The One Person Corporation (OPC) is a legal innovation recently introduced by the Revised Corporation Code. Through the amendment, a single person can now organize his or her corporation regardless of the amount of authorized capital stock. Further, it is a new model that could provide limited liability, credibility, and support to Micro and Small Businesses.
It was part of the amendments from REPUBLIC ACT No. 11232, also known as the “Revised Corporation Code of the Philippines” that became effective on 23 February 2019. Through the amendments, the government aims to provide ease of doing business, promote good corporate governance, and protect corporations and investors. To learn more about the benefits and privileges of a one-person corporation, it would be best to consult the top Philippine law firms.
“The Informal Sector”: Micro and Small Businesses
Micro, small, and medium enterprises (MSMEs)1 are important pieces to the development of the economy. It creates more jobs and allows the small businesses to grow themselves. According to the Senate of the Philippines, a Micro-enterprise has an asset of up to P3,000,000 and a workforce of up to 1-9 employees. As for Small enterprises, they have assets of P3,000,001 up to P15,000,000 and a workforce of 10-99 employees. Lastly, Medium Enterprises are businesses with assets of P15,000,001 up to P100,000,000 and a workforce of 100-199 employees.
In 2023, there were 1,241,733 MSMEs which made up 99.63% of the total businesses in the country. Further, the Micro enterprises generated 33.94% of the jobs in the country, proving that MSMEs are a vital and huge contributor to the economy.
Known as the “Informal sector”2, the business models are seldom far from the reach of government initiatives from lack of registration. As such, they are also constrained when it comes to diversification of supply and customer base. Additionally, MSME employees also face higher risks of vulnerability due to noncompliance with insurance and other mandatory benefits.
The Benefits that One Person Corporation Provides
A One Person Corporation (OPC) is a corporation owned by a single stockholder who could be a natural person, trust, or estate. The same single stockholder is the sole director and president of the OPC. As such, the single stockholder makes every business decision of the OPC while taking in all the business profits. Also, unlike a regular corporation, there are no shareholders and a board of directors, giving the single stockholder all the power.
One of the more important benefits of establishing an OPC would be that the business owners would have limited liability. The OPC is liable for its own debts and obligations and keeps the personal assets of the owner separate and far away from the reach of creditors.
Further, corporations now have perpetual existence granted by the recent amendments. Previously, the default corporate lifespan was only 50 years. Apart from that, the OPC also has a “nominee” and “alternate nominee” system that answers the question of succession in the OPC. The law allows the single stockholder to name a Nominee and Alternate Nominee. They are the designated people who will sit as the new director of the corporation in the event of the stockholder’s death or incapacity until the legal heirs of the stockholder can be determined. As further protection for the single stockholder, the law even allows changes to the nominees at any time without the need for amending the Articles of Incorporation.
Notably, not every business can incorporate as an OPC as the law specifically does not allow banks, preneed, insurance, and non-chartered government-owned and controlled corporations, among others. Further, a natural person licensed to exercise a profession may not be allowed to organize an OPC to exercise such a profession. Company incorporation is best left to the top lawyers in the Philippines.
Setting up an OPC
Micro or Small business enterprises that are planning, or even considering, establishing an OPC need to have legal counsel to walk them through the process. Abo Law has the experienced counsel and expertise in Corporation laws to assist anyone interested in establishing their corporation. Abo Law handles and assists various corporations through incorporation, registrations, and compliance with government regulations. Abo Law is more than equipped to guide entrepreneurs of MSMEs to take the next step forward.
https://web.senate.gov.ph/publications/AG%202012-03%20-%20MSME.pdf ↩︎
https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1030&context=res_cbrd ↩︎
