SEC sets guidelines for purging idle firms

MANILA, Philippines — The Securities and Exchange Commission (SEC), the corporate regulator, is tightening regulations for corporations that are not compliant with the necessary reportorial requirements.

Thus, the SEC released new guidelines on how non-compliant corporations would be placed under delinquent status and how inactive corporations’ certificates of registration, would be considered revoked.

SEC chairperson Emilio Aquino said the move is part of the regulator’s efforts to ensure the integrity of the corporate sector and champion good corporate governance.

“We will strictly enforce the reportorial requirements of corporations provided under the Revised Corporation Code and other pertinent laws, rules and regulations,” Aquino said.

He reminded companies that they are required to submit their annual financial statements, general information sheet, official contact details and other reports.

“Among others, the pieces of information contained in these reports ensure transparency and accountability in a corporation’s dealings for the benefit of its stakeholders, particularly the investors, consumers and employees,” Aquino said.

The new guidelines are embodied in SEC Memorandum Circular 19, Series of 2023, providing the Guidelines on Declaration of Delinquent Status and Revocation of Certificate of Registration of Corporations under Sections 21 and 177 of the Revised Corporation Code.

The guidelines apply to corporations which have failed to formally organize and commence their business within five years from the date of their incorporation as well as to those which have commenced operations but became inoperative for at least five consecutive years.

According to the SEC, the certificate of incorporation of a corporation that does not formally organize and commence its business within five years from incorporation shall be deemed revoked.

Likewise, corporations which have failed to file their reportorial requirements three times, consecutively or intermittently, within any five-year period are considered delinquent.

The SEC shall issue a show cause order to these corporations, directing them to appear before the Commission to explain why they should not be placed under delinquent status.

The SEC earlier said that 22,403 ordinary corporations are at risk of having their certificates of incorporation revoked for failure to submit their general information sheets within five years from the date of their incorporation.

Under the Revised Corporation Code, a corporation that does not formally organize and commence its business within five years from the date of its incorporation shall have its Certificate of Incorporation be deemed revoked as of the day following the end of the five-year period.

The SEC also previously released a list of 298,335 corporations, which have failed to submit their GIS intermittently within a five-year period.

These corporations are at risk of falling under delinquent status as provided under the Revised Corporation Code.

To give non-compliant and inactive corporations a chance to bring their company back to good standing, the SEC has launched an amnesty program for those who have failed to comply with their reportorial requirements over the years.