Corporate Compliance Program in the Philippines: A Practical Guide for Companies

Building a corporate compliance program in the Philippines means putting in place the structures, policies, and controls that keep a company within the requirements of Philippine law. The foundation is the Revised Corporation Code of the Philippines (Republic Act No. 11232), which governs how corporations are created, governed, and maintained. Companies that offer securities to the public must also comply with the Securities Regulation Code (Republic Act No. 8799). Where a business deals with government agencies, the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) adds rules that compliance programs must address. A working program combines corporate housekeeping, governance, disclosure, and anti-corruption controls.

What a corporate compliance program covers in the Philippines

A compliance program is the set of internal rules and practices that ensure a corporation meets its legal obligations. Under the Revised Corporation Code, a corporation is an artificial being created by operation of law with the right of succession and the powers expressly authorized by law or incidental to its existence (Section 2). Because corporate existence and powers flow from law, compliance begins with keeping the corporation's legal house in order.

For most Philippine corporations, the program covers four areas: corporate housekeeping with the Securities and Exchange Commission (SEC), board and officer governance, disclosure and reporting where securities are involved, and anti-corruption controls for dealings with government.

Corporate housekeeping and SEC compliance

A private corporation organized under the Revised Corporation Code commences its corporate existence from the date the SEC issues its certificate of incorporation (Section 18). From that point, the corporation must maintain its good standing.

Key housekeeping obligations include:

• Maintaining a registered corporate name. The SEC may order a corporation to stop using a name that is not distinguishable from one already registered or protected by law (Section 17).
• Avoiding non-use and continuous inoperation. If a corporation does not formally organize and commence business within five (5) years from incorporation, its certificate of incorporation is deemed revoked. If it becomes inoperative for at least five (5) consecutive years, the SEC may place it under delinquent status, with a two-year period to resume operations and comply (Section 21).
• Amending the articles of incorporation properly. Amendments require board approval and the vote or written assent of stockholders representing at least two-thirds (2/3) of the outstanding capital stock, and take effect upon SEC approval or after filing if not acted upon within six (6) months (Section 15).

Governance: board, officers, and independent directors

The board of directors or trustees exercises the corporate powers, conducts all business, and controls all properties of the corporation (Section 22). A compliance program should define how the board operates and how conflicts are managed.

For corporations vested with public interest, the board must have independent directors constituting at least twenty percent (20%) of the board. This covers corporations under Section 17.2 of the Securities Regulation Code, banks and quasi-banks, and other financial intermediaries, among others (Section 22). An independent director is a person who, apart from shareholdings and fees from the corporation, is independent of management and free from any relationship that could interfere with independent judgment (Section 22).

Securities disclosure and registration compliance

If a company sells or offers securities to the public in the Philippines, it must file a registration statement with and have it approved by the SEC before any sale, and must make information available to each prospective purchaser (Section 8.1 of the Securities Regulation Code). The registration statement must be signed by specified officers, accompanied by a verified board resolution (Section 12.4), and the SEC must declare it effective or rejected within forty-five (45) days of filing, unless the applicant is allowed to amend (Section 12.6).

The Securities Regulation Code also prohibits insider trading and other fraudulent or manipulative devices (Section 2). Compliance programs for listed or publicly offered companies should therefore include controls on material non-public information and timely disclosure.

Anti-corruption controls for dealings with government

Where a company transacts with government, the Anti-Graft and Corrupt Practices Act applies. It penalizes public officers for acts such as directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit in connection with any contract or transaction between the Government and any other party (Section 3[b]). Private persons can also be liable — for example, for knowingly inducing or causing a public official to commit offenses under Section 3 (Section 4[b]).

A compliance program should therefore include a gifts and hospitality policy, third-party due diligence, and controls on interactions with government agencies. Note that unsolicited gifts of small or insignificant value given as an ordinary token of gratitude or friendship are excepted from the Act (Section 14).

Frequently asked questions

What law governs corporate compliance in the Philippines? The Revised Corporation Code (Republic Act No. 11232) governs corporations generally. Companies offering securities to the public are also covered by the Securities Regulation Code (Republic Act No. 8799), and dealings with government are covered by the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019).

Is a compliance program required by Philippine law? Philippine law does not prescribe a single mandatory compliance program for all corporations. However, the Revised Corporation Code, the Securities Regulation Code, and the Anti-Graft and Corrupt Practices Act impose obligations that a company must meet, and a compliance program is the practical way to meet them.

When does a corporation become delinquent? If a corporation has commenced business but becomes inoperative for at least five (5) consecutive years, the SEC may, after due notice and hearing, place it under delinquent status. It then has two (2) years to resume operations and comply (Section 21).

Practical takeaways

• Ground the program in the Revised Corporation Code, and add the Securities Regulation Code and Anti-Graft and Corrupt Practices Act where applicable.
• Keep corporate housekeeping current: registered name, articles amendments, and active operations to avoid revocation or delinquent status.
• For corporations vested with public interest, ensure independent directors make up at least twenty percent (20%) of the board.
• If offering securities, file and maintain an SEC-approved registration statement and control material non-public information.
• Adopt gifts, hospitality, and third-party controls for any dealings with government.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 11232 - AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

• REPUBLIC ACT NO. 8799 - THE SECURITIES REGULATION CODE

• REPUBLIC ACT NO. 3019 - ANTI-GRAFT AND CORRUPT PRACTICES ACT

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.