Republic Act No. 11232, otherwise known as the Revised Corporation Code, issued the following Securities and Exchange (SEC) Memorandum Circulars, which aims at fostering inclusive entrepreneurship, improving the ease of doing business, promoting good corporate governance, and increasing protection afforded to corporations, investors and other stakeholders.
Establishment of a One Person Corporation (OPC)
SEC Memorandum Circular No. 07, Series of 2019implements Section 115 to Section 132 of the Revised Corporation Code, which provides for the establishment and operation of a One Person Corporation (OPC), a corporation with a single stockholder, who can be a natural person, trust, or estate.
The single stockholder shall be the sole director and president of the OPC. He/she is also required to designate a nominee and an alternate nominee named in the Articles of Incorporation, who shall replace him/her in the event of his/her death or incapacity.
An OPC only needs to submit its Articles of Incorporation (AOI) with the required details, as may be deemed necessary and convenient. The term of an OPC’s existence shall be perpetual, except in the case of a trust or estate, where the OPC’s existence shall be coterminous with the existence of the trust or estate. The OPC is also not required to have a minimum authorized capital stock, except as otherwise provided by special law, as well as submit any by-laws.
Rules on Material Related Party Transactions for Publicly-Listed Companies
SEC Memorandum Circular No. 10, Series of 2019 provides the rules on related party transactions (RPTs). Generally, RPTs are allowed, provided that when the RPTs amount to 10% or higher of a company’s total assets, it shall be considered as material related party transactions.
The rules regulate material RPTs or RTPs amounting to 10% or higher of a company’s total assets. Compliance with these Rules is mandatory for all publicly listed companies.
SEC issued this MC pursuant to Sec. 179 to promote corporate governance and the protection of minority investors, through among others, the issuance of rules and regulations consistent with international best practices.
The rules also invoke Sections 26 and 27 of the Revised Corporation Code, which provides that an interested director or officer of a corporation shall be disqualified from being a director, trustee or officer of any other corporation on the basis of a final judgment rendered by a court of a competent jurisdiction against the interested director or officer for abusive RPTs. The disqualification shall be for a period of at least one year or more, as may be determined by the Commission.
Use of Corporate and Partnership Names
SEC Memorandum Circular No. 13, Series of 2019implements Section 17 of the Revised Corporation Code, which prescribes standards and limitations in the use of corporate, one person corporate, and partnership names.
A term that describes the business of a corporation in its name should refer to its primary purpose. If there are two such terms, the first should refer to the primary purpose and the second to the secondary purpose.
A corporate or partnership name, which was previously used but became the subject of amendment, shall not be re-registered or used by another corporation or partnership for a period of three (3) years from the date of the approval of the adoption of the new corporate or partnership name.
Number and Qualifications of Incorporators
SEC Memorandum Circular No. 16, Series of 2019 implements Section 10 of the Revised Corporation Code, which provides that two or more persons, but not more than 15, may organize themselves and form a new domestic corporation. Only a One Person Corporation (OPC), a special corporation, may have a single stockholder.
An individual who signs the Articles of Incorporation (AOI) on behalf of an incorporator, who is not a natural person, may not be named as a director or trustee in the same AOI, unless when said individual is also the owner of at least one share of stock, or is also a member of the corporation.
Securities Deposit of Branch Offices of Foreign Corporation
SEC Memorandum Circular No. 17, Series of 2019 implements Section 143 of the Revised Corporation Code, which provides that all branches of foreign corporations duly licensed to do business in the Philippines shall deposit securities with an actual market value of at least Php 500,000 within 60 days after the issuance of their respective SEC licenses. The posting of additional securities shall be deposited within 6 months after the end of the fiscal year indicated in the corporations’ financial statements.
Acceptable securities include securities or any combination of government debt instruments and equity instruments. Those not acceptable as securities deposits are cash, money market placement, time deposits and bank guaranty or standby letter of credit and similar instruments.
Revival of Expired Corporations
SEC Memorandum Circular No. 23, Series of 2019 implements Section 11, paragraph 2 and Section 185 of the Revised Corporation Code, which allow for the revival of the corporate existence of certain corporations.
The expired corporations that may file for Petition for Revival of Corporate Existence are those whose:
- Term has expired;
- Certificate of Registration (COR) was revoked due to non-filing of reports;
- COR was suspended; and
- Corporate name has already been validly re-used, and is currently being used by another corporation
On the other hand, the following expired corporations are not allowed to file for revival:
- An expired corporation which has completed the liquidation of its assets;<
- A corporation whose COR has been revoked for reasons other than non-filing of reports;
- A corporation dissolved by virtue of Sections 6(c) and 6(d) of Presidential Decree 902-A, as amended by Presidential Decree 1799; and
- An expired corporation which already availed of re-registration, subject to exceptions
The Revival of Corporate Existence shall bring forth the following effects:
- Retain all rights and privileges; subject to all duties, debts and liabilities existing prior to Revival;
- With perpetual existence, unless application has a specific term;
- Appraisal Rights (for Dissenting Stockholder)
Holding of Regular Meeting of the Stockholders/Members
SEC Memorandum Circular No. 03, Series of 2020 implements Sections 48 to 51 and 57 of the Revised Corporation Code, which govern the holding of regular meetings of stockholders or members. It provides that:
- Written notice of regular meetings shall be sent to all stockholders/members of record at least 21 calendar days prior to the date of the meeting;
- In case of postponement of stockholders’/members’ regular meetings, the written notice shall be sent at least two weeks prior to the date of the meeting, as originally scheduled; and that
- The written notice must contain all information and deadlines relevant to the shareholders’/members’ participation in the meeting and exercise of the right to vote remotely.
Attendance and Participation of Directors, Trustees, Stockholders, Members, and Other Persons of Corporations in Regular and Special Meetings Through Teleconferencing, Video Conferencing and Other Remote or Electronic Means of Communication
SEC Memorandum Circular No. 06, Series of 2020 implements Sections 51 and 57 of the Revised Corporation Code, which provides for the rules in determining the quorum in the meetings of corporations and the manner of voting in such meetings.
Stockholders may now participate in their respective meetings and vote, whether by remote communication or in absentia. The right of vote may be exercised in person, through a proxy, or when so authorized in the by-laws, through remote communication or in absentia. The corporations shall also issue their own internal procedures embodying the mechanism for participation in meetings and voting through remote communication or in absentia.
Shareholders’ Approval on Sale of Corporate Assets
SEC Memorandum Circular No. 12, Series of 2020 implements Section 39 of the Revised Corporation Code, which governs the sale and other disposition of assets by corporations.
In the sale or disposal of corporate property and assets amounting to at least 51% of the corporation’s total assets, corporations are required to secure stockholders’ vote representing at least two-thirds of the outstanding capital stock prior to the execution of the sale.
The rules shall also apply to aggregate sale transactions that breach the 51 corporate asset threshold. The determination of whether or not the sale amounts to at least 51% of the corporation’s assets must be computed based on its latest audited financial statements.
Shareholders’ Right to Put Items on the Agenda for Regular/ Special Stockholders’ Meetings
SEC Memorandum Circle No. 14, Series of 2020 implements Sections 49 and 52 of the Revised Corporation Code, which govern the conduct of regular and special meetings of stockholders or members.
The rules empower the shareholders who, alone or together with other shareholders, hold at least 5% of the outstanding capital stock of a publicly listed Company to include items on the agenda prior to the regular/special stockholders’ meeting.
Authentication of Articles of Incorporation in Applications for Registration of New Domestic Corporations
SEC Memorandum Circular No. 16, Series of 2020 implements Section 180 of the Revised Corporation Code, which promulgate rules to facilitate and expedite the registration of corporations.
The rules allow for the submission of Articles of Incorporation (AOI) that are accompanied by a Certificate of Authentication signed by all incorporators in the form prescribed by the Commission, in lieu of notarization. Incorporators may choose to acknowledge the AOI before a notary public in accordance with the applicable laws and rules, and the same will likewise be accepted.
Number of Independent Directors and Sectoral Representatives of Exchanges and other Organized Markets
SEC Memorandum Circular No. 20, Series of 2020 implements Section 22 of the Revised Corporation Code, which provides for the qualifications and terms of directors or trustees of corporations.
The independent directors shall constitute at least one-third of the board of directors of the covered corporations. They must possess relevant experience or working knowledge in the capital or financial markets for at least three years prior to their election.
Corporate Term
SEC Memorandum Circular No. 22, Series of 2020 implements Section 11 of the Revised Corporation Code (RCC), which provides that Corporations incorporated under the RCC shall have perpetual existence unless its Articles of Incorporation (AOI) provides for a specific term.
Corporations incorporated under Batas Pambansa No. 68 and Act No. 1459, and which continue to exist, shall be deemed perpetual upon the effectivity of the RCC, without any action on the part of the corporation. A corporation may amend its AOI to reflect its perpetual corporate term subject to pertinent voting requirements and conditions.
Corporations which elect to retain their present corporate terms, shall file a notice with a Director’s Certificate. Corporations that opt to retain their specific corporate term may amend their AOI to extend or shorten the specific corporate term, provided the required number of votes shall be followed.
Filing, Investigation and Resolution of Complaints for Violation of the Right to Inspect and/or Reproduce Corporate Records
SEC Memorandum Circular No. 25, Series of 2020 implements Section 73 of the Revised Corporation Code which provides that corporate records, regardless of the form in which they are stored, shall be open to inspection by any director, trustee, stockholder or member of the corporation in person or by a representative at reasonable hours on business days, and a demand in writing may be made by such director, trustee or stockholder at their expense, for copies of such records or excerpts from said records.
An aggrieved party may file a report in the form of a Verified Complaint, with the Company Registration and Monitoring Department or any of the Extension Offices of the Securities and Exchange Commission, if a corporation, or any of its officers or agents, denies or does not act on a demand for inspection and/or reproduction of corporate records. The process include:
- Issuance of Summons;
- Filing and serving of a verified answer by the respondent;
- Conduct of a clarificatory conference/hearing before rendition of the final order;
- Amicable settlement/resolution;
- Issuance of the final order; and
- Resolution
Conversion of Corporations Either to One Person Corporation or to Ordinary Stock Corporation
SEC Memorandum Circular No. 27, Series of 2020 implements Sections 115 to 132 of the Revised Corporation Code, which govern the creation and operation of a One Person Corporation (OPC). The rules provide for the procedures in the conversion of an Ordinary Stock Corporation (OSC) to a One Person Corporation (OPC) as well as the conversion from OPC to OSC.
The conversion of an OSC to OPC must:
- Apply and submit, among others, an Application for Conversion and an Articles of Incorporation (AOI) of an OPC;
- Upon issuance of the Certificate of Filing of Amended AOI by the Securities and Exchange Commission (SEC) reflecting the conversion to OPC, the AOI and By-laws of the OSC shall be deemed superseded;
- Retain the SEC Company Registration Number (with an “OPC” prefix) to reflect its OPC nature; and
- The OPC converted to succeed the OSC and the latter’s outstanding liabilities
An OPC that wishes to convert to OSC must:
- Apply and submit, among others, an Application for Conversion and an AOI of an OSC;
- OPC’s AOI superseded (upon issuance of the Certificate of Filing of Amended AOI and By-laws) reflecting the conversion;
- Bear and retain the former SEC Registration Number in the Certificate of Filing of Amended AOI and By-laws; and
- OSC converted to succeed the OPC and latter’s outstanding liabilities
Corporations, Partnerships, Associations, and Individuals to Create and/or Designate E-mail Account Address and Cellphone Number for Transactions with the Commission
SEC Memorandum Circular No. 28, Series of 2020 implements Section 180 of the Revised Corporation Code (RCC), which mandates the Commission to develop and implement an electronic filing and monitoring system, and facilitate and expedite submission of reports, notices and documents required under the RCC.
The rules provide that every corporation, association, partnership, and person under the jurisdiction and supervision of the Commission shall submit a valid official email address and a valid official cellular phone number. In addition to the valid official email address and official cellular phone number, every corporation, association, partnership, and person under the jurisdiction and supervision of the Commission shall also submit a valid alternate email address and valid alternate cellular phone number.
Preventing the Misuse of Corporations for Illicit Activities through Measures Designed to Promote Transparency of Beneficial Ownership
SEC Memorandum Circular No. 01, Series of 2021 implements Section 73 of the Revised Corporation Code (RCC), which requires corporations to keep and preserve all information relating to the corporation, including the current ownership structure and voting rights of the corporation, including lists of stockholders or members, group structures, intra-group relations, ownership data, and beneficial ownership.
Incorporators of a corporation shall disclose to the Commission, within 30 days from the issuance of the company’s Certificate of Registration, the person or persons on whose behalf the registration, as well as the nominee directors/trustees and nominee shareholders of the applicant corporation shall in the same manner disclose to the Commission their respective principals or nominators. The same rule applies to nominators/principals/persons on whose behalf one acts as director/trustee/shareholder of existing corporations.
All persons who are nominee shareholders/directors/trustees of existing corporations before the effective date of this Circular shall submit to the Commission the said disclosure within 30 days from the date this Circular becomes effective (date of effectivity: 30 January 2021). Those who become nominee shareholders/directors/trustees on or after the effectivity of this Circular, shall submit the same within 30 days from the time they became or assumed the role of or started acting as nominee directors/trustees or shareholders.
Schedule and Procedure for the Filing of Annual Financial Statements, General Information Sheet and Other Covered Reports
SEC Memorandum Circular No. 03, Series of 2021 implements Section 180 of the Revised Corporation Code (RCC), which mandates the development and implementation of an electronic filing and monitoring system, and thereby facilitate and expedite the submission of reports, notices and documents required under the RCC, and the sharing of pertinent information with other government agencies.
All corporations are required to submit their annual reports using the Commission’s online submission tool called Electronic Filing and Submission Tool (eFAST). Except as otherwise provided, the Commission shall no longer accept hard copies of reports. All corporations registered with the SEC must enroll in eFAST in order to access and submit reports online, except as otherwise provided.
Calling of Special Stockholders’ Meetings
SEC Memorandum Circular No. 07, Series of 2021 implements Section 49 of the Revised Corporation Code (RCC), which governs the conduct of regular and special meetings of stockholders or members.
Any number of shareholders holding at least 10% of the outstanding capital stock of a publicly listed corporation shall have the right to call for a special stockholders’ meeting.
The call for a special meeting should be in writing, signed by the requesting shareholders, addressed to the company’s board of directors and transmitted through the corporate secretary at least 45 days prior to the proposed date of the meeting, include the name of the stockholders and their respective percentage of shareholdings which must constitute at least 10% of the outstanding capital stock of the corporation, and state the purpose, date and time, as well as proposed agenda items for the meeting.
The purpose must affect the legitimate interest of the stockholders and is germane to the stockholders’ interest, but should not include the removal of any director under Section 27 of the RCC. No stockholder may likewise call for a special meeting within 60 days from the previous meeting of the same nature where the same matter was discussed, unless allowed in the bylaws of the corporation or approved by the board.
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