Introduction: Why Board Setup Matters
A board of directors is a required governance body for Philippine corporations, except where specific rules apply, such as for One Person Corporations (OPCs). Proper board setup affects authority to act, validity of signatories, access to banking and financing, and the corporation’s ability to comply with Securities and Exchange Commission (SEC) reportorial requirements.
Under Philippine law, a corporation has a separate juridical personality. Corporate governance operationalizes this separation by establishing clear authority, assigning execution responsibilities, and formalizing documentation protocols.
For practical purposes:
- The Board of Directors approves major corporate actions and sets policy direction.
- Corporate Officers implement day-to-day operations and execute board-approved actions.
- Corporate Records document approvals, authority, and compliance.
Under the Revised Corporation Code (R.A. No. 11232), once directors are elected, the board must organize and elect the required corporate officers.
Legal Basis and Regulatory Oversight
Philippine corporate governance for domestic corporations is primarily governed by:
- Revised Corporation Code (R.A. 11232), which provides general rules on corporate powers, governance, officer elections, and reporting.
- Securities and Exchange Commission (SEC), which administers registration and monitors compliance with reportorial requirements.
Annual SEC submissions are generally processed online through the SEC’s eFAST system, subject to applicable SEC issuances and filing timelines.
Required Corporate Officers and Core Roles
After the election of directors, the board must convene to organize and elect corporate officers, including the President, Treasurer, and Corporate Secretary. Additional officers may be required depending on the corporation’s classification and regulatory regime.
1) President (Required)
Role: Functions as the Chief Executive Officer, representing the highest level of management. The President is responsible for executing Board-approved strategies and signing official documents within the scope of authority defined by the By-laws and Board resolutions.
Key rules:
- The President must be a director.
- The President cannot simultaneously serve as Treasurer or Corporate Secretary.
- The President can be a foreigner, unless the corporation is engaged in a business with nationality restrictions.
2) Treasurer (Required)
Role: Custodian of corporate funds and financial administration; commonly responsible for banking arrangements and financial signatories, subject to board authority and internal controls.
Key qualification:
- The Treasurer must be a resident of the Philippines.
- The Treasurer may or may not be a director, depending on the corporation’s by-laws and board action.
3) Corporate Secretary (Required)
Role: Maintains the corporation’s official records, including minutes and resolutions; commonly attests to corporate acts and issues certifications within the scope of authority.
Key qualification:
- The Corporate Secretary must be a Filipino citizen and a resident of the Philippines.
4) Compliance Officer (Required for certain corporations)
Corporations classified as vested with public interest may be subject to additional governance requirements under SEC regulations, which can include the designation of a Compliance Officer and other controls. Applicable requirements depend on the corporation’s status, size, and regulatory classification.
Number of Directors, Incorporators, and Shareholders
Ordinary Stock Corporation (Non-OPC)
- Incorporators: At least two (2) and up to fifteen (15).
- Directors: Up to fifteen (15) directors. The specific board size is stated in the Articles of Incorporation and/or by-laws, consistent with the Revised Corporation Code.
One Person Corporation (OPC)
- The single stockholder is typically the sole director, subject to OPC rules under the Revised Corporation Code.
- OPC governance and officer appointment requirements apply and should be addressed early in the setup process.
Qualifications, Residency, and Citizenship Requirements
Directors (Stock Corporation)
General baseline requirements under the Revised Corporation Code and standard practice include:
- Directors must be natural persons.
- Directors must hold at least one (1) share registered in their name, and must maintain that shareholding during their tenure.
- Directors are elected for one (1) year terms under the Revised Corporation Code framework, with holdover until successors are elected and qualified.
Residency and Practical Constraints
The Revised Corporation Code removed the prior general requirement that a majority of directors be Philippine residents for ordinary corporations. However, officer eligibility requirements still apply:
- The Treasurer must be a Philippine resident.
- The Corporate Secretary must be a Filipino citizen and a Philippine resident.
Foreign Ownership and Restricted Activities
Where the corporation operates in industries subject to nationality restrictions or limitations (including restrictions under the Constitution, specific statutes, the Foreign Investment Negative List, and sectoral regulations), governance must be aligned with allowable foreign participation.
The Anti-Dummy Law needs to be considered in this context, and it is designed to prevent 'nominee' setups where a local shareholder is only an owner on paper. It looks past the legal names to identify the beneficial owner—ensuring that in restricted sectors, foreign investors don't use local fronts to bypass limits on management, control, and profit-sharing.
Governance Documents Required for a Board-Compliant Setup
1) Articles of Incorporation (AOI)
The Articles of Incorporation establish the corporation’s core legal attributes, including:
- corporate name and primary purposes
- principal office
- capital structure
- incorporators and initial directors
- other declarations required under the Revised Corporation Code and SEC forms
2) By-Laws
By-laws provide operational governance rules, including:
- director election and removal procedures
- meeting rules (notice, quorum, voting)
- officer appointment and removal
- authorization thresholds for corporate acts
- records management and compliance procedures
3) Shareholders’ Agreement (Optional)
A shareholders’ agreement is not mandatory, but is commonly used where there are multiple founders, investors, differentiated rights, or negotiated governance terms. It typically addresses matters not fully captured by by-laws, including:
- reserved matters and veto rights
- board seat allocation
- transfer restrictions and exit mechanisms
- investor protections and information rights
Practical Compliance Considerations and Common Issues
1) Officer Eligibility Errors
Compliance issues commonly arise from appointing ineligible individuals as Treasurer or Corporate Secretary. Eligibility requirements are strict:
- Treasurer: Philippine resident
- Corporate Secretary: Filipino citizen and Philippine resident
Corporations with foreign ownership and/or management teams should plan officer appointments early.
2) Incomplete Corporate Records
Corporate records are required to evidence authority and compliance. At a minimum, corporations should maintain:
- minutes of meetings
- board resolutions and approvals
- Secretary’s Certificates when proof of authorization is required
- updated corporate books and records, including the stock and transfer book where applicable
3) Public Interest Corporation Requirements
Corporations vested with public interest may be subject to enhanced governance requirements, including independent director rules (commonly expressed in SEC guidance as at least twenty percent (20%) of the board, or two (2) directors, whichever is higher) and other compliance roles depending on SEC rules and classification.
4) OPC Governance Requirements
OPCs follow specific rules under the Revised Corporation Code. In general:
- The single stockholder is typically the President and sole director.
- A nominee and an alternate nominee must be designated by the single stockholder to ensure continuity of business in the event of the stockholder’s death or incapacity.
- The single stockholder may serve as Treasurer subject to applicable requirements, including the posting of a security bond.
- The Corporate Secretary must be a qualified individual separate from the single stockholder.
5) Ongoing SEC Reportorial Compliance
Corporations should establish a compliance calendar for SEC submissions, including:
- General Information Sheet (GIS): commonly required within thirty (30) days from the annual stockholders’ meeting, subject to SEC rules and filing deadlines
- Audited Financial Statements (AFS): filing rules and deadlines depend on SEC classification and applicable thresholds
- Other filings required by SEC issuances, including beneficial ownership disclosures where applicable
Annual reportorial submissions are generally filed through the SEC’s eFAST system, subject to SEC procedures.
Conclusion: The board isn’t bureaucracy, it’s your scaling infrastructure
Board composition, officer elections, and governance documentation are required components of corporate setup and ongoing compliance for Philippine corporations. Corporations should ensure that officer qualifications, record-keeping, and SEC reportorial filings align with applicable rules, including requirements that vary based on classification and regulatory coverage.
This article is general information and is not legal advice. Corporations with foreign investors, restricted business activities, or complex shareholding arrangements should seek a professional incorporation partner to design a compliant governance structure appropriate to their operations.
