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 amount numberof 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(link to Part 1-April 2019) and Part 2 (link to Part 1-May2019) 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, such as public companies, as well as banks, andquasi-banks, non-stock savings loan associations, and the like are required to elect must have independent directors into their board. The number of independent directorsThey must make up at least 20 percent0% of the whole boardtotal board seats.
Also known as an outside director, an independent director is an individual whohas 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 These corporations must also choose a compliance officerfrom the existing pool of corporate officers. His or her duty A compliance officer will beto monitor the company’s monitoring the policies and procedures of the company, which will then be andreported directlydirectly 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.
When the board needs to make an emergency decision, they must first complete a quorum. Reaching a quorum can be difficult if the number of current directors in not enough.
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 oronce a replacement director is appointment. With the new code, the corporation is allowed to have an emergency board that consists ofthe remaining directors or trustees and the appointed temporary director/s.The temporary director must be elected through unanimous vote and he or she will perform the necessary emergency actions only. Temporary directors hold the position for a limited amount of time.
Once the corporation has created the emergency board, they must inform the
Securities and Exchange Commission (SEC) within 3 days.
Having an emergency board is practical because it prevents the corporation from suffering any serious or irreversible damages.
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 to be included in the corporation’stheir by-laws and/or articles of incorporation.
Only arbitration These agreements must thatindicate the number of arbitrators and how they were appointed for validityare considered valid under the new code. Moreover, issues involving Only those that involve criminal offenses or third-party interests can’t be resolved by an are not included in the 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,But since corporations vested with public interest have the public as investors, they must nowmust alsothese 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 and how it can benefit your business by contacting Duran & Duran-Schulze Law. We provide high value legal services that are personalized, efficient, and affordable.Call us today at (+632) 478 5826 or email email@example.com for inquiries.