Before your enterprise can legally conduct business in the Philippines, you have to register with a number of important government agencies, chief among which is the Securities and Exchange Commission or the SEC if you’re operating a corporation or a partnership. On top of being the agency responsible for regulating securities or tradable financial assets in the Philippines, SEC—an agency within the Department of Finance—also maintains a registry of business entities in the country, possessing powers to regulate, investigate, or supervise the activities of companies and individuals to ensure their compliance with the law.
On top of ensuring that your business conforms to the laws and rules set forth under the Securities Regulation Code, registering with the SEC is necessary if you want to have access to the host of financing options available to other registered businesses in the Philippines. First Circle, for example, is only able to extend its invoice financing and purchase order financing facilities to B2B businesses that are already registered with the SEC and other important government agencies. Whether you’re in the business of exporting goods to foreign retailers, manufacturing apparel for a well-known clothing brand, supplying medical supplies to hospitals, or something else entirely, having your business fully registered with the SEC will open doors to a lot of opportunities you wouldn’t have access to otherwise.
Which Types of Businesses Require Registration with the SEC?
As part of the powers and functions provided by Presidential Decree No 902-A, the Securities and Exchange Commission is given absolute “jurisdiction, supervision and control over all corporations, partnerships, or associations, who are the grantees of primary franchise and/or a license or permit issued by the government to operate in the Philippines.”
The entities or juridical persons referred to above include the following:
Stock corporations are corporations that engage in income-generating activities and are permitted to declare dividends. They have shareholders that are given a portion of the ownership of the business through shares of stock. Stock corporations include both domestic stock corporations and foreign stock corporations.
Non-stock corporations are corporations with no authorized capital stock, which means they don’t issue shares of stock. These corporations’ incomes are not distributable as dividends to their members, trustees, or officers.
According to the SEC, non-stock corporations in the Philippines may be organized for a range of purposes, including charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social civil service, and others of the sort. Like stock corporations, non-stock corporations can also be either domestic or foreign.
Another legal type of business operation in the Philippines is a partnership, which is set up between two or more individuals who will have equal share of both management of—and profits from—the business. A partnership can take the form of any of the following: professional partnership, general partnership, or limited partnership.
Unlike a corporation, partners or co-owners in a partnership are taxed according to their individual incomes (instead of being subject to a corporate rate), and legally, they may be personally liable to the debts and obligations of the business. This means that the assets of individual owners in a partnership may be used to pay off the debts of the business, whereas with corporations, stockholders are liable only to the extent of their subscribed capital stock.
One key difference between corporations and partnerships that you need to be aware of is that a corporation becomes a juridical person only after the business is registered with the SEC, while a partnership becomes one from the time the agreement between partners is finalized. Furthermore, corporations cannot exist beyond a period of 50 years, whereas partnerships can exist for as long as the partners or owners decide to keep their contract in effect.
It is also important to note that if you own a business where you are the sole proprietor, you will have to register your business with the Department of Trade and Industry (DTI) instead of the SEC.
SEC Registration Process: Three “Lanes” to Choose From
Through the years, the Securities and Exchange Commission has made it easier for business owners to register their business with the agency. Since November 2017, for example, the agency’s company registration procedure has gone fully online with the launch of their proprietary Company Registration System or CRS, which replaced the timeworn SEC iRegister system. With the launch of the CRS, users were able to take advantage of many benefits, including 24/7 access to the system, free account registration and name verification, online payment facility, and minimal physical visits to the SEC office. The only times applicants were required to visit the SEC office was when they had to submit copies of notarized documents and when it was time to claim their Certificate of Registration.
Then, in March 2019, SEC launched a special new lane in its CRS in order to make one-day processing and approval of applications possible. The lane, currently known as Lane for Express Application Processing (LEAP) allows applicants to take advantage of a pro-forma online application in which they only need to input the required information and to tick items off the pre-provided lists. This system addresses major bottlenecks in the application process, which include manual document processing and compliance checks, among others.
Before the launch of LEAP, only the Regular Lane and the Fast Track Lane were available to users of the SEC CRS. The Fast Track Lane streamlined the original CRS process by implementing a hybrid-manual transition measure that enabled the quicker resolution or approval of pending applications. Under this process, specific applicants—namely corporations that had to submit additional documentation—were still required to manually submit original copies of notarized documents before they could claim their Certificates of Registration. With the introduction of LEAP, a special lane was made accessible to another class of corporations—specifically non-specialized ones that didn’t need to submit additional documentation.
Here’s a summary of the main differences between the three lanes:
Lane for Express Application Processing (LEAP)
- With LEAP, one-day processing and approval is made possible because no human intervention is needed to review the applications.
- LEAP employs a pro-forma application form, which is a lot easier to use because the applicant has to simply tick items off the given lists. In other sections of the form, users can fill in the required information instead. However, LEAP removes the option for users to create their own provisions or to upload their own documents into the system.
- LEAP is designed for use by general-purpose or non-specialized corporations, particularly those that do not need to submit extra documentary requirements like secondary licenses or endorsements from other government agencies.
Fast Track Lane
- As previously mentioned, the Fast Track Lane is a hybrid-manual transition system that simplifies the business registration process by expediting the approval of unfinished or unresolved CRS applications.
- Although applicants using the Fast Track Lane will be able to encode their applications online, they will still be required to manually present original copies of notarized documents to the SEC, which can then check and process the documents before the Certificate of Registration can be created.
- The Fast Track Lane can be used by corporations that have to submit additional documentary requirements, including secondary licenses or prior endorsements from other government agencies.
- Under the Regular Lane, all types of corporations and partnerships can be accommodated.
- The entire registration process can be done online, from the encoding of company details and the uploading of necessary documents all the way to paying the required registration fees.
- Applicants will only be required to go to SEC once: when their Certificate of Registration is ready for claiming.
Making the three lanes available to applicants is just one of the technological interventions conceived of by the SEC in order to streamline the overall business registration process, to cut down the time it takes to complete each application, and to improve the client experience of all those who rely on the agency’s services. In the next section, we shall discuss some of the most important requirements for registering a business with the SEC.
SEC Registration: The Things You Need to Prepare
After creating an account in the SEC Company Registration System and being asked what type of application you wish to pursue, you will then be prompted to verify your business name. The system will let you know whether or not the proposed trade name is still available, and if it is, you’ll be able to add it and submit it for evaluation. Afterwards, the SEC will send you an email notifying you on either the approval or the rejection of your proposed business name.
While you can always file an appeal for the re-evaluation of a rejected trade name, it’s best practice to prepare 2 or 3 more names that you can use, just in case your first choice doesn’t get approved (or isn’t available in the first place). You’ll be well advised to consult the SEC Memorandum Circular No. 14, s. 2017 or the Consolidated Guideline and Procedures on the Use of Corporate and Partnership Names, which can help you make sure that you’re picking an appropriate name for your business.
Basic Company Details
In order for the CRS to be able to generate documents such as your company’s Articles of Incorporation or Articles of Partnership, By-Laws, Treasurer’s Affidavit, Cover Sheet, and other documents, you must input several details about your company. The requirements and options will vary depending on the type of company you are registering and the kind of application you are pursuing, but in general, you will be asked by the system to define or provide details for the following:
- Company Information
- Company Address
- Company Classification
- Purpose Clause (the kind of business or operation you will engage in)
- Term of Existence (how many years your company will be in operation)
- Capital Structure (includes the amount of your authorized capital stock, total number of shares, and so on)
- Number of Incorporators
- Role or Profile of Incorporators
- Corporate Subscribers
Documents to Be Submitted
Finally, you need to prepare the documents that are relevant to your application. Again, the documentary requirements for registering a business with the SEC will depend on the kind of application you are working on. As mentioned, some of the required documents will be generated by the CRS, while others will have to be obtained elsewhere and submitted manually to the SEC. The documents you have to generate or secure can include the following, among several others:
- Cover Sheet
- Articles of Incorporation or Articles of Partnership
- Treasurer’s Affidavit
- Secondary Licenses
- Endorsements from Other Government Agencies
For further clarifications on the registration process of the Securities and Exchange Commission, you can always call the SEC at 8818-0921 and ask to be connected to their Company Registration and Monitoring Department.
Also note that there may be some waived requirements should the current proposed PH Stimulus Bill be approved. Under the regulatory relief for business entities section of the bill, faster and inexpensive business application processes will be facilitated for businesses heavily impacted by the COVID-19. To know more about the benefits MSMEs in the Philippines stand to receive from the proposed bill click here and to learn about the provisions for MSMEs you can read the draft of the Accelerated Recovery and Investment’s Stimulus for the Economy or ARISE bill here.
Best of luck in getting your business registered!
Need business financing today? Apply for one with First Circle by clicking here.
Need business financing today? Apply for one with First Circle by clicking here.