For many aspiring entrepreneurs, whether to start a sole proprietorship or a corporation, registering a business in the Philippines is daunting.
A sole proprietorship offers the freedom and simplicity but not the limited liability feature of a corporation. On the other hand, a corporation protects its owners with its limited liability feature but proves more complicated with its statutory compliance.
In February 2019, Congress enacted a new law that amended the Corporation Code of the Philippines. It is now known as the Revised Corporation Code of the Philippines (RCC).
With this overhaul of the country’s Corporation Code comes the introduction of the One Person Corporation (OPC). The OPC serves as private individuals’ vehicle for a sole corporation.
An OPC is a type of corporation that allows a single person, regardless of their nationality, to form a company without the need of using friends and family as directors of the company. Previously, to register a corporation in the Philippines, one needed to comply with a minimum of five directors.
In short, the OPC is an innovation to make it easier for businesses to form corporations in the Philippines. A sole trader or entrepreneur can now explore the corporate vehicle instead of being limited to a sole proprietorship.
This article will discuss the various advantages and disadvantages of establishing an OPC in the Philippines. We’ll also look at the necessary documents and procedures required to operate an OPC.
What is a One Person Corporation?
One Person Corporations are corporations that only have one stockholder. The one and only stockholders are required to take on the roles of the incorporator, sole director, and president of the company. When it comes to an OPC, the shareholder’s liability is capped to the value of their holdings in the company.
The OPC is exempt from having a minimum authorized capital stock requirement unless such a requirement is imposed by existing laws for a specific industry that is currently in effect. In addition, there is no need for any percentage of the permitted capital to be paid up at the time of incorporation unless special laws mandate such a requirement.
Within the first 15 days after the incorporation date, the only owner is required to nominate a Corporate Secretary, Treasurer, and any other officials the company needs. A single shareholder cannot take on the function of a Corporate Secretary.
However, they can serve as Treasurer if they furnish the Securities and Exchange Commission (SEC) with a surety bond. In addition to this, the individual who will serve as the Corporate Secretary must be a citizen of the Philippines. The person who will serve as Treasurer must be a resident of the Philippines.
The law also requires the single stockholder to appoint a nominee and an alternate nominee. They shall be indicated in the Articles of Incorporation to replace the single stockholder if they pass away or become unable to run the OPC. This information must be included in the articles of incorporation.
Who Qualifies for the OPC?
The following may qualify as the single stockholder of an OPC: :
- A natural person
Additionally, the single shareholder or sole incorporator must be of legal age. If the sole incorporator is a foreign citizen, the OPC must meet the appropriate capital requirement for the industry in which it was intended to operate. The capital limitation for foreigners shall be based on the Foreign Investment Negative List (FINL).
Meanwhile, all of the following are prohibited from forming an OPC:
- Natural individuals to practice a profession
- Insurance, trust, and pre-need firms
- Public and publicly-traded corporations
- Banks, non-bank, and quasi-banking institutions
- Government-owned and controlled companies (GOCCs) without their own charters
Bond Requirements for the Self-Appointed Treasurer
Suppose the director of the OPC and the only stockholder chooses to take on the role of self-appointed Treasurer. In that case, they will be required to provide a surety bond calculated based on the value of their capital stock.
All of the values are shown in Philippine Peso (₱).
Documents Required for OPC in the Philippines
All applications and transactions must be submitted manually or electronically to the Company Registration and Monitoring Department of the SEC or its official website.
The following is a list of the documentation that is required to register an OPC:
- Articles of Incorporation (Natural Person, Trust, or Estate) including:
- Names and details of the single stockholder
- Primary purpose
- Principal office address
- Term of existence
- The authorized, subscribed, and paid-up capital
- Nominee and alternate nominee
- Other matters that are consistent with the law and may be necessary and convenient
- Written Consent from the Nominee and Alternate Nominee
- Additional requirements (if applicable)
- Tax Identification Number (TIN) for Filipino single stockholder
- Tax Identification Number (TIN) or Passport Number for Foreign single stockholder
- Affidavit of Undertaking to Change Company Name (in case not incorporated in the Articles of Incorporation)
- Proof of Authority to Act on Behalf of the Trust or Estate (for trusts and estates containing OPC)
- Foreign Investments Act (FIA) Application Form (for foreign natural persons)
There is no need to submit and file a company’s by-laws or official regulations while registering as an OPC.
Upon the death or incapacitation of the only stakeholder, the specified nominees will assume control of the OPC.
Suppose the single stockholder wishes to modify its nominee and alternate nominee. In that case, they may do so by submitting their new nominations and their written approval to the Securities and Exchange Commission. The articles of incorporation do not need to be changed for this purpose.
Here is a summary of the fees you may expect:
- Articles of Incorporation – 1/2 of 1% of the authorized capital stock but not less than ₱2,000.00
- Name Reservation – ₱100.00 per company name and trade name
- Legal Research Fee (LRF) – 1% of the Registration/Filing Fee but not less than ₱20.00
- Foreign Investment Act (FIA) Application Fee – ₱3,000.00 if the single stockholder is a foreigner
- Documentary Stamp – ₱30.00
The process of registering an OPC is a bit complicated and uses a different route compared to regular corporations. Here are some of the steps to follow:
- Verify with the SEC your proposed business name
- Submit your documents for preliminary processing to the SEC
- Pay any filing costs applicable
- Submit hard copies of signed and notarized papers together with evidence of payment of filing fees.
- Request Registration Certificate from SEC
Applicants who had their business names rejected should write a Letter of Appeal and send it to the SEC.
It is the responsibility of the sole owner to nominate a treasurer, a corporate secretary, and any other officials within the first 15 days after the issuing of the Certificate of Registration. It can also be done together with the application.
To be clear, we understand that registering your company may seem to be an overwhelming task. But doing so can help you prevent any possible business troubles in the future.
In addition, the Securities and Exchange Commission (SEC) issued a memorandum in April 2020 allowing online registration of OPC, which supposedly made the process simpler.
Also, it is highly recommended that you seek the advice of an attorney who has experience in corporate law to address the requirements that are unique to your business. They must then inform the SEC of the appointment within five days.
The OPC may be used by Filipinos and foreigners who want to start a business in the Philippines. The incorporator has complete control and responsibility for their corporation.
It is ideal for those who desire to manage their own company without the associated risks of incurring personal obligations or avoiding the hassle of partnering with others. OPC is also best recommended to those who want complete control of the business with liability limitations.
Registering your business also builds trust with your customers. It creates the impression of accountability and a good reputation. Customers are more likely to do business with you if you are a duly registered business. You may use that status to get additional contracts, projects, or new markets in the future.
As a result of the OPC’s new, streamlined online procedure, the startup and entrepreneur community is given a much-needed boost. In the middle of the epidemic, the eCommerce sector is leading the way to growth and recovery.
Disclaimer: This article is for general guidance and is not a substitute for an expert opinion. Please consult your preferred tax and legal consultant for the specific details of your circumstances.[/et_pb_text][/et_pb_column] [/et_pb_row] [/et_pb_section]