The Basics on How to Form a Corporation in the Philippines

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Published — March 15, 2019

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.

Related article: How to register your corporation with the SEC

The Securities and Exchange Commission (SEC) is the national government regulatory agency charged with supervision over the corporate sector. It is the registrar and overseer of the Philippine corporate sector.

A corporation can either be a stock, or non-stock. A stock corporation is one which has capital stock divided into shares and authorized to distribute to the holders of such shares, dividends or allotments of the surplus profits on the basis of the shares held. On the other hand, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers. Any profit it may obtain incidental to its operations shall be applied in furtherance of the purpose(s) for which it was organized (Section 86, Revised Corporation Code). For profit purposes, a stock corporation should be the kind of corporation to be formed. At present, there is no minimum number of incorporators required to form a corporation but it has a maximum of only fifteen (15) incorporators.

Section 18 of Republic Act No. 11232, also known as the Revised Corporation Code provides that a private corporation commences its corporate existence and juridical personality from the date the Commission issues the Certificate of Incorporation under its official seal. Without the Certificate of Incorporation, a corporation is not yet considered in legal existence.

Requirements

            In forming a corporation, there are requirements to be submitted not only to the SEC but also to other government agencies. Below is an enumeration of the requirements needed and the respective agencies where it should be submitted.

The following documents must be submitted with the SEC:

1. Name Reservation/Verification Slip
2. Cover Sheet
3. Articles of Incorporation
4. Corporate By-Laws
5. Registration Data Sheet
6. Affidavit of Undertaking to Change Corporate Name
7. Bank Certificate

The Bank Certificate is needed as proof of the paid-in capital. According to Section 12 of the Revised Corporation Code, stock corporations are not required to have minimum capital stock unless otherwise specifically provided by law.

As for other requirements needed involving other government agencies:

1.From the local government unit (LGU) where the business will be located

a. Payment of Community Tax Certificate (CTC)

b. Barangay Clearance

c. Mayor’s Permit

2. The employees should also be registered in the following agencies:

a. Social Security System (SSS)

b. Philippine Health Insurance Corporation (PHIC)

c. Home Development Mutual Fund (HDMF)

A Corporation must also register in the Bureau of Internal Revenue (BIR) office for the issuance of a company Tax Identification Number (TIN) and other documents as well as payment of the necessary fees thereof.

Guideline on the Corporate Name

A corporate name is a must in establishing a corporation. No corporate name shall be allowed by the Commission if it is not distinguishable from that already reserved or registered for the use of another corporation, or if such name is already protected by law, or when its use is contrary to existing law, rules and regulations (Section 17 of the Revised Corporation Code). The corporate name must be unique and would not result in confusion with another corporation. This is also important to prevent any act of fraud.

The corporation name shall contain the word “Corporation” or “Incorporated,” or the abbreviations “Corp.” or “Inc.,” respectively (SEC Memorandum Circular No. 21, Series of 2013).

Before transacting with the SEC, the first step is to verify if the proposed corporate name is still available and will not likely deceive the public as to what corporation is really involved. To verify that the proposed corporate name you want is not yet registered to another corporation or company, one can verify it online via Iregister system of the SEC; or thru Name Verification Slip submitted to SEC Office. If it is still available and distinguishable from other corporate names already reserved and registered, then you must reserve the proposed corporate name and pay the corresponding fee. A Name Reservation or Verification Slip will then be issued to you which should be submitted to SEC along with the other requirements needed for registration.

Contents of the Articles of Incorporation and By-Laws

The submission of the Articles of Incorporation is mandatory and very important. It includes every basic and essential details of the corporation to be formed and registered with SEC. Section 13 of the Revised Corporation Code laid out the contents of the Articles of Incorporation to wit:

1. The name of the corporation;
2. The specific purpose or purposes for which the corporation is being formed. Where a corporation has more than one stated purpose, the articles of incorporation shall indicate the primary purpose and the secondary purpose or purposes: Provided, that a non-stock corporation may not include a purpose which would change or contradict its nature as such;
3. The place where the principal office of the corporation is to be located, which must be within the Philippines;
4. The term for which the corporation is to exist, if the corporation has not elected perpetual existence;
5. The names, nationalities, and residence addresses of the incorporators;
6. The number of directors, which shall not be more than fifteen (15) or the number of trustees which may be more than fifteen (15);
7. The names, nationalities, and residence addresses of persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified in accordance with this Code;
8. If it be a stock corporation, the amount of its authorized capital stock, number of shares into which it is divided, the par value of each, names, nationalities, and residence addresses of the original subscribers, amount subscribed and paid by each on the subscription, and a statement that some or all of the shares are without par value, if applicable;
9. If it be a non-stock corporation, the amount of its capital, the names, nationalities, and residence addresses of the contributors, and amount contributed by each; and
10. Such other matters consistent with law and which the incorporators may deem necessary and convenient.

An arbitration clause may be provided in the articles of incorporation wherein it will state that should there be any dispute between the corporation, its stockholders or members, or intra-corporate relations, it shall be referred to arbitration rather than to directly proceed in formal legal proceedings. With this, amicable settlement of disputes is a possibility.

In light of the passage of the Revised Corporation Code, the Articles of Incorporation and any amendments thereto can be filed with SEC in the form of an electronic document, in accordance with SEC’s rules and regulations on electronic filing.

For the corporate By-Laws, it shall contain the rules and regulations or private laws enacted by the corporation to regulate, govern, and control its own actions, affairs and concerns and of its stockholders or members and directors and officers in relation thereto and among themselves in their relation to the corporation (Timoteo B. Aquino, Philippine Corporate Law Compendium, 3^rd Edition, 2014). The By-Laws will be the fundamental law of the corporation and will serve as a code of the governing rules and regulations of all corporate affairs.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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