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By: Euney Marie J. Mata-Perez on March 14, 2019

In ranking the ease of doing business (EODB) of economies, the World Bank (WB) also evaluates a country’s protection of the interests of minority investors. In this regard, it considers two indices, namely, 1) conflicts of interest regulation, and 2) shareholders’ rights in corporate governance. Republic Act No. 112321 or the Revised Corporation Code (RCC) of the Philippines introduced several amendments and new provisions which seek to improve minority shareholder protection. These provisions should contribute to improving our country’s EODB ranking.

The WB’s extent of conflict of interest regulation index focuses on one of the most serious breaches of good corporate governance around the world– the related-party transaction. The index measures the protection of shareholders against directors’ misuse of corporate assets for personal gain by distinguishing three dimensions of regulation that address conflicts of interest: 1) transparency of related-party transactions, 2) shareholders’ ability to sue and hold directors liable for self-dealing, and 3) access to evidence and allocation of legal expenses in shareholder litigation.

The extent of shareholder governance index, on the other hand, measures shareholders’ rights in corporate governance by distinguishing three dimensions of good governance–1) shareholders’ rights and role in major corporate decisions, 2) governance safeguards protecting shareholders from undue board control and entrenchment and 3) corporate transparency on ownership stakes, compensation, audits and financial prospects. (
Our RCC introduced several amendments and new provisions to improve the protection of the minority shareholder, as set out below:

• Companies vested with public interest: Companies vested with public interest are required to have at least two independent directors, have its material contracts approved by at least 2/3 of the entire membership of the board, with at least a majority of the independent directors approving the same, and submit to the Securities and Exchange Commission (SEC) a directors’ compensation report, directors’ appraisal or performance report.

• Election/removal of directors: a) Upon the application of any stockholders, the SEC may summarily hold the election of directors, whenever the same is not held within 30 days from the date of a scheduled election, after verification of the unjustified non-holding of the election, and b) Removal of directors may be without cause, provided that such removal will not deprive minority stockholders of the right of representation to which they may be entitled.

• Director’s compensation: Directors or trustees are now prohibited from participating in the determination of their own per diems or compensation. Stockholders representing majority of the outstanding capital stock or members may grant the directors’ or trustees’ compensation and the amount thereof at a regular or special meeting.

• Conflict of interest: Directors or trustees who have a potential interest in any related party transaction must recuse themselves from voting on the approval of the related party transaction.

• Information to stockholders or members: Board of directors or trustees are required to present more information at each regular meeting of the stockholders or members. These information include detailed assessment of the corporation’s performance and strategies, explanation of dividend policy, director/trustee qualification, profiles and attendance report, director/trustee compensation report, director’s disclosure on self-dealing, and such other information which the SEC may require in the interest of good governance and the protection of minority shareholders. A stockholder or member may propose any matter for inclusion at any regular or special stockholders’ meeting.

• Voting: a) The right to vote of the stockholders or members may now be exercised through remote communication or in absentia, and b) Any stockholder not duly notified may attend the meeting and expressly state at the beginning of such meeting that the purpose of his attendance is to object to the transaction of any business because the meeting is not lawfully called or convened.

• Calling of meetings: If there is no person authorized or the person authorized unjustly refuses to call a meeting, the SEC may, upon petition of a stockholder or member, order the holding of a meeting.

• Maintenance of corporate records: The list of corporate records to be maintained by corporations was expanded to include ownership and group structures, intra-group relations, ownership data, beneficial ownership, and a record of all business transactions.

• Inspection of records: a) A stockholder’s right to copy records is expanded from being allowed to merely copying excerpts of corporate records to being permitted to reproduce corporate records, and b) If the corporation denies or does not act on demand for inspection and/or reproduction, the aggrieved party may report such denial or inaction to the SEC, and within five (5) days from receipt, the SEC can conduct an investigation and issue an order directing inspection.

• SEC’s powers: SEC’s powers have been expanded significantly to include the power to hold corporations in direct and indirect contempt, issue subpoenas and writs of execution and attachment and remove erring directors. The SEC has the power to promote corporate governance and protect the minority shareholders, through the issuance of regulations consistent with international best practices.

Indeed, while the above RCC provisions are a welcome addition to our corporation law, they also impose significant obligations on the corporation, through its directors, trustees and majority stockholders. Such provisions, coupled with SEC’s increased power to intervene directly on certain matters and even to impose penalties or sanctions, should result in our having a corporate regime which protects minority shareholders and promotes good governance. We hope these provisions also translate to an improved EODB ranking for the Philippines.

Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer and the president of the Asia-Oceana Tax Consultants Association. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at or visit MTF website at

From the The Manila Times website on March 14, 2019



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Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco