The recently enacted Revised Corporation Code brought new and progressive changes to the world of corporate businesses. One of the more anticipated changes was the permitting of One Person Corporations (OPC). Previously, corporations could only be organized when there were at least five incorporators, which could have been a hindrance to some business owners who wished to have a chartered company but could not find other incorporators or simply did not want to have to deal with other persons in their business.
On the other side of the spectrum, an Ordinary Stock Corporation (OSC) for reasons it may find advantageous, may want to convert to an OPC. While this was expressly allowed in the new Revised Corporation Code, it was only in August of 2020 when the guidelines made clear the process of such conversion.
In this post, we will discuss the flow of such conversion according to the Securities and Exchange Commission (SEC) Memorandum Circular No. 27, Series of 2020.
Acquisition of all outstanding capital stock of an OSC
The first and most crucial step is the acquisition of all the outstanding capital stock by a person of legal age, a trust, or an estate. The transfer must be cleared by the Bureau of Internal Revenue (BIR), which means that the taxes which are due because of such transfer has been duly paid. When the taxes have been cleared, the BIR will issue a Certificate Authorizing Registration (CAR) or Tax Clearance. After this hurdle, the rest of the procedure is like any amendment to a corporation’s Articles of Incorporation.
Documentary Requirements
- Cover Sheet;
- Application for Conversion of an OSC to a OPC (The format of this form is provided by the SEC and can be seen in SEC Memorandum Circular no. 27, Series of 2020);
- Original or Certified True Copy of the Deed of Assignment, or any other document, which effected the transfer and acquisition of all the outstanding capital stock of the previous OSC;
- CAR or Tax Clearance from the BIR;
- Notarized Secretary’s Certificate certifying that there is no intra-corporate dispute;
- Articles of Incorporation of an OPC (This must be filed and should be in the form as required by the SEC);
- Letter of acceptance of appointment by nominee and alternate nominee;
- Self-appointed Treasurer’s Bond, if applicable;
- Name reservation from the SEC;
- Monitoring Clearance from the SEC (This can be procured from the SEC’s monitoring department. It is a process where the commission checks and evaluates the corporation’s compliance with regulations. If there are violations, penalties may need to be paid);
- Endorsement clearance from the concerned government agency, if applicable;
- Undertaking to Change Corporate Name, signed by the single stockholder or single remaining director, if not yet included in the Articles of Incorporation;
- Undertaking to assume all liabilities of the OSC, duly signed by the single stockholder, if not yet included in the Articles of Incorporation.
Post-filing Process
After the evaluation of your application, the SEC will issue a Certificate of Filing of Amended Articles of Incorporation which will show the conversion of the OSC to an OPC. After its issuance, the old articles of incorporation and by-laws of the previous OSC shall be deemed superseded.
Once you have your certificate, you are basically done and have successfully converted your ordinary stock corporation to a new one person corporation. Note that the opposite, converting an OPC to an OSC, is also allowed and is laid-out in the same memorandum circular.
In future posts, we will discuss the nuances of an OPC and what its pros and cons are when compared to the more traditional OSC.