It’s not difficult to fall in love with the Philippines and start a new life, particularly with a business in mind. As of 2017, the Industry sector took the first place with the fastest growth of 7.2% in the economic sector, followed by Services, with 6.7%. In comparison to its ASEAN neighbors, the Philippines ranked 4th in terms of human capital, which pertains to the knowledge and skills people possess for them to create value in the global economic system. It also ranked 3rd based on the size of the economy as per GDP. As for manpower, Filipinos ranked at number 15 in terms of English proficiency worldwide and a high literacy percentage of 95.8% for men and 96.8% for women on 2015. The numbers are looking good so far, doesn’t it? On another plus note, for those who are tired of the city life, need not worry, for the country’s growth is not only concentrated in the capital city. All the regions in the Philippines were recorded to have a positive economic growth as of 2017, with the Cordillera Administrative Region in the lead with 12.1 percent, followed by Davao Region and Western Visayas, with 10.9 and 8.4 percent respectively.
However, despite its Asia’s tiger cub status in terms of economic growth, the Philippines is hurled with challenges, especially in the initial stages of starting a business part. In the World Bank standing in Ease of Doing Business, the country ranked 99th out of the 190 countries listed. The estimated days covered to establish a business takes 28 days, dealing with 7 government agencies in minimum. As a common saying goes, patience is indeed a virtue here, especially in dealing with government-related matters.
The primary step to register a business here in the Philippines is either with the Department of Trade and Industry (DTI) or Securities and Exchange Commission (SEC). Being a sole-proprietor however, is only applicable to Filipino Citizens, so let’s jump in right away to SEC. In this article, we will discuss thoroughly everything you need to know about SEC registration.
What is the Security and Exchange Commission (SEC)
It is a government entity that has jurisdiction over corporations, partnerships, and associations. It is also the agency that approves, rejects, suspends, revokes or requires amendments to registration statements and registration and licensing applications. To obtain a business permit, this is the government agency that you will encounter first.
What are the different types of Corporation?
Corporations that have stocks in which are divided into shares. These types of corporation also have the authorization to distribute their shares. To make things easier, stock corporations are for businesses whose primary purpose is to earn a profit.
This type of corporation, on the other hand, covers religious, charitable, scientific, athletic, social welfare and cultural purposes. It should be noted that no part of their income should benefit any person, regardless if they are in the corporation or not.
What are the requirements to open a Stock and Non-Stock Corporation:
Since January 2018, all applications are processed online via sec.gov.ph. The agency is trying its best to improve their service by streamlining the process and makes it accessible and convenient via online. We assume that they are still on trial and error stage for as of the moment, the processing time takes longer than before due to backlogs and website problems. Going back, here are the requirements that you need to prepare:
- Incorporators or shareholders. It should be a minimum of 5 incorporators and a maximum of 15. Take note that Filipinos should have 60% ownership of the company and there are only 2 foreigners allowed in a corporation. Foreigners also are not allowed to hold a position in the corporation (such as president, treasurer, etc). All incorporators must have a valid Tax Identification Number (TIN) from the Bureau of Internal Revenue.
- Create a user ID in the SEC website at https://crs.sec.gov.ph/. Input the proposed company name and fill out all the necessary fields. We highly recommend consulting an SEC personnel or an experienced business consultant in filling out the form for some questions may be uncommon to others.
- Wait for an email notification from SEC to upload the signed Articles of Incorporation, By-Laws and Treasurer’s Certificate. You have an option to choose the system-generated once or your own format.
- In case of amendments – you will receive a call from SEC to inform you which clause should be amended.
- Once everything is clear, you will receive an email in order of payment. You can pay directly at SEC counters or at the accredited banks. You need to submit the proof of payment online.
- Submit the original signed Articles of Incorporation, By-Laws and Treasurer’s Certificate to SEC main office or satellite offices. They will provide a date when your certificate is ready for pick up.
- After the release of the certificate, you need to purchase a stock book and have it registered.
Additional requirements for Non-Stock Corporation:
- For those who would like to add the word “foundation” in their company name, an initial capital of at least one million Philippine Pesos (PHP 1,000,000) is required with a Notarized Certificate of Bank Deposit issued by the bank as evidence is required.
- Submit to SEC a written statement of the company’s willingness to allow the commission to conduct an audit of its corporate books and records.
As of the writing of this post, the process can take up to 2 months maximum. Stock up on your patience for you will need a lot of those if you decide to do this on your own.
A branch office by definition pertains to foreign corporation or companies who are governed by foreign laws. Their business activities are conducted at their head office but their income generates from the host countries.
The minimum paid-up capital to set up a branch office here in the Philippines is USD 200,000.00. However, it can be reduced to USD 100,000 if:
- The business activity involves advanced technology
- The company employs at least 50 direct employees.
What are the requirements?
- Application form (SEC Form F-103) of a Foreign Corporation to establish a branch office in the Philippines.
- Certified copy of Board Resolution of the Parent company authorizing the opening of a branch office and assigning a Resident Agent (can be a Filipino citizen or a domestic corporation).
- Latest audited financial statement.
- Copies of Articles of Incorporation of the parent company.
- Registration data sheet.
- Resident Agent’s acceptance of appointment.
- Bank certificate or proof of inward remittance.
Almost similar with a branch office, regional headquarters is also registered and governed by foreign laws. The difference is it cannot derive income from its host countries. Its main purpose should only be dealing with clients of its parent company here in the Philippines. It is an advantage to set up this type of business if the only purpose is to get a better hand in the territory. Providing services or selling products is strictly forbidden.
What are the requirements?
- A capital of USD 50,000. It has to be registered with the Board of Investments.
- A resident agent.
- If qualified, Regional headquarters can register in Philippine Economic Zone Authority.
Can a corporation be 100% foreign-owned in the Philippines?
Once a corporation exceeds the 40% threshold for foreign ownership or to become a 100% foreign owned, it is automatically considered as a foreign corporation. However, there are more requirements and money involved to acquire a certificate, such as:
- A minimum paid-up capital of USD 200,000.00.
- To be considered to have a USD 100,000, a company must employ 50 direct employees or must use advance technology.
- For retail business, the paid-up capital must be USD 2,500,000 or more and the investment for establishing a store is not less than USD 250,000.
For what type of business can and cannot engage in for foreign enterprises, click here to check the negative list.
What are the Requirements?
- Basic requirements in opening a stock / non-stock corporation as mentioned earlier.
- Pay the required paid-up capital requirements.
- Click here to view the detailed list.
Opening a business here in the Philippines starting with the SEC registration can be a daunting task, especially to foreigners who are unfamiliar with the procedures of the aforementioned government agency. Fortunately, here at Infinit3Solutions, we have solid experience in handling business procedures, especially to budding entrepreneurs. Get in touch with our consulting team now to assist you in the process of establishing a business here in the Philippines.