When is the start and end of corporate existence? This issue was addressed by the Securities and Exchange Commission (SEC) when it issued SEC Memorandum No. 21-2014, dated Nov. 28, 2014. The SEC memorandum provides guidelines in determining the first and last day of corporate existence.
Under the SEC memorandum, the first day of the corporate term is the date of incorporation, as stated in the Certificate of Incorporation. According to the SEC, the date of incorporation is the day when the existence of a corporation commences pursuant to Section 19 of the Corporation Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987.
This rule is consistent with the Supreme Court’s pronouncement in Seventh Day Adventist Conference Church of Southern Philippines Inc. versus Northeastern Mindanao Mission of Seventh Day Adventist Inc., G.R. No. 150416, July 21, 2006 that corporate existence begins only from the moment a Certificate of Incorporation is issued.
Please note that the date of incorporation is the date written in the “In Witness Whereof” portion of the Certificate of Incorporation issued by the Company Registration and Monitoring Department of the SEC, upon the incorporation of the company.
Knowing the first day of corporate term is relevant as it only then that the incorporators, stockholders/members and their successors is constituted as body politic and corporate under the name stated in the Articles of Incorporation for a period of time mentioned therein, unless the period is extended, or the corporation is sooner dissolved in accordance with law (Section 19 of the Corporation Code).
From the date of incorporation, the corporation continues to exist for a period not exceeding 50 years, unless the term is shortened or extended. The corporate term can be found in the Articles of Incorporation (usually in the fourth provision), and the same may be extended for periods not exceeding 50 years in any single instance by amendment of the articles of incorporation (Section 11 of the Corporation Code). The corporate term may also be shortened by an amendment of the articles of incorporation.
Under the SEC memorandum, the last day of the corporate term is the day before corresponding numbered day of the same month of incorporation in the last year of the existence of a corporation, in accordance with the pronouncement of the Supreme Court in the case of Commissioner of Internal Revenue, et al. versus Primetown Property Group Inc. G.R. No. 162155.
Applying the foregoing rule, the last day of the corporate term of a corporation incorporated, for instance, on Feb. 5, 2015 and with a corporate term of 50 years under its Articles of Incorporation is Feb. 4, 2065, unless sooner dissolved or unless the period is extended in accordance with law.
Determining the last day of corporate life is important for corporations intending to extend their corporate life. In Cebu Bonded Warehousing Corporation vs. Fe Barin, in her capacity as chairperson of the SEC, En Banc, G.R. No. 204549, Feb. 6, 2013 cited in SEC En Banc Case No. 01-13-284 dated Oct. 1, 2013, the High Court held that the approval by the SEC of the amendment to the articles of incorporation is an indispensable requirement for the extension of the life of a corporation. Such approval must come before the expiration of its term. When the corporate life of the corporation ends, there is nothing more to extend. Where the term of the corporation has elapsed, there is nothing to renew for the corporation is already inexistent.
Further, when the period of corporate life expires, the corporation ceases to be a body corporate for the purpose of continuing the business for which it was organized. When such period expires and without any extension having been made pursuant to law, the corporation is dissolved automatically insofar as the continuation of its business is concerned (Philippine National Bank versus CFI, G.R. No. 63201, May 27, 1992).
Prior to the Primetown case, there was confusion whether Article 13 of the Civil Code or Section 31, Chapter VIII, Book I of the Administrative Code should be followed in the computation of legal periods. Article 13 of the Civil Code provides that when the law speaks of a year, it is understood to be equivalent to 365 days. Hence, there will be an issue when a year under consideration is a leap year. On the other hand, the Administrative Code provides that a year shall be understood to be 12 calendar months. The Court recognized that there exists a manifest incompatibility between the two as the number of days is irrelevant under the Administrative Code. The highest court, applying the legal maxim lex posteriori derogate priori held that the Administrative Code governs the computation of legal periods being the more recent law.
The SEC memorandum, in reckoning the corporate existence of corporations applied the Administrative Code following the decision of the Supreme Court in the Primetown case.
Emma F. Quinto is a supervisor from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.
The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com.
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