FAST FACTS: How the new Corporation Code makes business easier
MANILA, Philippines – Doing business in the Philippines is about to get easier, thanks to the amendments made to the 38-year-old Corporation Code.
President Rodrigo Duterte signed on Wednesday, February 20, Republic Act No. 11232 or the law which relaxes several procedures in setting up a business in the country.
The new Corporation Code now allows the formation of a corporation by a single person or one stockholder.
The old code required at least 5 stockholders in the formation of corporations.
It also removes the provision setting a minimum on the authorized capital stock.
The Securities and Exchange Commission (SEC) said this amendment allows more flexibility in pursuing business because the lone stockholder can make decisions without having to seek board consensus.
"It also affords greater protection to the stockholder by limiting liability to the corporate entity," the SEC said.
Perpetual corporate term
The amended law also grants a perpetual corporate term for existing and future corporations, unless specified in their articles of incorporation.
The old code set a 50-year term.
The SEC said this amendment would eliminate the possibility of businesses prematurely closing down because they failed to renew their registration.
Moreover, the new law allows corporations with expired registration papers to revive their businesses.
E-filing, remote communication
The new law was also crafted to better suit the modern times.
It mandates the SEC to implement an electronic filing and monitoring system.
"So far, the commission has implemented a fully automated and online company registration system for the pre-processing of corporations and partnerships, licensing of foreign corporations, amendments of the articles of incorporation and other corporate applications requiring its approval," the SEC said.
The new law also allows the use of videoconferencing and teleconferencing during stockholder meetings.
Stockholders may participate and vote in absentia or without being personally in the meeting.
Directors or trustees may also participate and vote in regular and special meetings through remote communication. However, they cannot join or cast their votes by proxy at board meetings.
The new also has a provision for an emergency board when a vacancy in a corporation's board of directors prevents the remaining directors from constituting a quorum and consequently from making emergency actions required to prevent grave, substantial, and irreparable loss or damage.
The vacancy may be temporarily filled from among the officers of the corporation by a unanimous vote of the remaining directors or trustees.
The corporation must then notify the SEC within 3 days from the creation of the emergency board.
Meanwhile, the amendments allow corporations to adopt alternative dispute resolution mechanisms for intra-corporate issues except those involving criminal offenses and interests of third parties.
"Collectively, the amendments are aimed at encouraging entrepreneurship and the formation of new businesses, improving the ease of doing business in the country, promoting good corporate governance, increasing protection afforded to corporations and stockholders, and deterring corporate abuses and fraud," SEC Chairman Emilio Aquino said.
The Philippines lags in the ease of doing business worldwide ranking, currently at 124th out of 190 countries. (READ: Ease of doing business: Why is the PH rank plummeting?)
"The passage into law of this measure is critical in our bid to improve the country's business climate and make our economy more competitive with the rest of the world," said Senate Minority Leader Franklin Drilon, who pushed for the measure. – Rappler.com