Increasing or Decreasing Company Capital in the Philippines: The Full SEC Process, Documents and Timeline

First, Three Capital Concepts: Authorized, Subscribed, Paid-Up

Before capital changes, distinguish a Philippine company's three layers of capital, or it gets confusing:

• Authorized Capital Stock (ACS): the total stock the company "may at most issue," as stated in the articles. Increasing/decreasing capital changes this figure.
• Subscribed Capital: the portion shareholders have subscribed and committed to pay in.
• Paid-Up Capital: the portion shareholders have actually paid in.

Increasing or decreasing the authorized capital amends a core clause of the articles, so it must go through a formal amendment and SEC approval. For minimum paid-up thresholds by company type, see our minimum paid-up capital guide.

When You Need to Increase Capital: Common Triggers

A company decides to increase capital usually out of these real needs:

• Expansion needs more funds: as the business grows, fuller capital is needed to support operations and investment.
• Meeting a foreign paid-up threshold: a domestic-market enterprise more than 40% foreign-owned often needs around USD 200,000 paid-up capital (per current FIA/SEC rules); if the original capital falls short, an increase is needed to comply.
• Bringing in new investors: issuing new shares to new shareholders, expanding the stock to accommodate the subscription.
• Debt-to-equity conversion: converting shareholder loans or advances into capital.
• Meeting regulatory or client requirements: some industries, tenders or major clients set a minimum capital.

Whatever the reason, first check whether the existing authorized capital has headroom: if subscriptions are near the authorized ceiling and no new shares can be issued, you must first increase the authorized capital.

When You Need to Decrease Capital: Common Triggers

Decreases are rarer but used in these situations:

• Surplus capital, returning it to shareholders: capital clearly exceeds operating needs and the company wants to lawfully return the surplus.
• Wiping out accumulated losses: reducing capital to write off book accumulated losses, making the statements truer and clearing the way for future dividends.
• Adjusting shareholding or restructuring: to fit ownership adjustments or group restructuring.
• Lowering an over-high paid-up requirement: capital set too high early on and not actually needed can be reduced lawfully.

A special note: a decrease directly affects creditors, so SEC review is stricter than for an increase — reducing capital may weaken solvency, and the law requires it not to prejudice creditors. The process section below explains this.

Increase Process: Board + Shareholders + SEC Approval

The main steps to increase authorized capital are broadly (exact documents and requirements follow current SEC rules):

1. Board resolution: a majority of directors approve the increase.
2. Shareholder approval: approval by shareholders representing two-thirds (2/3) of the outstanding capital stock at a meeting, with prior written notice as required.
3. Meet the 25%-25% rule: under the Revised Corporation Code, at least 25% of the increase must be subscribed, and at least 25% of the subscription must be paid in (in cash or property).
4. Prepare and sign documents: the amended articles, a Director's Certificate, a Treasurer's Affidavit, the notice and minutes of the shareholders' meeting, audited financial statements, and a bank certificate for the paid-in increase.
5. File with the SEC and pay fees: once the SEC approves, it issues a certificate approving the increase, completing the process.

The whole thing involves governance procedure (meetings, resolutions, notices) and document prep — follow the statutory voting ratios and document requirements, or the SEC may return the filing.

Decrease Process: One Extra Gate to Protect Creditors

The governance procedure to decrease authorized capital is similar to an increase (board resolution + 2/3 shareholder approval + amend the articles), but adds creditor-protection requirements and a more cautious review:

• Must not prejudice creditors: this is the statutory precondition. The company typically must submit a sworn statement that the decrease does not prejudice creditors, plus a list of creditors and similar materials.
• May require publication / notice: per SEC requirements, a decrease may involve notice to or publication for creditors so they can object.
• May involve BIR handling: where capital is returned to shareholders, tax considerations may arise, needing coordination with the BIR.

Precisely because creditors must be protected, a decrease is usually slower and more document-heavy than an increase. A decrease takes effect only after SEC approval — never return capital to shareholders before approval.

Time and Cost: Ranges, Not Instant

The time and cost of an increase/decrease are not fixed, depending on document completeness, SEC scheduling and case complexity:

• Time: an increase usually takes several weeks to a month or two; a decrease, with its extra creditor-protection step, is often slower. Complete papers with no deficiency requests go more smoothly.
• SEC official fees: the filing fee for an increase is usually tied to the increase amount (assessed at a set rate, plus related miscellaneous fees) — larger amounts cost more.
• Professional fees: drafting resolutions, amending the articles, sworn documents and financial-statement support usually need lawyers/accountants, billed separately.

The exact fee rates and computation follow current SEC schedules and do change. Estimate the official and professional fees for your specific increase/decrease amount before starting, and budget accordingly.

Link to Foreign-Ownership Thresholds: Mind Two Red Lines

For foreign-owned firms, capital changes often interact with two thresholds — consider both:

• Paid-up threshold (upward): a domestic-market enterprise more than 40% foreign-owned needs about USD 200,000 paid-up (reducible to about USD 100,000 if qualified, exempt if export-oriented). An increase is often precisely to reach or maintain this threshold; conversely, a decrease must not fall below the statutory minimum paid-up.
• Foreign-ownership ratio (lateral): when bringing in new shareholders and issuing new shares, watch whether the business is restricted on the Foreign Investment Negative List and whether the foreign ratio would breach the cap. If an increase changes the local/foreign structure, ensure it stays compliant.

In other words, capital changes are not an isolated numbers game — they engage foreign-ownership compliance. Formation and increases are often planned together; for the full registration backdrop see our company-registration guide, and where capital or profit is returned to shareholders see our profit and dividend repatriation guide.

Conclusion and Disclaimer

Both an increase and a decrease amend the articles, run a board resolution and a 2/3 shareholder resolution, and go through SEC approval; an increase must meet the 25% subscription/paid-up rule, while a decrease adds a creditor-protection review and is usually slower. For foreign-owned firms, also keep an eye on the paid-up threshold and foreign-ownership red lines.

This article is general information, not legal, tax or financial advice; the required documents, voting ratios, fees and foreign thresholds change with legislation and by case, so rely on current SEC and BIR rules together with professional advice. To plan an increase/decrease around your purpose (raising funds, meeting a threshold, returning capital, writing off losses) and to prepare the board and shareholder documents, amend the articles and file with the SEC, the Yixing company-setup team can start with a process and budget review.