In the Philippines the passing of the Revised Corporation Code (RCC), otherwise known as the Republic Act (RA) No. 11232, is one of the highlights of the current administration. It promotes ease of doing business and encourages local entrepreneurs and foreign investors.
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In the Philippines the passing of the Revised Corporation Code (RCC), otherwise known as the Republic Act (RA) No. 11232, is one of the highlights of the current administration. It promotes ease of doing business and encourages local entrepreneurs and foreign investors by passing legislation that aims to transform the Philippine business environment to be more conducive to doing business.
There are two notable amendments that potential investors must look into before setting up a corporation in the Philippines; One Person Corporation (OPC) and Perpetual Existence.
One Person Corporation
The creation of the OPC is rooted in Title XIII (Special Corporations) of the RCC. As compared to the old Corporation Law, where a company had to have at least five shareholders to organize a corporation, this standout amendment provides more flexibility in business structuring in the Philippines.
As defined by Section 116 of the same law, “A One Person Corporation is a corporation with a single stockholder: Provided, that only a natural person, trust, or an estate may form a One Person Corporation.”
Based on the above provision, it is essential to note that only natural persons, who must be of legal age (18 y.o), estate, or trust, are qualified to be incorporators. Hence, this rule contrasts with the general rule where juridical persons, like corporations, associations, and partnerships, can now organize a corporation for any lawful purpose(s).
As a matter of course, the creation of OPC has its limits as the RCC expressly prohibits the following to organize as OPCs:
- Banks, non-bank financial institutions, quasi-banks;
- Pre-need, trust insurance companies;
- Public and publicly listed companies;
- Non-chartered government-owned-and-controlled corporations (GOCCs); and
- A natural person licensed to exercise a profession, except as otherwise provided under special laws.
The term of existence of the OPC is perpetual unless otherwise dissolved by the sole owner.
Minimum Capital Required for Foreign-Owned OPCs
As provided by the Securities Exchange Commission (SEC) publication, the minimum paid-up capital for a foreign-owned OPC is USD 200,000 Paid-up capital is that portion of the authorized capital stock that has been both subscribed and paid.
Nominees In Case of Death or Incapacity
The RCC provides that a nominee and an alternate nominee must be designated and named in the Articles of Incorporation. In case of the single stockholder’s death and/or incapacity, the said nominees would replace him/her in the management of the OPC as director and president. However, the single stockholder can resume the management of the OPC at the end of his/her incapacity.
The creation of OPC is a huge leap for improving the Philippine business environment as this provides more benefit to persons desiring to set up a corporation alone. Compared to sole proprietorship, where the liability extends to the sole proprietor’s personal assets in case of default, the single stockholder is liable only to the extent of its contribution to the OPC.