How to Increase Authorized Capital Stock in the Philippines

A corporation that has already issued all of its authorized shares, or that simply wants more room to raise capital, bring in new investors, or convert debt into equity, cannot just print more stock certificates. Increasing the authorized capital stock (ACS) is a formal corporate act governed by Section 37 of the Revised Corporation Code of the Philippines (Republic Act No. 11232), and it has to go through both an internal approval process and a review by the Securities and Exchange Commission (SEC) before it takes legal effect. Here is how the process actually works, step by step.

The Legal Basis: Section 37 of the Revised Corporation Code

Section 37 provides that no corporation may increase (or decrease) its capital stock, or incur, create, or increase any bonded indebtedness, unless the increase is approved by a majority vote of the board of directors and by two-thirds of the outstanding capital stock at a stockholders’ meeting called specifically for that purpose. Written notice of the meeting — stating the time, place, and purpose — must be sent to stockholders at the addresses shown in the corporation’s books, whether served personally, by mail, or transmitted electronically under applicable SEC rules.

Step-by-Step Procedure

• 1. Board resolution. The board of directors passes a resolution proposing the increase and calling a stockholders’ meeting for that purpose.
• 2. Notice to stockholders. Written notice of the meeting’s date, place, and purpose is sent to every stockholder of record, through whatever channel — personal service, mail, or electronic transmission — the corporation’s practice and SEC rules allow.
• 3. Stockholders’ meeting and vote. At the meeting, the proposed increase must be approved by stockholders representing at least two-thirds of the outstanding capital stock.
• 4. Directors’ certificate. The directors execute a certificate, countersigned by the chairperson and secretary of the meeting, confirming compliance with Section 37’s requirements and stating: the amount of the increase; the names, nationalities, and addresses of the subscribers to the increase; the amount each has subscribed and paid; the total number of shares represented at the meeting; and the result of the vote authorizing the increase.
• 5. Meet the 25%/25% subscription-and-payment threshold. Before the SEC will approve the increase, at least 25% of the increased capital stock must be subscribed, and at least 25% of that subscribed amount must actually be paid, whether in cash or in property of equivalent value.
• 6. Prepare the amended Articles of Incorporation reflecting the new authorized capital stock, together with the directors’ certificate, a Treasurer’s Affidavit, and whatever other supporting documents the SEC’s current checklist requires for the specific type of corporation involved.
• 7. File with the SEC through the Commission’s electronic filing system, within six months of the date the board and stockholders approved the increase — the SEC may grant an extension for justifiable reasons, but the filing is expected within that window as the default rule.
• 8. Pay the applicable SEC filing fees. The SEC assesses fees for amendments of this kind under its own schedule of fees and charges, and the amount scales with the size of the increase and other factors the Commission applies at the time of filing — applicants should confirm the exact computation with the SEC or its accredited payment channels before filing, since the schedule is periodically updated.
• 9. SEC review and approval. Once the SEC confirms the application is complete and compliant, it approves the amendment and issues the corresponding certificate, at which point the increase becomes legally effective.

Why Corporations Increase Their Authorized Capital Stock

The most common reasons include: the corporation has already issued all of its originally authorized shares and needs more headroom to raise fresh capital; new investors want to come in through a fresh share issuance rather than buying out existing shareholders; the corporation wants to convert outstanding debt (owed to shareholders, affiliates, or creditors) into equity; or the corporation needs to meet a minimum capitalization threshold tied to a particular license, industry, or regulatory requirement that its current authorized capital no longer satisfies.

A Common Point of Confusion: Increasing ACS vs. Simply Issuing Unissued Shares

Not every capital raise requires this process. If a corporation still has authorized shares that were never issued — that is, the original authorized capital stock has not yet been fully subscribed and issued — it can typically issue those remaining shares directly, subject to its board and any applicable pre-emptive rights of existing stockholders, without going through the Section 37 amendment process at all. The formal increase-of-ACS procedure described in this article only becomes necessary once the corporation wants to raise its authorized ceiling above what its Articles of Incorporation currently allow.

Common Pitfalls to Avoid

• Filing before the 25%/25% threshold is met. The SEC will not approve an increase where less than a quarter of the new shares are subscribed, or where less than a quarter of that subscription has been paid, so corporations sometimes have to pause and complete subscriptions before the paperwork can move forward.
• Missing the six-month filing window. Once stockholders approve the increase, the clock starts running; letting it lapse without filing (and without securing an extension) can force the corporation to convene an entirely new stockholders’ meeting and start over.
• Overlooking nationality and foreign-ownership restrictions. For corporations engaged in activities where Filipino ownership percentages are legally required, an increase in authorized capital stock has to be structured so the required Filipino ownership share is preserved after the new shares are issued — this is a distinct area of law from the mechanics of Section 37 and deserves its own review before subscriptions are finalized.
• Forgetting to reconcile the by-laws. Any provision in the corporation’s by-laws that references the old authorized capital stock figure should be reviewed and updated for consistency once the increase is approved, even though the by-laws themselves are not automatically amended by the SEC’s approval of the Articles.

When to Bring In Counsel

Because the process touches corporate governance, securities regulation, and sometimes nationality-sensitive ownership rules all at once, corporations planning a capital increase are generally better served by involving corporate counsel early, rather than after the stockholders’ meeting has already been held. Counsel can help confirm that notice and quorum requirements were properly observed, that the directors’ certificate captures every detail the SEC expects, and that the subscription and payment structure will not create complications for a business subject to Filipino ownership requirements. Catching a documentation gap before the SEC does is almost always cheaper and faster than reconvening a stockholders’ meeting to cure a defect after the fact. This is especially true for corporations that plan to raise capital more than once, since a clean first filing tends to make the next increase, or any related corporate action, considerably easier to process.

What to Expect on Timing

There is no fixed, universal number of days within which the SEC processes an application to increase authorized capital stock — the timeline depends heavily on how complete and correctly documented the filing is, and on the Commission’s caseload at the time. Applications with all required signatures, notarizations, and proof of the 25%/25% subscription-and-payment threshold already in order move far more smoothly than applications the SEC has to send back for correction. Corporations planning a capital raise around a specific investor closing date should build in a reasonable buffer rather than assuming same-week approval.

Getting the Documentation Right the First Time

Because the directors’ certificate has to state fairly detailed information — the identities and nationalities of subscribers, the exact amounts subscribed and paid, and the vote results — and because the SEC checks all of this against the 25%/25% threshold before approving anything, corporations are well served by having their subscription agreements, proof of payment, and meeting minutes finalized and internally consistent before the certificate is drafted, rather than trying to reconcile the numbers after the fact.

Frequently Asked Questions

What vote is required to increase authorized capital stock? A majority vote of the board of directors and a two-thirds vote of the outstanding capital stock at a stockholders' meeting called specifically for that purpose.

Do all the newly authorized shares have to be paid up immediately? No. At least 25% of the increase must be subscribed and at least 25% of that subscribed amount must be paid before the SEC will approve the increase; the remainder can be called later under the terms of the subscription.

Is there a deadline to file the increase with the SEC after stockholders approve it? Yes. The application generally must be filed within six months of the board and stockholder approval, though the SEC may grant an extension for justifiable reasons.

Do I need to issue new shares to raise capital, or can I just increase the ACS? If the corporation still has authorized but unissued shares, it can typically issue those directly without amending its Articles; the Section 37 increase process is only needed once the corporation wants to raise its authorized ceiling above the current limit.

This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.

Getting the subscription math and documentation right before the certificate is drafted is what usually separates a smooth SEC approval from a filing that bounces back for correction.