8 major changes in the Corpo Code (2019)
On its Facebook page, Ponferrada Ty Law Offices wrote a post (quoted below with additional comments from Project Jurisprudence) about some notable changes in the Corporation Code, introduced by a new amendatory law signed by President Duterte. To read the whole post and to avail of their services, please go to "Ponferrada Ty Law Offices" at www.facebook.com/ptlaw/posts/2480537848633640.
[1] INCORPORATORS: Removal of the minimum number of incorporators. Under the law before this amendment, "Any number of natural persons not less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes."
[2] MINIMUM CAPITAL STOCK: Imposition of a Php 1,000,000.00 minimum capital stock on stock corporations. This effectively increases the minimum paid-up capital to Php 62,500.00. This is because 25% of the capital stock must be subscribed and 25% of the subscribed capital must be paid as required by law.
[3] CORPORATE TERM: Removal of the 50-year corporate term. This means that unless there is a provision in the Articles of Incorporation with regard to the term of corporate existence, the corporation will exist perpetually unless sooner dissolved.
This should not be confused with "erpetual succession," which, in corporation law, is the continuation of a corporation's or other organization's existence despite the death, bankruptcy, insanity, change in membership or an exit from the business of any owner or member, or any transfer of stock, etc. (Perpetual succession - Wikipedia. https://en.wikipedia.org/wiki/Perpetual_succession)
[4] ONE-PERSON CORPORATION: Allowance for a single person - whether natural or juridical - to organize and put up a corporation. However, this is subject to the requirement of a minimum capital stock of Php 1,000,000.00 to be paid up in a lump sum at the time of incorporation.
According to Senator Drilon as reported by Business Mirror Philippines, the old five-person limitation is considered as a "stumbling block" and it is common knowledge that some applicants use the names of household employees just to complete the five names. (https://businessmirror.com.ph/2018/08/10/solopreneurs-rejoice-one-person-corporation-act-approved-by-senate/)
[5] CORPORATE OFFICERS: Chief Executive Officer is made the alternative title to President and Chief Financial Officer is made the alternative title to Treasurer. Also, the inclusion of Compliance Officer as a mandatory corporate officer on top of the president/CEO, treasurer/CFO, and corporate secretary.
This change is in line with global trends. In other countries, especially in the United States, "President" is seldom used.
[6] BOARD MEETINGS: Allowance of remote communication methods in attending board meetings subject to provisions of the corporate by-laws. However, it must be pointed out that the old rule does not prohibit tele-attendance in board meetings.
[7] NATIONALITY OF A CORPORATION: Formalization of the test in determining the nationality of a corporation, i.e. the control test. The best case to read regarding this is Gamboa v. Teves where the Supreme Court had occasion to discuss the different between the control test and the grandfather test.
[8] REMOVAL OF A MEMBER OF THE BOARD OF DIRECTORS OR TRUSTEES: Empowering the SEC to remove disqualified members of the Board of Directors or Trustees.
[1] INCORPORATORS: Removal of the minimum number of incorporators. Under the law before this amendment, "Any number of natural persons not less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes."
[2] MINIMUM CAPITAL STOCK: Imposition of a Php 1,000,000.00 minimum capital stock on stock corporations. This effectively increases the minimum paid-up capital to Php 62,500.00. This is because 25% of the capital stock must be subscribed and 25% of the subscribed capital must be paid as required by law.
[3] CORPORATE TERM: Removal of the 50-year corporate term. This means that unless there is a provision in the Articles of Incorporation with regard to the term of corporate existence, the corporation will exist perpetually unless sooner dissolved.
This should not be confused with "erpetual succession," which, in corporation law, is the continuation of a corporation's or other organization's existence despite the death, bankruptcy, insanity, change in membership or an exit from the business of any owner or member, or any transfer of stock, etc. (Perpetual succession - Wikipedia. https://en.wikipedia.org/wiki/Perpetual_succession)
[4] ONE-PERSON CORPORATION: Allowance for a single person - whether natural or juridical - to organize and put up a corporation. However, this is subject to the requirement of a minimum capital stock of Php 1,000,000.00 to be paid up in a lump sum at the time of incorporation.
According to Senator Drilon as reported by Business Mirror Philippines, the old five-person limitation is considered as a "stumbling block" and it is common knowledge that some applicants use the names of household employees just to complete the five names. (https://businessmirror.com.ph/2018/08/10/solopreneurs-rejoice-one-person-corporation-act-approved-by-senate/)
[5] CORPORATE OFFICERS: Chief Executive Officer is made the alternative title to President and Chief Financial Officer is made the alternative title to Treasurer. Also, the inclusion of Compliance Officer as a mandatory corporate officer on top of the president/CEO, treasurer/CFO, and corporate secretary.
This change is in line with global trends. In other countries, especially in the United States, "President" is seldom used.
[6] BOARD MEETINGS: Allowance of remote communication methods in attending board meetings subject to provisions of the corporate by-laws. However, it must be pointed out that the old rule does not prohibit tele-attendance in board meetings.
[7] NATIONALITY OF A CORPORATION: Formalization of the test in determining the nationality of a corporation, i.e. the control test. The best case to read regarding this is Gamboa v. Teves where the Supreme Court had occasion to discuss the different between the control test and the grandfather test.
[8] REMOVAL OF A MEMBER OF THE BOARD OF DIRECTORS OR TRUSTEES: Empowering the SEC to remove disqualified members of the Board of Directors or Trustees.