SEC Issues Guidelines On Amending The Corporate Term

The SEC issued SEC Memorandum Circular (“MC”) No. 22 dated 18 August 2020 to implement Section 11 of the Revised Corporation Code of the Philippines (the “RCCP”), and provide guidelines for corporations that intend to amend their corporate term from a fixed term to perpetual existence and vice versa.

MC No. 22 operationalizes Section 11 of the RCCP, which provided that new corporations shall have perpetual existence unless the incorporators elect to set a fixed corporate term in the articles of incorporation. The RCCP further provides that corporations registered under the Corporation Code (“BP 68”) or the old Corporation Law (“Act No. 1459”) would likewise be deemed to have perpetual existence upon effectivity of the RCCP unless the corporation notifies the Securities and Exchange Commission (“SEC”) that it is electing to retain its specific corporate term.

Corporations electing for perpetual existence

Corporations with certificates of incorporation issued before the effectivity of the RCCP and which continue to exist up to the present shall be deemed to have perpetual existence upon effectivity of the RCCP, without any action required from them. However, at its discretion, a corporation may amend its articles of incorporation to expressly state that it shall have perpetual existence. Such amendment will require the majority vote of the Board of Directors or Trustees (the “Board”) and a vote of the stockholders representing a majority of the outstanding capital stock including the non-voting shares, or a majority of all members in case of non-stock corporations.

Corporations electing for a specific corporate term 

Existing corporations that elect to maintain their specific corporate term pursuant to its articles of incorporation must file a Notice with the SEC together with a Director’s Certificate certifying that the decision to retain its specific corporate term was approved by a majority of the members of the Board and by a vote of stockholders representing a majority of the outstanding capital stock, including the non-voting shares, or a majority of all members in case of a non-stock corporation. The Notice must be signed by at least a majority of the directors or trustees and attested by the Corporate Secretary and submitted to the SEC’s Company Registration and Monitoring Department no later than 23 February 2021. Corporations that file such Notice will be issued a Certificate of Filing Notice to Retain Specific Corporate Term.

Existing corporations that do not file a Notice on or before the deadline shall be deemed to have elected to change their corporate term from a specific corporate term to perpetual existence.

Other amendments to the corporate term

The corporation may also amend its articles of incorporation to extend or shorten its corporate term/existence, or it may opt to change its specific corporate term to perpetual existence and vice versa, subject to the following general requirements:

Changes	Requirement
Extension or Shortening of Specific Corporate Term Note: Applicable to corporations incorporated under the RCC and have specific corporate terms or those existing corporations that notified the SEC of their decision to retain their specific corporate terms.	Approval by vote or written assent of the majority of the Board and vote or written assent of the stockholders representing two-thirds (2/3) of the outstanding capital stock. An amendment to extend the corporate term must be filed not earlier than three (3) years prior to the original or subsequent expiration date of the corporate term unless there are justifiable reasons for an extension as may be determined by the SEC.  The extension of the corporate term shall take effect on the day following the original or subsequent expiry date.
Specific Corporate Term to Perpetual Existence Note: Applicable to corporations incorporated under the RCC and have specific corporate terms or those existing corporations that notified the SEC of their decision to retain their specific corporate terms.	Approval by vote or written assent of the majority of the Board and vote or written assent of the stockholders representing two-thirds (2/3) of the outstanding capital stock.
Perpetual Existence to Specific Corporate Term Note: Applicable to corporations incorporated under the RCC which have perpetual existence or those existing corporations whose terms were treated perpetual for failure to comply with the notification requirement.

Appraisal right of dissenting stockholders

The above changes in the corporate term shall be without prejudice to the appraisal right of dissenting stockholders. This may be done by making a written demand on the corporation for the payment of the fair market value of shares held within thirty (30) days from the date on which the vote was taken pursuant to Section 81 of the RCC.