SEC issues draft rules for one-person firms

THE Securities and Exchange Commission (SEC) released on Friday its proposed guidelines on establishing a one-person corporation (OPC) and converting an ordinary stock corporation into the former.

In a memorandum posted on its website, the SEC said the OPC should be run by a single stockholder, Filipino or otherwise. This person, it added, can be of legal age, estate or trust, or managed by a trustee. He or she should also be the firm’s sole director and president.

When applying for incorporation, the single stockholder must attach to his or her OPC application a written consent designating a nominee and an alternate nominee to take over the company in the event of incapacity or death. Changes can be made any time, but these must be submitted to the SEC, together with written consents.

The stockholder can reassume his or her position once his or her incapacity ends.

In case of death, the nominee will take over the company’s management until the legal heirs have been determined and have agreed on who will take the deceased’s place.

The articles of incorporation should bear the OPC’s primary purpose; principal office address; term of existence; stockholder’s name and details; authorized, subscribed and paid-up capital stock; and other matters deemed necessary.

Within 15 days after the certificate of incorporation is issued, the stockholder must appoint a treasurer, corporate secretary and other officers. He or she must notify the SEC five days upon appointment by filling out an appointment form.

The shareholder may assume the role of treasurer, but may not be appointed as corporate secretary.

The suffix “OPC” should be indicated below or at the end of its corporate name.

An OPC is not required to have a minimum authorized capital stock, except as otherwise provided by law.

As for reportorial requirements, an OPC should submit annual audited financial statements within 120 days from the end of the fiscal year; a report on explanations or comments by the president on the qualification, reservation or adverse remarks from the auditor in financial statements; a report on all self-dealings and related party transactions; and other necessary reports.

The SEC cleared that banks, non-bank financial institutions, quasi-banks, pre-need, trust, insurance, public and listed firms, and non-chartered state-run corporations can not incorporate as an OPC.

Conversion into OPC

In a separate memorandum, the SEC also released its proposed guidelines on converting an ordinary stock corporation (OSC) into an OPC.
Only a domestic company organized as a stock corporation can undergo the conversion, the commission said.

A single stockholder who acquired all the OSC’s outstanding capital stock may start applying for the conversion. The process is similar to amending the articles of incorporation to include the suffix “OPC” and remove any suffix indicating an OSC, such as “Incorporated” or “Inc.” and “Corporation” or “Corp.”

The SEC will also require the stockholder to reduce the number of directors to one, name a nominee and alternate nominee, and amend or remove provisions unique to OSCs, among others.

The secretary’s certificate, duly certified under oath by the corporate secretary, should also state that all taxes and obligations in favor of the government have been settled, and that the company or any of its stockholders, directors or officers is not involved in any intracorporate dispute.

The conversion shall take effect once the commission approved the amended articles of incorporation by issuing a “Certificate of Filing of Conversion to One-Person Corporation.”
Once approved, the OPC will retain its SEC company registration number. It shall also maintain legal responsibility for the OSC’s outstanding liabilities and obligations as of the approval date.

The proposed guidelines remain subject to public comments until March 29.

The concept of an OPC was introduced by the Revised Corporation Code of the Philippines, signed into law by President Rodrigo Duterte last month. It aims to simplify corporate governance standards and provide a business-friendly environment.

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