Minimum Capital Requirement for Corporations in the Philippines: What the Law Says

Under the Revised Corporation Code of the Philippines (Republic Act No. 11232), stock corporations are generally not required to have a minimum capital stock. This rule, found in Section 12 of the Code, states that stock corporations "shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law." This means that for most businesses, the amount of authorized capital stock is a matter of choice for the incorporators, not a legal hurdle.

What the Law Says About Minimum Capital

Section 12 of the Revised Corporation Code is clear: there is no statutory minimum capital requirement for ordinary stock corporations. The provision explicitly states that stock corporations "shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law."

This is a significant departure from the old Corporation Code, which required a minimum paid-up capital of at least 25% of the subscribed capital stock and a minimum subscribed capital of at least 25% of the authorized capital stock. Under the current law, incorporators have greater flexibility in determining how much capital their corporation needs.

However, the exception is important: special laws may impose minimum capital requirements on specific types of businesses. These include banks, insurance companies, preneed companies, public utilities, and other corporations authorized to obtain funds from the public. For these regulated industries, the relevant special law and the appropriate government agency will dictate the required minimum capital.

How Much Capital Should a Corporation Declare?

While there is no legal minimum, the amount of authorized capital stock must still be stated in the articles of incorporation. Under Section 13 of the Code, if the corporation is a stock corporation, the articles must include "the amount of its authorized capital stock, number of shares into which it is divided, the par value of each, names, nationalities, and residence addresses of the original subscribers, amount subscribed and paid by each on the subscription."

In practical terms, the authorized capital stock is the maximum amount of shares that a corporation is allowed to issue. The incorporators decide on this figure based on the business's needs, potential for growth, and the number of shares they plan to issue to investors.

There is one notable rule regarding the issuance of shares: no-par value shares must be issued for a consideration of at least Five pesos (P5.00) per share, as stated in Section 6 of the Code. This means that if a corporation issues shares without a stated par value, each share must be sold for at least P5.00.

Special Laws That Require Minimum Capital

The phrase "except as otherwise specifically provided by special law" in Section 12 means that certain industries have their own minimum capital requirements. Examples include:

• Banks and quasi-banks: Regulated by the Bangko Sentral ng Pilipinas (BSP), which sets minimum capital requirements based on the type and scale of the bank.
• Insurance companies: The Insurance Commission imposes minimum net worth requirements on insurance and preneed companies.
• Public utilities and financial intermediaries: These may have capital requirements under their respective regulatory frameworks.

For businesses in these sectors, the incorporators must comply with both the Revised Corporation Code and the applicable special law. The Securities and Exchange Commission (SEC) will not approve the articles of incorporation of these companies unless accompanied by a favorable recommendation from the appropriate government agency, as provided in Section 16 of the Code.

The Role of the Securities and Exchange Commission

The SEC is the government agency responsible for registering corporations in the Philippines. To incorporate, the incorporators must submit the intended corporate name for verification, then file the articles of incorporation and bylaws with the SEC. If the SEC finds the documents compliant, it issues the certificate of incorporation, which marks the commencement of the corporation's existence.

The SEC may disapprove the articles of incorporation on specific grounds listed in Section 16, including:

• The articles are not substantially in accordance with the prescribed form;
• The purposes are patently unconstitutional, illegal, or immoral;
• The certification on the amount of capital stock subscribed and/or paid is false; or
• The required percentage of Filipino ownership under existing laws has not been complied with.

Frequently Asked Questions

Is there a minimum capital requirement for a domestic corporation in the Philippines? No. Under Section 12 of the Revised Corporation Code, stock corporations are generally not required to have a minimum capital stock, unless a special law applicable to the specific business imposes one.

What is the minimum par value for no-par value shares? Under Section 6 of the Code, no-par value shares must be issued for a consideration of at least Five pesos (P5.00) per share.

Do banks and insurance companies have minimum capital requirements? Yes. These are regulated by special laws and their respective government agencies, such as the Bangko Sentral ng Pilipinas for banks and the Insurance Commission for insurance companies.

Practical Takeaways

• Most corporations need no minimum capital. For ordinary businesses, the incorporators may set the authorized capital stock at any amount they deem appropriate.
• Check for special laws. If the business is in a regulated industry like banking, insurance, or public utilities, confirm the applicable minimum capital with the relevant government agency.
• State the capital in the articles. The authorized capital stock, number of shares, and par value must be clearly indicated in the articles of incorporation.
• No-par shares cost at least P5.00 each. If the corporation issues no-par value shares, each must be issued for a consideration of at least P5.00 per share.
• Consult a professional. Determining the appropriate capital structure requires careful planning based on the business's goals and applicable regulations.

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