Entrepreneurs both local and foreign welcome the introduction of a One Person Corporation (“OPC”) under R.A. No. 11232 also known as the “Revised Corporation Code of the Philippines.” It allows the agility of a sole proprietorship and the limited liability of a corporation.
Previously, at least five (5) individuals need to incorporate a corporation. It is difficult at times for foreign investors to find local business partners or trustworthy nominees who can act on behalf of the principal foreign investors. With an OPC, a single stockholder can now establish a corporation and take advantage of the rights and privileges that are available to ordinary corporations and its shareholders. In addition, some foreign investors are not used to having so many people on board right at the onset. The OPC addresses this concern.
Here are some frequently asked questions as a reference for those who wish to know more about this type of corporate entity.
What is a One Person Corporation?
A One Person Corporation is a corporation with a single stockholder. Only a natural person, trust, or an estate may form a One Person Corporation.
Who are not Qualified to incorporate a One Person Corporation?
The following may not incorporate as One Person Corporation in light of the nature of their business activities or professions that require regulations:
- Banks
- Quasi-banks
- Pre-need companies;
- Trust companies;
- Insurance corporations; and
- Licensed Professionals for the purpose of exercising their profession.
Can a non-Filipino Citizen Incorporate a One Person Corporation?
A foreign national may own all the issued shares of the OPC provided the amount of capital and type of business activities to undertake are in accordance with the Foreign Investments Act and other applicable special laws.
What are the similarities or differences of a One Person Corporation and a Sole Proprietorship?
| One Person Corporation | Sole Proprietorship | |
|---|---|---|
| 1.Nature | Separate and distinct from its single stockholder | Sole proprietorship is only a business name of the sole proprietor; Sole proprietorship and its sole proprietor are one and the same |
| 2.Succession | Survives the death of the single stockholder and business continues | Registration expires upon death of the sole proprietor |
| 3.Liability | Limited to the capital contribution of the stockholder | Sole proprietor is personally liable |
| 4.Capital Requirement | No minimum unless a special law requires a minimum paid up capital | No minimum unless a special law requires a minimum paid up capital |
| 5.Regulatory Agency | Securities and Exchange Commission | Department of Trade and Industry |
A One Person Corporation is separate and distinct from its single stockholder. It generally affords a limited liability to the single stockholder unlike a sole proprietorship that attaches the liability of the sole proprietorship to the sole proprietor. Stated otherwise, a sole proprietor is personally liable for the liabilities of the sole proprietorship. An exemption to the rule is when the single stockholder fails to prove that its personal properties are separate from the assets of the One Person Corporation. If that is the case, the single stockholder may be held personally liable for the liabilities of the One Person Corporation.
With regard to succession, a One Person Corporation continues to exist and can still do business even if the single stockholder dies or becomes permanently incapacitated. In fact, it may have a perpetual existence. The same does not apply for a sole proprietor whose business name is renewed every five (5) years. Further, once the sole proprietor dies or becomes permanently incapacitated, the business ceases to exist unless the heirs of the sole proprietor registers the business name to do business.
Both One Person Corporation and sole proprietorship may be registered with no minimum paid up capital requirement unless a special law prescribes a minimum amount of investment.
The Securities and Exchange Commission registers and supervises One Person Corporations like any other ordinary corporations. The Department of Trade and Industry, on the other hand, registers the business name of a sole proprietor.
What are the Requirements in Incorporating a One Person Corporation?
The following are the requirements to incorporate a One Person Corporation with the Securities and Exchange Commission:
1. Corporate Name
First is to reserve the name of the One Person Corporation. It has to indicate the letters “OPC” at the end of the corporate name or below such name to distinguish it from an ordinary corporation that usually has “corporation” or “incorporated” or a variation of those terms affixed to its corporate name.
2. Articles of Incorporation
The articles of incorporation shall indicate, among others, the name, nationality, residence of the single stockholder. If the single stockholder is a trust or an estate, the details of the trustee, administrator, executor, guardian, conservator, custodian or other person exercising fiduciary duties, it is required to submit proof of its authority to act on behalf of the trust or estate.
The personal information of the nominee and alternate nominees are likewise required to be stated in the articles of incorporation.
The above details are in addition to the minimum matters that need to be indicated in the articles of incorporation of an ordinary corporation.
3. Nominee and Alternate Nominee
Together with the articles of incorporation, the acceptance of the appointment of a nominee and of an alternate nominee have to be filed with the Securities and Exchange Commission (“SEC”). The nominee has the duty to take care and manage the corporation’s affairs in the event of death or incapacity of the single stockholder while the alternate nominee assumes the duties and responsibilities of the nominee in the event that the nominee dies, is incapacitated or refuses to act as director and manager of the corporation.
4. By laws
Unlike an ordinary corporation, a One Person Corporation is not required to file its by laws with the SEC.
What are the Post-Incorporation Reportorial Requirements for a One Person Corporation?
The following reportorial requirements are required to be submitted with the SEC within the prescribed period:
- Audited annual financial statements or a sworn certification by the corporate treasurer and president;
- A president’s report explaining any qualification, reservation, or adverse remark or disclaimer made by an auditor;
- A disclosure of all self-dealings and related party transactions between the One Person Corporation and the single stockholder;
- Other reports that the SEC may require.
A One Person Corporation is likewise required to renew annually its mayor’s permit and its registration with the Bureau of Internal Revenue.
Is a One Person Corporation allowed to be converted into an ordinary corporation and vice versa?
A One Person Corporation may be converted into an ordinary stock corporation and vice versa.
The corporation files a notice to the Securities and Exchange Commission, which will then issue a certificate of filing of amended articles of incorporation. The converted corporation assumes the liabilities of its predecessor company.
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