Minimum Capital Requirements for Foreign Corporations in the Philippines

Foreign corporations setting up in the Philippines often ask whether a fixed minimum capital is required. Under Philippine law, the answer depends on the vehicle and the activity. The Revised Corporation Code abolished the general minimum capital stock requirement for stock corporations, providing that they "shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law." For foreign investors, the more relevant rules come from the Foreign Investments Act of 1991, as amended, which ties capital requirements to whether the enterprise serves the domestic market or exports.

What the Revised Corporation Code says about minimum capital

Section 12 of the Revised Corporation Code (Republic Act No. 11232) is explicit: stock corporations are not required to have a minimum capital stock unless a special law provides otherwise. This removed the old rule that generally required a minimum subscribed and paid-in capital for domestic corporations.

That does not mean capital is irrelevant. The articles of incorporation must still state the authorized capital stock, the number of shares, and their par value, and the incorporators must subscribe and pay for shares in accordance with the Code. But the Code itself no longer sets a floor for ordinary stock corporations.

The phrase "except as otherwise specifically provided by special law" is the key. Banks, insurance companies, trust and preneed companies, public utilities, and similar regulated entities are governed by their own charters and regulations, which may impose their own capital thresholds. The Corporation Code also bars certain regulated corporations from issuing no-par value shares.

How the Foreign Investments Act treats capital

For foreign-owned enterprises, the Foreign Investments Act of 1991, as amended by Republic Act No. 11647, is the primary statute. Its implementing rules define a domestic market enterprise as one that produces goods for sale or renders services to the domestic market entirely, or does not export at least sixty percent (60%) of its output. An export enterprise is one that exports sixty percent (60%) or more of its output.

The distinction matters because the Act's capital rules for foreign-owned domestic market enterprises are tied to the Foreign Investment Negative List (FINL), which lists areas of economic activity where foreign ownership is limited to a maximum of forty percent (40%) of the equity capital. Where an activity is not in the negative list, foreign investors may generally own up to 100% of the enterprise, subject to the applicable paid-in capital rules under the Act and its implementing rules.

The implementing rules define paid-in equity capital as the total investment actually paid in, in cash or property, referring to inward remittance or assigned capital in the case of foreign corporations. This is the figure regulators examine when assessing compliance.

The practical structure: branch, representative office, or subsidiary

How a foreign corporation enters the Philippines affects the capital question:

• A branch office carries out the business activities of the head office and derives income from the host country. It must be assigned capital, and the amount is governed by the Foreign Investments Act and SEC rules rather than the Corporation Code alone.
• A representative or liaison office deals directly with clients of the parent company but does not derive income from the host country and is fully subsidized by its head office. It undertakes activities such as information dissemination, promotion of the company's products, and quality control.
• A domestic subsidiary is a Philippine corporation organized under the Revised Corporation Code. Because Section 12 removed the general minimum capital stock rule, its capital structure is set by its articles of incorporation, subject to any special law covering its activity.

What counts as "doing business"

A foreign corporation may need to register before it can operate. The implementing rules define doing business broadly — soliciting orders, service contracts, opening offices (including liaison offices or branches), appointing representatives or distributors under the foreign corporation's full control, participating in the management or control of a domestic business, and any acts implying continuity of commercial dealings.

Certain acts are expressly not deemed doing business, including mere investment as a shareholder in a duly registered domestic corporation, having a nominee director or officer, appointing a representative or distributor who transacts business in its own name and account, publication of a general advertisement, and collecting information in the Philippines.

Registration path for foreign corporations

1. Determine whether the intended activity appears in the Foreign Investment Negative List and whether it is reserved for Filipino citizens.
2. Confirm whether the activity is a domestic market enterprise or an export enterprise under the Foreign Investments Act.
3. Verify whether the activity is governed by a special law with its own capital requirements, such as banking or insurance.
4. Choose the vehicle — branch, representative office, or domestic subsidiary — and prepare the corresponding capital documentation.
5. Reserve the corporate name with the Securities and Exchange Commission and file the required registration documents.
6. Secure any favorable recommendation from the appropriate government agency where the activity is under special regulatory jurisdiction.

Frequently asked questions

Is there a minimum capital for a foreign-owned corporation in the Philippines? Not under the Revised Corporation Code, which states that stock corporations shall not be required to have a minimum capital stock except as provided by special law. Foreign-owned enterprises remain subject to the capital rules of the Foreign Investments Act and, where applicable, the Foreign Investment Negative List.

What is the difference between a branch office and a representative office? A branch office carries out the business activities of the head office and derives income in the Philippines. A representative office deals with the parent company's clients but does not derive income locally and is fully subsidized by its head office.

Does a foreign corporation need to register with the SEC? If its activities amount to "doing business" in the Philippines, registration is required. The implementing rules of the Foreign Investments Act list acts that are not considered doing business, such as mere investment as a shareholder or appointing a distributor acting in its own name.

Practical takeaways

• The Revised Corporation Code removed the general minimum capital stock requirement for stock corporations, subject to special laws.
• Foreign-owned enterprises are primarily regulated by the Foreign Investments Act of 1991, as amended, and its implementing rules.
• The domestic market versus export enterprise distinction determines which capital rules apply.
• The Foreign Investment Negative List caps foreign ownership at forty percent (40%) in listed activities.
• Capital must be genuinely paid in — the rules define paid-in equity capital as actual cash or property investment, including inward remittance for foreign corporations.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• 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.