Are you planning to incorporate with the Securities and Exchange Commission (“SEC”)? Or have you previously applied for incorporation, experienced challenges, and want to know what has changed? If yes, then take a few minutes to read about the latest SEC updates on incorporation requirements and how valuable these changes are to corporations and law firms. 

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The SEC

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The SEC is vested with the authority to formulate and enforce standards, guidelines, policies, rules and regulations to carry out the provisions of the Revised Corporation Code (“RCC”)[1]. The SEC is also mandated to develop and implement an electronic filing and monitoring system. The SEC shall promulgate rules to facilitate and expedite, among others, corporate name reservation and registration, incorporation, submission of reports, notices, and documents required under the RCC, and sharing of pertinent information with other government agencies.[2]

 

Before 18 December 2023

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Before we delve into the latest Memorandum Circular (“MC”) of the SEC, let us revisit 3 key MCs: MC No. 28 Series of 2020, MC No. 1 Series of 2021, and MC No. 3 Series of 2021.

 

Memorandum Circular No. 28, Series 2020

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In 2020, the SEC issued MC No. 28, Series 2020. This MC requires all corporations under its jurisdiction and supervision to create and designate an official email address and cell phone number.[3] Both the official and alternate email addresses shall be where transactions, applications, letters, requests, papers, and pleadings may be processed, submitted, and/or filed online. Failure to comply with MC No. 28 is tantamount to incomplete filing of reportorial requirements with the SEC and subjects the Corporation to a penalty of Php10,000.00. 

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MC No. 1 Series of 2021

 

In 2021, the SEC issued MC No. 1 Series of 2021. This MC requires incorporators to disclose the person or persons on whose behalf the registration of the corporation was applied for.[4] This MC further requires nominee incorporators or applicants for registration, as well as the nominee directors/trustees and nominee shareholders of the applicant corporation, to disclose to the Commission their respective principals or nominators[5]. In cases of willful violation of MC No. 1, making untrue statements of a material fact, or refusal to permit any lawful examination into an incorporators or applicants affairs, the SEC may impose the following penalties and administrative sanctions:

 

1. fine of not less than Five Thousand Pesos (P5,000.00) nor more than Two Million Pesos (P2,000,000.00) plus not more than One Thousand Pesos (P1,000.00) for each day of continuing violation but in no case to exceed Two Million Pesos (P2,000,000.00),

2. suspension or revocation of the certificate of incorporation, and

3. other penalties within the power of the SEC to impose.[6]

 

MC No. 3 Series of 2021

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In 11 March 2021, the SEC issued MC No. 3, Series 2021. This MC mandated all corporations to use on the SEC’s Online Submission Tool, now known as the Electronic Filing and Submission Tool (“EFast”), when submitting all annual reportorial compliance documents before the SEC.[7] Except as otherwise provided in the MC and other issuances, the SEC shall no longer accept hard copies of reports, such as submissions through email, mail courier, and chute box.[8]Therefore, all corporations registered with the SEC must now enroll in the EFast in order to access and submit such annual reports through this SEC online submission tool.

 

MCs Enforced Before 18 December 2023

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Submission and compliance issues with the above-mentioned MCs have hounded corporations and firms for the past years. While the SEC considers these MCs improvements to their ease of doing business policies and programs, compliance with these MCs have been plagued with various challenges. From previously lost confirmatory emails to too filing totally new applications due to internal database issues of the SEC, compliance with the SEC’s mandates have not been easy. 

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MC No. 23 Series of 2023

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Fortunately, the SEC in 18 December 2023, issued MC No. 23, Series of 2023, integrating MC No. 01, MC No. 28, and MC No. 3 to the previously launched Electronic Simplified Processing of Application for Registration of Company (“eSPARC”) and the One-day Submission and E-registration of Companies (“OneSEC”), a sub-system of eSPARC.

 

Now, all registrants of eSPARC and OneSEC shall be deemed to have complied with the requirements and provisions of MC28, regarding the creation and/or designation of an official e-mail account and cellphone number, and MC01, regarding the requirement for incorporators to disclose with the SEC the person/s on whose behalf the registration of the corporation was applied for. The registrant will also be automatically enrolled in the Electronic Filing and Submission Tool (eFAST), for the submission of annual reports[9].

 

To reflect compliance with this new issuance, new versions of the following forms have been prescribed and annexed to the MC:

 

1.    Certificate of Authentication submitted by domestic corporations;

2.    Articles of Partnership; 

3.    SEC Form No. F-103 for Stock Branch Office of a Foreign Corporation; 

4.    SEC Form No. F-104 for a Stock Representative Office of a Foreign Corporation; 

5.    SEC Form No. F-108 for Non-Stock Branch and Non-Stock Representative Office of a Foreign Corporation; 

6.    Form for Multinational Companies, such as ROHQ and RHQ; and 

7.    Nominee(s)/Nominator(s) Declaration[10].

 

In line with this new MC, registrants with pending applications on eSPARC or OneSEC  prior to 18 December 2023 may opt to revert their pending applications and resubmit the same, so that it may be returned to the integrated MC28 compliance page of eSPARC or OneSEC. The application will be deemed compliant with MC28 once completed and approved.

 

If said registrants choose not to revert their pending applications, they will not be deemed compliant with the MCs, and therefore, must comply with mandatory requirements of all MCs after receiving their certificate of incorporation[11].

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A Welcome Change

 

The SEC’s MC No. 23 makes compliance with the above-mentioned SEC MCs a lot smoother and more efficient. This integration program by the SEC comes as a welcome development for SEC registrants this 2024.

 

If you require any help in incorporating, please let us know.

 

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[1] An Act Providing for the Revised Corporation Code [Revised Corporation Code], Republic Act No. 11232, Section 179 (o) (2019)

[2] Id. 179 (p)

[3] Securities and exchange Commission (“SEC”), SEC Memorandum Circular No. 28, Section 1, Series of 2020 (27 August 2020)

[4] SEC Memorandum Circular No. 1, Section 6, Series of 2021 (27 January 2021)

[5] Id, Section 7

[6] SEC Memorandum Circular No. 1, Section 13, Series of 2021 (27 January 2021)

[7] SEC Memorandum Circular No. 3, Section 2, Series of 2021 (11 March 2021)

[8] Id, Section 1

[9] SEC Memorandum Circular No. 23, Section 2, Series of 2023 (18 December 2023)

[10] Id, Section 3

[11] Id, Section 4

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