Tilting towards digitalization

The amendment of the 38-year-old Corporation Code through Republic Act (R.A.) 11232, or the Act Providing for the Revised Corporation Code of the Philippines (RCC) is a welcome development in efforts to improve the ease of doing business in the Philippines. Included in this revision is Section 180, a significant provision which requires the development and implementation of Securities and Exchange Commission’s (SEC) electronic filing and monitoring system through promulgation of rules to facilitate and expedite, among others, corporate name reservation and registration, incorporation, submission of reports, notices, and documents required under the RCC.

In response to this mandate by R.A. 11232, the SEC issued SEC Memorandum Circular (MC) 28, Series of 2020 dated October 27, 2020. The MC provides for the requirements for corporations, partnerships, associations and individuals to create and/or designate an email address and a cellphone number for transactions with the SEC. The memorandum circular aims to facilitate and expedite the transmission and receipt of official communications as well as enhance the integrity thereof.

Pursuant to this memorandum circular, existing corporations, associations, partnerships and persons under SEC’s jurisdiction and supervision shall submit a valid official email address and a valid official cellphone number within 60 days from its effectivity. For future applications and applications still pending with the Company Registration and Monitoring Department (CRMD), the official email address and cellphone number should be either indicated in the filled out registration forms or submitted within 30 days from the issuance of the certificate of registration, license or authority. Aside from these, an alternate email address and cellphone number shall also be provided by these entities.

Both the official and alternate email addresses shall be where transactions, applications, letters, requests, papers and pleadings under the jurisdiction of, or for consideration by, the SEC may be processed, submitted and/or filed online. Likewise, SEC may send notices, letter-replies, orders, decisions and/or other documents through said email addresses. The SEC recognizes communication through these channels and the information obtained therein have legal effect, valid and enforceable based on the provisions under R.A. 8792, otherwise known as Electronic Commerce Act. The entities are deemed to have received those emails on the date so sent by the SEC. Service of notice through this process shall be considered compliance with the notice requirement of administrative due process. Meanwhile, designating an official cellphone number is an additional layer of security measure against unauthorized access to such emails by including a multi-factor authentication (MFA) such as one­time personal identification number (OTP) scheme or two-step verification by a software-based authenticator will be performed before the email message can be retrieved.

These email addresses and cellphones numbers shall be under the control of the corporate secretary, who is the person charged with the administration and management of the corporation sole, the resident agent of the foreign corporation, the managing partner, the individual or duly authorized representative whose authority must be proven in the form of either a special power of attorney or secretary’s certificate.

The submission of the email addresses and cellphone numbers to SEC shall include the following: a. complete name of the corporation, association, partnership, or person; b. SEC registration number or identification; c. official electronic mail address; d. official cellular phone number; e. alternate electronic mail address; f. alternate cellular phone number; g. for corporation, the complete name and signature of the corporate secretary, the person charged with the administration and management of the corporation sole, or the duly authorized representative; h. for partnerships, the complete name and signature of the managing-partner, or the duly authorized representative; and i. for natural persons, his/her signature or his/her duly authorized representative’s signature. On top of these requirements, a duly signed authorization or certification stating that the entity allows the SEC to send communication and other documents through these channels is likewise required.

If the entity is unable to create an email account since the principal office address is in an area where there is no internet access, only the official and alternate cellphone numbers shall be submitted. These facts shall be stated in a Certification executed and filed by the entity. However, within 30 days from the time such area gains access to internet, the entity shall submit to the SEC the official and alternate email addresses.

Furthermore, the MC provides that within five days from the date the entity decided to change the email address and/or cellphone number, a notice of change of email address and/or cellphone number shall be filed with the SEC. In case of double filing, the SEC may summon the parties to determine its cause and determine whether an intra-corporate dispute exists. If it does, the submissions and /or notices and GIS shall be marked “DISPUTED” and may be unmarked only by an order from appropriate court.

Noteworthy in SEC MC No. 28, Series of 2020 is the requirement that beginning Feb. 23, 2021, the said email addresses and cellphone numbers shall be included in the General Information Sheet (GIS) and Notice of Update Form (NUF) regularly filed with the SEC, otherwise, such will be considered incomplete. Failure by entities required and covered by this memorandum circular to comply within the period provided by the said SEC MC, shall be administratively penalized in the amount of P10,000.

The SEC in issuing such memorandum circular, shows their conscious effort to shift from conventional to a more systematic approach in the exchange of information between corporate entities and government. As more government agencies shift towards digitalization of transaction, the SEC’s bold move should be a prototype; modernization and digitalization without sacrificing the integrity of official communications and transactions with the government. It encourages efficient mechanism of digital transaction and at the same time places safeguard of protection to ensure its authenticity and authority.

At present, we are faced by the challenges of the COVID pandemic and the need to continue government services without deterrence. The SEC, in issuing the MC, gave an innovative way of addressing these growing concerns and building definite measures to ease doing business in the country. When we are forced to observe social distancing, minimize physical transaction and perform work at home, this move by the SEC in tilting towards digitalization should be welcomed with cordial reception.

Renier Aries A. Razon is a supervisor from tax group of KPMG R.G. Manabat & Co. (KPMG 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 KPMG RGM&Co. For comments or inquiries, please email [email protected].