature.
The SEC Baguio Extension Office will be launching its webinar series, kicking off with a more in-depth discussion of these salient features late this month. For inquiries, please e-mail secbaguio@sec.gov.ph, and please follow us at https://www.facebook.com/PhilippineSEC for more SEC news and updates.
Keep safe, everyone.