Corporation Code overhaul pushed
The Securities and Exchange Commission is seeking a comprehensive reform of the basic law governing Philippine corporations to embrace modern global practices like giving a perpetual corporate term and allowing a single person to set up a corporation.
Completing a draft of proposed amendments after a review that started as soon as she assumed office in 2011, SEC chair Teresita Herbosa said in a press briefing on Friday that the proposed amendments would be “in keeping with the times.” The blueprint seeks to upgrade the antiquated Corporation Code of the Philippines, which was last amended in 1980, by drawing from practices in the US and across Southeast Asia.
Allowing a “perpetual” term for corporations in lieu of the current 50-year maximum term is one of the highlights of the proposal. Herbosa said this perpetual term was now a common worldwide practice, adding this would give corporations more flexibility in fund-raising. The corporations, however, will still be subject to reportorial requirements and periodically prove to the SEC that they still exist.
The SEC recognizes that some corporations, even those in good standing, forget to renew their term at the end of 50 years, especially when the original incorporations have passed away. “It’s a big mess. It’s not worth the trouble,” Herbosa said.
The proposed blueprint also seeks to allow less than five persons or even a single person to form a corporation. The current corporation code requires no less than five but no more than 15 persons to incorporate and organize a private corporation.
The SEC seeks to introduces a new provision governing a one-person corporation which will be part of a new category called “special corporations.” “It’s a very modern concept but it’s all over the world, ” Herbosa said. She explained that this would be different from a single proprietorship because the liability would be limited to the capital put in by the single incorporator. “In single proprietorship, all your money is out there. You can become liable,” she said.
But while the SEC is keen on allowing a one-person corporation, each person can only incorporate one such corporation at a time as there will be a prohibition against multiple one-person corporations.
“For example, if you want to sell cupcakes and invested P500,000 [in a one-person corporation] and then it went bankrupt, you can close that and set up another,” Herbosa said.
The proposed amendments also seek to strengthen penalty provisions, such as boosting the SEC’s capability to issue cease and desist orders. Stiffer penalties will be introduced, for instance, against willful certification of incomplete, inaccurate, false or misleading statements or reports; independent auditor collusion; organizing a corporation through fraud; fraudulent or unlawful conduct of business; theft of identity; acting as or engaging intermediaries for graft and corrupt practices; tolerating graft and corrupt practices and retaliation against whistleblowers.
Herbosa said the penalties under the corporation code would be aligned with the country’s Securities Regulation Code.