Guide to Setting Up a Company in the Philippines: 2020 Edition
Read through this guide to find out how you can set up a foreign company in the Philippines.
Table of contents
The Philippines has been a top choice for foreign investors and with Republic Act (RA) No. 11232, otherwise known as the Revised Corporation Code, signed into law in 2019, this will likely be true for years to come.
RA 11232 makes corporate registration simpler, attracting more investments from abroad. A noteworthy item in the revised code is the removal of the minimum number of shareholders in a corporation.
In this article, we discuss some key points in setting up a company in the Philippines and the options available to foreign investors.
Prior to RA 11232, domestic corporations needed a minimum of 5 incorporators. There is no longer a minimum number of shareholders to establish a corporation in the Philippines.
A corporation may have up to 15 shareholders. Corporations with a single shareholder are one-person corporations.
Domestic corporations can have foreign shareholders and, depending on the industry, it is possible to have full foreign ownership of a domestic corporation. It is the most popular legal entity type among foreign investors in the Philippines.
A shareholder of a domestic corporation can be any one of the following:
One Person Corporation
A one person corporation (OPC) only has one shareholder.
The shareholder can be any one of the following:
- Natural person
The owner of an OPC must name a nominee and an alternate nominee who will manage the company in the event of the owner’s death or if the owner is otherwise incapacitated.
All corporations in the Philippines must have the following officers:
- President. He or she is the corporation’s signatory. The president does not have to be a resident of the Philippines but must be a director and shareholder of the company.
- Corporate Secretary. The corporate secretary is in charge of administrative and informative work as well as taking care of records, documents, and minutes of all meetings. He or she must be a citizen of the Philippines.
- Treasurer. He or she is in charge of the corporation’s financial matters. The treasurer does not have to be a Filipino citizen but he or she must be a resident of the Philippines.
Emerhub can help you find a corporate secretary. Find more information about our corporate secretary service in the Philippines here.
Can the President of a One Person Company also be the Treasurer?
For OPCs, if the president is a resident of the Philippines, he or she may also be the company’s treasurer. However, he or she will have to post a surety bond. The basis for the amount of the bond is the company’s authorized capital stock.
The table below shows the computation for surety bond:
|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 of the OPC|
The minimum capital requirement for corporations depends on the level of foreign ownership.
A domestic corporation with more than 40% foreign ownership or a foreign-owned OPC has a minimum capital requirement of USD 200,000. The minimum capital requirement for a domestic corporation with less than 40% foreign ownership or a locally-owned OPC is PHP 5,000.
The paid-up capital is at least 25% of the subscribed capital for foreign-owned corporations and a minimum of PHP 5,000 for locally-owned corporations.
When do I need to inject the capital?
The company can deposit its paid-up capital once it has a local bank account. The company must make the deposit before submitting the audit of its first year’s financial statement.
How to reduce the minimum capital requirement in the Philippines
If a business employs at least 50 Filipino citizens or uses advanced technology, the minimum capital requirement is USD 100,000. The minimum capital requirement for a business that exports at least 70% of its products is PHP 5,000 (approx. USD 100).
Most business lines in the Philippines are open to foreign ownership as long as the applicable minimum capital requirement is fulfilled.
A thing to note, however, is that some business lines only allow a maximum percentage of foreign ownership as regulated by the Foreign Investment Negative List (FINL).
Industries not mentioned in the FINL can be 100% foreign-owned. Some of the common industries include but are not limited to:
- Internet businesses
- Wellness centers
- Teaching in higher education
- Training centers outside the formal education system
- Adjustment companies, lending companies, financing companies, and investment houses
- Business Process Outsourcing (BPO)
Before a business can begin operating, it must secure relevant permits and certificates from the Securities and Exchange Commission, the local government, and the Bureau of Internal Revenue.
Emerhub can take care of obtaining the above documents for your business. Our experienced team can complete the incorporation process on your behalf within 4 to 6 weeks.
You don’t need to set up a corporation to do business in the Philippines. In some cases, it may be more cost-effective to seek alternative options.
A representative office is an office set up by a parent company. Representative offices cannot engage in any commercial activities nor earn any revenue. However, they can perform business activities in support of their parent company.
Companies who wish to outsource back-office activities would benefit from opening a representative office. The representative office may also conduct market research or provide customer service. Representative offices are also great for companies who would like to register their products but not to deal with the distributors yet.
To set up a representative office in the Philippines, the parent company must transfer USD 30,000 to the corporate bank account in the Philippines. The parent company must remit the same amount annually to cover operating expenses.
Outsourcing business activities
You can still conduct business activities in the Philippines without setting up a legal entity. You can outsource tasks to service providers like Emerhub.
Some of our services include:
Fill out the form below and one of our experts will reach out to you to discuss setting up a company in the Philippines. You can also email us at [email protected].
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