10 Basic Features of One Person Corporation (OPC) in Philippines

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.

Summary

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.

By: Garry S. Pagaspas, CPA

Revised Corporation Code (RCC) or Republic Act No. 11232 in the Philippines signed into law last February 20, 2019 has introduced major changes in the Corporation Code under Batas Pambansa Bilang 68 in the Philippines and among those are related to personalities and officers. Below is a summary of those in the sequence they appeared in the RCC that you could use as easy reference for dealings with your respective corproations, Securities and Exchange Corporation (SEC), and other related discussions.

1. Incorporators

Incorporators in Philippines are the ones who originally form a corporation. Under the Old Corporation Code (OCC) or Batas Pambansa Bilang 68, an incorporator must be natural persons numbering at least 5 but not more than 15, must own at least one (1) share, and majority of which must be residents. This was changed under the Revised Corporation Code (RCC) or Republic Act No. 11232 as it expanded the 5-15 to not only natural persons but also to juridical persons – i.e., SEC-registered partnerships, SEC-registered association or corporation, and foreign corporations. Natural person incorporator must own at least one (1) share while a juridical-entity incorporation must authorize a representative who would sign on the SEC registration papers through a formal document like a partnership or board resolution. The requirement on majority must be residents of the Philippines was also deleted in the RCC. Finally, an incorporator in a One Person Corporation (a new type of corporation under RCC not found in OCC) must be a natural person only.

2. Board of Directors / Trustees

Board of Directors for stock corporation in the Philippines or Board of Trustees for non-stock, non-profit corporations in Philippines represents the governing body of the corporation through which the corporate powers are exercised directly or through the officers duly authorized by the Board. Revised Corporation Code of the Philippines deleted the requirement that majority of the members must be residents of the Philippines, extended trustees term to three (3) years from one (1) year, allowed stockholders voting through remote communication or in absentia for election of the Board. Board meetings shall now be presided by the Chairman of the Board, or the President in its absence, participated by Members though remote communication (e.g. videoconferencing, teleconferencing, or other alternative modes but cannot attend by proxy.

3. Independent director

Independent directors in Philippine for corporations vested with public interest (e.g. listed companies, banks and quasi-banks, pre-need companies, trust and insurance companies, etc.) is likewise a new inclusion in Revised Corporation Code not found in Old Corporation Code or BP 68, although, this has been existing prior to RCC by virtue of Securities Regulation Code. As defined in the Revised Corporation Code of the Philippines, an independent director in the Philippines is “a person who, apart from shareholdings and fees received from the corporation, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.

4. Corporate Compliance Officer

If the corporation is vested with vested with public interest, Revised Corporation Code of the Philippines requires the Board of Directors to elect a compliance officer. Again, while this is new in the corporation code, this is not totally new under the Securities Regulation Code and provided for under the Code of Corporate Governance.

5. Corporate President

The corporate president of the corporation in the Philippine is required to be a member of the Board of Director who runs the day-to-day operations of the corporation and perform such acts based on the authority given by the Board of Directors. Under the Revised Corporation Code of the Philippines, the President could preside over board or stockholder’s meeting in the absence of the Chairman of the Board.

6. Corporate Treasurer

Corporate Treasurer is required to be a resident of the Philippines under the Revised Corporation Code of the Philippines but could not be held by the same person acting as President. This would mean that the corporate Treasurer in the Philippines does not need to be a Filipino citizen for as long as it could show proof of residency and to the extent allowed by investment rules. In compliance with corporations filing of annual income tax return in Philippines and annual audited financial statements, a treasurer is required to be a signatory on the statement of management responsibility (SMR).

7. Corporate Secretary

A Corporate Secretary under the Revised Corporation Code of the Philippines is required to be a Filipino Citizen and a resident of the Philippines but could not be held by the same person acting as President. A corporate Treasurer in Philippines could at the same time hold such function as Corporate Secretary. As a corporate officer, functions of Corporate Secretary relates to board and stockholder’s meeting – notices, minutes and certification of such resolutions, among others; stockholdings, related stock certificates and maintenance of stock and transfer book in Philippines; and other administrative functions.    

8. Corporation Sole

Under the Revised Corporation Code in Philippines, a corporation sole may be established for religious purposes relative to the administration and management of the affairs, properties and temporalities of the religious institution. It is the chief archbishop, bishop, priest, minister, rabbi, or other presiding elder of such religious institution who could register a corporation sole.

9. Single Stockholder of One Person Corporation

A single corporation is a new type of corporate entity under the Revised Corporation Code in Philippines where a single stockholder could register a corporation, singly but clothed with limited liability in such manner as a regular corporation and not merely as a sole proprietor whose legal entity is attached to the legal personality of the owner. Single stockholder of One Person Corporation in Philippines acts as Sole Director and President at the same time and could even act further as a Treasurer, but subject to a surety bond requirement of SEC. To anticipate worst case scenario on the personality of single stockholder – e.g. death or incapacity, the Revised Corporation Code in Philippines requires designation of  the nominee director and alternate nominee director in Philippines who would take place the single stockholder as director and manage the corporation’s affair. Corporate Secretary of One Person Corporation in Philippines and such other officers could likewise be appointed.

10. Resident Agent in Philippines of Foreign Corporation

Resident agent requirement applies for foreign corporations who intend to do business in the Philippines securing with the Securities and Exchange Commission (SEC) a License to do Business in the Philippines and would act as a repository of such summons and other legal processes involving the foreign corporation with respect to its Philippine operations. Resident agent in the Philippines could either be a natural person residing in Philippines of good moral character and sound financial standing or a registered domestic corporation lawfully transacting business in the Philippines and of sound financial standing. Appointment of resident agent could be made through a board resolution of the foreign corporation’s board of director’s while change of Resident Agent would require a process of securing SEC approval on such new appointment.

Summary

The above enumeration of corporate personalities and officers in Philippines along with the changes in the rules under the Revised Corporation Code could serve as a guide in familiarizing the nature of their functions and in compliance with the necessary requirements of the SEC, if any. They are not all-inclusive and was simply hand-picked by the author for the purpose of this article.

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.