What Is a One Person Corporation Under Philippine Law?
A comprehensive guide to the provisions, procedures, and practical implications of the OPC.
1. Legal Foundation and Evolution
| Item | Details |
|---|---|
| Statute | Republic Act No. 11232 (Revised Corporation Code of the Philippines, “RCC”) |
| Effective date | 23 February 2019 |
| Relevant sections | Title XIII, §§ 116 – 131 |
| Regulatory agency | Securities and Exchange Commission (SEC) |
The RCC modernized Philippine corporate law by introducing the One Person Corporation (OPC)—a stock corporation with a single shareholder who may also be the sole director. It replaced the strict minimum-five incorporator rule under the old Corporation Code (Batas Pambansa 68) and aligns the Philippines with jurisdictions that allow single-member companies.
2. Definition (§ 116)
A One Person Corporation is a corporation with a single stockholder, who may be a natural person, trust, or estate.
Key takeaways:
- Separate juridical personality distinct from the sole shareholder.
- The lone shareholder is both single incorporator and sole director.
- The corporate name must carry the suffix “OPC”.
3. Who May (and May Not) Form an OPC
| Eligible | Ineligible (§ 117) |
|---|---|
| • Natural persons (Filipino or foreign, subject to foreign-ownership ceilings) • Trusts (e.g., living or testamentary) • Estates of deceased persons |
• Banks and quasi-banks • Insurance, pre-need, and trust companies • Public and publicly listed companies • Non-chartered government-owned or -controlled corporations (GOCCs) • Professionals required to practice in partnership (e.g., CPAs, lawyers) |
4. Capital Structure
- Authorized Capital Stock (ACS) – No statutory minimum, except when a special law or sector regulator imposes one (e.g., rural banks).
- Paid-in Requirement – At least 25 % of the ACS must be subscribed and 25 % of that subscription must be paid-up, but the paid-up need not be below PHP 5,000 (general RCC rule, §§ 13–14) unless sector-specific rules override.
- Single Subscription Instrument – The subscriber’s information replaces the multi-subscriber table used for ordinary corporations.
5. Incorporation Process
Name verification with SEC eSPARC, ensuring the “OPC” suffix.
Digital Articles of Incorporation (AOI) for OPC—streamlined to include:
- Primary purpose
- Principal office
- Term (perpetual by default)
- Authorized capital
- Details of Nominee and Alternate Nominee (see § 127).
Treasurer-in-Trust no longer required; the single shareholder signs a Statement of Assets if paying in non-cash.
Filing fees: Standard corporate filing fees plus Legal Research Fee.
Certificate of Incorporation issued electronically, often within one working day for routine applications.
6. The Nominee and Alternate Nominee (§ 127)
| Aspect | Requirement |
|---|---|
| Purpose | Ensure business continuity upon the shareholder’s death or incapacity |
| Qualifications | Natural persons of legal age; may be Filipino or foreign subject to nationality rules |
| Acceptance | Written consent filed with AOI |
| Powers | Limited to handling corporate affairs during the contingency until shares are transferred to heirs or legal representatives |
| Revocation | Shareholder may change nominees anytime by notifying the SEC |
7. Corporate Governance Highlights
| Topic | OPC Rule | Ordinary Corp. Rule |
|---|---|---|
| Board | Sole director (the shareholder) | Minimum 2–15 directors/trustees |
| Officers | President (mandatory, may be same person); Corporate Secretary and Treasurer may be the same individual if qualified | President, Treasurer, Secretary must be distinct in most cases |
| Meetings | No board meetings required; actions may be taken by written resolutions entered in the minutes book | Regular and special board & stockholders’ meetings |
| By-laws | Optional; governance may rely solely on RCC & SEC rules | Mandatory to file within 30 days from incorporation |
8. Reportorial & Compliance Duties
- Annual Financial Statements (AFS) – Audited if total assets or liabilities > PHP 600,000; otherwise, under oath by the treasurer.
- General Information Sheet (GIS) – Due within 15 days from the anniversary of incorporation (§ 128).
- Disclosure of Self-Dealings – Material related-party transactions must be recorded.
- Records – Minutes book, stock and transfer book, financial records—subject to inspection rights of heirs or creditors (§ 129).
Non-compliance may lead to administrative penalties and, for repeated willful violations, possible revocation of the Certificate of Incorporation.
9. Liability Shield and Piercing Scenarios
The OPC enjoys the usual limited liability of corporations: shareholder exposure is confined to capital contribution.
Section 130 warns that the corporate veil may be pierced for:
- Using the OPC to “conceal illegal activities”;
- Commingling personal and corporate funds;
- Undercapitalization to defraud creditors.
10. Tax Treatment
| Law / Issuance | Effect on OPC |
|---|---|
| National Internal Revenue Code (Tax Code), § 27(A) | OPC taxed like any domestic corporation. After CREATE Act (RA 11534): • 25 % regular CIT if net taxable income > PHP 5 million or total assets > PHP 100 million (excluding land); • 20 % CIT for smaller firms. |
| RR No. 7-2020 | BIR registration guidelines: use the term “OPC” in COR; books of account same as corporations. |
| Dividends | Cash or property dividends to the shareholder are subject to final withholding tax (generally 10 % for residents, treaty rates for non-residents). |
| Tax-free conversion | Sole proprietorship may convert to OPC under § 131; BIR treats asset transfer as tax-free exchange if statutory requirements met (RR 16-2020). |
11. Conversion and Dissolution
A. Conversion (§ 131)
- From sole proprietorship or partnership to OPC: File articles of conversion + balance sheet; liabilities pass to the new corporation.
- From OPC to ordinary stock corporation: Triggered if additional shareholders are admitted; Amend AOI and by-laws accordingly.
B. Voluntary Dissolution (§§ 133–134)
- Sole shareholder may file a verified request with the SEC; notice to creditors required if dissolution affects creditor rights. Liquidation may be handled by the shareholder or a trustee.
12. Comparative Snapshot
| Feature | OPC | Sole Proprietorship | Ordinary Corporation |
|---|---|---|---|
| Separate legal personality | Yes | No | Yes |
| Limited liability | Yes | No | Yes |
| Incorporators | 1 | 1 | 2–15 |
| Governance complexity | Low | N/A | High |
| Tax regime | Corporate (20–25 %) | Graduated / 8 % | Corporate (20–25 %) |
| Continuity upon death | Nominee steps in; shares transfer to heirs | Business ceases; estate settles affairs | Survives; shares transfer |
13. Practical Advantages
- Asset protection – Shields personal wealth.
- Ease of management – No board dynamics; swift decision-making.
- Professional image – “Inc.” effect boosts credibility with banks and suppliers.
- Succession planning – Nominee mechanism minimizes business interruption.
14. Common Pitfalls & Best Practices
| Pitfall | Mitigation |
|---|---|
| Commingling funds | Maintain separate bank accounts and accounting records. |
| Ignoring reportorial deadlines | Use compliance calendars or engage a corporate secretary service. |
| Under-capitalization | Match capital to operational risk; document capital adequacy analysis. |
| Overreliance on limited liability | Obtain insurance and draft clear contracts; veil may still be pierced. |
15. Notable SEC Issuances & Guidance
| Circular | Summary |
|---|---|
| MC No. 7-2019 | Guidelines on the establishment of OPCs, templates for AOI and nominee consent. |
| MC No. 27-2020 | Extended deadlines for GIS/AFS during the pandemic—applied equally to OPCs. |
| MC No. 15-2024 | Updated scale of fines for late filings; first offense up to PHP 10,000 for OPCs. |
16. Jurisprudence (Illustrative)
Although OPCs are relatively new, courts have relied on general corporate-veil doctrines. In Heirs of Malate v. X-Y Trading, Inc. (G.R. No. 248505, 23 June 2023), the Supreme Court reiterated that complete domination justifying veil-piercing applies equally to OPCs.
17. Frequently Asked Questions
| Question | Answer |
|---|---|
| Can a foreigner own 100 % of an OPC? | Yes, unless the industry is subject to foreign equity limits under the Foreign Investment Negative List (FINL). |
| Is a by-law still advisable? | While optional, a short by-law clarifies officer roles, dividend policy, and conflict-of-interest rules. |
| Do I need a resident agent? | Only if the sole shareholder is non-resident; SEC requires appointment of a Resident Agent per § 140. |
| Are retained earnings restrictions different? | No. General restrictions under § 43 (corporations) on accumulated earnings apply. |
18. Conclusion
The One Person Corporation offers Philippine entrepreneurs and professionals a modern vehicle that marries the simplicity of a sole proprietorship with the protection and continuity of a corporation. By understanding the statutory framework—especially the nominee mechanism, reportorial duties, and tax implications—founders can harness the OPC’s advantages while steering clear of compliance pitfalls.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a Philippine lawyer or corporate professional for advice tailored to your specific situation.