Foreign businessmen who want to conduct business in the Philippines usually put up either a domestic corporation or a branch office, but tend to favor the corporation more for the tax benefits.
Moreover, putting up a corporation on Philippine shores gives a non-local lesser legal liability and the opportunity for Philippine equity participation in activities which are restricted to them in a standard setup.
Prospective corporations are required to reserve and register a name, submit a proposed Articles of Incorporation (AI) and By-laws, and prove that they have the minimum capital requirement for their chosen industry.
For a corporation to be established it must have 5 to 15 incorporators. Incorporators are stockholders or members mentioned in the AI who originally formed, and who are signatories of, the corporation.
Incorporators must meet the following criteria:
- Natural persons (i.e., not business entities or the like)
- Of legal age
- The majority are residents of the Philippines
- Must own or subscribe to at least one share of the capital stock
A corporation will have juridical personality when the Securities and Exchange Commission (SEC) issues it a Certificate of Incorporation and puts said corporation under the latter’s jurisdiction.
Articles of Incorporation (AOI)
According to the Corporate Code of the Philippines or Batas Pambansa Bilang 68, all corporations must file with the SEC its proposed AOI. This must be written in any of the country’s official languages and must be duly signed and acknowledged by all incorporators.
The AOI should include the following information unless prescribed by the Code or by special law:
- The corporation’s name
- The purpose of the company’s incorporation
- If there is more than one stated purpose, the primary and secondary purpose (A non-stock corporation cannot include a purpose that would change or contradict its nature)
- Location of the corporation’s main office
- How long the corporation is to exist
- The names, nationalities, and places of residence of the incorporators
- The number of directors (which should not be less the five but not more than 15)
- The names, nationalities, and residences of the directors or trustees until the election of the first regular directors or trustees in accordance with the Code
For Stock Corporations
- The amount of its authorized capital stock
- The number of shares it is divided into
- The value of each par value share
- The names, nationalities, and residences of the original subscribers, the amount they subscribed and paid for
For Non-stock Corporations
- The amount of its capital
- The names, nationalities, and residences of its contributors and the amount they contributed
- Additional information deemed necessary by the incorporators that are
not inconsistent with law
Paid-Up Capital in the Philippines
Paid-up capital refers to the amount of money received from investors or shareholders in exchange for shares of stocks in the company. Paid-up capital could be in the form of cash, real property, service, equipment, or anything of value.
The minimum paid-up capital of a corporation is dependent on the industry it is involved with and its equity. The provisions of the Foreign Investments Act of 1991 become applicable to a corporation when there are foreign shareholders involved.
Minimum Paid-Up Capital Requirement Based on Industry
Finance
Financing Company – Main (in 1st class cities) | P10,000,000 |
Financing Company – Main (in other cities) | P5,000,000 |
Financing Company – Main (in municipalities) | P2,500,000 |
Financing Company – Branch (in 1st class cities) | P1,000,000 |
Financing Company – Branch (in other cities) | P500,000 |
Financing Company – Branch (in municipalities) | P250,000 |
Freight Forwarders
Freight Forwarders – Domestic | P250,000 |
Freight Forwarders – International | P2,000,000 |
Insurance
Insurance Broker | P20,000,000 |
Reinsurance Broker | P20,000,000 |
Insurance Broker and Reinsurance Broker | P50,000,000 |
Life Insurance Company | P1,000,000,000 |
Non-Life insurance Company | P1,000,000,000 |
Reinsurance Company | P2,000,000,000 |
Investment
Investment Adviser/Manager | P10,000,000 |
Investment Company | P50,000,000 |
Investment House | P300,000,000 |
Lending Company – Main | P1,000,000 |
Lending Company – Branch (in 1st class cities) | P300,000 |
Lending Company – Branch (in other cities) | P150,000 |
Lending Company – Branch (in municipalities) | P75,000 |
Mining
Mining (authorized capital stock) | P100,000,000 |
Mining (paid-up capital stock) | P6,250,000 |
Recruitment
Recruitment for Local Employment (Corporation) | P500,000 |
Recruitment for Local Employment (Partnership) | P200,000 |
Recruitment for Overseas Employment | P2,000,000 |
Schools (for stock corporations)
Elementary Education | P1,000,000 |
Elementary and Secondary Education | P2,500,000 |
Elementary, Secondary, and Tertiary Education | P5,000,000 |
Security
Security Agency | P500,000 |
Securities Broker/Dealer (New/SROMember) | P10,000,000 |
Securities Broker/Dealer in Propriety Shares (Non-SRO-Member) | P5,000,000 |
Other Industries
Breakbulk agent | P250,000 |
Cargo Consolidator | P400,000 |
Health Maintenance Organization | P10,000,000 |
Non-Vessel Operating Common Carrier | P4,000,000 |
Pawnshop | P100,000 |
Pre-Need Plan Issuer | P100,000,000 |
Pre-Need Plan Agent | P5,000,000 |
Retail Trade with Foreign Equity | P2,500,000 |
Special Purpose Vehicle | P31,250,000 |
Special Purpose Corporation | P5,000,000 |
Transfer Agent | P1,000,000 |
Minimum Paid-Up Capital Based on Equity
For domestic corporations with more than 40% of foreign equity:
Domestic Market Enterprise US | $200,000 |
Export Market Enterprise | P5,000 |
For foreign branch offices:
Domestic Market Enterprise US | $200,000 |
Export Market Enterprise P5,000 | P5,000 |
For foreign branch offices:
Domestic Market Enterprise US | $200,000 |
Export Market Enterprise | P3,000 |
For non-domestic corporations:
Foreign Representative Office US $30,000 | $30,000 |
Regional Area Headquarters (RHQ) | $50,000 |
Regional Operating Headquarters (ROHQ) US | $200,000 |
… and you might just need our assistance.
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