FOREIGN CORPORATIONS operating through a license to do business in the Philippines are covered by the provisions of the Corporation Code. In this respect, similar to domestic corporations, they are regulated by the Securities and Exchange Commission (SEC). Among the obligations of a foreign corporation is the duty to notify the SEC of relevant changes on a timely basis, such as changes in principal office address, accounting period, current set of officers, among others.
Data such as these are required to be reflected in the General Information Sheet (GIS). In case changes occur after the filing of the annual GIS, the current practice is for the foreign corporations to either submit a letter notice to the SEC or file an amended GIS to formally notify the SEC.
Last December, the SEC issued Memorandum Circular No. 22 prescribing the use of a “notification update form” when notifying the SEC of the changes mentioned above. The adoption of this uniform requirement starting this year is specifically intended to dispense with the various notices submitted from time to time by foreign corporations to the SEC.
Under the guidelines, the notification update form must be accomplished and signed under oath by the president or resident agent of the concerned foreign corporation. Being mere extensions of their head offices in the Philippines, foreign corporations have the same set of officers as that of their head office. In case the signatory will be signing this form outside the Philippines, in addition to notarization, the form should likewise be authenticated or consularized at the Philippine Embassy or Consular office in the place where the form is signed.
What changes should be reported to the SEC using the new form? Under the guidelines, the new form should be used for updates in the foreign corporation’s principal office address, fiscal year, composition of officers in the Philippines and additional subsidiaries/affiliates.
Since the form does not distinguish whether the principal office address refers only to the Philippine office, one could take the view that any change in principal office address of the foreign corporation, whether in the Philippines or in its home country, should be covered.
As mere extensions of their head offices, Philippine branches, representative offices, and regional headquarters of foreign corporations follow the accounting period observed by their head offices. Thus, in case the head office changes its accounting period, necessarily, its licensed Philippine office should observe the new accounting period as well. In such cases, the SEC must be properly notified. The timely notice of the change of accounting period is crucial considering that the last date of filing reports, such as the Audited Financial Statements, and the additional security deposit for branch offices, are reckoned from the fiscal year end.
Updates on subsidiaries and affiliates are specifically crucial for Regional Headquarters (RHQ) and Regional Operating Headquarters (ROHQ), which are only allowed to transact business with affiliates, subsidiaries, and branches. Upon applying for registration with the SEC, RHQs and ROHQs submit a list of the affiliates, subsidiaries, and branches with which they will be transacting. Previously, any addition to the list is submitted to the SEC in the form of a letter notice. Now, the updated list should instead be reflected through the use of the new form.
The notification update form must be submitted by the foreign corporation within thirty (30) days from the occurrence of any of the changes mentioned above. Once submitted, the updates shall form part of the records of the foreign corporation with the SEC and shall be made available to the public.
The notification form does not, by any means, replace the obligation of foreign corporations to submit the annual GIS thirty (30) days from the anniversary of the issuance of the foreign corporations’ SEC license. Moreover, all updates contained in the notification update form which remain effective at the time of submission of the GIS should also be reflected in the GIS; the mere filing of the notification update form will not be sufficient.
With respect to other information not covered under the notification update form, there is nothing in the memorandum circular that precludes foreign corporations from filing a traditional letter notice or an amended GIS, whichever option the company decides to take.
While the memorandum circular does not provide for sanctions in case of failure to file the notification information update within the time prescribed, this new requirement should not be taken lightly. After all, these data form part of the foreign corporations’ records with the SEC and failure to reflect changes may have adverse consequences.
For instance, the foreign corporation may not receive official letters or notices from the SEC if the latter was not properly notified of the change in address. Moreover, as discussed above, information such as fiscal year end have an impact in determining a foreign corporation’s compliance with the SEC’s reportorial requirements. The foreign corporation may be penalized for late filing of reports if the SEC is not properly notified of the change in accounting period. More importantly, the foreign corporation has the obligation to keep its records with the SEC updated as the parties with whom it transacts may depend on such information. As such, it is only proper that its records are maintained as accurately and updated as possible.
Clearly, the notification update form is intended to make notification requirements more convenient to comply with on the part of foreign corporations. Moreover, it is advisable to use the prescribed form to avoid issues with the SEC.
Aimee Rose DG. dela Cruz is a manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
+63 (2) 845-2728
aimee.rose.d.dela.cruz@ph.pwc.com
source: Businessworld
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