DID you know that Philippine Securities and Exchange Commission (SEC) was the first of its kind to be established in Asia? After over eight decades, the SEC has succeeded not only in withstanding change, but more so proving its importance in safeguarding national interest. The SEC was established on 26 Oct 1936 by virtue of the Commonwealth Act No. 83 prompted by the need to safeguard public interest in view of local stock market boom at that time.
SEC or the Commission is the national government regulatory agency charged with supervision over the corporate sector, the capital market participants, the securities and investment instruments market, and the investing public. Created on October 26, 1936 by Commonwealth Act (CA) 83 also known as The Securities Act, the Commission was tasked to regulate the sale and registration of securities, exchanges, brokers, dealers and salesmen. Subsequent laws were enacted to encourage investments and more active public participation in the affairs of private corporations and enterprises, and to broaden the Commission’s mandates. Recently enacted laws gave greater focus on the Commission’s role to develop and regulate the corporate and capital market toward good corporate governance, protection of investors, widest participation of ownership and democratization of wealth.
SEC is the registrar and overseer of the Philippine corporate sector that supervises more than 500,000 active corporations and evaluates the financial statements filed by all registered corporations under it. Accordingly, SEC also develops and regulates the capital market, a crucial component of the Philippine financial system and economy it contributes significantly to government revenues.
So what entities must be registered with SEC and what are the pre-requisites before registering?
First, let us define what is a Corporation? SEC considers a corporation as a juridical person created by operation of law and registered with the Securities and Exchange Commission. A corporation must register its Articles of Incorporation and by-Laws with SEC based on its classifications whether stock, non-stock or foreign. As defined, a stock corporation is engaged in income generating activities and is authorized to declare dividends while a non-stock corporation is organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social civil service, or similar purposes, like trade, industry, agricultural and like chambers, or any combinations thereof.
A corporation is deemed imbued with juridical personality from the time the Certificate of Incorporation is issued by the Securities and Exchange Commission. In registering a corporate name, applicants must first verify if the proposed corporate or partnership name is not yet taken and being used by others and this can be checked online via Iregister system of SEC or thru Name Verification Unit at G/F Secretariat Building, PICC Complex, Roxas Boulevard Pasay City or thru Satellite Offices and SEC Extension Offices.
The SEC guidelines states that if the proposed name has been allowed for use, applicants pay P100.00 as reservation fee for thirty days and there’s an online fill-out form for the AI-BL. For those who are already contemplating to register, they should have the following ready; name of the corporation, specific purpose or purposes for which the corporation is being incorporated, place where the principal office of the corporation is to be located, which must be within the Philippines, term of which the corporation is to exist and the names, nationalities and residences of the incorporators.
The number of directors or trustees shall not be less than five or more than fifteen and the names, nationalities and residences of persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified. Now, on the number of seat for foreigners in the board, SEC imposes that the number of seat for foreigners in the board of directors is in proportion of their present foreign equity to the number of directors as stated in the Articles of Incorporation. Also, the number of their seats should not exceed the proportion of the allowable foreign equity to the number of the directors in the AI in accordance with Anti-Dummy Law.
If the corporation is registered under the Foreign Investment Act, all the directors can be foreigners however, it is subject to compliance with the requirements of the Corporation Code on Directors that also state that majority are residents of the Philippines.
On business activities that no foreigners can own, SEC on its guideline states that the following; Mass Media, Practice of professions, Retail trade enterprises with paid-up capital of less than US$2,500,000, Private Security Agencies, Small scale mining, Utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic zone as well as small-scale utilization of natural resources in rivers, lakes, bays and lagoons, Ownership, operation and management of cockpits and manufacture of firecrackers and other pyrotechnic devices are fully reserved to Filipino citizens. This now clears what I had in mind when SEC came out in the news recently when it called the attention of a trending online portal. With reference from: www.sec.gov.ph