Aspiring solopreneurs, we have good news for you.
Exciting times in the local business landscape are coming as the Senate gave the green light for the amendment of a 38-year-old business law that allows a single person to form a corporation. This brings hope to put an end to the agitation of business-oriented and independent people who are somewhat forced into co-signing partners because of our existing code in registering a company- which requires at least five stockholders in order to form a corporation with the Securities and Exchange Commission (SEC).
This leaves an aspiring entrepreneur with no option but to set up a business registered as single proprietorship, which exposes the business-owner to unlimited financial risks.
As compared to a corporation, which is a separate juridical entity from the owner, the corporation registered under the current policy shields the shareholder from boundless risk as his or her liability is limited to the amount of his or her investment.
In a statement from the Senate, it was said that the new one-person corporation policy was approved with 20 affirmative votes, zero negative votes, and no abstention in the third and final reading.
The Senate Bill No. 1280 was authored by Senate Minority Leader Franklin M. Drilon, who saw it fit to update the Batas Pambansa Bilang 68 or the Corporation Code of the Philippines which was passed back in 1980, stating that a corporation must be made up of five individuals.
By lifting the limitations of the current law, Drilon seeks to attract more entrepreneurs to set up more businesses in the country. This is also one of the ways that the country can keep up with global competitiveness as a one-person corporation is a typical business setup in other countries.
The current five-person limitation is considered as a “stumbling block” by Drilon, who said that it is common knowledge that some applicants use the names of household employees just to complete the five names.
A corporation and its owners are considered as separate entities. This means that a shareholder’s liability is limited only to the amount of the investment that was put in the corporation.
In contrast, a single proprietorship has a simple structure because only one person holds the reins of the business. But its financial setup can be tricky. The proprietor and the business share one TIN (Taxpayer’s identification number), making them one and the same taxpayer. Because of this, the proprietor is put at risk in shouldering debts and other liabilities should the business fail.
Among the key provisions in the measure are: removing the minimum number of incorporators; permitting the establishment of a one-man corporation, and allowing electronic filing of reportorial requirements and attendance in meetings by remote communication or in absentia.
In a statement, it was said that these changes are geared towards making the code adaptable to the changing business landscape and making the Philippines an attractive investment destination.
Drilon said that the proposed amendments are divided into four reform clusters consisting of policies that will support the ease of doing business measure the country; protect the corporate and stockholders; push for corporate and civic responsibility; and strengthening the country’s policy and regulatory corporate framework.
In the first cluster pertaining to the ease of doing business, Drilon said that he would simplify the name verification process, and grant a perpetual life as the default option for corporations.
For the second cluster, the measure includes provisions on the creation of emergency boards, revised rules on the right to inspect corporate books, modified quorum requirements, and expanded grounds for disqualification of directors.
Drilon said that the third reform focuses on firming up Corporate and Civic Responsibility to impose corporate criminal liability and penalties for graft and corruption.
The fourth reform cluster includes provisions on arbitration of commercial disputes, amendments on dissolution, and the alignment of SEC’s powers under the Corporation Code with the Securities Regulation Code.
Other sponsors of the law include senators Juan Miguel F. Zubiri, Juan Edgardo “Sonny” M. Angara, Francis “Chiz” G. Escudero, and Paolo Benigno “Bam” Aquino IV.
With a faster way of putting up a corporation, there would be bigger chances of attracting local and international entrepreneurs in the country. These developments would impact the country’s economics, generating revenue and eventually boost employment opportunities. This will make for an even stronger landscape for successful solopreneurs in the country, who have started a new era of entrepreneurs with dynamic and unique business models.