Setting Up a Corporation in the Philippines

June 25, 2017

Many investors, both local and foreign, do not know how to register a business in the Philippines. There are people who, despite having high-paying jobs or profitable sole proprietorships, still wonder whether starting their own corporation is better. There will never be a clear answer as to when, why, and where to organize your corporation. However, when you are already sure in forming a corporation, failing to comply with the registration requirements of the Securities and Exchange Commission (SEC) and other government agencies is inexcusable. Unlike the “when,” “why,” and “where,” the answer to the question of “how to establish and register a corporation” is straightforward. Getting your corporation off to a flying start is your goal, and registering it with the SEC should be the first step.

 

The Corporation Code of the Philippines defines a corporation as an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence. Corporations may be stock or non-stock. SEC requires at least five (5) incorporators to establish a corporation.

 

Any number of natural persons not less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes. Each of the incorporators of s stock corporation must own or be a subscriber to at least one (1) share of the capital stock of the corporation.

 

Due to the separate juridical personality of a corporation, it is a general rule that the shareholders are not personally liable for the debts or obligations of the corporation. The corporate shareholders are liable only up to the extent of their equity investment in the corporation. They have limited liability. The creditors of the corporation can only claim from the properties of the corporation and not from the personal assets of the shareholders.

 

When a corporation needs additional capitalization to fund its expansion and other projects, it may do so by selling shares or issuing bonds. It is not surprising that a corporation attracts more outside investors than the other business structures.

 

The structure of a corporation provides continuity and stability. A corporation continues to exists even though a shareholder dies or transfers his or her shares to third persons.

 

While a corporation does not guarantee the success of a business, the foregoing advantages make it an attractive business vehicle for investors.

 

Documentary Requirements:

 

1. Name Reservation/Verification Slip;

2. Articles of Incorporation;

3. By-laws;

4. Treasurer’s Affidavit that he/she has been elected by the subscribers of the corporation as treasurer thereof, to act as such until his/her successor has been duly elected and qualified in accordance with the by-laws of the corporation, and that at least 25% of the authorized capital stock of the corporation has been subscribed and at least 25% of the total subscription has been paid, and received by him/her, in cash or property, in the amount of not less than P5,000.00;

5. Registration Data Sheet;

6. Affidavit of Undertaking to Change Corporate Name;

7. Bank Certificate showing paid in capital;

8. Cover Sheet;

9. Endorsement or Clearance from other government agencies (if applicable);

10. For corporations with more than 40% foreign equity: Application Form for registration under the Foreign Investments Act of 1991 (R.A. 7042, as amended); and

11. Endorsement/Clearance from: (a) Philippine Economic Zone Authority (PEZA) for applicant under R.A. 7916, (b) Subic Bay Metropolitan Authority (SBMA) or Clark Development Corporation (CDC) for applicant under R.A. 7227 and (c) Cagayan Economic Zone Authority (CEZA) for applicant under R.A. 7922.

 

Procedure:

 

1. Verify or reserve your proposed business name through the website of SEC. If the proposed name is allowed by SEC, the reservation and confirmation notice is printed and given to the applicant. Follow the SEC instructions in paying the reservation fee;

2. Submit the documentary requirements to SEC;

3. Pay the filing fee;

4. Once the application is approved, a Certificate of Registration (COR) will be issued;

5. Acquire a barangay clearance in the place where the principal office of the corporation is located;

6. Apply for a business permit from the Mayor’s Office in the city or municipality where the principal office of the corporation is located;

7. Register with the Bureau of Internal Revenue (BIR); and

8. Register with the Social Security System (SSS), Home Development Mutual Fund (HDMF), and Philippine Health Insurance Corp. (PhilHealth).

 

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