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AT A GLANCE:

Revised Corporation Code of the Philippines or Republic Act No. 11232 provides penalties for the violation of its provisions, including the unauthorized use of corporation names, fraudulent practices, and graft and corrupt practices.

The Revised Corporation Code of the Philippines or Republic Act No. 11232 not only governs the creation, organization, and operation of corporations but likewise prescribes penalties for violations of its provisions. To promote good corporate governance and protect the investing public, the Code imposes fines and other sanctions against corporations, directors, trustees, officers, auditors, and other persons who commit acts prohibited by law.

The criminal and penal provisions are primarily found under Title XVI (Investigations, Offenses and Penalties), Sections 158 to 171 of the Revised Corporation Code. These provisions impose administrative, civil, and criminal liability for violations of the Code and for acts committed in bad faith, fraud, or abuse of corporate authority.

Common Crimes and Prohibited Acts under the RCC 

1. Fraudulent Conduct of Corporate Affairs
2. Acting Without Authority or in Violation of Disqualification Rules
3. Falsification of Corporate Records and Reports
4. Unauthorized Use of Corporate Name
5. Refusal to Allow Inspection of Corporate Records
6. Issuance of Fraudulent or Watered Stocks
7. Violations of Reportorial Requirements

Unauthorized Use of Corporation Name 

Under Section 17 of Republic Act No. 11232, no corporate name shall be allowed by the Commission if it is not distinguishable from that already reserved or registered for the use of another corporation, or if such name is already protected by law, rules and regulations. It clarifies that a name is not distinguishable even if it contains one or more of the following:

1. The word “corporation”, “company”, incorporated”, “limited”, “limited liability”, or an abbreviation of one of such words; and
2. Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different tenses, spacing, or number of the same word or phrase.

Section 17 of Republic Act No. 112342 further provides:

The Commission upon determination that the corporate name is: (1) not distinguishable from a name already reserved or registered for the use of another corporation; (2) already protected by law; or (3) contrary to law, rules and regulations, may summarily order the corporation to immediately cease and desist from using such name and require the corporation to register a new one. The Commission shall also cause the removal of all visible signages, marks, advertisements, labels prints and other effects bearing such corporate name. Upon the approval of the new corporate name, the Commission shall issue a certificate of incorporation under the amended name.

 

If the corporation fails to comply with the Commission’s order, the Commission may hold the corporation and its responsible directors or officers in contempt and/or hold them administratively, civilly and/or criminally liable under this Code and other applicable laws and/or revoke the registration of the corporation.

The unauthorized use of corporate name shall be punished with a fine ranging from Ten thousand pesos (₱10,000.00) to Two hundred thousand pesos (₱200,000.00). (Section 159 of Republic Act no. 11232)

Violation of Disqualification Provision

Under Section 26 of Republic Act No. 11232, 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:

1. ) 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“;
2. ) Found administratively liable for any offense involving fraudulent acts; and
3. ) By a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct similar to those enumerated in paragraphs (a) and (b) above.

When, despite the knowledge of the existence of a ground for disqualification as provided in Section 26 of this Code, a director, trustee or officer willfully holds office, or willfully conceals such disqualification, Section 160 of Republic Act no. 11232 provides that such director, trustee or officer shall be punished with a fine ranging from Ten thousand pesos (PhP10,000.00) to Two hundred thousand pesos (PhP200,000.00) at the discretion of the court, and shall be permanently disqualified from being a director, trustee or officer of any corporation. When the violation of this provision is injurious or detrimental to the public, the penalty shall be a fine ranging from Twenty thousand pesos (PhP20,000.00) to Four hundred thousand pesos (PhP400,000.00).

Violation of Duty to Maintain Records, to Allow their Inspection or Reproduction 

In Section 161 of Republic Act No. 11232, the unjustified failure or refusal by the corporation, or by those responsible for keeping and maintaining corporate records, to comply with Sections 45, 73, 92, 128, 177 and other pertinent rules and provisions of this Code on inspection and reproduction of records shall be punished with a fine ranging from Ten thousand pesos (₱10,000.00) to Two hundred thousand pesos (₱200,000.00), at the discretion of the court, taking into consideration the seriousness of the violation and its implications. When the violation of this provision is injurious or detrimental to the public, the penalty is a fine ranging from Twenty thousand pesos (₱20,000.00) to Four hundred thousand pesos (₱400,000.00). 

Willful Certification of Incomplete Inaccurate False or Misleading Statements or Reports

Under Section 162 of Republic Act No. 11232, any person who willfully certifies a report required under this Code, knowing that the same contains incomplete, inaccurate, false, or misleading information or statements, shall be punished with a fine ranging from Twenty thousand pesos (₱20,000.00) to Two hundred thousand pesos (₱200,000.00). When the wrongful certification is injurious or detrimental to the public, the auditor or the responsible person may also be punished with a fine ranging from Forty thousand pesos (₱40,000.00) to Four hundred thousand pesos (₱400,000.00). 

Independent Auditor Collusion 

In Section 163 of Republic Act No. 11232, an independent auditor is defined as one who, in collusion with the corporation’s directors or representatives, certifies the corporation’s financial statements despite its incompleteness or inaccuracy, its failure to give a fair and accurate presentation of the corporation’s condition, or despite containing false or misleading statements. It further provides that the independent auditor shall be punished with a fine ranging from Eighty thousand pesos (₱80,000.00) to Five hundred thousand pesos (₱500,000.00). When the statement or report certified is fraudulent, or has the effect of causing injury to the general public, the auditor or responsible officer may be punished with a fine ranging from One hundred thousand pesos (₱100,000.00) to Six hundred thousand pesos (₱600,000.00). 

Obtaining Corporate Registration Through Fraud 

According to Section 164 of Republic Act No. 11232, those responsible for the formation of a corporation through fraud, or who assisted directly or indirectly therein, shall be punished with a fine ranging from Two hundred thousand pesos (₱200,000.00) to Two million pesos (₱2,000,000.00). When the violation of this provision is injurious or detrimental to the public, the penalty is a fine ranging from Four hundred thousand pesos (₱400,000.00) to Five million pesos, (₱5,000,000.00). 

Fraudulent Conduct of Business

Under Section 165 of Republic Act No. 11232, a corporation that conducts its business through fraud shall be punished with a fine ranging from Two hundred thousand pesos (₱200,000.00) to Two million pesos (₱2,000,000.00). When the violation of this provision is injurious or detrimental to the public, the penalty is a fine ranging from Four hundred thousand pesos (₱400,000.00) to Five million pesos (₱5,000,000.00).

Acting as Intermediaries for Graft and Corrupt Practices

Section 166 of Republic Act No. 11232 provides:

A corporation used for fraud, or for committing or concealing graft and corrupt practices as defined under pertinent statutes, shall be liable for a fine ranging from One hundred thousand pesos (₱100,000.00) to Five million pesos (₱5,000,000.00).

 

When there is a finding that any of its directors, officers, employees, agents, or representatives are engaged in graft and corrupt practices, the corporation’s failure to install:

 

(a) safeguards for the transparent and lawful delivery of services; and (b) policies, code of ethics, and procedures against graft and corruption shall be prima facie evidence of corporate liability under this section.

Engaging Intermediaries for Graft and Corrupt Practices 

In Section 167 of Republic Act No. 11232, a corruption that appoints an intermediary who engages in graft and corrupt practices for the corporation’s benefit or interest shall be punished with a fine ranging from One hundred thousand pesos (₱100,000.00) to One million pesos (₱1,000,000.00). 

Tolerating Graft and Corrupt Practices 

Under Section 168 of Republic Act No. 11232, a director, trustee, or officer who knowingly fails to sanction, report, or file the appropriate action with proper agencies, allows or tolerates the graft and corrupt practices or fraudulent acts committed by a corporation’s directors, trustees, officers, or employees shall be punished with a fine ranging from Five hundred thousand pesos (₱500,000.00) to One million pesos (₱1,000,000.00). 

Retaliation Against Whistleblowers 

Section 169 of Republic Act No. 11232 defines a whistleblower as any person who provides truthful information relating to the commission or possible commission of any offense or violation under this Code. Any person who, knowingly and with intent to retaliate, commits acts detrimental to a whistleblower such as interfering with the lawful employment or livelihood of the whistleblower, shall, at the discretion of the court, be punished with a fine ranging from One hundred thousand (₱100,000.00) to One million (₱1,000,000.00).

Other Violations 

Regarding violations of any of the other provisions of the Revised Corporation Code or its amendments, Section 170 of Republic Act No. 11232 provides a punishment by a fine of not less than Ten thousand pesos (₱10,000.00) but not more than One million pesos (₱1,000,000.00). If the violation is committed by a corporation, the same may, after notice and hearing, be dissolved in appropriate proceedings before the Commission; Provided, That such dissolution shall not preclude the institution of appropriate action against the director, trustee, or officer of the corporation responsible for said violation: Provided, further, That nothing in this section shall be construed to repeal the other causes for dissolution of corporation provided in this Code.

Read also: Features of the Revised Corporation Code

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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