Minimum Capital Requirements for a Construction Firm in the Philippines
Updated as of 15 May 2025
1. The Legal Layers That Determine “Capital”
| Layer | Governing Law / Regulator | What the rule is about | Why it matters to a construction firm |
|---|---|---|---|
| Incorporation | Revised Corporation Code (RA 11232, 2019) | No statutory minimum paid-up capital for ordinary stock corporations; you still need the classic “25 % subscribed / 25 % paid” of whatever authorized capital you declare. | Sets the floor (as low as ₱5,000) for purely Filipino firms that will not be regulated by a special law. (PCNC) |
| Foreign equity | Foreign Investments Act (RA 7042 as amended by RA 11647, 2022) | - US $200 000 minimum paid-in capital for a domestic-market enterprise with >40 % foreign ownership. - US $100 000 if the enterprise: (a) is “advanced-technology”, (b) a registered startup/enabler, or (c) employs ≥15 Filipino workers. |
Applies to construction corporations that are more than 40 % foreign-owned and intend to serve the local (non-export) market. (Platon Martinez, Global Trade Alert) |
| Contractors’ licensing | Contractor’s License Law (RA 4566) & Philippine Contractors Accreditation Board (PCAB) | PCAB looks at net worth / equity, not paid-in capital, and ties it to eight “Categories” (AAAA → E). | This is the real capital gatekeeper for the construction sector; without a PCAB licence a firm cannot legally bid for any construction project (public or private). (Scribd) |
Key takeaway: After you incorporate, the decisive capital bar you must clear is PCAB’s, not the SEC’s. Even a zero-capital One-Person-Corporation can incorporate, but it still needs to prove the PCAB net-worth minimum before it can build anything.
2. PCAB Categories, Net-Worth Floors and Project Ceilings
The latest PCAB Categorization & Classification Table (PCAB-QMS-REF-001, Rev. 01, 1 Nov 2023) sets the minimum net-worth/equity for each category. The figures are the same for General Engineering (horizontal works) and General Building (vertical works); specialty trades are shown separately.
| PCAB Category | Minimum Net Worth* | Typical single-contract ceiling** |
|---|---|---|
| AAAA (Quadruple A) | ₱1 000 000 000 | No ceiling; can bid for any project. |
| AAA | ₱180 000 000 | ₱3 billion + |
| AA | ₱ 90 000 000 | ~₱1 billion |
| A | ₱ 30 000 000 | ~₱ 300 million |
| B | ₱ 10 000 000 | ~₱ 100 million |
| C | ₱ 6 000 000 | ~₱ 45 million |
| D | ₱ 2 000 000 | ~₱ 15 million |
| E / Trade | ₱ 100 000*** | Micro contracts; often sub-trade or labour-only. |
* Based on audited net worth (assets – liabilities) or paid-up capital for newly-organized entities. ** PCAB uses credit-point formulas that combine financial, equipment and experience points; ceilings above are rough public-sector bidding limits commonly used by DPWH and GOCCs. *** Category E has no Sustaining Technical Employee (STE) requirement.
(Scribd)
2.1 Quadruple A (“AAAA”) licence
Who may qualify?
- A newly-organized domestic corporation (may be up to 100 % foreign-owned) or an existing PCAB licensee that can show ≥ ₱1 billion equity/net worth.
- Two flavours: Quad A Platinum (Filipino-owned) and Quad A Gold (foreign-owned). (Forms Philippines)
Benefits: perpetual licence validity (subject to annual fee), authority to use ISO, OSH and environmental credits, and eligibility for megaprojects/P3s.
3. Licence Types and Their Capital Implications
| PCAB Licence Type | Capital rule |
|---|---|
| Regular | Must meet the Category net-worth minimum every year. Only Filipino-owned firms (≥ 60 % Filipino equity) can hold regular licences. |
| Special | Granted to a foreign contractor, joint venture, or project owner for one specific project. No published peso minimum, but PCAB routinely checks proof of capacity (e.g., parent-company guarantees). |
| Trade | For labour-only/sub-trade works; requires only Category E net worth (₱100 000) and no STE. (Scribd) |
4. Interaction With Other Capital-Based Rules
Government Procurement (RA 9184 & DPWH rules)
- Bidding classifications mirror PCAB categories; failure to match your licence Category with the project size is a ground for disqualification.
Economic Zone or Incentive Registrations (PEZA, BOI)
- BOI may still impose a paid-in capital test (often ₱10–50 million) for preferred construction-related activities; these sit on top of the PCAB requirement.
Banking / Surety Lines
- Surety companies tie bond limits to your audited net worth; therefore, barely meeting the PCAB floor often results in low bonding capacity.
5. Practical Tips
| Stage | What to prepare | Why |
|---|---|---|
| Before SEC filing | Draft an authorized capital that is ≥ PCAB net-worth floor for the Category you need and satisfies FIA thresholds if foreign-owned. | Avoid costly amendments later. |
| During audit | Keep cash, receivables & DOSRI advances within PCAB’s “allowable limits” (see Table 6 of PCAB guidelines). Excess amounts are knocked off your net worth. (Scribd) | |
| Renewal / upgrade | Secure BIR-stamped AFS, LTO OR/CR for equipment, and land titles to get full credit points. | These documents directly feed the financial- and equipment-credit formulas. |
| Foreign entrants | Decide early between a Special Licence (project-by-project) and setting up a Quad A Gold corporation (₱1 billion equity). | Capital outlay, tax exposure and project pipeline determine which route is cheaper. |
6. Penalties for Undercapitalisation or Unlicensed Contracting
- Administrative fines: up to ₱100 000 per offence, plus daily penalties.
- Criminal liability: 6 months – 2 years imprisonment for officers who sign contracts without a licence.
- Blacklisting: automatic in public procurement databases (PhilGEPS, DPWH, LGUs).
- Civil risk: contracts may be declared void, leaving the contractor unpaid.
7. Checklist: Minimum Capital Questions to Ask Yourself
- What is the largest single project I intend to bid for in the next three years?
- Will there be >40 % foreign equity?
- Can I substantiate the net-worth figure with audited assets acceptable to PCAB (cash, equipment, real property)?
- Do I need a Quad A licence for mega-projects or PPPs?
- If foreign, is a Special Licence enough, or should I capitalise a domestic subsidiary?
Conclusion
Incorporating a construction company in the Philippines is easy—capitalisation can be nominal under the Revised Corporation Code. Building legally is hard because PCAB links your licence, and thus your project size, to a verified net-worth threshold. Align your SEC capital, PCAB Category, and (if foreign-owned) FIA paid-in capital before you invest. Doing the math up front costs far less than being sidelined at bid time.
This article is for general information only and is not a substitute for formal legal or tax advice. Always confirm requirements with the SEC, PCAB, and the Department of Trade and Industry for the latest issuances.