New Philippine Rules on One Person Corporations and Small Incorporator Requirements
The Philippine corporation law landscape has recently seen some notable changes that provide more flexibility for businesses. In this post, I will discuss the new rules on One Person Corporations and the reduced incorporator requirements for corporations in the Philippines.
The Corporation Code of the Philippines has traditionally required a minimum of 5 incorporators to form a corporation. However, the recent Republic Act No. 11232 has amended this rule to allow for less than 5 incorporators. The new law permits just 1 incorporator for a One Person Corporation and a minimum of 2 incorporators for regular corporations.
One Person Corporations
A One Person Corporation (OPC) is a new form of corporation in the Philippines composed of just one incorporator who will be the sole director/president and sole stockholder. This provides flexibility for sole entrepreneurs who want to incorporate and avail of corporate benefits like limited liability.
The main requirements for One Person Corporations are:
- Just one incorporator who is a natural person and Philippine citizen
- Capitalization of at least PHP 100,000
- Limited to a term of 50 years
OPCs offer advantages like simpler decision making as there is just one stockholder. However, sole ownership also increases risk and liability exposure for that one person. Extra prudence is required in managing an OPC.
Reduced Incorporators Rule
The other major change is the reduction of the minimum number of incorporators for regular corporations to just 2-4 people. The previous Corporation Code required at least 5 incorporators for forming a corporation.
With the amendments, the incorporator requirements are now:
- Stock Corporation: Minimum of 2 incorporators
- Non-Stock Corporation: Minimum of 3 incorporators
- Foundation: Minimum of 4 incorporators
This provides flexibility for startups and smaller businesses to incorporate with just 2-4 persons rather than needing 5 people previously. However, reduced diversity of incorporators also means less expertise.
In summary, the new rules on One Person Corporations and lower incorporator requirements provide a more business-friendly company registration process in the Philippines. If you need help in forming a corporation in the Philippines, email me at kpborra@borralaw.com