By: Garry S. Pagaspas, CPA
With the passage of Revised Corporation Code in Philippines or Republic Act No. 11232 (RA No. 11232) sometime February 2019, One Corporations Corporation (OPC) in Philippines is conceptualized to provide an additional legal structure to facilitate ease of doing business in the Philippines at par with other countries and jurisdictions. Relatively, legal provisions on One Person Corporation Philippines are found in Chapter III of Title VIII of Republic Act No. 11232 and is being implemented by SEC Memorandum Circular No. 7 series of 2019 and going through these rules, features of the One Person Corporation in Philippines could be enumerated as follows:
1. Single stockholder corporation
As the name implies, this corporation is owned by a single stockholder, a natural person of legal age, trust or estate as compared to a now two (2) to fifteen (15) regular domestic corporation in Philippines under the Revised Corporation Code. Such single stockholder would be the sole incorporator for purposes of registering one person corporation in Philippines with Securities and Exchange Commission (SEC), the sole director, and the president, or even a self-appointed treasurer subject to bond requirement. On this aspect, one person corporation in Philippines is easier and less complicated as to documentation on registration.
2. Limited liability corporation
One person corporation in Philippines is a limited liability corporation in same manner as a regular domestic corporation, unlike sole proprietorship with Department of Trade and Industry (DTI) whose liability extend to personal assets of the sole proprietor. This would mean that in general, the single stockholder is liable only to the extent of its capital contribution upon showing that the one person corporation in Philippines is adequately financed with respect to the liabilities of the one person corporation in Philippines. Notably, piercing the veil of corporate entity is likewise applicable to one person corporation.
3. Identifiable as OPC on its name
Regular corporations are required to use on its name a suffix as “corporation” or “corp.” or “incorporation” or “inc.”. to be identified as such regular domestic corporation. In same manner, one person corporation is required to use the suffice “OPC” either below or at the end of its corporate name. Accordingly, you can easily identify a one person corporation and be much conscious that you are dealing with one having a single stockholder only.
4. Allowed to foreign investors but with exclusions
One person corporation is applicable to all, in general, – locals and foreigners who wanted to invest in the Philippines in such allowed areas under foreign investment rules in Philippines such as in business process outsourcing (BPO), knowledge process outsourcing (KPO), rendering services, trading goods, or manufacturing. However, one person corporation in Philippines is not allowed for banks, non-bank financial institutions, quasi-banks, pre-need, trust, insurance, public and publicly listed companies, non-chartered government-owned and controlled corporations (GOCCs), and professionals for practice of such profession, unless, provided under special laws.
5. No minimum paid-up capitalization
A corporation applying for registration with SEC carries with it an application for maximum amount of capitalization it can issue otherwise termed as “authorized capital stock” that could be subscribed (subscribed capital stock) and paid-up (paid-up capitalization), either, fully or partly upon the application for registration or during its lifetime. In registering one person corporation in Philippines, applicant has to declare such proposed authorized capital stock, subscribed and paid-up, but no minimum paid-up capital is required, unless, required by special laws or rules based on the intended operations. For example, lending investor business required a minimum paid-up capitalization of at least P1,000,000.00.
6. Perpetual corporate term, in general
Under the Revised Corporation Code in Philippines, corporate term is now perpetual, unless, the incorporations would intend a definite term, say 50 years. Accordingly, one person corporation’s corporate term is perpetual, in general, unless a term is indicated.
7. Single stockholder but not alone
Here comes the, could be misconception – single stockholder, alone or by itself, may not be able to register a one person corporation in the Philippines. Under the Revised Corporation Code in Philippines, registering one person corporation in Philippines would require appointment of nominee and alternate nominee who would take over the management and operation of one person corporation in Philippines as director and president upon the death or incapacity (permanent or temporary) of the single stockholder. One person corporation in Philippines is likewise required to appoint a corporate secretary (a resident and citizen of the Philippines), treasurer (resident of the Philippines), unless it opted for self-appointed treasurer by posting a surety bond coverage ranging from P1M to P5M plus depending on authorized capitalization, and such other officers.
8. Transferability of shares
While the Revised Corporation Code and the implementing SEC memorandum circular does not expressly provide for the transfer of shares of one person corporation Philippines, a personal view is submitted that shares of stock of one person corporation is transferrable taking into account its corporate features and the suppletory character of regular corporation provisions to one person corporation Philippines. Incidentally, the pro-forma Articles of Incorporation provides for a limitation on the transfer of shares that would support this view on transferability, to the extent that the transferee is allowed foreign equity under investment laws and rules in Philippines.
9. Convertible to regular corporation and vice-versa
The Revised Corporation Code in Philippines provides that a one person corporation in Philippines could be converted to a regular corporation upon notice to the SEC within sixty (60) days from the circumstances leading to conversion, and compliance with such requirements for stock corporation. On the same manner, a regular corporation may be converted to a one person corporation in Philippines when a single stockholder of a regular corporation acquires all the shares of stock and application for one person corporation in Philippines with the SEC. In both instances of conversion, the SEC shall issue a certificate of filing amended articles of incorporation and the converted entity would be legally responsible of the outstanding liabilities as of the conversion.
10. Reportorial requirements
One person corporation in Philippines is required to file with the SEC the following: (a) audited financial statements within 120 days from end of its accounting year, unless total assets or total liabilities does not exceed PhP600k, which financial statements shall be certified under oath by the corporation’s treasurer; (b) Report containing explanations or comments by the President on certain instances provided; (c) Disclosure of self-dealings and related party transactions; and, (d) Other reports SEC may require.
Notably, one person corporation is enticing to use as legal entity taking into account the above basic features and peculiarities based on the author’s personal understanding of the provisions of the Revised Corporation Code and its implementing rules.
Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for two (2) decades helping further taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has likewise been helping out local and foreign investors/clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.
Disclaimer: This is for purposes of academic discussions only as personally summarized by the author, not of Tax and Accounting Center, Inc. and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.
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