Being able to establish a stock corporation is certainly very ideal for businessmen and businesswomen alike for the reason that it offers certain advantages that other types of companies do not. One of the main benefits that a corporation offers is a limited liability and limited risks for its owners and shareholders. However, in exchange for such benefits, there are also way more legal documents and papers that would be needed in order to legitimately form and register such type of company.
What is a Corporation and How Can it Protect its Owners?
A corporation is divided into two categories: stock (which is engaged in generating income and mostly used for business) and non-stock (which is non-profit and utilized by charities and other organizations). Both must be formed by at least five but not more than fifteen incorporators and it is a legal entity that is separate and distinct from its owners (incorporators). A corporation has legal rights and obligations similar to that of a person and it is allowed to enter into contracts, acquire a loan, hire employees, pay taxes, sue and get sued, and the likes. Because of its separate identity, it provides limited liability to its owners in ways that its owners (and shareholders) are not responsible for all its debts if the company fails or/and if it gets sued.
Can a Corporation Be An Incorporator in the Philippines?
Since a corporation is a legal entity and can enter contracts, it is easy to assume that it can also be an incorporator. However, according to the standards of our law, a corporation cannot be an incorporator of any company in the country. Incorporators are defined as the individuals who originally created the corporation. These people are also the ones who must sign in the Articles of Incorporation. Our law requires all incorporators to be natural persons, of legal age, and their majority to be residents of the Philippines. With these prerequisites being stated, it means that neither a corporation nor a partnership can be an incorporator of any Philippine corporate entity. There is, however, a way for a corporation (or a partnership) to become a stockholder of a Philippine corporation and that is by acquiring a stock of that certain company but only after it has been completely incorporated.
How Do I Form a Family Corporation in the Philippines?
On a different note, family corporations are also quite common in the Philippines. To make things clear for some who are wondering if there is such a significant difference between family corporations and an ordinary corporation, let me tell you that there is really not much difference between the two. Apparently, a “family corporation” is almost the same as any ordinary corporation. The only main distinction between them is that a family corporation is made up of close relatives as shareholders and incorporators while a conventional corporation is formed by individuals that are not related by blood. So, if you are thinking about how such corporations are formed, the answer is that the process and documents necessary in forming a family corporation in the Philippines is simply the same as with the other corporations.
What are the Documents Necessary to Form a Stock Corporation?
According to the Security and Exchange Commission’s (SEC) website, here are the basic requirements needed to register a corporation:
- Name Verification Slip. This may be secured online through sec.gov.ph or by visiting the SEC Name Verification Unit at G/F Secretariat Building, PICC Complex, Roxas Boulevard Pasay City; or through Satellite Offices and SEC Extension Offices.
- Articles of Incorporation (AI) and By-laws (BL). The SEC has an online fill-out form for the AI-BL on their website. This must be signed and notarized.
- Treasurer’s Affidavit. This must declare the amount of the shares of stock subscribed and the cost of its subscription price which has been paid-in to him as Treasurer-in-Trust of the intended corporation. It must also be stated that at least 25% of the authorized capital stock has been subscribed, and at least 25% of the amount subscribed has been paid-in to him for the interest and to the account of the corporation.
- Joint affidavit of two incorporators to change the corporate name. This is not required if it’s already declared in the AI.
Note that these are the most basic documentary requirements. Additional requirements may be needed depending on the type of business you are trying to register.
How Do I Register as a Corporation?
- Reserve and register your proposed business name on the Security and Exchange Commission’s website or by making a personal appearance at their office. Bring the completed, signed, and notarized required documents such as Articles of Incorporation, By-Laws, Treasurer’s Affidavit, Joint Affidavit of Two Incorporators, and any additional required documentation. Pay the fees then claim your SEC Certificate of Registration.
- Get a Barangay Clearance in the Barangay Hall where your business is located and request for clearance. You may be required to submit a Certificate of Business Registration, 2 Valid IDs, and Proof of Address.
- Obtain a Business Permit from the Mayor’s Office by visiting the municipal office where your business is placed and request for a business permit form. You may be asked to provide the same requirements for the Barangay Clearance.
- Register with the Bureau of Internal Revenue (BIR) through their Regional District Office that covers your business’s location. Ask for a copy of BIR Form 1903 (Application for Registration of Partnership or Corporation) and provide the following: Certificate of Business Registration from SEC, 2 Valid IDs, Proof of Address, Barangay Clearance, and Business Permit from the Mayor’s office. You can claim your BIR Certificate of Registration after paying all applicable fees and registering your book of accounts and receipts.
As always suggested, it is best to have a lawyer take care of things such as business registration for your corporation in the Philippines. This saves you time and effort and guarantees that things are processed correctly. So, if you think you need some legal assistance, keep in mind that Yap, Kung, Ching & Associates Law Office has all the best lawyers needed for this kind of task and you can always give us a call for assistance and inquiries.