The corporate secretary plays a vital role in upholding a company’s corporate governance and legal compliance. An improperly appointed secretary or failure to properly report any changes can render the corporation’s actions invalid.
Changing a corporate secretary requires strict adherence to the legal process. Minor errors in a board resolution or delays in filing with the Securities and Exchange Commission (SEC) may lead to serious compliance issues and operational disruptions.
What is a Corporate Secretary?
A corporate secretary is one of the corporate officers responsible for managing board matters and ensuring compliance with the requirements of the Securities and Exchange Commission (SEC). They also organize and document the board meetings, manage the corporation’s records and official books, and perform other essential functions that support the corporation’s governance and legal compliance.
Is the Corporate Secretary a Board Member?
No, a corporate secretary is not a board member or even a shareholder in the corporation. However, they are considered as a board officer elected by the directors for a one-year term. The Board usually renews the corporate secretary’s terms at the annual meeting.
Qualifications of a Corporate Secretary in the Philippines
To appoint a corporate secretary, the individual of a legal age must be a resident and citizen of the Philippines. He/she must not be the president of the corporation since it is not allowed to become a corporate secretary and a president at the same time.
Additionally, it is beneficial to the corporation if the appointed corporate secretary is someone who is updated with the latest Securities and Exchange Commission (SEC) requirements and issues. Although it is not required, it is a great advantage to the corporation if the appointed corporate secretary is a lawyer.
Special Functions of a Corporate Secretary in the Philippines
Under Section 123 of the Revised Corporation Code, the following are the functions of a corporate secretary:
- Be responsible for maintaining the minutes book and/or records of the corporation;
- Notify the nominee or alternate nominee of the death or incapacity of the single stockholder, which notice should be given no later than five (5) days from such occurrence;
- Notify the Commission of the death of the single stockholder within five (5) days from such occurrence and stating in such notice the names, residence addresses, and contact details of all known legal heirs; and
- Call the nominee or alternate nominee and the known legal heirs to meeting and advise the legal heirs with regard to, among others, the election of a new director, amendment of the articles of incorporation, and other ancillary and/or consequential matters.
Reasons for Changing a Corporate Secretary
A corporation may need to appoint a new corporate secretary for several reasons, including :
- Resignation or Retirement. When the current corporate secretary voluntarily resigns or retires from their position.
- Organizational Restructuring. Mergers, acquisitions, or changes in corporate strategy may require appointing a new corporate secretary.
- Non-Performance or Non-Compliance. If the corporate secretary fails to perform their duties and responsibilities or comply with legal and regulatory requirements.
- Disqualification. When the corporate secretary no longer meets the qualifications under the Revised Corporation Code or has committed a disqualifying violation.
- End of Term. If the corporate secretary’s contract has ended.
Best Practices When Appointing a New Corporate Secretary
Appointing a new corporate secretary is a critical process that requires careful planning and execution. To ensure a smooth and compliant transition, here are the best practices when appointing a new corporate secretary:
- Seek Professional Assistance. Consider consulting a corporate secretarial services provider to simplify and ensure full compliance with the regulatory requirements.
- Conduct a Thorough Process. The outgoing corporate secretary should assist and facilitate the transfer of all relevant documents, records, and responsibilities. The newly appointed secretary must be briefed on pending compliance matters and legal obligations.
- Ensure Regulatory Compliance. Submit all required documents to the Securities and Exchange Commission (SEC) and ensure that all board resolutions and changes are properly documented and notarized, as necessary.
- Appoint a Qualified Individual. Make sure the new corporate secretary meets the qualifications prescribed under the Revised Corporation Code of the Philippines.
- Assess Performance. Regularly assess the performance of the newly appointed corporate secretary to ensure they are aligned with the corporation’s goals and are effectively fulfilling their duties.
Requirements for Changing a Corporate Secretary in the Philippines
To legally change a corporate secretary, the best practice is to ensure that the corporation complies with the corporate governance regulations by providing the following:
- Resignation Letter of the former corporate secretary
- Minutes of the board meeting to include:
– Board Resolution for Appointment of a new corporate secretary
– Acceptance of the appointment by the newly appointed corporate secretary
- Updated General Information Sheet (GIS)
- Notarized Secretary’s Certificate of Board Approval
Please note that non-compliance may result in penalties, delayed processing, and compliance risks.
How to Change a Corporate Secretary in the Philippines
In the Philippines, changing a corporate secretary requires a formal process to ensure compliance with the Securities and Exchange Commission (SEC).
To successfully change a corporate secretary, follow these procedures:
- Secure a Resignation or Retirement Letter. Obtain a signed resignation or retirement letter from the outgoing corporate secretary. If the change is initiated by the Board of Directors, a board resolution approving the removal or resignation must be prepared and documented.
- Approve a Board Resolution for Appointment. The Board of Directors must pass a resolution accepting the resignation or removal of the outgoing corporate secretary and approving the appointment of the new one. These decisions must be recorded in the minutes of the board meeting.
- Prepare the Required Documents. Prepare all necessary documents and ensure that all are correctly signed and notarized to avoid any delays.
- File with the SEC. Submit the updated General Information Sheet along with the supporting documents to the SEC. Be sure to settle the applicable SEC filing fees to complete the process.
- Inform the Stakeholders and Authorities. Inform business partners, banks, and relevant authorities about the change. Update corporate documents, contracts, and official records to reflect the appointment of the new corporate secretary.
- Facilitate the Transition of Duties. Coordinate a smooth turnover of responsibilities and corporate records. Ensure that the new corporate secretary is fully informed about the pending compliance matters and understands their legal obligations under the Revised Corporation Code.
Common Challenges in Changing a Corporate Secretary
Changing a corporate secretary may often come with several challenges, including:
- SEC Processing Delays. Incomplete requirements can lead to delays in the approval process with the Securities and Exchange Commission (SEC).
- Lack of Cooperation from the Outgoing Secretary. If the outgoing secretary is unresponsive or unwilling to assist, the transition of responsibilities may be complicated and may cause delayed filings.
- Difficulty in Finding a Qualified Replacement. The new corporate secretary must meet the qualifications set under the Revised Corporation Code.
- Compliance Risks. Mishandling the process can result in regulatory penalties or legal issues, especially if the corporation fails to meet reporting or filing deadlines.
Reasons for Disqualification to be a Corporate Secretary
According to Section 26 of the Revised Corporation Code of the Philippines, an individual may be disqualified from being elected as a corporate secretary of any corporation if, within five (5) years prior to the election or appointment, they have the following:
- Convicted by final judgment:
- An offense punishable by imprisonment for a period exceeding six (6) years;
- For violating the Revised Corporation Code; and
- For violating Republic Act No. 8799 or The Securities Regulation Code;
- Found administratively liable for any offense involving fraudulent acts; and
- By a foreign court or equivalent foreign regulatory authority for acts, violations, or misconduct similar to those aforementioned.
Penalties for Violation of Appointing a Disqualified Corporate Secretary
Pursuant to Section 160 of the Revised Corporation Code, despite the knowledge of the existence of the grounds for disqualification of a corporate secretary, an appointed disqualified individual must be punished with a fine ranging from Php 10,000.00 to Php 200,000.00, and a permanent disqualification from holding any position in a corporation.
Furthermore, if the violation committed is injurious or detrimental to the public, he/she shall be penalized with a fine ranging from Php 20,000.00 to Php 400,000.00.
Need further information and assistance regarding Corporate Secretarial Services? Talk to our team at Duran & Duran-Schulze Law in BGC, Metro Manila, Philippines to know more about the requirements and process. Call us today at (+632) 8478 5826 or +63 917 194 0482, or send an email to info@duranschulze.com for more information.
