Senate amends Corporation Code for better business climate

The Senate approved on third and final reading a bill which would amend the 38 year-old Corporation Code to improve the country's business climate and make it attractive to large and small businesses.

Senate Bill No. 1280, authored and sponsored by Senate Minority Franklin Drilon and co-sponsored by Senate Majority Leader Juan Miguel Zubiri, was approved with 20 affirmative votes, zero negative vote and no abstention.

Apart from Drilon and Zubiri, the bill was also co-authored by Senate President Vicente Sotto III and Senators Nancy Binay, Joseph Victor Ejercito, Sherwin Gatchalian, Richard Gordon, Gregorio Honasan II, Risa Hontiveros, Panfilo Lacson, Manny Pacquiao, Francis Pangilinan, Aquilino Pimentel III, Grace Poe and Antonio Trillanes IV.

According to Drilon, the bill will amend the Corporation Code (Batas Pambansa Bilang 68), enacted in 1980, to establish a more business- and investor-friendly environment in the country.

"A reform in our corporate sector will certainly make the country more investment-attractive and, therefore, investments can generate jobs that can help our country and our people," Drilon said.

"We must provide an environment conducive not just to big businesses, but make the corporate vehicle an appealing prospect for startups and entrepreneurs," he added.

Drilon said the various amendments under the bill were categorized under four reform clusters: 1.) policies that would enhance ease of doing business; 2.) rules that would prioritize corporate and stockholder protection; 3.) provisions that would instill corporate and civic responsibility; and 4.) amendments that would strengthen the country's policy and regulatory corporate framework.

"In general, the proposed amendments promote efficiency and encourage transparency in corporate dealings from formation to daily operations," he said.

Among the key reforms to streamline the process of incorporation, Drilon said, was the introduction of the "one-person corporation" concept, which would permit a single person to form a corporation.

He said this move would help address problems regarding the current requirement of at least five stockholders for a corporation - a "common stumbling block" which led investors to name even their household members and hired help as incorporators just to comply with the rule.

To help investors avoid the risk "of having their corporations dissolved simply by forgetting to renew their corporate term," the bill will grant a perpetual term as the default option for corporations.

The bill will also require the adoption of an electronic filing system for reportorial requirements, and will simplify the current "confusing" name verification system to allow seamless automation of name registration for corporations.

Likewise, the bill will allow the use of alternative modes of communication in corporate meetings, so that stockholders and directors can attend and participate through remote communication - and in some cases, "votes may be cast in absentia."

Drilon said the proposed amendments, which were in line with global best practices, would allow the country "to compete with other countries as a viable investment destination and business-friendly jurisdiction."

"If we are to keep up with the rest of the financial world, we need to codify best international corporate practices and address the archaic bottlenecks in the areas of starting a business and protecting minority investors," he said.

Drilon noted that doing business in the country "still presents many complexities," as observed by the World Bank in its 2017 "Ease of Doing Business survey" where the Philippines dropped seven spots from 164th to 171th in the 'Starting a Business' aspect. (JDC)