The Philippines is a popular market for foreign investors and companies seeking to expand their operations into Southeast Asia. This is primarily due to its robust economy, wide availability of English-speaking talent, and strategic location concerning other economic and trading hubs in Asia.
In recent years, setting up a company in the Philippines has also become significantly easier, thanks to revisions to corporate structure regulations implemented by the Philippine government to encourage foreign investments. This article will serve as your comprehensive guide to setting up a company in the Philippines.
Limited liability companies in the Philippines
What types of corporations can be set up in the Philippines?
Limited liability companies (LLC) in the Philippines are referred to as corporations. These legal entities will generally be classified depending on the corporate shareholder structure defined in the articles of incorporation:
- Domestic corporations: These companies can have foreign shareholders, with the possibility of full foreign ownership depending on capital and industry. Shareholders can be a person, partnership, association, or corporation.
- One Person Corporation: A company comprised of a single shareholder, who can be a natural person, trust, or estate.
The most common form of incorporation for foreigners seeking to expand into the Philippines through an LLC is generally the domestic corporation. If you are considering a single shareholder structure for your operations, then be sure to check out our guide to One Person Corporations in the Philippines.
Shareholder structures for corporations
Currently, the minimum number of shareholders required in the Philippines for a domestic corporation is two, otherwise, it is required to register as an OPC. Domestic corporations can also have up to a maximum of 15 shareholders. Foreign shares must follow specific limitations depending on the industry and invested capital:
| Up to 40% foreign shares | Over 40% foreign shares |
|---|---|
| Can operate in any industry | Limits and restrictions on allowed industries |
| USD 100.00 minimum capital | USD 200.000 minimum capital |
If you are seeking to start a domestic corporation with < 40% foreign shares, it is also common practice to give local shareholders preferential shares, while giving some ordinary shares ten times more voting rights. This can allow minority foreign shareholders to maintain control over the company and its overall operations.
Minimum capital requirements for setting up a company in the Philippines
The minimum capital required for setting up a corporation in the Philippines will depend primarily on whether the majority shares in the company are domestic or foreign-owned:
- Domestic corporations with ≤ 40% foreign shares require a minimum capital of USD 100.00
- Domestic corporations with ≥ 40% foreign shares require a minimum capital of USD 200,000.00
- If your business employs at least 50 Filipino citizens or uses advanced technology, the minimum capital is USD 100,000.00
- If your business exports at least 70% of its products, the minimum capital is USD 100.00
- If your business employs at least 50 Filipino citizens or uses advanced technology, the minimum capital is USD 100,000.00
- If your business exports at least 70% of its products, the minimum capital is USD 100.00
The paid-up capital is at least 25% of the subscribed capital for foreign-owned corporations and a minimum of USD 100.00 for locally-owned corporations. The company can deposit the capital once it has a local bank account. The deposit must be done before submitting the audit of the first year’s financial statement.
Key requirements for starting a company in the Philippines
Designating corporate officers for your corporation
When setting up a company in the Philippines, it is mandatory that you designate certain corporate officers to oversee key functions within the corporation and ensure that operations are in compliance with local regulations:
| Designation | Role | Other requirements |
|---|---|---|
| President | Acts as the corporations signatory | Must be a director and shareholder in the company |
| Corporate Secretary | Oversees company administration and recordkeeping for meetings (minutes, documents) | Must be a citizen of the Philippines |
| Treasurer | Oversees corporation finances. | Must be a resident of the Philippines |
| Compliance officer | Ensures compliance with legal and tax regulations | N/A |
Surety bonds for One Person Corporations
As OPC’s are comprised of a single shareholder, it is possible for the president of the corporation to also act as treasurer, as long as they are a resident of the Philippines. However, they will have to post a surety bond which will be determined based on the OPC’s authorized capital stock:
| Authorized capital stock (PHP) | Surety bond coverage (PHP) |
|---|---|
| 1 - 1,000,000 | 1,000,000 |
| 1,000,001 - 2,000,000 | 2,000,000 |
| 2,000,001 - 3,000,000 | 3,000,000 |
| 3,000,001 - 4,000,000 | 4,000,000 |
| 4,000,001 - 5,000,000 | 5,000,000 |
| Over 5,000,001 | Surety bond coverage is equal to the authorized capital stock of the OPC |
Navigating foreign company ownership in the Philippines
Most lines of business and industry in the Philippines are open to foreign ownership, as long as the corporation meets the applicable minimum capital requirement. However, some industries are regulated by the Foreign-Investment Negative List (FINL) and limit or restrict foreign ownership based on Philippine legislation.
Industries that are not mentioned in the FINL are open to 100% foreign ownership as long as company operations and activities do not overlap with one of the regulated lines of business. The most common industries that allow 100% foreign ownership include (but are not limited to):
- Internet and E-commerce businesses
- Wellness centers
- Teaching in higher education
- Training centers outside the formal education system
- Adjustment, lending, and financing companies, as well as investment houses
- IT businesses
- Business Process Outsourcing (BPO)
How to register a company in the Philippines?
Whether you are planning to register a domestic corporation or a different legal entity in the Philippines, it is necessary to secure the relevant permits and certificates before you can start operations. These are obtained from the Securities and Exchange Commission (SEC), the Local Government Unit (LGU), and the Bureau of Internal Revenue (BIR).
Emerhub’s team of advisors is experienced in the incorporation process in the Philippines and can assist you every step of the way through our company registration service. Our experts can navigate the complexities of local regulations and complete the incorporation on your behalf within 4 to 6 weeks.
If you are interested in setting up a company in the Philippines, contact Emerhub via the form below and one of our advisors will get back to you as soon as possible to start the process!