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SEC Memorandum Circular No.

Series of 2009
Took effect on July 15, 2009.
The Revised Code of Corporate Governance shall apply to registered corporations and to branches or
subsidiaries of foreign corporations operating in the Philippines that:
a. sell equity and/or debt securities to the public that are required to be registered with the Commission
b. have assets in excess of P50,000,000 and at least two hundred (200) stockholders who own at least
one hundred (100) shares each of equity securities, or
c. whose equity securities are listed on an Exchange; or
d. are grantees of secondary licenses from the Commission.
Revised Code of Corporate Governance constitutes 12 Articles namely:
Article 1- Definition of Terms

Article 10- Regular Review of the Code and the Scorecard

Article 2- Rules of Interpretation

Article 11- Administrative Sanctions

Article 3- Board Governance

Article 12- Effective Date

Article 4- Adequate and Timely Information

Article 5- Accountability and Audit
Article 6- Stockholders Rights and Protection of Minority Stockholders Interests
Article 7- Governance Self-Rating System
Article 8- Disclosure and Transparency
Article 9- Commitment to Good Corporate Governance
Corporate Governance as it is defined, is the framework of rules and systems in which corporations must
adhere for the proper governance of the board of directors in its duties & responsibilities to the stockholders. The
Board of Directors are the primary responsible for the constitution of the corporation. Aside from its policymaking responsibility, they are also expected to oversee the management. The Board shall be composed of at
least 5 but not more than 15 members which are elected by the stockholders. The companies covered by this
code shall have at least 2 independent directors or the equivalent 20% of the total members of the Board,
whichever is lesser provided than it shouldnt be less than 2.

The Chairman of the Board and the Chief Executive Officer must be separated to exercise balance of
power, capacity for independent decision making and higher accountability. Some of the duties of the Chair are:
to ensure that meetings of the board are held in accordance to its by-laws, supervise agendas of the meeting, and
maintain qualitative communication and information between the Board ad Management. But in cases where the
Chair and CEO positions are unified, proper checking and monitoring must be laid down to ensure that the
Board gets the independent views.
The Chair is also prone for disqualification whether permanent or temporary only. Some of the grounds
that may permanently void this position are: convicted by final judgment or order by a court or competent
administrative body of an offense involving moral turpitude, fraud and crime, violation of the provision,
insolvency and a lot more. Some of the temporary disqualifications include: refusal to comply with the
disclosure requirements of the SEC, absence in more than fifty (50) percent of all regular and special meetings of
the Board during his incumbency. A temporary disqualified director must take appropriate remedies within 60
days from the disqualification but if he fails to do so, then the disqualification shall be permanent.
The sole responsibility of the Board is to foster the long-term success of the corporation, and to sustain its
competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its
stockholders. Alongside with this, they are also responsible with the corporations mission, visions, policies,
strategies and objectives.

The Duties and Functions of the Board are the following:


Implement a process for the selection of directors who are competent, professional, honest and highly
motivated management officers.

2. Provide sound strategic policies and guidelines to the corporation on major capital expenditures.
3. Ensure the corporations faithful compliance with all applicable laws, regulations and best business
4. Establish and maintain an investor relations program that will oversee by the CEO, if feasible.
5. Formulate a clear policy for communities in which the corporation has directly affected.
6. Adopt a system of check and balance within the Board. Review of the internal control system.
7. Identify key risk areas and performance indicators

Formulate and implement policies and procedures that would ensure the integrity and transparency of
related party transactions

9. Constitute an Audit Committee and such other committees it deems necessary to assist the Board in the
performance of its duties and responsibilities.
10. Establish an alternative dispute resolution system to settle misunderstandings within the Board and other
11. Meet at such times or frequency as may be needed. The minutes of such meetings should be duly recorded.
12. Keep the activities and decisions of the Board within its authority under the articles of incorporation and bylaws, and in accordance with existing laws, rules and regulations.
13. Appoint a Compliance Officer who shall have the rank of at least vice president. In the absence of such
appointment, the Corporate Secretary, preferably a lawyer, shall act as Compliance Officer.
There are also regulations constituted for the board meetings and quorum requirement. At least on
independent director is expected to attend its regular meeting for transparency purposes. SEC Form 17-C is a a
sworn certification about the directors record of attendance in Board meetings to be submitted on or before
January 30 of the following year. Remuneration should be sufficient enough to compensate for the competency,
expertise & qualifications of the officers & members.

The Board is responsible for creating Board Committees that will help on establishing good corporate
governance. The Audit Committee shall consist of at least three (3) directors, who shall preferably have
accounting and finance backgrounds, one of whom shall be an independent director and another with audit
experience. The chair of the Audit Committee should be an independent director. The Board can also create a
nomination committee, which may be composed of at least three (3) members and one of whom should be an
independent director, to review and evaluate the qualifications of all persons nominated to the Board, a
compensation or remuneration committee, which may be composed of at least three (3) members and one of
whom should be an independent director, to establish a 14 formal and transparent procedure for developing a
policy on remuneration of directors and officers.

The Corporate Secretary who should be a Filipino citizen and a resident of the Philippines, is an officer
of the corporation. Some of the duties of a corporate secretary would be responsible for the safekeeping of the
integrity of the minutes of the meetings of the Board and ensure that all Board procedures, rules and regulations
are strictly followed by the members. On the other hand, the Board shall also appoint a Compliance officer
which will regulate the monitoring of the compliance of the rules and the violations may found.

The Board is solely responsible to its stockholders. It should provide them with a balanced and
comprehensible assessment of the corporations performance, position and prospects on a quarterly basis,

including interim and other reports that could adversely affect its business, as well as reports to regulators that
are required by law. Thus, the Management must supply all timely and adequate data to the Board in order for
them to generate reliable information. The Management may also cooperate with the Audit Committee to
supervise the financial reporting and internal control procedures. Here are some of the important points of the
audit procedures for good corporate governance:
The external auditor should be rotated or changed every five (5) years or earlier, or the signing partner of the
external auditing firm assigned to the corporation, should be changed with the same frequency.
The Internal Auditor should submit to the Audit Committee and Management an annual report on the internal
audit departments activities, responsibilities and performance relative to the audit plans and strategies as
approved by the Audit Committee.
The Internal Auditor should certify that he conducts his activities in accordance with the International
Standards on the Professional Practice of Internal Auditing. If he does not, he shall disclose to the Board and
Management the reasons why he has not fully complied with the said standards.
The external auditor shall not, at the same time, provide internal audit services to the corporation.

The Board should be transparent and fair in the conduct of the annual and special stockholders meetings
of the corporation. The stockholders should be encouraged to personally attend such meetings. If they cannot
attend, they should be apprised ahead of time of their right to appoint a proxy. It is also the duty of the Board to
promote the rights of the stockholders such as preemptive right, right to vote, right for dividends and more.

The Board may create an internal self-rating system that can measure the performance of the Board and
Management in accordance with the criteria provided for in the Code. Transparency is a key element for good
corporate governance. Thus, it is therefore essential that all material information about the corporation which
could adversely affect its viability or the interests of the stockholders should be publicly and timely disclosed.

Lastly, any violation on this Code would be subject to a fine of not more than Two Hundred Thousand
Pesos (P200,000) shall, after due notice and hearing, be imposed for every year, without prejudice to other
sanctions that the Commission may be authorized to impose under the law; provided, however, that any violation
of the Securities Regulation Code punishable by a specific penalty shall be assessed separately and shall not be
covered by the abovementioned fine.

The REVISED CODE OF CORPORATE GOVERNANCE issued by Securities and Exchange
Commission provides a concise and reliable guidelines for the use of the involved corporations. The
administrative sanction provided in the Code is justifiable since there are still a lot of companies that operates
with lack of non compliance to the proper corporate governance.
A corporation must able to adhere to the basic requirements of this Code such as the qualifications of
directors, the duties of the other officers and the proper procedures for transparent negotiations. If a corporation
fails to present a good corporate governance, then the whole corporation would be at stake. Moral turpitude and
negligence in its operations may rise as they try to manipulate these simple regulations. The Committees created
by the Board shall be subject for extensive reviews by the Commission to assess its independence within the
internal structure and its performance as on assisting the corporation to achieve good corporate governance.

I strong believe that this Code also enhances the performance of every sector of a corporation. Their
operations would competent and appropriate enough to comply with the guidelines. The Commission must also
provide a high monitoring on compliance whether these guidelines are practiced on small to high value corporate

environment. I highly suggests that the revised code needs reinforcement at its best and be updated from time to
time as the corporate environment changes in line with the globalization and ASEAN integration.