By Anna Isabella C. Galvez

On August 18, 2020, the Securities and Exchange Commission (SEC) issued Memorandum Circular (MC) No. 22-2020, which provides the guidelines on corporate term as provided in Section 11 of the Revised Corporation Code (RCC). The RCC was signed into law on February 20, 2019 and took effect on February 23, 2019.

The guidelines laid down by the SEC are as follows:

 

 

Corporate Term Remarks
Revised Corporation Code of the Philippines (R.A. No. 11232)
1 Perpetual, unless the Articles of Incorporation provides a specific corporate term.

 

Corporation Code of the Philippines (B.P. No. 68) and The Corporation Law (Act No. 1459)
2 Corporations with Certificate of Incorporation issued prior to the effectivity of the RCC and which continue to exist – deemed perpetual upon the effectivity of the RCC, without any action on the part of the corporation. The corporation may amend its Articles of Incorporation to reflect its perpetual corporate term by a vote of:

§  majority of its Board of Directors or Trustees; and

§  stockholders representing a majority of its outstanding capital stock including non-voting shares, or a majority of the members, in case of a non-stock corporation.

 

For all other provisions to be amended in one same amended Articles of Incorporation, the required vote should be vote of:

§  majority of its Board of Directors or Trustees; and

§  stockholders representing at least 2/3 of its outstanding capital stock or members, in case of a non-stock corporation.

 

3 Corporations with Certificate of Incorporation issued prior to the effectivity of the RCC and which continue to exist, that elect to continue with their present corporate term pursuant to their Articles of Incorporation – notify the SEC by filing a Notice with attached Directors’ Certificate, certifying that the decision to retain the specific corporate term was approved in a meeting duly held for the purpose by a majority vote of the Board of Directors of Trustees and by the vote of the stockholders representing a majority of the outstanding capital stock, including non-voting shares, or a majority of the members, in case of a non-stock corporation The Notice must be signed by at least a majority of the members of the Board of Directors or Trustees, and attested by the Corporate Secretary.

 

The SEC has provided a sample format of the Notice (see picture below).

 

Submit the Notice to the SEC Company Registration and Monitoring Department, any SEC Satellite Office or SEC Extension Office, within a period of two years from February 23, 2019 or until February 23, 2021 pursuant to Section 185 of the RCC.

 

The SEC shall then issue a Certificate of Filing Notice to Retain Specific Corporate Term.

 

The corporate term of corporations which fail to comply with the required notification shall be treated as perpetual after the lapse of the two-year period.

 

 

Any amendment to extend or shorten the corporate term or to change it to specific or perpetual term must be approved by vote or written assent of majority of the Board of Directors or Trustees and of stockholders representing at least 2/3 of the outstanding capital stock of the corporation. Any extension shall not be made earlier than three (3) years prior to the original or subsequent expiration of the corporate term, unless there are justifiable reasons for extension as may be determined by the SEC. Extension shall take effect only on the day following the original or subsequent expiry date.

Any change in the corporate term shall be without prejudice to the appraisal right of dissenting stockholders in accordance with the RCC.

MC No. 22-2020 was published in Philippine Daily Inquirer and Philippine Star on August 23, 2020.

FNS

FNS


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