Just last February, the Revised Corporation Code was enacted by the Philippine government. The Code had to be revised in order to make it easier for entrepreneurs to protect themselves, since before, owners of small and medium enterprises had to establish their businesses as sole proprietorships . However, the promulgation of the Revised Corporation Code has made entrepreneurship much easier in many ways. Here’s how the new Code benefits business owners.
The One Person Corporation
Under the old Corporation Code, sole corporations, or corporations with only one person, were limited to religious groups. This all changed with the Revised Corporation Code, since anyone can now establish a One Person Corporation (OPC). Thanks to the new Code, any entrepreneur (except licensed professionals) can now incorporate their businesses. This is beneficial because they only risk their capital, not the rest of their possessions. As a result, the introduction of the OPC can help entrepreneurs protect themselves with limited liability.
NOTE: One Person Corporations were given their designation because the definition of the corporation sole was retained by the Revised Corporation Code.
It Takes 2-15 People to Establish a Corporation
Under the old Corporation Code, to establish a secular corporation, there had to be at least 5 incorporators/founders. However, the Revised Corporation Code allows an ordinary corporation to be established by 2-15 incorporators. Thus, entrepreneurs who want to get into the financial services industry will find incorporating their businesses more convenient, since the Code does not allow the creation of OPCs engaged in financial services. As a result, incorporating your business has never been easier.
Changing Your Business Type Has Never Been As Easy
Another advantage the Revised Corporation Code gives entrepreneurs is that it allows OPCs to be converted into ordinary corporations, and ordinary corporations to become OPCs. All they have to do is to inform the Securities and Exchange Commission (SEC) about their intent to change their corporate status, after a single person acquires full ownership of the ordinary corporation, or after an OPC owner is able to get more people to invest in his business, in the case of OPCs.The benefit of this process is that the converted corporation retains the continuity of the original. So, the Revised Corporation Code allows entrepreneurs more flexibility when operating their corporations.
The Corporate Term is Now Perpetual
In the old Corporation Code, corporations would have to renew their existence every 50 years or so. However, with the Revised Code, corporations have a perpetual term of existence, which means that unless they go bankrupt, decide to shut down, or merge with other corporations, they can last forever. This innovation was also applied to existing corporations, so they no longer need to renew their existence as well. Thus, the Revised Corporation Code has reduced the amount of paperwork needed for a corporation to stay afloat.
An Entrepreneur’s Life Has Become Easier
In the end. the Revised Corporation Code is a godsend for entrepreneurs, since it makes it easier for them to attain limited liability and protect their personal assets, give their businesses a life of their own, and adapt their businesses to the changing atmosphere. As a result, the new Code is one of the best things that our government has done in recent years, for unlike before, anyone, especially small and medium business owners, can now establish their own corporations, and avail of all the advantages corporate status offers, like allowing businesses to grow beyond the founder.
Source: Revised Corporation Code. (2019, February 20). Retrieved from http://www.sec.gov.ph/wp-content/uploads/2019/03/2019Legislation_RA-11232-REVISED-CORPORATION-CODE-2019.pdf.