Minimum Capital Rule
A one person corporation is a stock corporation with a single stockholder, so it must have share capital even though it has only one owner. The Revised Corporation Code does not impose a fixed minimum authorized capital stock for an OPC, except when a special law requires a particular capitalization for the business, industry, or transaction involved.
The rule removes the old policy of requiring a statutory floor for incorporation, but it does not permit a corporation with no shares, fictitious subscriptions, or illusory paid-up capital. An OPC must still state its capital structure in its articles, issue or subscribe at least enough shares to make the single person a stockholder, and receive lawful consideration for shares treated as paid.
The absence of a minimum authorized capital stock is a registration rule. It means that the Securities and Exchange Commission should not reject an OPC merely because its authorized capital stock is small, provided the articles and supporting documents comply with the Code and no special law imposes a higher amount.
Capital Concepts in an OPC
The capital stock of an OPC is governed by the ordinary concepts applicable to stock corporations, adjusted to the reality that there is only one stockholder at incorporation. The sole stockholder may be a natural person, trust, or estate, but the subscribed shares are still corporate shares and not merely personal assets used in a sole proprietorship.
| Concept | Meaning in an OPC | Legal effect |
|---|---|---|
| Authorized capital stock | The maximum share capital the OPC may issue under its articles, stated through the authorized shares and, for par value shares, their par value. | Shares cannot be validly issued beyond this ceiling without amending the articles and securing the required approval. |
| Subscribed capital | The portion of the authorized shares the sole stockholder agrees to take and pay for. | The subscription is an enforceable obligation in favor of the corporation and, in proper cases, its creditors. |
| Paid-up capital | The portion of the subscription actually paid or validly contributed in cash, property, or other lawful consideration. | Only real and lawful consideration may be treated as paid; fictitious payment may create personal liability. |
| Outstanding shares | The shares issued to and held by the sole stockholder, excluding treasury shares. | The sole stockholder exercises voting, economic, and control rights through these shares. |
| Stated capital | The capital amount legally tied to issued shares and not freely distributable as profit. | It protects creditors by restricting improper return of capital to the sole stockholder. |
Scope of the No-Minimum Rule
The no-minimum rule concerns the amount of authorized capital stock required by the corporation law for an OPC to come into existence. It does not erase the need to comply with special laws, nationality restrictions, licensing rules, and regulator-prescribed capitalization applicable to the corporation's intended business.
If the OPC will engage in an activity for which a special law requires a minimum paid-in capital, minimum net worth, security deposit, capitalization by branch or store, or other financial qualification, that special requirement prevails. The corporation law supplies the general incorporation rule, while the special law supplies the industry-specific financial threshold.
When the sole stockholder is a foreign person, trust, or estate, the OPC must also comply with foreign equity restrictions and paid-in capital rules applicable to the activity. If the activity is reserved to Philippine nationals, capitalization cannot cure the nationality defect; if the activity is open to foreign equity subject to a capitalization threshold, the threshold must be independently satisfied.
Some entities and activities are restricted from using the OPC form or from using it for a particular purpose. In those situations, the issue is not the amount of capital but the legal capacity to organize as an OPC for that business.
Authorized Capital and Share Structure
An OPC's articles must identify the share structure with enough certainty to show what the corporation may issue and what the sole stockholder has subscribed. For par value shares, the authorized capital is tied to the aggregate par value of the authorized shares. For no-par value shares, the articles identify the number of authorized shares and the consideration rules applicable to no-par shares govern issuance.
A no-par value share is generally treated as fully paid and non-assessable once issued for its stated consideration, and the consideration received forms part of capital rather than distributable profits. No-par value shares may not be issued for less than the statutory minimum consideration per share, so the no-minimum rule for OPCs does not eliminate the separate rule governing no-par share issuance.
The authorized capital stock need not be fully subscribed at incorporation. Unissued shares remain available for later issuance to the sole stockholder, subject to the articles and applicable law. If shares are issued or transferred to another person so that the corporation no longer has only one stockholder, the corporation must comply with the rules on conversion from an OPC to an ordinary stock corporation.
The single-stockholder feature simplifies voting and approval mechanics, but it does not allow issuance beyond authorized shares, issuance for unlawful consideration, or disregard of filing requirements. Corporate acts affecting capital must still be documented through written action and reflected in corporate records.
Subscription and Payment by the Sole Stockholder
The sole stockholder's subscription is both the basis of ownership and a contract to contribute capital to the corporation. To the extent unpaid, the subscription is an asset of the OPC and may be collected according to law. The sole stockholder cannot defeat creditors by treating unpaid subscription as a purely internal matter.
Payment for shares must consist of consideration recognized by corporation law, such as cash, property actually received, previously incurred indebtedness of the corporation, or services already rendered when such consideration is legally acceptable. Future services, unsupported promises, and overvalued property do not create genuine paid-up capital.
If property is used as consideration, its valuation must be made in good faith. Knowingly overvalued property may result in watered stock, which exposes the person responsible for the issuance and the stockholder receiving the shares to liability for the difference between the value received by the corporation and the value represented as paid.
For par value shares, issuance below par is not allowed because the par value fixes the minimum issue price of the share. For no-par value shares, the stated consideration and statutory minimum consideration perform the function of protecting capital. In either case, an OPC cannot use the absence of a minimum authorized capital stock to justify an issuance that impairs capital or misstates payment.
Capital Adequacy and Limited Liability
The most important consequence of the OPC capital rule is that no statutory minimum does not mean no responsibility for adequate financing. The single stockholder who invokes limited liability has the burden of showing that the OPC was adequately financed for its business and obligations. If the single stockholder cannot make that showing, the stockholder may be held jointly and severally liable for the debts and liabilities of the OPC.
Adequate financing is not measured by a universal peso amount. It depends on the nature of the business, foreseeable operating expenses, regulatory requirements, credit arrangements, asset base, insurance, capitalization practice in the industry, and the risks the corporation reasonably assumes. A small consulting OPC may require far less capital than an OPC engaged in inventory-heavy, construction, lending, or regulated operations.
This rule gives practical content to the separate juridical personality of an OPC. The law allows one person to incorporate without a statutory capital floor, but it does not allow that person to externalize ordinary business risks onto creditors through a shell corporation that was never reasonably funded.
Capital inadequacy is especially significant in an OPC because ownership, management, and economic benefit are concentrated in one person. The same person ordinarily decides the amount of capital, controls payments to and from the corporation, signs contracts for the corporation, and receives distributions. These facts make proper capitalization and recordkeeping central to preserving limited liability.
Special Laws and Regulated Businesses
The phrase "except as otherwise provided by special law" covers requirements imposed outside the general corporation law. A special law may require a particular amount of paid-in capital, minimum net worth, deposits, reserves, bonds, insurance, or other financial capacity before the corporation may operate or obtain a license.
Regulated businesses may also be subject to continuing capital requirements after incorporation. Compliance at the time of SEC registration may not be enough if the applicable regulator requires maintenance of capital, liquidity, reserves, or financial ratios during operations.
Where a special law requires a minimum paid-in capital, the OPC must satisfy the paid-in requirement with actual contributions, not merely a high authorized capital stock. Authorized capital shows capacity to issue shares; paid-in capital shows that value has actually entered the corporation.
Where a special law requires a minimum authorized capital stock, the articles must state at least that amount. Where the law requires paid-in capital or net worth, the OPC must meet that distinct measure even if its authorized capital is higher. The legal question is therefore the exact financial metric required by the governing special law.
Changes in Capital After Incorporation
An OPC may increase or decrease its authorized capital stock in accordance with the rules on amendment of articles and capital alteration. The fact that there is only one stockholder simplifies approval but does not dispense with the need for a valid corporate act, proper documentation, and SEC approval when required.
An increase in authorized capital allows the OPC to issue additional shares, but it does not by itself place money or property into the corporation. Capital becomes meaningful only when shares are subscribed and paid, or when the corporation otherwise receives lawful consideration for the issuance.
A decrease in capital cannot be used to prejudice creditors. A return of capital to the sole stockholder must respect the trust fund principle, statutory restrictions on distributions, and the rights of existing creditors. Corporate funds representing capital cannot be withdrawn as if they were the personal funds of the sole stockholder.
If the OPC admits another stockholder through issuance or transfer of shares, the capital structure must be aligned with the change in corporate form. The corporation's status as an OPC depends on having a single stockholder, not merely on having one controlling stockholder.
Operational Consequences
- An OPC has no fixed minimum authorized capital stock under the general corporation law, but it must still have a lawful share structure and at least one valid stockholder-subscription relationship.
- Special laws prevail over the no-minimum rule when they prescribe capital, net worth, paid-in capital, deposits, or financial capacity for the intended business.
- Authorized capital is only a ceiling for share issuance; paid-up capital is the actual value contributed to the corporation.
- The sole stockholder remains liable on unpaid subscriptions, and those subscriptions may be reached according to law when corporate assets are insufficient.
- Shares must be issued for lawful and real consideration; watered stock rules and capital impairment principles apply even when the corporation has only one stockholder.
- The single stockholder who relies on limited liability must be able to show that the OPC was adequately financed for its business.
- Capital changes must follow corporate and SEC requirements even though the sole stockholder can approve matters alone.
- Capitalization cannot cure an activity that the OPC is legally prohibited from undertaking or an ownership structure that violates nationality restrictions.