Articles of Incorporation (One Person Corporation)

What are the Articles of Incorporation?

The Articles of Incorporation for a one-person corporation is the document that is used to form a stock corporation with a single stockholder. The single stockholder can be a natural person (an individual), a trust, or an estate.

A trust is a legal entity that is formed for a person to hold property for a special purpose (e.g. to pay for the education of another) in favor of a person called a beneficiary. If a trust is incorporated as a one-person corporation, the single stockholder should be the trustee, named under the trust. On the other hand, an estate pertains to all the properties of a deceased person. If it is an estate that is incorporated as a one-person corporation, the single stockholder should be the administrator (if a person died without a written will), or executor (if a person died with a written will).

What are the different types of Articles of Incorporation?

The following are the different types of Articles of Incorporation:

• Articles of Incorporation (One Person Corporation). This is used to form a stock corporation where there is a single stockholder. The single stockholder can be a natural person, a trust, or an estate. This document should be used to form a one-person corporation
• Articles of Incorporation for Non-Stock Corporations. This is a document that is a necessary document to form a non-stock corporation. A non-stock corporation is a type of business organization that does not issue stocks or shares of ownership.
• Articles of Incorporation for Stock Corporations. This is a document that is needed to form a stock corporation. A stock corporation is a type of business organization where ownership is represented by stocks or shares of the company's capital stock.
• Articles of Incorporation (Non-Stock Educational Corporation). This is needed to form a corporation in the Philippines. This document is specifically designed for non-stock educational corporations.

To form partnerships, the following should be used:

• Articles of Partnership (General Partnership). This is a document wherein the persons enter into an agreement or contract of partnership. In a general partnership, all partners have unlimited liability for the debts and obligations of the partnership. This means that each partner is personally responsible for the partnership's financial obligations and can be held liable for any losses or damages incurred by the business.
• Articles of Partnership (Limited Partnership). This is a document wherein the persons enter into an agreement or contract of limited partnership. Limited partners have limited liability and are only liable for the amount of their investment in the partnership. Limited partners typically do not participate in the management of the business and are only passive investors.

Is it mandatory to have Articles of Incorporation?

To form a one-person corporation, the Articles of Incorporation for one-person Corporations should be prepared and submitted to the Securities and Exchange Commission. Absent this document, the one-person corporation will not have corporate existence or existence under the law.

What must the Articles of Incorporation contain?

The Articles of Incorporation must contain the following information:

• The name of the one-person corporation,
• The purposes of the one-person corporation,
• The duration of the one-person corporation,
• The place where the one-person corporation will operate (principal office),
• The details of the single stockholder,
• The capital contributions in the one-person corporation,
• The details of the nominee and the alternate nominee, and
• The details of the treasurer.

What are the prerequisites of the Articles of Incorporation?

There is no minimum capitalization required for a one-person corporation. However, if the one-person corporation has minimum capitalization i.e. money or property is contributed, the corporation's capital should be owned by a Filipino citizen depending on the specific industry with which the corporation is engaged, to be legal and valid.

Those fully reserved for Filipino ownership are mass media (except recording), retail trade with paid-up capital of less than US$2,500,000.00, cooperatives, and private securities agencies. The Foreign Investment Negative List may be inspected to determine the Filipino ownership requirement for corporations in a specific industry. If the requirement under the list mentioned is not complied with, any violating corporation may be meted with a fine or suspension, or its officers may be punished with imprisonment.

Who is involved in the Articles of Incorporation?

The Single stockholder is the one and only stockholder in the one-person corporation and is named as such in the Articles of Incorporation as originally forming or composing the corporation. He may be a natural person (an individual), a trust, or an estate.

• Natural person. The single stockholder who is an individual must be of legal age. In the Philippines, this is 18 years old.
• Trust. A trust is a legal entity that is formed for a person to hold property for a special purpose (e.g. to pay for the education of another) in favor of a person called a beneficiary. If a trust is incorporated as a one-person corporation, the single stockholder should be the trustee, custodian, guardian, or other person exercising fiduciary duties (duties of doing something under a trust for the benefit of another) named under the trust.
• Estate. An estate pertains to all the properties of a deceased person. If it is an estate that is incorporated as a one-person corporation, the single stockholder should be the administrator (if a person died without a written will), or executor (if a person died with a written will).

In the case of trust or estate, the proof of authority to act on behalf of the trust or estate should be attached (This may be the court-issued document appointing the executor or administrator in case of an estate, or the one appointing a trustee under a trust).

• Nominee or alternate nominee. The nominee named under the Articles of Incorporation, or the alternate nominee, if the nominee is unable, will replace the single stockholder if he dies or becomes unable to manage the affairs of the one-person corporation.

Who cannot enter into the Articles of Incorporation?

Foreigners are not allowed to be a single stockholder if the business activity of the corporation is fully reserved for Filipino ownership.

Examples of business activities that are fully reserved for Filipino ownership are mass media (except recording), retail trade with paid-up capital of less than US$2,500,000.00, cooperatives, and private securities agencies.

Note that the single stockholder is disqualified from being a trustee of any corporation if, within 5 years before the election or appointment, the person was:

• Convicted by final judgment of (a) an offense punishable by imprisonment for a period exceeding six years, (b) a violation of the Revised Corporation Code, or (c) a violation of the Securities Regulation Code.
• Found administratively liable for any offense involving acts of fraud.
• Found liable by a foreign court or equivalent foreign regulatory authority for acts, violations, or misconduct similar to those in the abovementioned points.

What can be the duration of the Articles of Incorporation?

The Articles of Incorporation subsist so long as the one-person corporation exists. A one-person corporation can have a perpetual existence, meaning, it can exist indefinitely. It can also have a definite term. Further, note the following distinctions of a natural person, a trust, and an estate, and their applicable rules in terms of the duration of the one-person corporation:

• Natural person. If the single stockholder dies or becomes unable to manage the affairs of the one-person corporation, such death does not cause the end of the one-person corporation, in such case, he will be replaced by the nominee named under the Articles of Incorporation, or the alternate nominee, if the nominee is unable to replace the single stockholder.
• Trust. The one-person corporation ends when the trust itself ends as when the purpose of the trust is already accomplished. For example, the trust is established to cover the financial support of 10 beneficiaries named under the trust until all of the beneficiaries reach the age of 25. Once the beneficiaries reach the age of 25, the trust ends, and therefore, the one-person corporation also ends.
• Estate. The one-person corporation ends when the estate closes as when all of the assets of the deceased person have been distributed to his heirs.

What has to be done once the Articles of Incorporation are ready?

Once the document is completed, the single stockholder must sign at least three original copies of the document.

The document also includes an Acknowledgment portion. Notarization of the document converts the document from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity. To notarize the document, the parties must go to a notary public to acknowledge that they have signed the Distribution Agreement freely and voluntarily. They should also present a valid I.D. issued by an official agency bearing their photograph and signature such as a driver's license or a passport, among others.

Once the document is notarized, one original copy will be kept by the one-person corporation, one original copy will be kept by the notary public and the last original copy of the Articles of Incorporation may be submitted to the Securities and Exchange Commission, together with the other requirements (e.g. the written consent of the nominee and alternate nominee, a bond, if the single stockholder appoints himself as the treasurer, and an appointment form for the appointment of the officers of the corporation should also be submitted.), to register the corporation.

Which documents should be attached to the Articles of Incorporation?

The following should be attached to the Articles of Incorporation:

• The document showing the authority of the single stockholder to form the one-person corporation on behalf of the trust or estate. i.e. Letter of Administration, Declaration of Trust (if the single stockholder is a trust or estate).
• The letter of consent of the nominee and alternate nominee.

Note that the Securities and Exchange Commission may require other attachments for purposes of registration of the Articles of Incorporation such as a bond, if the single stockholder appoints himself as the treasurer, and an appointment form for the appointment of the officers of the corporation.

Is it necessary to notarize the Articles of Incorporation for it to be valid?

Yes. The Articles of Incorporation is a document that should be submitted to the Securities and Exchange Commission for purposes of forming the corporation, the Securities and Exchange Commission requires the same to be notarized before it is registered.

Further, notarization of the Articles of Incorporation converts the same from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity, meaning, the document will be presumed to be validly written and signed once it is shown to court in case a dispute is brought before it.

Is it necessary to register the Articles of Incorporation?

Yes. After notarization, the Articles of Incorporation must be registered before the Securities and Exchange Commission. Other requirements such as the written consent of the nominee and alternate nominee, a bond, if the single stockholder appoints himself as the treasurer, and an appointment form for the appointment of the officers of the corporation should also be submitted. For a more complete list of requirements, the website of the Securities and Exchange Commission should be checked.

Once the requirements are complete, the Securities and Exchange Commission will issue a Certificate of Registration of the corporation signifying that the corporation is valid and exists under the law.

What are the costs involved in the finalization of Articles of Incorporation?

Some notaries public may charge based on the percentage of the amount of capital involved, which is usually ay 1%. Further, registration fees may also be paid for the registration to be made before the Securities and Exchange Commission.

Which laws are applicable to Articles of Incorporation?

Articles of Corporation are governed by the Revised Corporation Code of the Philippines. However, other laws, their rules and regulations, and SEC rules may affect the conduct and transactions of the Corporation such as but not limited to the 1987 Constitution of the Philippines, the Securities Regulation Code, the Foreign Investment Act, the Republic Act 8179, specifically the Foreign Investment Negative List, the Anti-Money Laundering Act, and the Anti-Dummy Law may affect the ownership and board membership requirements of a corporation, depending on the business of the corporation. The paid-up capital may also have a minimum amount depending on the industry.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.