How to Convert the 5-Person Corporation to One Person Corporation?

By: Cecile S. Maglunob, CPA

The Revised Corporation Code of the Philippines or Republic Act No. 11232 Title XIII of Chapter III allowing the conversion of the Ordinary Stock Corporation (OSC) to One Person Corporation (OPC) has sparked the interest of many business entities wanting to simplify corporate matters by adopting the OPC set-up. SEC has finally issued the guidelines on the conversion process through SEC Memorandum Circular 27-2020. 

There could be a number of advantages to justify conversion of your regular 5-person corporation to OPC in the Philippines, such as simplified management having a single stockholder who is at the same time the director and the President, lesser corporate documentation as there is no need for By-laws, and could be faster decision making process as compared to a regular corporation which has to undergo a Board Meeting and in some instance, stockholders confirmation.  

Below are sample steps on how to convert your regular 5-person corporation to OPC in the Philippines

Step 1 – Acquisition of all outstanding shares

A natural person of legal age, a trust or an estate applying for OPC or the five-person corporation conversion to OPC should have acquired all the outstanding stocks of the corporation with corresponding Electronic Certificate Authorizing Registration (eCAR)/ tax clearance issued by the BIR. 

Step 2 – Securing SEC monitoring clearance on reportorial compliance

As normally required by the SEC prior to the formal application for amendment, applicants may have to undergo the process of securing the reportorial compliance monitoring clearance. You will need to submit copies of the corporate registrations and related amendments, latest financial statements, latest General Information Sheet, stock and transfer book registration page, among others. If the SEC will find deficiencies, it will impose penalties and will require payment prior to issuance of SEC monitoring clearance, otherwise, it will be issued immediately.

Step 3 – Amendment of Articles of Incorporation for conversion to OPC

The process will be deemed as an amendment of the Articles of Incorporation and should be accompanied by the following documents:

  1. Cover sheet;
  2. Application for Conversion of an Ordinary Stock Corporation ( the SEC has provided the template for this document and should be signed by the single stockholder who acquired all the outstanding shares of the capital stock)
  3. Original or certified true copy of the document/s affecting the transfer/s of full ownership (i.e deeds of assignment )
  4. Certificate Authorizing Registration/ BIR tax clearance
  5. Notarized Secretary’s Certificate of No Intra-Corporate Dispute
  6. Articles of Incorporation of an OPC, filed in accordance with the SEC guidelines on the establishment of a One Person Corporation
  7. Letter of Acceptance of Appointment of Nominee and Alternate Nominee
  8. Self-appointed Treasurer Bond, if applicable
  9. Name Reservation
  10. Monitoring Clearance from other relevant departments of the SEC or from the Compliance Monitoring Division (CMD)
  11. Endorsement for appropriate government agencies, if applicable
  12. Undertaking to Change Corporate Name duly executed under oath by the single stockholder
  13. Undertaking to Assume All Liabilities of the Ordinary Stock Corporation, duly executed by the single stockholder

It should be noted that upon issuance of the Certificate of Filing of Amended Articles of Incorporation by the SEC reflecting the conversion of the OPC, the Articles of Incorporation and the By-laws of the OSC shall be deemed superseded. The date of issuance of Certificate of Filing of Amended of Articles of Incorporation shall be deemed as the date of approval.

The SEC Registration Number of the converted entity shall remain as well as the Corporate name only with additional suffix “OPC” to reflect its nature as One Person Corporation.

For some set-ups, conversion to OPC could be an option to simplify corporate matters in running the business. It is however to be noted that whatever liabilities incurred by the OSC shall be assumed by the single shareholder of the OPC as of the date of conversions. 

To read more about the advantages and features of the OPC, you may refer to our article on the 10 Basic Features of One Person Corporation(OPC) in the Philippines.

© Tax and Accounting Center 2022. All Rights Reserved

error: Content is protected !!