Choosing your corporation type
Corporations in the Philippines may be structured as one of the following:
Domestic corporation – a domestic corporation is one that has been organized and incorporated in the Philippines and under Philippine laws. It may or may not include foreign investors.
Branch office –a branch office is the legal presence of a foreign corporation in the Philippines. It does not have a personality separate from its parent office.
Representative office – a representative office cannot generate profit in the Philippines and only acts to promote a foreign company’s products in the country, conduct quality control or disseminate information about the foreign company.
Regional headquarters – a regional headquarter serves as a foreign company’s communication hub in the Asia-Pacific and other regions, and also cannot generate income in the country.
Regional operating headquarters – ROHQ serve the same function as regional headquarters but may do business and generate income in the Philippines.
Each business structure has different incorporation requirements, and is governed by different sets of rules.
The following information focuses on the requirements and rules covering domestic corporations.
Forming a domestic corporation
The requirements in forming a domestic corporation include:
1. At least five and at most 15 incorporators, each one holding at least one share of the company.The shareholders must designate a Treasurer of the corporation.
2. Registration of the corporation with the SEC.
3. Minimum paid-in capital equivalent to 25% of the company’s subscribed capital stock, which should not be less than P5,000.
4. The Treasurer’s Affidavit confirming that he has received the required paid-in capital on behalf of the corporation.
5. Articles of Incorporation and By-Laws.
6. Endorsements and clearances from relevant government agencies.
The basic rule on ownership of Philippine domestic corporations states that foreigners cannot own more than 40% of a company. There are exceptions, however.
The Foreign Investment Act (FIA) Negative Lists A& B specify the industries where foreign ownership is restricted, ranging from zero foreign ownership to a maximum of 60%. Economic activities or industries that are not on the lists may have up to 100% foreign ownership.
Unless otherwise restricted in the FIA Negative Lists A& B, a company can have up to 100% foreign ownership, providedit meets any of the following criteria:
It has a minimum paid-in capital of US$200,000.
It is an export company, that is, it exports at least 60% of its output. The minimum paid-in capital for export companies is only P5,000 regardless of ownership.
The business uses advanced technology and employs at least 50 persons, and has a minimum paid-in capital of US$100,000.
How we can help
Founded by corporate lawyers, certified accountants and business leaders who have expert knowledge in all aspects of starting and running a Philippine business, we are well positioned to provide you with the best service when incorporating your business.
Each type of business structure has advantages and disadvantages. Our corporate attorneys and business consultants can help you decide which one is right for you so you are informed of the legal and tax implications down the road.
In addition to helping you incorporate or form a corporation, we provide professional advice useful to all business owners in the Philippines. We also help you secure all the business licenses andpermits you need, and determine if you’re eligible for tax incentives and registration with PEZA or BOI.