Regulatory Alerts2022-03-02
Disqualifications of Directors, Trustees, and Officers of Corporations and Guidelines for Their Removal
The Securities and Exchange Commission of the Philippines issued these guidelines to implement Sections 26 and 27 of the Revised Corporation Code, establishing strict disqualification criteria for corporate directors, trustees, and officers. Individuals are barred from holding office if they have been convicted of offenses carrying imprisonment exceeding six years, found administratively liable for fraud, or sanctioned by foreign authorities for similar misconduct within five years prior to appointment. The Commission may order the removal of disqualified officials upon verified complaint or motu proprio after due process, while retaining the authority to sanction boards that knowingly retain ineligible members.
■% Securitiesand Exchange Commission PHILIPPINES SEC Memorandum Circular No. Series of2022 TO ALL CONCERNED SUBJECT : Disqualifications of Directors, Trustees and Officers of Corporations; and the Guidelines on the Procedure for their Removal (Pursuant to Sections 26 and 27 ofthe Revised Corporation Code ofthe Philippines) WHEREAS, under Section 26 of Republic Act No. 11232, or the Revised Corporation Code ofthe Philippines ("RCC"), a person shall be disqualified from being a director, trustee, or officer of any corporation if, within five (5) years prior to the election or appointment as such, the person was: (a) Convicted by final judgment: (1) Of an offense punishable by imprisonment for a period exceeding six (6) years; (2) For violating this Code; and (3) For violating Republic Act No. 8799, otherwise known as "The Securities Regulation Code"; (b) Found administratively liable for any offense involving fraudulent acts; and (c) By a foreign court or equivalentforeign regulatoiy authority for acts, violations or misconductsimilar to those enumerated in paragraphs [a] and [b] above; WHEREAS, the same section provides that the Securities and Exchange Commission ("Commission") or the Philippine Competition Commission ("PCC") may impose qualifications or other disqualifications in its promotion of good corporate governance or as a sanction in its administrative proceedings; WHEREAS, Section 27 ofthe RCC provides thatthe Commission shall, motu proprio or upon a verified complaint, and after due notice and hearing, order the removal of a director or trustee elected despite the disqualification, or whose disqualification arose or is discovered subsequent to an election, and the removal of a disqualified director shall be without prejudice to othersanctionsthat the Commission may impose on the board of directors or trustees who, with knowledge ofthe disqualification, failed to remove such director or trustee; WHEREAS, Section 96 ofthe RCC providesthat, unlessthe context clearly provides otherwise, the stockholders ofa close corporation shall be deemed to be directors, for the Page 1 of 14 4 Published: Manila Bulletin, 4 March 2022 Business World, 4 March 2022 Filed with UP Law Center: 3 March 2022
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