Section 131 of Republic Law No. 11232, also known as the Revised Companies Code of the Philippines (RCC), provides for the conversion of an ordinary company into a one-person company (UCI).
Conversion is defined as the process of changing something from one configuration to another. This involves introducing something called “Input” which will be exploited by the process to produce another called “Output”. To fully appreciate the conversion under Article 131 CCR, we need to understand both the entry and exit of the conversion process.
First, let’s start with the exit. An OPC is one of the revolutionary provisions introduced by the RCC. It is defined as a company with a single shareholder (article 116, RCC); thus, it only concerns joint stock companies.
The RCC only allows a natural person, a trust or a succession to form a UCI (article 116, RCC). This means that Congress intended to exclude legal persons from becoming founders of a mutual fund. Likewise, certain entities are not authorized to be incorporated as UCIs, in particular banks and quasi-banks, emergency, trust and insurance companies, public and listed companies and companies owned and controlled. by the State without a charter (article 116, RCC).
On the other hand, the entry required for conversion under Article 131 of the CCR refers only to an ordinary joint stock company. The aforementioned provision stipulates that an ordinary joint-stock company can request the conversion into a UCI when a single shareholder acquires all of his shares.
Under the draft guidelines on the transformation of a public limited company into a UCI, which the commission is in the process of finalizing, the sole shareholder must first acquire all the shares of the public limited company before the latter can be authorized. to request the transformation.
In its conversion request, the public limited company must change its corporate name to indicate the letters “OPC” either below or at the end of its corporate name (article 120, RCC). It should also remove any suffix indicating that it is a common stock corporation, such as “Corporation”, “Incorporated”, “Corp.” ”Or“ Inc. ”. In addition, he will not be required to submit and file a new set of corporate statutes.
However, the joint stock company must retain its SEC company registration number. This is in consideration of the provision of article 131 of the CCR which states that “The UCI converted from an ordinary joint-stock company will succeed the latter and will be legally liable for all unpaid debts of the latter at the date of conversion. “
Moreover, it necessarily follows that the request must not alter or modify the amount of authorized, subscribed and paid-up share capital of the company taking into account the “trust fund doctrine”, according to which the share capital of the company A company, along with all of its other property and assets, is generally considered equity as a trust fund for the payment of company debts. This gives the creditors of the company the right of priority payment over any shareholders of the company. It also lowers the barriers to opening a company and doing business in the Philippines.
The ordinary joint-stock company must also appoint an agent and a substitute agent, and the written consent of the agent and the substitute agent must be attached to its request (Article 124, RCC). The candidate must sit as a director and manage the affairs of the proposed UCI in the event that the sole shareholder is temporarily incapacitated (article 125, RCC). In the event of the death or permanent incapacity of the sole shareholder, the proxy sits as a director and manages the affairs of the UCI until the legal heirs of the sole shareholder have been legally determined and the heirs have appointed one of them or agreed that the succession will be the sole shareholder of the UCI. The alternate candidate sits as a director and manages the UCI in the event of incapacity, incapacity, death or refusal to exercise the functions of director and manager of the company, and only for the same duration. and under the same conditions applicable to the candidate (article 125, RCC).
At this point, I think I have already gone through all the salient elements relating to converting a common stock company into a mutual fund. As part of the implementation of this initiative, the SEC will soon issue various information circulars (MCs). I advise monitoring the SEC website for updates on the various MCs. Please be assured that the SEC is committed to assisting our businesses as part of its joint efforts to make doing business in the Philippines easier, with the goal of improving and simplifying regulations for businesses and introducing stronger rights protections. of property.
With the help of Article 131 of the CCR, common stock companies are encouraged to avail themselves of the process of converting common stock companies – OPC. This will allow
to streamline their decision-making processes and become more responsive to changing business conditions and environmental interactions as they occur.
Therefore, we at the SEC believe that with the fully equipped RCC, our goal of naming the Philippines as one of the best investment destinations in the world, especially with the proper implementation of the facility provisions. to do business in the Philippines and more importantly, improving our position in the World Bank’s Ease of Doing Business rankings is now in our hands. With proper implementation, coupled with the competitiveness and participation of each of us, each stakeholder could say, “It’s easy @ SEC! “
Kelvin Lester K. Lee is Commissioner of the Securities and Exchange Commission (SEC). The views and opinions expressed here are hers. You can send your comments and questions to [email protected]
