The Securities and Exchange Commission (SEC) issued the guidelines on purging delinquent and inactive corporations.
The guidelines under SEC Memorandum Circular No. 19, Series of 2023, involve the placement of non-compliant corporations under delinquent status and the revocation of the certificates of registration of inactive corporations.
Corporations which failed to formally organize and commence their business within five years from the date of their incorporation and those which commenced operations but became inoperative for at least five consecutive years would be placed under the delinquent status.
“In line with our mandate of ensuring the integrity of the corporate sector and championing good corporate governance, we will strictly enforce the reportorial requirements of corporations provided under the Revised Corporation Code and other pertinent laws, rules and regulations,” SEC chairperson Emilio Aquino said.
Aquino said firms are required to submit their annual financial statements, general information sheet (GIS), official contact details to ensure transparency and accountability in a corporation’s dealings for the benefit of stakeholders, particularly investors, consumers and employees.
The SEC earlier reported that about 22,403 firms were in danger of having their certificates of incorporation revoked for failure to submit their GIS within five years from the date of their incorporation.
Another 298,335 ordinary corporations could be placed under delinquent status after they failed to submit their GIS for three times consecutively or intermittently within a five-year period.
Corporations with revoked status may file their petition to lift the order of revocation anytime, subject to existing rules and regulations.
Meanwhile, the SEC said it would issue a show cause order to corporations with continuous inoperation for five years and direct them to explain why they should not be placed under delinquent status.
It said failure to provide a valid justification for continuous inoperation would cause the corporation to be placed under delinquent status.
This means the SEC would no longer process such corporation’s applications for amendment of articles of incorporation, amendment of license or conversion to one person corporation, among other similar transactions.
Corporations that failed to file their financial statements and/or GIS for three times, consecutively or intermittently within a period of five years would also be placed under delinquent status.
Non-complaint firms would still be given six months to submit the requirements, after which the SEC would enter a “revoked status” in their records and issue an order of revocation.