The Revised Corporation Code of the Philippines (RA 11232) is an effort by President Duterte’s government to improve the efficiency and accessibility of doing business in the Philippines. It was signed into law on 20 February 2019. The Code, which focuses on simplifying the company incorporation process and improving corporate governance standards across the Philippines, will have benefits for both the local business community and foreign investors. This article outlines the most significant and practical changes introduced by the Code.
If you wish to receive tailored updates such as this one directly to your email, subscribe to our monthly newsletter here. Visit www.cloudcfo.ph also on a regular basis for updates and information about accounting, bookkeeping and financial services in the Philippines.
The Revised Corporation Code of the Philippines (RA 11232) was signed into law on 20 February 2019. It is aimed at promoting business and commerce across the country by simplifying the process for registering and administering a corporation in the Philippines.
It should now be easier for business owners and foreign investors to register a new business with the Securities and Exchange Commission (SEC). Changes to corporate governance standards and processes will also make the Philippines a more attractive market in which to operate.
The Philippines is falling on the scale of global competitiveness for business. The most recent Doing Business Report (2019) ranked the Philippines 124th out of 190 countries for ease of doing business – a fall of 11 places from the previous year. The introduction of the Code appears to be a step in the right direction for the country and is a welcome development.
This article outlines some of the most significant changes introduced by the Code and the implications of these changes for new and existing companies in the Philippines. If you wish to know more, don’t hesitate to contact us for a free consultation at email@example.com.
You can now create a One-Person Corporation
Previously, to register a corporation in the Philippines, it was necessary to have a minimum of five incorporators. This requirement has now been removed. A corporation can now have just one incorporator (up to a maximum of 15 incorporators), creating a new type of corporate entity: the One Person Corporation (OPC).
The key features of an OPC include:
- The one incorporator will also be the president and the sole director;
- A nominee and an alternate nominee must be appointed to take over in case the sole incorporator becomes incapacitated;
- The incorporator can appoint himself/herself as the company Treasurer provided they post a cash bond with the SEC;
- All OPCs are required to include OPC at the end (or below) the name of the company;
- A corporation existing before the Code can be changed to an OPC. An OPC can also be changed to a corporation with more than one incorporator. Both changes will require an application to the SEC and compliance with additional registration requirements.
No longer a minimum capitalization requirement
Previously, corporations had to have at least 25% of subscribed capital paid-up at incorporation. Also, at least 25% of the authorised capital stock had to be subscribed at incorporation. These requirements have now been removed. The Code provides that stock corporations shall not be required to have a minimum capital stock (unless required under some special law).
No more 50-year life limit
Corporations used to have a mandatory 50-year life span or “corporate term”. Now, all corporations can legally live for an indefinite period of time – a perpetual existence!
Companies incorporated before the introduction of the Code will also have perpetual existence unless a shareholder majority votes to keep the original life term of the company. A corporation’s Articles of Incorporation can also set out the life term of the corporation.
Majority resident directors requirement? Gone
There is no longer a requirement for the majority of the board of a corporation to be residents in the Philippines. This is good news for foreign investors and multinational companies seeking to establish a presence in the Philippines.
It is important to remember however that the Treasurer must be a resident of the Philippines!
The SEC is moving online
Finally! It will soon be possible to submit corporate filings online to the SEC. The Code requires the SEC to introduce an online system capable of processing registrations, incorporations, notices and other forms of SEC submissions.
Electronic and remote communications for stockholder meetings
Snail mail is out! Corporations can now send e-mail invitations to stockholders for stockholder meetings (provided the company’s internal governance rules allows it!).
Remote and in absentia voting at stockholder meetings will also be allowed (again, provided the company’s internal governance rules allow) – participants will not have to be physically present at meetings to cast a vote. The SEC has not yet introduced the mechanism for how this will work in practice – so stay tuned!
Location changes for stockholder meetings
Requirements around meeting locations have also been relaxed. Previously, stockholder meetings were required to take place in the main office of the company. Now, if it’s not practicable, meetings can be held elsewhere inside the city or municipality of the company.
Companies often face issues when they can’t fill a meeting quorum due to unplanned absences or vacancies. The Code has now provided a solution for this. Emergency Boards can be utilised to fill the positions of unplanned absences/vacancies for board meetings in order to satisfy quorum requirements. The SEC must be informed immediately of the creation of an Emergency Board.
CloudCfo is an outsourced cloud accounting and financial service provider for companies in the Philippines. We have experience advising clients (domestic and international) on incorporation, business registrations, BIR and SEC compliance. We have an in-depth understanding of the accounting, governance and tax compliance system in the Philippines and a track record of navigating clients successfully through this system. We are experts at tailoring our services and providing advice to fit a specific business model. Visit us at www.cloudcfo.ph or contact us at firstname.lastname@example.org and let us help you grow your business with confidence.