Published — May 4, 2018
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
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Every starting entrepreneur has to consider the business organization that will carry out the business he is about to establish. Considering that there are several ways by which a business may be organized, one has to at least be familiar, if not equipped with full working knowledge, as to the nature and characteristics of each of his options, and how it will affect the way he does business.
Among the options that an entrepreneur may choose is to form a corporation, which is defined by law 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 [See: Sec. 2, Corporation Code].
Creation of corporations
Ay number of natural persons not less than 5 but not more than 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 a stock corporation must be a subscriber to at least 1 share of stock of the corporation [See: Sec. 10].
Incorporation, loosely speaking, is the process of forming a corporate entity, in accordance with the requirements of the Corporation Code. It includes the following steps:
- Execution of the Articles of Incorporation by the incorporators, and other documents such as the corporate by-laws, among others.
- The corporate treasurer must execute an affidavit showing 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 fully paid to him. Such paid up subscription shall not be less than Php 5,000.00.
- Filing with the Securities and Exchange Commission (“SEC”) of the Articles of Incorporation and treasurer’s affidavit, and payment of the filing and publication fees.
- Issuance by the SEC of a Certificate of Incorporation.
Once SEC issues the Certificate of Incorporation, the corporation is already organized and existing. However, before a Certificate of Incorporation is issued, there is a need for substantial compliance with the formal requirements of incorporation.
Basic steps and requirements in registration
One may register a corporation online through the SEC’s Company Registration System (“CRS”) by logging in at crs.sec.gov.ph.
The registrant will be required first to create an account, which will be used in registering the corporation. After creation of an account, proceed with the next steps, which are:
- Verify company name
- Add company name
- Add company details
The registrant will be required to accomplish online forms by filling up the blank spaces that will be provided, and by choosing from among the various options available through pull-down menus. The process is pretty much straightforward, and all the registrant has to do is to proceed as instructed.
Submission of documents and payment of fees
After accomplishing the necessary online forms, the following documents will be generated by the system:
- Cover Sheet
- Articles of Incorporation
- By-Laws
- Treasurer`s Affidavit (for stock corporation)
Once generated, print them and submit by uploading them to the CRS.
The documents submitted will be evaluated, and confirmation will be sent through email. Once confirmed, the registrant will be advised to pay the filing fee online through Landbank’s ePayment Portal. The amounts:
- Filing fee = 1/5 of 1% of the of the authorized capital stock, but not less than Php 2,000.00 (plus 1% of the amount as Legal Research Fee).
- Registration of By-Laws = Php 1,010.00.
Issuance of certificate of registration
After paying the filing fees, the Certificate of Registration bearing applicant’s SEC registration number and Unified Registration Report (“URR”) will be generated, and will be issued upon approval. This will be the only time that the registrant will be required to visit SEC. Just take note, however, that the registrant should bring the original notarized documents with him in his only visit, because aside from claiming the Certificate of Registration, he will have to submit the said originals to the SEC.
Once the corporation is successfully registered and a Certificate of Incorporation is issued, the corporation is deemed to have been born, and it starts to possess a personality separate and distinct from its incorporators, stockholders, directors, officers, and all other persons composing it.
Corporate business operations
After incorporation, there is a need for the corporation to commence its business operations as a condition of continued corporate existence. If a corporation does not formally organize and commence its business transactions within 2 years from its incorporation, its corporate powers shall cease and the corporation shall be deemed dissolved. Even if a corporation has commenced the transaction of its business but later on becomes continuously inoperative for a period of at least 5 years, it shall also be a ground for the suspension or revocation of its certificate of incorporation [See: Sec. 22].
With this, it is imperative for every entrepreneur to actually engage in business and to remain in business for the corporation to continue existing. That’s precisely the point in creating a corporation, anyway. At any rate, such registration with the SEC would be the start. Entrepreneurs, therefore, are better off aware of not only how to run their corporate businesses, but also as to how they would begin doing corporate business in the first place, through registration.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding corporations and corporate governance, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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