On the new prohibited acts under the Revised Corporation Code
Worse, vindication of the rights of offended investors or minority stockholders can hardly be appreciated when the offenders are allowed to get off by the simple expedient of paying a mere fine.
Published in Daily Tribune on
by: Emmanuel Emigdio D. Dumlao
Republic Act 11232 or the Revised Corporation Code (RCC) took effect on 23 February 2019 upon completion of its publication in two newspapers of general circulation.
In repealing Batas Pambansa Bilang 68 or the Old Corporation Code (OCC), the RCC seeks to promote ease of doing business (removing minimum subscription requirements) and corporate governance (establishment of independent directors for certain corporations).
The RCC also aims to better protect minority stockholders and investors, as well as strengthen the regulatory powers of the Securities and Exchange Commission (SEC) over corporations.
However, the last two dictates of the RCC seem to have gotten the short end of the stick.
A comparison of the penalties for violations of both the OCC and the RCC reveals a disparity in the severity of imposable penalties.
Section 144 of the OCC provides that violations of any of its provisions shall be punishable by a fine of not less than P1,000.00 nor more than P10,000.00 or by imprisonment for not less than 30 days nor more than five years, or both, in the discretion of the court.
On the other hand, Title XVI of the RCC provides for new specific prohibited acts such as: Section 159-Unauthorized use of corporate name; Section 160-Violation of disqualification provision; Section 161 Violation of duty to maintain records and Willful certification of incomplete, inaccurate, false or misleading statements or reports; Section 163-Collusion of an independent auditor; Section 164 Obtaining corporate registration through fraud; Section 165-Fraudulent conduct of business; Section 166-Acting as intermediaries for graft and corrupt practices; Section 167-Engaging intermediaries for graft and corrupt practices; and Section 168-Tolerating graft and corrupt practices. Interestingly, the imposable penalties for all of these new prohibited acts are mere fines ranging only from P5,000 to P5,000,000.
While the imposable fines for violations of the OCC needed to be increased, it is the opinion of the author that the elimination of the penalty of imprisonment for guilty directors, trustees and officers of corporations for any of the prohibited acts in the RCC is a step back in providing better protection for investors and minority stockholders. In addition, it may even be argued that the most severe fine of P5,000,000 can be considered as too little depending on the size of the corporation to which the erring corporate director, trustee or officer belongs.
In criminal law, the primary purpose in imposing penalties for violations of the law is to provide an example to deter others from committing the same. In addition, imposing penalties also vindicates the violated rights of the offended parties. However, given that the RCC only fines individuals who commit any of the aforementioned prohibited acts, it cannot be said that corporate directors, trustees or officers would effectively be deterred from committing such offenses. Worse, vindication of the rights of offended investors or minority stockholders can hardly be appreciated when the offenders are allowed to get off by the simple expedient of paying a mere fine.
In the Sponsorship Speech of former Solicitor General Estelito Mendoza during the Batasang Pambansa deliberations of the OCC, he said: “What is sought under the (OCC) is to lay down rules and regulations for the organization of corporations with a view to the protection of public interest…” In doing away with the penalty of imprisonment for violations of the RCC, it seems to have dropped the ball in terms of protecting the public from these new prohibited acts.
