With the guidelines for putting up a one-person corporation (OPC) and providing how ordinary stock corporations can be converted into OPCs now, the Securities and Exchange Commission (SEC) is bullish that more entrepreneurs in the country will be encouraged to setup their own business.
According to SEC Chairperson Emilio Aquino, “The provision for a one person corporation should encourage the formation of more businesses in the country by making it easier for entrepreneurs to start a limited liability company.”
SEC Chairman expects that with the guidelines many would benefit an economy where micro, small and medium enterprises comprise more than 99% of business establishments and generate around 63% of jobs.
The SEC also requested interested parties to submit their comments on the draft Guidelines on the Establishment of a One Person Corporation (OPC) and Guidelines on the Conversion of an Ordinary Stock Corporations into a One Person Corporation (OPC).
The concept of a corporation with a single stockholder was introduced by Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines, which took effect on Feb. 23.
Section 10 of the revised code paves the way for the creation of an OPC by removing the minimum number of incorporators that may organize a corporation. It also defined an OPC in Chapter III.
The draft guidelines reiterate that only a natural person, trust or estate may form an OPC. But it clarifies the incorporator should be a natural person of legal age.
The SEC said the “trust” does not refer to a trust entity but a subject being managed by a trustee. If the single stockholder is a trustee, administrator, executor, guardian, conservator, custodian or other person exercising fiduciary duties, proof of authority to act on behalf of the trust or estate must be submitted at the time of incorporation.
The draft guidelines also clarifies that non-bank financial institutions may not incorporate as OPC aside from banks, quasi-banks, pre-need, trust and insurance companies, public and publicly listed companies, and non-chartered government-owned and/or -controlled corporations.
A foreign natural person may put up an OPC, subject to the applicable constitutional and statutory restrictions on foreign participation in certain investment areas or activities.
To incorporate, an OPC needs to submit only its Articles of Incorporation, which sets forth among others a primary purpose, principal office address, term of existence, names and details of the single stockholder, the nominee and alternate nominee, and the authorized, subscribed and paid-up capital.
When the single stockholder assumes the position of the treasurer, an OPC must post a surety bond, computed based on its authorized capital stock and subject to renewal every two years, or as may be required, upon review of its annual financial statements.
At the minimum, an OPC with authorized capital stock of up to P250,000 will have to give a bond of P250,000. The bond shall be equal to the authorized capital stock when the latter breaches P5 million.
On the conversion to an OPC, only a domestic stock corporation may do so and the single stockholder may apply after acquiring all the outstanding capital stock of the corporation.
The process is the same as amending Articles of Incorporation to include the suffix “OPC” in the corporation’s name and remove any suffix indicating an ordinary stock corporation such as “corporation” and “incorporation.”
However, the corporation must also amend its Articles of Incorporation to reduce the number of directors, name a nominee and alternate nominee, and amend or remove provisions distinctive to ordinary stock corporations, among others.
The SEC will then require a secretary’s certificate that the single stockholder acquired all outstanding shares in the corporation and has decided to convert the corporation to OPC, and for that purpose, has decided to amend the incorporation papers, repeal the by-laws of the corporation and appoint a nominee and alternate nominee for the OPC.
The secretary’s certificate should also state that all taxes and obligations in favor of the government has been settled, and that the corporation or any of its stockholder, director, or officer is not involved in any intra-corporate dispute.
The commission will also require proof acquisition of all the outstanding shares, affidavit of acceptance by the nominee and alternate nominee, name reservation, monitoring clearance of the ordinary stock corporation, and undertaking to change corporate name by the single stockholder.
The conversion of an ordinary stock corporation into an OPC takes effect upon approval of the Amended Articles of Incorporation through the issuance of a Certificate of Filing of Conversion to One Person Corporation.
Upon approval of the conversion, the OPC will retain its SEC company registration number and will also maintain legal responsibility for the ordinary stock corporation’s outstanding liabilities and obligations as of the date of approval of the conversion.