The Revised Company Code | Company Applicant
Republic Act No. 11232, also known as the Revised Companies Code (RCC), was enacted in February 2019. It amended the 38-year-old Companies Code of the Philippines (Batas Pambansa Blg. 68).
It appears that the RCC has largely achieved its goal of advancing the business climate, improving the ease of doing business, encouraging more investment, strengthening the corporate governance system and integrating global best practices.
There are many changes made by the RCC, some of which are as follows:
Duration, capitalization, entry into office and corporate officers
Perpetual existence. Corporations now exist in perpetuity, unless otherwise provided. (Sec 11, RCC) This is a welcome development because in the past, shareholders will suddenly find that their companies’ charters have expired, resulting in the need to incur expenses for recovery.
Share capital. Companies are no longer required to have a minimum share capital and the previous requirement that at least 25% of the authorized share capital must be subscribed and at least 25% of it must be paid up has been removed. (arts. 12 and 14, RCC)
Officers. The RCC lists the mandatory corporate officers who are the president, the treasurer and the secretary general. The treasurer must now be a resident of the Philippines, and for public benefit corporations, the appointment of a compliance officer is required. (Art. 24, CCR)
Non-use of the corporate charter. If a company does not formally organize and start operations within five years, counting from the previous two years, its charter is deemed to be revoked.
Companies can also be placed in default of payment if they started their activities but then became inoperative for 5 years. These entities have 2 years to resume their activities. (Art. 21, CCR)
Constitution of companies
Two to 15 founders. Under the old Companies Code, at least five founders who were natural persons were required to set up a company. This resulted in situations where office staff, drivers and kasambahays presented themselves as founders when in reality they had no capital contribution to the company.
The RCC provides that any person, partnership, association or corporation, alone or jointly with others, but no more than fifteen, may constitute a corporation. Accordingly, a company can be formed with one to at most fifteen founders. (Art. 10, CCR)
Sole proprietorship. Since a corporation can now be formed with only one shareholder, there is now the One Person Corporation (OPC). The sole shareholder will be the sole director and president of the company and will appoint a treasurer, a general secretary and other officers of the OPC. (articles 116, 120 to 122, RCC)
The OPC, like other corporations, has a perpetual existence. In the event of the death or incapacity of the sole shareholder, the candidate and his substitute replace the person as director and manage the affairs of the mutual fund. (Art. 124, CCR)
Companies invested in the public interest
The RCC identifies companies that are deemed to be in the public interest and imposes additional requirements on them such as the requirement to appoint independent directors, a compliance officer and the submission of compensation and valuation reports to the Securities and Exchange. Commission (SEC). As a further safeguard for the shareholders of these companies, the RCC provides that shareholders are permitted to vote at meetings by means of remote communications or in absentia in the elections of directors or trustees, whether or not this is authorized in the articles of association. . (Art. 22, 24, 23, 177, RCC)
Use of technology
As the pandemic and remote working ushered in the widespread adoption and acceptance of technology, the RCC had the foresight to include provisions integrating technology as early as 2019.
Electronic filing and submission. The RCC provides that applications for incorporation and amendments as well as filing and supervision, reservation of corporate name, registration and submission of reports, notices and other documents may be filed electronically with the SEC, which issue and implement appropriate policies and procedures. (Art. 13 & 180, RCC)
Remote communication and voting in absentia. Written notices of regular meetings may be sent to all shareholders or registered members by electronic mail or in any other manner permitted by the SEC under its guidelines (Art. 49, CCR)
The RCC provides for voting by remote communication or in absentia for shareholders or members of companies. There must be rules governing voting and the company must establish appropriate procedures. (Art. 49 & 57, RCC)
On the other hand, directors or trustees who cannot physically attend or vote at board meetings may participate and vote by remote communication, such as videoconferencing, teleconferencing or other alternative means of communication that offer them reasonable possibilities. to participate. However, directors or trustees may not attend or vote by proxy at board meetings. (Art. 52, CCR)
Inspection of company records
Company records, regardless of the form in which they are kept, must be available for inspection by any director, trustee, shareholder or member of the company. Although the inspection provision was already in the old Companies Code, the RCC has provided clearer guidelines on the parameters of claims, who can be held responsible for denying claims and acceptable defenses in case refusal of inspection. (Art. 73, CCR)
Recognizing that resolving disputes through arbitration can be a faster way to resolve disputes and, bearing in mind the crowded roles of courts, the RCC has given particular attention to arbitration.
Infighting and disputes between shareholders of a corporation may be unavoidable and the RCC provides that an arbitration agreement may be included in the corporation’s charter which is binding on the corporation, its directors, trustees, officers and directors or officers . (Art. 181, CCR)
An arbitration agreement may be included in the articles or articles of association of an unlisted company and, disputes between the company, its shareholders or members, which arise from the implementation of the articles or articles of association, or from intra -company, must be referred to arbitration. A dispute is not arbitrable when it involves criminal offenses and the interests of third parties.
The SEC has issued its Circular Memorandum No. 8 dated September 19, 2022 which provides the intra-corporate dispute arbitration guidelines for corporations.
The RCC provides that within sixty days of issuance of the SEC’s license to transact in the Philippines, the branch of the foreign company must file with the SEC, for the benefit of present and future creditors of the licensee in the Philippines. Philippines, security satisfactory to the SEC, with an actual market value of at least PhP500,000.
Other than this, within six months of each licensee’s fiscal year, the SEC must require the licensee to deposit additional securities or financial instruments equivalent in actual market value to two percent of the amount by which the licensee’s gross income for that financial year exceeds P10,000,000. The amounts were increased by the RCC by P100,000 and P5,000,000, for the actual market value of the security and the gross income threshold under the old companies code. (Art. 143, CCR)
Companies already in existence when the CCR came into force that could be affected by its changes and new requirements have had two years to comply. (Art. 185, CCR)
(The author, Atty. John Philip C. Siao, is an attorney and co-manager of the law firm Tiongco Siao Bello & Associates, a professor at MLQU School of Law and an arbitrator for the Construction Industry Arbitration Commission of the Philippines. He can be contacted at [email protected] The opinions expressed in this article belong solely to the author.)
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