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The long-anticipated revision and update of the corporation law have now been realized. 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 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. At the latter portion, items retained by the RCC are
likewise listed. The corresponding sections in the RCC are provided at the end of each item for easy reference.
THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA |1
12. Failure of a corporation to formally organize and now be given to the stockholders and members
commence its business within 5 years from the electronically. (Section 36; Section 37)
date of its incorporation shall be render the 22. Notice about the meeting on the proposed
certificate of incorporation deemed revoked as increase or decrease of capital stock or increase
of the day following the end of the 5-year of bonded indebtedness may now be given to the
period. (Section 21; Section 22) stockholders electronically. (Section 37;
13. Trustees elected shall have a term not exceeding Section 38)
3 years. (Section 22; Section 23) 23. The certificate executed in case of increase or
14. A treasurer to be elected must be a resident of decrease of capital stock or increase of bonded
the Philippines. (Section 24; Section 25) indebtedness need not set forth the actual
15. The duties of elected officers may be provided indebtedness of the corporation on the day of
not only in the bylaws, but also as resolved by the meeting. (Section 37; Section 38)
the board of directors. (Section 24; Section 25) 24. The application for increase or decrease of
16. The death, resignation, or cessation to hold office capital stock or increase of bonded
of any director, trustee, or officer shall be indebtedness shall be filed with the SEC within
reported in writing to the SEC within 7 days from 6 months from the date of approval of the board
knowledge thereof. (Section 25; Section 26) of directors and stockholders, which may be
extended for justifiable reasons. (Section 37;
17. Disqualification of directors, trustees, or officers Section 38)
for violations of the RCC and Securities
Regulation Code or RA 8799, now clearly 25. The treasurer’s sworn statement accompanying
requires conviction by final judgment. It also the application for increase of capital stock now
adds two additional disqualifications: finding clearly provides that the required 25%
of administrative liability for any offense involving subscription is of the “increase in capital
fraudulent acts and judgment or finding of a stock” instead of “increased capital stock”. The
foreign court or equivalent foreign regulatory for new rule is consistent with the current policy of
acts similar to the aforementioned grounds. The the SEC. (Section 37; Section 38)
SEC and the Philippine Competition Commission 26. Notice about the meeting on the proposed sale
or PCC may impose additional qualifications or or other disposition of all or substantially all of the
other disqualifications. (Section 26; Section 27) corporate assets may now be given to the
18. Elections to fill vacancies in directorships and stockholders electronically. (Section 39;
trusteeships due to term expiration must be held Section 40)
no later than the day of such expiration. In 27. Notice about the meeting on the proposed
case of removal, vacancy may be filled during the investment of corporate funds in another
same meeting. In all other cases, it must be filled corporation may now be given to the
no later than 45 days from the time the stockholders electronically. (Section 41;
vacancy arose. (Section 28; Section 29) Section 42)
19. Dealings of directors, trustees, or officers now 28. Bylaws must now be filed together with the
include their spouses and relatives within the articles of incorporation. It can no longer be filed
4th civil degree of consanguinity or affinity. within one month from notice of issuance of the
(Section 31; Section 32) certificate of incorporation. (Section 45; Section
20. The prohibition on domestic corporations 46)
against giving donations for political 29. Bylaws may provide other matters for the proper
purposes has been removed. Now, only foreign or convenient transaction of its corporate affairs
corporations are prohibited to give such for the promotion of good governance and anti-
donations. (Article 35; Section 36) graft and corruption measures. (Section 46;
21. Notice about the meeting on the proposed Section 47)
extension or shortening of corporate term may 30. If the date of regular meeting of stockholders is
not fixed in the bylaws, it shall be held on any
THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA |2
date after April 15 of every year as determined 38. Pledgors and mortgagors are now identified as
by the board provided that a written notice shall secured creditors to include other persons
be sent to all stockholders or members at least granted with security interest over the shares.
21 days prior to the meeting, unless a different (Section 54; Section 55)
period is required. Notice of regular meetings 39. No voting trust agreement shall be entered into
may now be sent electronically. (Section 49; which are anti-competitive and violative of
Section 50) nationality and capital requirements in
31. There is an exhaustive list of matters (which addition to for purposes for the perpetuation of
may be expanded through proposal) required to fraud. (Section 58; Section 59)
be presented at each regular meeting of 40. Additional consideration for stocks: shares of
stockholders or members. (Section 49; Section stock in another corporation and other generally
50) accepted form of consideration. (Section 61;
32. General waivers of notice in the articles of Section 62)
incorporation or the bylaws shall not be allowed. 41. Notice of the sale of delinquent stocks may be
Attendance at a meeting shall not constitute a sent through other means provided in the
waiver of notice of such meeting when the bylaws. (Section 67; Section 68)
express purpose of attendance is to object to the
transaction of any business because the meeting 42. There is an exhaustive list of corporate books
is not lawfully called or convened. (Section 49; and records that must be preserved at the
Section 50) principal office and made available to the
stockholders or members. (Section 73; Section
33. Metro Cebu, Metro Davao, and other 74)
Metropolitan areas (in addition to Metro Manila)
are now considered a city or municipality for 43. The financial statements furnished to the
purposes of places where stockholders’ or requesting stockholder or member shall be in
members’ meetings may be held. (Section 50) the form and substance of the financial
reporting required by the SEC. (Section 74;
34. Notices of stockholders’ or members’ meetings Section 75)
now require certain information and
accompanying proxy forms. (Section 50; 44. If the total assets or total liabilities of the
Section 51) corporation are less than P600,000 or such
other amount as may be determined by the
35. All proceedings and any business transacted at Department of Finance, the financial statements
the stockholders’ or members’ meetings shall be required to be presented to the stockholders or
valid even if improperly held or called, provided members may be certified under oath by the
that no one of the present stockholders or treasurer and the president. (Section 74; Section
members expressly states at the beginning of the 75)
meeting that the express purpose of
attendance is to object to the transaction of 45. The notice required for meetings to approve
any business because the meeting is not merger or consolidation shall be given in the
lawfully called or convened. (Section 50; Section same manner as giving notice of regular or
51) special meetings. (Section 76; Section 77)
36. Notice of board meetings must be sent to every 46. There are four additional items that must be set
director or trustee at least 2 days prior to the forth in the articles of merger or consolidation.
scheduled meeting, unless a longer period is (Section 77; Section 78)
provided in the bylaws. (Section 52; Section 53) 47. There is appraisal right in case of investment of
37. It is now expressly provided that directors or corporate funds for any purpose other than the
trustees who cannot physically attend or vote at primary purpose of the corporation. (Section 80;
board meetings can participate and vote through Section 81)
remote communication that allow them 48. The first trustees elected in a non-stock
reasonable opportunities to participate. (Section corporation does not have to serve their initial
52; Section 53) terms partially (1 year for 1/3 of the board, 2
THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA |3
years for the other 1/3, and 3 years for the rest). 57. In case of expiration of corporate term,
(Section 91; Section 92) dissolution shall automatically take effect on the
49. Incorporation of educational institutions no day following the last day of the corporate
longer require the favourable term stated in the articles of incorporation
recommendation of the Department of without need for the issuance of the certificate of
Education, Culture, and Sports. (Section 107 of dissolution. (Section 136; Section 120)
OCC was not reproduced in RCC) 58. The grounds for involuntary dissolution are
50. The voting requirement in case of voluntary now listed down. (Section 138; Section 121)
dissolution where no creditors are affected now 59. Banks are excluded from the provision on
only requires majority vote of the board and corporate liquidation. (Section 139, Section 122)
affirmative vote of stockholders owning at least 60. Upon the winding up of corporate affairs, any
majority of the outstanding capital stock or asset distributable to any creditor or stockholder
majority of the members. (Section 134; Section or member who is unknown or cannot be found
118) shall be escheated in favour of the national
51. Notice on the meeting to vote on the voluntary government. (Section 139; Section 122)
dissolution must be given to each stockholder or 61. The threshold for bonds or securities required
member at least 20 days prior to the meeting. for foreign corporations applying for license to
Notice may now be given electronically. do business in the Philippines has been adjusted
(Section 134; Section 118) P100,000 to P500,000 (as initial bond or
52. A verified request for voluntary dissolution shall security) and P5,000,000 to P10,000,000
be filed with the SEC containing required (licensee’s gross income for the fiscal year that
information and accompanied by required will require additional securities). (Section 143;
documents. (Section 134; Section 118) Section 126)
53. The SEC must approve the request for 62. If a domestic corporation is appointed as a
dissolution within 15 days from receipt and resident agent of a foreign corporation, it must
issue the certificate of dissolution. (Section 134; be of sound financial standing and must show
Section 118) proof that it in good standing as certified by the
54. For corporations regulated by government SEC. (Section 144; Section 127)
agencies, applications for dissolution must be 63. Administrative sanctions such as fines for the
favourably recommended by the appropriate violations of the RCC or of a rule, regulation, or
government agency. (Section 134; Section order of the SEC have been increased. Aside
118) from fines, the SEC may issue permanent cease
55. In case of voluntary dissolutions where creditors and desist orders, or suspend or revoke
are affected, the petition must contain certain certificates of incorporation, or dissolve
information and accompanied by required corporations and forfeit its assets. (Section 158;
documents. (Section 135; Section 119) Sections 143 and 144)
56. It is now clearly provided that voluntary 64. Reportorial requirements for every corporation
dissolution shall take effect only upon the are now listed down, with a right to redact
issuance by the SEC of a certificate of confidential information. (Section 177; Section
dissolution. (Sections 134 and 135; Sections 141)
118 and 119) 65. The powers, functions, and jurisdiction of the
SEC are now listed down. (Section 179; Section
143)
THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA |4
INNOVATIONS:
1. Revival of corporations whose terms have authorized in the bylaws or by a majority of the
expired is now allowed subject to all of its duties, board. Such modes are available to corporations
debts, and liabilities existing prior to its revival. vested with public interest, even in the absence
(Section 11 of the RCC) of a provision in the bylaws. Stockholders or
2. An arbitration agreement may now be provided members who participate through remote
in the articles of incorporation. (Section 13) communication or in absentia shall be deemed
present for purposes of quorum. (Section 23)
3. One Person Corporations must bear “OPC” at
end of its corporate name. (Section 14) 12. Directors and trustees elected are now required
to observe the rules of good corporate
4. The form of articles of incorporation now governance. (Section 23)
includes the undertaking to change the name
of the corporation when there exists a prior right 13. Corporations vested with public interest are
or if it is contrary to law, public morals, good required to elect a compliance officer. (Section
customs, or public policy. (Section 14) 24)
c. Violation of duty to maintain records and to 53. The SEC shall develop and implement an
allow their inspection or reproduction electronic filing and monitoring system.
(Section 180)
d. Willful certification of incomplete, inaccurate,
false, or misleading statements or reports 54. An arbitration procedure is laid down to govern
arbitration agreements provided in the articles of
e. Independent auditor collusion incorporation or bylaws. (Section 181)
f. Obtaining corporate registration through 55. Jurisdiction over party-list organizations are
fraud transferred to the Commission on Elections or
g. Fraudulent conduct of business COMELEC. (Section 182)
h. Acting as intermediaries for graft and corrupt 56. Corporations affected by the new
practices requirements are given 2 years from the
effectivity of the RCC within which to comply.
RETENTIONS:
1. Definition and classes of corporations, 8. Rules on quorum in stockholders’ and members’
corporations created by special laws, meetings and who shall preside (Sections 51 and
corporators, incorporators, stockholders, and 53)
members (Sections 2 to 5 of the RCC) 9. Rules on voting in case of joint ownership of
2. Rules governing redeemable, preferred, and stocks and for treasury shares (Sections 56 and
treasury shares (Sections 6, 8, and 9) 57)
3. Rules on de facto corporations and corporations 10. Rules on subscription contract, pre-
by estoppel (Sections 19 and 20) incorporation subscription, issuance of stock
4. Rule on disloyalty of a director (Section 33) certificates, liability for watered stocks, interest
on unpaid subscription, payment of balance of
5. Rules on powers to deny pre-emptive right, subscription, questioning delinquency sales,
acquire own shares and declare dividends court action to recover unpaid subscriptions,
(Sections 38, 40, and 42) effect of delinquency, right of unpaid and non-
6. Rule on ultra vires acts (Section 44) delinquent shares, lost or destroyed certificates
7. Rules on amendment to bylaws (Section 47) (Sections 59 to 60, 63 to 66, and 68 to 72)
11. Procedure in the exercise of appraisal right
(Sections 81 to 84)
THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA |8
12. Definition and purposes of non-stock 17. Rule on application for a license to do business
corporations and non-transferability and by foreign corporations (Section 142)
termination of membership (Sections 86 to 87 18. Rules on applicable laws to foreign corporations,
and 89 to 90) amendments to its articles of incorporation and
13. Rules in distribution of assets in non-stock bylaws, amendment of license, merger or
corporations (Sections 93 and 94) consolidation, doing business without a license,
14. Rules governing close corporations (Sections 95 revocation of license, issuance of certificate of
to 104) revocation, and withdrawal (Sections 146 to 153)
15. Rules governing religious corporations (Sections 19. Definition of outstanding capital stock (Section
107 to 114) 173)
16. Definition and rights of foreign corporation 20. Rule on designation of governing boards
(Section 140) (Section 174)
The RCC becomes effective upon complete publication in the Official Gazette or in at least 2 newspapers of
general circulation. The official copy of RCC is now available for download in the website of the Official Gazette.
DISCLAIMER: This is for general information only. This shall not serve as a substitute for professional advice
which depends on specific facts and circumstances. If this would be used for academic or other informational
purposes, securing the author’s express permission is required. All rights reserved.
ABOUT THE AUTHOR: Atty. Nico B. Valderrama, CPA, MPM is a corporate legal counsel for a group of
companies engaged in manufacturing, transportation, and real estate development. He also provides legal
counselling to various clients engaged in hospital business, real estate brokerage, and commercial leasing. He
is a junior reviewer in the Review School of Accountancy (ReSA) and teaches Regulatory Framework for Business
Transactions (RFBT) which covers several civil and commercial laws. He also teaches civil and commercial laws
in the Arellano University School of Law (AUSL). He is likewise licensed to practice law in the State of New York,
USA.
THE REVISED CORPORATION CODE: CHANGES AND DEVELOPMENTS IN CORPORATION LAW by NICO B. VALDERRAMA |9