The Securities and Exchange Commission (SEC) serves as the primary regulator of corporate entities in the Philippines, enforcing the Revised Corporation Code of the Philippines (Republic Act No. 11232), which took effect on 23 February 2019. This Code modernized the framework for corporate formation and governance, replacing the 1980 Corporation Code (Batas Pambansa Blg. 68). Among its key areas of regulation are the rules governing incorporators—the persons or entities who initiate the creation of a corporation—and the qualifications, composition, and restrictions applicable to the Board of Directors or Trustees. These provisions ensure transparency, accountability, and compliance with public policy, particularly in protecting minority shareholders, maintaining national control in strategic industries, and preventing unfit individuals from holding positions of corporate power. The rules apply to both stock and non-stock corporations, with special regimes for One Person Corporations (OPCs) and entities governed by special laws such as banks, insurance companies, and public utilities.

Incorporators: Definition, Number, and Qualifications

Incorporators are the founders who execute and file the Articles of Incorporation (AOI) with the SEC. Under Section 10 of the Revised Corporation Code, any person, partnership, association, or corporation—singly or jointly with others, but not exceeding fifteen (15) in number—may organize a corporation for any lawful purpose. This marks a significant liberalization from the old Code, which limited incorporators to five to fifteen natural persons only.

For regular corporations (non-OPCs), the maximum remains fifteen. There is no statutory minimum beyond the requirement of at least two for non-OPC stock corporations in practice, as a single stockholder triggers the OPC regime. Partnerships, associations, or corporations may serve as incorporators, allowing greater flexibility for institutional or foreign investment vehicles.

A distinct regime exists for One Person Corporations under Sections 5 to 15. An OPC may be formed by a single stockholder who is a natural person, a trust, or an estate. The single stockholder automatically serves as the incorporator and must appoint a corporate secretary and treasurer (who may be the same person if a Philippine resident). A nominee and alternate nominee must also be designated to ensure continuity in case of the sole stockholder’s death or incapacity.

Qualifications for incorporators include:

Legal capacity to contract (generally, at least 18 years of age).
For natural-person incorporators, full civil capacity.
No citizenship restriction in general, though foreign incorporators must comply with foreign equity limitations under the Constitution, the Foreign Investments Act (Republic Act No. 7042, as amended), and other special laws (e.g., 60% Filipino ownership in public utilities, 100% Filipino in mass media).
In the AOI, incorporators must indicate their names, nationalities, residences, and subscription to shares or membership interests. Each incorporator in a stock corporation typically subscribes to at least one share, although the Code does not explicitly mandate this for every incorporator in the same manner as the old law.

Juridical persons (except trusts or estates in OPCs) cannot be the sole stockholder of an OPC. Religious corporations and government-owned or -controlled corporations follow additional rules under special provisions of the Code.

Role and Responsibilities of Incorporators

Incorporators are responsible for:

Preparing and signing the AOI and bylaws.
Naming the initial directors or trustees.
Subscribing to the initial capital stock or membership.
Filing the incorporation documents with the SEC, including the Treasurer’s Affidavit (for stock corporations) attesting to the deposit of paid-up capital.
Electing the initial board and officers at the organizational meeting.

Once the SEC issues the Certificate of Incorporation, the corporation acquires juridical personality, and the incorporators’ role largely ends unless they are also elected as directors. The initial board they name serves until the first annual meeting of stockholders or members.

Transition from Incorporators to the Board of Directors

The incorporators’ primary function is transitional. Section 22 of the Code mandates that the board of directors or trustees shall manage the corporation. In non-OPC stock corporations, the incorporators typically become the initial directors, but this is not mandatory. The board assumes full governance powers upon issuance of the Certificate of Incorporation.

Composition and Qualifications of the Board of Directors

Section 22 of the Revised Corporation Code fixes the board size for stock corporations at not less than five (5) nor more than fifteen (15) directors. Non-stock corporations follow the same range for trustees. An exception applies to OPCs, where the single stockholder is the sole director and president.

Qualifications under Section 23 are strict and mandatory:

The director or trustee must be a natural person (juridical entities are disqualified).
The director must own at least one share of stock (for stock corporations) or be a member (for non-stock), with the share or membership recorded in the corporation’s books in the director’s name.
The director must have the legal capacity to contract.
A majority of the directors or trustees must be residents of the Philippines. This residency requirement applies at all times and is a continuing qualification.

Directors are elected by stockholders through cumulative voting (unless the AOI provides otherwise), ensuring minority representation. Terms are one year for stock corporations and up to three years for non-stock corporations, with re-election permitted absent other restrictions.

Disqualifications and Restrictions on Directors and Trustees

The Revised Corporation Code and SEC-implemented rules impose several layers of disqualification to safeguard corporate integrity:

Statutory Disqualifications (Section 27): No person may serve if convicted by final judgment of an offense punishable by imprisonment exceeding six (6) years, or of any violation of the Revised Corporation Code committed within five (5) years before election or appointment. Additional disqualifications may be imposed by the corporation’s bylaws or by special laws (e.g., banking, insurance, or securities regulations).
Citizenship and Residency: While foreigners may serve as directors, the majority-residency rule prevents full foreign control of the board. In restricted industries (e.g., land ownership, natural resources, advertising), the Constitution and special laws impose further equity-based restrictions that indirectly affect board composition through ownership requirements. The Anti-Dummy Law (Commonwealth Act No. 108, as amended) prohibits foreigners from occupying positions that allow control or management in nationalized activities.
Independent Directors: For publicly listed companies, registered issuers of securities, and other covered corporations, SEC-mandated corporate governance rules require a minimum number of independent directors (typically at least two or 20% of the board, whichever is lower). Independent directors must have no material relationship with the corporation, its officers, or substantial shareholders, ensuring impartial oversight. This requirement is enforced through annual certifications and disclosures filed with the SEC.
Corporate Governance and Conflict-of-Interest Rules: Directors are subject to fiduciary duties of loyalty and care. The Code of Corporate Governance (issued by the SEC) requires disclosure of material interests, prohibits self-dealing without proper approval, and mandates board committees (audit, nomination, compensation, and corporate governance) for covered companies. Interlocking directorships are permitted but must be disclosed; certain financial institutions face stricter limits under Bangko Sentral ng Pilipinas or Insurance Commission rules.
Age and Capacity: Directors must be of legal age and possess full contractual capacity. Minors and persons under legal disability are barred.
SEC Administrative Requirements: Upon election or appointment, directors must submit a Director’s Information Sheet (DIS) and other documents to the SEC for verification of qualifications. Failure to meet residency, share-ownership, or disqualification standards results in rejection of amendments to the AOI or bylaws, or administrative sanctions.
Special Industry Restrictions: Banks, quasi-banks, insurance firms, pre-need companies, and public utilities are governed by additional statutes (e.g., General Banking Law, Insurance Code) that may impose higher minimum board sizes, Filipino-citizen majorities in key positions, or fit-and-proper tests administered by the SEC or other regulators.

One Person Corporations: Unique Board Regime

In an OPC, the single stockholder is the sole director, president, and incorporator. The board requirement is effectively waived, but the corporation must still appoint a treasurer (who must be a Philippine resident if not the sole stockholder) and a corporate secretary (a natural person who is a Philippine resident and cannot be the sole stockholder). The nominee and alternate nominee serve as substitutes upon the sole stockholder’s death or incapacity, triggering succession rules under Section 14.

Enforcement, Compliance, and Penalties

The SEC reviews all incorporation documents and annual reports for compliance with incorporator and board rules. Violations—such as false statements in the AOI, election of disqualified directors, or failure to maintain majority Philippine residency—may result in:

Rejection or revocation of the Certificate of Incorporation or Certificate of Filing of the OPC.
Fines ranging from ₱10,000 to ₱1,000,000 per violation, plus daily penalties.
Imprisonment for officers or directors in cases of fraud or serious violations (Section 176).
Administrative sanctions including suspension of corporate powers or dissolution proceedings.

Corporations must maintain an updated stock and transfer book or membership book reflecting director qualifications. Any change in directors requires filing of amended reports within the prescribed period.

Practical Implications and Continuing Obligations

The rules on incorporators and board restrictions are continuing obligations. A director who later becomes disqualified (e.g., through conviction or loss of share ownership) must vacate the position immediately. Annual corporate governance reports filed with the SEC include certifications of compliance. In mergers, consolidations, or conversions (including to or from OPC status), the resulting entity must satisfy the same incorporator and board standards.

These provisions reflect the Philippine government’s policy of balancing ease of doing business with safeguards for public interest, investor protection, and national sovereignty. Compliance with SEC rules on incorporators and board restrictions is therefore not merely procedural but a cornerstone of valid corporate existence and governance in the Philippines.