With the advent of Republic Act No. 11232, otherwise known as the “Revised Corporation Code of the Philippines,” (RCC) which became effective on Feb. 23, one need not assemble a group of at least five individuals in order to establish a Philippine domestic corporation.
The RCC defines a one person corporation as “a corporation with a single stockholder: Provided, That only a natural person, trust, or an estate may form a one person corporation.” Banks and quasi-banks, pre-need, trust, insurance, public and publicly listed companies, and non-chartered government-owned and -controlled corporations may not, however, incorporate as a one person corporation.
A one person corporation shall not be required to have a minimum authorized capital stock, except as otherwise provided by special law. Moreover, unless otherwise required by applicable laws or regulations, no portion of the authorized capital of a one person corporation is required to be paid-up at the time of incorporation.
A one person corporation is not required to submit and file corporate by laws.
A one person corporation must indicate the letters “OPC” either below or at the end of its corporate name.
The single stockholder of a one person corporation shall be the sole director and president of the one person corporation.
Securities and Exchange Commission (SEC) Memorandum Circular No. 7, Series of 2019, entitled “Guidelines on the Establishment of A One Person Corporation,” which became effective on May 1, provides that the term of existence of a one person corporation shall be perpetual. However, in case the single stockholder of the one person corporation is a trust or estate, its term of existence shall be co-terminous with the existence of the trust or estate.
Within 15 days from the issuance of its certificate of incorporation by the SEC, a one person corporation must appoint a Treasurer, Corporate Secretary, and other officers as it may deem necessary, and notify the Commission thereof within five days from such appointment.
The single stockholder of a one person corporation may not be appointed as the Corporate Secretary of the one person corporation, but may assume the role of its Treasurer.
A single stockholder who is likewise the self-appointed Treasurer of the Corporation is required to give a bond to the SEC in such a sum as the SEC may require: Provided, that the said stockholder/Treasurer shall undertake in writing to faithfully administer the one person corporation’s funds to be received as Treasurer, and to disburse and invest the same according to the Articles of Incorporation of the one person corporation as approved by the SEC. Such bond shall be renewed every two years or as often as may be required.
The single stockholder shall designate a Nominee and an Alternate Nominee who shall, in the event of the single stockholder’s death or incapacity, take the place of the single stockholder as director and shall manage the corporation’s affairs. The Articles of Incorporation of the one person corporation should state the names, residence addresses, and contact details of the Nominee and Alternate Nominee, as well as the extent and limitations of their authority in managing the affairs of the one person corporation. The written consent of the Nominee and Alternate Nominee shall be attached to the application for incorporation of the one person corporation. Such consent may be withdrawn in writing any time before the death or incapacity of the single stockholder.
The single stockholder may, at any time, change its Nominee and Alternate Nominee by submitting to the SEC the names of the new nominees and their corresponding written consent. For this purpose, the Articles of Incorporation need not be amended.
A one person corporation shall maintain a minutes book which shall contain all actions, decisions, and resolutions taken by the one person corporation. When action is needed on any matter, it shall be sufficient to prepare a written resolution, signed and dated by the single stockholder, and recorded in the minutes book of the one person corporation. The date of recording in the minutes book shall be deemed to be the date of the meeting for all purposes under the RCC.
The Corporate Secretary of a one person corporation is required to:
(a) be responsible for maintaining the minutes book and/or records of the one person corporation;
(b) notify the Nominee or Alternate Nominee of the death or incapacity of the single stockholder, which notice shall be given no later than five days from such occurrence;
(c) notify the SEC of the death of the single stockholder within five days from such occurrence and stating in such notice the names, residence addresses, and contact details of all known legal heirs; and
(d) call the Nominee or Alternate Nominee and the known legal heirs to a meeting and advise the legal heirs with regard to, among others, the election of a new director, amendment of the articles of incorporation, and other ancillary and/or consequential matters.
A one person corporation is required to submit the following within such period as the SEC may prescribe:
(a) annual financial statements audited by an independent certified public accountant: Provided, That if the total assets or total liabilities of the one person corporation are less than P600,000, the financial statements need merely be certified under oath by the corporation’s Treasurer and President.
(b) a report containing explanations or comments by the President on every qualification, reservation, or adverse remark or disclaimer made by the auditor in the latter’s report;
(c) a disclosure of all self-dealings and related party transactions entered into between the one person corporation and the single stockholder; and
(d) such other reports as the SEC may require.
The SEC may place a one person corporation under delinquent status should the corporation fail to submit the aforementioned reportorial requirements three times, consecutively or intermittently, within a period of five years.
The fiscal year of a one person corporation shall be that set forth in its Articles of Incorporation or, in the absence thereof, the calendar year.
A sole shareholder claiming limited liability has the burden of affirmatively showing that the one person corporation was adequately financed. Where the single stockholder cannot prove that the property of the one person corporation is independent of the stockholder’s personal property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the one person corporation.
The principles of piercing the corporate veil applies with equal force to one person corporations as with other corporations.
Hopefully, the allowance by the RCC of one person corporations will contribute to the ease of doing business in the country.
The opinions expressed herein are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author may be emailed at email@example.com. The author is the President of the Financial Executives Institute of the Philippines, Inc. (FINEX) and Of Counsel of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW), the leading and largest law firm in the Philippines.
Eusebio V. Tan is the President of Financial Executives Institute of the Philippines, Inc. (FINEX)