Change is inevitable, and in the dynamic landscape of business, it often comes in the form of the transfer of ownership or the entry of new owners into a corporation. Business owners have the power and authority to sell the business, assign, transfer or convey his property such as shares of stock in a corporation to another person. This means business owners can transfers their shares to suitable buyers.
Change of ownership deals with the owner to transfer ownership rights from one entity or individual to another. This can occur due to various reasons, including, retirement, succession planning, strategic partnerships, financial restructuring, disputes, or legal obligations. The decision to transfer business ownership involves legal procedures and requirements, including the transfer of stock, asset, liability, contract, license, permit, and tax obligation. The process may also require the approval of government agencies such as the Department of Trade and Industry (DTI), Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), and other Local Government Units (LGUs) depending on the type of business entity.
Change of ownership is a complex process that reflects the evolving dynamics of business environments. Navigating this process needs to be evaluated thoroughly, especially by legal experts to ensure that it complies with relevant laws, regulations, and corporate governance standards to avoid tax implications and any other issues that may arise.
Different Types of Business Entity in the Philippines
- Sole proprietorship. It is the most basic type of business organization in the Philippines. Since a sole proprietorship is an extension of the owner, any claims made against the business must be addressed through the owner’s assets. As a result, the proprietor’s assets and liabilities are also those of the company.
- One Person Corporation (OPC). It is a special corporation with a single stockholder. Republic Act No. 11232, or the Revised Corporation Code of the Philippines, introduced the idea to the Philippine corporate setting. An OPC may only be registered by a natural person, trust, or estate. Nonetheless, the incorporator must always be a natural person who is of legal age. Unlike sole proprietorship, an OPC has a personality distinct from the stockholder and, thus, the stockholder’s limited liability to the amount of capital invested.
- Partnership. Can be formed by two (2) or more individuals who agree to do business together for profit through a partnership agreement.
- Corporation. There are two types of corporations; the stock corporation which a corporation with capital stock divided into shares and authorized to distribute to the holders of such shares, dividends, or allotments the profits of the business based on equity of shares, which may be a domestic or foreign corporation, and the non-stock corporation which a corporation that neither generates profit nor issues shares of stock to its members.
- Cooperative. It is a group of people who have a common interest and have willingly joined forces to pursue a legal common social or economic goal. They equally contribute to the capital needed for the project and accept a fair portion of its risks and rewards in line with the generally acknowledged cooperative principle.
One Person Corporation (OPC)
A One-Person Corporation (OPC) is a type of corporation created with only a single stockholder compared to two or more owners or stockholders required of a common corporation. Similar to a normal corporation, the stocks of the sole stockholder of the OPC can be transferred from one person to another.
In the Philippines, where corporate governance is highly regulated, navigating ownership transfer requires a clear understanding of the legal and tax framework and procedural requirements. Matters involving the business structure of ownership, such as the number of directors and shareholders in a company can change and must be updated accordingly. Any such changes must be reflected in the company’s Articles of Incorporation.
When amending the shareholding structure of the business, the names of the new shareholders must be reflected in the Securities and Exchange Commission of SEC’s records. This is thru the update of the General Information Sheet or GIS.
Prior to updating the GIS or filing a new appointment form if OPC, however, the buyer or seller must first secure the Bureau of Internal Revenue (BIR) Certificate Authorizing Registration or BIR CAR. This is required before the corporate secretary can update the GIS. You may refer to the step by step process in securing the BIR CAR for shares of stock here.
SEC Amendment
In the corporate structure, however, is not a regular domestic corporation but a One Person Corporation (OPC), the procedure and requirements for the change of owner is different as it includes an amendment of the SEC steps as follows:
- BIR CAR Processing
Certificate Authorizing Registration (CAR) is one issued by the Bureau of Internal Revenue (BIR) in relation to transfer of shares of stock in the Philippines. - SEC Amendment of AOI
The Articles of Incorporation may be amended following the proper procedure laid down by the Securities and Exchange Commission (SEC). Amendments can be made on the corporate name, principal office address, number of directors or purpose of the corporation, in compliance with Section 15.Sec. 15. Amendment of Articles of Incorporation. – Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (⅔) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code. The articles of incorporation of a non-stock corporation may be amended by the vote or written assent of majority of the trustees and at least two-thirds (2/3) of the members.
The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Amendments to the articles shall be indicated by underscoring the change or changes made, and a copy thereof duly certified by under oath by the corporate secretary and a majority of the directors or trustees, with a statement that the amendments have been duly approved by the required vote of the stockholders or members, shall be submitted to the Commission.
The amendments shall take effect upon their approval by the Commission or from the date of filing with the said Commission if not acted upon within six (6) months from the date of filing for a cause not attributable to the corporation.
Requirements for Change of Owner for One Person Corporation (OPC)
In this case, only the owner shall be amended. The requirements to complete the amendment of the OPC corporate files are as follows:
- Cover Sheet
- Sole Owner’s Reso / Certificate re: Amendment of AOI (Change of Owner)
- Secretary’s Certificate re: Amendment of AOI (Change of Owner)
- Amended AOI (OPC)
- Deed of Assignment (Nguyen to Tran)
- Secretary’s Certificate No Intra Corp
- Appointment Form of Officers (New Owner)
Need further information and assistance in the Change of Owners and Transfer of Ownership in Corporation? Talk to our team at FILEDOCSPHIL to know more about the requirements and process. Call us today at (+63) 917 149 2337 or send an email to info@filedocsphil.comor simply message us through the live chat for more information.
