The concept of a One Person Corporation (OPC) was introduced to the Philippines through the recent enactment of the Revised Corporation Code. This concept is neither novel nor revolutionary in the field of business law. In other countries such as Singapore and Hong Kong, a single shareholder is enough to set up a Private Limited Company.
The introduction of the OPC eases up the requirements for setting up a corporation for many businesses and start-ups in the Philippines. For one, corporations don’t need to issue shares to nominee shareholders just to fulfill the five-person requirement for incorporation. Decision making for corporate transactions is also made much faster because only one person needs to decide. Moreover, OPCs may be inherited by the single stockholder’s heirs. However, if the OPC has plans of becoming a publicly-listed company, it needs to convert to a corporation with more than one shareholder*
The following guidelines summarizes Memorandum Circular No. 7, Series of 2019 issued by the Securities and Exchange Commission last May 1, 2019 on the Guidelines on the Establishment of a One Person Corporation.
1. Who can set up a One Person Corporation (OPC)?
Only natural persons (who may be Filipino or foreign), trusts, or estates.
For trusts, what is allowed to form the OPC is the subject of the trust, not the trustee. The trustee is the mere representative of the trust. Similarly, for estates, it is the estate of the deceased that is allowed to form the OPC, not the administrator. The administrator is also the mere representative of the estate in setting up the OPC.
2. Who are not allowed to form OPCs?
Banks, non-bank financial institutions, quasi-banks, pre-need, trust, insurance, public and publicly listed companies, non-chartered government owned and controlled corporations.
For clarification, it is trust companies that offer trust management services and which are appointed as trustees in trust arrangements that are not allowed to form OPCs. Trust companies are primarily created, and duly authorized by the BSP, to engage in trust and other fiduciary business and investment management activities. It can perform the same functions as those presently undertaken by the trust departments of banks. What is allowed to form an OPC is the trust itself, i.e. the subject matter of the trust. Just like in an estate, where it is the estate of the deceased that is allowed to form an OPC.
OPCs cannot be organized for the purpose of exercising a profession, except as otherwise provided by special laws.
3. What are the Qualifications of an OPC Incorporator?
For natural persons, the incorporator must be of legal age.
For trusts and estates, the single stockholder must have proof of his/her authority to act. For trusts, this authority may be proved through a document that authorizes the stockholder to act as a trustee. For estates, this may be evidenced by letters testamentary or of administration.
4. What is the term of the OPC?
For OPCs constituted by a natural person, the term shall be perpetual.
For estates and trusts, the term shall be co-terminous with the existence of the trust or estate.
5. Do OPCs need to have Articles of Incorporation and By-Laws?
The OPC only needs to file its Articles of Incorporation. It is not required to submit any By-Laws.
See sample AOIs for Natural Person OPC, Estate OPC, and Trust OPC.
6. Is there a minimum amount of capital stock that needs to be subscribed and paid up?
No. OPCs are not required to have a minimum authorized capital stock, except as otherwise provided by special laws.
Unless otherwise required by applicable laws or regulations, no portion of the authorized capital stock is required to be paid-up at the time of incorporation.
To be clear, there is no more requirement to subscribe to 25% of the authorized capital stock and there is no more requirement to pay up 25% of the subscribed capital.
7. What are the other requirements for an OPC?
Corporate Name – the suffix “OPC” should be indicated, e.g. “Juan dela Cruz OPC”
Nominee and Alternate Nominee – the single stockholder is required to designate a nominee and an alternate nominee in the Articles of Incorporation who shall replace the single stockholder in the event of the latter’s death and/or incapacity. The written consent of both the nominee and the alternate nominee must be attached to the application for incorporation. The Nominee and Alternate Nominee may be changed at any time through the submission of a Notice of Change of Nominee and Alternate Nominee.
Foreign National – A foreign natural person may put up an OPC, subject to applicable capital requirements and constitutional and statutory restrictions on foreign participation in certain investment areas or activities.
8. Who shall be the Director and Officer of the OPC?
The single stockholder shall be the sole director and president of the OPC.
Within 15 days from the issuance of its Certificate of Incorporation, the OPC shall appoint a treasurer, corporate secretary, and other officers as it may deem necessary. The SEC must be notified within 5 days from appointment using the Appointment Form prescribed by the SEC.
The single stockholder cannot be appointed the corporate secretary. If the single-stockholder is also the self-appointed treasurer, he/she must give a bond to the SEC.
9. What are the bond requirements for the self-appointed treasurer of the OPC?
The self-appointed treasurer must post a surety bond based on the authorized capital stock, renewable every two years:
The bond is a continuing requirement for as long as the single-stockholder is the self-appointed treasurer of the OPC.
The bond may be cancelled upon proof of appointment of another person as treasurer and filing of Amended Form for Appointment of Officers.
10. When is the existence of an OPC deemed terminated?
The existence of OPCs constituted by a natural person may be terminated by shortening the corporate term.
OPCs under the name of an estate may be dissolved upon proof of Partition, such as an Order of Partition issued by a court in cases of Judicial Settlement or a Deed of Extrajudicial Settlement in cases of summary settlement of estate.
OPCs under the name of a trust may be dissolved upon proof of termination of the trust.
11. What happens when the Single Stockholder dies or becomes incapacitated?
If the single stockholder becomes incapacitated, the nominee can take over management as director and president until the single stockholder recovers.
If the single stockholder dies or becomes permanently incapacitated, the nominee will take over the management of the OPC until the legal heirs have been determined and the heirs have agreed among themselves who will take the place of the deceased.
12. What are the Reportorial Requirements for the OPC?
Annual Audited Financial Statements – must be submitted within 120 days from the end of the fiscal year. If the total assets or total liabilities of the OPC are less than Php 600,000.00, the financial statements must be certified under oath by the corporation’s treasurer.
A report on all explanations or comments by the president on the qualification, reservation, or adverse remarks made by the auditor in the financial statements.
A disclosure of all self-dealings and related party transactions entered into between the OPC and the single stockholder.
Other reports as the SEC may require.
13. Can the single stockholder claim limited liability just like in an ordinary stock corporation?
Yes. However, the single stockholder must prove that the corporation was adequately financed. If the single stockholder cannot prove that the property of the OPC is independent of the stockholder’s personal property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the OPC.
Should you have any questions on the establishment of a One Person Corporation, kindly contact us here.
Read SEC Memorandum Circular No. 7, Series of 2019 in full here.