What is the main source of law authorising this entity form?

The Revised Corporation Code of the Philippines (Republic Act No. 11232, also known as the “Revised Corporation Code”).

Give a brief summary of this entity form, including

Does the entity possess separate legal personality?

A corporation has a separate legal personality from its shareholders and directors.

(Maximum) period of existence

A corporation has a perpetual existence unless its Articles of Incorporation provides otherwise.

Governing document(s)

A corporation is governed by the Revised Corporation Code and its Articles of Incorporation and bylaws.

Liability of incorporators / shareholders

As a general rule, incorporators/shareholders are not personally liable for the debts of the corporation except to the extent of their unpaid subscriptions. Incorporators are the shareholders or members mentioned in the Articles of Incorporation as originally forming and composing the corporation and who are signatories thereof.

(Governing) bodies

The governing body of a corporation is the Board of Directors (for stock corporations) or Board of Trustees (for non-stock corporations).

Other particularities

Directors, trustees, or officers of the corporation are not personally liable for their actions as such, except in certain instances under the Revised Corporation Code and special laws.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

Domestic corporations may engage in international transactions subject to the licensing and regulatory rules of the applicable foreign jurisdiction.

Can this type of entity be publicly listed or held?

Only stock corporations may be listed on the Philippine Stock Exchange (PSE). Non-stock corporations may not be listed on the PSE.

Can this type of entity be used for a non-profit or charitable organization?

Non-stock corporations may be formed or organised for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes. Stock corporations are formed with the expectation of surplus profits and dividends although they may give reasonable donations for public welfare, hospital, charitable, cultural, scientific, civic, or similar purposes.

Give a brief summary of the process of incorporation, formation, or organization, including

Main documents required

The incorporation documents are filed with the Securities and Exchange Commission. The main incorporation documents are:

1. Name Verification Slip;
2. Notarised Articles of Incorporation executed by the incorporators;
3. Notarised bylaws signed by the incorporators;
4. For stock corporations, notarised treasurers affidavit certifying compliance with the subscription and minimum paid-up capital requirement, if applicable;
5. Notarised undertaking to change the corporate name if it is found to be misleading, deceptive, or confusingly similar to a registered name or contrary to public morals, good custom, or public policy; and
6. A favourable recommendation of the appropriate government agency if the agency is governed by a special law.

Involvement of notary, company register, governmental authorities

After verification and examination of the submissions, the Securities and Exchange Commissions will issue a Certificate of Incorporation.

Timing (estimate)

The incorporation process takes approximately two (2) months from the filing of the complete documents. However, the estimated timeline may be affected by quarantine measures imposed due to COVID-19. This may also depend on whether the incorporation is done under manual processing or through the online registration system of the Securities and Exchange Commission.

Main costs, including registration and similar fees (excluding legal fees)

A stock corporation must pay a filing fee equivalent to one-fifth of 1% of the authorised capital stock but not less than PHP2000, or the subscription price of the subscribed capital stock – whichever is higher – plus 1% of the amount as a legal research fee, no less than PHP20. The registration fee for bylaws of a stock corporation is PHP1,010.

A non-stock corporation must pay a registration fee for Articles of Incorporation and bylaws amounting to PHP2,020.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The primary and secondary purposes of the corporation are set out in the Articles of Incorporation.

Minimum number of incorporators / shareholders and residency requirements

Any person, partnership, association, or corporation – singly or jointly with others, but not more than 15 in number – may organise a corporation for any lawful purpose/s. Each incorporator of a stock corporation must own at least one (1) share of stock of the corporation.

Minimum number of directors (or other applicable officers) and residency requirements

The corporation may not have more than 15 directors or trustees. Each director of a stock corporation must own at least one (1) share of stock of the corporation. Trustees of non-stock corporations must be members thereof.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

As a rule, no minimum paid-up capital is needed for incorporation. However, some special laws and regulations require minimum capitalisation requirements for certain corporations. For example, a corporation engaged in a domestic market enterprise and owned to the extent of more than 40% by foreigners is required to have a minimum paid up capital of at least USD 200,000. The initial paid-up capital, if in the form of cash, is deposited in a bank in the name of the treasurer-in-trust for the corporation.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

The incorporators must sign the Articles of Incorporation and the bylaws of the corporation. The Articles of Incorporation must be notarised. Therefore, if the incorporators sign abroad, the Articles of Incorporation will also have to be consularised or apostilled, as applicable.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Each incorporator must indicate his/her Taxpayer Identification Number (TIN) in the Articles of Incorporation. The TIN of the corporation will be provided in its certificate of incorporation although it must still register with the relevant office of the Philippine Bureau of Internal Revenue prior to commencement of business operations.

What is the title of the applicable company registry?

Securities and Exchange Commission.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles, Ownership identification (direct and/or indirect ownership, 'beneficial owners'), Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

The following information must be filed with the Securities and Exchange Commission and is publicly available:

1. The following information must be filed with the Securities and Exchange Commission and is publicly available:
2. Bylaws.
3. Audited financial statements.
4. General information sheet, which contains:


1. Parent, subsidiary, and affiliate companies;
2. Directors;
3. Officers;
4. Top 20 stockholders of record;
5. Paid-up capital;
6. Declaration of dividends;
7. Manpower complement; and
8. Beneficial Ownership Declaration.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Board of Directors/Board of Trustees (the board).

Generally, the board exercises all the powers, conducts all the business, and controls and holds all the property of the corporation. Other functions may be assigned to the board in the bylaws of the corporation.

Unless the Articles of Incorporation or the bylaws provide for a greater majority, a simple majority of the members of the board as fixed in the Articles of Incorporation constitutes a quorum for the transaction of corporate business. Every decision of at least a majority of those present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers and certain actions under the Revised Corporation Code which requires the vote of a majority of all the members of the board.

The bylaws of a corporation may provide for an executive committee, composed of at least three (3) members of the board, which may act on matters delegated to it in the bylaws or by majority vote of the board, except certain non-delegable matters specified in the Revised Corporation Code.

Non-stock or special corporations may, through their Articles of Incorporation or bylaws, designate their governing boards by any name other than a board of trustees.

How are the members of the executive body appointed, dismissed and replaced?

The members of the board are initially appointed in the Articles of Incorporation and are thereafter elected by the stockholders or members of the corporation. They hold office for one (1) year and act as such in a hold-over capacity until their successors are elected and qualified.

A director must be a shareholder or a member.

A director or trustee of a corporation may be removed by a vote of the stockholders holding at least two-thirds of the outstanding capital stock entitled to vote in a stock corporation, or by a vote of at least two-thirds of the members entitled to vote in a non-stock corporation at a regular meeting or at a special meeting called for the purpose.

Vacancies resulting from an increase in the number of directors or trustees may be filled only by election of the stockholders or members in a meeting duly called for the purpose, or in the same meeting authorising the increase, if stated in the notice.

If the vacancy results from reasons other than removal, expiration of term, or increase in the board membership, it may be filled by the vote of at least a majority of the remaining directors or trustees, if they still constitute a quorum. Otherwise, the vacancy must be filled by election of the stockholders or members.

When the vacancy is due to term expiration, the election shall be held no later than the day of such expiration at a meeting called for that purpose. When the vacancy arises as a result of removal by the stockholders or members, the election may be held on the same day of the meeting authorising the removal and this fact must be so stated in the agenda and notice of said meeting. In all other cases, the election must be held no later than 45 days from the time the vacancy arose.

A director or trustee elected to fill a vacancy shall be referred to as a replacement director or trustee and shall serve only for the unexpired term of the predecessor in office. However, when the vacancy prevents the remaining directors from constituting a quorum and emergency action is required to prevent grave, substantial, and irreparable loss or damage to the corporation, the vacancy may be temporarily filled from among the officers of the corporation by unanimous vote of the remaining directors or trustees. The action by the designated director or trustee shall be limited to the emergency action necessary, and the term shall cease within a reasonable time form the termination of the emergency or upon election of the replacement director or trustee, whichever comes earlier. The corporation must notify the Securities and Exchange Commission within three (3) days from the creation of the emergency board, stating therein the reason for its creation.

Any change in the membership of the board must be reported to the Securities and Exchange Commission in the corporation’s General Information Sheet. If the company is listed, it must also file a current report (SEC Form 17-C).

Is it possible to appoint corporate directors or must all directors be natural persons?

No; directors, as a rule, must be elected and not appointed, except during incorporation. All directors must be natural persons.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

Yes; we assume “non-executive” director in this context is intended to mean an “independent director” or one who, apart from shareholdings and fees received from the corporation, is independent of management and free from any business or other relationship which could or could reasonably be perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director. The board of the following corporations vested with public interest shall have independent directors constituting at least 20% of such board:

1. Corporations whose securities are registered with the Securities and Exchange Commission, namely those corporations listed with an exchange or with assets of at least PHP50,000,000 and having 200 or more holders of shares, each holding at least 100 shares of a class of its equity shares;
2. Banks and quasi-banks, non-stock savings and loan associations, pawnshops, corporations engaged in money service business, preneed, trust and insurance companies and other financial intermediaries; and
3. Other corporations engaged in businesses vested with public interest like the above, as may be determined by the Securities and Exchange Commission.

Independent directors must be elected by the shareholders present or entitled to vote in absentia during the election of directors. Independent directors shall be subject to rules and regulations governing their qualifications, disqualifications, voting requirements, duration of term and term limit, maximum number of board membership and other requirements as prescribed by the Securities and Exchange Commission. The executive and non-executive directors typically function in a one-tier board.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

There is no title given to the body of shareholders/stockholders and members of a corporation. Although the board conducts the business of the corporation, the affirmative vote or written assent of the stockholders or members is required in the following matters:

1. Amendment of the Articles of Incorporation;
2. Election or removal of directors or trustees;
3. Grant of compensation, other than per diems, to directors;
4. Ratification of contracts entered into by the corporation with its directors or trustees;
5. Ratification of contracts entered by the corporation with another corporation, when an interlocking director has only a nominal interest in the former and a substantial interest (i.e. shareholdings exceeding 20%) in the latter;
6. Ratification of a director’s acquisition of a business opportunity which should belong to the corporation;
7. Extending or shortening the corporate term;
8. Incurring, creating, or increasing any bonded indebtedness of the corporation;
9. Increase or decrease of authorized capital stock;
10. Denial of pre-emptive right;
11. Sale of all or substantially all corporate assets;
12. Investment of corporate funds in any other corporation or business, or for any purpose other than the primary purpose for which it was organised;
13. Issuance of stock dividends;
14. Conclusion of a management contract with another corporation;
15. Amendment, repeal, or adoption of new corporate bylaws;
16. Authorising the board to fix the price of shares issued without par value;
17. Approval of a plan of merger or consolidation, or any amendment thereto;
18. Delegation to the board of the power to amend, repeal, and adopt new bylaws, and the revocation thereof; and
19. Dissolution of a corporation.

Shareholders of shares that are not entitled to vote have the right to vote in the (i) amendment of the Articles of Incorporation, (ii) adoption and amendment of bylaws, (iii) sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all the corporate property, (iv) incurring, creating or increasing bonded indebtedness, (v) increase or decrease of capital stock, (vi) merger or consolidation of the corporation with another corporation/s, (vii) investment of corporate funds in another corporation or business in accordance with the Revised Corporation Code, and (viii) dissolution of the corporation. In addition to their right to vote on all matters that require their consent or approval, the stockholders have the following rights under the Revised Corporation Code:

1. Pre-emptive right to all stock issuances of the corporation;
2. Right to inspect corporate books and records;
3. Right to information;
4. Right to dividends;
5. Right to transfer shares;
6. Right to receive residual assets following the corporation’s partial or full liquidation; and
7. Appraisal right.

Note: Other rights and responsibilities may be set out in the Articles of Incorporation and in the bylaws.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Unless the Revised Corporation Code or the Articles of Incorporation and bylaws require a higher quorum requirement, a quorum generally consists of the stockholders representing a simple majority of the outstanding capital stock of a stock corporation, or a simple majority of the members of a non-stock corporation. Due to the higher voting requirement in the Revised Corporation Code for matters such as the amendment of the Articles of Incorporation, removal of board members, issuance of stock dividends, and approval of a plan of merger or consolidation, a higher quorum is effectively required. The Articles of Incorporation may provide – or may be amended to provide – higher quorum and voting requirements.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

The Revised Corporation Code provides special rules governing close corporations. A close corporation is one whose Articles of Incorporation provides that it must have a maximum of 20 stockholders, that its shares shall be subject to one (1) or more transfer restrictions, and that it shall not list in any stock exchange nor make any public offering of its shares.The Articles of Incorporation of a close corporation may provide that it be managed by the stockholders of the corporation rather than by a board of directors.

The Revised Corporation Code provides special rules for a “One Person Corporation” or “OPC”. Only a natural person, trust or an estate may form an OPC.

Banks and quasi-banks; pre-need, trust, insurance, public and publicly held companies; and non-chartered government-owned and controlled corporations may not incorporate as OPCs. A natural person who is licensed to exercise a profession may not organise as an OPC for the purpose of exercising such profession except as otherwise provided under special laws. Other special corporations include educational corporations and religious corporations.

Companies listed on the PSE, those with registered securities, as well as those with assets of at least PHP50,000,000 or other amounts as prescribed by the Securities and Exchange Commission, having 200 or more holders each with at least one hundred 100 shares of a class of its equity securities are governed by special rules and required to make certain disclosures, as well as submit periodic reports.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

A corporation is required to file its financial statements with the Securities and Exchange Commission within the prescribed time which depends on the last numerical digit of the corporation’s registration or license number. A corporation whose fiscal year ends on a date other than 31 December must file its financial statements within 120 calendar days from the end of its fiscal year.

A corporation, as a rule, is required to submit financial statements audited by an independent certified public accountant. However, if the total assets or liabilities of the corporation are less than PHP600,000, the financial statements must be certified under oath by the corporation’s treasurer or Chief Financial Officer. Stock and non-stock corporations which do not meet the PHP600,000 total assets or liabilities threshold may submit their annual financial statements accompanied by a duly notarised Treasurer’s Certification only (rather than an Auditor's Report).

A corporation vested with public interest must also submit a director or trustee compensation report, as well as a director or trustee appraisal or performance report, including the standards or criteria used to assess each director or trustee. The reportorial requirements must be submitted annually and within such period as may be prescribed by the Securities and Exchange Commission. Listed corporations are required to submit audited quarterly financial reports. The said requirements are in addition to those relating to filing tax returns with the Bureau of Internal Revenue.

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

As a rule, each financial statement submitted by a corporation to the Securities and Exchange Commission must have been audited by an external auditor or independent Certified Public Accountant. However, if the total assets or liabilities of the corporation are less than PHP600,000, it is enough that the financial statements are certified under oath by the corporation’s treasurer or Chief Financial Officer.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

The members of the board must elect a president, who must be a director; a treasurer, who must be a resident of the Philippines but need not be a director; a secretary, who must be a Philippine citizen and resident of the Philippines; and other officers as provided for in the bylaws. If the corporation is vested with public interest, the board must also elect a compliance officer. Two (2) or more positions may be held concurrently by the same person, except no one can act as president and secretary or president and treasurer at the same time. The corporate secretary is the custodian of corporate records and is responsible for calling meetings.

What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?

For stock corporations, shares; for non-stock corporations, membership.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Yes, the corporation must always have common shares (or ordinary shares), but their shares may be further divided into classes or series of shares (in addition to common) with rights, privileges, and restrictions stated in the Articles of Incorporation. Examples of these are “preferred” shares, which may be given priority in the distribution of dividends or assets, and such other preferences stated in the Articles of Incorporation, as well as “redeemable” shares, which may be purchased by the corporation upon the expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the corporate books. Certain classes of shares may also be deprived of the right to vote, except in certain cases in which, as provided under the Revised Corporation Code, all shareholders have the right to vote. Non-stock corporations may also provide for classes of membership, such as voting and non-voting.

What documentation is required for the transfer of ownership interests?

A deed of assignment and the duly endorsed stock certificate are needed to transfer ownership interest. Membership in a non-stock corporation and all rights arising therefrom are personal and non-transferable, unless the Articles of Incorporation or the bylaws otherwise provide.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

In addition to the above-mentioned documents, the Certificate Authorising Registration (CAR) from the Bureau of Internal Revenue must be submitted to the corporate secretary before the transfer will be recorded in the stock and transfer book of the corporation. Unless recorded in the stock and transfer book, the transfer will not bind third parties including the corporation.

Are there any applicable stamp duties imposed when transferring ownership interests?

Documentary stamp tax (DST) in the amount of PHP1.50 for every PHP200 or fraction thereof of the par value of the shares. For shares without par value, the DST imposed is equivalent to 50% of the DST paid upon the original issue of the shares.

How are shares issued? (including information on payment obligations, registration requirements)

Provided that there is sufficient authorised capital stock, unsubscribed shares may be issued by the board through a resolution. For original issue of shares, DST is imposed in the amount of PHP2 for each PHP200 or fraction thereof of the par value of the share. For shares without par value, the DST is based on the actual consideration for the issuance of such shares of stock. In the case of stock dividends, the DST is based on the actual value represented by each share. The subscription must be recorded in the stock and transfer book only upon proof of payment of the DST.

Although partial payment of the subscription price is allowed, the stock certificate is issued to the subscriber only upon full payment of the subscription. Shares may not be issued for a consideration less than the par or issued price. A director or officer who consents to the issuance of stocks below the par or issued price (i.e. watered stocks) will be liable with the stockholder involved for the deficiency in the consideration.

Further information on equity contributions, e.g., Non-cash payments on shares; (Share premium) contributions without issuance of shares, Can partially paid shares/ownership interests permitted and what are the restrictions on them?

Consideration for the issuance of shares may be any of the following, or a combination thereof:

1. Cash;
2. Property necessary or convenient for the use and lawful purposes of the corporation at a fair valuation equal to the par or issued price of the stock issued;
3. Services actually rendered to the corporation;
4. Previously incurred indebtedness of the corporation;
5. Amounts transferred from unrestricted retained earnings to stated capital;
6. Outstanding shares exchanged for stock;
7. Shares of stock in another corporation; and/or
8. Another generally accepted form of consideration.

If the consideration is other than cash or consists of intangible property such as patents or copyrights, the valuation thereof is initially determined by the incorporators or the board, subject to approval by the Securities and Exchange Commission. Shares of stock may not be issued in exchange for promissory notes or future services. Share premiums or additional paid-in capital (i.e. subscription price in excess of par value) is considered part of the equity of the corporation.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Generally, a corporation may only reacquire shares when it has unrestricted retained earnings. Such reacquired shares are called “treasury shares”. An exception would be redeemable shares, which the corporation may repurchase regardless of unrestricted retained earnings provided that after such redemption, the corporation’s assets will still be sufficient to cover its liabilities.

A decrease in the capital stock requires a majority vote of the board and the affirmative vote of the stockholders representing at least two-thirds of the outstanding capital stock. A decrease in the capital stock also requires prior approval of the Securities and Exchange Commission and where appropriate, of the Philippine Competition Commission.

The corporation must submit to the Securities and Exchange Commission a Certificate of Decrease of Authorised Capital Stock; an audited financial statementstatements as of the last fiscal year; a list of stockholders before and after the decrease, certified under oath by the corporate secretary; the amended Articles of Incorporation; a notarised directors’ certificate certifying (i) the amendment of the Articles of Incorporation to decrease the authorised capital stock, (ii) a directors’ certificate which is a notarised document signed by a majority of the directors and the corporate secretary certifying the amendment of the Articles of Incorporation to decrease the authorised capital, the votes of the directors and the stockholders thereto, and (iii) the date and place of the stockholders meeting, (iii) proof (in the form of a publisher’s affidavit) that the decrease in capital has been published in a newspaper of general circulation; (iv) a notarised secretary’s certificate that there is no pending case involving an intra-corporate dispute and (v) clearance from other departments/government agencies.

If the decrease involves a return of capital, the corporation must also file a long form audit report and list of creditors with the amounts due to each, certified by the auditor or certified under oath by the company accountant, with the written consent of each creditor.

Any requirements with respect to distributions to shareholders?

The board may declare dividends only out of the unrestricted retained earnings of the corporation, as shown in its latest annual or interim financial statement. The dividends may be paid in the form of cash, property, or stock. Stock dividends may be issued out of the unrestricted retained earnings and upon the approval of stockholders representing at least two-thirds of the outstanding capital stock entitled to vote. Stock corporations are prohibited from retaining surplus profits in excess of 100% of their paid-in capital stock, except in certain cases enumerated in the Revised Corporation Code.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, the shareholders agreement is binding between the parties, but only the provisions thereof reflected in the Articles of Incorporation, bylaws, and stock certificate will be binding on third parties.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

Corporations are subject to corporate income tax and must pay an annual registration fee of PHP500 to the Bureau of Internal Revenue. They must also pay for the annual renewal of their business permits in the localities where they have offices, as well as the renewal of any license or accreditation granted by other government agencies.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

There are national internal revenue taxes and local taxes. On a national level, domestic corporations are subject to a normal corporate income tax of 25% on their taxable income. If the corporation’s net taxable income does not exceed PHP5,000,000 and the total assets do not exceed PHP100,000,000, the corporate income tax rate is 20%. For resident foreign corporations, the corporate income tax rate of 25% will be imposed on their taxable income.

Beginning the fourth taxable year from commencement of a corporation’s business operations, a minimum corporate income tax of 1% of its gross income is imposed when the minimum corporate income tax is greater than the normal corporate income tax. However, the rate of 1% is only until 30 June 2023. After such time, the minimum corporate income tax will return to 2%.

Local government units such as cities and municipalities are also authorised to impose local business and community taxes on corporations. The discussion above excludes business related taxes such as value-added tax, percentage tax and excise tax which are imposed at the national level.

Summary of any specific matters, e.g. recent or prospective major legal developments

Recent major legal developments include the passage of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) which became effective 11 April 2021. For domestic corporations, corporate income tax rates are reduced from 30% to 25% or 20%, whichever is applicable.