Subsidiary Corporation

Setting Up a Domestic Corporation  Philippines

A Domestic Corporation is a business entity that is organized, registered, and existing under Philippine laws. It is an artificial being created by operation of law and has a juridical personality that is separate from its stockholders and/or other corporations to which it is connected.

Although the Philippines does not adopt the legal concept of Limited Liability Company (LLC) or Private Limited Company (PLC), a domestic corporation serves as its closest local equivalent by virtue of the powers and attributes granted to the latter by the Corporation Code of the Philippines. Similar to LLCs, a domestic corporation incurs its own liabilities and is legally responsible for the payment of its obligations. Its stockholders can also only be held liable to the extent of their share capital.  

The juridical personality of a domestic corporation could only come into existence after the issuance of the Certificate of Registration (upon filing of the Articles of Incorporation and other relevant documents) by the Securities and Exchange Commission (SEC) – the government agency mandated to supervise the existence and government compliance of corporations operating in the Philippines.

Domestic corporations must satisfy the statutory requirement of at least five (5) and not more than fifteen (15) incorporators who shall be mentioned in the Articles of Incorporation as originally forming and composing the corporation. They must be signatories to the Articles and have no powers beyond those vested in them by the statute. Moreover, they must be natural persons of legal age, each subscribe to or own at least one (1) share of the capital stock of the corporation, and majority of them have to be residents of the Philippines.

Registration of a Domestic Corporation in the Philippines

Here’s a simplification of the business registration process for domestic corporations:

Types of Domestic Corporations

Provided under the provisions of the Foreign Investments Act of 1991, domestic corporations can be classified as any of the following:

  • Domestic Corporation with 0% Foreign Equity (100% Filipino-owned)
  • Domestic Corporation with 0.01% to 40% Foreign Equity
  • Foreign-Owned Domestic Corporation with 40.01% to 100% Foreign Equity

The classification of domestic corporations in the Philippines depends on their stockholders’ outstanding amount of shares to the capital stock of the corporation. Moreover, the nationality of the stockholders determines the corporation’s extent of participation in areas of business activity and investment in the Philippines.

Domestic corporations that only consist of Filipino stockholders can freely participate in any economic activity and industry sector in the country. Conversely, those that consist of foreign stockholders are restricted to participate in activities that are included in the Foreign Investment Negative List (FINL). Although foreign investors and companies are generally allowed to set up businesses in the Philippines, the Constitution and some specific laws prescribe the implementation of the FINL to restrict foreign equity and participation in activities that are wholly or partly exclusive to Filipino entrepreneurs. However, economic activities not included in the FINL are 100% open to foreign investment and participation.

Need Help in Registering Your Business in the Philippines?

Kittelson & Carpo Consulting has registered hundreds of local and foreign companies in the Philippines. Our full spectrum of corporate services is guaranteed to help you enjoy a seamless business registration process.