The Securities and Exchange Commission (SEC) has recently issued Memorandum Circular (MC) 27 series of 2020 to operationalize Title XIII, Chapter III of Republic Act 11232, or the Revised Corporation Code of the Philippines (RCC), which allows the conversion from an Ordinary Stock Corporation (OSC) to a One Person Corporation (OPC), as well as the conversion from an OPC to an OSC.
Part I: The rules of converting from OSC to OPC are as follows:
1. If a natural person of legal age, a trust, or an estate (“single stockholder”) has acquired all of the outstanding capital stocks of an OSC, with the corresponding Certificate Authorizing Registration (CAR)/ tax clearance having been issued by the Bureau of Internal Revenue (BIR), the OSC may apply for its conversion into an OPC, subject to the submission of the documentary requirements enumerated in the issuance, which shall be processed as an Amendment of the Articles of Incorporation (AOI).
2. Upon issuance of the Certificate of Filing of Amended AOI by the SEC reflecting the conversion to OPC, the AOI and By-laws of the OSC shall be deemed superseded. The date of issuance of the Certificate of Filing of Amended Articles of Incorporation shall be deemed as the date of approval of the conversion.
3. The Certificate of Filing of Amended AOI shall bear and retain the corporation’s original SEC Registration Number. The name of the corporation will now have an “OPC” suffix in order to reflect its nature as an OPC.
4. The newly converted OPC shall be legally responsible for all the outstanding liabilities as of the date of approval of the conversion.
5. The provisions of Title XIII, Chapter III of the RCC shall apply primarily to OPCs, while other provisions of the Code apply suppletorily.
6. The amount of fees for (1) amendment of Articles of Incorporation, (2) name reservation, and (3) legal research under the consolidated schedule of fees and charges shall be the applicable fees.
Part II: The rules of converting from OPC to OSC are as follows:
1. When the shares in an OPC cease to be held solely by a single stockholder, the OPC may be converted into an OSC after due notice to the SEC of such facts and of such circumstance/s leading to the conversion, and after compliance with all the requirements for a stock corporation, as may be determined by SEC, after an evaluation of the submitted documentary requirements enumerated in the issuance.
2. Following the transfer/s of shares in an OPC wherein there becomes at least two stockholders in the OPC, a notice of conversion of OPC into OSC shall be filed with the Commission within 60 days from such transfer/s of shares. The period for filing the notice shall be observed even though the conversion will be applied for, or will take place, afterwards.
3. For the purpose of submitting the notice required under the immediately preceding section, the date of transfer of shares shall be deemed to be the date that the corresponding CAR/ tax clearance is issued by the BIR.
4. If the notice of conversion is filed with the SEC beyond 60 days from the transfer of shares, the OPC may still be approved for conversion into an OSC subject to prior payment of penalty if found liable for violation of Section 132, in relation to Section 1584 of the RCC.
5. Upon issuance by the SEC of the Certificate of Filing of AOI and of Bylaws reflecting the conversion to an OSC, the AOI of the OPC shall be deemed superseded. The date of issuance of the Certificate of Filing of Amended AOI and of Bylaws shall be deemed as the date of approval of the conversion.
6. The Certificate of Filing of Amended AOI and of Bylaws shall bear and retain the corporation’s original SEC Registration Number. Further, the corporation shall remove the “OPC” suffix as part of its corporate name.
7. The newly converted OSC shall be legally responsible for all the outstanding liabilities as of the date of conversion.
8. The amount of fees for (1) amendment of AOI, (2) registration of Bylaws, (3) name reservation, and (4) legal research, under the Consolidated Schedule of Fees and Charges shall be the applicable fees.
Part III: The provisions common to both conversions are as follows:
1. The signatory/ies of the converted corporation must clearly state in the AOI that they voluntarily agreed to convert the corporation in the following or similar manner-
“KNOW ALL MEN BY THESE PRESENTS:
The undersigned stockholder/s, of legal age, voluntarily agreed to convert a stock corporation under the laws of the Republic of the Philippines and certify the following.”
2. By reason of the nature of these corporations the conversion from an OSC to OPC shall be deemed as optional. On the other hand, the conversion from an OPC to OSC shall be deemed as mandatory, unless when winding-up and dissolution is appropriate.
3. Processing of applications for conversion of corporations shall commence only upon receipt by the CRMD, or by any of SEC Extension Offices nationwide, of the complete documentary requirements enumerated in this guidelines including the proof of payment of applicable fees. This shall be done manually by the Commission until further notice.
4. In case an opposition or dispute arises from the conversions discussed in guidelines, the aggrieved party may file before the CRMD a verified Petition for Cancellation of the certificate thus issued, on the ground of fraud in the procurement thereof in accordance with the applicable laws and other rules or issuances by the SEC.
This Memorandum Circular shall amend all issuances, orders, rules, and regulations of the SEC that may be inconsistent with it and shall take effect immediately after its publication in a newspaper of general circulation.
Please be guided accordingly.
P&A Grant Thornton
Certified Public Accountants
As published in SunStar Cebu, dated 21 October 2020