Existing domestic corporations with a five-member board can now amend their articles of incorporation to reduce the number of its board directors. Prior to the effectivity of R.A. No. 11232 also known as the “Revised Corporation Code”, those wishing to establish a domestic corporation were forced to comply with the minimum number of incorporators, that is, five individuals majority of whom must be residents of the Philippines. Now, an ordinary domestic corporation can be incorporated with a minimum of at least two (2) incorporators who may also serve as the first set of board directors. Said minimum number of directors similarly applies to existing domestic corporations.
The reduction of the number of directors eases the burden of looking for nominees and maintaining five (5) nominees just so the company would be compliant. From corporate housekeeping position, it is generally easier to manage and organize meetings of smaller boards. Because of the limited number of people involved, preparing materials before and after each meeting could be swiftly done. Scheduling special meetings for faster decision-making may also be effortless with fewer people involved.
Looking at it from a corporate governance perspective, small boards spend less time in discussions but fostering deeper debates and making quicker decisions, thereby making the decision-making process more efficient and effective. The same is especially true for boards that have nominee directors solely for the purpose of compliance with the former Corporation Code of the Philippines.
With the passage of the Revised Corporation Code of the Philippines into law, ordinary corporations may now have as few as two (2) directors. The Philippine Securities and Exchange Commission (SEC) is now accepting existing companies’ application to reduce the number of board directors.
If you wish to know more information about the process and requirements or other related concerns, please send your email to [email protected] or visit our page barrozolaw.com
