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Philippine Incorporation

The Philippine government has recently undertaken several measures to improve doing business in the country. Foremost among these initiatives is the Integrated Business Registry System, which has significantly cut down the steps and time needed to process and approve the registration of corporations with the Securities and Exchange Commission (SEC).

In the past, the process took 16 steps and 34 days. This has been reduced to 6 steps and 8 days, with many applications approved within 24 hours.

The SEC registration process, however, is just one of the many steps you have to take to incorporate your business in the Philippines. Before you get to that stage, you have to address a number of important issues and prepare several documents.

Incorporation options

Foreign businesses may be incorporated in the Philippines as one of the following:

  • 100% foreign-owned branch office 

  • 100% foreign-owned representative office 

  • 100% foreign-owned regional headquarters or regional operating headquarters 

  • 100% (or more than 40%) foreign-owned domestic corporation 

  • 60%/40% Filipino/foreign owned domestic corporation

Most foreign companies in the Philippines are set up either as a branch office or a 60/40 domestic corporation. Foreign-owned branch offices may be organized only within the restrictions covered by the Foreign Investment Act (FIA) Negative List A & B. Domestic corporations, on the other hand, offer more administrative flexibility.

Foreign ownership can be as much as 100% except in economic activities specified on the FIA Negative List.

You also need to determine where to put up your business. The Philippine government has designated economic zones where eligible businesses can enjoy a wide range of incentives, including income tax holidays and import duty privileges. Tax rates and the costs of doing business may also vary greatly by region.

Forming a domestic corporation

Foreign-owned branch or representative offices and regional headquarters need not incorporate in the Philippines. But they must obtain a license to do business in the country from the SEC. These companies must also appoint a resident agent who can receive summons and represent the company in judicial proceedings in the Philippines.

A domestic corporation must have at least five incorporators, with 5 to 15 directors or trustees. The corporation can be one of the following:

1. Stock corporation – allowed to distribute dividends to shareholders. Incorporators and directors must own at least one share of stock. 

2. Non-stock corporation – organized for public purposes, such as charitable institutions, foundations, educational institutions and others. It does not issue shares of stock.

Capitalization

The new corporation must deposit its paid-in capital at the bank. The minimum paid-in capital at the time of incorporation should be 25% of the total subscribed capital stock, and must not be less than P5,000. The minimum required capital is higher for certain industries as specified by the SEC.

Registration with the SEC

Registration with the SEC may be done online, but payment of the filing fee has to be done at the SEC office.

Before registration, you must first have your company name verified and reserved with the SEC – a process that may also be done online.

SEC registration requirements include:

  • Company name verification slip

  • Articles of Incorporation and Bylaws

  • Treasurer’s Affidavit – this shows that the required paid-in capital has been received by the corporation’s treasurer and deposited at the bank

  • Joint affidavit of two incorporators to change corporate name, unless already stated in the AI

  • Additional clearances and licenses, depending on the industry

A filing fee needs to be paid at the SEC office. You can use the SEC calculator http://www.sec.gov.ph/online-services/registration-calculator-2/ to determine the filing fee amount.

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