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The new code allows the formation of a corporation by one person or one
stockholder. The previous requirement was for at least five stockholders. This
resulted in the use of nominal stockholders who do not contribute in any
significant way, or in unnecessarily expanding the number of owners which
made the corporate vehicle less efficient and more problematic.

A one-person corporation embodies the corporate law idea that a corporation

is a different entity with a separate personality from the individual natural

The effect is that it is easier to set up corporations and entrepreneurs will use
less of the sole proprietorship mode. The challenge is for the Securities and
Exchange Commission to make it less expensive and faster to incorporate to
make the change meaningful.

There is no longer a minimum authorized capital stock. Previously, there was

an amount of which 25% was set as subscribed capital stock and another
25% to serve as the paid-up capital. This was a pointless mathematical
exercise and did not create any value or better regulation. Everyone was just
meeting the minimums regardless of the need of the business or the financial
capacity of the incorporators.


Corporations used to die at the end of their corporate life which is 50 years. A
positive act was needed to extend it. The amended law allows companies to
exist forever and applies to existing and future corporations. A positive act is
required to kill the corporation.
Although the stated purpose is to prevent business from closing down
because of non-renewal of registration, over the passage of time, we may see
a slew of “zombie corporations” which exist in paper and hold assets but with
none of the mortal stockholders around.

Under the new law, corporations with expired registration papers can be
There is a semblance of electronic filing under the old regime. But as any user
can attest, it is slow, with a clunky user interphase and very limited capability.
SEC staff has a long wish list for a truly interactive system that will allow faster
approvals and simpler monitoring. The current provider will have to step up or
ship out.

A previous SEC circular allowed the use of videoconferencing and

teleconferencing in certain instances. This rule is now in the new law.
Stockholders may participate and vote without being personally present.
Directors or trustees may also participate and vote in regular and special
meetings through remote communication.

With this rule liberalization, stronger corporate cyber-security measures are

essential. Otherwise, the next batch of intra-corporate disputes will revolve
around the integrity of the communication by electronic means, the
authentication of disputed identities and electronic record-keeping.


In contrast with the recognition of technology, it is unfortunate that the new
law copied and crystallized the form for incorporation in its Section 14. The
superior approach is for legislation to provide guidelines on content and allow
the regulator to prescribe the design and the procedure. This will provide
flexibility and inject dynamism specially for the electronic system of filing and
monitoring and the changing times.

To cast forms into laws is a bad practice that calls for rethinking to avoid this
persistent bureaucratic problem. Forms are forms and laws should deal with


With the costly and lengthy formal, adversarial and court-based resort to solve
conflicts, the new law calls for the institution of alternative dispute resolution
mechanisms for intra-corporate issues. Given the powers of the SEC, it can
answer the cry of business people for ways and means to address discord in
the boardroom.

There are two key areas that the Revised Corporation Code does not answer.

The first is on control of corporation. One of the most contentious and vexing
issues in our body of corporate laws is the question on how to determine
control of the corporation — is it the “control test” or the “grandfathering rule.”
Cases involving actual and beneficial interest are routinely ruled upon by the
courts all the way up and down the Supreme Court. This affects business
climate and affects investment certainty.

Recent laws and rulings may be pointing to convergence and a new law
ideally can contain a chapter on control that will once and for all clarify the
controlling regime.

The other is on rules on conflicts of interest. A form of private sector

corruption that is particularly harmful and not easy to detect is the self-dealing
of directors with their companies that is beneficial to the concerned individuals
but not to the corporation even if knowledge or information was gained from
their positions of trust and confidence. The new law is basically a rehash of
the old provision.

Overall, the Revised Corporation Code is an improvement and the change is