COMPREHENSIVE SUMMARY

By: Christine Mae R. Mendoza

Business is an important source of government revenue because the business activities

contribute to the government revenue in the form of taxes.

The three forms of business organization include sole proprietorship, partnership and
corporation. In a sole proprietorship, one individual owns and controls the business. In
partnership, two or more persons agree to do business together with an aim of earning and
sharing of profit. In section 2 of the Corporation Code corporation is defined as an artificial
being created by operation of law, having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence.

However, on the 21st day of February 2019, Republic Act 11232, or the Act providing for
the Revised Corporation Code of the Philippines, was signed into law by President Rodrigo R.
Duterte and amended a 38-year-old Corporation Code. According Senator Franklin Drilon, it is
made to enhance the place of doing business, to strengthen stockholders protection and
institutionalized corporate governance provisions, to instill civic corporate responsibility and
strengthen policy and regulatory framework. The following are the highlights of the amendment:

OLD CORPORATION CODE REVISED CORPORATION CODE

ONE PERSON Requires at least five (5)
CORPORATION stockholders to form a corporation.
PERPETUAL A corporation has a term limit of 50
EXISTENCE years, unless extended. Its existence
is deemed dissolved upon expiration
of the term.
MINIMUM Required that at least 25% of the
CAPITAL STOCK authorized capital stock must be
subscribed, and at least 25% of the
total subscription must be paid by
the stockholders, provided that the
minimum paid-up capital shall not
be lower than Php5, 000.00.
INCORPORATORS, Not less than five and not more than
DIRECTORS, fifteen
TRUSTEES, AND
OFFICERS
One person corporation (“OPC”) may now be
formed by a single stockholder, who may be a
natural person, trust or an estate. However,
banks and quasi-banks, pre-need, trust,
insurance, public and publicly listed companies,
and non-chartered government-owned and
controlled corporations may not incorporate as
OPC.
The default rule is that a corporation shall have
perpetual existence, unless otherwise specified
in the Articles of Incorporation.
Removed the aforementioned 25% subscription,
payment and minimum paid-up capital
requirements. The New Code states that “stock
corporations shall not be required to have a
minimum capital stock, except as otherwise
specifically provided by special law.”
 Removed the minimum number of
incorporators, directors and trustees, which
stood as five (5) under the Old Code.
 The stockholder of the corporation includes managers who implements policies in day to
day operation, creditors who lends money for the corporation, shareholders who provide money
and capital for corporations to grow, employees, clients, government, taxes and the public.

The purposes of the corporation are early stage survival- where corporation seek to
survive especially in their early years of existence, to increase profit which is commonly the
primary purpose of the business, to offer vital services to the general public and to offer goods
and services to the mass market.

The performance incentives and disincentives are share incentive, where employees of a
corporation is allowed to subscribe and own shares, shareholders’ intervention is where
shareholders are more vigilant to exercise their rights and obligation as part of the corporations
where they are allowed to scrutinize the performance of the company if member of the board of
directors are not performing their duties well, threat of being fired, takeover threat.

The non-executive directors or also called as independent director are not employed by
the company, their role is to see things outside the company by not being influenced by anyone
in the company. Non –executive directors are responsible for strategies, establishing networks,
monitoring performance, and audit.

The roles of audit committee are geared toward carrying out practical, progressive
changes in the functions and expectations placed on corporate board. They are also expected to
have no emotional connections to the company in order to fully render their service in a rational
manner.

Corporate Governance is defined by the following:

Malaysian High level finance committee report on corporate governance

 process and structure use to direct and manage the business and affairs of
the company towards enhancing the business prosperity and corporate
accountability with the ultimate objective o realizing long term
shareholder value.
The Wall Street Journal (June 23, 1999)
 refers to a joint responsibility imposed on the Board of Directors and
management to protect shareholders rights and enhance shareholders
value.
SEC Memorandum Circular No. 2, series of 2002, Code of Corporate Governance
 a system whereby shareholders, creditors and other stakeholder of a
corporation ensure that the management enhances the value of a
corporation as it competes in an increasingly global market place.
 Sir Adrian Cadbury
 concerned with holding the balance between economic and social goals
and between individual and communal goals.

Biore, et. al.

 structures and process by which companies are directed and controlled.

Corporate Governance and the board of directors considers how companies are directed
and controlled by the directors whom are usually the agents of shareholders, they are the
stewards or people who are looking after for the company’s asset.

The fundamental objectives of corporate governance are improvement of shareholders

value and conscious consideration of the interest of other stockholders

Good governance promotes:

 Transparency where the company is willing and open to provide clear information to
shareholders and other stakeholders the disclosure of the financial performance figures
which are truthful and accurate.
 Accountability which is the obligation and responsibility to give an explanation or reason
for the company's actions and conduct.
 Prudence is the management’s committee/board's responsibility to safeguard the interests
of the charity through good planning and management of finances, activity and risk.

Benefits of good governance are:

 Reduced vulnerability, reduce risk must recognize and address the

increased vulnerability resulting from poor governance and planning processes,
inadequate, structural inequalities, power imbalances between social groups or serious
under-investment in resilience building.
 Marketability where a negotiable security is said to have good marketability if there is an
active open market in which it can easily be resold.
 Credibility is an objective result of its administrative ability, as well as a comment of the
public, reflecting how much they lay satisfaction and trust on the government.