CORPORATION LAW

Atty. Solomon M. Hermosura

The Revised Corporation Code (“RCC”), which took effect on
February 23, 2019, paved the way for the creation of the “One Person
Corporation” (“OPC”). As this concept is new, the SEC released two
memorandum circulars seeking to regulate the formation and
establishment of this novel business organization.
REVISED CORPORATION CODE
The Revised Corporation Code is the guidepost for the
establishment of the One Person Corporation, particularly Chapter III of
Title XII, which primarily governs its formation. An OPC is defined as “a
corporation with a single stockholder”.
Only Natural Persons (of legal age), Trust and Estate may form an
OPC. Even a foreign natural person may put up an OPC, however, it
remains subject to the constitutional and statutory restrictions on foreign
ownership. The trust elucidated under this title pertains to the “subject
being managed by the trustee.” The single stockholder shall become the
President and Sole Director of the OPC, and may be appointed as the
Treasurer. Nevertheless, a single stockholder cannot be the Corporate
Secretary.
The requirements for the Articles of Incorporation in Sec 14 of the
RCC shall apply to OPCs and shall also contain additional requirements
stated in the chapter.
An OPC shall not be required to have a Minimum Authorized
Capital Stock. But, if the stockholder assumes the position of treasurer,
the draft circulars provide that he must post a surety bond based on the
authorized capital stock, subject to renewal every two years, and upon
review of annual financial statements. Parenthetically, those with
authorized capital stocks between P1 and P250,000 shall shall give a bond
of P250,000. The bond shall be equal to the authorized capital stock when
the latter breaches P5 million.
While foreign natural persons may form OPCs, albeit subject to
restrictions as earlier mentioned, it is only the domestic corporations,
organized as stock corporation, that may be converted into a One Person
Corporation. The process shall be the same as amending the Articles of
Incorporation. As the inclusion of the suffix “OPC” is required under the
provisions of the code for names of this kind of corporation, its
conversion would necessarily render the same effect. Further, the number
of directors would naturally be reduced, the nominee and alternate
nominee shall be named, and the corporation shall adopt the distinctive
features of the OPC as provided for in the code.

AREÑO, Kim Louise 3C 1

 CORPORATION LAW
Atty. Solomon M. Hermosura
In sum, the memorandum circulars, when taken in view and aligned
with of the provisions of a One Person corporations, aims to provide
further clarification. As this is a novel chapter of the code, conceived in
the RCC, such draft guidelines remain essential as it gives the necessary
additional information needed to thresh out any ambiguities. The RCC
provides for its defining characteristics; and where there exists any
question, particularly on the requisites, and conversion of an existing
corporation to an OPC, the draft circular construes the steps needed to
integrate this entity into an actual One Person Corporation.
THE POWERS AND FUCTIONS OF THE SEC
The Securities and Exchange Commission is armed with the power
to “Approve, reject, suspend, revoke or require amendments to
registration statements, and registration and licensing applications.” In
view of such power, the memorandum circular provides for the guidelines
and documentary requirements to satisfy the conversion from an already
existing corporation to an OPC. It shall include the amended Articles of
Incorporation, including pertinent changes which characterize the nature
of an OPC, as provided in the RCC. The commission also requires a
Secretary’s Certificate to evidence the acquisition of all the outstanding
shares by the single stockholder, the settlement of taxes and all other
obligations in favor of government, and free from intra-corporate dispute.
Other requirements that have been provided in the code must also be
complied with.
PUBLIC POLICY FOR ALLOWING THE ORGANIZATION OF OPCs
The primary purpose for the organization of the One Person
Corporation is to give ease in doing business in the country. It provides
for platform for entrepreneurs to form their own corporation. What makes
this a viable and advantageous option for persons who wish to engage in
business is the limited liability of the stockholder. The corporate entity is
separate and distinct from the person comprising it, making the personal
properties of the stockholder independent from that of the corporation.
This means that creditors of the corporation may not come after the assets
of the single stockholder. However, the stockholder must prove that the
corporation is sufficiently adequately financed. Such restriction aims to
prevent the stockholder from abusing the system by converting corporate
properties to personal properties, intentionally keeping it away from the
reach of his creditors. The Doctrine of Piercing the Veil of Corporate
Fiction applies to OPCs, as well as Corporate Income Tax.

AREÑO, Kim Louise 3C 2