Press Release
December 13, 2016

Drilon pushes amendments to Corporation Code

Senate President Pro-Tempore Franklin M. Drilon sponsored today Senate Bill No. 1280 seeking to amend the thirty six-year old Corporation Code, with the objective of making the Philippines conducive to doing business under a system of good corporate governance.

Among the key amendments in the proposed law amending the Corporation Code of the Philippines are: provisions that remove the minimum number of incorporators, permit the establishment of a one-man corporation, allow electronic filing of reportorial requirements and attendance in meetings via remote communication or in absentia. These changes are geared towards making the Code adaptable to the changing business landscape and making the Philippines an attractive investment destination.

In his sponsorship speech, Drilon, Chairman of the Senate Committee on Constitutional Amendments and Revision of Codes, explained that the proposed amendments may be divided into four reform clusters consisting of policies that seek to (a) improve the ease of business in the country; (b) prioritize corporate and stockholder protection; (c) instill corporate and civic responsibility; and (d) strengthen the country's policy and regulatory corporate framework.

Drilon said that the proposed changes will streamline the process of incorporation: "If we are to keep up with the rest of the financial world, we need to codify best international corporate practices and address the archaic bottlenecks in the areas of starting a business, and protecting minority investors."

"We must likewise provide an environment conducive not just to big businesses, but make the corporate vehicle an appealing prospect for startups and entrepreneurs," Drilon said.

Enhancing the ease of doing business

To contribute to the ease of doing business, Drilon said the proposed revised corporation code would introduce the concept of the one-person corporation, simplify the name verification process, and grant a perpetual life as the default option for corporations.

He pointed to a provision requiring corporations to have least five incorporators as "a common stumbling block" for many investors.

"Investors name individuals as incorporators, with no real interest in the corporation, just to comply with the legal requirement," Drilon stressed.

"It is common knowledge that sometimes people get their drivers, their maids, their cooks, just to form five. One thing that we will change is that we will allow a one-person corporation so a single person can put up a corporation," he said.

Prioritizing Corporate and Stockholder Protection

The second reform cluster, according to Drilon, includes provisions on the creation of emergency boards, revised rules on the right to inspect corporate books, modified quorum requirements, and expanded grounds for disqualification of directors.

The creation and recognition of an emergency board, which can operate for a limited period and purpose will allow the corporation to continue its daily operations despite vacancies in the board.

The proposed Code likewise provides additional qualifications of directors in the hope of fostering a more principled corporate decision-making.

Instilling Corporate and Civic Responsibility

Drilon said that the third reform is on the imposition of more stringent Corporate and Civic Responsibility, which specifically proposes to impose corporate criminal liability and penalties for graft and corruption.

He said the proposal is consistent with the country's obligation under the United Nations Convention Against Corruption, which seeks, among others, to prevent the use of the corporation as a vehicle for committing crimes

This is in recognition of the fact that corporations are effective vehicles for the accumulation of capital, production of goods, and delivery of services but are also social institutions in which the public has an interest.

The bill will likewise strengthen corporate responsibility especially in cases of corporations vested with public interest, which may now be required to have independent directors and compliance officers.

Strengthening the Policy & Regulatory Corporate Framework

The fourth reform cluster includes provisions on arbitration of commercial disputes, amendments on dissolution, and the alignment of SEC's powers under the Corporation Code with the Securities Regulation Code.

"In general, the proposed amendments promote efficiency and encourage transparency in corporate dealings - from formation to daily operations.. Having them in place will allow the Philippines to compete with other countries as a viable investment destination and small-business-friendly jurisdiction," Drilon concluded.

News Latest News Feed