The Revised Corporation Code of the Philippines (Republic Act No. 11232) took effect in 2019, replacing the decades-old Corporation Code (Batas Pambansa Blg. 68). It introduced significant reforms that make it easier to do business in the Philippines. Here are the most important changes every business owner should know.
One-Person Corporation (OPC)
The most revolutionary change is the introduction of the One-Person Corporation. A single natural person can now form a corporation with limited liability — previously, at least five incorporators were required. An OPC allows sole entrepreneurs to enjoy the protections of incorporation without needing to find co-incorporators. The sole stockholder acts as the sole director and must appoint a nominee and alternate nominee who will step in upon the stockholder’s death or incapacity. See our complete guide to creating a corporation for OPC requirements.
Perpetual Corporate Term
Under the old code, corporations had a maximum corporate term of 50 years, renewable. RA 11232 now grants corporations a perpetual corporate term unless a specific term is provided in the Articles of Incorporation. This eliminates the need for costly and time-consuming renewals every 50 years. Existing corporations can amend their articles to adopt perpetual existence.
Reduced Minimum Capital Stock
The Revised Corporation Code reduced the minimum paid-up capital requirement to P5,000 for most domestic stock corporations, except those covered by special laws (e.g., banks, insurance, financing companies). Previously, there was no standard minimum but practice required higher amounts. Additionally:
- At least 25% of the authorized capital stock must be subscribed
- At least 25% of subscribed capital must be paid-up at incorporation
- The treasurer’s affidavit serves as proof of paid-up capital
Simplified Incorporation Process
The code simplified incorporation in several ways:
- Single incorporator — The requirement of at least five incorporators has been removed. One person is enough (OPC).
- Electronic filing — The SEC has implemented the eSPARC system for online submission of incorporation documents.
- Electronic notarization — The SEC accepts electronically notarized documents for corporate filings.
- No more minimum number of directors for OPC — Only one director is required.
Corporate Rehabilitation
The code introduced a new, more efficient procedure for corporate rehabilitation, designed to help financially distressed companies recover and continue operations. The process allows a corporation to enter into rehabilitation proceedings under court supervision, with a stay order protecting it from creditors during the rehabilitation period.
Corporate Governance Reforms
New governance provisions include:
- Independent directors — Required for corporations covered by the Securities Regulation Code (public companies).
- Risk management committee — Required for corporations with public interest.
- Emergency board meetings — Now may be conducted through remote communication (video conferencing, etc.) as authorized in the by-laws.
- Electronic corporate records — Corporate books and records may be kept electronically.
Merger and Consolidation
The code simplified the merger and consolidation process, reducing the approval threshold from two-thirds to a majority of the board of directors (subject to stockholder approval). This makes corporate restructuring more accessible.
Other Notable Changes
- Pre-emptive rights — Stockholders now have pre-emptive rights to subscribe to new shares unless restricted in the articles of incorporation.
- Piercing the corporate veil — Provisions were strengthened, especially for OPCs, to prevent abuse of the corporate structure through commingling of assets.
- Annual report filing — All corporations, including OPCs, must file annual reports (GIS and AFS) with the SEC.
- Electronic notice of meetings — Notices may be sent electronically if authorized in the by-laws.
FAQs About the Revised Corporation Code
Do existing corporations need to amend their articles to adopt perpetual term?
Yes. Existing corporations with a fixed 50-year term must amend their Articles of Incorporation to adopt a perpetual term. This requires a board resolution and stockholder approval.
Can an existing sole proprietorship convert to an OPC?
Yes. A sole proprietor can register as an OPC with the SEC. Assets and liabilities of the sole proprietorship can be transferred to the OPC.
Are foreign investors affected by these changes?
Yes. The OPC is available to foreign nationals allowed to engage in business in the Philippines under existing laws, subject to the Foreign Investment Negative List.
What is the penalty for non-compliance with SEC filing requirements?
Failure to file annual reports can result in penalties, suspension of certificate of incorporation, and eventually revocation of the corporate franchise.
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\n\n\nDisclaimer: This article is for general information only and is not legal advice. Consult a qualified lawyer for your specific situation.
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