On 20 February 2024, the Securities and Exchange Commission, specifically the Company Monitoring and Registration Department, issued an Order dated 16 February 2024 suspending the certificates of incorporation of 117,885 corporations for continuous operation and failure to file their reportorial requirements beyond the prescribed period.
The Commission gave the suspended corporations 30 days from the date of publication of the Order to avail of existing remedies under the law and the Commission’s rules and regulations.
It appears that this is part of the Commission’s enhanced efforts to encourage compliance by its regulated entities. Last year, the Commission granted an amnesty on fines and penalties, which provided corporations ample and cost-effective opportunity to update and make current their compliance with the documentary and reportorial requirements under the Revised Corporation Code and the rules promulgated by the Commission. This grant of amnesty also ensured a prudent identification of active and inactive corporations.
Following the amnesty grant and the identification of corporations that were in danger of having their certificates of registration revoked for failure to comply with documentary and reportorial requirements, the Commission issued SEC Memorandum Circular No. 19, series of 2023, promulgating guidelines on the declaration of delinquent status and revocation of certificate of registration of corporations.
The Circular applied to the non-use of a corporate charter, continuous inoperation for five years, and non-filing of reportorial requirements.
We take a look at the first scope — non-use of corporate charter.
According to the Circular, the certificates of incorporation of corporations that failed to formally organize and commence their businesses within five years from the date of their incorporation shall be deemed revoked as of the day following the end of the five-year period and a “Revoked Status” shall be entered in the corporations’ records in the Commission’s database. The Commission will also issue the corresponding order of revocation by registered mail. In cases where the Commission may deem it practicable, the order of revocation may be published in a newspaper of general circulation, including the Commission’s website.
This notwithstanding, a corporation with a revoked status may, at any time, file a Petition to Lift the Order of Revocation, subject to existing rules and regulations. Among the documents to be submitted to the Commission are the latest due Audited Financial Statements, latest due General Information Sheet, Copies of the Certificate of Incorporation, latest Articles of Incorporation and/or By-Laws, copy of registration of stock and transfer book or membership book. However, the corporation shall also undergo monitoring and will be required to pay the corresponding fines and filing fees.
The Commission shall issue an order lifting the revoked status of the corporation if the petition is meritorious. With regard to covered corporations with pending intra-corporate disputes, the petition shall only be accepted upon the finality of a court decision resolving the intra-corporate controversy.
(To be continued)
