UPDATES

SEC REGULATIONS
SEC OPINIONS
ATTY. MARIE CECILE ROQUE-QUINTOS
POBLADOR BAUTISTA & REYES LAW OFFICES

2014

SEC REGULATIONS
SEC Memo Circular No. 08, S. 2014

Amendments to Revised Code of

Corporate Governance

Corporate Governance
The framework of rules, systems, and
processes in the corporation that governs the
performance of the Board of Directors and
Management of their respective duties and
responsibilities to stockholders and other
stakeholders which include, among
others, customers, employees,
suppliers, financiers, government and
community in which it operates.

Responsibilities of Board
It is the Boards responsibility to foster the

long-term success of the corporation, and to

sustain its competitiveness and profitability
in a manner consistent with its corporate
objectives and the best interests of its
stockholders and other stakeholders.

Duties and Functions of Board

To ensure a high standard of practice for the corporation, its
stockholders and other stakeholders, the Board should
conduct itself with honesty and integrity in the performance of,
among others, the following duties and responsibilities: x x x
(e) Identify the corporations stakeholders in the community in
which it operates or are directly affected by its operations and
formulate a clear policy of accurate, timely, and effective
communication with them.

On Accountability & Audit

(A)X X X

(ii)An effective system of internal control that

will ensure the integrity of the financial reports
and protection of the assets of the corporation
for the benefit of all stockholders and other
stakeholders.

On Disclosure and Transparency

XXX

It is therefore essential that all material information about the

corporation which could adversely affect its viability or the
interest of its stockholders and other stakeholders should
be publicly and timely disclosed. Such information should
include, among others, earnings results, acquisition and
disposition of assets, off balance sheet transactions, related
party transactions, and direct and indirect remuneration of

On Disclosure and Transparency

The Board shall therefore commit at all
times to full disclosure of material
information dealings. It shall cause the
filing of all required information through
the appropriate Exchange mechanisms
for listed companies and submissions to
the Commission for the interest of the
stockholders and other stakeholders.

SEC REGULATIONS
SEC Memo Circular (MC) No. 06, S. 2014, as
amended by MC No. 1, S. 2014

Amendment of the Principal Office

Address

Metro Manila no longer allowed

Existing corporations and partnerships
whose Articles of Incorporation or
Articles of Partnership indicate only a
general address must amend their
articles to specify the complete
address
If address refers only to a city,
town or municipality or
Metro Manila Amend

Complete Address
street number, street name,
barangay, city or municipality
if applicable, name of building,
number of building, name or
number of unit

Compliance
Deadline: 30 June 2015
No penalty for non-compliance;
however, SEC can impose the
sanctions of deferment of
applications such as amendments,
certifications and clearances

Transfer of office within same

city
SEC MC No. 16, s. 2014
If corporations address in its articles of
incorporation is already specific and it moves
to another location within the same city or
municipality
corporation is NOT required to file an
amended articles of incorporation
corporation must declare new/current address
in General Information Sheet within 15 days
from transfer

Transfer of office; Partnerships

Corporation may nevertheless file an
amended articles of incorporation
Non-filing of GIS will result in
imposition of penalty
Partnership : since no obligation to file
GIS, it is required to file an amended
articles of partnership every time it
transfers to a new location

Service of Summons, etc.

Corporations and partnerships shall be
deemed to have been duly notified or validly
served where the Commission has sent its
subpoena, summons, notice, show cause
letter, and other communications to the
address indicated in the articles of
incorporation or partnership, and/or GIS,
as the case may be.

SEC REGULATIONS
SEC Memo Circular (MC) No. 21, S. 2014

Guidelines Governing Computation

of Corporate Term

Corporate Term
First Day of Term : Date of

Incorporation
Section 11. Corporate term. - A

corporation shall exist for a period not

exceeding fifty (50) years from the
date of incorporation unless sooner
dissolved or unless said period is
extended. x x x

Corporate Term
The last day of the corporate term is
the date before corresponding
numbered day of the same month of
incorporation in the last year of the
existence of a corporation. (BIR v.
Primetown Preperty Group Inc.)

SEC REGULATIONS
SEC Memo Circular (MC) No. 22, S. 2014

Guidelines for the Use of

Notification Update Form for
Foreign Corporations

Notification Update Form

Contains all information such as change in
principal office address, accounting period,
changes of officers, subsidiaries or affiliates
which occur before submission of GIS
Signed under oath by President or Resident
Agent
Submitted within 30 days from the
occurrence of any change

Notification Update Form

All updates to be integrated in the GIS
when it becomes due
Does NOT replace or dispense with
the GIS which is submitted within 30
days from anniversary date of issuance
of license

SEC OPINIONS
Foreign Corporations Doing Business
Limitations on Foreign Ownership
Educational Institutions
Liquidation Issues - Trustee ;
Properties
Others

Foreign Corporations
A foreign corporation that actively
participated in the bidding for a
government project is doing business
and must secure a license to transact
business in the Philippines. Participation in a
bidding process shows the foreign
corporations intention to engage in business
in the Philippines. - SEC OGC Opinion No. 1421, dated 5 August 2014

Foreign Corporations
A foreign corporation that invests in an

unincorporated consortium, even if it has minority

and non-controlling interest, is doing business
and must secure a license to transact business in
the Philippines. Doing Business includes
participating in the management, supervision or
control of any domestic business, firm, entity or
corporation. The FIA-IRR only exempts
investments in equity of a domestic corporation.
- SEC-OGC Opinion No. 14-01 dated 21 February 2014

Foreign Equity Limitations

A corporation engaged in:
(a) the marketing and sale of digital publication
(b) providing digital platform to clients and advising them
the online outlets that would best meet their promotional
campaigns
(c) providing a digital platform to the third-party website to
sell and monetize their online inventory
using the internet or mobile technology as primary medium
is engaged in

Mass Media and Advertising

- SEC-OGC Opinion dated 8 May 2014

Foreign Equity Limitations

A company providing telecommunications, media
and information technology products and services,
like research, development, production,
management, marketing and operation of
telecommunications value added services through
telecommunications companies; xxx digital media
and other media except mass media
is engaged in Mass Media and
Telecommunications
- SEC-OGC Opinion No. 14-15, dated 7 July 2014

Foreign Equity Limitations

Construction companies which will cater
exclusively to private construction
contracts can be owned by foreign nationals
Provided, it is not engaged in any of the
industries in the FINL and minimum
capitalization requirement is complied with
- SEC OGC Opinion No. 14-27 dated 2 October 2014

Educational Institutions
Foreigners cannot be directors or
officers in educational institutions, other
than those established by religious groups
and mission boards.
Anti-Dummy Law is not applicable.
Controlling law is 1987 Constitution, as
implemented by PD No. 176, Sec. 2 which
limits directorships and management
positions in educational institutions to
Philippine citizens.
- SEC OGC Opinion No. 14-20, dated 5 August 2014

Educational Institution
ESH
(99% Filipino)

ESG
98% owned by
ESH

Liquidation
QUESTION: Whether real properties
owned by corporation whose term has
expired but which applied for reregistration with SEC under same
name shall automatically vest about
the new corporation
ANSWER: NO. It is mandatory for
dissolved corporation to liquidate its
assets and liabilities within 3 years
from expiration of corporate term. (SEC
OGC Opinion No. 14-29)

Liquidation
QUESTION: Who may act as trustee
during the liquidation period?
ANSWER: Members of the Board of
Directors / Counsel handling
pending litigation
(SEC OGC Opinion No. 14-02)

APIC
Cannot be reversed and converted into
a loan
Trust Fund Doctrine
Violation of Trust Fund Doctrine: APIC is
a contribution of a stockholder over
and above the par value of the shares
and forms part of the Trust Fund upon
its recording in the books of the
corporation
Cannot be converted into subscribed
capital

Corporation as
Guarantor/Surety
General Rule: A corporation has no
power to become a guarantor or surety
for another corporation.
Exception: When expressly granted in
the Articles of Incorporation
ULTRA VIRES
Effect of SEC Opinions
(SEC OGC Opinion No. 14-16)

Consideration for Shares

Form of payment: interest in co-owned property
Section 62. Consideration for stocks. - Stocks shall
not be issued for a consideration less than the par or
issued price thereof. Consideration for the issuance of
stock may be any or a combination of any two or
more of the following:
1. Actual cash paid to the corporation;
2. Property, tangible or intangible, actually
received by the corporation and necessary or
convenient for its use and lawful purposes at a
fair valuation equal to the par or issued value
of the stock issued;

x x x

Consideration for Shares

REQUIREMENTS
1. Waiver of Rights signed by all possible
co-owners/ redemptioners stating that
they are waiving their right of
redemption or pre-emption in relation
to the said transfer; or
2. Affidavit of transferring co-owner

Consideration for Shares

a. that he has given written notice to all
possible co-owners / redemptioners;
b. that the same was received by them;
and
c. that the 30-day period of redemption
has already expired
accompanied with copy of actual written
notice and proof of receipt
(SEC OGC Opinion No. 14-28)

Certificate of Ownership of Crypt is

not a Security
Securities are shares, participation or
interests in a corporation and evidenced by
a certificate, contract, instrument, whether
written or electronic in character. It includes:
Shares of stocks, bonds, debentures, notes,
evidences of indebtedness, asset-backed
securities;
Investment contracts, certificates of interest
or participation in a profit sharing agreement,
certificates of deposit for a future
subscription;
Certificates of assignments, certificates of
participation, trust certificates, voting trust

Certificate of Ownership of Crypt is not a

Security

Elements of investment contract:

(a) an investment of money
(b) in a common enterprise
(c) with expectation of profits
(d) primarily from efforts of others

Certificate of Ownership of Crypt is not a

Security
Certificate of Ownership : ownership of vault,
possession and perpetual use
No profits are expected or derived by buyer
But, in Par. 3, issuer may devise a scheme by
which a residual share in (common areas) of
The Sanctuarium is recognized in favor of all
owners of the vaults.
(SEC OGC Opinion No. 14-17)