By: Garry S. Pagaspas, CPA
Revised Corporation Code (RCC) or Republic Act No. 11232 in the Philippines signed into law last February 20, 2019 has introduced major changes in the Corporation Code under Batas Pambansa Bilang 68 in the Philippines and among those are related to personalities and officers. Below is a summary of those in the sequence they appeared in the RCC that you could use as easy reference for dealings with your respective corproations, Securities and Exchange Corporation (SEC), and other related discussions.
Incorporators in Philippines are the ones who originally form a corporation. Under the Old Corporation Code (OCC) or Batas Pambansa Bilang 68, an incorporator must be natural persons numbering at least 5 but not more than 15, must own at least one (1) share, and majority of which must be residents. This was changed under the Revised Corporation Code (RCC) or Republic Act No. 11232 as it expanded the 5-15 to not only natural persons but also to juridical persons – i.e., SEC-registered partnerships, SEC-registered association or corporation, and foreign corporations. Natural person incorporator must own at least one (1) share while a juridical-entity incorporation must authorize a representative who would sign on the SEC registration papers through a formal document like a partnership or board resolution. The requirement on majority must be residents of the Philippines was also deleted in the RCC. Finally, an incorporator in a One Person Corporation (a new type of corporation under RCC not found in OCC) must be a natural person only.
2. Board of Directors / Trustees
Board of Directors for stock corporation in the Philippines or Board of Trustees for non-stock, non-profit corporations in Philippines represents the governing body of the corporation through which the corporate powers are exercised directly or through the officers duly authorized by the Board. Revised Corporation Code of the Philippines deleted the requirement that majority of the members must be residents of the Philippines, extended trustees term to three (3) years from one (1) year, allowed stockholders voting through remote communication or in absentia for election of the Board. Board meetings shall now be presided by the Chairman of the Board, or the President in its absence, participated by Members though remote communication (e.g. videoconferencing, teleconferencing, or other alternative modes but cannot attend by proxy.
3. Independent director
Independent directors in Philippine for corporations vested with public interest (e.g. listed companies, banks and quasi-banks, pre-need companies, trust and insurance companies, etc.) is likewise a new inclusion in Revised Corporation Code not found in Old Corporation Code or BP 68, although, this has been existing prior to RCC by virtue of Securities Regulation Code. As defined in the Revised Corporation Code of the Philippines, an independent director in the Philippines is “a person who, apart from shareholdings and fees received from the corporation, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.
4. Corporate Compliance Officer
If the corporation is vested with vested with public interest, Revised Corporation Code of the Philippines requires the Board of Directors to elect a compliance officer. Again, while this is new in the corporation code, this is not totally new under the Securities Regulation Code and provided for under the Code of Corporate Governance.
5. Corporate President
The corporate president of the corporation in the Philippine is required to be a member of the Board of Director who runs the day-to-day operations of the corporation and perform such acts based on the authority given by the Board of Directors. Under the Revised Corporation Code of the Philippines, the President could preside over board or stockholder’s meeting in the absence of the Chairman of the Board.
6. Corporate Treasurer
Corporate Treasurer is required to be a resident of the
Philippines under the Revised Corporation Code of the Philippines but could not
be held by the same person acting as President. This would mean that the corporate
Treasurer in the Philippines does not need to be a Filipino citizen for as long
as it could show proof of residency and to the extent allowed by investment
rules. In compliance with corporations filing of annual income tax return in
Philippines and annual audited financial statements, a treasurer is required to
be a signatory on the statement of management responsibility (SMR).
7. Corporate Secretary
A Corporate Secretary under the Revised Corporation Code of the Philippines is required to be a Filipino Citizen and a resident of the Philippines but could not be held by the same person acting as President. A corporate Treasurer in Philippines could at the same time hold such function as Corporate Secretary. As a corporate officer, functions of Corporate Secretary relates to board and stockholder’s meeting – notices, minutes and certification of such resolutions, among others; stockholdings, related stock certificates and maintenance of stock and transfer book in Philippines; and other administrative functions.
8. Corporation Sole
Under the Revised Corporation Code in Philippines, a
corporation sole may be established for religious purposes relative to the
administration and management of the affairs, properties and temporalities of
the religious institution. It is the chief archbishop, bishop, priest,
minister, rabbi, or other presiding elder of such religious institution who
could register a corporation sole.
9. Single Stockholder of One Person Corporation
A single corporation is a new type of corporate entity under the Revised Corporation Code in Philippines where a single stockholder could register a corporation, singly but clothed with limited liability in such manner as a regular corporation and not merely as a sole proprietor whose legal entity is attached to the legal personality of the owner. Single stockholder of One Person Corporation in Philippines acts as Sole Director and President at the same time and could even act further as a Treasurer, but subject to a surety bond requirement of SEC. To anticipate worst case scenario on the personality of single stockholder – e.g. death or incapacity, the Revised Corporation Code in Philippines requires designation of the nominee director and alternate nominee director in Philippines who would take place the single stockholder as director and manage the corporation’s affair. Corporate Secretary of One Person Corporation in Philippines and such other officers could likewise be appointed.
10. Resident Agent in Philippines of Foreign Corporation
Resident agent requirement applies for foreign corporations
who intend to do business in the Philippines securing with the Securities and
Exchange Commission (SEC) a License to do Business in the Philippines and would
act as a repository of such summons and other legal processes involving the
foreign corporation with respect to its Philippine operations. Resident agent
in the Philippines could either be a natural person residing in Philippines of
good moral character and sound financial standing or a registered domestic
corporation lawfully transacting business in the Philippines and of sound financial
standing. Appointment of resident agent could be made through a board resolution
of the foreign corporation’s board of director’s while change of Resident Agent
would require a process of securing SEC approval on such new appointment.
The above enumeration of corporate personalities and officers in Philippines along with the changes in the rules under the Revised Corporation Code could serve as a guide in familiarizing the nature of their functions and in compliance with the necessary requirements of the SEC, if any. They are not all-inclusive and was simply hand-picked by the author for the purpose of this article.
Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for two (2) decades helping further taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has likewise been helping out local and foreign investors/clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.
Disclaimer: This is for purposes of academic discussions only as personally summarized by the author, not of Tax and Accounting Center, Inc. and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.
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