Reducing the Number of Stockholder

Read also: MAY A DIRECTOR OF A STOCK CORPORATION BE REMOVED FROM OFFICE?

The Revised Corporation Code which took effect on February 2, 2019 removed the absolute requirement of having a minimum of five (5) individuals in the formation of corporations. Further, the law now allows the establishment of a One-Person Corporation (OPC) composed of a single shareholder, who may be a natural person, a trust or an estate.

Reducing the Number Of Stockholders From The Minimum Number of Five (5) To Two (2)

To reduce the number of stockholders from the minimum number of five (5) to two (2), the corporation should amend its Article of Incorporation to reflect this change. For the amendment of the Articles of Incorporation, Securities and Exchange Commission (SEC) requires the following documentary requirements to be submitted:

• Basic Requirements

1. Amended Articles of Incorporation
2. Directors’ or Trustees Certificate – notarized and signed by majority of the directors or trustees and the corporate secretary, certifying (i) the amendment of the Articles of Incorporation and indicating the amended provisions, (ii) the vote of the directors or trustees and stockholders or members, (iii) the date and place of the stockholders’ or members’ meeting; and (iv) the tax identification number of the signatories which shall be placed below their names
3. Notarized Secretary’s Certificate on no pending case of intra-corporate dispute
4. Compliance Monitoring Division (CMD) Clearance and/or clearance from other Department of the Commission

• Additional Requirements

1. Endorsement/clearance from other government agencies, if applicable if the provision to be amended is the corporate name, submit:

1. Name Verification Slip
2. Affidavit of a director, trustees or officer undertaking to change corporate name.(Not required if already stated in the AI)

Conversion from an Ordinary Corporation to One Person Corporation

A shareholder may acquire all the stocks of an ordinary stock corporation and apply for the conversion thereof into a One Person Corporation (OPC).  A One Person Corporation is a corporation with a single stockholder.

If the application for conversion is approved, the Commission shall issue a certificate of filing of amended articles of incorporation reflecting the conversion. In terms of liability, the single shareholder claiming limited liability has the burden of affirmatively showing that the corporation was adequately financed.

On February 17, 2020 SEC posted on its website (www.sec.gov.ph) the draft memorandum circular (Draft MC) that pertains to the guidelines for the conversion of corporations to One-Person Corporation for public to comment. The salient features are as follows:  

PART I

ORDINARY STOCK CORPORATION TO ONE PERSON CORPORATION

Section 1

When a single stockholder acquires all the stocks of an Ordinary Stock Corporation, the Ordinary Stock Corporation may apply for conversion into One Person Corporation, by submitting the following documentary requirements:

1. Cover sheet
2. Affidavit of Conversion of an Ordinary Stock Corporation to a One Person Corporation, executed 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 corporation’s corporate secretary, setting forth the following:
   1. Total number of shares of the Ordinary Stock Corporation issued and outstanding
   2. List of stockholders of the Ordinary Stock Corporation before the acquisition of all the outstanding shares by the single stockholder
   3. Name of the single stockholder who acquired all of the outstanding shares of the capital stock of an ordinary stock corporation, in his own name in the books of the corporation
3. Original copy of the document/s effecting the transfer/s (i.e.: deeds of assignment, or any legal document 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
4. Notarized Secretary’s Certificate of No Intra-Corporate Dispute
5. Articles of Incorporation of a One Person Corporation, duly prepared, signed and acknowledged or authenticated by the single stockholder and by the corporation’s treasurer in accordance with the SEC Guidelines on the Establishment of a One Person Corporation or such other Guidelines that the Commission may hereafter issue
6. Letter of acceptance of appointment by Nominee and Alternate Nominee
7. Self-appointed Treasurer’s Bond, if applicable
8. Name reservation
9. Endorsement clearance from other relevant department of the SEC or from the Compliance Monitoring Division of the Company Registration and Monitoring Department, whichever is applicable
10. Endorsement clearance from appropriate government agencies, if applicable
11. 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

Section 2

In the Articles of Incorporation of a One Person Corporation to be submitted, the provision/article indicating the name/s and address/es of the original incorporator/s of the ordinary stock corporation shall be retained as is.

Meanwhile, the provisions 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. Other details particular to a One Person Corporation shall likewise be indicated.

Section 3

Upon issuance of the Certificate of Filing of Amended Articles of Incorporation by the SEC reflecting the conversion to a One Person Corporation, the Articles of Incorporation and By-laws of the Ordinary Stock Corporation shall be deemed superseded.

Section 4

In the Certificate of Filing of Amended Articles of Incorporation that will be issued, the corporation will retain its SEC Company Registration Number, but will have the “OPC” prefix in order to reflect its nature as a One Person Сoгporation.

Section 5

The One Person Corporation converted from an Ordinary Stock Corporation shall succeed the latter and be legally responsible for all the latter’s outstanding liabilities as of the date of approval of the conversion.

Section 6

The provisions of Title XIII, Chapter III of the Revised Corporation Code shall apply primarily to One Person Corporations, while other provisions of the Code apply suppletorily.

Section 16

In the Articles of Incorporation of the converted corporation, the signatory/ies thereto must clearly state that they voluntarily agreed to convert the Ordinary Stock Corporation into a One Person Corporation, or the One Person Corporation into an Ordinary Stock Corporation, as the case may be.

Section 17

Processing of applications for conversion of an Ordinary Stock Corporation into a One Person Corporation, and of a One-Person Corporation into an Ordinary Stock Corporation, shall commence only upon receipt by the Commission of the complete documentary requirements including the proof of payment of the applicable fees.

Section 18

The processing of applications for conversion in accordance with the provisions of the Revised Corporation Code and the foregoing guidelines shall be done manually, until further notice, by the Company Registration and Monitoring Department of the Securities and Exchange Commission or by any of the Commission’s Extension Offices nationwide.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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