Guidelines for the Conversion of Corporations (SEC Memorandum Circular No. 27, series of 2020)

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AT A GLANCE:

There are two types of conversion outlined in SEC Memorandum Circular No. 27, series of 2020: (1) from an ordinary stock corporation to a one-person corporation, and (2) from a one-person corporation to an ordinary stock corporation.

The processing of applications for conversion of corporations shall commence only upon receipt by the Securities and Exchange Commission’s Company Registration and Monitoring Department or by any of the SEC Extension Offices nationwide, of the complete documentary requirements enumerated in the guidelines including the proof of payment of the applicable fees. (SEC Memorandum Circular No. 27, series of 2020)

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SEC Memorandum Circular No. 27, series of 2020, provides essential guidelines for the conversion of corporations. These guidelines are meant to make it easier for companies to change their type from one form to another. They help ensure that companies follow the rules and regulations set by the government and make business operations smoother.

 

         There are two types of conversion outlined in SEC Memorandum Circular No. 27, series of 2020: (1) from an ordinary stock corporation to a one-person corporation, and (2) from a one-person corporation to an ordinary stock corporation. Conversion from one form to another may be pursued under certain circumstances, with specific documentary requirements to fulfill.

 

Companies looking to switch from an ordinary stock corporation to a one-person corporation must adhere to the prescribed process and provide the necessary documents, as outlined in the memorandum circular. Similarly, those aiming to convert from a one-person corporation back to an ordinary stock corporation must follow the designated procedures and submit the required documentation as per regulatory guidelines.

 

ORDINARY STOCK CORPORATION

TO

ONE-PERSON CORPORATION

 

When may an Ordinary Stock Corporation (OSC) apply for its conversion into a One-Person Corporation (OPC)?

         An OSC may apply for its conversion into an OPC, if a natural person of legal age, a trust or an estate (“single stockholder”) has acquired all of the outstanding capital stock of an OSC, with the issuance of a Certificate Authorizing Registration/Tax Clearance by the Bureau of Internal Revenue (“BIR”).

 

What are the documentary requirements?

        

         The following are the documents that need to be submitted:

 

1. Cover sheet
2. Application for Conversion of an OSC to OPC

•         Signed by the single stockholder (who has acquired all of the outstanding shares of the capital stock of an ordinary stock corporation); and,
•         Countersigned by the corporate secretary in the form prescribed by the Commission.

 

3. Original or certified true copy of the documents effecting the transfer of full title/ownership of shares, or authority to act on behalf of the trust/estate, if applicable
4. Certificate Authorizing Registration/Tax Clearance from BIR
5. Notarized Secretary’s Certificate of No Intra-Corporate Dispute
6. Articles of Incorporation of an OPC

•         In the form prescribed by the SEC, which shall comply with and/or contain the following:

 

1. Must be duly prepared, signed, and acknowledged or authenticated by the single stockholder and by the corporation’s treasurer;
2. Provision/article indicating the name/s and address/es of the original incorporator/s of the OSC;
3. Provisions/articles on the number of directors, their names and addresses, as well as their subscription and payment details shall be modified to reflect the name, address, subscription, and payment details of the single stockholder in the form prescribed by the Commission;
4. Provision/article on nominee and alternate nominee, their names, nationalities, residence addresses, and the extent, coverage, and limitations of their authorities;
5. Other details particular to an OPC shall likewise be indicated in accordance with Memorandum Circular No. 07, Series of 2019 or the SEC Guidelines on the Establishment of a One Person Corporation, and/or such other guidelines that the Commission may hereafter issue.

 

•         The following shall likewise be added as a new Article in the Articles of Incorporation of the One Person Corporation –

 

“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.”

 

•         A copy of the latest Articles of Incorporation of the OSC shall be attached to the Articles of Incorporation of the OPC

 

7. Letter of Acceptance of Appointment by Nominee and Alternate Nominee
8. Self-Appointed Treasurer’s Bond
9. Name reservation
10. Monitoring clearance from other relevant department of the SEC or from the Compliance Monitoring Division (CMD) of the Company Registration and Monitoring Department (CRMD), whichever is applicable
11. Endorsement clearance from appropriate government agencies, if applicable
12. Undertaking to Change Corporate Name duly executed under oath by the single stockholder or the sole remaining director, if not yet included in the Articles of Incorporation, and,
13. Undertaking to Assume All Liabilities of the Ordinary Stock Corporation, duly executed under oath by the single stockholder of the OPC, if not yet included in the Articles of Incorporation.

 

 

ONE-PERSON CORPORATION

TO

ORDINARY STOCK CORPORATION

 

When may a One-Person Corporation (OPC) apply for its conversion into an Ordinary Stock Corporation (OSC)?

 

When the shares in an OPC ceases to be held solely by a single stockholder, the OPC may be converted into an OSC after due notice to the Commission of such fact/s and of such circumstance/s leading to the conversion, and after compliance with all the requirements for a stock corporation, as may be determined by the Commission, and after an evaluation of the documentary requirements.

 

What are the documentary requirements?

 

The following are the documents that need to be submitted:

 

1. Cover sheet
2. Notice of Conversion of a One Person Corporation into an Ordinary Stock Corporation

•         Signed by all holders of shares of the outstanding capital stock
•         Countersigned by the corporate secretary in the form prescribed by the Commission.

 

3. Original or certified true copy of the documents effecting the transfer of full title/ownership of shares
4. Certificate Authorizing Registration/Tax Clearance from BIR
5. Articles of Incorporation and By-Laws of an OSC

•         In the form prescribed under Section 14 of the Revised Corporation Code, which shall comply with and/or contain the following:

1. Must be duly prepared, signed, and acknowledged or authenticated by the stockholders who voted for their adoption, and by the corporation’s treasurer;
2. Provision/article indicating the name/s and address/es of the original incorporator/s of the OPC;
3. Provisions/articles on the number of directors, their names and addresses, as well as their subscription and payment details;
4. Other details particular to an OSC shall likewise be indicated in accordance with the provisions of the Revised Corporation Code and guidelines that the Commission has issued

 

•         The following shall likewise be added as a new Article in the Articles of Incorporation of the One Stock Corporation –

 

“Upon issuance by the Securities and Exchange Commission of the Certificate of Filing of Amended Articles of Incorporation and By Laws 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.”

 

•         A copy of the latest Articles of Incorporation of the OSC shall be attached to the Articles of Incorporation of the OPC

 

6. Name reservation
7. Monitoring clearance from other relevant department of the SEC or from the Compliance Monitoring Division (CMD) of the Company Registration and Monitoring Department (CRMD), whichever is applicable
8. Endorsement clearance from appropriate government agencies, if applicable
9. Undertaking to Change Corporate Name duly executed under oath by the authorized representative or director of the OSC, if not yet included in the Articles of Incorporation.

 

According to Section 17 of the Memorandum Circular, the processing of applications for conversion of corporations shall commence only upon receipt by the CRMD, or by any of the SEC Extension Offices nationwide, of the complete documentary requirements enumerated in these guidelines including the proof of payment of the applicable fees. This shall be done manually by the Commission until further notice.

 

Read also:

https://www.alburolaw.com/can-an-ordinary-corporation-be-converted-into-a-one-person-corporation/

https://www.alburolaw.com/sole-proprietorship-vs-one-person-corporation/

 

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