2017-12-20

NPM No. 040-2017

Requesting Entity: National Food Authority (NFA) National Capital Region
Issues Concern: Change of Ownership of a Sole Proprietorship
 
Details
Whether or not a prospective bidder, a sole proprietor, whose registered name was changed and the owner named is not the original owner,
is qualified to bid.

[A] sole proprietorship does not possess any juridical personality separate and distinct from the personality of the owner of the enterprise and the
personality of the persons acting in the name of such proprietorship. 3

Accordingly, a subsequent change in the business name of the sole proprietorship will not change its status as such, and the fact that it does not have
a separate personality from its owner. However, if it is the ownership of the sole proprietorship that changed, there is effectively a “new” sole
proprietorship, following the principle that a sole proprietorship has no separate and distinct personality from its owner.

Whether or not a change in company name and the owner thereof may be considered a “new” company thus disqualifying it from joining the
bidding.

[I]t is our considered view that a newly registered sole proprietorship may use the experience of another sole proprietorship owned by the same
individual. Conversely, if the ownership of the sole proprietorship has changed, a new enterprise is established, thus the experience of the original sole
proprietorship, owned by an individual, will not extend to the new enterprise that is owned by another individual.

Last May 6, the Securities and Exchange Commission (SEC) began accepting applicants
for one person corporations (OPCs), one of the major additions to Republic Act 11232 or
the Revised Corporation Code. A day later, the SEC announced that it already approved
the country’s first-ever OPC, a transport business named Smart Transportation and
Solutions.
Under the new law, individuals can register their business with only one incorporator, a
decrease from the previous law requiring at least five shareholders. This means that
entrepreneurs without any business partners now have another business structure they can
apply for apart from sole proprietorships.
In this article, we’ll discuss what you need to know about OPCs and what makes them
different from sole proprietors.

Who Can Put Up an OPC?

“Only a natural person, trust, or estate may form a One Person Corporation,” reads the
Revised Corporation Code. However, professionals cannot register an OPC for their
respective professions. For example, an accountant cannot put up an OPC to practice
accountancy.
The law also disallows certain types of businesses to put up OPCs, namely “banks and
quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and non-
chartered government-owned and -controlled corporations,” as all of these businesses are
subject to stricter corporate regulations.
OPCs are also open to foreigners who are looking to put up a business in the Philippines.
However, these are still subject to the regulations on foreign ownership limits.

Differences Between OPCs and Sole Proprietorships

Before the approval of the Revised Corporation Code, most entrepreneurs who were
unable to find business partners to meet the five-person requirement would opt to register
their business as a sole proprietorship.
Entrepreneurs registering as sole proprietors mean that they become personally liable for
all the risks that their businesses take. In other words, the assets of the business and the
entrepreneur are treated as the same, making it risky for a sole proprietor’s personal
resources.
That risk doesn’t apply to an entrepreneur registering as an OPC. As an OPC, a business owner
can claim limited liability, which means that the company’s assets and the owner’s personal
assets are treated separately. Should a business go under debt, creditors of sole proprietors can
demand for an entrepreneur’s personal assets, whereas OPCs only stick to the assets invested in
the company.
As OPCs are corporations, they have a fixed income tax rate of 30%. Sole proprietors are
treated as individuals when taxed, which means their applicable rates would vary
depending on their gross sales.

How to Register as an OPC

The process of incorporating an OPC is similar to that of registering a corporation. In a
notice released by the SEC days before they started accepting applications, it listed five
main steps for OPC registration:
1. Verification and approval of company name
2. Submission of registration documents (i.e., cover sheet, articles of incorporation, written
consents)
3. Payment of filing fees (Php 100 for name reservation, at least Php 2,000 for articles of
incorporation depending on authorized capital stock, at least Php 20 for legal research fee
depending on the total filing fee, and an additional Php 3,000 for foreigner applicants)
4. Submission of notarized documents and proofs of payment
5. Receipt of the certification of registration
Note that the SEC will only process applications for OPCs manually, which means that
interested entrepreneurs must go to the SEC head office in the Philippine International
Convention Center to complete the process. While the notice did not mention online
processing, it said that the manual process was only applicable for the time being.

Unique OPC Regulations

As OPCs have a relatively unique structure compared to traditional corporations, the
Revised Corporate Code listed provisions and exceptions that only apply to them.
For one, all one person corporations must add “OPC” to their corporate names. In the case
of the first OPC registration accepted, its full corporate name is “Smart Transportation
and Solutions OPC.”
Entrepreneurs registering as OPCs are not required to submit corporate bylaws, or the
official regulations of a company. However, they still need to submit the company’s articles
of incorporation.
As an OPC only has one incorporator, they will serve as both the director and president of
the formalized company. The law also states that OPCs must appoint a corporate
secretary, treasurer, and other necessary officers within 15 days from the date of
incorporation. The business owner cannot take the role of corporate secretary, but they
may assume the role of treasurer provided that they submit a bond to the SEC.
While OPCs will only have one board member, registrants must submit the written
consents of a nominee and an alternate nominee. These are the designated individuals who
will take over the business in the event of the founder’s death. They will handle company
operations until an heir to the founder is legally recognized.

In Conclusion
OPCs give entrepreneurs without partners another option for formalizing their businesses.
While it is not necessarily better or worse than sole proprietorships, it’s a step forward in
making entrepreneurship accessible to more Filipinos and foreigners who want to do
business in the country.