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Liz Servañez
Liz Servañez serves as Branch Manager in the Philippines.
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Christine Aguilar
Christine Aguilar serves as Head of Operations in the Philippines.
When you are setting up your business in the Philippines, one of the key requirements is having the right corporate structure in place. It determines how your company will be organized, who will manage it, and how decisions will be made.
In light of this, it is important to familiarize yourself with the corporate structure in the Philippines.
In this article, we will discuss the requirements to hold key roles in a company. We will also touch on the responsibilities of a company’s directors and corporate officers.
Corporate structure in the Philippines
There are two types of corporations in the Philippines, domestic corporations and one person corporations. Regardless of the type, the corporate structure consists of the following:
- Shareholder(s)
- Director(s)
- Corporate Officers
- President
- Treasurer
- Corporate Secretary
An individual may hold more than one of the above roles in a company. We discuss each of these in further detail below.
1. Shareholders in a Corporation in the Philippines
Shareholders are considered the owners of the company, as they each hold equity through issued shares. They can be either individuals or corporate entities, and the number varies depending on what type of legal entity you are planning to set up.
The table below shows the requirements for shareholders in the Philippines:
| Type of Corporation | Number of Directors | Who can be a shareholder |
|---|---|---|
| Domestic Corporation | 2 to 15 | Natural person Partnership Association Corporation *foreign or local |
| One Person Corporation | 1 | Natural person Trust Estate *foreign or local |
Foreigners can hold shares in a domestic corporation if the relevant industry allows for foreign ownership. Similarly, a foreign investor can open a one person corporation if the industry is open to 100% foreign ownership.
The percentage of allowed foreign ownership depends on the industry. Many industries allow for full foreign ownership. However, there are a few which require majority Filipino ownership.
The table below shows examples of businesses that allow foreign ownership.
| Business/Industry | Allowed foreign ownership |
|---|---|
| IT | 100% |
| Lending business | 100% |
| Agriculture | 100% |
| Pharmaceutical | 100% |
| Consultancy | 100% |
| Telecom | 100% |
| Real Estate (buying and selling of land) | 40% |
| Private recruitment | 25% |
For more details on allowed and restricted sectors, refer to the foreign investment negative list in the Philippines.
Shareholders of a corporation in the Philippines have limited liability. As such, they will not be personally liable for the corporation’s debts. Should the company fail, their personal assets will be safe. The extent of their liability is the same as the value of their investment.
2. Directors in Philippine Corporations
The board of directors manages the corporation in accordance with the Corporation Code of the Philippines. Shareholders vote and elect members of the board of directors. A director holds this position usually for 1 year or until shareholders elect successors.
Qualifications of Directors
Aside from getting elected by shareholders, directors must also meet the following requirements:
- A natural person
- Must be of legal age
- Must own at least 1 share
- Must not have been convicted of a criminal offense punishable by imprisonment for a period exceeding 6 years
- Must not have violated the Corporation Code within five years prior to the date of election
Because a director must also be a shareholder, there can be no more than 15 directors in a corporation. For the same reason, foreign nationals can only hold the director role if the industry allows full or partial foreign ownership. Note that in industries that only allow partial foreign ownership, the majority of directors must be Filipino citizens.
Board of Directors’ Roles and Responsibilities
The board of directors can act on behalf of the corporation. They can perform tasks including but not limited to the following:
- Make strategic decisions in the company;
- Make day-to-day decisions
- Appoint senior management
In line with their roles within the company, the board of directors must always act in good faith. The board of directors must protect the interests of the corporation and its stockholders. Members of the board cannot make decisions for their individual benefit. The board of directors must also sure that the company follows legal and accounting requirements.
For non-stock, non-profit corporations, trustees serve the same function as a board of directors.
3. Corporate Officers in a Philippine Corporation
Corporate officers are the personnel who are appointed by the board to manage your company’s daily operations and ensure regulatory compliance.
All corporations in the Philippines must have the following corporate officers. The board of directors assigns the corporate officers.
A. President
The president acts as the signatory on behalf of the corporation and report to the board of directors.
Here are the requirements for the president of a corporation in the Philippines:
- A natural person
- Must be of legal age
- Must be a shareholder and director
There is only one shareholder in a one person corporation. Therefore, he or she must be the president of the company.
A foreigner may hold this position provided that he or she meets all other requirements.
It is also important to note that the president of a company does not need to be a resident of the Philippines.
B. Corporate Secretary
The corporate secretary handles all of the corporation’s administrative and informative work.
The requirements for a corporate secretary:
- A natural person
- Must be of legal age
- Must be a Filipino citizen and resident
Many corporate secretarial tasks involve maintaining compliance with local laws. The corporate secretary is in charge of the following tasks:
- Documenting changes to the company’s share capital;
- Documenting election or resignation of directors;
- Preparing certifications of board resolutions;
- Authorizing documents circulating in the corporation
Your corporate secretary must be someone who is familiar with relevant laws and regulations in the Philippines. You should not appoint someone just because they meet the citizenship and residency requirements.
One way to fill this role is by outsourcing your corporate secretary. Our legal team will take care of these tasks and ensure that you maintain compliance with local laws.
C. Treasurer
The treasurer takes care of all of the corporation’s financial matters. These include annual statements, financial reports, funds, and similar valuable effects that belong to the corporation.
The treasurer must meet the following requirements:
- A natural person
- Must be of legal age
- Must be a resident of the Philippines
A foreigner may hold this position as long as he or she is a resident of the Philippines.
The president of a one person corporation may also be the treasurer. This option is not open to domestic corporations.
If the president of a one person corporation appoints himself or herself as the treasurer, they must pay a surety bond. The company’s authorized capital stock serves as the basis for the amount of the bond.
The table below shows the surety bond necessary:
| Authorized capital stock (in PHP) | Surety bond coverage (in PHP) |
|---|---|
| 1 to 1,000,000 | 1,000,000 |
| 1,000,001 to 2,000,000 | 2,000,000 |
| 2,000,001 to 3,000,000 | 3,000,000 |
| 3,000,001 to 4,000,000 | 4,000,000 |
| 4,000,001 to 5,000,000 | 5,000,000 |
| 5,000,001 and above | Surety bond coverage is equal to the authorized capital stock |
Understanding the Capital Structure When Setting up a Corporation
Capital structure refers to the composition of how a corporation is financed through its issuance of shares.
When it comes to capital structure in the Philippines, there are three key components you need to understand when forming a corporation:
- Authorized Capital Stock (ACS): The maximum amount of capital the corporation is authorized to issue, as stated in its Articles of Incorporation. It sets the upper limit for issuing shares.
- Subscribed Capital: The portion of the ACS that shareholders agree to commit and pay for.
- Paid-Up Capital: The amount of subscribed capital that has been paid by the shareholders at the time of company incorporation. This determines the financial base of the company and should follow minimum capital requirements.
How Emerhub Can Help Structure Your Company
Emerhub helps foreign investors expand their businesses across Southeast Asia. Our local experts in the Philippines will guide you through every stage of your incorporation process to establish a compliant and well-structured business.
Our services include:
- Determining the most suitable entity type based on your business model and plans.
- Preparation and filing of incorporation documents, along with coordination with the BIR, LGU, and SEC for tax and operational permits.
- Provision of a licensed Corporate Secretary to meet SEC compliance, maintain corporate records, and oversee annual meeting documentation.
- Ongoing assistance with statutory filings, corporate book maintenance, and updates to your company information.
Ready to launch your business in the Philippines? Get in touch with our experts by filling out the form below.
