On 20 February 2019, President Rodrigo Duterte signed into law the Revised Corporation Code of the Philippines, which may be considered as a landmark legislation updating the 38-year-old Corporation Code of the Philippines to adjust to modern times in doing business.
Implications for business in the Philippines
According to Senator Franklin Drilon, principal sponsor and author of the Code, the amendments are focused on “removing barriers hindering the entry of both small and large enterprises into the Philippine market” as it aims to foster smoother transactions in doing business in the Philippines. The honorable senator also mentioned in his speech on 26 March 2019 during the Joint Forum on the Revised Corporation Code that the critical changes in the Revised Corporation Code would create an investor-friendly environment conducive for business to thrive and prosper, whereby it contains four major reforms:
Key reforms and significant provisions of the law
The following are some of the key reforms under the Revised Corporation Code vis-à-vis the four abovementioned reforms:
Ease of doing business
The Revised Corporation Code introduced seven key reforms intended to enhance the ease of doing business in the Philippines:
The law also introduced new provisions intended to strengthen stockholder protection and institutionalise corporate governance provisions:
Corporate civic responsibility
The law instills corporate civic responsibility by imposing corporate criminal liability and penalties for graft and corruption. Furthermore, the erring corporation’s registration may also be revoked.
Strengthening the policy and regulatory corporate framework
There are amendments made to the regulatory powers of the Philippine Securities and Exchange Commission (“SEC”) and provisions on arbitration:
The enactment of the Revised Corporation Code comes at an appropriate time wherein the Philippine government has been active in campaigning and promoting for ease of doing business in the Philippines. This new law will certainly go hand in hand with the Ease of Doing Business Act passed in 2018 as well as with the more liberal Foreign Investments Negative List issued on October 2018, and other laws and regulations in relation to doing business. Philippine business players look forward to the better changes that can be brought about by the Revised Corporation Code in order to improve the Philippines’ competitiveness as an investment destination.
This alert is for general information only and is not a substitute for legal advice.