Only I can live forever
Only I can live forever
by Diane Erika L Modesto
Arguably, one of the most hated villain in any film series is Voldemort, the main antagonist of Harry Potter in J.K. Rowling’s seven classic novels. Voldemort spent his energy and willpower in overcoming death. In fact, his only desire was to achieve immortality.
Like Voldemort, corporations in the Philippines may aspire to live eternally by the passage of R.A. 11232, known as the “Revised Corporation Code”, which took effect on 23 February 2019. This milestone piece of legislation could not have come at the most opportune time considering that the Philippines fell 11 spots lower at the World Bank’s Ease of Doing Business Report 2019. In the said report, Philippines notched 124th overall ranking out of 190 economies worldwide, a cold distance from 113th place in 2018. The World Bank yearly releases a “doing Business” report, which compares business regulations of domestic firms. It likewise measures how easy or difficult it is for an entrepreneur to open and run a small to medium-sized business while complying with relevant regulations in the country where it is situated.
Among the notable modifications of this newly-coined law is the power granted to corporations to exist perpetually. Under Section 11 of the Revised Corporation Code, a corporation shall have perpetual existence unless its certificate of incorporation provides otherwise. Prior to its amendment, a corporation has an initial maximum life of fifty (50) years from the date of its incorporation, after which, it may be ipso facto dissolved or be extended by amending its Articles of Incorporation provided that no extension can be made earlier than five (5) years prior to the original or subsequent expiry date.
In the case of PNB vs. CFI of Rizal, G.R. No. 63201, dated 27 May 1992, the Court had the opportunity to discuss the importance of corporate term. In that case, the extension of the lease contract between Philippine Blooming Mills (PBM) and private respondents was conditioned on the extension of PBM’s corporate term. Considering that PBM had a corporate life of 25 years, the lease contract automatically expired when PBM did not comply with the requirements provided by law for the extension of its corporate term. Accordingly, when the period of corporate life expires, the corporation ceases to be a body corporate for the purpose of continuing the business for which it was organized. As such the corporation is dissolved automatically and there is no need for the Securities and Exchange Commission to make an involuntary dissolution of a corporation whose corporate term had ended because its articles of incorporation had in effect expired by its own limitation. Finally, cases like this will now be avoided as establishments will not lose its legal personality anymore due to its untimely filing of extension of corporate term.
Although under the old Corporation Code, a corporation may virtually have a perpetual lifespan since it is renewable every fifty (50) years, R.A. 11232 made it easier for the company to achieve its perpetual status by doing away with the administrative work of filing with the SEC, an amendment of articles of incorporation to extend its corporate term.
This, notwithstanding, perpetual existence is not obligatory and the corporation is given an option whether to avail the same or not. In no uncertain terms, Paragraph 2 Section 11, of the Revised Corporation Code provides that a corporation may elect to retain its specific corporate term pursuant to its articles of incorporation upon a vote of its stockholders representing majority of its outstanding capital stock.
The new Code also adopts a “Lazarus Effect” provision. The last paragraph of Section 11 of the Revised Corporation Code, allows the corporation, whose term has already expired, to revive its corporate existence together with all the rights and privileges under its prior certificate of incorporation. However, before a corporation can have a new lease of life, it must make good of all its duties, debts and liabilities then existing prior to the expiration of its corporate term. Upon approval of the SEC, the corporation shall be deemed revived and an amended certificate of incorporation will be issued giving it perpetual existence unless its application for revival provides otherwise.
While Voldemort’s “only I can live forever” mantra was proven to be short lived, since Harry Potter solved the mystery surrounding his immortal status, sure enough corporations can declare and live with those maxim without any reservations, as they now have the power to exist perpetually. Truly, this innovation in corporation’s life helps the present Corporation Code stay attuned to the evolving business landscape and makes our economy more competitive with the rest of the world.
Diane Erika L. Modesto is a Supervisor from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.
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