Broader Coverage for Subscription Contract: Supporting Ease of Doing Business in the Philippines
What is a subscription contract under Philippine law?
Under Philippine law, a Subscription Contract is any agreement to acquire unissued shares of a corporation, whether the corporation already exists or is still to be formed, even if the parties call it a purchase or use a different label.
Types of subscription contracts in the Philippines
There are two types of subscription contracts:
- pre-incorporation subscription contracts; and,
- post-incorporation subscription contracts.
A pre-incorporation subscription contract refers to an agreement to subscribe the shares of a corporation still to be formed, while a post-incorporation subscription contract refers to an agreement to subscribe the shares entered after the incorporation or formation of the corporation.
Previous SEC Requirement on Increase in Authorized Capital Stock
Previously, in applications to increase the authorized capital stock where subscriptions are paid in cash, except those where payments to the subscription to the increase is more than Fifty Million Pesos (P50,000,000.00), the Securities and Exchange Commission (SEC) required companies to submit a notarized subscription contract in lieu of a special audit report. The requirement included that the said subscription contract shall be executed by the President and the Treasurer of the corporation.
SEC Memorandum Circular No. 6, Series of 2026 (SEC MC 6)
However, the SEC has just issued SEC Memorandum Circular No. 6, Series of 2026 (SEC MC 6), that expanded the applicability of the notarized subscription contract. Notably, the circular removed the paid-up capital threshold effectively broadening the instances where companies must submit a notarized subscription contract when paying in cash. Under SEC MC 6, the subscription contract must be signed now by the subscriber(s), in addition to the President, and the Treasurer of the company, and specify the number of additional shares subscribed and the amount paid. If the President or Treasurer cannot sign, the company must submit a Board Resolution authorizing another Director or Officer to sign on their behalf.
Continued Requirement for Special Audit Report
The relevant circular further clarified that listed companies, public companies under the Securities Regulation Code, companies that offer or sell securities to the public and companies with secondary licenses regulated by the Commission are still required to submit a Special Audit Report.
About the author
Atty. Al Savior Dimo is a Senior Associate from the Corporate Secretarial group of Forvis Mazars in the Philippines. This article is for general information purposes only and should not be considered professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent Forvis Mazars in the Philippines.