By: Alexander Llanes Acain, Jr. Esq.
The enrolled copies of Senate Bill No. 1280 and House Bill No. 8374 (An Act Amending the Corporation Code of the Philippines) was already submitted on January 28, 2019, to the Presidential Legislative Liason Office for the signature of President Rodrigo Duterte. I am expecting that this new corporation code will be signed into law in the next few days. (Update: The Revised Corporation Code or Republic Act No. 11232 was signed into law on July 23, 2019).
One of the most important reforms introduced in the new corporation code is the provision of One Person Corporation. That means that a corporation can now be formed with only one person as a stockholder. An Estate or Trust can also form a One Person Corporation. The minimum paid-up capital requirement was also pegged of not be less than Php5,000.00. This one-person corporation is in accord with the global best practices in almost all jurisdictions all over the world where you can form a corporation with only one person as Director or Stockholder.
This is a welcome development to foreign investors because they can now form a corporation with only one person without having to look for at least five incorporators and directors to form a corporation. The One Person Corporation would also help address problems regarding the current requirement of at least five stockholders for a corporation – a common obstacle which led investors to resort to engaging dummies like naming their chauffeur or employees as stockholders to comply with the rule.
Notably, the One Person Corporation cannot be used to form a corporation which requires a secondary license like Banks, Financing companies, Overseas Recruitment, Pre-need, Insurance, etc. or those activities that will fall under the foreign negative list when the incorporator is a foreigner. Professionals cannot also form a One Person Corporation.
Personally, as a corporate law practitioner myself, I believe that these new amendments to the existing old corporation code of the Philippines circa 1980 and the introduction of new reforms which are by the global best practices will help establish a more business and investor-friendly environment in the country.