A subsidiary is a domestic stock corporation, either wholly or partially owned (but controlled) by a foreign corporation. It has a separate and distinct legal entity from its parent. It is managed by its board of directors, which exercises all corporate powers, conducts all business and controls all property of the corporation.
Directors are elected by the stockholders themselves. Officers are elected by the directors, and they perform the duties imposed on them by law and the bylaws of the corporation.
It is an extension of, and not a separate and distinct entity from, the foreign corporation. It carries out business activities of the head office and derives income from the Philippines. A resident agent is designated, to whom summons and other legal processes may be served on behalf of the foreign corporation.
It is an extension of, and not a separate and distinct entity from, the foreign corporation. It deals directly with the clients of the head office in the Philippines but does not derive income from the country and is fully subsidized by its head office. A resident agent is designated, to whom summons and other legal processes may be served on behalf of the foreign corporation.
Regional or area headquarters
It is an administrative branch of a multinational company and, thus, not a separate and distinct legal entity. It is established to supervise, communicate and coordinate the multinational company's subsidiaries, affiliates and branches in the Asia-Pacific region. It is not allowed to do business or derive any income from sources within the Philippines. Its operations must be fully subsidized by way of inward remittances from its head office.
Regional operating headquarters
It is an administrative branch of a multinational company and, thus, not a separate and distinct legal entity. It is established to perform qualifying services to the multinational company's affiliates, subsidiaries or branches in the Philippines, the Asia-Pacific region and other foreign markets. It is prohibited from offering its services to entities other than the foregoing. It is also prohibited, directly or indirectly, to solicit or market goods and services on behalf of the multinational company or any of its affiliates or subsidiaries. It is allowed to derive income from sources within the Philippines.
Partnership has a legal personality separate and distinct from its partners. Generally, each partner is considered an agent of the partnership and their acts are binding, unless otherwise provided in the articles of partnership. A foreign corporation may be a partner in a domestic partnership only after such foreign corporation obtained a license to transact business in the Philippines.
One Person Corporation
The Revised Corporation Code (RCC) introduced the new concept of a One Person Corporation (OPC), which is defined as “a corporation with a single stockholder.” This corporation may only be formed by a natural person, trust or an estate. Banks and quasi-banks, preneed, trust, insurance, public and publicly listed companies, and non-chartered government-owned and -controlled corporations are not allowed to incorporate as OPCs. Further, a natural person who is licensed to exercise a profession is also generally not allowed to organize as OPC for the purpose of exercising such profession, except as otherwise provided under special laws. Similar to ordinary corporations, an OPC has no minimum capital stock requirement. Unlike an ordinary corporation, however, an OPC is not required to submit corporate bylaws.
The single stockholder serves as the sole director and president of the OPC. The OPC is required to appoint a treasurer, corporate secretary and other officers as necessary within 15 days from the issuance of its certificate of incorporation. However, the single stockholder is proscribed from being appointed as the corporate secretary.
The single stockholder is required to designate a nominee and an alternate nominee who shall take their place as director in the event of their death or incapacity. The extent and limitations of the authority of the nominee and alternate nominee shall be stated in the articles of incorporation. The nominee and alternate nominee may be changed at any time and without need of amendment of the articles of incorporation.
In case of death or permanent incapacity, the nominee shall sit as director only until the legal heirs of the single stockholder have been lawfully determined, and the heirs have designated 1 of them or have agreed that the estate shall be the single stockholder.
In lieu of meetings, a written resolution signed and dated by the single stockholder and recorded in the minutes book shall be sufficient when action is needed on any matter. Aside from the minutes book, the OPC shall also be required to submit reportorial requirements. Failure to submit such requirements 3 times within a period of 5 years may place the OPC under delinquent status. The reportorial requirements are as follows:
- Annual financial statements
- A report containing explanations or comments by the president on every qualification, reservation or adverse remark or disclaimer made by the auditor in the latter’s report
- A disclosure of all self-dealings and related party transactions and
- Other reports required by the SEC.
The RCC allows the conversion from an ordinary corporation to an OPC and from an OPC to an ordinary stock corporation. An ordinary stock corporation may be converted to an OPC when the single stockholder acquires all the stocks of an ordinary stock corporation and files an application for conversion with the SEC. An OPC may be converted into an ordinary stock corporation after due notice to the SEC of such fact and of the circumstances leading to the conversion. One such circumstance provided by the law is the death of the single stockholder. In such a case, the legal heirs may decide to either wind up and dissolve the OPC or convert it into an ordinary stock corporation.