Perpetual corporate existence
After 38 years, Congress has updated the Corporation Code of the Philippines (Batas Pambansa 68) to make it more responsive to the times and help facilitate doing business in the country.
The Revised Corporation Code (RCC), or Republic Act 11232, retained some of its predecessors’ provisions and enacted into law some decisions of the Supreme Court and resolutions of the Securities and Exchange Commission (SEC) on important corporate and securities issues.
It also allows the use of modern technological systems and processes by corporations to facilitate the conduct of their internal affairs and compliance with regulatory requirements.
Credit for the RCC should be given to former SEC Chair Teresita Herbosa who initiated its amendments in 2013 and Sen. Franklin Drilon who steered them through Congress.
Considering the expected impact of these amendments on the existing corporate environment, it is likely the SEC will issue guidelines on their implementation for the benefit of the affected parties.
A standout provision in the RCC is the grant of perpetual juridical existence to all corporations, unless their articles of incorporation provide for a different timeline.
In the old law, the maximum allowable period of corporate life was 50 years from the date of incorporation. At least five years before the expiration date, it may file for an extension of its corporate life for another 50 years or X number of years it wants.
The benefit of unlimited existence shall apply to all corporations registered before the effectivity of the RCC and continue to exist up to the present.
However, if a corporation has a specific corporate term in its articles of incorporation and it wants to retain that period, it should, upon the vote of its stockholders representing a majority of its outstanding capital stock, inform the SEC of such intention.
Corollary to the “no expiration date” status of existing corporations, the RCC is offering a new lease on life to corporations whose terms have already expired.
If they want, they can apply for a revival of their corporate existence and the enjoyment of their rights and privileges under their articles of incorporation.
But this privilege is not going to be expense-free. The applicant corporation has to pay whatever duties, debts and liabilities it may have incurred before its corporate life ceased.
Depending on the nature of their business, these would include, among others, fines or penalties for nonsubmission or late filing of certain regulatory documents, e.g. audited financial statements and General Information Sheet.
In effect, the defunct corporation that wants to do business again has to “pay” for the consequences of its failure to comply with the SEC’s requirements when it was still alive.
If the SEC approves the application, the corporation shall be deemed revived and shall enjoy the benefit of perpetual existence, unless its application provides for a different period.
The question is posed: Why go through the trouble and financial expense of reviving a dead corporation when registering a new corporation would be a lot easier?
The reasons for availing of the revival option may be sentimental attachment to the corporate name, especially if it represents the names of its founders, or the corporation has gained wide public recognition already, or—and this is the most critical—the corporation owns real estate properties that are still registered in its name.
There is a caveat in the application for a revival of corporate life. The favorable recommendation of the concerned government agency is required if it involves banks, banking and quasi-banking institutions; preneed, insurance and trust companies; nonstock savings and loans associations; pawnshops; corporations engaged in money service; and other financial intermediaries.
The reason for the additional requirement is simple. These corporations solicit money from the public so their regulators’ approval is essential before they can be allowed to do business again.
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