Minimum Capital for Foreign Companies in the Philippines: What the Law Actually Requires

The Philippines generally does not impose a single, fixed minimum capital on foreign companies. Under Section 12 of the Revised Corporation Code (Republic Act No. 11232), stock corporations "shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law." For foreign investors, the real constraints come from two other sources: the Foreign Investments Act of 1991, as amended by Republic Act No. 11647, which sets a minimum paid-in equity capital for certain domestic market enterprises, and the Foreign Investment Negative List, which caps foreign ownership in restricted activities. Special laws covering banks, insurance, and similar regulated industries may impose their own capital requirements.

Does the Revised Corporation Code Set a Minimum Capital?

No. Section 12 of the Revised Corporation Code is explicit: a stock corporation is not required to have a minimum capital stock unless a special law provides otherwise. This removed the old rule that generally required at least P5,000 in paid-up capital for domestic corporations.

Two related rules matter for structuring:

• No-par value shares must be issued for a consideration of at least Five pesos (P5.00) per share, and the entire consideration is treated as capital that cannot be distributed as dividends (Section 6).
• Banks, trust, insurance, and preneed companies, public utilities, building and loan associations, and other corporations authorized to obtain or access funds from the public may not issue no-par value shares (Section 6).

The practical point: the Corporation Code itself is not the source of a minimum capital figure for foreign companies. The applicable special law or investment rule is.

What Is the Minimum Paid-In Capital for Foreign Companies?

The key rule sits in the Foreign Investments Act of 1991, as amended by Republic Act No. 11647, and its Implementing Rules and Regulations. Under the IRR, a domestic market enterprise is one that produces goods for sale or renders services to the domestic market entirely, or exports less than sixty percent (60%) of its output.

For foreign-owned domestic market enterprises, the law generally requires a minimum paid-in equity capital — historically set at US$200,000. That figure is reduced to US$100,000 where the enterprise meets either of two conditions:

1. It involves advanced technology, as defined in the IRR (high or emerging technologies based on modern scientific knowledge requiring advanced expertise); or
2. It directly employs at least fifty (50) direct employees, meaning personnel hired and engaged under the control and supervision of the applicant investor or employer in the production of goods or performance of services.

Note the distinction the IRR draws between a domestic market enterprise and an export enterprise. An export enterprise is one that exports sixty percent (60%) or more of its output (or, for traders, of purchases). Export enterprises are not subject to the domestic market enterprise capitalization threshold.

How the Foreign Investment Negative List Affects Capital and Ownership

The Foreign Investment Negative List (FINL), as defined in the IRR, is a list of economic activities where foreign ownership is limited to a maximum of forty percent (40%) of the equity capital of enterprises engaged in them.

This matters because the Foreign Investments Act governs foreign participation in domestic market enterprises not covered by the FINL. If an activity is on the Negative List, the forty percent ownership ceiling applies, and the corporate structure must reflect it. Under Section 16 of the Revised Corporation Code, the SEC may disapprove articles of incorporation where the required percentage of Filipino ownership of capital stock under existing laws or the Constitution has not been complied with.

For corporations engaged in activities reserved for Filipino citizens, the articles of incorporation must carry the restriction that no transfer of stock or interest may reduce Filipino ownership below the required percentage (Section 14, Eleventh).

Registration and Foreign Exchange Steps for Foreign Investors

Once the capital structure is settled, the registration path generally runs as follows:

1. Verify and reserve the corporate name with the SEC (Section 18).
2. File the articles of incorporation and bylaws with the SEC, stating the authorized capital stock, subscribers, and amounts paid (Sections 13 and 14).
3. Obtain the certificate of incorporation, which marks the start of corporate existence (Section 18).
4. Register the inward investment with the Bangko Sentral ng Pilipinas where required, so that capital and earnings can later be repatriated. Under BSP Circular No. 1192, a Bangko Sentral Registration Document (BSRD) evidences BSP registration of investments, and registration allows the investor to access FX resources for servicing and settlement.

The IRR defines foreign investment as an equity investment by a non-Philippine national in foreign exchange or its peso equivalent in other assets actually transferred to the Philippines and duly registered with the BSP.

Frequently asked questions

Is there a minimum capital for a foreign-owned corporation in the Philippines? Not under the Revised Corporation Code, which requires no minimum capital stock unless a special law provides otherwise (Section 12). The minimum paid-in capital rule for foreign investors comes from the Foreign Investments Act and applies to domestic market enterprises.

How much is the minimum paid-in capital for a foreign domestic market enterprise? The Foreign Investments Act, as amended, generally requires US$200,000, reduced to US$100,000 if the enterprise involves advanced technology or directly employs at least fifty (50) direct employees.

Can a foreigner own 100% of a Philippine company? Yes, if the activity is not on the Foreign Investment Negative List. Activities on the Negative List limit foreign ownership to a maximum of forty percent (40%) of equity capital.

Practical takeaways

• The Revised Corporation Code imposes no general minimum capital stock; special laws do (Section 12).
• The Foreign Investments Act sets the minimum paid-in equity capital for foreign-owned domestic market enterprises, with a lower threshold for advanced technology or at least fifty direct employees.
• A domestic market enterprise exports less than 60% of output; an export enterprise exports 60% or more and is treated differently.
• Activities on the Foreign Investment Negative List cap foreign ownership at 40% of equity capital.
• Register inward investments with the BSP to preserve the right to repatriate capital and remit earnings.

Primary sources

The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.

Amendments to foreign exchange regulations covering foreign investmentsOpen in Law LibraryDownload PDF

• REPUBLIC ACT NO. 11232 - AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

• IRR OF REPUBLIC ACT NO. 11647 - IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 11647 OR AN ACT PROMOTING FOREIGN INVESTMENTS, AMENDING THEREBY REPUBLIC ACT NO. 7042, OTHERWISE KNOWN AS THE "FOREIGN INVESTMENTS ACT OF 1991", AS AMENDED, AND FOR OTHER PURPOSES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.