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Articles of Incorporation Philippines: A Comprehensive Guide

Understanding Articles of Incorporation in the Philippines

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Definition and Importance

The Articles of Incorporation is a legal document that establishes the existence of a corporation in the Philippines. It is a requirement under the Corporation Code of the Philippines and must be submitted to the Securities and Exchange Commission (SEC) for approval. The Articles of Incorporation is an essential document that outlines the rights, powers, and limitations of the corporation and its shareholders.

The importance of the Articles of Incorporation cannot be overstated. It is the foundation upon which the corporation is built and serves as a guide for the corporation’s operations. It defines the corporation’s purpose, structure, and governance. It also outlines the corporation’s stock ownership, management, and distribution of profits.

Key Components

The Articles of Incorporation must contain the following key components:

  1. Name of the Corporation – The name of the corporation must be unique and distinguishable from other corporations in the Philippines. It must also include the word “corporation,” “incorporated,” “limited,” or their abbreviations.

  2. Purpose of the Corporation – The purpose of the corporation must be stated clearly and concisely. It should describe the business or activities that the corporation intends to engage in.

  3. Term of Existence – The term of existence refers to the period during which the corporation will operate. It can be perpetual or for a specific period.

  4. Principal Office – The principal office is the location where the corporation’s main business operations are conducted.

  5. Board of Directors – The Board of Directors is responsible for managing the corporation’s affairs. The number of directors, their qualifications, and their term of office must be specified in the Articles of Incorporation.

  6. Authorized Capital Stock – The authorized capital stock is the maximum number of shares that the corporation can issue. The number of shares, their par value, and the classes of shares must be specified in the Articles of Incorporation.

Types of Corporations

Under the Corporation Code of the Philippines, there are three types of corporations: stock corporations, non-stock corporations, and one-person corporations.

  1. Stock Corporation – A stock corporation is a corporation that issues shares of stock to its shareholders. The shares represent ownership in the corporation and entitle the shareholder to a portion of the corporation’s profits.

  2. Non-Stock Corporation – A non-stock corporation is a corporation that does not issue shares of stock. It is usually formed for charitable, religious, educational, or other non-profit purposes.

  3. One-Person Corporation – A one-person corporation is a corporation that has only one shareholder. It was introduced in 2019 under the Revised Corporation Code to encourage entrepreneurship and simplify the process of incorporating a business in the Philippines.

In conclusion, the Articles of Incorporation is a crucial document that outlines the foundation and governance of a corporation in the Philippines. It must be drafted carefully and in compliance with the Corporation Code of the Philippines to ensure the corporation’s legality and protection of its shareholders.

The Incorporation Process and Regulatory Compliance

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Incorporation Procedure

The process of incorporating a company in the Philippines involves several steps that must be followed to ensure compliance with the country’s laws and regulations. The first step is to verify the availability of the desired company name with the Securities and Exchange Commission (SEC) through the Name Verification Slip (NVS) process. Once the name is approved, the next step is to secure a bank certificate to serve as proof of the company’s paid-up capital. The bank certificate must be submitted along with other requirements to the SEC.

After submitting the requirements, the SEC will review the documents and issue a Certificate of Incorporation if everything is in order. The Certificate of Incorporation is a legal document that certifies the existence of the company. It is important to note that the entire incorporation process can take up to a few weeks to complete.

Securities and Exchange Commission (SEC) Requirements

The SEC has specific requirements that must be met by companies seeking to incorporate in the Philippines. One of the requirements is the submission of Articles of Incorporation, which outlines the company’s purpose, capital structure, and other important details. The Articles of Incorporation must be signed by the incorporators and submitted to the SEC.

Another requirement is the Tax Identification Number (TIN) of the company, which must be secured from the Bureau of Internal Revenue (BIR). The company must also secure other necessary permits and clearances from government agencies such as the Social Security System (SSS) and Home Development Mutual Fund (HDMF).

Post-Incorporation Obligations

After incorporation, companies must comply with various regulations and requirements to maintain their legal status. One of these requirements is the submission of an Annual Financial Statement to the SEC. The company must also secure a Business Permit from the local government unit where it operates.

Compliance with other regulations such as labor laws, environmental laws, and tax laws is also necessary to avoid penalties and legal liabilities. It is important for companies to have a clear understanding of their obligations and responsibilities as a corporation to ensure compliance with the law.

In conclusion, the incorporation process in the Philippines involves several steps and requirements that must be followed to ensure compliance with the country’s laws and regulations. Companies must also comply with post-incorporation obligations to maintain their legal status. It is important for companies to seek professional advice and guidance to ensure compliance with the law.

Legal and Capital Structure

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When incorporating a business in the Philippines, it is important to understand the legal and capital structure of the corporation. This section will provide an overview of the key concepts related to corporate capital and stocks, the roles and responsibilities of corporate officers, and corporate governance.

Corporate Capital and Stocks

The capital stock of a corporation refers to the total amount of money or property that the corporation has received from its shareholders in exchange for shares of stock. The authorized capital stock is the maximum amount of capital stock that a corporation is authorized to issue under its articles of incorporation. The par value is the minimum price at which a share of stock can be issued, while the term “without par value” means that the shares have no minimum price.

The treasurer is responsible for managing the corporation’s finances and maintaining its records. The trustee is responsible for managing the assets of the corporation on behalf of the shareholders. The officers of the corporation, including the president, vice president, secretary, and treasurer, are responsible for managing the day-to-day operations of the corporation.

Roles and Responsibilities of Corporate Officers

The officers of a corporation have specific roles and responsibilities that are outlined in the corporation’s bylaws. The president is responsible for the overall management of the corporation, while the vice president is responsible for assisting the president and assuming the president’s duties in their absence. The secretary is responsible for maintaining the corporation’s records and ensuring that all necessary filings are made with the Securities and Exchange Commission (SEC).

Corporate Governance

Corporate governance refers to the system of rules, practices, and processes by which a corporation is directed and controlled. The board of directors is responsible for overseeing the corporation’s management and ensuring that the corporation is operating in the best interests of its shareholders. The shareholders have the right to elect the board of directors and to vote on major corporate decisions, such as mergers and acquisitions.

In conclusion, understanding the legal and capital structure of a corporation is essential for anyone looking to incorporate a business in the Philippines. By familiarizing themselves with the roles and responsibilities of corporate officers, the capital stock and stocks, and corporate governance, entrepreneurs can ensure that their corporation is structured in a way that is both legally compliant and financially sound.

Foreign Participation and Restrictions

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In the Philippines, foreign equity restrictions are governed by the 1987 Constitution, the Foreign Investment Act (FIA) of 1991, and the Foreign Investment Negative List (FINL). These laws regulate the participation of foreign nationals in Philippine corporations and businesses.

Foreign Ownership Regulations

Under the FIA, foreign investors are permitted to own up to 100% of the equity of domestic corporations, except in certain industries that are restricted or regulated by the government. The FINL, which is published by the Department of Trade and Industry, lists the industries that are subject to foreign equity restrictions. The FINL is periodically updated to reflect changes in government policy.

Compliance with the Foreign Investment Act

Foreign investors who wish to invest in the Philippines must comply with the FIA and other relevant laws. They must register with the Securities and Exchange Commission (SEC) and obtain the necessary permits and licenses from government agencies. They must also comply with the Anti-Dummy Law, which prohibits the use of Filipino nominees to circumvent foreign equity restrictions.

Foreign investors who wish to invest in certain industries that are reserved for Filipino nationals must obtain a waiver from the appropriate government agency. They must also comply with the constitutional and statutory restrictions on foreign participation in certain investment areas or activities.

In summary, foreign participation in Philippine corporations and businesses is subject to various legal restrictions and regulations. Foreign investors must comply with the FIA, the FINL, and other relevant laws. They must also obtain the necessary permits and licenses from government agencies and comply with the Anti-Dummy Law.

Special Types of Corporations

In the Philippines, there are several special types of corporations that are governed by different laws and regulations. This section will discuss three of these special types of corporations: non-profit organizations, one person corporations, and partnerships vs. corporations.

Non-Profit Organizations

Non-profit organizations are corporations that are organized for purposes other than generating profit. These organizations are usually organized for charitable, religious, educational, or cultural purposes. Non-profit organizations are governed by special laws and by the general provisions of the Revised Corporation Code of the Philippines.

Under the Revised Corporation Code, non-profit organizations are classified as non-stock corporations. Non-stock corporations are corporations that do not issue stocks and are not intended to generate profit. Non-stock corporations are governed by special provisions of the Revised Corporation Code and by other special laws.

One Person Corporations

One Person Corporations (OPCs) are corporations that have only one stockholder. OPCs are governed by the general provisions of the Revised Corporation Code, as well as by special provisions that apply specifically to OPCs.

One of the advantages of an OPC is that it allows a single individual to enjoy the benefits of a corporation, such as limited liability, without having to form a partnership or a traditional corporation with other individuals. OPCs are also subject to less stringent requirements for incorporation than traditional corporations.

Partnerships vs. Corporations

Partnerships and corporations are two different types of business organizations. Partnerships are governed by the Civil Code of the Philippines, while corporations are governed by the Revised Corporation Code.

One of the main differences between partnerships and corporations is that partnerships are not separate legal entities from their partners. This means that the partners are personally liable for the debts and obligations of the partnership. In contrast, corporations are separate legal entities from their shareholders, which means that the shareholders are generally not personally liable for the debts and obligations of the corporation.

Another difference between partnerships and corporations is that partnerships are generally easier and less expensive to form than corporations. However, corporations offer advantages such as limited liability and perpetual existence that partnerships do not.

In conclusion, non-profit organizations, one person corporations, and partnerships vs. corporations are three special types of corporations that are governed by different laws and regulations in the Philippines. Each type of corporation has its own advantages and disadvantages, and individuals should carefully consider their options before deciding which type of corporation to form.

Frequently Asked Questions

What information is required to complete the Articles of Incorporation in the Philippines?

According to the Securities and Exchange Commission (SEC) of the Philippines, the Articles of Incorporation must contain the following information:

  • The name of the corporation, which must not be identical or deceptively similar to any existing corporation or partnership name.
  • The purpose or purposes for which the corporation is being formed.
  • The principal office address of the corporation.
  • The term or duration of the corporation.
  • The names, nationalities, and residences of the incorporators, who must be at least five but not more than fifteen in number.

How can one obtain a copy of the Articles of Incorporation from the Philippine SEC?

A copy of the Articles of Incorporation can be obtained by submitting a request to the SEC. The request must include the name of the corporation and the SEC registration number. The request can be made in person, by mail, or online through the SEC’s electronic filing and monitoring system.

What are the steps to amend the Articles of Incorporation with the Philippine SEC?

To amend the Articles of Incorporation, the corporation must file an amendment with the SEC. The amendment must include the proposed changes and the reason for the amendment. The amendment must be signed by a majority of the members of the board of directors or trustees and approved by the stockholders representing at least two-thirds of the outstanding capital stock or members representing at least two-thirds of the voting rights.

What is the difference between stock and non-stock corporations in the context of Philippine Articles of Incorporation?

A stock corporation is a corporation that issues stocks to its shareholders, who are entitled to vote and receive dividends. A non-stock corporation, on the other hand, is a corporation that does not issue stocks and is usually organized for charitable, religious, educational, or similar purposes. The Articles of Incorporation for a non-stock corporation must include provisions on the distribution of assets upon dissolution.

How does the Certificate of Incorporation differ from the Articles of Incorporation in the Philippines?

The Certificate of Incorporation is a document issued by the SEC that certifies the existence of a corporation. It is issued after the Articles of Incorporation have been approved by the SEC and all the requirements for incorporation have been complied with. The Certificate of Incorporation contains the name of the corporation, the SEC registration number, and the date of incorporation.

What are the legal implications of the Articles of Incorporation for a corporation in the Philippines?

The Articles of Incorporation are a fundamental document that outlines the basic information, structure, and compliance of a corporation with the SEC. The Articles of Incorporation are binding on the corporation and its shareholders, and any amendment to the Articles of Incorporation must be approved by the SEC. Failure to comply with the Articles of Incorporation can result in legal and financial consequences for the corporation and its officers.