In many sections of this website and in our Guide to Opening a Company in the Philippines we mention one of the most important steps being, "Placing the required paid up capital with a local bank". Whether you are setting up a domestic corporation, partnership, sole proprietorship, branch office, representative office, or a regional headquarters all require you to place capital with a local bank.
But few guides explain how it is done or what are the requirements.
It is a fairly simple process but should be explained thoroughly so that there are no mistakes that can lead to delays.
First step is determining how much capital you are required to place with a local bank.
The Minimum capital the SEC requires to be placed varies from organization to organization.
** Can be reduced to 100,000 USD if the company plans to directly employ over 50 local workers, or utilizes advanced technology. However if you opt for utilizing advanced technology, it must be ok'ed by the Dept. of Science and Technology which could take up to 6 months.
** You may also reduce the capital if your company operates as an export business, the SEC has no clear ruling on the exact capital required for an export business but we recommend at least 15,000 USD.
Now I'm sure the first thing you will notice is the major capital difference required for foreigners owning a business and for locals. Unfortunately this the requirement of corporate code of the Philippines and mandated by law. I believe the idea is that if you are foreign and you want to do business here then there is a requirement to create more liability for them. I don't necessarily agree with it but what can you do.
Also I suggest that you just place the minimum requirement, there are of course advantages to valuing a company but the paid up capital directly determines how much you will need to pay the SEC in the Philippines for the registration (1 1/2% of the paid up capital)
So once you have established the amount of capital needed you must go to a local bank and set up a Treasury in Trust Fund or a TITF. The bank will require that you show them the notarized articles of incorporation, partnership papers, sole proprietorship application, or the documents for the other foreign corporations before allowing you to open the account. Very important to include there is the name reservation from SEC for the company you will open as this needs to be the name of the account.
You will also need someone to act as the treasurer and the signatory of the account. This creates a slight catch 22 for a lot of foreign investors as the Central Bank (BSP) requires that you must be resident to be a signatory on any bank account, but to apply for residency as a worker or business owner you must open the account and form the company. This can be solved by allowing a lawyer or company to act as your treasurer (just make sure its someone you trust).
Recently HSBC now allows for foreigners to open non-resident accounts with them, it is the only bank that allows these types of accounts to be setup in the Philippines so foreign companies can keep all of their banking internally.
After the TITF account has been setup the bank will issue you a certificate stating the funds are placed with them. They will also institute a freeze on the account so that you cannot withdraw the funds until you issue a letter to cancel the TITF account or show them the completed registration from the SEC. This is to ensure that the funds remain in the account during the entire registration process.
I hope this article has explained thoroughly the rules and requirements for placing capital in the Philippines.
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