To increase its authorized capital stock, a Philippine corporation amends its articles of incorporation and has the increase approved by the SEC. Under Section 37 of the Revised Corporation Code, the board approves by majority, stockholders holding at least two-thirds of the outstanding capital stock approve at a meeting called for the purpose, and the treasurer swears that at least 25% of the increase has been subscribed and at least 25% of that subscription paid. The application must reach the SEC within six months of the approvals, and the increase takes effect only when the SEC approves it.
Key Takeaways
- Authorized capital is the ceiling on the shares a corporation may issue. Raising it puts no money into the company; the subscriptions do.
- The approvals are a majority of the board and two-thirds of the outstanding capital stock, at a stockholders' meeting with written notice of its time, place and purpose.
- At least 25% of the increase must be subscribed, and at least 25% of the subscription paid, in cash or in property.
- The SEC application is due within six months of the board and stockholder approvals.
- Since SEC Memorandum Circular No. 6, series of 2026, a cash subscription can be supported by a notarized subscription contract instead of a special audit report, whatever the amount, with exceptions.
Authorized, subscribed and paid-up capital
The articles of incorporation state three figures:
- Authorized capital — the most share capital the corporation may issue.
- Subscribed capital — the shares stockholders have committed to take.
- Paid-up capital — the part of the subscriptions actually paid in.
Shares cannot be subscribed beyond the authorized capital. When a corporation needs to issue more shares than its articles allow, it increases the authorized capital first. The common reasons are a new investor taking shares, a foreign shareholder raising its stake, shareholder advances being converted into shares, shares issued for property, and room for an employee share plan.
A foreign stake can itself set the size of the increase. Under the Foreign Investments Act as amended by Republic Act No. 11647 (2022), a corporation more than 40% foreign-owned that sells to the domestic market needs US$200,000 of paid-in capital, or US$100,000 in three cases; an exporter of 60% or more of its output has no minimum. Minimum capital for a foreign-owned company sets out each case.
The approvals
Section 37 of the Revised Corporation Code requires both:
- A majority vote of the board of directors.
- Two-thirds of the outstanding capital stock at a stockholders' meeting called for the purpose. Written notice of the time, place and purpose goes to every stockholder, personally or by an electronic means the by-laws or the SEC's rules recognize.
Two-thirds is counted on the outstanding capital stock, not on the shares present at the meeting.
The results go into a certificate signed by a majority of the directors and countersigned by the chairperson and the secretary of the stockholders' meeting. It states the amount of the increase, the shares subscribed, the name, nationality and address of each subscriber, the amount each subscribed and paid, the stock represented at the meeting and the vote. Where appropriate, the increase also needs the approval of the Philippine Competition Commission.
The 25% rule
The SEC will not accept the certificate unless it comes with a sworn statement of the treasurer showing that at least 25% of the increase has been subscribed and at least 25% of the amount subscribed has been paid in cash, or that property worth 25% of the subscription has been transferred to the corporation.
For an increase from ₱5,000,000 to ₱15,000,000:
| Amount | |
|---|---|
| Increase | ₱10,000,000 |
| Subscribed, at least 25% of the increase | ₱2,500,000 |
| Paid, at least 25% of the subscription | ₱625,000 |
The 2026 change for cash subscriptions
SEC Memorandum Circular No. 6, series of 2026, lets a cash subscription be supported by a notarized subscription contract in place of a special audit report, regardless of the amount. Before it, the subscription contract was enough only up to ₱50,000,000. The contract is signed by the subscribers, the president and the treasurer, and states the shares subscribed and paid. A special audit report is still required of listed and public companies, companies offering securities to the public, and companies holding an SEC secondary license, and the SEC may ask for one in other cases. A subscription paid in property is supported differently.
Step by step
- Set the new figure and the share structure. The new authorized capital, par value and classes. Check whether the articles deny preemptive rights; if they do not, existing stockholders may subscribe to new shares in proportion to their holdings (Revised Corporation Code, Section 38). Anything else to change in the articles, such as the primary and secondary purposes, can go in the same amendment.
- Board meeting. The board approves the increase and the amendment, and calls the stockholders' meeting.
- Stockholders' meeting. Notice, the two-thirds vote, minutes.
- Subscription and payment. At least 25% of the increase subscribed and 25% of that paid in cash, or property worth 25% of the subscription transferred to the corporation.
- The certificate and the treasurer's statement. Signed, and consistent with the board resolution and the minutes to the peso and to the share.
- File with the SEC within six months of the approvals. The period can be extended for justifiable reasons.
- After approval. The increase takes effect once the SEC approves it and issues its certificate of filing. The new shares are recorded in the stock and transfer book, and an amended General Information Sheet is filed.
What it costs
- The SEC's filing fee, paid when the application is filed.
- Documentary stamp tax on the new shares: ₱1.50 for every ₱200 of par value, which is 0.75%, since 1 July 2025 under Republic Act No. 12214. It is filed on BIR Form 2000 within five days after the close of the month of issue.
- The paid-in capital itself, at least 25% of the subscription.
- Professional fees for preparing and filing the papers. Where Korp is the corporate secretary, the increase is quoted as an additional service.
What about a branch office?
A branch has no shares, so none of this applies to it. A branch adds funds by inward remittance of assigned capital, under the rules of its SEC license. Starting a branch office covers how a branch is licensed.
Korp handles it as your corporate secretary
When Korp is a company's corporate secretary, it handles a capital increase as an additional service, quoted separately from the corporate secretary subscription: the stockholders' approval, the treasurer's sworn statement, the proof of subscription and payment, the documentary stamp tax return and payment on the new shares, and the SEC application. The tax itself is paid by the company. The stock and transfer book is then updated under the subscription.
Frequently asked questions
Can authorized capital be increased after incorporation?
Yes. The corporation amends its articles of incorporation with a majority of the board and two-thirds of the outstanding capital stock, the treasurer swears that 25% of the increase is subscribed and 25% of that paid, and the SEC approves the amendment.
Can paid-up capital be more than authorized capital?
No. Paid-up capital is the paid part of the subscriptions, and shares cannot be subscribed beyond the authorized capital. A corporation that needs to issue more shares increases its authorized capital first.
Is there a deadline to file the increase with the SEC?
Yes. The application is due within six months of the board and stockholder approvals, a period that can be extended for justifiable reasons.
Does an increase need a special audit report?
Not for most cash subscriptions since SEC Memorandum Circular No. 6, series of 2026: a notarized subscription contract is enough, whatever the amount. Listed and public companies, companies offering securities to the public and companies with an SEC secondary license still need one, and the SEC may ask for one in other cases. A subscription paid in property is supported differently.
This article is general information, not legal advice.
