10 Notable Personalities under the Revised Corporation Code in Philippines

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.

1. Incorporators

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.

Summary

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.

TITLE XV – FOREIGN CORPORATIONS

Section 140. Definition and Rights of Foreign Corporations. – For purposes of this Code, a foreign corporation is one formed, organized or existing under laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or State. It shall have the right to transact business in the Philippines after obtaining a license for that purpose in accordance with this Code and a certificate of authority from the appropriate government agency.

Section 141. Application to Existing Foreign Corporations. – Every foreign corporation which, on the date of the effectivity of this Code, is authorized to do business in the Philippines under a license issued to it shall continue to have such authority under the terms and conditions of its license, subject to the provisions of this Code and other special laws.

Section 142. Application for a License. – A foreign corporation applying for a license to transact business in the Philippines shall submit to the Commission a copy of its articles of incorporation and bylaws, certified in accordance with law, and their translation to an official language of the Philippines, if necessary. The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following:

• (a) The date and term of incorporation;
• (b) The address, including the street number, of the principal office of the corporation in the country or State of incorporation;
• (c) The name and address of its resident agent authorized to accept summons and process in all legal proceedings and all notices affecting the corporation, pending the establishment of a local office;
• (d) The place in the Philippines where the corporation intends to operate;
• (e) The specific purpose or purposes which the corporation intends to pursue in the transaction of its business in the Philippines: Provided, That said purpose or purposes are those specifically stated in the certificate of authority issued by the appropriate government agency;
• (f) The names and addresses of the present directors and officers of the corporation;
• (g) A statement of its authorized capital stock and the aggregate number of shares which the corporation has authority to issue, itemized by class, par value of shares, shares without par value, and series, if any;
• (h) A statement of its outstanding capital stock and the aggregate number of shares which the corporation has issued, itemized by class, par value of shares, shares without par value, and series, if any;
• (i) A statement of the amount actually paid in; and,
• (i) Such additional information as may be necessary or appropriate in order to enable the Commission to determine whether such corporation is entitled to a license to transact business in the Philippines, and to determine and assess the fees payable.

Attached to the application for license shall be in a certificate under oath duly executed by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the country or State of the applicant allow Filipino citizens and corporations to do business therein and that the applicant is an existing corporation in good standing. If the certificate is in foreign language, a translation thereof in English under oath of the translator shall be attached to the application.

The application for a license to transact business in the Philippines shall likewise be accompanied by a statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Commission and when appropriate, other government agencies that the applicant is solvent and in sound financial condition, setting forth the assets liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application.

Foreign banking, financial, and insurance corporations shall, in addition to the above requirements, comply with the provisions of existing laws applicable to them. In the case of all other foreign corporations, no application for license to transact business in the Philippines shall be accepted by the Commission without previous authority from the appropriate government agency, whenever required by law.

Section 143. Issuance of License. – If the Commission is satisfied that the applicant has complied with all the requirements of this Code and other special laws, rules and regulations, the Commission shall issue a license to transact business in the Philippines to the applicant for the purpose or purposes specified in such license. Upon issuance of such license, such foreign corporation may commence to transact business in the Philippines and continue to do so for as long as it retains its authority to act as a corporation under the laws of the country or State of its incorporation, unless such license is sooner surrendered, revoked, suspended, or annulled in accordance with this Code or other special laws. Within sixty (60) days after the issuance of the license to transact business in the Philippines, the license, except foreign banking or insurance corporations, shall deposit with the Commission for the benefit of the present and future creditors of the license in the Philippines, securities satisfactory to the Commission, consisting of Bonds or other evidence of indebtedness of the Government of the Philippines, its political subdivisions and instrumentalities, or of government-owned-or-controlled corporations and entities, shares of stock or debt securities that are registered under Republic Act No. 8799, otherwise known as “The Securities Regulation Code”, shares of stock in domestic corporations listed in stock exchange, shares of stock in domestic insurance companies and banks, any financial instrument determined suitable by the Commission, or any combination thereof with an actual market value of at least Five hundred thousand pesos (P500,000.00) or such other amount that may be set by the Commission; Provided, however, That within six (6) months after each fiscal year of the license, the Commission shall require the licensee to deposit additional securities or financial instruments equivalent in actual market value to two percent (2%) of the amount by which the licensee’s gross income for that fiscal year exceeds Ten million pesos (P10,000,000.00). The Commission shall also require the deposit of additional securities or financial instruments if the actual market value of the deposited securities of financial instruments has decreased by at least ten percent (10%) of their actual market value at the time they were deposited. The Commission may, at its discretion, release part of the additional deposit if the gross income of the licensee has decreased, or if the actual market value of the total deposit has increased, by more than ten percent (10%) of their actual market value at the time they were deposited. The Commission may, from time to time, allow the licensee to make substitute deposit for those already on deposit as long as the licensee is solvent. Such licensee shall be entitled to collect the interest or dividends on such deposits. In the event the licensee ceases to do business in the Philippines, its deposits shall be returned, upon the licensee’s application and upon proof to the satisfaction of the Commission that the licensee has no liability to Philippine residents, including the Government of the Republic of the Philippines. For the purpose of computing the securities deposit, the composition of gross income and allowable deductions therefrom shall be in accordance with the rules of the Commission.

Section 144. Who May be a Resident Agent. – A resident agent may either be an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines: Provided, That an individual resident agent must be of good moral character and of sound financial standing; Provided, further, That in case of a domestic corporation who will act as resident agent, it must likewise be of sound financial standing and mush show proof that it is in good standing as certified by the Commission.

Section 145. Resident Agent; Service of Process. – As a condition to the issuance of the license for a foreign corporation to transact business in the Philippines, such corporation shall file with the Commission a written power of attorney designating a person who must be a resident of the Philippines, on whom summons and other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office. Such foreign corporation shall likewise execute and file with the Commission an agreement or stipulation executed by the proper authorities of said corporation, in form and substance as follows:

“The (name of foreign corporation) hereby stipulates and agrees, in consideration of being granted a license to transact business in the Philippines, that if the corporation shall cease to transact business in the Philippines, or shall be without any resident agent in the Philippines on whom any summons or other legal processes may be served, then service of any summons or other legal processes may be made upon the Commission in any action or proceedings arising out of any business or transaction which occurred in the Philippines and such service shall have the same force and effect as if made upon the duly authorized officers of the corporation at its home office.”

Whenever such service of summons or other process is made upon the Commission, the Commission shall within ten (10) days thereafter, transmit by mail a copy of such summons or other legal processes to the corporation at its home office or principal office. The sending of such copy by the Commission shall be necessary part of and shall complete such service. All expenses incurred by the Commission for such service shall be paid in advance by the party at whose instance the service is made.

It shall be the duty of the resident agent to immediately notify the Commission in writing of any change in the resident agent’s address.

Section 146. Law Applicable. – A foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except those which provide for the creation, formation, organization or dissolution of corporations or those which fix relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation.

Section 147. Amendments to Articles of Incorporation or Bylaws of Foreign Corporations. – Whenever the articles of incorporation or bylaws of a foreign corporation authorized to transact business in the Philippines are amended, such foreign corporation shall, within sixty (60) days after the amendment becomes effective, file with the Commission, and in proper cases, with the appropriate government agency, a duly authenticated copy of the amended articles of incorporation or bylaws, indicating clearly in capital letters or underscoring the changes made, duly certified by the authorized official or officials of the country or State of incorporation. Such filing shall not in itself enlarge or alter the purpose or purposes for which such corporation is authorized to transact business in the Philippines.

Section 148. Amended License. – A foreign corporation authorized to transact business in the Philippines shall obtain an amended license in the event it changes its corporation name, or desire to pursue other or additional purposes in the Philippines, by submitting an application with the Commission, favorably endorsed by the appropriate government agency in the proper cases.

Section 149. Merger or Consolidation Involving a Foreign Corporation Licensed in the Philippines. – One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporations if permitted under the Philippine laws and by the law of its incorporation: Provided, That the requirements on merger or consolidation as provided in this Code are followed.

Whenever a foreign corporation authorized to transact business in the Philippines in the Philippines shall be a party to a merger or consolidation in its home country or State as permitted by the law authorizing its incorporation, such foreign corporation shall, within sixty (60) days after the effectivity of such merger or consolidation, file with the Commission, and in proper cases, with the appropriate government agency, a copy of the articles of merger or consolidation duly authenticated by the proper official or officials of the country or State under whose laws the merger or consolidation was affected: Provided, however, That if the absorbed corporation is the foreign corporation doing business in the Philippines, the latter shall at the same time file a petition for withdrawal of its license in accordance with this Title.

Section 150. Doing Business Without a License. –No foreign transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause or action recognized under Philippine laws.

Section 151. Revocation of License. – Without prejudice to other grounds provided under special laws, the license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the Commission upon any of the following grounds:

• (a) Failure to file its annual report or pay any fees as required by this Code;
• (b) Failure to appoint and maintain a resident agent in the Philippines as required by this Title;
• (c) Failure, after change of its resident agent or address, to submit to the Commission a statement of such change as required by this Title;
• (d) Failure to submit to the Commission an authenticated copy of any amendment to its articles of incorporation or by laws or of any articles of merger or consolidation within the time prescribed by this Title;
• (e) A misrepresentation of any material matter in any application, report or affidavit or other document submitted by such corporation pursuant to this Title;
• (f) Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions;
• (g) Transacting business in the Philippines outside of the purpose or purposes for which such corporation is authorized under its license;
• (h) Transacting business in the Philippines as agent of or acting on behalf of any foreign corporation or entity not duly licensed to do business in the Philippines; or,
• (i) Any other ground as would render unfit to transact business in the Philippines.

Section 152. Issuance of Certificate of Revocation. – Upon the revocation of the license to transact business in the Philippines, the Commission shall issue a corresponding certificate of revocation, furnishing a copy thereof to the appropriate government agency in the proper case.

The Commission shall also mail the notice and copy of the certificate of revocation to the corporation, at its registered office in the Philippines.

Section 153. Withdrawal of Foreign Corporations. – Subject to existing laws and regulations, a foreign corporation licensed to transact business in the Philippines may be allowed to withdraw from the Philippines by filing a petition for withdrawal of license. No certificate of withdrawal shall be issued by the Commission unless all the following requirements are met:

• (a) All claims which have accrued in the Philippines have been paid, compromised or settled;
• (b) All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions, have been paid, and (c) The petition for withdrawal of license has been published once a week for three (3) consecutive weeks in a newspaper of general circulation in the Philippines.

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By: Tax and Accounting Center Philippines

As you have noticed, foreign corporations are allowed to do business in the Philippines and deal with all of us in their day-to-day operations. When the worst case scenario comes that their Philippine operations has to terminate and leave the country, the question that could come to our mind is:

To whom shall the notices, summonses, and legal processes be served?

This question has been answered in at least two instances – requiring resident agent in the Philippines of foreign corporations. In other words, Philippine laws, rules, and regulations provides for the appointment of resident agent as follows:

A. Resident Agent under Securities and Exchange Commission

Under Section 144 of the Revised Corporation Code of the Philippines, and we quote:

“Section 144. Who may be a resident agent. – A resident agent may either be an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines: Provided, That an individual resident agent must be of good moral character and of sound financial standing; Provided, further, That in case of a domestic corporation who will act as resident agent, it must likewise be of sound financial standing and mush show proof that it is in good standing as certified by the Commission.

The resident agent of a resident foreign corporation is one appointed on whom summons and other legal processes against the Company may be served in all actions or other legal proceedings against the Company. Such appointment is revocable at the instance of the Company and change of resident agent would require a Board resolution from the Company revoking the appointment of previous resident agent and appointing a new one.

In the Company’s compliance with the filing of the annual General Information Sheet (GIS) within thirty calendar (30) days from the anniversary date of issuance of Company’s license to do business, the resident agent signs under oath the contents thereof.

Under Section 314, Title 3 of the Insurance Code of the Philippines, it provides and we quote hereunder:

“Section 314. The term “resident agent”, as used in this title, is one duly approved by a foreign insurer or broker not authorized to do business in the Philippines to receive in its behalf notices, summons and legal processes in connection with actions or other legal proceedings against such foreign insurer or broker.”

For the purpose, the Insurance Commission will issue a Certificate of Registration as Resident Agent based on the required documentation such as the copy of the power of attorney, duly notarized and authenticated by the Philippine Consul in the place where such foreign insurer or broker is domiciled, empowering the resident agent to receive notices, summons and legal processes for and in behalf of such foreign insurer or broker in connection with any action or legal proceedings against such foreign insurer or broker.

Disclaimer: This article is for general conceptual guidance only 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.