Corporation Law: The Revised Corporation Code of the Philippines - Sec 1 (September 4, 2023)

THE REVISED CORPORATION CODE  OF THE PHILIPPINES  

Republic Act No. 11232 

TITLE I - GENERAL PROVISIONS 

Definitions and Classifications 

SECTION 1. Title of the Code. - This Code shall  be known as the "Revised Corporation Code of the Philippines"

1. History of Philippine Corporate Law. 

  • The first general law on corporations in the Philippines was Act No. 1459, known as the Corporation Law, which was passed by the Philippine Commission in 1906 and took effect on April 1, 1906. 
    • Act No. 1459 was practically a codification of the American law on corporations.
  • Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines", repealed Act No. 1459 in 1980. 
    • The Corporation Code took effect on May 1, 1980.
  • The Corporation Code was expressly repealed by Republic Act No. 11232, otherwise known as the "Revised Corporation Code of the Philippines" (RCCP). 
    • Section 187 of the RCCP provides that: "Batas Pambansa Blg. 68, otherwise known as 'The Corporation Code of the Philippines', is hereby repealed. Any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule or regulation contrary to or inconsistent with any provision of this Act is hereby repealed or modified accordingly." 
    • Most of the provisions of the Corporation Code were retained and became part of the RCCP. However, the RCCP did not merely amend the Corporation Code. The RCCP is a complete code on corporations that embodies the provisions of the Corporation Code that Congress opted to reenact.
1.01 Effectivity of RCCP

  • Section 188 of the RCCP provides that the law "shall take effect upon completion of its publication  in the Official Gazette or in at least two (2) newspapers of general  circulation." 
  • The entire RCCP was published in the Manila Bulletin  and the Business Mirror on February 23, 2019. 
  • Accordingly, pursuant to Section 188, the RCCP took effect on February 23, 2019 since it is no longer necessary for fifteen days from publication to expire before the law takes effect. 
  • This view is expressed in the Notice dated February 28, 2019 of the Office of the Commission Secretary of the Securities and Exchange Commission (SEC).

2.  Applicability of RCCP 
  • The Revised Corporation Code applies to all corporations already in existence at the time the  RCCP took effect. 
  • The RCCP is consistent with the mandate under Section 16, Article XII of the Constitution for Congress to prescribe all the criteria for the "formation, organization, or regulation"  of private corporations in a general law applicable to all without discrimination. 
2.01. Effect of Repeal of the Corporation Code. 
  • Section 185 of the RCCP provides that "a corporation lawfully existing and doing business in the Philippines affected by the new requirements of this Code shall be given a period of not more than two (2) years from the effectivity of this Act within which to comply." 
  • However, there are also provisions of the RCCP that, in effect, directly modify the Articles of Incorporation of existing corporations, whether incorporated under the Corporation Code or the old Corporation Law. 
    • For example, the Corporation Code limited the corporate term to 50 years while the old Corporation Law allowed perpetual term for certain types of corporations.
    • Thus, a corporation that was registered in 1967 with perpetual term was deemed to exist for 50 years only under the Corporation Code but reckoned from May 1, 1980 or up to May 1, 2030 unless dissolved or extended within the prescribed period. 
    • The RCCP returned to the previous rule under the Corporation Law. With the passage of the RCCP, therefore, all existing corporations now have perpetual term unless they choose to have a fixed term.
  • It should be recalled that Section 148 of the Corporation Code also contained substantially the same provisions as Section 185 of the RCCP. 
    • All corporations lawfully existing and doing business in the Philippines on the date of the effectivity of the Corporation Code and thereafter authorized, licensed or registered by the SEC were deemed to have been authorized, licensed or registered under the provisions of the Corporation Code, subject to the terms and conditions of its license, and governed by the provisions of the Code. 
    • Existing corporations were also given a 2-year period within which to comply with the provisions of the Corporation Code. 
  • Like the RCCP, there were also provisions of the Corporation Code that, in effect, directly modified the Articles of Incorporation of existing corporations. 
    • For example, the rule giving all shareholders the right to vote was applied to a corporation that was in existence at the time of the effectivity of the Corporation Code despite a contrary provision in the Articles of Incorporation.
    • The provision m the Articles of Incorporation was valid under Act No. 1459 but was later considered invalid under the Corporation Code.
Mandatory Provisions.
  • The rule is the same under the RCCP such that existing corporations are bound to comply with the mandatory provisions of the RCCP. 
  • All corporations that are registered and existing under the Corporation Code continue to exist under the RCCP. Nevertheless, all the mandatory provisions of the RCCP are binding on existing corporations. For example, existing corporations must comply with all the reportorial requirements imposed under the RCCP although the required reports were not previously filed by corporations.
Vested Rights under the Corporation Code. 
  • Section 145 of the Corporation Code provided that vested rights of and liabilities incurred by any corporation, its stockholders, members, directors, trustees, or officers under the Corporation Code are not removed or impaired by any subsequent amendment or repeal of the said Code or of any part thereof. 
  • Therefore, vested rights and liabilities of existing corporations are not affected by the amendment and repeal of the Corporation Code. This is consistent with Section 10 of Article III of the Constitution that provides that "no law impairing the obligation of contracts shall be passed." 

Vested Rights under the RCCP. 
  • Consistently, existing rights and remedies will not be affected if the RCCP is subsequently amended or if a corporation is dissolved. 
  • The provisions of Section 184 of the RCCP are identical to the wordings of Section 145 of the Corporation Code. Hence, under Section 184, the following are not removed or impaired either by the subsequent dissolution of the corporation or by any subsequent amendment or repeal of the RCCP or of any part thereof: 
    • Vested rights or remedies in favor of or against any corporation, its stockholders, members, directors, trustees, or officers; and 
    • Any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers. 

3. When the RCCP Applies Suppletorily. 
  • General Rule: The Corporation Code, now the RCCP, is the primary law that should be applied in the regulation of corporations. 
  • Exceptions: 
    • The General Banking Law and the New Central Bank Act are the primary laws on banks. The RCCP applies only suppletorily. 
      • The RCCP is a general law that applies to all types of corporations while the New Central Bank Act and the General Banking Law regulate specifically banks and other financial institutions.
      •  As between a general and special law, the latter shall prevail- generalia specialibus non derogant. 
      • This is the reason for the provisions of Section 184 of the RCCP which state that nothing in the RCCP "shall be construed as amending existing provisions of special laws governing the registration, regulation, monitoring and supervision of special corporations such as banks, nonbank financial institutions and insurance companies." 
      • Section 184 likewise provides that "notwithstanding any provision to the contrary regulators such as the Bangko Sentral ng Pilipinas and the Insurance Commission shall exercise primary authority over special corporations such as banks, nonbank financial institutions, and insurance companies under their supervision and regulation.
    • The Insurance Code of the Philippines applies to insurance corporations as primary statute while the RCCP applies suppletorily. 
      • Accordingly, insurance corporations, like banks are still under the regulatory powers of the SEC as corporate entities. 
      • For example, insurance corporations must still comply with the submission of reportorial requirements to the SEC as mandated by the RCCP. 
      • However, insurance corporations are subject to the regulatory powers of the Insurance Commission in the pursuit of insurance business, in the same manner that the Bangko Sentral ng Pilipinas (BSP) regulates banks as such. 
      • Thus, for instance, the minimum paid-up capital may be imposed by the Insurance Commission on insurance corporations and by the BSP on banks, respectively. 
    • The Pre-Need Code or Republic Act No. 9829 is the primary law on pre-need companies.
    • Republic Act No. 6657  also known as the Comprehensive Agrarian Reform Law.
      • The same rule was applied in one case where the Supreme Court observed that: "Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations. On the other hand, Republic Act No. 6657 is the special law on agrarian reform." Hence, the said special law prevails on matters involving agrarian reform.
4. Other Applicable Laws and Rules.
There are also special laws that apply to corporations. 
  • Contain regulatory norms that are part of Corporate Law:
    • Republic Act No. 8799, Securities Regulation Code
    • Presidential Decree No. 902-A, 
    • Republic Act No. 7041, The Foreign Investment Act of 1991
    • Commonwealth Act No. 108,  Anti-Dummy Law
  • The RCCP takes into consideration various laws such as:
    • Republic Act No. 10173, Data Privacy Act
    • Republic Act No. 8293, Intellectual Property Code of the Philippines
    • Republic Act No. 10667, Philippine Competition Act
4.01 New Civil Code Supplements Corporate Law. 
  • There are missing details of Corporate Law that are supplied by the New Civil Code.
    • For instance, agency rules apply to certain acts of directors, officers or stockholders in the absence of any applicable provision in the Corporation Code.
4.02 SEC Rules and Regulations
  • Opinions of SEC Legal Officers do not have the force and effect of SEC Rules and Regulations because as a collegial body only the SEC en banc can adopt rules and regulations.
    • Only the SEC en banc can issue opinions that have force and effect of regulations.
  • Nevertheless, it does not mean that opinions of SEC Officers are not given any weight. 
    • Opinions of SEC Officers are cited in this work because SEC Officers implement the statutory provisions and even act in a specific way in the absence of statutory rules or rules and regulations promulgated by the SEC en banc.
  • Until the Supreme Court makes doctrinal pronouncements on the  specific matters regulated/acted upon by SEC Officers, it is advisable for Corporate law "practitioners" to be familiar with the opinions of SEC Officers. 
  • In addition, in many cases, SEC officers, including the SEC General Counsel, cite persuasive authorities that are usually resorted to in the absence of Constitutional and statutory provisions.

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