Company Registration and Corporate Services Licensing in the Philippines

Company Registration and Corporate Services Licensing in the Philippines
An Overview of Legal and Regulatory Requirements

1. Introduction

The Philippines offers a strategic location, a young and English-proficient workforce, and government incentives that attract both local and foreign businesses. To operate legally, entities must comply with company registration requirements and, depending on the nature of their business, secure appropriate licenses from various government agencies. This article provides a comprehensive overview of the legal and regulatory frameworks governing company registration and corporate services licensing in the Philippines.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult qualified legal professionals for guidance tailored to your specific circumstances.

2. Governing Laws and Regulatory Bodies

  1. Revised Corporation Code of the Philippines (Republic Act No. 11232)

    • Enacted in 2019, it updated the old Corporation Code (Batas Pambansa Blg. 68).
    • Governs the establishment, organization, and regulation of corporations in the Philippines.
    • Introduced notable changes such as the One Person Corporation (OPC) and eased some capital requirements.

  2. Securities and Exchange Commission (SEC)

    • The primary agency regulating corporations, partnerships, and other business entities.
    • Issues Certificates of Incorporation or Registration for partnerships and corporations.
    • Oversees corporate governance and compliance, including submission of annual reports and audited financial statements.

  3. Department of Trade and Industry (DTI)

    • Oversees the registration of sole proprietorships.
    • Administers business name registration for single-owner businesses.

  4. Local Government Units (LGUs)

    • Issue local business permits or Mayor’s permits, barangay clearances, and other location-based licenses.

  5. Bureau of Internal Revenue (BIR)

    • Issues Tax Identification Numbers (TIN) to entities and collects taxes.
    • Requires businesses to register and secure Authority to Print (ATP) official receipts/invoices.
    • Enforces regular tax compliance (e.g., VAT, income tax, withholding tax).

  6. Other Agencies

    • Certain industries require additional licensing from specialized agencies, e.g., Bangko Sentral ng Pilipinas (BSP) for financial institutions, Philippine Economic Zone Authority (PEZA) for export-oriented or IT enterprises, Food and Drug Administration (FDA) for food/drugs/cosmetics, and so on.

3. Business Structures in the Philippines

Businesses typically register under one of the following structures:

  1. Sole Proprietorship

    • Owned by a single individual who exercises full control and bears all liabilities.
    • Registration is with the DTI for the business name, then with the LGU for the Mayor’s permit, and the BIR for tax obligations.
    • Easiest to set up but owner’s personal assets are exposed to liability.

  2. Partnership

    • Formed by two or more persons who share profits and liabilities.
    • Registered with the SEC; requires Articles of Partnership.
    • Each partner is liable up to the extent of their partnership contributions; in a general partnership, liability can extend to personal assets.

  3. Corporation

    • A separate legal entity with a minimum of 2 and a maximum of 15 incorporators (under the old rules). Under the Revised Corporation Code, there can be a single stockholder in the case of a One Person Corporation (OPC).
    • Liability is limited to the corporate assets, protecting stockholders’ personal assets.
    • Requires Articles of Incorporation and Bylaws for SEC registration, unless an OPC which has simplified governance documents.

  4. One Person Corporation (OPC)

    • A new structure introduced by the Revised Corporation Code.
    • Allows a single individual to form a corporation without needing a board of directors or corporate secretary (though a treasurer and other officers are still required, which can be the same person with certain conditions).
    • Offers limited liability but must comply with corporate compliance rules set by the SEC.

  5. Branch Office / Representative Office / Regional Headquarters (for Foreign Corporations)

    • A foreign corporation can set up a branch or representative office in the Philippines.
    • Branch offices engage in revenue-generating activities, while representative offices may only conduct non-commercial activities such as market research and liaison.
    • Requires SEC approval and compliance with minimum capital requirements for branch offices.

4. Steps to Register a Corporation in the Philippines

Below is the standard process for registering a domestic corporation with multiple stockholders. Note that One Person Corporations and branches/representative offices have slightly modified procedures.

  1. Name Verification

    • Use the SEC’s online system (e.g., SEC Name Verification System) to check if the proposed corporate name is still available.
    • Reserve the name once approved.

  2. Drafting and Notarizing Incorporation Documents

    • Articles of Incorporation: Outlines the corporate name, principal office, purpose, term of existence, names of incorporators, capital structure, etc.
    • Bylaws: Specifies the internal governance rules, though for OPCs, separate bylaws are optional.
    • Documents must be signed by all incorporators and notarized.

  3. Bank Certificate of Deposit (If Required)

    • For some corporations (except OPCs or those not required by law), the SEC may require proof of paid-up capital via a bank certificate of deposit.
    • Deposit the required portion of authorized capital stock in a local bank.

  4. Filing and Payment of Fees

    • Submit the notarized documents to the SEC.
    • Pay registration fees, which typically include filing fees, legal research fees, and other miscellaneous charges.

  5. Issuance of SEC Certificate of Incorporation

    • Once the SEC verifies the documents and payment, it issues a Certificate of Incorporation (or Certificate of Registration for partnerships).

  6. Post-Registration Requirements

    • BIR Registration: Apply for a TIN, register official receipts/invoices, and pay the annual registration fee.
    • LGU Registration: Obtain a Mayor’s permit and barangay clearance.
    • Social Security Agencies: Register with the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (HDMF or Pag-IBIG) if you have employees.
    • Books of Accounts: Must be registered with the BIR and regularly maintained.

5. Foreign Ownership and Investment Restrictions

  1. Foreign Investments Act (FIA)

    • Governs foreign equity in domestic enterprises.
    • Maintains a “Foreign Investment Negative List” specifying industries that are either partially or fully restricted from foreign ownership.

  2. 60-40 Equity Rule

    • In certain industries (e.g., public utilities, media), the Constitution mandates at least 60% Filipino ownership, allowing up to 40% foreign equity.
    • Recent amendments to the Public Service Act (PSA) have relaxed certain restrictions, but each sector must be checked individually.

  3. Antidummy Law

    • Prohibits foreign nationals from circumventing ownership restrictions by using “dummy” Filipino shareholders.
    • Violations can lead to serious criminal and administrative penalties.

6. Licensing for Corporate Services and Regulated Activities

Depending on the nature of the business, additional licenses or certifications may be required:

  1. Professional Services and Corporate Service Providers

    • Law firms and accounting firms are subject to the relevant professional regulations (e.g., the Supreme Court for law firms, the Professional Regulation Commission for CPAs).
    • Corporate service providers offering business registration, corporate secretarial, and compliance services typically must register with the SEC and/or relevant professional bodies.

  2. Financial Services

    • Entities engaged in banking, lending, or other financial services must secure licenses from the Bangko Sentral ng Pilipinas (BSP).
    • Companies offering investment products may also need to register with the SEC’s Markets and Securities Regulation Department.

  3. IT-BPO and PEZA Registration

    • Information Technology and Business Process Outsourcing (IT-BPO) companies often register with the Philippine Economic Zone Authority (PEZA) to enjoy tax incentives if they locate in PEZA-accredited economic zones.
    • Registration involves separate requirements and continuous compliance with PEZA regulations.

  4. Export or Manufacturing Businesses

    • May obtain licenses from the Bureau of Customs for import-export clearances and from the Department of Trade and Industry for trade-related licenses.

  5. Retail Trade Enterprises

    • Foreign retail investors must meet minimum paid-up capital requirements under the Retail Trade Liberalization Act, as recently amended.

  6. Telecommunications, Energy, and Other Utilities

    • Must comply with special licenses from agencies such as the National Telecommunications Commission (NTC), the Energy Regulatory Commission (ERC), or others, depending on their sector.

7. Ongoing Corporate Compliance

  1. Annual General Meeting (AGM)

    • Corporations must hold a regular stockholders’ meeting (or members’ meeting for non-stock corporations) at least once a year.
    • OPCs have simplified requirements but must still file annual reports.

  2. Annual Filing with the SEC

    • General Information Sheet (GIS): Must be submitted within 30 days from the date of the annual stockholders’ meeting. For OPCs, submission is required within the same timeline after the fiscal year ends.
    • Audited Financial Statements (AFS): Must be filed with the SEC, typically on or before April 15 or as determined by the SEC’s schedule if the corporation uses the calendar year.
    • Other Reports: Companies may need to file additional disclosures if there are significant corporate changes (e.g., change in principal office, capital structure amendments).

  3. BIR Compliance

    • Regular tax filings, including:
      • Monthly or quarterly VAT and withholding tax returns.
      • Quarterly income tax returns and annual income tax returns.
    • Payment of the annual registration fee (usually by January 31).
    • Maintenance of updated books of accounts.

  4. LGU Renewals

    • Renew the Mayor’s permit, barangay clearance, and other local licenses annually (usually during the first quarter of the year).

  5. Employment-Related Compliance

    • Monthly remittance of employee contributions to SSS, PhilHealth, and Pag-IBIG.
    • Proper registration and compliance with the Department of Labor and Employment (DOLE) requirements if labor-intensive.

8. Special Considerations for Foreign Corporations

  1. Capital Requirements

    • Foreign-owned domestic corporations not covered by special laws generally need a minimum paid-up capital of USD 200,000, which can be reduced to USD 100,000 if the enterprise employs at least 50 direct employees or uses advanced technology.
    • Different industries have different capital requirements depending on the regulatory framework.

  2. Visa and Immigration Compliance

    • Foreign directors, officers, or employees may need the appropriate work visa (e.g., 9(g) Pre-Arranged Employment Visa, 47(a)(2) for PEZA-registered enterprises, or Special Non-Immigrant Visas).
    • The Bureau of Immigration and the Department of Labor and Employment (DOLE) regulate work permits and visas.

  3. Anti-Money Laundering Regulations

    • Financial institutions and certain covered entities must comply with Anti-Money Laundering Council (AMLC) rules, including Know Your Customer (KYC) requirements and suspicious transaction reporting.

9. Penalties and Enforcement

Failure to comply with registration, licensing, and ongoing reporting requirements can lead to:

  • Fines and monetary penalties imposed by the SEC, BIR, or LGUs.
  • Suspension or revocation of the Certificate of Incorporation or business permit.
  • Civil or criminal liability for directors/officers in extreme cases of fraud, tax evasion, or violations of the Antidummy Law.

10. Best Practices and Practical Tips

  1. Seek Professional Advice

    • Engage lawyers, accountants, or corporate service providers who are well-versed in Philippine corporate laws to avoid costly mistakes.

  2. Plan for Capitalization and Ownership Structure

    • Clarify ownership percentages early to ensure compliance with foreign equity restrictions.
    • Prepare to meet minimum paid-up capital requirements.

  3. Keep Up with Annual and Periodic Filings

    • Maintain a compliance calendar to avoid late submission penalties.
    • Update the SEC, BIR, and LGUs on any changes in business address, directors, or capital structure.

  4. Monitor Regulatory Changes

    • The Philippine legislative and regulatory environment evolves regularly (e.g., amendments to foreign ownership restrictions, expanded privileges for One Person Corporations).
    • Subscribe to updates from the SEC, DTI, BIR, and other agencies.

  5. Implement Strong Corporate Governance

    • Maintain well-organized corporate records and minutes of meetings.
    • Ensure transparency and accountability within the corporation to attract investors and avoid regulatory scrutiny.

11. Conclusion

Establishing and running a company in the Philippines requires navigating multiple regulatory channels—principally the SEC, DTI, BIR, and LGUs—while also complying with sector-specific licensing requirements. The Revised Corporation Code has made it easier for businesses to set up, especially through the introduction of One Person Corporations. However, thorough knowledge of foreign ownership restrictions, tax obligations, and ongoing corporate compliance remains crucial.

Entrepreneurs and investors should be mindful of the legal landscape and seek professional assistance to ensure proper registration and licensing. By meeting all regulatory requirements, businesses can operate smoothly in the Philippine market and take advantage of the country’s growth potential and investment incentives.

Note: For specific queries or guidance on company formation, licensing, or compliance, always consult legal and accounting professionals licensed in the Philippines.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

Privacy Policy

Terms of Use

Lawyer Login

 
 
Privacy Policy         Terms of Use         Lawyer Login