If your corporation is converting into a One Person Corporation, the first question is usually simple: will our existing business contracts still be valid? In most cases, yes. A proper conversion from an ordinary stock corporation to a One Person Corporation, or OPC, does not automatically erase supplier contracts, leases, customer agreements, loans, service contracts, employment arrangements, or pending obligations. But the practical answer depends on the wording of each contract, especially clauses on assignment, change of control, corporate reorganization, lender consent, permits, and notices.

What “conversion to a One Person Corporation” means in the Philippines

A One Person Corporation is a corporation with a single stockholder. Under the Revised Corporation Code, only a natural person, trust, or estate may form an OPC. Certain entities, such as banks, quasi-banks, insurance companies, public and publicly listed companies, and some other regulated entities, cannot be OPCs. The corporate name must carry the “OPC” suffix, and the single stockholder is the sole director and president. (Supreme Court E-Library)

This is important because Philippine law uses the word conversion in a specific way. Under Section 131 of Republic Act No. 11232, or the Revised Corporation Code of 2019, an ordinary stock corporation may apply for conversion into an OPC when one stockholder acquires all the corporation’s shares. If approved, the Securities and Exchange Commission issues a certificate of filing of amended articles of incorporation reflecting the conversion. (Supreme Court E-Library)

This is different from a sole proprietorship “becoming” an OPC. A sole proprietorship has no separate juridical personality from its owner. An OPC, on the other hand, is a corporation. So if a DTI-registered sole proprietor later forms an OPC, that is usually not a statutory conversion. The OPC is a different legal person, and contracts under the sole proprietor’s name may need assignment, novation, or new agreements.

General rule: existing contracts of the corporation continue

For a true SEC conversion from an ordinary stock corporation to an OPC, the safest starting point is this:

The corporation remains responsible for its existing obligations.

Section 131 of the Revised Corporation Code expressly provides that the OPC converted from an ordinary stock corporation “shall succeed” the ordinary stock corporation and be legally responsible for all outstanding liabilities as of the date of conversion. Section 132 applies a similar rule when an OPC later converts into an ordinary stock corporation. (Supreme Court E-Library)

SEC Memorandum Circular No. 27, series of 2020, which governs conversion between ordinary stock corporations and OPCs, follows the same approach. It states that, upon SEC approval, the converted OPC retains the corporation’s original SEC registration number, adds the “OPC” suffix, and succeeds the ordinary stock corporation’s liabilities.

In plain English: conversion is not a magic reset button. The company cannot avoid rent, loans, supplier payables, customer obligations, warranties, employment obligations, taxes, or pending claims simply by changing into an OPC.

Why contracts usually survive conversion

Philippine contract law is built on the principle that agreements must be honored. Article 1159 of the Civil Code says obligations arising from contracts have the force of law between the parties and must be complied with in good faith. Article 1306 allows parties to agree on terms and conditions as long as they are not contrary to law, morals, good customs, public order, or public policy. (Lawphil) (Lawphil)

A proper OPC conversion generally does not replace the debtor or obligor with a completely new person. The same SEC-registered corporation continues, but in a different corporate form. That is why most contracts do not need to be signed all over again just because the company becomes an OPC.

However, Article 1311 of the Civil Code also says contracts take effect between the parties, their assigns, and heirs, except when rights and obligations are not transmissible by nature, by stipulation, or by law. This is where the fine print matters. If the contract itself restricts assignment, change in ownership, change of control, or corporate restructuring, the other party may have contractual rights that must be respected. (Lawphil)

Conversion is usually not novation, but watch for clauses requiring consent

Novation means an old obligation is replaced by a new one. Under Article 1291 of the Civil Code, obligations may be modified by changing the object or principal conditions, substituting the debtor, or subrogating a third person in the creditor’s rights. Article 1292 says novation must be clearly declared or the old and new obligations must be incompatible. Article 1293 adds that substituting a new debtor requires the creditor’s consent. (Lawphil)

Because a statutory OSC-to-OPC conversion normally involves the same corporation continuing under its original SEC registration number, it is usually not a substitution of debtor. But problems arise when parties treat the transaction as more than a formal conversion. For example:

The business is moved from a sole proprietor to a newly formed OPC.
Assets are transferred from one corporation to a different OPC.
Contracts are transferred from an old company to a new entity.
The contract says a change in share ownership is deemed an assignment.
A bank loan prohibits reorganization or change of control without prior written consent.

In those situations, the other party’s consent may be needed.

Legal basis: key laws and rules

Revised Corporation Code, RA 11232

The Revised Corporation Code is the main law on OPCs. The key provisions for contracts and liabilities are:

Provision	Practical meaning
Section 116	Defines an OPC as a corporation with a single stockholder, limited to a natural person, trust, or estate.
Section 120	Requires the corporation to use “OPC” in its corporate name.
Section 122	Requires appointment of a treasurer, corporate secretary, and other officers as needed. The single stockholder cannot be corporate secretary.
Section 129	Requires OPC reportorial submissions, including financial statements and related-party transaction disclosures.
Section 130	Places the burden on the sole shareholder claiming limited liability to show that the corporation was adequately financed and that corporate property is separate from personal property.
Section 131	Provides that an ordinary stock corporation converted into an OPC remains responsible for outstanding liabilities.

These rules matter because contracts are not reviewed in isolation. Counterparties, banks, landlords, government agencies, and courts will also look at whether the OPC is properly capitalized, separately run, and compliant with SEC requirements. (Supreme Court E-Library)

SEC Memorandum Circular No. 27, series of 2020

SEC MC No. 27 sets the documentary requirements for conversion. For an ordinary stock corporation converting to an OPC, the SEC filing package commonly includes:

Cover sheet
Application for conversion signed by the single stockholder and countersigned by the corporate secretary
Original or certified true copy of the documents transferring full ownership of shares
BIR Certificate Authorizing Registration or tax clearance
Notarized Secretary’s Certificate of No Intra-Corporate Dispute
Articles of Incorporation of the OPC
Nominee and alternate nominee details and letters of acceptance
Self-appointed treasurer’s bond, if applicable
Name reservation
SEC monitoring clearance
Endorsement clearances from other agencies, if applicable
Undertaking to change corporate name
Undertaking to assume all liabilities of the ordinary stock corporation

The SEC’s eAMEND system also classifies conversion of an ordinary stock corporation to an OPC, and conversion of an OPC to an ordinary stock corporation, as amendments under regular processing. (eAMEND)

Civil Code rules on contracts

The Civil Code remains important because conversion does not override private contract terms. The most relevant rules are:

Civil Code rule	Why it matters
Article 1159	Contracts must be complied with in good faith.
Article 1305	A contract is a meeting of minds where parties bind themselves to give something or render service.
Article 1306	Parties may set their own terms if lawful.
Article 1311	Contracts bind the parties, assigns, and heirs, except when not transmissible by nature, stipulation, or law.
Articles 1291–1293	Novation and substitution of debtor require clear intent and, for debtor substitution, creditor consent.

How different business contracts are affected

Type of contract	Usual effect of OPC conversion	What to check
Supplier contracts	Usually continue. Payables and purchase obligations remain with the corporation.	Change-of-control clause, credit terms, personal guarantees, required notice.
Customer or client contracts	Usually continue, especially if services are still performed by the same corporation.	Clauses on assignment, subcontracting, data privacy, key personnel, service levels.
Office, warehouse, or commercial lease	Usually continues if the same corporate lessee remains.	Landlord consent, name update, security deposit records, permits, signage, billing details.
Bank loans and credit lines	Often sensitive. Banks usually require notice or consent for ownership changes or amendments.	Loan covenants, default clauses, board approvals, updated secretary’s certificate, specimen signatures.
Franchise or distributorship agreements	May require prior consent because the franchisor or principal approved a specific ownership structure.	Transfer restrictions, approval of controlling owner, territorial rights, renewal conditions.
Government contracts	Usually require profile updates and may require agency consent depending on procurement rules and contract terms.	Eligibility documents, PhilGEPS profile, agency notices, performance security.
Employment contracts	Employees remain employed by the same corporation in a true conversion.	Payroll name updates, SSS/PhilHealth/Pag-IBIG records, authorized signatories, internal policies.
Insurance policies	Usually continue but should be updated to the new OPC name.	Named insured, insured location, business description, bank mortgagee clauses.
Licenses and permits	May remain valid but must often be updated after name or ownership changes.	SEC certificate, BIR Certificate of Registration, mayor’s permit, sector-specific licenses.

Step-by-step guide before converting if the corporation has active contracts

1. Confirm that the transaction is a true SEC conversion

Before reviewing contracts, confirm the legal structure. Ask:

Is the business currently an ordinary stock corporation registered with the SEC?
Has one eligible stockholder acquired all outstanding shares?
Is the single stockholder a natural person, trust, or estate?
Is the business allowed to operate as an OPC?
Are there foreign ownership restrictions?

If the existing business is only a sole proprietorship or if assets are moving to a newly created OPC, treat the matter as a transfer of business, not a simple conversion.

2. Complete the share transfers properly

The single stockholder must lawfully acquire all outstanding shares. In practice, this usually means preparing deeds of assignment or similar transfer documents, updating stock records, and securing BIR clearance or eCAR where required.

The BIR has procedures for transfer of shares of stock, and SEC MC No. 27 specifically requires a Certificate Authorizing Registration or tax clearance from the BIR as part of the conversion requirements. (Bureau of Internal Revenue)

Common bottlenecks at this stage include incomplete deeds of assignment, inconsistent names or TINs, unpaid taxes, missing corporate approvals from selling stockholders, and delays in BIR processing.

3. Make a contract inventory

Create a table of all active contracts before filing the SEC conversion. Include:

Contract name
Counterparty
Date signed
Expiration or renewal date
Payment obligations
Personal guarantees
Security deposits
Collateral or mortgages
Notice requirements
Consent requirements
Default clauses
Governing law and venue
Whether the contract is material to operations

Prioritize leases, loans, major suppliers, key customers, franchises, licenses, government contracts, software subscriptions, and contracts with foreign counterparties.

4. Look for “trigger clauses”

The most important clauses usually use words like:

assignment
transfer
change in ownership
change of control
merger
consolidation
reorganization
conversion
restructuring
successor
prior written consent
event of default
material adverse change

Even if Philippine law says the OPC succeeds the old corporation, the contract may still require notice or approval when ownership changes from several stockholders to one.

5. Get written consent where needed

If consent is required, get it before the conversion becomes a problem. For important contracts, use a short written consent or amendment stating that:

the counterparty acknowledges the planned conversion to an OPC;
the contract will continue in full force;
the corporation’s new name with “OPC” will be used after SEC approval;
all obligations, warranties, deposits, payables, and guarantees remain effective unless expressly changed;
billing, notices, and authorized signatories are updated.

Avoid relying only on verbal approval, text messages, or informal Viber confirmations for high-value contracts.

6. File the SEC amendment and monitor comments

Conversion applications are processed as amendments. The SEC eAMEND guide explains that the portal covers amendment applications, including conversion of an ordinary stock corporation to an OPC, and that applications may move through validation, documentary upload, processing, payment, hard-copy submission, post-audit, and release stages. (eAMEND)

In practice, timing depends on document completeness, SEC comments, BIR clearance, name issues, pending SEC compliance deficiencies, and whether another agency endorsement is required. A clean filing may move faster, while filings with tax, ownership, or compliance issues can take significantly longer.

7. After SEC approval, update records immediately

Once the SEC issues the certificate of filing of amended articles of incorporation:

use the correct corporate name with “OPC”;
update invoices, official receipts, contracts, letterheads, websites, and email signatures;
update bank records and authorized signatories;
update BIR registration details, if applicable;
update local permits and sector-specific licenses;
notify major customers, suppliers, landlords, and lenders;
record OPC decisions in the minutes book.

BIR Form 1905 is used for registration information updates, including registered name or trade name changes and other taxpayer registration updates. (Bir.gov.ph)

8. Keep the OPC separate from the owner

A common mistake is thinking that because there is only one stockholder, the corporation and owner can freely mix money. That is dangerous.

Section 130 of the Revised Corporation Code says a sole shareholder claiming limited liability has the burden of showing that the corporation was adequately financed. If the single stockholder cannot prove that OPC property is independent from personal property, the stockholder may be jointly and severally liable for OPC debts and liabilities. (Supreme Court E-Library)

In daily operations, this means:

maintain a separate bank account;
avoid using corporate funds for personal expenses;
document advances and reimbursements;
keep books updated;
issue written resolutions for major decisions;
keep related-party transactions properly disclosed;
maintain contracts in the OPC’s exact registered name.

Documents commonly needed for contract continuity

Purpose	Documents usually useful
Proving the conversion	SEC Certificate of Filing of Amended Articles of Incorporation, amended Articles of Incorporation, updated company profile.
Proving authority to sign	Secretary’s Certificate, written resolution of the single stockholder, updated specimen signatures, government ID of authorized signatory.
Updating banks	SEC documents, BIR Certificate of Registration, board or sole stockholder resolution, beneficial ownership documents, KYC forms.
Updating leases	Notice to landlord, SEC certificate, amended lease addendum if required, updated billing details.
Updating suppliers and customers	Formal notice, updated business name, tax registration details, bank details, contract addendum if needed.
Updating tax records	BIR Form 1905, SEC approval documents, old and updated registration details, supporting documents required by the RDO.
Updating local permits	SEC documents, BIR registration, barangay clearance if required, mayor’s permit amendment forms, lease or occupancy documents.

Special issues for foreigners converting to an OPC

A foreign individual may be able to own an OPC if the business activity is open to foreign ownership. But the OPC structure cannot be used to bypass nationality restrictions.

The Foreign Investments Act and the Regular Foreign Investment Negative List identify activities reserved to Philippine nationals or subject to foreign equity limits. The 13th Regular Foreign Investment Negative List under Executive Order No. 113, series of 2026, continues the system of listing activities restricted by the Constitution, specific laws, national security, defense, public health, morals, and protection of small and medium enterprises. (Supreme Court E-Library)

Foreigners should pay close attention to contracts involving:

landholding corporations;
public utilities;
mass media;
retail trade below statutory capital thresholds;
government procurement;
security services;
education;
natural resources;
professions reserved to Filipinos.

The Anti-Dummy Law, Commonwealth Act No. 108, punishes arrangements that evade nationality restrictions by falsely simulating Filipino ownership or control. (Lawphil)

For example, if a foreigner buys all shares of a corporation that owns Philippine land, converting the company into an OPC does not solve the constitutional problem. The issue is not merely the corporate form. The issue is whether the resulting ownership and control structure violates Philippine nationality laws.

Common pitfalls when converting with existing contracts

Assuming all contracts automatically transfer

For a true OSC-to-OPC conversion, the same corporation generally continues. But for a sole proprietorship, partnership restructuring, or asset transfer to a newly formed OPC, contracts do not automatically move unless the other party agrees or the contract allows assignment.

Forgetting bank consent

Bank loans often contain strict covenants. A change in ownership, amendment of articles, change in corporate name, or change in authorized signatories may trigger notice or consent requirements. Ignoring these clauses can create a technical default even if payments are current.

Updating the SEC but not the BIR, LGU, banks, and counterparties

The SEC certificate is only one part of the transition. If invoices still use the old name, bank accounts are not updated, or the mayor’s permit remains under an outdated corporate name, counterparties may delay payments or refuse documents.

Not checking personal guarantees

If the single stockholder or former stockholders signed personal guarantees, surety agreements, or real estate mortgages, conversion to OPC does not automatically release them. Release of a guarantor or surety usually requires the creditor’s written consent.

Mixing personal and corporate funds

An OPC gives a single owner the convenience of corporate personality, but it also increases scrutiny. If the owner treats corporate money as personal money, creditors may argue that limited liability should not apply.

Ignoring pending disputes

Pending lawsuits, collection claims, labor complaints, arbitration, tax audits, or demand letters do not disappear. The converted OPC remains responsible for outstanding liabilities.

Failing to notify regulated agencies

Some industries require approval or endorsement from agencies beyond the SEC. Examples include businesses involving food, drugs, lending, financing, real estate development, education, recruitment, transportation, telecoms, energy, or other regulated activities. SEC MC No. 27 expressly includes endorsement clearance from appropriate government agencies when applicable.

Practical examples

Example 1: Small family corporation with supplier contracts

A family corporation has five stockholders. One sibling buys out the others and becomes the sole stockholder. The corporation applies for conversion to an OPC. Its existing supplier contracts usually continue because the corporation remains the contracting party. But if the supplier agreement says any change in ownership requires written notice within 10 days, the OPC should comply.

Example 2: Restaurant lease under the corporation’s name

A corporation leases a restaurant space in Makati. After conversion to OPC, the lease does not automatically terminate. But the lease may require landlord consent for corporate restructuring or changes in control. The safer approach is to send the landlord the SEC certificate and sign a short lease addendum confirming the updated corporate name.

Example 3: Sole proprietor moving contracts to a new OPC

A DTI-registered sole proprietor has catering contracts with corporate clients. The owner forms an OPC and wants future payments sent to the OPC. This is not a simple conversion. The clients should sign new contracts, assignment agreements, or novation documents, depending on the original terms.

Example 4: Loan with personal guarantees

An ordinary corporation has a bank loan guaranteed by two former stockholders. One stockholder acquires all shares and converts the company into an OPC. The loan remains. The guarantees remain unless the bank releases them in writing.

Frequently Asked Questions

Do existing contracts automatically terminate when a corporation becomes an OPC?

No. In a proper conversion from an ordinary stock corporation to an OPC, contracts generally do not automatically terminate. The converted OPC succeeds the ordinary stock corporation and remains legally responsible for outstanding liabilities. (Supreme Court E-Library)

Do we need to sign new contracts after OPC conversion?

Usually not, if the contracting party remains the same SEC-registered corporation. However, it is often practical to sign short amendments or acknowledgment letters to update the corporate name, authorized signatories, billing details, and notice addresses.

Is conversion to OPC considered assignment of contracts?

Not always. A true statutory conversion is different from assigning a contract to another legal person. But some contracts define assignment broadly to include change of control, restructuring, or transfer of ownership. Always check the wording.

What happens to debts after converting to a One Person Corporation?

The debts remain. The converted OPC is legally responsible for the ordinary stock corporation’s outstanding liabilities as of the date of conversion. Conversion cannot be used to escape creditors.

Can a supplier or landlord refuse to recognize the OPC?

A supplier or landlord cannot ignore the legal effect of a valid SEC conversion, but they may enforce contractual rights if the contract requires prior consent, notice, updated documents, or approval of ownership changes.

What if the old contract uses the corporation’s old name without “OPC”?

The contract does not become invalid simply because the name later changed to include “OPC.” But the corporation should update records and send notice to avoid payment, billing, tax, and enforcement problems.

What happens to employee contracts after conversion?

In a true conversion, the employer remains the same corporation, so employment generally continues. The company should update payroll records, government remittance records, HR documents, and authorized signatories.

Can a sole proprietorship convert its contracts to an OPC?

Not automatically. A sole proprietorship and an OPC are different legal persons. Contracts under the sole proprietor’s name may need new contracts, assignment, or novation, especially if the contract involves personal services, credit approval, or non-assignment clauses.

Can a foreigner own the OPC after conversion?

Possibly, but only if the business activity is open to foreign ownership and the single stockholder is eligible under the OPC rules. The OPC structure cannot be used to bypass the Constitution, the Foreign Investments Act, the Foreign Investment Negative List, or the Anti-Dummy Law.

Can the single stockholder be personally liable for old contracts?

The corporation is generally liable for corporate contracts. But under Section 130 of the Revised Corporation Code, the single stockholder claiming limited liability must show adequate financing and separation of corporate and personal property. If the owner abuses the OPC form or mixes assets, personal liability may become an issue. (Supreme Court E-Library)

Key Takeaways

A true conversion from an ordinary stock corporation to an OPC generally does not cancel existing business contracts.
The converted OPC succeeds the ordinary stock corporation and remains liable for outstanding obligations.
Contract clauses on assignment, change of control, restructuring, lender consent, and notices still matter.
Sole proprietorship-to-OPC transitions are different; contracts may need assignment, novation, or new signing.
Banks, landlords, franchisors, government agencies, and regulated-industry counterparties often require formal updates or consent.
Update SEC, BIR, LGU, bank, payroll, invoice, permit, and contract records after approval.
Foreign ownership restrictions and the Anti-Dummy Law must be checked before allowing a foreign individual to become the sole stockholder.
The OPC owner must keep corporate assets separate from personal assets to preserve limited liability.