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Incorporators of a Corporation

There should be at least five (5) natural individuals, a majority of whom should be residents of the Philippines, to act as incorporators of a Philippine corporation. However, a corporation may subscribe to the authorized capital stock of a corporation in the pre-incorporation stage. The incorporators are required to disclose their full names, residential address, citizenship, birth date, Tax Identification Number and official ID details.

 

Foreign Nationals or Foreign Corporations as Stockholders

A foreign national or foreign corporation can subscribe to and own shares of stock of a domestic corporation. There are nationality restrictions, which limit foreign ownership in certain industries.  However, in certain instances and subject to certain requirements, foreign nationals and/or foreign corporations are allowed to be the controlling stockholder/s or can own up to 100% of the issued capital stock of a domestic corporation.

 

Juridical Personality

Under Philippine laws, a corporation has a separate and distinct juridical personality from its stockholders and/or officers. However, in instances where the corporate vehicle was utilized for fraudulent purposes, the law also allows the corporate identity to be pierced or lifted, in which case, responsibility or liability may be imposed upon the individuals forming or having control of the corporation.

 

Issuance of Shares

The issuance of shares of stock from the unissued authorized capital stock of a corporation is governed by the Securities Regulation Code of the Philippines.  While, as a rule, registration is required before shares are issued, certain transactions may be classified as exempt from registration requirements, or the shares to be issued may be classified as exempt securities. Said issuance is subject to the approval or confirmation by the Securities and Exchange Commission.

The issuance of shares of stock or the subsequent transfer thereof is subject to the payment of a Documentary Stamp Tax in addition to the Capital Gains Tax, if any, in the latter event.

 

Issuance of Stock Certificates

A stockholder is entitled to the issuance of a Stock Certificate only upon payment of the full amount of his subscription, together with interest and expenses (in case of delinquent shares), if any is due. Partial payments on one subscription shall be deemed applied proportionately among the number of shares, in which case, no stock certificate can as yet be issued before its full payment. [SEC Opinion No. 06-113]

 

Corporate Reportorial Requirements

Philippine law generally requires the submission of the following:

a.   General Information Sheet (“GIS”) – within thirty (30) days from the actual date of the Annual Stockholders or Members’ Meeting and/or any change in the composition of the Board of Directors or Trustees of a corporation or any other information in the GIS. If the corporation is unable to hold stockholders’ or members’ meeting for the calendar year, then the GIS must be filed not later than January 30 of the next calendar year. For corporations with annual gross sales or revenues of at least Php10,000,000.00, copies in electronic format (i.e. on disc drives or compact discs) must also be submitted.

b.   Audited Financial Statements – stamped received by the Bureau of Internal Revenue and within 120 days (105 days for corporations whose securities are registered under the Revised Securities Act or Securities Regulation Code) after the end of the corporation's fiscal year as specified in the corporate By-Laws. For stock corporations with paid-up capital of less than Php50,000.00, or non-stock corporations with gross annual receipts of less than Php100,000.00 or total assets of less than Php500,000.00, the Financial Statements shall, at the minimum, be certified under oath by the treasurer of the corporation. For corporations with annual gross sales or revenues of at least Php10,000,000.00, copies in electronic format (i.e. on disc drives or compact discs) must also be submitted.

c.   Affidavit of Non-Operation (in addition to the GIS and the Financial Statements) – within 120 days after the end of the fiscal year as specified in the corporate By-Laws, if the corporation is not in operation.

d.   Stock and Transfer Book (for stock corporations) or Membership Book (for non-stock corporations) – within 30 days from the date of issuance of the certificate of incorporation.

 

Foreign Corporations

A foreign corporation is defined as one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state. It shall have the right to transact business in the Philippines after it shall have obtained a license to transact business in the Philippines. [Sec. 123, Corporation Code of the Philippines] The application for such a license shall include specifically required data, including the designation of a resident agent, who shall be authorized to accept summons and processes in all legal proceedings affecting the corporation, which is meant to ensure that proper jurisdiction will be obtained over the foreign corporation in the event of suits and similar proceedings. [Sec. 126-128, Ibid.]

Subject to the approval by the Securities and Exchange Commission and/or the Board of Investments upon submission of certain documentary requirements, a foreign corporation may establish any of the following in the Philippines:

a.   a Representative Office, for liaison and research work, quality control, and/or solicitation of clients, but which will not earn any income in the Philippines, with proof of inward remittance of at least US$30,000.00;

b.   a Branch Office, which is allowed to do business and earn income in the Philippines. Generally, a branch office of a foreign corporation that qualifies as a “domestic market enterprise” must have a paid-up capital of at least US$200,000.00. However, where the activities of the domestic market enterprise involve advanced technology or where at least 50 direct employees are employed, the paid-up capital requirement is reduced to US100,000.00. A branch office that qualifies as an export enterprise (exporting 60% or more of its output) is not subject to any minimum capitalization requirement;

c.   a Regional or Area Headquarter, to act as supervisory, communications and coordinating center for affiliates, subsidiaries, or branches in the Asia Pacific Region, but without any authority to do business or to earn income in the Philippines, which requires, among other things, proof of inward remittance of at least US$50,000.00 initially and, thereafter, US$50,000.00 annually;

d.   a Regional Operating Headquarter, which is allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries or branches in the Asia Pacific Region and in other foreign markets, which requires, among other things, proof of inward remittance of at least US$200,000.00; and

e.   a Regional Warehouse, to (i) serve as a supply depot for the storage, deposit, and safekeeping of its spare parts, semi-finished products, and raw materials, (ii) fill up transactions and sales made by its head office or parent company, and (iii) serve as storage or warehouse of goods purchased locally for export abroad. A Regional Warehouse, which cannot do business or to earn income in the Philippines, may be set up by a foreign company which has established or will simultaneously establish a Regional or Area Headquarter or a Regional Operating Headquarter.

 

Corporate Rehabilitation

A corporation, partnership, or association which possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due may file with the proper court a petition for suspension of payments and for rehabilitation. Subject to compliance with certain requirements, including the submission of the rehabilitation plan, the court may issue an order to temporarily stop enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise, against the debtor. Thereafter, upon proof of viability of the rehabilitation plan, the court may grant the petition, which shall have, among others, the following effects:

a.   The plan and its provisions shall be binding upon the debtor-corporation and all persons who may be affected by it, including the creditors, whether or not such persons have participated in the proceedings or opposed the plan or whether or not their claims have been scheduled;

b.   The debtor-corporation shall comply with the provisions of the plan and shall take all actions necessary to carry out the plan; and

c.   Payments shall be made to the creditors in accordance with the provisions of the plan.