d. One Person Corporations

Excepted Corporations

The following are not allowed to incorporate as OPC:

• Banks,
• Non-bank financial institutions,
• Quasi-banks,
• Pre-need,
• Trust,
• Insurance companies; and
• Public and publicly listed companies,
• Non-chartered GOCCs; and
• Natural person who is licensed to exercise a profession may not organize an OPC for the purpose of exercising such a profession. EXC: unless otherwise provided by special laws. (Sec. 116)¹

Capital stock requirement (Sec. 117)

General Rule: A One Person Corporation is not required to have a minimum authorized capital stock.

Exception: As otherwise provided by special law.

Note: Unless required by applicable laws or regulations, no portion of the authorized capital is required to be paid up at the time of incorporation. (SEC Circular No. 7, Series of 2019)²

Articles of incorporation and by-laws

Requirements for filing the Articles of Incorporation:

• In accordance with Sec. 14 of the RCC³.
• If the single stockholder is a trust or an estate - the name, nationality, and residence of the trustee, administrator, executor, guardian, conservator, custodian, or other person exercising fiduciary duties together with the proof of such authority to act on behalf of the trust or estate
• Name, nationality, residence of the nominee and alternate nominee, and the extent, coverage and limitation of the authority. (Sec. 118)⁴

Note: OPCs are NOT required to file their corporate bylaws. (Sec. 119)⁵

Corporate name

It should Indicate the letters “OPC” either below or at the end of their corporate name. (Sec. 120)⁶

Corporate structure and officers

One Person Corporation (OPC) (Sec. 116)⁷

• a corporation with a single stockholder

Who may form?

• Natural person – must be of legal age
• A foreign natural person may put up an OPC subject to applicable capital requirement and constitutional and statutory restrictions on foreign participation in certain investment areas or activities (SEC Memorandum 7-2019)⁸
• Trust – does not refer to a trust entity, but the subject being managed by a trustee. If the single stockholder is a trust or estate, identify the trustee, administrator, executor, guardian, conservator, custodian, or other person exercising fiduciary duties
• proof of authority to act on behalf of the trust or estate must be submitted at the time of incorporation (SEC Memorandum 7-2019)
• Estate

Who may NOT form?

• Banks and quasi-banks, non-bank financial institutions (SEC Memorandum 7-2019)
• Pre-need, trust, insurance, public and publicly-listed companies
• Non-chartered government-owned and - controlled
• Natural person who is licensed to exercise a profession to form an OPC for the purpose of exercising such profession

Exception: as provided under special laws

The single stockholder shall be the sole director and president of the One Person Corporation. (Sec. 121)⁹

When to appoint officers? (Sec. 122)¹⁰

Within fifteen (15) days from the issuance of its certificate of incorporation

Who to appoint?

• Treasurer
• Corporate secretary
• Other officers as may be deemed necessary

Who and when to notify?

Securities and Exchange Commission (SEC)

• within five (5) days from appointment
• using the Appointment Form as may be prescribed by the SEC (SEC Memorandum 7-2019)¹¹

Single stockholder allowed?

• Corporate secretary – NO
• Treasurer – YES
• Conditions:
• Give bond to the SEC in such a sum as may be required

BOND REQUIREMENT as per SEC Memorandum Circular No. 7-2019¹²:

• Bond shall be renewed every two (2) years or as often as may be required, upon review of the Audited Financial Statements/ Financial Statements certified under oath by the company’s President/Treasurer
• Bond is a continuing requirement as long as the single stockholder is the self-appointed Treasurer of the OPC
• Bond may be cancelled upon proof of appointment of another person as the Treasurer and Filing of Amended Form for Appointment of Officers
• Undertake in writing to faithfully administer the One Person Corporation’s funds to be received as treasurer
• To disburse and invest the same according to the articles of incorporation as approved by the SEC

Special Functions of the Corporate Secretary(RA 11232, Sec. 123)¹³

In addition to the functions designated by the One Person Corporation, the corporate secretary shall:

• Be responsible for maintaining the minutes book and/or records of the corporation
• Notify the nominee or alternate nominee of the death or incapacity of the single stockholder
• notice shall be given no later than five (5) days from such occurrence
• Notify the SEC of the death of the single stockholder
• within five (5) days from such occurrence
• state the names, residence addresses, and contact details of all known legal heirs
• Call the nominee or alternate nominee and the known legal heirs to a meeting and advise the legal heirs with regard to:
• the election of a new director
• amendment of the articles of incorporation
• other ancillary and/or consequential matters

Nominee

• designated by a single stockholder
• in the event of the single stockholder’s death or incapacity, nominee takes the place of the single stockholder as director and shall manage the corporation’s affairs
• written consent of both nominee and alternate nominee (SEC Memorandum Circular No. 7, Series of 2019)¹⁴ – to be attached in the application of incorporation
• time before the death or incapacity of the single stockholder
• may be changed at any time
• by submitting to the SEC the names of the new nominees and their corresponding written consent
• Articles of Incorporation need NOT be amended (SEC Memorandum Circular No. 7, Series of 2019)

What shall be contained in articles of incorporation with regard to the nominee and alternate nominee?

• names
• nationalities
• residence addresses
• contact details
• extent, coverage, and limitations of their authority in managing the affairs of the One Person Corporation.

Term of Nominee and Alternate Nominee (Sec. 125)¹⁶

Incapacity of the single stockholder:

• Temporary - until the stockholder, by self determination, regains the capacity to assume such duties.
• Death or Permanent - until the legal heirs of the single stockholder have been lawfully determined, and the heirs have designated one of them or have agreed that the estate shall be the single stockholder of the One Person Corporation

Alternate Nominee

• shall sit as director and manage the One Person Corporation in case of the nominee’s inability, incapacity, death, or refusal to discharge the functions as director and manager of the corporation
• for the same term and under the same conditions applicable to the nominee

Minimum Capital Stock Required for One Person Corporation (Sec. 117)¹⁷

General rule: No minimum authorized capital stock

Exception: as otherwise provided by special law

Required Paid Up Capital (SEC Memorandum 7-2019)¹⁸

General rule: No portion of authorized capital stock is required to be paid up at the time of incorporation

Exception: as otherwise required by applicable laws or regulations

Minutes and records

A One Person Corporation shall maintain a minutes book which shall contain all actions, decisions, and resolutions taken by the One Person Corporation. (Sec. 127)¹⁹

When action is needed on any matter, it shall be sufficient to prepare a written resolution, signed and dated by the single stockholder, and recorded in the minutes book of the One Person Corporation. The date of recording in the minutes book shall be deemed to be the date of the meeting for all purposes under this Code. (Sec. 128)²⁰

Liability (Sec. 130)²¹

A sole shareholder claiming limited liability has the burden of affirmatively showing that:

• the corporation was adequately financed.
• the property of the One Person Corporation is independent of the stockholder’s personal property.

The principles of piercing the corporate veil applies with equal force to One Person Corporations as with other corporations.

Conversion from an Ordinary Corporation to a OPC (Sec. 131)

When a single stockholder acquires all the stocks of an ordinary stock corporation, the latter may apply for conversion into a OPC, subject to the submission of such documents as the SEC may require. If the application for conversion is approved, the SEC shall issue certificate of filing of amended articles of incorporation reflecting the conversion.

Conversion from an OPC to an Ordinary Stock Corporation (Sec. 132)

A One Person Corporation may be converted into an ordinary stock corporation after due notice to the SEC of such fact and of the circumstances leading to the conversion, and after compliance with all other requirements for stock corporations under this Code and applicable rules. Such notice shall be filed with the SEC within sixty (60) days from the occurrence of the circumstances leading to the conversion into an ordinary stock corporation. If all requirements have been complied with, the SEC shall issue an amended certificate of incorporation reflecting the conversion.

In case of death of the single stockholder, the nominee or alternate nominee shall transfer the shares to the duly designated legal heir or estate within seven (7) days from receipt of either an affidavit of heirship or self- adjudication executed by a sole heir, or any other legal document declaring the legal heirs of the single stockholder and notify the SEC of the transfer. Within sixty (60) days from the transfer of the shares, the legal heirs shall notify the SEC of their decision to either wind up and dissolve the One Person Corporation or convert it into an ordinary stock corporation.

Note: The Converted Corporations shall succeed the former corporation and be legally responsible for all the latter’s outstanding liabilities as of the date of conversion.