The intent of Republic Act 11232 or the Revised Corporation Code (RCC) of the Philippines to criminalize violators may create a ‘chilling effect’ on commercial infrastructure in promoting the use of the corporate medium in pursuing investments and commercial activities.
Atty. Cesar Villanueva, chairperson of the board of trustees of the Institute of Corporate Directors, said during the Annual Public Policy Conference (APPC) webinar on “Ethical Business” that the shift from the “comply or explain approach” of the Securities and Exchange Commission (SEC)’s Code of Corporate Governance, has been pursued “in an overly broad and criminalized manner”.
Villanueva explained that before the RCC, the prevailing rule in Philippine corporate law was that if an offense is committed in pursuit of business affairs, it would be the culprit of the directors, trustees, officers, or even employees who would be personally and criminally held liable for committing well-defined offenses.
“The ultimate owners of the corporate business enterprise, the shareholders, were shielded from the consequences of fraudulent acts of the corporate agent,” he said.
Under the revised Code, however, it would be the innocent shareholders and other investors and stakeholders who will be adversely affected by tagging the corporation as a criminal, Villanueva pointed out.
He also explained that under the old SEC’s “comply or explain approach”, companies must state whether they comply with the Code’s provisions in their annual corporate governance reports. They should identify any areas of noncompliance and explain the reasons for such.  
Further, he noted that, “no sanctions are imposed for noncompliance with the provisions of the Code, except for failure to file with the SEC the annual corporate governance report.”
However, this is opposite to the revised Code, which sanctions failure to comply with its corporate provisions.
For instance, the new Code grants SEC the power to impose administrative sanctions on any violations of its provisions.
“Ironically, although among the main objectives in the promulgation of the RCC was to promote the ease of doing business through the corporate medium, [the RCC’s] overly broad and criminalized enforcement mechanisms have created unnecessary unease in doing business through the corporate medium. It impinges upon the exercise of business judgment of boards and management for fear of professional catastrophe,” Villanueva argued.
Another concern, he raised, is that these enforcement mechanisms provide opportunities for wily shareholders to bring decent harassment suits against corporate directors, trustees, and officers. 
Villanueva noted that, in the end, it is the SEC that has the authority to evaluate and determine whether violations against the Code will prosper or not.  
The APPC is the main and culminating activity of the Development Policy Research Month celebration led by the Philippine Institute for Development Studies every September. This year’s theme is “Reset and Rebuild for a Better Philippines in the Post-Pandemic World”, or in Filipino, “Muling Magsimula at Magtayo Tungo sa Mas Matatag na Pilipinas Pagkatapos ng Pandemya”.###
You may watch the APPC webinar on “Ethical Business” at or

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