There are several types of registering businesses in the Philippines as provided below.
- 100% Foreign Owned Domestic corporation
- 100% Philippine Local Corporation (100% Filipino owned)
- 60/40 Owned Domestic Corporation (60% Filipino owned and 40% Foreign Owned)
- Foreign Branch
- Regional Headquarters
- Regional Operating Area Headquarters
- Representative Office
- Sole Proprietorship
Foreign investors usually start and do business in the Philippines through a Domestic corporation or a Branch. Using either entity has its advantages and disadvantages. Corporations are more favorable in terms of administrative regulation. Branches, which may be more advantageous taxwise, cannot be used if the activities to be undertaken are included in the Foreign Investment Negative list . Corporations on the other hand, can accommodate the necessary Philippine ownership.
Forming or registering a corporation requires a minimum of 5 incorporators, each of whom must be actual persons and hold at least a single share in the company. Majority of the incorporators must be Filipino. A Corporation must have between 5 and 15 directors (or trustees if a non-stock corporation), each of whom must have at least one share of stock. A majority of the directors (or trustees) must be Philippine residents. All Domestic Corporations (those incorporated in the Philippines) obtain their license from and are registered with the Securities and Exchange Commission. The SEC will require a prospective Corporation to reserve and register a name, submit proposed Articles of Incorporation and By-Laws which are complaint with the requirements of the Corporation Code of the Philippines, and prove that it has the minimum capitalization requirements pertaining to the industry or business the corporation is engaged in. Under the Foreign Investment Act , the minimum paid-up capital requirement for a corporation considered a Domestic Market Enterprise (DME) or one where the foreign equity exceeds 40% is US$200,000, which must be remitted into the Philippines. The registrationÂ requirements do not apply to DMEs that are export-oriented or involve advance technology and will employ at least 50 employees.
A Branch of a Foreign Corporation doing business in the Philippines must obtain a license to do so from the SEC upon registration. The foreign corporation head office must prove its legal existence in its country of origin, its financial soundness, and its authorization to set up a branch in the Philippines. The Branch will need to appoint a resident agent in the Philippines who will be in charge of receiving summons and legal processes. This allows the SEC and other entities to obtain jurisdiction over the foreign company.
Starting and setting up a branch normally involves remitting US$200,000 as capital investment when registering a company with the SEC in the Philippines. Branches engaged in activities involving advance technology, or that employ at least 50 direct employees, are required to inwardly remit a reduced amount of US$100,000 as assigned capital. Export-oriented branches are not subject to minimum assigned capitalization requirements. Special rules apply for certain types of branch operations. It is advisable for companies to register their remittance with Central Bank of the Philippines or Bangko Sentral ng Pilipinas and obtain a BSRD .
The failure of a foreign corporation to obtain a license to do business will prevent the entity from filing suit in the Philippine courts. The issuance of a certificate of incorporation from the SEC signifies the commencement of corporate existence and juridical personality for a company.
Before commencing operations in the Philippines, businesses must also register with the Bureau of Internal Revenue (BIR), the Social Security System (SSS), the Home Development Mutual Fund (HDMF), the Philippine Health Insurance Corporation (Phil-Health) , and the local government unit where its principal office will be located.
Corporations who qualify may avail of tax incentives by registering with the BOI or PEZA
Philippines Incorporation Basic Requirements. Security and Exchange Commission registration (SEC)
1)Name Verification Slip (secure online or from SEC Name Verification Unit )
2)Articles of Incorporation and By-laws
4)Affidavit of incorporator or director undertaking to change corporate name (not required if Articles of Incorporation has provision on this commitment )
Registration and Incorporation of Business in the Philippines
Pellas & Associates can assist foreign company in the preparation of business registration requirements in the Philippines in the following aspect:
- Determine company (Foreign Branch, Foreign or 60/40 Domestic Corporation)
- Determine Capital Requirement
- Open local bank account
- Register and secure company name with SEC or DTI
- Identify Shareholders, Directors, Nominees and Incorporators
- Draft Articles of Incorporation and By-Laws
- Process documents with SEC, BOI, PEZA, BIR, SSS, etc
- Process Mayor Permit and Business Permit