Two-person corporation
In a previous column (20 February 2020), I took up the formation of a one-person corporation which is now allowed under the Revised Corporation Code. A reader responded by inquiring whether a two or a three or a four person corporation may also be allowed since the standard requirement then was for at least five (5) incorporators to form a corporation.
The question was very interesting since Section 116 of said law specifically defines a “one-person corporation” as a “corporation with a single stockholder”, which means that a corporation with more than one stockholder or incorporator would not qualify under said definition. At the same time it may be noted that under Section 10 of the same law, the previous requirement for the minimum five (5) incorporators has been deleted. It now states that “any person, partnership, association or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. What may also be noted is that the law no longer prescribes a minimum number of incorporators but instead merely sets their maximum number to fifteen (15).
I then sought guidance from SEC rules and, fortunately, a memorandum circular (series of 2019) has been issued on the subject stating that “for the purpose of forming a new domestic corporation under the Revised corporation Code, two (2) or more persons, but not more than fifteen (15) may organize themselves and form a corporation”. Thus, it is clear and settled that a two- or three- or four- person corporation may now be formed and organized.
However, the SEC memorandum circular is also explicit that “only a One Person Corporation (OPC) may have a single stockholder, as well as sole director”. What it means is that if, say, two persons agree to organize a corporation, the same can be allowed although such corporation cannot be allowed to avail of privileges reserved only for an OPC. Such privileges would include the following provisions: (1) the term of existence of the OPC shall be perpetual; (2) the OPC is not required to submit and file corporate by laws; (3) the single stockholder shall be the sole director and president of the OPC; (4) the single stockholder shall also act as the self-appointed treasurer of the corporation; and (5) in lieu of board meetings, when action is needed on any matter, It shall be sufficient to prepare a written resolution, signed and dated by the single stockholder and recorded in the minutes book of the OPC (Sections 119, 121, 122 and 128, Revised Corporation Code).
The two-person corporation, just like ordinary corporations, would have to issue shares of stock, adopt and submit bylaws, constitute a board of directors, hold stockholders and board meetings, appoint corporate officers, and comply with all the other requirements for regular corporations such as issuing board resolutions for actions of its board of directors. In other words, forming a two-person corporation provides the ease of organizing a corporation through only two (2) incorporators and this can mean a substantial reduction in terms of documentation, signing requirements and regulatory verification under the fit-and-proper rule. Moreover, it has the flexibility of admitting into the corporation subscribers and stockholders in addition to the two (2) incorporators, in such number as may be allowed by its authorized capital. As may be noted, incorporators refer to those who form and organize a corporation, as distinguished from subscribers and stockholders who can join the corporation subsequently or without being incorporators.
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The above comments are the personal views of the writer. His email address is dezunigajuan@gmail.com