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ign-investment-negative-list/

The Pros and Cons of Setting

Up a One Person Corporation in
the Philippines
In February 2019, the Philippine government released the Revised Corporation Code (RCC) to support
the country’s fast-growing infrastructure and entice foreign investors to do business in the country.
One of the major provisions in the RCC was the introduction of a new legal entity, the One Person
Corporation (OPC).
An OPC is a business structure that allows a single person to form a corporation without the need of
shareholders or a board of directors. The owner is the sole shareholder, acting director, and president
of the corporation. To give you an insight into the new business structure, this article will walk you
through the advantages and disadvantages of setting up an OPC in the Philippines. 

Advantages of a One Person Corporation in

the Philippines
OPCs foster many advantages for entrepreneurs as they provide an easier way to establish a business
in the country. Such advantages allow a single person to register as an OPC, reduce the minimum
capital requirement, limit the liability for business owners, and many more. 

Limited Liability for Business Owners

The introduction of the OPC aims to support the growing sector of micro, small, and medium
enterprises (MSMEs) in the Philippines by allowing a sole owner to register their business as a
corporation without needing a minimum number of shareholders.
Registering your business as an OPC ensures that only the company is liable for its debts and
obligations. The owner’s personal assets will be deemed separate and protected from creditors. This
protection is known as the “corporate veil”, which separates the actions of an organization from the
actions of a shareholder. 

Perpetual Existence
The former Corporation Code limits corporations to a 50-year lifespan with the chance to petition for
renewal with the Securities and Exchange Commission (SEC). Under the RCC, corporations are
now allowed to exist perpetually unless their Articles of Incorporation (AOI) provides otherwise. 
Such amendments were made to reduce the probability of businesses shutting down prematurely and
allowing them to create long-term value investments. 

No Minimum Capital Requirement

Unlike other business structures, the OPC does not have a minimum capital requirement. Additionally,
no portion of authorized capital is required to be paid up at the time of incorporation unless stated by
special laws. 
The only payments needed to incorporate an OPC are filing fees, name reservation fees, and legal
research fees. 

Open to Foreign Investors

Foreign investors may register an OPC. However, it must be within an industry that permits 100%
foreign ownership. Approved industries include manufacturing, export, retail, or e-commerce. 
A full list of prohibited industries can be found on the Foreign Investments Negative List. Additionally,
foreign nationals are required to provide paid-in capital of at least US$200,000.

Complete Control of the Business

Unlike a traditional corporation, the director of an OPC has total control over the company. They are
not subjected to the scrutiny of shareholders and do not need to seek consensus from the board of
directors. All business decisions are at the director’s sole discretion, and all profits are theirs alone.

Disadvantages of One Person Corporations

in the Philippines
Despite the many advantages of setting up an OPC, there are several disadvantages that come along
when using this kind of business structure to do business in the Philippines. 

Limited to Natural Persons, Trusts, or Estates

The RCC prohibits professionals from turning their practice into a corporation. This is to protect the
fields of medicine, law, and other regulated professions from corporate interests and ensure that
patient and client welfare comes first. Also prohibited from setting up an OPC are banks, quasi-banks,
and other financial institutions to protect the public interest.

More Paperwork and Complexity

Compared to a sole proprietorship, OPCs have more administrative requirements. Along with the AOI,
OPCs are also required to file the following documents:
 Annual audited financial statements
 An explanatory report in response to audit findings and recommendation(s)
 Disclosure of all self-dealings between the OPC and the director
 Other reports as required
Depending on the size of your company, these additional documents may require you to extend more
hours to fulfill such requirements beyond the usual tasks of running your business. 

Existing Corporations Are Allowed to

Restructure as OPC
An existing domestic ordinary stock corporation (OSC) may apply to convert to an OPC. A single
stockholder must acquire all shares of the company. The role of the corporate secretary and treasurer
must be filled. 
The director may appoint themselves as the treasurer but cannot be the corporate secretary. After
meeting such prerequisites, the following documents must be submitted to SEC:
 Amended Articles of Incorporation (AOI) 
 Secretary’s Certificate
 Proof of acquisition of shares 
 A signed affidavit of acceptance for both nominees
 Reservation of the corporation’s name
 Monitoring clearance

You can visit SEC’s official website for more information regarding the OPC registration process. 

Register a One Person Corporation in the

Philippines
In efforts to support the business scene in the Philippines, the OPC structure allows entrepreneurs and
foreign investors to easily establish a business in the country by permitting minimal requirements
upon registration. 
Doing so opens your company to grow and compete against strong industry players as well as making
your services available to the Philippine and ASEAN markets. If you find the registration process
exhaustive, you can reach out to business consulting firms to assist you.
Doing business in the
Philippines: Foreign
Investment Negative List
The Foreign Investment Negative List, or Negative List, is a list of economic sectors where foreign
ownership and participation in the Philippines are regulated. It contains two component lists: List A
and List B. List A contains areas of investment where foreign ownership is limited by mandate of the
Philippine Constitution or by specific laws. List B, on the other hand, contains areas of investment
where foreign ownership is limited for reasons of security, defense, risk to health and morals, and
protection of local small-and-medium enterprises (SMEs). 
Except for activities where restrictions on foreign equity are imposed under the Philippine Constitution
or statutes, the President of the Philippines may amend the Negative List and such amendments
should not be made more than once every two years. 
The regular Negative List is updated and issued every two years and the current version being
implemented is the 11th version, signed into law by President Rodrigo Duterte under Executive Order
(EO) No. 65 in October 2018.  

Updates on the 11th Version of the

Negative List
The 11th version added sectors where up to 100% foreign participation will be allowed: 
 Internet businesses (a new category previously included in the category of mass media, which
remains completely restricted to foreign participation and ownership);
 Teaching at higher education levels (provided the subject being taught is not a professional
subject or included in a government board or bar examination);
 Training centers engaged in short-term high-level skills development that do not form part of
the formal education system;
 Insurance adjustment companies, lending companies, and investment houses; and
 Wellness centers.

It also increased participation of up to 40% on two sectors:

 Contracts for construction and repair of locally-funded public works (except those that are
foreign-funded or assisted and required to undergo international competitive auction), which
used to have 25% foreign equity cap; and
 Private radio communication networks (previously only up to 20% equity). 

However, the new Negative List removed the following sectors from the list (where up to 40% foreign
equity was previously allowed):
 Facility operator of an infrastructure or a development facility requiring a public utility
franchise; and
 Adjustment companies. 
The 11th Foreign Investment Negative List
(under EO 65)
List A
No Foreign Equity
 Mass media, except recording and internet business
 Practice of professions, including radiologic and x-ray technology, law, criminology, and
marine deck officers and marine engine officers
o Subject to the Annex on Professions indicating professions where foreigners are
allowed to practice in the Philippines subject to reciprocity and where corporate
practice is allowed; and 
o Foreigners may teach at higher education levels if subject being taught is not a
professional subject (included in a government board or bar examination).
 Retail trade enterprises with paid-up capital of less than US$2.5 million
 Cooperatives
 Organization and operation of private detective, watchmen or security guards agencies
 Small-scale mining
 Utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic
zone as well as small-scale utilization of natural resources in rivers, lakes, bays, and lagoons
 Ownership, operation, and management of cockpits
 Manufacture, repair, stockpiling, and/or distribution of nuclear weapons
 Manufacture, repair, stockpiling, and/or distribution of biological, chemical, and radiological
weapons and anti-personnel mines
 Manufacture of firecrackers and other pyrotechnic devices

Up to 25% Foreign Equity

 Private recruitment, whether for local or overseas employment
 Contracts for the construction of defense-related structures

Up to 30% Foreign Equity

 Advertising

Up to 40% Foreign Equity

 Contracts for the construction and repair of locally-funded public works, except:
o Infrastructure/development projects covered in Republic Act (RA) No. 7718; and
o Projects which are foreign-funded or assisted and required to undergo international
competitive bidding.
 Exploration, development, and utilization of natural resources
 Ownership of private lands
 Operation of public utilities, except power generation and the supply of electricity to the
contestable market and similar businesses or services not covered by the definition of public
utilities
 Educational institutions other than those established by religious groups and mission boards,
for foreign diplomatic personnel and their dependents and other foreign temporary residents,
or for short-term high-level skills development that do not form part of the formal education
system as defined in Section 20 of Batas Pambansa (BP) No. 232 (1982)
  Culture, production, milling, processing, trading except retailing, of rice and corn and acquiring,
by barter, purchase or otherwise, rice and corn and the by-products thereof
 Contracts for the supply of materials, goods, and commodities to Government-Owned and
Controlled Corporation (GOCC), company, agency or municipal corporation 
 Operation of deep-sea commercial fishing vessels
 Ownership of condominium units
 Private radio communications network

List B
Up to 40% Foreign Equity

 Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring

Philippine National Police (PNP) clearance:
o Firearms (handguns to shotguns), parts of firearms and ammunition therefor,
instruments or implements used or intended to be used in the manufacture of
firearms; 
o Gunpowder;
o Dynamite;
o Blasting supplies;
o Ingredients used in making explosives:
 Chlorates of potassium and sodium;
 Nitrates of ammonium, potassium, sodium barium, copper (11), lead (11),
calcium, and cuprite;
 Nitric acid;
 Nitrocellulose;
 Perchlorates of ammonium, potassium, and sodium;
 Dinitrocellulose;
 Glycerol;
 Amorphous phosphorus;
 Hydrogen peroxide;
 Strontium nitrate powder;
 Toluene; and
o Telescopic sights, sniper scope, and other similar devices.

However, the manufacture or repair of these items may be authorized by the Chief of the PNP to non-
Philippine nationals; provided that a substantial percentage of output, as determined by the said
agency, is exported. Provided further that the extent of foreign equity ownership allowed shall be
specified in the said authority/clearance (RA No. 7042 as amended by RA No. 8179). 

 Manufacture, repair, storage, and/or distribution of products requiring Department of National

Defense (DND) clearance:
o Guns and ammunition for warfare;
o Military ordinance and parts thereof (e.g., torpedoes, depth charges, bombs,
grenades, missiles);
o Gunnery, bombing, and fire control systems and components;
o Tactical aircraft (fixed and rotary-winged), parts, and components thereof;
o Space vehicles and component systems;
o Combat vessels (air, land, and naval) and auxiliaries;
o Weapons repair and maintenance equipment;
 o Military communications equipment;
o Night vision equipment;
o Stimulated coherent radiation devices, components, and accessories;
o Armament training devices; and
o Others as may be determined by the Secretary of the DND. 

However, the manufacture or repair of these items may be authorized by the Secretary of National
Defense to non-Philippine nationals; provided that a substantial percentage of output, as determined
by the said agency, is exported. Provided further that the extent of foreign equity ownership allowed
shall be specified in the said authority/clearance (RA No. 7042 as amended by RA No. 8179).
 Manufacture and distribution of dangerous drugs (RA No. 7042 as amended by RA No. 8179)
 Sauna and steam bathhouses, massage clinics, and other like activities regulated by law
because of risks posed to public health and morals, except wellness centers
 All forms of gambling, except those covered by investment agreements with Philippine
Amusement and Gaming Corporation (PAGCOR)
 Domestic market enterprises with paid-in equity capital of less than the equivalent of
US$200,000
 Domestic market enterprises which involve advanced technology or employ at least fifty (50)
direct employees with paid-in equity capital of less than the equivalent of US$100,000

Source: Official Gazette of the Philippines

Updated: November 8, 2019