A PROPOSED measure that seeks to make the Philippines more conducive to business by addressing the bottlenecks in starting an enterprise and protecting minority investors was introduced by Senate President pro-tempore Franklin Drilon at the plenary level.
During the session Tuesday afternoon, Drilon presented Senate Bill (SB) 1280, under committee report 22, or the “Act Amending the Corporation Code of the Philippines.”
It is time for Congress to amend the 38-year-old Corporation Code of the Philippines in order for the country to keep up with the rest of the financial world, the senator noted in his sponsorship speech.
“We must likewise provide an environment conducive not just to big businesses, but make the corporate vehicle an appealing prospect for startups and entrepreneurs,” Drilon, chairman of the Senate Committee on Constitutional Amendments and Revision of Codes, added.
Although the Philippines has been hailed as the fastest-rising economy in Asia and predicted to outperform China, it is still widely observed that doing business in the country presents many complexities, he said.
While the country was able to improve its ranking, from 103rd to 99th, in the 2017 World Bank’s “Ease of Doing Business” survey, the Philippines dropped seven spots from 164th to 171st in the aspect of Starting a Business.
SB 1280 aims to address the situation by introducing provisions that remove the minimum number of incorporators, permit the establishment of a one-man corporation, allow the electronic filing of reportorial requirements and attend in meetings via remote communication or in absentia.
“These changes are geared towards making the Code adaptable to the changing business landscape and making the Philippines an attractive investment destination,” the senator said in his speech.
The proposed amendments may be divided into four reform clusters, consisting of policies that seek to improve the ease of business in the country; prioritize corporate and stockholder protection; instill corporate and civic responsibility; and strengthen the country’s policy and regulatory corporate framework.
To enhance the ease of doing business, Drilon said the bill seeks to remove a common stumbling block for many investors, which is the requirement for a corporation to have at least five incorporators.
Such policy has made declarations of trust and nominee shareholders indispensable to doing business in the country.
“Investors name individuals as incorporators, with no real interest in the corporation, just to comply with the legal requirement. For local business owners, naming the entire household as incorporators— from cook to driver—is not unusual,” the senator said.
Drilon noted the proposed Revised Corporation Code would introduce the concept of the one-person corporation, simplify the name verification process, and grant a perpetual life as the default option for corporations.
SB1280 also calls for the creation of emergency boards, which can operate for a limited period and purpose, allowing the corporation to continue operating daily despite vacancies in the board.
It also revised the rules on the right to inspect corporate books, modified the quorum requirements, and expanded the grounds for disqualification of directors.
In instilling corporate responsibility, the revised code also calls for the imposition of corporate criminal liability and penalties for graft and corruption, Drilon said.
The provision aims to prevent the use of the corporation as a vehicle for committing crimes, and aside from having to pay hefty fines the corporation may also suffer revocation of its registration.
The fourth reform cluster includes provisions on arbitration of commercial disputes, amendments on dissolution, and the alignment of Securities and Exchange Commission’s (SEC’s) powers under the Corporation Code with the Securities Regulation Code.
“In general, the proposed amendments promote efficiency and encourage transparency in corporate dealings – from formation to daily operations. Having them in place will allow the Philippines to compete with other countries as a viable investment destination and small-business-friendly jurisdiction,” Drilon said.