The Revised Corporation Code of the Philippines (Republic Act No. 11232) is a legislation that was recently signed to improve the business procedures in the Philippines.
The new code makes a number of welcome revisions, from reducing the required number of stockholders to developing an electronic monitoring and filing system.
Here is part 3 of our overview of the key provisions implemented through the Revised Corporation Code. Read Part 1 and Part 2 here.
Appointment of a board with independent directors and a compliance officer
Corporations vested with public interest, which includes entities like non-stock savings loan associations, public companies, as well as banks andquasi-banks must have independent directors into their board. They must make up at least 20 percent of the total board seats.
Also known as an outside director, an independent director is an individual who has no material or business relationship with the corporation. But just like any other member on the board, an independent director receives his or her share of shareholdings and fees from the corporation.
In addition to independent directors, the revised code also requires the appointment of a compliance officer, who will be picked from the existing pool of corporate officers. His or her duty will beto monitor the company’s policies and procedures of the company and directly report to the chairman of the board.
Establishing an emergency board
In the event that an emergency must be made but a vacant seat prevents the board from reaching a quorum, a temporary director can be called to fill this empty spot and create an emergency board. This will allow the corporation to avoid any serious or irreversible damages.
For a temporary director to fill the vacancy, he or she must obtain the unanimous vote of the directors. The temporary director’s term is limited for that emergency action only or once a replacement director is appointment.
Once the corporation has created the emergency board, they must inform the Securities and Exchange Commission (SEC) within 3 days.
Arbitration agreement for intra-corporate issues
An intra-corporate dispute is a disagreement that transpires between the stockholder and the corporation.
To avoid further issues, the new code now allows corporations to have arbitration agreements for intra-corporate issues in their by-laws and/or articles of incorporation.
Only arbitration agreements that indicate the number of arbitrators and how they were appointed are considered valid under the new code. Moreover, issues involving criminal offenses or third-party interests can’t be resolved by an arbitration agreement.
Additional requirements for annual reports
Every year, all corporations are required to submit their Annual Financial Statements and General Information Sheets to the Securities and Exchange Commission (SEC). Under the revised code, corporations vested with public interest must also submit the following additional requirements:
- A director compensation report
- A director performance or appraisal report (including the criteria used to evaluate each director)
Learn more about the Revised Corporation Code by contacting Duran & Duran-Schulze Law. We provide high value legal services that are personalized, efficient, and affordable.Call (+632) 478 5826 or email [email protected] for inquiries.