You’ve probably felt the frustration of navigating the bureaucratic system and meeting the stringent requirements of setting up and registering your first corporation. Of course, it was impossible to take advantage of the limited liability that a corporate structure provides unless you teamed up with many other stockholders or incorporators. As a solo entrepreneur, your only option seemed to be going down the sole proprietorship route.
But then, everything changed with the introduction of a One Person Corporation (OPC), the reduction of the minimum number of directors for an ordinary stock corporation (OSC), and other key provisions under R.A. 11232, otherwise known as the Revised Corporation Code (RCC) of the Philippines. You may have breathed a sigh of relief, knowing that incorporating a company has just become a lot simpler and more accessible.
Can you still switch from an OSC to OPC, or maybe vice versa? This article provides a complete guide on amending the Articles of Incorporation (AOI) so you can convert your company’s legal personality. Read on and tell us in the comments how we can assist you with your SEC documentation needs.
One Person Corporation Versus Ordinary Stock Corporation
Before you make your decision final, here are the key differences between a One Person Corporation (OPC) and an Ordinary Stock Corporation (OSC).
Number of Shareholders
An OPC is specifically designed to allow a single stockholder—whether a natural person, trust, or estate—to own and operate the corporation. In contrast, an OSC, which is a more traditional corporate structure, requires at least two incorporators to set up the corporation and act as the first directors of the same.
Foreign Ownership
OPCs and OSCs can be 100% foreign-owned except in industries or sectors where there are foreign ownership restrictions set in the Foreign Investment Negative List (FINL). Both must also adhere to the rules outlined in the Foreign Investments Act (FIA) and other relevant laws regarding foreign participation.
Management Structure
In an OPC, the management structure is simple and streamlined as the single stockholder also serves as the president and sole director of the corporation. On the other hand, an OSC follows a more complex governance structure, where there is a board of directors responsible for major corporate decisions.
Liability
Both OPCs and OSCs offer limited liability protection to their shareholders. The shareholders are only liable for the corporation’s debts and obligations up to the amount of their investment.
Corporate Documentation
While both OPCs and OSCs are supervised and regulated by the Securities and Exchange Commission (SEC), corporate documentations vary. During the company incorporation and registration, for instance, OSCs require both Articles of Incorporation (AOI) and Bylaws, while OPCs require only AOIs. It is not mandatory for an OPC to submit its Bylaws.
Taxation
Both OPCs and OSCs in the Philippines are subject to the same corporate tax laws and rates. Corporations are taxed at a rate of 25% (reduced from 30%) except for those having net taxable revenue of less than PHP 5 million and total assets of less than PHP 100 million, which are taxed at a rate of 20%.
When Should a Company Convert Its Legal Personality
The conversion of your OSC to an OPC (and vice versa) is particularly governed by Sections 131 and 132 of the RCC. The SEC, through its Memorandum Circular No. 27 Series of 2020, provides additional guidelines to ensure clarity in the conversion process.
OSC to OPC Conversion (Optional Filing)
An OSC may apply to convert into an OPC if a single stockholder—whether a natural person, trust, or estate—has acquired all the outstanding capital stocks of the OSC, i.e., with a corresponding Electronic Certificate Authorizing Registration (eCAR) or tax clearance having been issued by the Bureau of Internal Revenue (BIR). Because of the nature of these two corporations, the filing of the AOI amendment for the conversion is optional.
OPC to OSC Conversion (Mandatory Filing)
On the other hand, an OPC must convert into an OSC when its shares are no longer held by a single stockholder, or if another person or entity acquires at least a share, resulting in two or more stockholders. Unlike the other case, the filing of the AOI amendment for the conversion is mandatory unless the corporation is undergoing winding-up or dissolution.
SEC Requirements for Converting an OPC to OSC (and Vice Versa)
When you convert your company’s legal personality between an OPC and an OSC, certain documentary requirements must be submitted to the SEC for legal compliance. These typically include:
Documentary Requirements for OSC to OPC Conversion:
- Cover Sheet;
- Application for Conversion of an Ordinary Stock Corporation to a One Person Corporation (i.e., signed by the single stockholder who has acquired all of the outstanding shares of the capital stock and countersigned by the corporate secretary in the form prescribed by the SEC);
- Original or Certified True Copy (CTC) of the document/s affecting the transfer/s of full title/ownership of shares (i.e., deeds of assignment, or any legal documents transferring the shares to the single stockholder) and if applicable, a certified true copy of proof of authority to act on behalf of the trust/estate;
- Electronic Certificate Authorizing Registration (eCAR) or tax clearance from the BIR;
- Notarized Secretary’s Certificate of No-Intra Corporate Dispute;
- Amended Articles of Incorporation (AOI) of an OPC
- Letter of Acceptance of Appointment by nominee and alternate nominee;
- Self-appointed Treasurer’s Bond, if applicable;
- Name Reservation;
- SEC CMD Monitoring Clearance;
- Endorsement Clearances from appropriate government agencies, if applicable;
- Undertaking to Change Corporate Name; and,
- Undertaking to Assume All Liabilities of the Company.
Documentary Requirements for OPC to OSC Conversion:
- Cover Sheet;
- Notice of Conversion of a One Person Corporation into an Ordinary Stock Corporation, signed by all holders of shares of the outstanding capital stock and countersigned by the corporate secretary in the form prescribed by the SEC;
- Original or Certified True Copy (CTC) of the document/s affecting the transfer/s of full title/ownership of shares (i.e., subscription contracts, deeds of assignment, or any legal document declaring the legal heirs of the single stockholder);
- Electronic Certificate Authorizing Registration (eCAR) or tax clearance from the BIR;
- Articles of Incorporation and Bylaws of an OSC;
- Name Reservation;
- SEC CMD Monitoring Clearance;
- Endorsement Clearances from appropriate government agencies, if applicable;
- Undertaking to Change Corporate Name; and,
- Undertaking to Assume All Liabilities of the Company.
For converting an OSC to an OPC, a copy of the latest Articles of Incorporation (AOI) of the OSC must be attached to the AOI of the OPC. Equally, the following statement must be included as a new article in the AOI of the OPC:
“Upon issuance by the Securities and Exchange Commission of the Certificate of Filing of Amended Articles of Incorporation, reflecting its conversion into a One Person Corporation, the attached Articles of Incorporation of the Ordinary Stock Corporation shall be deemed superseded.”
Likewise, for OPC to OSC conversion, a copy of the latest AOI of the OPC must be attached to the AOI of the OSC. The AOI of the OSC must also include a new article with the following statement:
“Upon issuance by the Securities and Exchange Commission of the Certificate of Filing of Amended Articles of Incorporation and of Bylaws of this corporation, reflecting its conversion into an Ordinary Stock Corporation, the attached Articles of Incorporation of the One Person Corporation shall be deemed superseded.”
How to Convert an OPC to OSC (and Vice Versa): Step-by-Step Process
Your conversion of an OPC to OSC (or vice versa) falls under regular applications, which can now be filed online through the SEC Electronic Application for Modification of Entry Data (eAMEND Portal) and which are subject to the issuance of an original Certificate of Filing Amendment of Incorporation (AOI) (and Bylaws, if applicable).
1. Draft and Gather the Documentary Requirements.
Before you apply for the conversion with the SEC, ensure that all shares are assigned accordingly (i.e., to a single stockholder for OSC to OPC, or to multiple stockholders for OPC to OSC), with transfer taxes paid and an Electronic Certificate Authorizing Registration (eCAR) from the BIR. Also, prepare all other required documents, including clearances from the SEC and other government agencies, if applicable.
2. Create an Application and Generate the Amendment Form on eAMEND.
Log in to the eAMEND Portal at https://eamend.sec.gov.ph/login, select the appropriate options, and enter your company’s SEC Registration Number to create an application.
3. Sign and Notarize the Documents.
Have the authorized representatives, such as the president, corporate secretary, treasurer, board members, nominee, and alternate nominee, sign the required documents. Ensure all documents are properly notarized as necessary.
4. Upload the Finalized Documents to the eAMEND Portal.
Return to the eAMEND portal and upload the documentary requirements. Upload the latest CMD Monitoring Clearance from the SEC or check the box for the Affidavit of Undertaking if the clearance is unavailable, download the SEC-generated template for this affidavit. Attach the Sole Owner’s Resolution/Board Resolution authorizing submission of the Affidavit of Undertaking.
5. Wait for the Review of SEC Evaluator.
Check the status of your application and wait for approval by the SEC. The review may take several weeks or months. Afterwards, a new status update will be reflected in the eAMEND portal.
6. Generate the Payment Assessment Form (PAF) and Settle the Fees.
You will receive an email notification with a “For Payment” status once the SEC Assigned Processor has reviewed and pre-approved your application. Follow the instructions provided to download the Payment Assessment Form (PAF) and proceed to payment.
7. Wait for the Post-Audit and Submit Hard Copies of Documents.
After making the payment, a post-audit shall be conducted. Once completed, prepare four (4) sets of the signed and notarized hard copies, including the payment receipt, and submit them to the SEC Processing Office. One set should be the original notarized copy, with the remaining sets as photocopies to reduce costs.
8. Receive the Amendment Certificate.
After submission of the physical copies of the documents, the application status will be changed to “For Releasing of Certificate.” Once this status update is reflected, SEC will issue the Certificate of Filing of Amended Articles of Incorporation, which supersedes the original incorporation document.
FAQs on Corporate Conversion
For your additional reference, here are the frequently asked questions about OPC to OSC conversion (and vice versa) in the Philippines, along with their answers:
1. When should the notice of conversion be filed with the SEC?
Conversion of OSC to OPC is optional; hence, there is no deadline for filing. For OPC to OSC conversion, a Notice of Conversion must be filed with the SEC within sixty (60) days from the transfer of shares or the date of the issuance of the Electronic Certificate Authorizing Registration (eCAR) or tax clearance by the BIR.
2. What happens if the notice is not filed within the prescribed period?
If the notice is filed beyond the 60-day period, the OPC may still be approved for conversion subject to prior payment of penalty if found liable for violation of the RCC.
3. Can the new OSC or OPC retain its former name?
It depends on the circumstances. If there is already an existing corporation with a similar name, the new OSC or OPC is required to adopt a new name. Otherwise, the new OSC or OPC can retain its former name. In the case of a new OPC, however, it must bear the suffix “OPC.” This will depend on the review and approval of the SEC.
4. After the conversion, will the new OSC or OPC be considered a new entity?
No. It is still the same corporation bearing the same SEC registration number.
5. What happens to the company’s debts and liabilities after the conversion?
The OPC/OSC assumes all the outstanding liabilities as of the date of approval of the conversion.
6. When is the considered date of effectivity of the conversion?
The date of the issuance of the Certificate of Filing of Amended Articles of Incorporation (and of Bylaws, if applicable) is deemed to be the date of approval.
7. How much is the processing fee?
The fees for converting from OSC to OPC include PHP 1,000 for amending the Articles of Incorporation, PHP 100 for name reservation (30 days), and 1% of the filing fee for legal research.
8. How long does it take to process the AOI amendment for the conversion?
While an OPC to OSC conversion (and vice versa) is a regular application, the amendment process can take a year before completion.
To sum up, the introduction of a One Person Corporation (OPC) under the Revised Corporation Code (RCC) has made incorporating a company way easier, especially for solo entrepreneurs. The law also provides clear and straightforward guidelines for converting legal personalities between an OPC and OSC. By following these, you can ensure that your company remains legally compliant, operates efficiently, and adapts to the evolving business needs.
… and you might just need our assistance.
At FilePino, we ensure our team stays updated with the latest rules and regulations governing business compliance across various government agencies. We also leverage our extensive experience and expertise in navigating the intricacies of transactions.
Ready to convert your OPC into an ordinary stock corporation (OSC) (or vice versa)? Set up a consultation with FilePino today! Call us at (02) 8478-5826 (landline) and 0917 892 2337 (mobile) or send an email to info@filepino.com.
