How to register a corporation?

Background

In the Philippines, a corporation is its version of a limited liability company (LLC) in Europe. Stockholders or investors are, generally, liable only to the extent of their shareholdings, save under certain exceptions like in piercing the veil of corporate entity under certain instances. Securities and Exchange Commission (SEC) is the government agency lodged with the registration and regulation of these entities.

Domestic company or domestic corporation refer to those that are registered and existing under the law of the Philippines. Its registration with the SEC is normally affected by the nature of its activity it intends to operate as it would dictate the amount of required minimum capitalization, extent of foreign equity participation, and other documentary requirements. For simplicity, this article is premised on the setting-up of a company that intends engage primarily on local sales in the Philippines.

Requirements

First and foremost is the conceptualization of the corporation by the incorporators, say, what business to undertake, where, how will it operate, how is the capitalization and how much will each contribute. It is required that at least five (5) to fifteen (15) natural persons, majority of which are residents of the Philippines, can incorporate a corporation. Upon that concept, they check on the intended name with the SEC name reservation system (with corp., corporation, inc., or incorporated) to check its availability. Name should not be deceptively or confusingly similar to an existing registered corporation or protected name, and should not be that prohibited to be used. Upon availability of the name and its successful reservation, the incorporators will then proceed with the following documentary requirements:

a. Articles of Incorporation in accordance with the Corporation Code of the Philippines;
b. By-laws, also in accordance with the Corporation Code of the Philippines;
c. Treasurer’s Affidavit on the requirement that at least 25% of the authorized capital must be subscribed and that at least 25% of the same shall be paid-up;
d. Bank Certification for the treasurer’s-in-trust (TITF) account required to be opened with he bank of choice for the paid-up capitalization. The above (a) to (c) documents, some bank forms, and Treasurer’s identification cards and picture is necessary for the TITF. Also, TITF account will not be withdrawn until after the corporation is registered, but could be allowed for deposits.
e. Joint Undertaking to change name in accordance with SEC format and terminologies;
f. Authorization to SEC and BSP to inquire into bank deposit for the verification of the paid-up capitalization in a depository bank;
g. Affidavit of corrections, for the necessary corrections in the process;
h. Coversheet in accordance with SEC format; and
i. Endorsement from other government regulatory agencies for specific industries like, power, drugs and medicine, and the similar agencies requiring secondary license.

The above requirements are sensitive and must be made in accordance with law, SEC rules and regulations. SEC requires at least sic (6) sets of the above documents. As a guide and easy reference, SEC employees cooperative is making available a set of the above documents, except for the Bank Certification, Name reservation, and Endorsement for a minimal amount in Pesos. For the purpose, promoters may be hired as they are knowledgeable and more particular with the requirements of the law and SEC regulations, like lawyers, corporate practitioners and experienced professionals in the fields like CPA’s in direct interaction with SEC.

SEC Procedures

Upon completion, the above documents and papers are then submitted to SEC-Corporation and Partnership Registration Department (CPRD) for evaluation of the completeness and compliance with laws and SEC rules. Comments, if any, may require revisions, while, if found in order, then the CPRD will prepare a Payment Assessment Form (PAF) with the details of application fees of approximately 1/5 of 1% of authorized capitalization. Upon payment with the Cashier, SEC Receiving Unit will formally stamped received the application and at least one (1) receiving copy will be furnished to the applicant.

From such filing, the CPRD will again re-evaluation the application papers and documents and will undergo the review process. If found in order, then approval will follow within approximately four (4) to seven (7) working days from date of receipt of the application. Comments, if any in the re-evaluation and review process, may require revisions and clarifications, and must be complied for the process to proceed. Date of approval of the application marks the birth of the corporation and acquisition of juridical entity for all intents and purposes, and Certificate of Incorporation with Bureau of Internal Revenue (BIR) Tax Identification Number (TIN) will then be issued.

Post SEC registration

Upon issuance of the Certificate of Incorporation, the Company will then proceed with the registration of its Stock and transfer Book (for stock corporation), or Membership Book (for non-stock corporations). Likewise, it shall proceed with the formal registration with the BIR, the local government units for the Mayor’s Permit to operate a business, and registration with other agencies.

If it is a stock corporation, then, documentary stamp tax (DST) at the rate of P1.00 per P200 par value, or fractional part thereof, shall be paid not later than the fifth (5th) day of the month following the month of approval of the SEC. Failure to pay would entail penalties, e.g surcharge of 25% based on the basic amount of tax due, 20% interest, and compromise penalty based on scale of the basic amount of tax.

Reportorial requirements

Documentary requirements does not end up on the above. During the corporation’s existence, reportorial requirements of the SEC, BIR, and other agencies are required to be file on a timely and continuous manner. Again penalties in accordance with the agency’s regulations will be imposed for failure to do so.

Tags: Articles of Incorporation, By-laws, corporate name, CRPD, incorporation, payment assessment form, reportorial requirements, SEC procedures, SEC registrations, treasurer-in-trust