SECURITIES AND EXCHANGE COMMISSION MEMOS & OPINIONS

1. What is a memorandum circular?

- Memorandum Circular are issuances that publish pertinent and applicable portions,
as well as amplifications, of laws, rules, regulations and precedents issued by the
SEC and other agencies/offices.

2. What is an opinion?
- Also known as an ‘opinion letter’, a legal opinion is given in the form of a letter
issued by a law firm expressing legal conclusions and/or analysis of a specific
transaction. The recipient of the opinion will then rely on its contents as a basis for
entering into the transaction.
- The delivery of a legal opinion is often a condition in cross-border transactions and
this needs to be satisfied before any advance of money is made. A legal opinion will
seek to reassure a lender that the transaction documents will: (i) bind the parties
involved in the transaction; and (ii) be enforceable against those parties.

3. Create an outline of the SEC memorandum circulars and opinions from 2018 to
2021.
4. The outline should be brief but a comprehensive summary that is, giving the
information clearly and encapsulating it in a few words. Remember that this will
serve as your reviewer.
5. Just indicate the GIST of the memos and opinions focusing on the following:

MEMORANDUM CIRCULARS

2021

1. MC No. 07 s. 2021 - Calling of Special Stockholders’ Meetings 23 April 2021

TO: PUBLICLY LISTED COMPANIES

SUBJECT: CALLING OF SPECIAL STOCKHOLDERS‘MEETINGS

To promote good corporate governance and the protection of minority investors, the Securities and
Exchange Commission pursuant to its regulatory power under Section 179 (d) of Republic Act No.
11232, and Administrative Order No 38, Series of 2013 resolved to issue the following rules:

(1) Any number of shareholders of a corporation (“Qualifying Shareholders") who hold at

least (10%) or more of the outstanding capital stock (“Qualifying Shares”) of a Publicly
Listed Company shall have the right to call for a Special Stockholders’ Meeting. The Special
Stockholders 'Meeting may be done physically or remotely through allowable means of
remote communication.

(2) The Qualifying Shareholders should have continuously held the Qualifying Shares for a
period of at least 1 year prior to the receipt by the Corporate Secretary of a written Call for a
Special Stockholders‘ Meeting.
 (3) The Call for a Special Stockholders’ Meeting shall be in writing, signed by all Qualifying
Shareholders, addressed to the Board of Directors and transmitted through the Corporate
Secretary at least forty-five (45) days prior to the proposed date of the special meeting.

The Qualifying Shareholders must provide proof of shareholdings and at least one (1)
government-issued ID.

The Board of Directors may, at its discretion, set the Special Stockholders’ Meeting, earlier
than forty-five (45) days, if it determines that the matters raised by the Qualifying
Shareholders necessitate a quick resolution to prevent undue damage to the company.

(4) The Board of Directors shall determine if the objectives and conditions in the Call for
Special Stockholders’ Meeting are consistent with the requirements of this Memorandum
Circular.

If found to be consistent, the BOD shall issue the Notice to convene the Special Stockholders’
Meeting at least seven (7) days prior to the proposed date of special meeting .

If found to be inconsistent, the BOD shall send a written notice to the requesting stockholders
indicating that a meeting cannot be called due to their failure to comply with the
requirements of this Memorandum Circular, clearly setting forth the basis of such
inconsistency, within twenty (20) days from receipt of the request.

(5) In the event that the Board of Directors fail to respond to the Call for Special
Stockholders’ Meeting within 20 days from receipt of the request, the Qualifying
Stockholder/s may avail of the remedy provided under paragraph 7, Section 49 of the R00

The Qualifying Shareholders may avail of the same remedy if the Board of Directors refuses
to call a meeting under Section (4) above.

(6) Any officer or agent of the corporation who shall refuse to allow a Qualifying
Shareholder to exercise his/her right to call a meeting shall be liable under Section 158 of the
RCC: Provided: that if such refusal is made pursuant to a resolution or order of the Board of
Directors, the liability under this section for such action shall be imposed upon the directors
who voted for such refusal; Provided further, that it shall be a defense to any action under
this Memorandum Circular that the shareholder exercising any of these rights was not acting
in good faith or in accordance with the requirements of this Memorandum Circular;
Provided furthermore, that delay in the processing of such requests shall be equivalent to
refusal if the delay is solely caused by negligence on the part of the corporation.

If, after due notice and hearing, the Commission finds that any provision of this
Memorandum Circular has been violated, or that any of the right hereunder has been abused,
the Commission may impose any or all of the sanctions provided under Section 158 of the
RCC.

2. MC No. 06 s. 2021- Amendments on the SRC Rules 9 and 10 22 April 2021

TO: ALL CONCERNED

SUBJECT: AMENDMENTS ON THE SRC RULES 9 AND 10

On 20 April 2021. the Commission En Banc resolved to APPROVE the following proposed
amendments to SRC Rules 9 and 10:

Rule 9.1 Exempt Securities

 The requirements and procedures for registration under Sections 8 and 12 shall not as a
general rule apply to any of the following classes of securities:
(a) Any security issued or guaranteed by the Government of the Philippines, or by any
political subdivision or agency thereof. or by any person controlled or supervised by and
acting as an instrumentality of said Government.

(b) Any security issued or guaranteed by the government of any country with which the
Philippines maintains diplomatic relations, or by any state, province or political subdivision
thereof based on reciprocity:

(c) Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the

proper adjudicatory body.

(d) Any security or its derivatives the sale or transfer of which, by law, is under the
supervision and regulation of the Office of the Insurance Commission, Housing and Land Use
Rule Regulatory Board, or the Bureau of Internal Revenue.

(e) Any security issued by a bank except its own shares of stock.

 The registration requirements shall not likewise apply to the following:

a. Any evidence of indebtedness issued by a financial institution that has been licensed
by the BSP to engage in banking or quasi-banking shall be exempt from registration.
b. Evidence of indebtedness issued to the BSP under its open market and/or
rediscounting operations;
c. Bills of exchange arising from a bona fide sale of goods and services that are
distributed and/or traded by banks or investment houses duly licensed by the
Commission and BSP through an organized market that is operated under the rules
approved by the Commission;
d. Any security issued or guaranteed by multilateral financial entities established
through a treaty or any other binding agreement to which the Philippines is a party
or subsequently becomes a member (hereinafter referred as Multilateral Financial
Entities or MFE). e. g.. international financial institutions. multilateral development
banks. development finance institutions or any other similar entities; or by facilities
or funds established. administered. and supported by MFEs; Provided. that the issuer
shall file an offering circular/ memorandum in a format prescribed by the
Commission and containing among others: (1 ) information about the issuer and the
security to be issued. (2) information about the MFE. and (3) information about the
guarantee.
e. The registration requirements shall not likewise apply to evidence of indebtedness. e.
g.. commercial papers. that meet the following conditions:
i. Issued to not more than nineteen (19) non-institutional lenders;
ii. Payable to a specific person:
iii. Neither negotiable nor assignable and held on to maturity: and
 iv. In an amount not exceeding One Hundred Fifty Million Pesos (PhP
150.000.000.00) or such higher amount as the Commission may prescribe.

 The purchase and sale of such security shall not be exempt from the coverage of the
provisions of the Code on civil and other related liabilities, and other applicable provisions
of the Code on fraud.

 Consistent with public interest and for the protection of investors, the Commission, may
require an Issuer of a class of securities exempted from registration, to make available to
investors and file with the Commission periodic disclosures regarding the Issuer. its business
operations, its financial condition, its governance principles and practices, its use of investor
funds, and other appropriate matters, and may also provide for suspension and termination
of such requirement with respect to such Issuer.

Rule 9.2 Other Exempt Securities

 The Commission may, by rule or regulation after public hearing, add to the foregoing any
class of securities if it finds that the enforcement of the Code With respect to such securities is
not necessary in the public interest and for the protection of investors.

Rule 10.1 Exempt Transactions

 Offer or Sale of Securities to Qualified Buyers under Section 101(1) of the Code.

Sections 8 and 12 shall not likewise apply to securities issuedandsold to thefollowing qualified
buyers:

(a) Bank;
(b) Registered investment house;
(c) Insurance company;
(d) Pension fund or retireruent plan maintained by the Government of the Philippines or am
political subdivision thereof or managed by a bank or other persons authorized by the BSP to
engage in trust functions;
(e) Registered Securities Dealer;
(f) An account managed by a Registered Broker under a discretionary. Arrangement as provided
for in the other relevant provisions in these SRC 2015 Rules;
(g) Registered Investment Company ( e. g., mutual fund companies);
(h) Provident fund or pension fund maintained by a government agency or by a government or
private corporation and managed by an entity author i' d accordingly by the BSP or the SEC
to engage in trust function or in fund management;
(i) A trust corporation that is authorized by the BSP to perform the acts of a trustee;
(j) Unit investment trust funds that are established in accordance with rules and regulations of
the BSP;
(k) A fund established and covered by a trust or [IVA agreement under a discretionary
arrangement in accordance with rules and regulations of the BSP, A discretionary~
arrangement means that the entity managing the fund is granted authority to decide on the
investment of the trust fluids or 1M4 funds;
(l) A fund established and covered by a trust or IAM ag1eement under a non- discretionary
arrangement in accordance with rules and regulations of the BSP provided that the beneficial
owner/s or principal/s of such fund possess the qualifications on financial capacity and
sophistication as specified in 2015 SRC Rules 10.1.11.1for natural persons, and 1 0. 1. I 1 .2
 for juridical persons; and provided also, that the treatment of such fund as qualified buyer
does not contravene the trust or 1144 agreement.
(m) A fund established and covered by a trust or [W agreement wherein the beneficial owner or
principal of the fund has been deemed or conferred as a qualified buyer under SRC Sec. 10.1
(l) or SRC Rule 10.1.11; and
(n) An entity with quasi bank license issued by BSP,
(o) Pre-need company authorized by the Insurance Commission.
(p) Collective Investment Scheme authorized by the relevant regulatory authority pursuant to
existing laws and regulations.
(q) A listed entity on the Philippine Stocke change, or a related body corporate of a Philippine
Stock Exchange listed entity provided that it engages the service of a professional fund
manager, through direct hire or via outsourcing to an authorized fund management entity.
(r) A foreign entity not being established or incorporated in the Philippines that, if established or
incorporated in the Philippines. would be covered by one of the preceding paragraphs; and
(s) Such other person as the Commission may by rule or order determine as qualified buyers, on
the basis of such factors as financial sophistication, net worth, knowledge, and experience in
financial and business matters. or amount of assets under management. ”

3. MC No. 05 s. 2021 - Extension of the Deadline for the Submission of 2020 Annual
Reports for the Calendar Year Ended December 31, 2020 11 April 2021

TO: All Publicly Listed Companies, Issuer of Registered Securities, and Public Companies

SUBIECT: Extension of the Deadline for the Submission of 2020 Annual Reports for the Calendar
Year Ended December 31, 2020

The Commission en Banc, in its April 6, 2021, meeting, has ordered the extension of the deadline for
submission of the 2020 Annual Reports for calendar year ended December 31, 2020, from April 15,
2021, to May 17, 2021.

This extended deadline is without prejudice to the schedule on the filing of AFS as may be required by
the Bureau of Internal Revenue [BIR]. It shall automatically conform with the BIR should the latter
move its own deadline to a date later than May 17, 2021.

4. MC No. 03 s. 2021 - Schedule and Procedure for the Filing of Annual Financial
Statements, General Information Sheet and Other Annual Reports 9 March 2021

TO: ALL CONCERNED CORPORATIONS

SUBIECT: SCHEDULE AND PROCEDURE FOR THE FILING OF ANNUAL FINANCIAL

STATEMENTS. GENERAL INFORMATION SHEET AND OTHER COVERED REPORTS.

The Commission, pursuant to its authority under the Revised Corporation Code of the Philippines
[RCC) and the Securities Regulation Code (SRC), hereby issues and promulgates the following
guidelines on the 2021 filing of AFS, GIS, SSF. GFFS. and SFFS. and the use of the Online
Submission Tool (CST) in filing the said reports with the Commission:

Mode of Submission of Reports

-The submission of annual reports to the Commission shall be done online using the Commission's
Online Submission Tool (0ST).
-Except as otherwise provided in this Memorandum Circular and other issuances. the Commission
shall no longer accept hard copies of reports. No submission through email, mail, courier and chute
box shall be allowed and/or accepted.
-The submission of GFFS and SFFS in diskette or compact disc is no longer required.

Reports Accepted through the DST.

For the initial implementation of the OST, the following reports shall be accepted:

(a) Audited Financial Statements

[b] General Information Sheet [GIS)
(c) Sworn Statement for Foundation (SSF)Z
(cl) General Form for Financial Statements (GFFS)
(e) Special Form for Financial Statements (SFFS). including IHFS3, Pl-lFS“, BDFS5, LCFSé,
FCFS7, LCIFS, and FCIF9
(f) Affidavit of Non-Operation (AND), to be filed together with the GIS/AFS. Filer may submit a
GIS/AFS without any movement/change
(g) Affidavit of Non-Holding of Annual Meeting (ANHAM), to be filed together with the 615. Also, the
filer may submit a GIS, without any movement/change [No Meeting Held).

Mandatory Enrollment to OST

 All corporations registered with SEC must enroll in the DST in order to access and submit
reports through the 0ST, except as otherwise provided in this Memorandum Circular and
other issuances of the Commission.
 Enrollment process starts on 15 March 2021.

SEC Offices in Charge

 For the initial implementation, the Systems Operations Division, Information and
Communications Technology Department (SOD»ICTD) shall initially handle the provision of
access to the 0ST through a validation process.
 Subsequently, for validation on the registration of a corporation, this will be handled by the
Company Registration and Monitoring Department [CRMD), in order to verify the
authenticity of registration documents submitted by the corporation, and subsequently, all
SEC departments requiring the relevant reports.

Required Format of Submission.

The OST will prompt the filer whether the report to be filed should be in Portable Document Format
[PDF], Microsoft Excel and other formats.

The GIS must be submitted in two (2] formats:

[a] Multi-Page PDF with Text Layer of the accomplished but unsigned form:
[b] Multi-Page PDF High Resolution Scan (at least 100x100 dpi) of the document with the
Signatories Page and the Notarization Page.

The following reports must be submitted in the format stated below:

[c] Annual Financial Statements (AFS) - PDF

(1] The AFS. and its applicable accompanying attachments pursuant to Revised SRC Rule 68.
must be submitted in the following format:
i. Multi-Page PDF High Resolution Scan [at least 100x100 dpi) of the document with
the signatories Page and the Notarization Page
[d] Sworn Statement for Foundation (SSF) — PDF
[1] The SSF must be submitted in the following format: i. Multi-Page PDF High Resolution
Scan [at least 100x100 dpi) of the document with the signatories Page and the Notarization
Page
(e) General Form for Financial Statements [GFFS) — Excel
[0 Special Form for Financial Statements (SFFS), including IHFS, PHFS. BDFS,
LCFS, FCFS. LCIF, and FCIF — Excel
(g) Affidavit of Non-Operation (AND) attached to AFS/GIS — PDF
[h] Affidavit of Non-Holding ofAnnual Meeting [ANHAM) attached to GIS - PDF

However, the responsibility for ensuring the accuracy and completeness of the abovementioned
applicable reports lie with the filers or the authorized signatories.

Review of the Quality of the Image of the Report; FinaI Acceptance of the Report.
 Filers will receive an automatic reply for the initial acceptance of the reports for review by the
SEC-Electronic Records Management Division [SEC-ERMD] with regard to the quality of the
image. Once the reports have passed the quality assurance, a Quick Response [QR) Code will be
issued to filers online.
 In the case of filers who complied with the prescribed format but failed to indicate the prescribed
content required in the report, the Department requiring such report will address the issue during
the monitoring process through proper review and assess penalties. if applicable, subject to the
existing laws. rules and regulations and memorandum circulars issued by the Commission.

Sorting of Reports for Public Access.

-The SEC-ERMD Receiving Officer will sort and classify the pages ofthe report for public access
and/or for department requirement particularly those to be treated as confidential.

-PDF file with signature and notary will be ingested to the Online Submission Portal (OSP) for
public use.

Other Requirements for Audited Financial Statements.

(a) The Audited Financial Statements. other than the consolidated financial statements. shall be
stamped “received" by the Bureau of Internal Revenue (BIR) or its authorized banks.

[b] The basic components of the Audited Financial Statements shall be submitted by the filers.
Failure to comply with any of the formal requirements under the said Rule, and/or any material
deficiency or misstatement that may be found upon evaluation of the specific contents thereof. shall
be considered a sufficient ground for the imposition of penalties by SEC. The acceptance and receipt
by the Commission of the financial statements shall be without prejudice to such penalties.

[c] The General Financial Reporting Requirements states the threshold for an Audited Financial
Statements as follows:

(1) Stock corporations with total assets or total liabilities of Six Hundred Thousand Pesos
(Php600.000] or more
(2) Non-stock corporations with total assets or total liabilities of Six Hundred Thousand
Pesos (Php600,000) or more as prescribed under the RCC
(3) Branch offices/representative offices of stock foreign corporations with assigned capital
in the equivalent amount of One Million Pesos (Php1.000.000) or more;
[4) Branch offices/representative offices of non»stock foreign corporation with total assets in the
equivalent amount of One Million Pesos (Php1.000.000) or more;
[5) Regional operating headquarters of foreign corporations with total revenues in the
equivalent amount of One Million Pesos (Php1,000.000) or more;
[6) Financial statements of branch offices of foreign corporations licensed to do business in
the Philippines by the Commission shall comply with the requirements of this Rule, unless otherwise
determined by the Commission as not applicable.

[d] Corporations which do not meet the threshold stated in Section 9, no. 3, items a and b, may
submit their Annual Financial Statements accompanied by a duly notarized Treasurer’s or Chief
Financial Officer Certification only (rather than an Auditor's Report]
[e] The One Person Corporation shall submit Annual Financial Statements audited by an
Independent certified public accountant: Provided. That if the total assets or total liabilities of the
corporation are less than six hundred thousand pesos (P600,000.00), the financial statements shall be
certified under oath by the corporation's treasurer and president.

[f] Regulated entities must comply with all the required documents on Audited Financial Statements
submission, including but not limited to, other documents to be filed together with the Audited
Financial Statements. Schedules and other requirements, pursuant to the Revised SRC Rule 68, dated
19 August 2019.14

OTHER OPTIONS FOR THE SUBMISSION OF REPORTS

OST Kiosks.
-All corporations, except as otherwise provided in this Memorandum Circular, are required to enroll
and submit their reports [AFS, GIS. SSF, GFFS, SFFS like Il-IFS, PHFS and BDFS, LCFS, FCFS,
LCIF, and FCIF, AND and ANHAM) through OST.
-However, in case filers cannot enroll and submit reports through the OST, kiosks shall be provided
in SEC offices and other areas, as may be designated by the Commission for technical assistance on
the use of the OST.
-The OST Kiosks will be available for nine [9) months, from 15 March 2021 to 15 December 2021.
Subsequent submissions shall be done remotely.

Over-the-Counter Submission of Reports due to DST Problems.

-Filers who successfully created an account in the OST shall submit their reports online.
-The SEC Main Office, all SEC Extension Offices (E05), and Satellite Offices may accept reports over
the counter if filers present the Notice from OST that problems have been encountered during the
process of enrollment and/or submission.

Reports to be Submitted Through Email.

-Scanned copies of the printed or hard copies of the Reports with wet signature and proper
notarization other than AFS, GIS, SSF. GFFS. SFFS like lHFS, PHFS. BDFS, LCFS, FCFS, LCIF.
and FCIF, ANO and ANHAM, shall be filed in Portable Document Format (PDF) through email at:
[email protected]
-For those Reports that require the payment of filing fees, these still need to be filed and sent via
email with the SEC'S respective Operating Departments.

DEADLINES
Deadlines for Submission of reports.

(a) For the initial implementation of the OST, all stock corporations are required to enroll with the
system starting March 15, 2021 to December 15. 2021.

Non-stock corporations are given the option whether they will enroll and submit their reports
through OST or proceed to the SEC Kiosk for assistance in the enrollment process or submit their
reports over the counter.

Nonetheless. by 2022. all corporations, whether stock or nonstock. shall be required to enroll
and submit their reports through the OST.

[b] All corporations shall submit their GIS within thirty (30] calendar days after, counted from their
date ofAnnual Meeting or Actual Meeting.
[c] All stock corporations with fiscal year ending December 31, including branch offices.
representative offices, regional headquarters and regional operating headquarters of foreign
corporations, shall enroll and file their AFS through OST depending on the last numerical digit
oftheir SEC registration or license number in accordance with the following schedule:

June 1-30: 1
]uly 1-31: 2
August 1-31: 3 & 4
September 1-30: 5 8: 6
October 1-31: 7 & 8
November L30: 9 & 0

All stock corporations may enroll and submit their reports through OST even prior to their
respective coding schedule.

For stock corporations unable to enroll and file their AFS through 0ST based on the above
coding schedule, the filing of reports done over-the-counter shall not be accepted. Such corporations
are mandated to still enroll and file through OST.

For all corporations that have complied with the OST enrollment, all submissions of its
reports shall be done online.

(d) GFFS and SFFS must be filed within 30 days from the deadline of AFS submission. The
Certification under oath and submission of the reports in diskettes required under SEC Memorandum
Circular No. 6. Series of 2006 is no longer required. However. the accuracy and completeness of the
reports are still expected from the Reports submitted by the companies.

Corporations with Different Filing Schedule.

The above filing schedule shall not apply to the following corporations:

(a) Those corporations whose fiscal year ends on a date other than December 31. These
entities shall file their AFS within 120 calendar days from the end of their fiscal year;

(b) Those whose securities are listed in the Philippine Stock Exchange (PSE) and those
whose securities are registered but not listed in PSE except those companies which filed SEC Form
17-EX, and those Public Companies covered under Sec. 17.2 of the SRC. These entities shall continue
to observe the due date offiling of their respective AFS [within 105 calendar days after the end of the
fiscal year], as an attachment to their Annual Reports [SEC Form 17-A), in accordance with the
Implementing Rules and Regulations of the SRC and the Revised SRC Rule 68.

(c) Corporations whose AFS are being audited by the Commission on Audit (COA);

Applications for Validation of the CRMD.

All corporations that will file their reports through the OST but whose applications for enrollment are
still for validation by the CRMD, shall receive a notification during their registration and through
their registered email on how to proceed with their application.

Date of Receipt ofthe Report

-The reckoning date of receipt ofreports is the date the report was initially submitted to the OST, if
the filed report is compliant with the existing requirements.
-A report which was reverted or rejected is considered not filed or not received.

Fees and Charges.

For the initial implementation (3 months) of the OST and the USP, the SEC will not impose fees and
charges for public access.
 2020

1. MC No. 32 s.2020 - Basis of Preparation of Audited Financial Statements for BSFIs

18 November 2020
- BSP Regulatory Relief Measures:
a. Staggered booking of allowance for credit losses over a maximum period of five years;
b. Reclassification of debt securities measured at fair value to amortized cost category;
c. Exclusion of eligible loans from past due and non-performing classification until 31
December 2021; and
d. Any other regulatory relief that will be issued for prudential reporting due to COVID-19
pandemic;
- BSP requested that the SEC allow Audited Financial Statements of BSFIs to be prepared in
accordance with Philippine Financial Reporting Standards (PFRS), as modified by the
application of the above financial reporting reliefs.
- SEC agrees that the prudential accounting relief measures, as well as the other regulatory
reliefs issued by the BSP
- Aim to strengthen the ability of BSFIs to continue to operate and service the financing
requirements of the general public
- The Commission approved the adoption of an industry specific framework, to be referred to
as the PFRS, as modified by the application of the financial reporting reliefs issued by the
BSP and approved by the SEC.
- BSFIs have the option to prepare their financial statements using said industry-specific
framework or full PFRS for the duration and terms allowed by the BSP.
 BSFIs, which opt to adopt the industry-specific framework, should specify in the “Basis
of Preparation of the Financial Statements” section of the financial statements the reliefs
availed of and indicate that the availment thereof covers only current-year transactions.
 To ensure transparency in financial reporting, a qualitative disclosure of the impact of
the reliefs availed of should be disclosed.
- Entities have the option to take either the full retrospective or the modified retrospective
approach in doing the above adjustments when it reverts to full PFRS after the period of
relief.
- The external auditor shall include an Emphasis of Matter paragraph in the auditor’s report
to draw attention to the basis of accounting that has been used in the preparation of the
financial statements.

2. MC No. 31 s.2020 - Non-Imposition of Fines and Other Monetary Penalties for Non-
Filing, Late Filing and Failure to Comply with Compulsory Notification and other
Reportorial Requirements 9 November 2020
 Non-filing and late filing of GIS and Audited Financial Statement(AFS) and other reportorial
requirements shall not be fined.
 Violations incurred that will fall due from September 14, 2020 to December 19, 2020 shall
not be fined and other monetary penalties.
 All violations incurred outside the covered period of September 14, 2020 to December 19,
2020 shall be fined.
 This is in compliance with the Bayanihan to Recover as One Act
3. MC No. 30 s.2020 - Revision of the General Information Sheet (GIS) of Foreign
Corporations to Include Beneficial Ownership Information 3 November 2020
 SEC registered foreign corporations(stock and non-stock) shall disclose their beneficial
owners in upon submission of General Information Sheet(GIS).
 Update: Changes to the beneficial owners shall be updated through the Notification of
Update Form(NUF) within 30 days of change.
 Penalty: Failure to disclose after due notices and hearing shall be penalized in accordance to
Section 11 of SEC Memorandum Circular No. 15-2019.

4. MC No. 28 s.2020 - Requirement for Corporations, Partnerships, Associations, and

Individuals to Create and/or Designate E-mail Account Address and Cellphone
Number for Transactions with the Commission 27 October 2020
 The following shall be submitted together with the General Information Sheet(GIS) and
Notification Update Form(NUF):
o Complete name of the corporation, association, partnership, or person
o Sec registration Number or ID
o Official E-mail address
o Official Cellphone Number
o Alternate E-mail Address
o Alternate Cellphone number
 Purpose E-mail: The email address shall be used to communicate notices, applications,
letters, requests, etc. from the Commission to the entity and vice-versa.
 Purpose Cellphone Number: The cellphone number shall be used as an authentication device.
One Time Personal Identification Number (OTP) is received and entered by the entity to
retrieve the messages from the Commission.
 No Internet Access: If the entity has no internet access, only the official and alternate
cellphone numbers shall be required.
 Change of E-mail or Cellphone Number: Notify the Commission within 5 days from the date
the e-mail/cellphone number is changed.
 Penalty: Failure to submit an e-mail or cellphone number shall be penalized with Php10,000.

5. MC No. 27 s.2020 - Guidelines for the Conversion of Corporations Either to One

Person Corporation or to Ordinary Stock Corporation 14 October 2020

Part1: Ordinary Stock Corporation to One Person Corporation

 An OSC may apply to convert to an OPC once all the outstanding shares are owned by a
single stockholder
 The application shall be signed by the single stockholder and countersigned by the
corporate’s secretary.
 The OSC’s AOI and By-Laws shall be deemed superseded once the Certificate of Filing of
Amended Articles of Incorporation has been issued.
 The new name of the corporation shall have the suffix “OPC”.
 The OPC shall be responsible for the liabilities of the OSC.
Part2: One Person Corporation to Ordinary Stock Corporation

 Once there are at least 2 shareholders, and OPC may apply to convert to an OSC
 The application shall be signed by the stockholders and the corporate’s secretary.
  Notice of Conversion of OPC to an OSC shall be filed within 60 days from the date the shares
are transferred. Notice may still be filed beyond 60 days may still be approved but subject to
penalty.
 The OPC’s AOI and By-Laws shall be deemed superseded once the Certificate of Filing of
Amended Articles of Incorporation has been issued.
 The suffix “OPC” shall be removed from the corporation’s name.
 The OSC shall be responsible for the liabilities of the OPC.
Part3: Provision Common to Both Kinds of Conversion

 The signatories of the conversion must clearly state that they voluntarily agree to convert the
corporation.
 Conversion of OSC to OPC: Optional
 Conversion of OPC to OSC: Mandatory

6. MC No. 25 s. 2020 - Guidelines in the Filing, Investigation and Resolution of

Complaints for Violation of the Right to Inspect and/or Reproduce Corporate
Records 9 September 2020

 [Sec 73 RA 11232] corporate records shall be open to inspection by any director, trustee,
stockholder/member of the corporation in person or by a representative at reasonable hours
on business days, and may make a demand in writing for copies or excerpts
 [Sec 73 RA 11232] any officer/agent who refuses inspection/reproduction of records shall be
liable for damages & guilty of offense
 Sec 1 – aggrieved party may file a Verified Complaint with the CRMD or any extension office
of SEC with a filing fee of P10,130 inclusive of LRF and DST
 Violations
o Outright refusal to inspect
o Failure to take necessary steps to allow inspection within reasonable amount of time
o Failure to give reasonable amount of time to inspect
o Outright refusal to reproduce copies
o Failure to take necessary steps to allow reproduction
o Failure to give reasonable amount of time to reproduce copies
 Contents of Verified Complaint
o Corporate name, SEC Reg #, complete mailing address of subject corporation
o Date and time of demand
o Statement that the complainant is a director/trustee/stockholder/member at the time
of demand with piece of evidence attached
o Complete name and mailing address of custodian of corporate records and/or
corporate secretary to whom demand was made, and custodian’s position in
corporate structure
o Complete name and mailing address of those liable
o Form of demand, written/verbal (attach photocopy if written)
o Specific records to be inspected
o Manner and circumstance which demand was made
o Relevant circumstance after demand
o Statement that complainant acted in good faith or for legitimate purpose
 o Name and signature of complainant, position in corporate structure, proof of
authority attached if he is a representative
o Affidavit signed by complainant that allegations are true and correct, not filed to
harass, cause unnecessary delay, or needlessly increase cost of regulation, factual
allegations have evidentiary support
o Certification Against Forum Shopping
o Photocopy of OR or other proof of payment of filing fee
o Supporting documents
o Such other matters the complainant deems necessary to include
 File 3 original copies of the VC with supporting documents, and an additional copy per
respondent
 Dismissal of Verified Complaint
o Not compliant with requirements in Sec 3
o CRMD/extension office has no jurisdiction
o Pending action/complaint involving same subject matter in any court/tribunal/agency
o Insufficient evidence
 Summons – issued within 5 calendar days from filing of VC, directed to respondent/violator
o Name of extension office or CRMD, names of parties to action
o Direction that the respondent file with SEC and serve to complainant his Verified
Answer within 10 calendar days from receipt of summons
o Notice that unless there is a Verified Answer, complainant will take judgment by
default and may be granted relief
o Signature of director of CRMD/extension office
o Photocopy of VC and supporting documents
 Verified Answer – within 10 days from receipt of summons, respondent shall file 3 original
copies and serve a copy to the complainant and other respondents
o Facts or circumstance relevant and necessary on why they are not liable
o Legal grounds for basis of Verified Answer
o Name and signature of respondent, position in corporate structure
o Affidavit that allegations are true and correct, not filed to harass, have evidentiary
support
o Proof of service to complainant and co-respondents
o Supporting documents and/or evidence
 Failure to answer within the period will render a judgment granting such relief or imposing
the sanction presented
 Clarificatory Conference – purpose of ascertaining facts, issues and other matters necessary
and further examination of additional documents, not later than 30 days after last Verified
Answer is filed
 Effect of Withdrawal of Complaint – amicable settlement or resolution in writing
(English/Tagalog) signed by them and accompanied by a jurat or acknowledgement before
notary public; does not automatically result in outright dismissal of investigation
 Final Order – within 30 days after conclusion of clarificatory conference/receipt of last
affidavits/expiration of period for filing, containing appropriate order, sanction, grant of
relief or denial
  Verified Status Account (VSA) – directive to allow complainant to inspect/make copies, both
parties shall file a VSA (joint or not) within 15 days from date of compliance or last day of
period within which to comply
 Appeal or Motion for Reconsideration has been made and denied, both parties shall file joint
VSA or respective VSAs within 15 days from finality of the Final Order and/or the Decision
or Resolution on Appeal/Motion for Reconsideration
 Unless contradicted and overcome by evidence:
o Respondent complied with Final Order if they filed a VSA while the complainant
failed
o Respondent did not comply if complainant filed a VSA and respondent failed, or both
complainant and respondent failed to file a joint VSA
 Issue a Show Cause Order, includes a directive to the respondent to show good cause as to
why Commission should not impose sanctions/penalties for failing to comply
 Contents of VSA
o Name of extension office / CRMD, names of parties in action, SEC Case Number
o Corporate name and SEC registration number of subject corporation
o Facts, circumstances and justification why directive was not complied with
o Name and signature of complainant and/or respondent
o Affidavit duly signed by complainant and/or respondent that allegations are true and
correct, not filed to harass, with evidentiary support
 Second Clarificatory Conference
 Resolution – within 30 days from receipt of joint VSA or last VSA, or expiration of period
from which to file
o Concise statement of facts, findings and conclusions
o Reason and law which it is based
o Names or persons responsible or liable
o Appropriate order, sanction, grant of relief or denial
o Name and signature of director of CRMD or appropriate extension office
 Administrative Sanctions – any or all sanctions under Sec 158 of Revised Corporation Code
 Commission may assist in the prosecution of violation. Task may be designated to the
Enforcement and Investor Protection Department (EIPD), Company Registration and
Monitoring Department (CRMD) and or appropriate extension office.
 Effectivity – shall take effect immediately after its publication in the Official Gazette or in at
least 2 newspapers of general circulation.

7. MC No. 19 s.2020 - Signatories of the Manual on Corporate Governance and

Penalty for Noncompliance With the Requirement 6 August 2020

 Public Companies and registered issuers are mandated to submit a new Manual on
Corporate Governance (MEMORANDUM CIRCULARG) pursuant to SEC MEMORANDUM
CIRCULAR 24, 2019 within 6 months from effectivity date thereof, or until 12 July 2020.
 Deadline for MEMORANDUM CIRCULARG is extended to 30 September 2020.
 Signatories of MEMORANDUM CIRCULARG shall be the company’s Chairman of the
Board and Compliance Officer
 Incomplete or incorrect signatories are considered not filed.
 Basic penalty – P10,000 (non or late submission of MEMORANDUM CIRCULARG)
  Monthly penalty – P1,000 (accrue until MEMORANDUM CIRCULARG is submitted)
 PCs and RIs that are publicly listed shall continue to be governed by MEMORANDUM
CIRCULAR No. 19 s. 2020

8. MC No. 18 s.2020 - Procedures in the filing of Audited Financial Statements and

General Information Sheet to SEC after the Enhanced Community Quarantine 11
May 2020

 Audited Financial Statements (AFS) and General Information Sheet (GIS)

 All corporations (and branch offices, representative offices, etc.) shall file their AFS and GIS
through the SEC Express Nationwide Submission (SENS) to any courier of their choice
and/or Philippine Postal Office
 All corporations with principal office under the jurisdiction of any extension office shall file
their reports to the nearest EO
 All SEC satellite offices shall be temporarily closed for receiving reports
 All filings shall be delivered to the SEC Head Office, Ground Floor, Secretariat Building,
PICC Complex, Pasay City by the Philpost and/or courier
 AFS and GIS can be filed electronically prior submission of hardcopy through SENS but
upon lifting of CQ, the corporation may file thru SENS
 AFS shall have stamped “received” by the BIR or its authorized banks, unless the BIR allows
alternative proof of submission
 Covers only filing of AFS for corporations with fiscal years ending 30 November 2019 and 31
December 2019
 Following are excluded from number coding schedule as stated in MEMORANDUM
CIRCULAR 5 & 7, where filing deadline remains until June 30, 2020
o Publicly Listed Companies
o Issuers of registered securities under the supervision of the Market and Securities
Regulation Department
o Investment Companies, Issuers of Proprietary and Non-proprietary
Shares/Timeshares, and Public Companies
 All corporations (and branch offices and the like) shall file their AFS through SENS using
courier or Philpost, depending on the last numerical digit of their SEC registration or license
number in accordance with the following schedule:
o June 29-30, July 1-3, 6-10: 1 and 2
o July 13-17: 3 and 4
o July 20-24: 5 and 6
o July 27-30: 7 and 8
o August 3-7: 9 and 0
 All corporations may file AFS through SENS regardless of the last numerical digit of their
registration number on or before the first day stated in the above coding schedule pertaining
to the said digit
 Late filings shall be accepted starting August 10, 2020 through SENS and shall be subject to
prescribed penalties
 Basic components of AFS as prescribed under SRC R68 shall be submitted, failure to comply
is grounds for penalties
 General Financial Reporting Requirements as amended:
 o Stock corporation with TA/TL of P600,000 or more
o Non-stock corporation with TA/TL of P600,000 or more
o Stock foreign corporations with assigned capital to P1 million or more
o Non-stock foreign corporations with TA of P1 million or more
o Regional operating headquarters of foreign corporations with TR of P1 million or
more
o FS of branch offices of foreign corps licensed in the PH shall comply with R68 unless
otherwise determined as not applicable
 Corporations that don’t meet the threshold may submit their AFS with a duly notarized
Treasurer’s Certification only
 SEC Express Nationwide Submission (SENS)
o Download SENS checklist and form
o Accomplish and sign
o Attach checklist with signed undertaking to each report
o Enclose in envelope
o Go to nearest courier for offsite submission and pay service and courier fee
o Courier delivers receiving copy to filer within agreed period of time
 Any Courier/Regular Mail (with no return copy of the report submitted)
o Download SENS checklist and form
o Accomplish and sign
o Attach checklist with signed undertaking to each report
o Enclose in envelope
o Go to courier or post office
 Date of mailing as shown by registry receipt of courier shall be considered as reckoning date
of submission, for Philpost it shall be date of receipt.
 Reports filed through email during CQ, reckoning date of receipt shall be date stated in the
Acknowledgement Confirmation stated in the email attached to the hardcopy of reports
submitted.

9. MC No. 17 s.2020 - Extension of the deadline for the submission of 2020 Annual
Reports and/or Audited Financial Statements of Companies with Fiscal Year ending
31 January 2020 to 30 April 2020, including the applicable Quarterly Reports 7 May
2020

 The Commission grants extension of the deadlines for the submission of the following reports
of companies with fiscal years ending 31 January 2020 to 31 March 2020, for a period of 60
calendar days from the regular filing deadlines;
 For companies with fiscal years ending 30 April 2020, an extension of the deadline for
submission of the following reports is for a period of 45 calendar days from the regular filing
deadline
o Annual Reports (SEC Form 17-A) and Audited FS of publicly listed companies (PLC)
o Annual Reports and AFS of issuers of registered securities (other than PLCs)
o AFS of all other companies other than the above mentioned
 Deadline for Quarterly Reports (SEC 17-Q) for the first quarter of covered companies is
hereby extended for a period of 45 calendar days from the regular filing deadlines
 Extension shall be automatically applied
  For PLC and issuers of registered securities under the supervision of the Market and
Securities Regulation Department, those who want to avail the extended period shall file
special disclosure form SEC Form 17-LC, filed not later than 5 calendar days before the
regular filing deadline
 All material information, whether price-sensitive or trade sensitive, must be disclosed on a
timely basis
 Covered companies are encouraged to file their reports before the extended deadline

10. MC No. 16 s.2020 - Guidelines on Authentication of Articles of Incorporation in

Applications for Registration of New Domestic Corporations 29 April 2020

 The following guidelines are adopted on the authentication of articles of incorporation for
easy company registration:
 Scope – apply to the registration of new domestic corporations
 Authentication by Incorporators – accept AoI for registration that are accompanied with
Certificate of Authentication signed by all incorporators in the form, both need not be
notarized nor consularized
 Acknowledgement before Notary Public – they may acknowledge the AoI before a notary
public if they choose
 Authentication of Articles of Incorporation Executed Abroad – apostilled in accordance with
the 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public
Documents (Apostille Convention), or notarized or authenticated by a Philippine diplomatic
or consular office
 Registration of Foreign Investments – more than 40% foreign equity shall be accompanied by
an application for registration of investments of non-Philippine national using SEC Form F-
100 (authenticated in accordance as above only if the same is executed outside the PH)
 Obtaining Corporate Registration Through Fraud or Misrepresentation – registration shall
be revoked
o Those responsible or who assisted directly or indirectly therein, shall be punished
with a fine ranging from P200,000 to P2,000,000
o When violation is injurious or detrimental to the public, penalty shall be P400,000-
P5 million
 Willful Certification of Incomplete, Inaccurate, False, or Misleading Statements or Reports
o Punishable with a fine ranging from P20,000 to P200,000
o If certification is injurious or detrimental to the public, penalty shall be P40,000-
P400,000..

11. MC No. 14 s.2020 - Shareholders’ right to put items on the Agenda for Regular/
Special Stockholders’ meetings 28 April 2020

 Shareholders who (alone or with others) hold at least 5% outstanding capital stock of a PLC
shall have the right to include items on the agenda prior to the regular/special stockholders’
meeting
 All items added pursuant to this MEMORANDUM CIRCULAR after the Definitive
Information Statement (DIS) has been filed with the Commission shall be filed under Other
Matters (no longer required to amend its DIS)
 Any officer/agent who unjustly refuses to allow qualified shareholders to exercise their right:
 o If such refusal is made pursuant to a resolution or order of the BOD, the directors
who voted for refusal shall be liable
o It shall be a defense to any action under this MEMORANDUM CIRCULAR that the
shareholder exercising any of these rights was not acting in good faith or for a
legitimate purpose.

12. MC No. 12 s.2020 - Shareholders’ approval on Sale of Corporate Assets 7 April 2020

 The sale or disposal of corporate property and assets amounting to at least 51% of the
corporation’s total assets shall be considered as sale of all or substantially all of corporate
property and assets, whether such sale accrued in a single transaction or in several
transactions taking place within 1 year from the date of 1st transaction.
 Vote of stockholders representing at least 2/3 of the outstanding capital stock in a
stockholders’ meeting shall be required prior to the execution of the sale transaction.
 In aggregate sale transactions, shareholder approval shall be required for the sale
transaction that breaches the 51% corporate asset threshold.
 Determination of whether or not the sale amounts to at least 51% of the corporation’s assets
must be computed based on total assets in latest audited FS.

13. MC No. 10 s.2020 - Guidelines on submission by Electronic Mail of GIS, AFS,

Forms and Documents required under existing Laws, Rules and Regulations, and
recognition of Electronic Signature 20 March 2020

 Guidelines and Conditions in Filing Documents through Electronic Mail

o Portable Document Format (PDF) preferably with text layer
o Contain an electronic signature (electronic images of wet or physical signatures are
recognized)
o Submitted documents should be sent as Multipurpose Internet Mail Extensions
(MIME) attachments to an email from a valid company email account or address of
an authorized representative
o Documents may be submitted unnotarized but those with signatures appearing shall
be held accountable
o Statement declaring authenticity of submitted documents and commitment to submit
physical versions once state of public health emergency is lifted
o Sender should request for a Return Receipt and Delivery Status Notification to
ensure that the email has been sent and has also been received by the SEC
 Purpose – intended to facilitate compliance by all concerned corporations during the state of
public health emergency.

14. MC No. 09 s.2020 - Guidelines for the filing of the General Information Sheet (GIS)
during the COVID-19 Outbreak and Enhanced Community Quarantine 18 March
2020
Section 1. Where Election of Directors, Trustees, and Officers was held. 
 Where an election of Directors, Trustees, and Officers was held, the GIS shall be submitted
within thirty (30) days from actual meeting thru mail (ordinary or registered), private
courier, or email at [email protected] [email protected] or
[email protected] 

Section 2. Annual meeting and Election of Directors, or Officers is not held due to health and
safety reasons relating to the COVID-2019 disease
  Election originally scheduled between 01 March 2020 and 31 May 2020, not held on account
of health and safety reasons relative to COVID-19 disease, and corporation has no facilities
for remote communication, shall be reported through a notice within 30 days from the
original meeting date either through mail, courier or by electronic means
 Accompanied by a statement specifying a new date for election which is within sixty (60) days
from the originally scheduled date. 

Section 3. Non-holding of Annual meeting of Election of Directors, Trustees, or Officers due

to other causes.
 Non-holding of election due to reasons other than that provided in section 2, and non-
holding of election originally scheduled on dates outside the covered period, shall be
reported to the Commission within thirty (30) days from the date of the scheduled
election, and shall specify the new date for election which shall not be later than sixty
(60) days from the scheduled date. 
 The non-holding of election initially reported due to health and safety reasons may
nevertheless be considered as a non-holding of election due to other causes if, upon
application of an officer, it has been verified that the non-holding of election is indeed
not related to the COVID-19 disease. 
 If it is found that the non-holding of election is unjustified, the Commission shall issue an
order directing the issuance of a notice stating the time and place of the election.

Section 4. The report on non-holding of annual meeting in accordance to Sections 2 and 3 shall
be submitted to [email protected] and shall contain the following: 

1. Corporate name
2. SEC Registration Number
3. Date of annual meeting per By-Laws
4. Date of actual meeting
5. Reason for the non-holding of meeting
6. Venue of the intended meeting
7. Signed and dated by the Corporate Secretary 

Section 5. Report of Election; Non-holding of annual meeting, where no stockholder, member,

director, or trustees applied for an order from the Commission that an election be held.
 Results of the election subsequent to the report of non-holding of elections as provided in
Sections 2 and 3 above, and which is held outside the covered period, shall be reported to the
Commission through submission of GIS within thirty (30) days from the date of actual
meeting when the election was held.
 The GIS submitted shall no longer enjoy the same forbearance from the penalty for late
submission as provided in Section 1. 

Section 6. Extension of Coverage.

 After this MC comes into force, and upon evaluation of ensuing, and the Enhanced
Community Quarantine, the Commission may extend the covered period provided as deemed
necessary. 

15. MC No. 08 s.2020 - Adoption of Accounting Standards and Philippine

Interpretations Committee Questions and Answers (PIC Q&As) 16 March 2020
Several pronouncements have been adapted as part of SEC’s rules and regulations on financial
reporting

A. Accounting Standards

Pronouncements Effectivity date

PFRS 17. Insurance Contracts Effective for annual periods beginning on
or after January 1, 2021.
Amendments to PAS 19, Plan Amendment, Effective for annual periods beginning on
Curtailment or Settlement or after January 1, 2019.
Annual Improvements to PFRSs 2015-2017
cycle
Amendments to PFRS 3, Definition of a Effective for annual periods beginning on
Business or after January 1, 2020.
Amendments to PAS 1 and PAS 8, Definition of
Material
Philippine Interpretation IFRIC 23, Effective for annual periods beginning on
Uncertainty over Income Tax Treatments or after January 1, 2019.

B. PIC Q&A

Pronouncements Effectivity date

PIC Q&A No. 2018-01, PAS 8 – Voluntary The consensus in this Q&A is effective from
changes in accounting policy the date of the approval by the FRSC
PIC Q&A No. 2018-02, PAS 36 – Non-
controlling interests and goodwill impairment
test
PIC Q&A No. 2018-PFRS 13, PAS 16, and
PAS 36 – Fair value of property plant and
equipment and depreciated replacement cost
PIC Q&A No. 2018-04, PAS 41 - Inability to
measure fair value reliably for biological assets
within the scope of PAS 41, Agriculture
PIC Q&A No. 2018-05, PAS 37 - Liability
arising from maintenance requirement of an
asset held under a lease
PIC Q&A No. 2018-06, PAS 27 - Cost
investment in subsidiaries in separate financial
statements when pooling is applied in
consolidated financial statements.
PIC Q&A No. 2018-07, PAS 27 and PAS 28, -
Cost of an associate, joint venture, or
subsidiary in separate financial statements.
PIC Q&A No. 2018-10, PFRS 10 and PFRS 3 –
Accounting for the acquisition of a non-wholly
owned subsidiary that is not a business
PIC Q&A No. 2018-09, PAS 21 –
Classification of deposits and progress
payments as monetary or nonmonetary items
PIC Q&A No. 2018-10, PAS 2 – Scope of
disclosure of inventory write downs
PIC Q&A No. 2018-1, Classification of land by
real estate developer
PIC Q&A No. 2018-1, Conforming changes to The effective date of the amendment is
 PIC Q&As - Cycle 2018 included in the affected Q&As
PIC Q&A No. 2018-14, PFRS 15 – Accounting The effective date and transition provision of
for cancellation for real estate sales. this Q&A follow those PFRS 15 Appendix C,
upon approval by the FRSC
PIC Q&A No. 2018-15, PAS 1 – Classification The consensus in this Q&A is effective from
of advances to contractors in the nature of the date of approval of the FRSC and should
prepayments: Current vs. Non-current follow the provisions under PAS 8, Accounting
Policies, Changes in accounting estimates and
Errors.
PIC Guidance of Financial Reporting June The effective date of the amendment is
2018 included in the Q&As affected

16. MC No. 06 s. 2020 - Guidelines on the Attendance and Participation of Directors,

Trustees, Stockholders, Members, and Other Persons of Corporations in Regular
and Special Meetings Through Teleconferencing, Video Conferencing and Other
Remote or Electronic Means of Communication 12 March 2020

OBJECTIVES, COVERAGE AND DEFINITION 

Section 1. Objectives. Provide corporations guidance in formulating internal procedures and bylaws
allowing directors, trustees, stockholders, members and other persons to participate and vote in
meetings in absentia. 

These also operationalize the objectives Electronic Commerce Act, to facilitate domestic and
international dealings through the utilization of electronic, and technology and to promote the
universal use of electronic transaction. 

Section 2. Application. Shall apply to all corporations registered with the Commission. 

Section 3. Definition of Terms.

a. Remote Communication - the transfer of data between two or more devices not located at the
same site. 

b. Teleconferencing - holding of a conference among people remote from one another by means of

telecommunication devices such as telephone or computer terminals. 

An interactive group communication (three or more people in two or more locations) through an
electronic medium. Bring people together under one roof even though they are separated by hundred
miles. 

c. Videoconferencing - holding of a conference among people in remote locations by means of

transmitted audio and video signals. 

d. Computer Conferencing - teleconferencing supported by one or more computers. 

e. Audio Conferencing - conference in which people at different locations speak to each other via
telephone or Internet connections. 

BOARD MEETINGS OF DIRECTORS OR TRUSTEES 

Section 4. Participation in Board Meetings Through Remote Communication; Internal
Procedures.

 Directors or trustees, who cannot physically attend can participate and vote through remote
communication (videoconferencing, teleconferencing, or other alternative modes of
communication).
 Directors or trustees cannot attend or vote by proxy at board meetings.
 Notify in advance the Presiding Officer and the Corporate Secretary of participating in a
meeting through remote communication. The Secretary shall note it in the Minutes of the
meeting. 
 Corporations may issue their own internal procedures for the conduct of board meetings
through remote communication.
Section 5. Quorum.

 A majority of the directors or trustees as stated in the articles of incorporation shall

constitute a quorum.
 A director or trustee who participates through remote communication, shall be deemed
present for the purpose of attaining quorum. 
Section 6. Notice of the Meeting.

 The Corporate Secretary shall send the notice of the meeting to all directors or trustees in
accordance with the manner of giving notice as provided in the bylaws or by board
resolution. 
 It may be sent through electronic mail, messaging service or such other manner.
 Notice of regular or special meetings stating the date, time and place of the meeting must be
sent at least two (2) days prior to the scheduled meeting, unless a longer time is provided in
the bylaws. A director or trustee may waive this requirement, either expressly or impliedly.

The notice of meetings shall include the following information: 

a. The date, time and place of the meeting
b. The agenda of the meeting
c. All pertinent materials for discussion which shall be numbered and marked in such
manner that the director or trustee can easily follow and participate in the meeting
d. That a Director or trustee may participate via remote communication
e. Contact information of the Corporate Secretary or office staff whom the director or
trustee may communicate
f. When the meeting is for the election of directors or trustees or officers,
the requirements and procedure for nomination and election
g. The fact that there will be a visual and/or audio recording of the meeting
h. Other instructions to facilitate participation in the meeting through
remote communications. 
Section 7. Roll Call. At the start of the meeting, the Presiding Officer shall instruct the Corporate
Secretary to make a roll call. Every attendee shall state the following: 

1. Full name and position

2. Location
3. Confirmation that he/she can clearly hear and/or see the other attendees
4. Confirmation that he/she received the Notice of the Meeting including the agenda and
materials, and 
 5. Specify the device being used (ie., smartphone, tablet, laptop, desktop, television, etc.) 
The Corporate Secretary shall confirm and note the participants and certify the existence of quorum. 

Section 8. Voting. In case of a need to vote in any matter in the agenda, the Presiding Officer shall
direct the Corporate Secretary to note the vote of each director or trustee. 

 The director or trustee participating in the meeting via remote communication may cast his
vote through electronic mail, messaging service or other manner as provided in the internal
procedures.
 The vote shall be sent to the Presiding Officer and the Corporate Secretary for notation. 
Section 9. Other Duties of the Corporate Secretary. The Corporate Secretary shall also assume the
following responsibilities: 

1. Ensure that suitable equipment and facilities are available for the conduct of meeting by
remote communication (i.e. reliable internet connection, high bandwidth availability capable
of supporting numerous simultaneous  connections, etc.); 
2. Ensure that the attendees are able to hear and see the other participants clearly during the
and attendees should be able to communicate and understood by the other party; 
3. Ensure that the visual and audio recordings of the meeting are secured; 
4. Ensure that the visual and audio recordings of the election/meeting are current and on-going
and that there is no stoppage or interruption. Should an interruption or stoppage occur, the
recording shall restart from the point where it was stopped with proper statement of points in
time; 
5. Ensure to safe-keep and perpetuate in updated data storage equipment or facility the visual
and audio recordings, and 
6. Require those who attended the meeting through remote communication, to sign the minutes
of the meeting on a reasonable time after the meeting. 
MEETINGS OF STOCKHOLDERS OR MEMBERS 

Section 10. Participation in Stockholders' or Members' Meetings Through Remote

Communication.

 Stockholders or members who cannot physically attend at stockholders' or members'

meetings may participate through remote communications or other alternative modes.
 Stockholder or member shall notify in advance the Presiding Officer and the Corporate
Secretary of his/her intention.
 Corporate Secretary shall note it in the Minutes of the meeting 
Section 11. Quorum in Meetings.

 Quorum shall consist of the stockholders representing a majority of the outstanding capital
stock or a majority of the members for nonstock corporations.
 A stockholder or member who participates through remote communication or in absentia
shall be deemed present for purposes of quorum.
Section 12. Voting in the Election of Directors, Trustees and Officer Through Remote
Communication.

The right to vote of stockholders or members may be exercised:

 In person, through a proxy or through remote communication or in absentia.

  Remote communication or in absentia when authorized by a resolution of the majority of the
board of directors. Provided, only be applicable for a particular meeting.
 In the election of directors, trustees and officers of corporations vested with public interest,
they may vote through remote communication or in absentia, notwithstanding the absence of
a provision in the bylaws of such corporations. 
Section 13. Internal Procedures.

 Corporations shall issue their own internal procedures embodying the mechanisms for
participation in meetings and voting through remote communication or in absentia. 
 The internal procedures may take into account the corporation's number of stockholders or
and members, location of stockholders or members, importance of the matters to be discussed
and voted upon in the meeting, promotion of minority rights and other factors consistent with
the protection and promotion of stockholders' or member's rights. 
The internal procedures may provide for the following: 

a. Mechanism to verify the identity of the stockholders or members and who among them have
the right to vote during the meeting
b. Measures to ensure that all stockholders or members have the opportunity to participate in
the meeting including an opportunity to read or hear the discussion substantially
c. C. Mechanism to enable stockholders or members to vote during the meeting including
ensuring that the integrity and secrecy of the votes are protected
d. Procedures for documenting the meeting and any process/motion which may be done
afterwards; and
e. Mechanism in making the record of the meeting, either video or audio recording, available to
the stockholders or members.
f. Other matters to address administrative, technical and logistical issues. 
Section 14. Notices.

 The Secretary shall send out the notices of the meeting to all stockholders or members in
accordance with the manner of giving notice as stated in the bylaws. 
 Written notice may be sent through electronic mail or such other similar manner.
 Notice of regular meetings which should state the date, time and place of the meeting must be
sent to every stockholders or members at least twenty one (21) days prior to the scheduled
meeting, unless a longer time is provided in the bylaws.
 Notice of special meetings which should state the date, time and place of the meeting must be
sent to every stockholders or members at least one (1) week prior to the scheduled meeting,
unless a longer time is provided in the bylaws. 
 In case of postponement, written notice shall be sent to all stockholders or members of record
at least two (2) weeks prior to the date of the meeting.
 The notice shall further be accompanied by other relevant matters such as the following: 
a. The agenda of the meeting
b. When attendance, participation, and voting by remote communication or in absentia,
are authorized, the requirements and procedures to be followed when a stockholder
or member elects either option
c. Manner of casting of votes and the period during which vote by
remote communication or in absentia will be accepted
d. Contact information of the Secretary or office staff whom the stockholder or member
may notify about his or her option
 e. When the meeting is for the election of directors or trustees, the requirements
and procedure for nomination and election
f. The fact that there will be visual and audio recording of the meetings (for
future reference). 
 In case meeting was conducted through teleconferencing, a visual and audio recording of the
election or meeting should be secured.
 The Secretary is duty-bound to safe-keep and perpetuate in updated data storage equipment
or facility the visual and audio recordings. 
 All pertinent materials for discussion shall be numbered and marked by the Secretary that the
stockholder or member participating through remote communication can easily follow and
participate. 
Section 15. Place of Meetings of Stockholders or Members.

 Presiding officer shall call and preside the stockholders' or members' meetings, regular or
special, at the principal office of the corporation, or in the city or municipality where the
principal office of the corporation is located.

2019

1. MC No. 24 s.2019 – Code of Corporate Governance for Public Companies and

Registered Issuers 19 December 2019

CODE OF CORPORATE GOVERNANCE

FOR PUBLIC COMPANIES AND REGISTERED ISSUERS

INTRODUCTION
1. The Code of Corporate Governance for Public Companies and Registered Issuers is rooted in
the same Corporate Governance principles provided in the Code of Corporate Governance
for Publicly-Listed Companies with the same intention of raising the corporate governance
standards of Philippine corporations consistent with the G20/OECD1 Principles of
Corporate Governance and other internationally recognized corporate governance
principles.
2. The Code will adopt the "comply or explain" approach which combines voluntary compliance
with mandatory disclosure.
3. The Code is arranged as: Principles, Recommendations and Explanations
a. Principles can be considered as high-level statements of corporate governance good
practice.
b. Recommendations are the objective criteria to identify the specific features of corporate
governance good practices that are recommended for companies.
c. Explanations strive to provide additional information on the recommended best practice.
4. It does not prescribe "one size fits all" framework to allow companies some flexibility in
establishing their corporate governance practices. Hence, the Principle of Proportionality is
considered in the application of the provisions of this Code.

THE BOARD'S GOVERNANCE RESPONSIBILITIES

1. ESTABLISHING A COMPETENT BOARD

Principle: The company should be headed by a competent, working board.

Recommendations:
 i. The Board should be composed of directors with a collective working knowledge,
experience or expertise (KEE) that is relevant to the company's industry/sector.
ii. The Board should be headed by a competent and qualified Chairperson.
iii. Company must have policy on training of directors, orientation program for first-
time directors and annual continuing training for all directors.
iv. The Board should have a policy on board diversity.
v. The Board should ensure that it is assisted in its duties by a separate individual of
Corporate Secretary- not a member of the Board of Directors and should annually
attend a training on corporate governance.
vi. The Board should ensure that it is assisted in its duties by a Compliance Officer-
have a rank of Senior Vice President or an equivalent position with adequate stature
and authority in the corporation and not be a member of the Board of Directors and
should annually attend a training on corporate governance.
2. ESTABLISHING CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD
Principle: All directors as well as to shareholders must know their fiduciary roles, responsibilities
and accountabilities of the Board as provided under the law, the company's articles of incorporation
and by-laws, and other legal pronouncements and guidelines.

Recommendations:

i. Board members should act in behalf of the company and all shareholders/members
and all other stakeholders in a:
 fully informed basis (FIB),
 in good faith (IGF),
 with due diligence and care (WDDC), and
 in the best interest (IBI)
ii. Board should:
 oversee the development of,
 approve the company’s business and strategy, and
 monitor its implementation,
- to sustain the company's long-term viability and strength
iii. Board should be:
 responsible for ensuring and adopting an effective succession planning
program for directors, key officers and Management (DKM).
- by adopting a retirement policy for directors and key officers
iv. Board should:
 align the remuneration of key officers and board members with the long-
term interests of the company/organization.
 formulate and adopt a policy specifying the relationship between
remuneration and performance.
- no director or trustee should participate in the determination of his
own per diem or compensation
v. Board should have:
 formal and transparent board nomination and election policy that should
include how it accepts nominations from its shareholders/members and
reviews the qualifications of nominated candidates.
- policy should include an assessment of the effectiveness of the
Board's processes and procedures in the nomination, election, or
replacement/removal of a director/trustee and its process of identifying
the quality of directors should be aligned with the strategic direction of
the company.
 vi. Board should have:
 overall responsibility in ensuring that there is a policy and system
governing related party transactions (RPTs) and other unusual or
infrequently occurring transactions, particularly those which pass certain
thresholds of materiality.
- The policy should include the appropriate review and approval of
material RPTs, which guarantee fairness and transparency of the
transactions.
vii. The Board should be primarily responsible for:
 approving the selection and assessing the performance of the Management
led by the Chief Executive Officer (CEO) or his equivalent, and
 control functions led by their respective heads (Chief Risk Officer, Chief
Compliance Officer, and Chief Audit Executive, as may be applicable).
viii. The Board should establish
 an effective performance evaluation framework
- it includes the standard or criteria for assessment, that will ensure that
the Management, including the Chief Executive Officer or his
equivalent, and personnel's performance is at par with the standards set
by the Board and Senior Management.
ix. The Board should:
 Oversee an appropriate internal control system is in place
- it includes setting up a mechanism for monitoring and managing
potential/actual conflicts of interest of board members, management,
and shareholders/members.
 also adopt an Internal Audit Charter
x. The Board should:
 oversee that a sound Enterprise Risk Management framework is in place
- to effectively identify, monitor, assess and manage key business risks.
- guide the Board in identifying units/business lines and enterprise-level
risk exposures, as well as the effectiveness of risk management
strategies
xi. The Board should have: a
 Board Charter
- formalizes and clearly states the roles, responsibilities and
accountabilities in carrying out its fiduciary duties.
- serve as a guide to the directors in the performance of their functions
and should be made publicly available.

3. ESTABLISHING BOARD COMMITTEES

Principle: Board committees should be set up to the extent possible to support the effective
performance of the Board's functions, particularly with respect to audit, risk management,
compliance and other key corporate governance concerns, such as nomination and remuneration.
The composition, functions and responsibilities of all the board committees should be contained in
their respective board committee charters.

Recommendation:

i. The Board should establish board committees that focus on specific board functions
to aid in the optimal performance of its roles and responsibilities. The Board
committees should be composed only of board members.
ii. The Board should establish an Audit Committee
 - It enhances the oversight capability over the company’s financial
reporting, internal control system, internal and external audit
processes, and compliance with applicable laws and regulations.
- The committee should be composed of at least three (3) appropriately
qualified non-executive directors, the majority of whom, including the
Chairperson, should be independent directors.
- All of the members of the must have relevant background, knowledge,
skills, and/or experience in the areas of accounting, auditing and
finance.
- The Chairperson of the Audit Committee should not be the
Chairperson of the Board or of any other committees.
iii. The Board should establish a Corporate Governance Committee
- It is tasked to assist the Board in the performance of its corporate
governance responsibilities, including the functions that were formerly
assigned to the Nomination and Remuneration Committee.
- It should be composed of at least three (3) directors, majority of whom
should be independent directors, including the Chairperson.
iv. Subject to a corporation's size, risk profile, nature and complexity of operations, the
Board should establish a separate Board Risk Oversight Committee (BROC)
- It is responsible for the oversight of a company’s Enterprise Risk
Management System to ensure its functionality and effectiveness.
- Composed of at least three (3) directors, the majority of whom should
be independent directors, including the Chairperson.
- At least one member of the committee must have relevant thorough
knowledge and experience on risk and risk management.
v. All established committees should have Committee Charters
- state in plain terms their respective purposes, memberships, structures,
operations, reporting processes, resources and other relevant information.
- Should provide the standards for evaluating the performance of the
Committees and its members.
4. FOSTERING COMMITMENT
Principle: To show full commitment to the company, the directors should devote the time and
attention necessary to perform their duties and responsibilities properly and effectively, including
sufficient time to be familiar with the corporation's business.

Recommendations:

i. The directors should attend and actively participate in all meetings of the Board,
Committees, and shareholders/members in person or through
tele-/videoconferencing conducted in accordance with the rules and regulations of
the Commission, except when justifiable causes.
ii. The non-executive directors of the Board should not concurrently serve as
directors to more than ten (10) public companies and/or registered issuers.
However, the maximum concurrent directorships shall be five (5) PC and/ RI if the
director also sits in at least three (3) publicly-listed companies.
iii. A director should notify the Board where he is an incumbent director before
accepting a directorship in another company.

5. REINFORCING BOARD INDEPENDENCE

Principle: The Board should endeavor to exercise an objective and independent judgment on all
corporate affairs.
Recommendation:

i. The Board should be composed of a majority of non-executive directors

- who possess the necessary qualifications to effectively participate and help
secure objective, independent judgment on corporate affairs and to carry
out proper checks and balances.
ii. The Board should have at least two (2) independent directors, or at least one-
third of the members of the Board, whichever is higher
iii. The Board should ensure that its independent directors possess the necessary
qualifications and none of the disqualifications for an independent director to
hold the position.
iv. The Board's independent directors should serve for a maximum cumulative
term of nine (9) years.
- After which, the independent director should be perpetually barred from
reelection as such in the same company,
- But he may continue to qualify for nomination and election as a non-
independent director.
- If the company wants to retain an independent director who has served for
nine (9) years, the Board should provide meritorious justification/s and
seek shareholders members approval during the annual shareholders'
/members' meeting,
v. The positions of Chairperson of the Board and Chief Executive Officer or its
equivalent position, should be held by separate individuals and each should
have clearly defined responsibilities,
vi. The Board should designate a lead director among the independent directors if
the Chairperson of the Board is not independent
- including if the positions of the Chairperson of the Board and Chief
Executive Officer or its equivalent are held by one person.
vii. A director with a material or potential interest in any transaction affecting the
corporation should fully disclose his adverse interest, abstain from taking part
in the deliberations for the same and recuse from voting on the approval of the
transaction,
viii. The non-executive directors should have separate periodic meetings with the
external auditor and heads of the internal audit, compliance and risk function
without any executive directors present
- to ensure that proper checks and balances are in place within the
corporation.
- the meetings should be chaired by the lead independent director, if
applicable.
6. ASSESSING BOARD PERFORMANCE
Principle: The best measure of the Board's effectiveness is through an assessment process. The
Board should regularly carry out evaluations to appraise its performance as a body, and assess
whether it possesses the right mix of backgrounds and competencies.

Recommendations and Explanation:

i. The Board should conduct an annual self-assessment of its performance, including

the performance of the Chairperson, individual members and committees.
ii. The Board should have in place a system that provides, at the minimum, criteria
and process that allow for a feedback mechanism from the shareholders/members.to
determine the performance of the :
  Board
 the individual directors,
 committees and
7. STRENGTHENING BOARD ETHICS
Principle: Board directors are duty-bound to apply high ethical standards, taking into account the
interests of all stakeholders.

Recommendations:

i. The Board should adopt a Code of Business Conduct and Ethics,

 which would provide standards for professional and ethical behavior
 articulate acceptable and unacceptable conduct and practices in internal
and external dealings of board members
ii. The Board should ensure the proper and efficient implementation and monitoring
of compliance with the Code of Business Conduct and Ethics.
DISCLOSURE AND TRANSPARENCY

8. ENHANCING COMPANY DISCLOSURE POLICIES AND PROCEDURES

Principle: The Board should establish corporate disclosure policies and procedures that are
practical and in accordance with generally accepted best practices and regulatory expectations.

Recommendations:

i. The Board should establish corporate disclosure policies and procedures

 to ensure a CART report to shareholders/members and other stakeholders
(CART - comprehensive, accurate, reliable and timely)
 and gives a fair and complete picture of a company's financial condition,
results and business operations,
ii. The Company should have a policy requiring all directors and officers to
disclose/report to the company any dealings in the company's shares by the said
directors and officers within five (5) business days
iii. The company’s CGP, P&P should be contained in its Manual on Corporate
Governance (CGP, P&P corporate governance policies, programs and procedures)
 which should be submitted to the Commission and posted on the
company's website.
iv. The company should disclose all relevant information on its CGP in the Annual
Corporate Governance Report,
 Which should be submitted to the Commission, and continuously updated
and posted on the company's website

9. STRENGTHENING EXTERNAL AUDITOR'S INDEPENDENCE AND IMPROVING AUDIT

QUALITY

Principle: The company should establish standards for the appropriate selection of an external
auditor, and exercise effective oversight of the same to strengthen the external auditor's
independence and enhance audit quality.

Recommendations:
 i. The Audit Committee should have a robust process for approving and
recommending the appointment, reappointment, removal, and fees of the external
auditor afterwards approved by the Board Of Directors and the shareholders.
- For the removal or change in the external auditor, the reasons for removal
or change should be disclosed to the Commission, the shareholders, and
the public through the company website and other required disclosures.
ii. The Audit Committee Charter should include:
- Audit Committee's responsibility on assessing the integrity and
independence of external auditors, taking into consideration relevant
Philippine professional and regulatory requirements,
- Audit Committee's responsibility on reviewing and monitoring the external
auditor's suitability and effectiveness on an annual basis.
iii. The company should disclose the nature of non-audit services performed by its
external auditor in the Annual Report in the interest of managing potential conflict
of interest cases. The Audit Committee should be alert for any potential conflict of
interest situations, given the guidelines or policies on non-audit services, which
could be viewed as impairing the external auditor's objectivity.
10. INCREASING FOCUS ON NON-FINANCIAL AND SUSTAINABILITY REPORTING
Principle: The Board should ensure that the company discloses material and reportable
nonfinancial and sustainability issues.

Recommendation:

i. The company should have a clear and focused strategy on the disclosure of non-
financial information.
 It should disclose to all shareholders/members and other stakeholders the
company’s long-term goal and short-term goals as well as impacts on the
management of environmental, economic, social and governance (EESG)
issues of its business which underpin sustainability.

11. PROMOTING A COMPREHENSIVE AND COST-EFFICIENT ACCESS TO RELEVANT

Principle: The company should maintain a comprehensive and cost-efficient communication
channel for disseminating relevant information. This channel is crucial for an informed decision-
making by investors, stakeholders and other interested users.

Recommendation:

i. The company should have a website

- to ensure a comprehensive, cost-efficient, transparent and timely manner of
disseminating relevant information to the public.

INTERNAL CONTROL AND RISK MANAGEMENT FRAMEWORKS

12. STRENGTHENING INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS

Principle : To ensure the integrity, transparency and proper governance in the conduct of its affairs
the company should have a strong and effective internal control system and enterprise risk
management system.

Recommendation:
 i. The Company should have an adequate and effective internal control system and an
ERP framework in the conduct of its business considering its size, risk profile,
nature and complexity of operations
ii. The Company should have in place an independent internal audit function
- It provides an independent and objective assurance, and consulting services
designed to add value and improve the company's operations.

CULTIVATING A SYNERGIC RELATIONSHIP WITH SHAREHOLDERS/MEMBERS

13. PROMOTING SHAREHOLDER/MEMBER RIGHTS

Principle: The company should treat all shareholders/members fairly and equitably, and also
recognize, protect and facilitate the exercise of their rights.

Recommendation:

i. The Board should ensure that basic shareholder/member rights are disclosed in the
MCG.
ii. The Board should encourage active shareholder participation
 by sending the Notice of Annual and Special Shareholders' /Members'
Meeting with sufficient and relevant information

- at least 21 days before the meeting.

iii. The Board should encourage active shareholder/member participation

 by making the result of the votes on matters taken during the most recent
Annual or Special Shareholders'/ Members' Meeting publicly available the
next working day.
 the Minutes of the Annual and Special Shareholders'/Members' Meeting
should be available on the company website within five (5) business days
from the date of the meeting.
iv. The Board should make available an alternative dispute mechanism to resolve
intra-corporate disputes in an amicable and effective manner.
v. The Board should establish an IRO or CRO to ensure constant engagement and
communication with its shareholders/members. The IRO or CRO or its equivalent
should be present at every shareholders'/members' meeting.

DUTIES TO STAKEHOLDERS

14. RESPECTING RIGHTS OF STAKEHOLDERS AND EFFECTIVE REDRESS FOR

VIOLATION OF STAKEHOLDER'S RIGHTS
Principle: The rights of stakeholders established by law, by contractual relations and through
voluntary commitments must be respected. Where stakeholders' rights and/or interests are at stake,
stakeholders should have the opportunity to obtain prompt effective redress for the violation of their
rights.

Recommendation:

i. The Board should identify the company's various stakeholders and promote
cooperation between them and the company in creating wealth, growth and
sustainability.
 ii. The Board should establish clear policies and programs to provide a mechanism on
the fair treatment, protection and enforcement of the rights of stakeholders.

15. ENCOURAGING EMPLOYEES' PARTICIPATION

Principle: A mechanism for employee participation should be developed to create a symbiotic
working environment consistent with the realization of the company's objectives and good corporate
governance goals.

Recommendation:
The Board should .
i. establish policies, programs and procedures that encourage employees to actively
participate in the realization of the company's goals and in its governance
ii. set the tone and make a stand against corrupt practices by adopting an anti-
corruption policy and program in its Code of Business Conduct and Ethics and
should disseminate the policy and program to employees across the organization
through orientations and continuous trainings to embed them in the company's
culture.
iii. establish a suitable framework for whistleblowing that allows employees to freely
communicate their concerns about illegal or unethical practices, without fear of
retaliation and to have direct access to an independent member of the Board or a
unit created to handle whistleblowing concerns and it should be conscientious in
establishing the framework, as well as in supervising and ensuring its
enforcement.

16. ENCOURAGING SUSTAINABILITY AND SOCIAL RESPONSIBILITY

Principle: The company should be socially responsible in all its dealings with the communities in
which it operates. It should ensure that its interactions serve its environment and stakeholders in a
positive and progressive manner that is fully supportive of its comprehensive and balanced
development.

Recommendation:

i. The company should recognize and place an importance on the interdependence

between business and society, and promote a mutually beneficial relationship that
allows the company to grow its business, while contributing to the advancement of
the society where it operates.

2. MC No. 23 s.2019 – Guidelines on the Revival of Expired Corporations (Pursuant to

Section 11 of the Revised Corporation Code of the Philippines) 25 November 2019
 Who can file petition for revival of corporate existence:
o Corporation with expired term
o Expired corporation whose certificate of registration has been revoked for non-filing,
provided that it shall file proper petition to lift its revoked status and must settle
corresponding penalties
o Expired corporation whose name has been validly reused and is currently being used
by another, provided that the former shall change its name within 30 days from
issuance of certificate of revival of corporate existence
 Who may not file for revival:
o Expired corporation with completed liquidation process
o Corporation whose certificate of registration has been revoked for reasons other
than non-filing
 o Corporation dissolved by virtue of Sec 6c and 6d of PD No. 902-A as amended by PD
1799
o Expired corporation which already availed of re-registration in accordance with
MEMORANDUM CIRCULAR 13s.2019 or other MEMORANDUM CIRCULAR
except when:
 Re-registered corporation has given consent, has undertaken voluntary
dissolution immediately after issuance of petitioner’s certificate of revival, or
 Re-registered corporation has given consent, has undertaken to change its
corporate name immediately after issuance of petitioner’s certificate of
revival
 Required vote to initiate revival: at least majority vote of BOD, and vote of at least majority
of outstanding capital stock (for nonstock: BOT, members)
 Where to file: Commission’s Company Registration and Monitoring Department (CRMD),
any SEC satellite office, or any SEC extension office
 Payment of fees:
o Petition Fee – P3,060 inclusive of legal research fee and documentary stamp tax
o Filing fee – based on present authorized capital stock of the company
 Procedure of revival:
o File a verified petition for the revival of corporate existence
 Approved by vote of majority of outstanding capital stock
 Change in composition of stockholders or members since expiration, with
reconciliation of changes
 Undersigned are duly elected directors or trustees and officers of petitioner
 As of date of filing, no action or proceeding has been filed or is pending
before any court or tribunal (intra-corporate dispute)
 Revival shall not cause damage, loss, injury
 Petitioner’s name has already been validly reused, petitioner shall change its
corporate name within 30 days from issuance of certificate of revival of
corporate existence
 Expired corporation which already availed of re-registration in accordance
with MEMORANDUM CIRCULAR 13s.2019 or other MEMORANDUM
CIRCULAR except when:
 Re-registered corporation has given consent, has undertaken
voluntary dissolution immediately after issuance of petitioner’s
certificate of revival, or
 Re-registered corporation has given consent, has undertaken to
change its corporate name immediately after issuance of petitioner’s
certificate of revival
o Publish in a newspaper of general circulation its petition for revival stamped
“received” with corresponding docking number within 15 days from filing
o File following evidence within 15 days from publication
 Affidavit of newspaper’s EIC/managing editor/content editor attesting to fact
of publication
 Actual newspaper cutout of publication showing date and name, and all
pages of petition with its attachments
o Parties in interest may file a verified opposition to the petition for revival with a
clear statement of the grounds relied upon within 15 days from date of publication of
verified petition for revival (serve a copy to petitioner and attach such proof to be
filed with the commission)
o Petition for revival and any opposition shall be verified in the same manner as
verified answers
o Party in interest shall file original documents along with 3 copies thereof, which
shall be properly marked
 o Upon filing, petitioner shall pre-mark all evidence to be introduced and shall present
original documents for comparison with photocopies (same goes for opposing party),
shall also make accessible the original to adverse party in order to verify and
compare. In lieu of scheduled conference, they may stipulate in their respective
Petition/Opposition that each of documents is an authentic copy
o Commission may call for a Clarificatory Conference
o If Petition is meritorious, petition is granted and issued a certificate of revival of
corporate existence
o Certificate of revival shall provide for a perpetual term of existence unless a specific
corporate term is stated
 Documentary requirements:
o Photocopy of petitioner’s certificate of incorporation and articles of incorporation
o Photocopy of petitioner’s certificate of filing of amended articles if incorporation and
proposed changes in corporate term to be effected
o Petitioner’s duly accomplished GIS as of date of expiration
o Notarized list of stockholders/members as of date of approval of revival
o Change in composition of stockholders/members since expiration, GIS of petitioner
as of date of approval of resolution to file
o Photocopy of supporting evidence referred to in reconciliation of changes
o Photocopy of petitioner’s AFS as of date of expiration and for year immediately
preceding
o Photocopy of petitioner’s AFS as of a date not exceeding 120 days prior date of filing
for petition for revival and for year immediately preceding
o Photocopy of OR for payment of petition fee and filing fee
o Favorable recommendation of appropriate government agency (banks, preneed,
insurance, NSSLAs, pawnshops, money service business, financial intermediaries)
o Proof of reservation of petitioner’s proposed new corporate name (name already
validly reused)
o Expired corporation which already availed of re-registration in accordance with
MEMORANDUM CIRCULAR 13s.2019 or other MEMORANDUM CIRCULAR
except when:
 Re-registered corporation has given consent, has undertaken voluntary
dissolution immediately after issuance of petitioner’s certificate of revival, or
 Re-registered corporation has given consent, has undertaken to change its
corporate name immediately after issuance of petitioner’s certificate of
revival
 Additional requirement for certain corporations: favorable recommendation of appropriate
government agency for banks, banking and quasi-banking institutions, preneed, insurance
and trust companies, NSSLAs, pawnshops, corporations engaged in money service business,
other financial intermediaries
 Applicability of revised corporation code: revived corporations shall be given a period of 2
years from issuance of certificate of revival to comply with provisions of Revised Corporation
Code
 Appraisal right: without prejudice to appraisal right of dissenting stockholders
 Exemption: in broader interest of justice and in order to best serve public interest; apply
such suitable, fair and reasonable procedure to improve the delivery of public service

3. MC No. 20 s.2019 – Guidelines on the Adoption of Centralized (One-Stop-Shop)

Framework for Accreditation/Selection of External Auditors/Auditing Firms of the
Securities and Exchange Commission, Bangko Sentral ng Pilipinas and Insurance
Commission’s Regulated and Supervised Institutions 13 November 2019
Section 1. Policy statement 

 SEC considers the external auditing profession as a partner in promoting the integrity of
financial reports and transparency in the financial system.
 SEC is issuing the guidelines on the adoption of centralized framework for accreditation/
selection of external auditors (individual practitioners and audit firms) in the financial sector
in line with its cooperative arrangements with the Bangko Sentral ng Pilipinas (BSP),
Insurance Commission (IC), and Philippine Deposit Insurance Corporation (PDIC), under
the auspices of the Financial Sector Forum (FSF).
 The guidelines aim to streamline the accreditation/ selection process for external auditors of
institutions belonging to the financial sector and to promote the ease of doing business. 
Section 2. Definition of terms 

 Conditional accreditation - refers to the approval of the application with shorter validity
period. 
 Delisting - refers to the revocation of the validity of inclusion in the Financial Sector
Regulators' List of Accredited/Selected External Auditors. 
 Engagement Quality Control Reviewer - refers to a partner who is responsible for the audit
engagement quality control review. 
 Financial Sector Regulators - refers to the BSP, SEC, IC and PDIC constituting the FSF. 
 Financial Sector Forum - a voluntary interagency body that aims to: 
a. Facilitate consultations and exchange of information among its members on matters
relating to the supervision and regulation of financial institutions supervised and
regulated by the BSP, SEC or IC or insured by the PDIC; and 
b. Coordinate the regulatory and supervisory policies and efforts of the member
agencies. 
 Key Audit Partners - pertain to the engagement partner (or in most cases, the signing
partner), the engagement quality control reviewer and other audit partners, if any, on the
engagement team who make key decisions or judgments on significant matters with respect to
the audit of the financial statements on which the firm will express an opinion. 
 Lead Partner - refers to the partner or other person in the firm who is responsible for the
engagement and its performance, and for the auditor's report that is issued on behalf of the
firm, and who, where required, has the appropriate authority from a professional, legal or
regulatory body. 
 Manager - refers to a managerial or supervisory staff of the audit engagement 
 Suspension - refers to temporarily barring the external auditor to conduct audit of covered
institutions for a certain period of time. 
Section 3. Covered institutions and appointment of external auditors 

a. External auditors shall be classified into three groups or categories and shall extend their
services to covered entities belonging to the same category or to categories lower than the
category of the external auditor, as follows: 

1. Group A 
Bangko Sentral ng Pilipinas: 

a. Universal/Commercial Banks
b. Foreign Banks and branches or subsidiaries of foreign banks
 c. Banks, trust departments and trust corporations with additional
derivatives authority 
Securities and Exchange Commission: 

a. Issuers of registered securities which have sold class of securities pursuant to a
registration under the Securities Regulation Code except those issuers of registered
time shares, proprietary and non-proprietary membership certificates which are
covered in Category
b. This category shall also cover corporations applying for the registration of their
securities; b. Issuers with a class of securities listed for trading in an Exchange
c. Public companies or those which have total assets of at least Fifty Million
Pesos (P50 million) or such other amount as the Commission shall prescribe, and
having Two Hundred (200) or more holders each holding at least One
Hundred (100) shares of a class of its equity securities
d. Clearing Agency and clearing agency as depository
e. Stock and securities exchange/s and other Self-Regulatory Organizations. 
Insurance Commission: 

a. Insurance companies
b. Reinsurance companies
c. Mutual benefit associations (MBA)

2. Group B. 
Bangko Sentral ng Pilipinas: 

a. Thrift Banks
b. Non-bank financial institutions with quasi-banking license
c. Trust departments and trust corporations
Securities and Exchange Commission: 

a. Issuers of registered timeshares, proprietary and non-proprietary

membership certificates, and corporations applying for the registration of such
securities
b. Investment houses
c. Brokers and dealers of securities
d. Investment companies that are not in the process of registering securities or have no
registered securities yet
e. Government securities eligible dealers
f. Universal banks registered as underwriters of securities; g. Investment company
advisers; 
g. Special purpose corporations registered under the Securitization Act of 2004 and its
implementing rules
h. Such other corporations which may be required by law to be supervised by
the Commission. 
Insurance Commission: 

a. Trust for charitable uses

b. Pre-need companies
c. Health Maintenance Organizations (HMO) companies
 d. Insurance, reinsurance, pre-need and HMO brokers

3. Group C 
Bangko Sentral ng Pilipinas: 

a. Rural and Cooperative Banks

b. Non-stock Savings and Loan Associations
c. Pawnshops
d. Remittance and Transfer Companies (RTCs)/Money Changers/Foreign Exchange
Dealers (MCs/FXDs), including Virtual Currency Exchanges and Electronic Money
Issuers
e. Credit Card Issuers/ Acquirers. 
Securities and Exchange Commission: 

a. Financing Companies whose assets in the preceding year are above Ten
Million Pesos (P10 Million)
b. Lending Companies whose assets in the preceding year are above Five Million Pesos
(P5 Million)
c. Transfer agents
d. Non-stock, non-profit corporations including foundations which solicit or receive
annual donations or contributions and/or with fund balance amounting to more than
Twenty-Five Million Pesos (P25 Million) and One Hundred Million Pesos (P100
Million), respectively, over the preceding three (3) years or such other amount that
the Commission may set through order or guidelines. 
A non-stock, non-profit corporation that is already scoped in by the above
requirement can only be excluded if its annual donations or contributions and/or
fund balance fall below Twenty-Five Million Pesos (P25 Million) and One Hundred
Million Pesos (P100 Million), respectively, over the preceding three (3) years; and 

e. Such other corporations that the Commission may consider as imbued with public
interest regardless of the lack of a requirement to obtain a secondary license from
the Commission. 
Insurance Commission: 

a. Micro-MBAs
b. General Agents

b. Covered institutions shall engage the services of an external auditor included in the List of
Accredited/Selected External Auditors for covered institutions supervised by the Financial
Sector Regulators. Covered institutions shall only appoint an external auditor belonging to
the same category or from higher categories than what is required for the covered
institutions: Provided, that the respective Financial Sector Regulators may require covered
institutions to appoint an external auditor from higher categories than what is required as
part of its supervisory action on the covered institution. 
c. Lead partners and engagement quality control reviewers of the audit firms appointed by
covered entities shall be included in the Financial Sector Regulators' List of
Accredited/Selected External Auditors. They shall be subject to the same
accreditation/selection process in accordance with this MC. In the event that the selected
partners leave the audit firm prior to the expiration of his/her inclusion, he/she may only
 audit covered institutions under Category C unless he/she is subsequently included in the
Financial Sector Regulators' list of Accredited/Selected External Auditors as an individual
external auditor under another category. 
d. As required under Revised Securities Regulation Code (SRC) Rule 68, the independent
auditors or key audit partners shall comply with the provisions on long association of
personnel (including partner rotation) with an audit client as prescribed in the Code of
Ethics for Professional Accountants in the Philippines as adopted by BOA and PRC and such
other standards as may be adopted by the SEC. 
e. The Financial Sector Regulators shall not be held responsible for any liability or loss that
may arise from the accreditation/ selection of the external auditor engaged by covered
entities for audit or non-audit services. 
f. The accreditation/ selection of external auditor shall be valid for five (5) years or for a
shorter period prescribed by the Financial Sector Regulators, unless suspended or delisted by
the Financial Sector Regulators based on their respective applicable rules and regulations. It
is the responsibility of the accredited/selected external auditors to maintain the validity of
their PRC/BOA Accreditation during the effectivity of their accreditation with the Financial
Sector Regulators. 
g. The approval or grant by the SEC of the application for accreditation/inclusion in the List of
Accredited/Selected External Auditors of institutions supervised and regulated by the BSP
and IC shall be subject to the prior clearance and concurrence of the BSP and/or IC, as
applicable. 
h. The suspension or delisting of the external auditors shall be the sole responsibility of each of
the Financial Sector Regulators. The regulator concerned shall inform the SEC of the
suspension or delisting of the external auditor. 
Section 4. Independence of external auditor 

 External auditor shall fully meet the independence requirements provided under the Code of
Ethics for Professional Accountants in the Philippines on a continuing basis. 
Section 5. Qualification requirements 

 An accredited/ selected external auditor shall have the following qualifications at the time of
application:

a. Individual external auditor or Partner of an Audit Firm 

1. Accredited and licensed by the PRC/BOA
2. Has at least five (5) years experience in external audit as a manager, lead partner,
engagement quality control reviewer or its equivalent (as previously/currently
employed in an auditing firm)
3. Has established adequate quality assurance procedures to ensure full compliance
with recognized standards in accounting, and regulatory requirements
4. Has attended or participated in training for at least 120 hours in subjects
like international financial reporting and auditing standards, corporate governance,
taxation, code of ethics and regulatory requirements of the BSP, IC and SEC relevant
to the practice and qualified as a form of compliance with the Continuing
Professional Development Program of the BOA
5. At the time of application, the applicant must have the following track record: 
BSP: 
 a. For Category A, he/she must have audited at least one (1) covered
client under Category A or at least five (5) BSP-Supervised
Financial Institutions (BSFI) clients under Category B
b. For Category B, he/she must have at least two (2) covered clients
under Category B or at least six (3) BSFI clients under Category C
c. For Category C, he/she must have at least three (3) covered
corporate clients with total assets of at least P10 Million. 
SEC: 

a. For Group A applicant, he/she shall have had a minimum of five

(5) corporate clients with total assets of at least Fifty Million Pesos
(P50 Million) each, or such amount as may be prescribed by the
SEC
b. For Group B, he/she shall have had a minimum of three (3)
corporate clients with total assets of at least Twenty Million Pesos
(P20 Million) each, or such amount as may be prescribed by the
Commission
c. For Group C, he/she shall have had a minimum of three (3)
corporate clients with total assets of at least Five Million Pesos (P5
Million) each, or such amount as may be prescribed by the SEC. 
IC: 

a. For Group A, the applicant must have audited at least five (5) IC-
regulated entities under Group A either as lead or engagement
quality control reviewer, or at least ten (10) IC-regulated entities
under Group B, or ten (10) corporate clients with at least Fifty
Million Pesos (P50 Million) each. Provided further, there are no
material findings on the quality of his/her audit work within the last
three (3) years
b. For Group B, the applicant must have audited at least three (3) IC-
regulated entities under Group B either as lead or engagement
quality control reviewer, or at least five (5) IC-regulated entities
under Group C, or five (5) corporate clients with total assets of at
least Twenty Million Pesos (P20 Million) each. Provided further,
there are no material findings on the quality of his/her audit work
within the last three (3) years. 
c. Group C, he shall have had a minimum of three (3) IC-regulated
entities under Group C either as lead or engagement quality control
reviewer, or at least five (5) corporate clients with total assets of at
least Five Million Pesos (P5 Million) each. Provided further, there
are no material findings on the quality of his/her audit work within
the last three (3) years. 

b. Audit Firm 
1. Must be accredited with the PRC/BOA and the name of the partners applying
for accreditation, selection should appear in the attachment to the certificate
of accreditation issued by the PRC/BOA
2. Must have established adequate quality assurance procedures to ensure
full compliance with the recognized standards in accounting, auditing and
regulatory requirements
3. Must have partner/s, who are accredited/ selected under the same category as
the audit firm is applying for, at the time of application and during the validity of its
inclusion in the Financial Sector Regulators' List of Accredited/Selected
External Auditors
4. At the time of application, the applicant firm must have the following track record: 
BSP: 

a. For Category A, the applicant firm must have audited at least five (5)
covered clients under Category A or ten (10) covered clients under
Category B
b. For Category B, the applicant firm must have audited at least three
(3) covered clients under Category B or five (5) covered clients
under Category
c. For Category C, the applicant firm must have audited at least five
(5) corporate clients with total assets of at least Fifty Million Pesos
(P50 Million) each. 
SEC: 

a. For Group A applicant, he shall had a minimum of five (5) corporate

clients with total assets of at least Fifty Million Pesos (P50 Million)
each, or such amount as may be prescribed by the Commission
b. For Group B, he shall have had a minimum of three (3) corporate
clients with total assets of at least Twenty Million Pesos (P20
Million) each, or such amount as may be prescribed by the
Commission
c. For Group C, he shall have had a minimum of three (3) corporate
clients with total assets of at least Five Million Pesos (P5 Million)
each, or such amount as may be prescribed by the Commission. 
IC: 

a. For Group A, the applicant audit firm must have audited at least five
(5) IC regulated entities under Group A, or at least ten (10) IC-
regulated entities under Group B, or ten (10) corporate clients with
at least Fifty Million Pesos (P50 Million) each. Provided further,
there are no material findings on the quality of audit work within the
last three (3) years
b. For Group B, the applicant audit firm must have audited at least
three (3) IC regulated entities under Group B, or at least five (5) IC-
regulated entities under Group C, or five (5) corporate clients with
total assets of at least Twenty Million Pesos (P20 Million) each.
Provided further, there are no material findings on the quality of
audit work within the last three (3) years
c. For Group C, the applicant firm must have audited at least three (3)
IC regulated entities under Group C or five (5) corporate clients
with total assets of at least Five Million Pesos (P5 Million) each.
Provided further, there are no material findings on the quality of
his/her audit work during the last three years. 
Section 6. Application/renewal documentary requirements 

a. A notarized Application Form (Form 1 for Audit Firm; Form 2 for Individual External
Auditor) shall be submitted by the applicant to the SEC, together with the following
supporting documents: 
For Initial Application: 

1. Copy of a valid PRC/BOA Certificate of Accreditation or PRC Accreditation under

Philippine bilateral agreements, with attachment listing the name of qualified
partner/s of the firm (as applicable)
2. Notarized certification that the applicant has attended or participated in training for
at least 120 hours in subjects like international financial reporting and auditing
standards, corporate governance, taxation, code of ethics and regulatory
requirements of the BSP, IC and SEC relevant to the practice and qualified as a form
of compliance with the Continuing Professional Development Program of the
PRC/BOA
3. Copy of the Quality Assurance Manual
For Renewal Application: 

1. Copy of a valid PRC/BOA Certificate of Accreditation or PRC Accreditation under

Philippine bilateral agreements, with attachment listing the name of qualified
partner/s of the firms (as applicable)
2. Notarized certification that the applicant has attended or participated in training for
at least 120 hours in subjects like international financial reporting and auditing
standards, corporate governance, taxation, code of ethics and regulatory
requirements of the BSP, IC and SEC relevant to the practice and qualified as a form
of compliance with the Continuing Professional Development Program of the
PRC/BOA
3. Copy of Amended Quality Assurance Manual (if any)
b. The external auditor shall apply for renewal within the first six (6) months of the last year of
validity of its inclusion in the Financial Sector Regulators' List of Accredited/Selected
External Auditors. 
c. The applicable fees currently collected by each of the Financial Sector Regulators shall
apply in the applications for accreditation/ selection of External Auditors until the same has
been adjusted or increased by the SEC. 

 SEC Conditional Accreditation granted under this Memorandum Circular shall be for a
period of one audit year only.
 The external auditors granted a Conditional Accreditation shall file a new application before
the expiration of the same. 
Section 7. Reportorial requirements 

 The external auditor included in the List of Accredited/Selected External Auditors shall
adhere to the regulatory and reportorial requirements set out by the respective Financial
Sector Regulators of the covered institutions. 
Section 8. Suspension and/or delisting of external auditors in the list of accredited/selected external
auditors 
  An external auditor included in the List of Accredited/Selected External Auditors shall be
suspended or delisted by the Financial Sector Regulator based on its applicable rules and
regulations 
 The suspension or delisting shall be the sole responsibility of each of the Financial Sector
Regulators.
 The regulator shall inform the SEC of the suspension and/or delisting including the grounds
for the same. 
Section 9. Transitory provision 

 External auditors whose validity will expire on or before December 31, 2020 are hereby
given an extension of their accreditation allowing them to engage in the audit of the 2019
financial statements. 

4. MC No. 16 s.2019 – Guidelines on the Number and Qualifications of Incorporators

Under the Revised Corporation Code 30 July 2019

TO: ALL CONCERNED

SUBJECT: GUIDELINES ON THE NUMBER AND QUALIFICATION OF INCORPORATORS

UNDER THE REVISED CORPORATION CODE

WHEREAS:

Section 10 of Republic Act No. 1 1232, otherwise known as the Revise Corporation Code of the
Philippines, allows any person, partnership, association corporation, singly or jointly with others but
not more than fifteen (15) in number, to organize a corporation for any lawful purpose or purposes;

The Securities and Exchange Commission (SEC) deems it necessary to issue guidelines for the clear
and proper implementation of the foregoing provision of law;

The SEC adopts the following guidelines on the composition of incorporators for the registration of
domestic corporations under the Revised Corporation Code:

Number of incorporators

For the purpose of forming a new domestic corporation under the Revised Corporation Code, two
(2) or more persons, but not more than fifteen (15], mayor ganize themselves and form a corporation.

Only a One Person Corporation (UPC) may have a single stockholder, as well as a sole directori
Accordingly, its registration must comply with the corresponding separate guidelines on the
establishment of an OPC.

Definition of incorporators

incorporators are those stockholders or members mentioned in the Articles of Incorporation as

originally forming and composing the corporation, and who are signatories thereof.

Qualifications of incorporators
Each incorporator of a stock corporation must own, or be a subscriber to, at least one [1) share of
the capital stock, each incorporator of a nonstock corporation must be a member of the corporation.
The incorporators may be composed of any combination of natural person/s, SEC-registered
partnership/s, SEC-registered domestic corporation/s or association/s, as well as foreign
corporation/st
incorporators who are natural persons must be of legal age, and must sign the Articles of
Incorporation/ Bylaws.
Partnerships as incorporators
In the event that an SECerecorded partnership is made an incorporator, the application for
registration must be accompanied by a Partners' Affidavit, duly executed by all the partners, to the
effect that they have authorized the partnership to invest in the corporation about to be formed and
that they have designated one of the partners to become a Signatory to the incorporation documents.
Partnerships under "dissolved" or “expired" status with the SEC shall not be authorized to become
an incorporator.
Domestic Corporations or Associations as incorporators
In the event that an SEC-registered domestic corporation or association is made an incorporator, its
investment in the new corporation must be approved by a majority of the board of directors or
trustees and ratified by the stockholders representing at least two-thirds (2/3] ofthe outstanding
capital stock, or by at least two thirds [2/3) of the members in the case of nonstock corporations, at a
meeting duly called for the purpose.
A Directors'/Trustees' Certificate or a Secretary's Certificate, indicating the necessary approvals, as
well as the authorized signatory to the incorporation documents, shall be executed under oath and
submitted by the applicant.
Domestic corporations under "delinquent", “suspended", “revoked" or "expired" status with the SEC
shall not be authorized to become an incorporator.
Foreign Corporations as incorporators
In the event that a foreign corporation is made an incorporator, the application
for registration must be accompanied by a copy of a document duly authenticated‘by a Philippine
Consulate or with an apostille affixed thereto. authorizing the foreign corporation to invest in the
corporation being formed and specifically naming the designated signatory on behalf of the foreign
corporation
Signatories of the Articles of Incorporation
Each individual signing the Articles of incorporation/ Bylaws must indicate the capacity upon which
he/she is affixing his/her signature thereto. An individual designated to sign the Articles of
Incorporation/ Bylaws on behalf of an incorporator, which is not a natural person. must also indicate
the corporate or partnership name of the entity being represented and for who he/she is executing the
Articles of incorporation/ Bylaws.
The Taxpayer identification Number (TIN) of the principal, as well as the designated signatory,
should both be indicated in the Articles of incorporation.
No application for incorporation shall be accepted unless the registration documents reflect the TIN
or passport number of all its foreign investors other than foreign corporations which have not yet
been issued a Taxpayer Identification Number.
After incorporation, all the foreign investors, natural or juridical. shall secure a Taxpayer
identification Number. All documents to be filed with the SEC after Incorporation {2.9, General
Information Sheets] shall not be accepted unless the TIN of all its foreign investors, natural or
juridical, resident or non-resident, are indicated therein.
Designation of Incorporators as Directors or Trustees
An individual who signs the Articles of incorporation on behalf of an incorporator, which is not a
natural person. may not be named as a director or trustee in the same Articles of incorporation,
unless when the said individual is also the owner of at least one (1) share of stock. or is also a
member. of the corporation being formed.
Foreign Nationals in the Articles of Incorporation
The inclusion of foreign nationals in the Articles of Incorporation shall be subject to the applicable
constitutional. statutory, and regulatory restrictions, as well as conditions, with respect to foreign
participation in certain investment areas or activities.
Additional Requirements for Certain Corporations
No Articles of Incorporation of banks, banking and quasi-banking institutions, preneed, insurance
and trust companies. NSSLAS, pawnshops, and other financial intermediaries shall be approved
unless accompanied by a favorable recommendation of the appropriate government agency to the
effect that the Articles of Incorporation are in accordance with law.
Processing of Applications
The processing of applications for registration in accordance with the new provisions of the Revised
Corporation Code shall be done manually by the Company Registration and Monitoring Department
and the Extension Offices of the SEC. until further notice

5. MC No. 15 s.2019 – Amendment of SEC Memorandum Circular No. 17, Series of

2018 on the Revision of the General Information Sheet (GIS) to include Beneficial
Ownership Information (“2019 Revision of the GIS”) 26 July 2019

Subject:

Amendment of SEC memorandum circular no. 17, series of 2018 on the revision of the general
information sheet to include beneficial ownership information

Coverage

Shall apply to all SEC registered stock and non-stock domestic corporations required to submit the
GIS under existing laws, rules, and regulation

Definition of terms

 Beneficial owner- Any natural person(s) who ultimately own(s) or control(s) or exercise(s)
ultimate effective control over the corporation. Determined on the basis of the following:
o Natural person(s) owning, directly or indirectly or through a chain of ownership at
least 25% of the voting rights, voting shares or capital of the reporting corporation
o Natural person(s) who exercise control over the reporting corporation, alone or
together with others, through any contract, understanding, relationship, intermediary
or tiered entity
o Natural person(s) having the ability to elect a majority of the board of
directors/trustees, or any similar body, of the corporation
o Natural person(s) having the ability to exert a dominant influence over the
management or policies of the corporation
 o Natural person(s) whose directions, instructions or wishes in conducting the affairs
of the corporation are carried out by majority of the members of the BOD
o Natural person(s) acting as stewards of the properties of corporations where such
properties are under the care or administration of said Natural person(s)
o Natural person(s) who actually own or control the reporting corporation through
nominee shareholders or nominee directors acting for or on behalf of such natural
persons
o Natural person(s) ultimately owning or controlling ore exercising ultimate effective
control over the corporation through other means not falling under any of the
foregoing categories
o Natural person(s) exercising control through positions held within a corporation.
 Only applicable in exceptional cases where no natural person is identifiable
who ultimately owns or exerts control over the corporation
 Beneficial ownership information- Identification documents or information on the beneficial
owner of the corporation
 Direct ownership- Ownership of shares in the reporting corporation and not through
ownership of shares in a corporate shareholder nor any intermediate layers of corporate
shareholders
 Dominant influence- Situation in which the instructions or directions given by any natural
person, who may or may not be a stockholder of the reporting corporation, on the
management or policies of the corporation, are always or almost always followed
 GIS- General Information Sheet
 Grandfather Rule- The method by which the percentage of Filipino equity in a corporation
engaged in nationalized and/or partly nationalized areas of activities, provided for under the
Constitution and other nationalization laws, is computed, in cases where corporate
shareholders are present, by attributing the nationality of the second or even subsequent tier
of ownership to determine the nationality of the corporate shareholder.
 Indirect Ownership- Type of ownership through one’s percentage of ownership in a
corporate shareholder of a corporation or through layers of corporate shareholders
 Legal Owner- Natural or juridical person who owns or has the controlling ownership interest
over the corporation or has the ability of taking relevant decisions within the corporation and
impose those resolutions
 Multiple Layers- Layers of corporations comprising the ownership structure of the reporting
corporation
 Reporting Corporation- Refers to the corporation submitting ore required to submit the GIS
to the commission
 Senior Managing Official- The natural person who exercises executive control over the daily
or regular affairs of the corporation through a senior management position
 Ultimate Effective Control- Any situation in which ownership/control is exercised through
actual or a chain of ownership or by means other than direct control
 Voting right- The right of the members of a Non-stock corporation to vote which may be
limited, broadened or denied the Articles of Incorporation or the By- Laws

Disclosure of Beneficial ownership information

All SEC registered corporations are required to take reasonable measures to obtain and hold up-to-
date information on their beneficial owners as defined herein and to disclose the same in a timely
manner in the GIS.
The following information on the beneficial owner shall be provided:

 A complete name which shall include the surname, given name, middle name, and name
extensions
 Specific residential address
 Date of Birth
 Nationality
 Tax identification number
 Percentage of ownership
Identification of Beneficial Owner

 The identity of the natural person(s) who ultimately has controlling ownership in the
corporation. For this purpose, any natural person owning at least 25% (shares or voting
rights) of the corporation shall be considered as a beneficial owner.
 The identity of the natural persons (if any) exercising control of the corporation through
other means.
 The identity of the natural persons composing the Board of Directors/Trustees or any similar
body and/or the senior management official of the reporting corporation.
Determination of Natural Person Who Ultimately Owns the Corporation through Indirect
Ownership

In determining the natural person(s) who ultimately owns the corporation, the percentage of
ownership shall be computed using the methodology applied in the “Grandfather Rule”. The natural
person(s) who ultimately owns at least twenty-five percent (25%) of the voting shares or capital of the
reporting corporation through ownership of shares in a corporate stockholder or through multiple
layers of corporate stockholders shall be considered as a Beneficial Owner. To arrive at the actual
percentage of beneficial ownership in the reporting corporation, both the direct and indirect
shareholdings in the corporation shall be considered.

Members of the Board of Directors/Trustees or Any similar Body and/or Senior Managing Official
as Beneficial owner/s Exceptional Cases

In exceptional cases where no natural person is identifiable who ultimately owns or exerts control
over the corporation, the reporting corporation having exhausted all other means of identification
and provided there are no grounds for suspicion, may consider the senior managing official of the
reporting corporation to be the beneficial owner(s).

Obligation of Directors/Trustees and Officers

The Directors/Trustees and Officers shall exercise due diligence required in ensuring that the
requirement to disclose its beneficial owner in the GIS is complied with.

Validating Information

The Commission may, at any reasonable time, check the validity of the beneficial ownership
information provided in the GIS through an on-site inspection of the books and records of the
corporation and/or through other means available which may include but not limited to information
that may be obtained from other sources such as the books and records of other corporate entities
and data gathered from investigations conducted by law enforcement agencies and the AMLC.
Modification in the GIS

The Beneficial ownership declaration page and the Attestation page in the GIS shall be in the form as
appearing in the corresponding pages in Annex “B” (GIS for Stock Corporations) and Annex “C”
(GIS for Non-stock corporations)

Penalties

Failure to disclose

Failure to disclose the Beneficial Owner of the reporting corporation in accordance with this
Circular is tantamount to non-filing/nonsubmission of the GIS and the erring corporation shall be
penalized accordingly

For Stock Corporations with retained earnings of less than Php 500,000:

a) First violation Php 10,000

b) Second violation Php 20,000
c) Third violation Php 50,000
d) Fourth and subsequent violations Php 100,000
For Non-Stock Corporations with fund balance of less than Php 500,000:

a) First violation Php 5,000

b) Second violation Php 10,000
c) Third violation Php 20,000
d) Fourth and subsequent violations Php 50,000
For stock corporations with retained earnings or non-stock corporations with fund balance of Php
500,000 or more but less than Php 5,000,000, the penalties shall be twice the amount imposed above.

For stock corporations with retained earnings or non-stock corporations with fund balance of Php
5,000,000 or more but less than Php 10,000,000, the penalties shall be thrice the amount imposed
above.

For stock corporations with retained earnings or non-stock corporations with fund balance of Php
10,000,000 or more, the penalties shall be four times the amount imposed above.

Liability of Directors/Trustees and/or Officers of the Corporation

After due notice and hearing, corporate Directors/Trustees and/or Officers who fail to exercise due
diligence in ensuring the compliance with the disclosure of beneficial ownership requirement shall be
held liable by the Commission. Penalties to be imposed on such erring directors, trustees, and/or
officers are:

a) First violation Php 5,000

b) Second violation Php 10,000
c) Third violation Php 20,000
d) Fourth and subsequent violations Php 50,000
Submission of GIS in Electronic Format

The submission of the GIS in electronic format pursuant to SEC Memorandum Circular No. 6, Series
of 2006 is hereby suspended until further notice.

Submission of the GIS with the Required Beneficial Ownership Information.

The GIS as provided for in this Circular shall be used by corporations whose GIS are due for
submission beginning 30 June 2019.

6. MC No. 13 s.2019 – Amended Guidelines and Procedures on the Use of Corporate

and Partnership Names 21 June 2019

 Guidelines and procedures in registration of corporate, one person corporate and

partnership names:
o Contains the word “corporation” or “incorporated” or “corp.” or “inc.”
o Contain the word “OPC” either below or at the end of corporate name
o Partnership name shall contain “company” or “co.”, if limited it will contain
“limited” or “ltd.”, while professional partnerships may bear “company”,
“associates”, or “partners” or other similar descriptions
o Corporate name of foundation shall use “foundation”
o All businesses in microfinance activities shall use the word “microfinance” or
“microfinancing” provided that they state in their purpose clause that they shall
conduct microfinance operations pursuant to RA 8425
 A term that describes the business of a corporation in its name should refer to its primary
purpose. If there are 2 terms, then primary before secondary purpose
 Distinguishable name from other corporate/partnership names
o if similar to that of one registered, they shall add one or more distinctive words (but
shall not be allowed if registered name is coined or unique unless the BOD gives
consent)
o punctuation marks, spaces, symbols and the like do not count as distinguishing words
for purposes of differentiating a proposed name
o name consisting of special symbols will not be registered
 Business/trade name different from corporate name shall be indicated in Articles of
Incorporation/Partnership, and they may have more than 1
 Trade name or trademark registered with IPO may be used as part of corporate name if
latter gives consent
 Own name:
o Full name or surname may be used if he/she is a stockholder/member/partner of said
entity and has consented, if already dead, then consent shall be given by his/her
estate
o OPC may use own name accompanied with descriptive words, may also use name of
other person with consent and descriptive words
o Commission may require registrant to explain the reason for use of person’s name
o Meaning of initials shall be stated in Articles of Incorporation/Partnership or
separate document signed by incorporator/director/partner
 Name of internationally known foreign corporation cannot be used by a domestic corp unless
its subsidiary and parent corporation has consented;
o Name in foreign language that violates good morals, public order or policy, has
offensive or indecorous meaning shall not be registered
 Name of local geographical unit, site or location cannot be used as corporate name unless
with descriptive word or phrase
 Following words and phrases can be used in the manner enumerated below:
o “Finance Company”. “Financing Company”, “Finance and Leasing Company”,
“Leasing Company”, “Investment Company”, “Investment House” – engaged with
financing or investment house business
o “Lending Company”, “Lending Investor” – lending companies, or “Pawnshop” –
pawnshops
o “Bank”, “Banking”, “Banker”, “Savings and Loan Association”, “Trust
Corporation”, “Trust Company” – banking or trust business
 o “United Nations”, “UN” – exclusive to United Nations and its attached agencies
o “Bonded” – licensed warehouses
o “SPV-AMEMORANDUM CIRCULAR” – authorized to act as special purpose
vehicle
o International government organization (like INTERPOL) may not be used unless duly
authorized by the Commission
o ASEAN
 Practice of a profession regulated by a special law provides for permissible use of
profession’s name
 Following words and phrases can only be used by those mentioned:
o “Investment(s)” or “capital” – investment house or company
o “capital” – investment house/company, holding company
o “asset/investment/fund/financial management” or “asset/investment/fund/financial
adviser” – investment company adviser or holders of investment management
activities (IMA) license from BSP
o “National, bureau, commission, state” – governmental functions
o “association/organization” – non-stock corporations in non-profit activities
o “Stock exchange/futures exchange/derivatives exchange”, “stock broker/securities
broker/derivatives broker”, “commodity/financial futures merchant/broker”,
“securities clearing agency/stock clearing agency”, “plans” – exchange, broker
dealer, commodity futures broker, clearing agency, pre-need company under SRC
 RA 10530 – the use of “red cross” “red crescent” or “red crystal” cannot be used unless
with consent of Philippine Red Cross
 Enumeration of the above are not exclusive and may increase or decrease
 Name of business that has been dissolved or registration is revoked shall not be used within 5
years from approval of dissolution or 5 years from date of revocation, unless use has been
allowed at the time of dissolution/revocation
 No application for re-registration of expired corporation shall be processed unless
application is accompanied by the following:
o Board Resolution, executed and signed under oath by hold-over BOD attesting that:
 Applicant for re-registration is new corporation intending to use name
(specially identifying corporate name and registration number)
 Re-registration is approved by majority vote of directors/trustees and vote of
stockholders holding majority outstanding capital stock
 Include statement in AoI that the same is using name of expired corporation
 No longer file petition to set aside order of revocation (if applicable)
o Latest GIS of expired corporation, stamped “received” by Commission
o Affidavit executed under oath by hold-over corporate secretary that:
 No properties owned by dissolved/revoked corporation due for liquidation;
no properties is transferred to the new corporation, (stock) non used for
subscription payment without undergoing corporate liquidation process
 No pending intra-corporate dispute or claim involving expired corporation
 Expired corporation has no derogatory information with the Commission
o Upon approval, CoR to be issued shall indicate new SEC registration number and
pre-generated TIN as confirmation that same is a distinct and separate entity
 Corporate/partnership name previously used but becomes subject of amendment shall not be
used for a period of 3 years from date of approval of adoption of name
o Earlier period may be allowed if they give consent
o Corporations: Directors/Trustees Certificate & Secretary Certificate of non-
existence of intracorporate dispute
o Partnerships: Partnerships’ Resolution
o OPC: consent of sole stockholder/designated nominee in notarized instrument and
countersigned by corporate secretary
  Name of absorbed/constituent corporation may not be used unless it is the surviving
corporation, and another corporation may use if consent is obtained such as:
o Director’s Certificate
o Secretary’s Certificate
 Reservation or notice of availability of name shall not constitute approval; no erasures,
changes allowed on name reservation form, and appeals from or opposition to approval, or
complaints shall be resolved by the CRMD.
 At time of registration, submit an affidavit containing unqualified undertaking to change
name immediately upon receipt of notice by the Commission that another has the name and
etc.
 Affidavit shall be signed by at least 2 incorporators or partners.

7. MC No. 07 s.2019 – Guidelines on the Establishment of a One Person Corporation

(OPC) 26 April 2019

Subject:

Guidelines, rules and regulations in the establishment of a one Person Corporation

Definition and Incorporator:

 One-person corporation (OPC)- A corporation with a single stockholder, who can only be a
natural person, trust or estate.
 The incorporator of an OPC being a natural person must be of legal age
 Trust (as an incorporator)- The subject being managed by a trustee
 If the single stockholder is a trustee, administrator, executor, guardian, conservator,
custodian, or other person exercising fiduciary duties, proof of authority to act on behalf of
the trust or estate must be submitted at the time of incorporation
Term of Existence:

 OPC (Natural person)- Perpetual

 OPC (Trust or estate)- Co-terminous with the existence of the trust or estate.
Corporate Name:

The suffix “OPC” should be indicated either below or at the end of its corporate name.

Single Stockholder as Director and Officer:

The single stockholder shall be the sole director and president

Designation of Nominee and Alternate Nominee:

The stockholder is required to designate a nominee and an alternate nominee named in the Articles of
Incorporation who shall replace the single stockholder in the event of the latter’s death and/or
incapacity.

 The written consent of both nominee and alternate nominee shall be attached to the
application for incorporation
Only Articles of Incorporation Needed:
Must set forth

 Its primary purpose

 Principal office address
 Term of existence
 Names and details of the stockholder
 Paid-up capital
 Other matters consistent with law and which may deem necessary and convenient
Minimum Capital Stock and Bylaws not required:

 OPC is not required to submit and file its Bylaws

 OPC is not required to have a minimum authorized capital stock except as otherwise
provided by special law.
Officers:

Within 15 days from the issuance of its Certificate of Incorporation the OPC shall appoint:

 Treasurer
 Corporate Secretary
 Other officers
The OPC shall the notify the SEC thereof within five days from appointment.

Bond Requirement for the Self- Appointed Treasurer

The stockholder who assumes the position of the Treasurer shall post a surety bond to be computed
based on the authorized capital stock (ACS) as shown:

Authorized Capital Stock Surety Bond Coverage

1 to 1,000,000 1,000,000
1,000,001 to 2,000,000 2,000,000
2,000,001 to 3,000,000 3,000,000
3,000,001 to 4,000,000 4,000,000
4,000,001 to 5,000,000 5,000,000
5,000,001 and above Shall be equal to the OPC’s ACS

 Subject to renewal every two years or upon review of the annual submission o the Audited
Financial Statements certified under oath by the company’s President and Treasurer
 The bon is a continuing requirement for so long as the single stockholder is the self-
appointed Treasurer
 The bond may be cancelled upon proof of appointment of another person as the Treasurer
and Filing of Amended Form for Appointment of Officers
Change of Nominee or Alternate Nominee

At any time, the OPC may change its nominee and alternate nominee by submitting to the
Commission the names of the new nominees and their corresponding written consent.
Incapacity or Death of the Single Stockholder

When the stockholder Incapacitated- The nominee can take over as director and president until the
end of incapacity

When stockholder is dead or permanently incapacitated- The nominee will take over management
until the legal heir have been lawfully determined and the heirs have agreed among themselves who
will take the place of the deceased

Reportorial Requirements

Shall submit the following documents within the period required by the SEC:

 Annual audited financial statements within 120 days from the end of its fiscal year
o Provided that if the total assets or liabilities of the corporation are less than six
hundred thousand pesos, the financial statement shall be certified under the oath by
the corporation treasurer
 Report on all the Explanations or comments by the president on the qualification, reservation
or adverse remarks made by the auditor in the financial statements
 Disclosure of all self-dealing and related party transactions
 Other reports as the SEC may require
Who are Not Allowed to Form OPCs

 Banks
 Non-bank Financial institutions
 Quasi-banks
 Pre-need
 Trust
 Insurance
 Public and publicly listed companies
 Non-chartered government-owned and controlled corporation
 A natural person who is licensed to exercise a profession may not organize an OPC for the
purpose of exercising such profession
Foreign National

A foreign natural person may put up an OPC, subject to the applicable capital requirement and
constitutional and statutory restrictions on foreign participation in certain investment areas or
activities.

8. MC No. 01 s.2019 – 2019 Filing of Annual Financial Statements and General

Information Sheet 11 January 2019

To maintain an organized and orderly filing of AFS and GIS the following should be followed:
I. ANNUAL FINANCIAL STATEMENTS
 All corporations (branch offices, representative offices, regional HQs, and regional
operating HQs of foreign corporations) shall file their AFS in accordance to the last digit of
their SEC registration or license number:

Submission/Filing Dates Last Digit of License

 Number

April 22, 23, 24, 25, 26 1&2

April 29, 30, May 2 and 3 3&4

May 6, 7, 8, 9, 10 5&6

May 20, 21, 22, 23, 24 7&8

May 27, 28, 29, 30, 31 9&0

 Any corporation may file before its respective filing date.

 The following corporations are exemptions to the above rule:
Type of Corporation Submission/Filing Dates
Those whose fiscal year ends on a date other 120 days from the end of their fiscal year
than December 31
Broker Dealer whose fiscal year ends on Based on the general rule/dates above
December 31
Broker Dealer whose fiscal year ends on a 110 days from the end of such fiscal year
date other than December 31
Corporations whose securities are listed on Within 105 calendar days after the end of
the PSE and those whose securities are fiscal year
registered but not listed in PSE.
Those whose AFS are audited by COA Not specified
provided they are:
i. signed by the President and Treasurer
attesting to their timely submission to
COA;
ii. confirmed by COA through an affidavit.

 All corporations may file their AFS regardless of the last numerical digit on or before the last
day stated in the coding schedule pertaining to said digit.
 Late filings shall be accepted starting June 3, 2019. Penalty will be computed from the date
of the last day of filing schedule.
 AFS will be stamped with “received by BIR” unless the BIR allows an alternative proof of
submission.
 The basic components of AFS as prescribed by the SRC shall be submitted by filers.
 Failure to comply with requirements under said Rule shall be considered a sufficient ground
for imposition of penalties by the SEC.

II. GENERAL INFORMATION SHEET

 All corporations shall file their GIS within 30 calendar days from:
o Stock – date of actual annual stockholders’ meeting
o Non-stock - date of actual annual members’ meeting
o Foreign – anniversary date of the issuance of the SEC license

III. ALL REPORTS

 All corporations may directly file their AFS and GIS in SEC Head Office, PICC Building, all
satellite offices applying the SEC issued number coding schedule for AFS.
 All filers of AFS and GIS complying with the coding schedule may choose to avail the options
of:
 o SEC Express Nationwide Submission; and
o Any Courier or Regular Mail.
 The reckoning date of submission through courier is the date the courier has actually sent or
delivered the filed reports.

2018

1. MC No. 17 s.2018 – Revision of the General Information Sheet (GIS) to Include

Beneficial Ownership Information 28 November 2018
 To: All SEC registered Domestic corporations
 Subject: Revision of the General Information Sheet (GIS) to include beneficial ownership
information
 Purpose:
i. to assist in the implementation AMLA and to ensure timely access to adequate,
accurate and current information on the beneficial ownership and controls of
SEC registered corporations and prevent their misuse for money laundering and
terrorist financing purposes.
 Section 1 – Coverage:
i. This MC shall apply to all SEC registered domestic corporations (stock and
nonstock)
 Section 2 – Definition and terms:
i. Beneficial owner – any natural person who:
1. Ultimately owns or controls the corporation
2. Has ultimate effective control over the corporation
ii. Ultimate effective control – Refers to any situation in which ownership/control is
exercised through actual or a chain of ownership or by means other than direct
control.
1. This may be achieved through the following:
a. Direct or indirect ownership of at least 25% of voting shares
b. Subject to any contract, agreement or understanding which gives
him/her voting power or investment power
c. Any situation where a person has the ability to exert dominant
influence over the management and majority of BOD are under
obligation or control of a person
iii. GIS – Refers to the General information sheet

 Section 3 – Disclosure of beneficial ownership:

i. All SEC registered corporations are required to disclose their beneficial owners.
The following information must be provided
1. Complete name
2. Residence
3. Nationality
4. Tax number
5. Percentage of ownership
 Section 4 – Determination of beneficial ownership
i. If corporation is owned through multiple layers, any intermediate layers of the
company’s ownership structure should be identified
 ii. Such information shall be declared in the GIS, illustrated in an ownership chart
with ownership amounts
 Section 5 – Updating of beneficial ownership info
i. Updated GIS shall be submitted to SEC within 7 days after such change occurred
or effected
 Section 6 – Validating information
i. Sec shall validate the beneficial ownership information through an on-site
inspection of the books and records of the corporation
 Section 7 – Effectivity
i. Immediately after its publication in a national newspaper of general circulation.

2. MC No. 16 s.2018 – Guidelines on Anti-Money Laundering and Combating the

Financing of Terrorism for SEC covered Institutions (“2018 AML/CFT Guidelines”)
9 November 2018

Chapter 1
SEC covered institutions shall conform to this guideline and amend their Money Laundering and
Terrorist Financing Prevention Program (MLPP).
Covered Institutions:
- Persons regulated by the Commission under the SRC, the Investment Houses Law, the
Investment Company Act, the Financing Company Act of 1998, the Lending Company
Regulation Act of 2007, other laws and regulations implemented by the Commission, and the
AMALA, as amended.
- Subject to regulatory power of appropriate government agencies
o Entities managing securities
 Brokers, Dealers, Salesmen, Associate person of a broker of dealer,
Investment Houses
o Investment Company Adviser/Fund Managers, Mutual Fund Distributors, Mutual
Fund Companies, Closed-End Investment Companies
o Investment Advisor/Agent/Consultant
o Financing and Lending Companies
 With more than 40% foreign participation in its voting stock; or
 With paid-up capital of at least Php10 million
o Other entities administering or otherwise dealing in currency, commodities or
financial derivatives, cash substitutes and other similar monetary instruments or
property supervised or regulated by the Commission
Scope
o Covered institutions
o Subsidiaries and affiliates which are also covered

Chapter 2
Definitions:
- Except as otherwise defined herein, all terms used shall have the same meaning as those defined
in the AMLA, as amended.
o Securities broker – a person engaged in the business of buying and selling securities for the
account of others.
o Securities dealer - any person who buys and sells securities for his or her own account in
the ordinary course of business.
o Securities salesman - a natural person hired to buy and sell securities on a salary or
commission basis; shall be properly endorsed to the Commission by the employing Broker
Dealer
o Associated person of a broker or dealer - any person employed full time by the broker
dealer whose responsibilities include internal control supervision of other employees for
SRC and rules and regulations compliance
o Investment House - any enterprise which primarily engages, whether regularly or an
isolated basis, in the underwriting of securities of another person or enterprise, including
securities of the government and its instrumentalities
o Investment Company Adviser/Fund Manager - an investment company advisor licensee who
regularly advises or recommends investment decisions with regard to the securities or other
portfolio of the investment company pursue want an advisory contract with the investment
company
o Mutual Fund Distributor - a juridical person duly licensed or authorized by the Commission
to distribute shares or units of an investment company as either principal distributor or sub-
distributor
o Investment Company - any issuer which is, or holds itself out as being, engaged primarily,
in the business of investing, reinvesting or trading securities
o Open-End Investment Company (Mutual Fund) – an investment company which is offering
for sale or has outstanding, any redeemable security of which it is the issuer.
o Closed-end Investment Company – an investment company which offers for sale a fixed
number of non-redeemable securities which are offered in an initial public offering and
thereafter traded in organized market as determined by the Commission
o Investment Adviser/Agent/Consultant
 Who for an advisory fee is engaged in the business of advising others, either
directly of through circulars, reports, publication or writings, as to the calue
of any security and as to advisability of trading in any security; or
 Who for compensation and as part of a regular business, issues or
promulgates, analyzes reports concerning the capital market, except:
 Any bank or trust company
 Any journalist, reporter, columnist, editor, lawyer, accountant or
teacher
 The publisher of any bona fide newspaper, news, business or
financial publication of general or regular circulation, including
their employees
 Any contract market
 Such other person not within the intent of this definition, provided
that the furnishing such service by the foregoing persons is solely
incidental to the conduct of their business or profession
 Who undertakes the management of portfolio securities of investment
companies, including the arrangement of purchases, sales or exchange of
securities
o Financing Companies – a corporation which are primarily organized for the purpose of
extending credit facilities
o Lending Company – a corporation engaged in granting loans from its own capital funds or
from funds sourced from not more than 19 persons
o Affiliate – an entity with at least 20% but not more than 50% of the voting stock of which is
owned directly of indirectly by a covered institutions or over which a covered institution has
the ability in fact to exert a significant influence
 Significant Influence - the ability to participate in the managerial, operating or
financial decisions of an entity with the reasonable possibility, but not for certainty,
of determining the content of those decisions
o Subsidiary – an entity that is controlled directly or indirectly by a covered institution
o Beneficial Owner – any natural person who ultimately owns or controls the customer
and/or on whose behalf a transaction or activity is being conducted; or has ultimate
effective control over customer that is a legal person or arrangement
  Legal Arrangements – express trusts or other similar legal arrangements (fiducie,
treuhand, fideicomiso)
 Ultimate effective control – any situation in which ownership or control is exercised
through a contractual or a chain of ownership or by means other than their control
o Unlawful Activity (refer to AMLA outline)
o Politically Exposed Peron or PEP – an individual who is or has been entrusted with a
prominent public possession or function in:
1. The Philippines with substantial authority over policy, operations are the use or
allocation of government-owned resources
2. A foreign state
3. An international organization
4. * shall include immediate family members, and close relationships and associates that
are reputedly known to have:
a. joint beneficial ownership of a legal entity or legal arrangement with the
main/principal PEP
b. sole beneficial ownership of a legal entity or legal arrangement that is known to
exist for the benefit of the main/principal PEP
 Immediate family members - spouse or partner, children and their
spouses, parents and parents in-law, and siblings
 Close associates – person who maintain a particularly close
relationship with the PEP, and include persons who are in a
position to conduct substantial domestic and international financial
transactions on behalf of the PEP

Chapter 3
Money Laundering
- processing of the proceeds of a crime to disguise their origin
- process of masking the benefits derived from serious offenses or criminal conduct (under
AMLA) so that they appear to have originated from a legitimate source
 Committed by:
o Any person who, knowing that any monetary instrument or property represents,
involves, or relates to the proceeds of any unlawful activity
o Any covered person who, knowing that a covered or suspicious transaction is
required under the AMLA to be reported to the AMLC, fails to do so.
 Stages
o Placement – the physical disposal of cash proceeds derived from an illegal activity
o Layering – separating the illicit proceeds from their source by creating complex
layers of financial transactions designed to disguise the audit trail and provide
anonymity or to obscure the source of funds
o Integration – provides appearance of legitimacy to criminally-derived wealth. Once
the layering succeeds, this stage places the laundered proceed back into the economy
appearing to be normal business funds

Chapter 4
Basic Principles and Policies to Combat Money Laundering and Terrorist Financing
1. Money Laundering and Terrorist Financing Prevention Program (MTPP)
a. Detailed procedures of the compliance and implementation of the following:
i. Customer identification process
 Acceptance policies
 On-going monitoring processes
ii. Record keeping and retention
iii. Covered transaction reporting
iv. Suspicious transaction reporting
b. Effective and continuous training program
 i. Directors
ii. Responsible officers
c. Adequate screening and recruitment process
d. Internal audit system
e. Independent audit program
f. Corrective mechanism on deficiencies
g. Cooperation with AMLC
h. Designation of an AML Compliance Officer
i. Accessible due diligence and ML/TF risk management information mechanism for
appropriate people and institutions
j. Policies and control procedures and monitoring mechanism for prevention or
mitigation of ML/TF risks
2. Submission of the Revised and Updated Money Laundering Prevention Programs (MLPP)
with Approval by the BOD or Country Head
3. Updating of MLPP
a. At least once every two years
4. Checking of Covered Person’s MLPP

Chapter 5
Customer Identification (KYC)
A. General Requirements
1. Written client identification and acceptance policies and procedures
Covered institutions must develop:
 Written client identification
 Graduated acceptance policies and procedures
a. criteria for customers that are likely to pose low, normal or high risk
to their operations
b. Most include procedures for providing customers with adequate
notice that the covered institution is requesting information to verify
their identities
2. Continuing due diligence
3. Customer information and identification documents
4. Additional or further verification measures
5. Updating client information
6. Unusual transactions
 Unusually large transactions
 unusual patterns of transactions
7. Acquisition by covered institution of the business of another covered institution
8. If the true identity of customer cannot be established, the covered institution should
take reasonable measures
9. Conduct of face-to-face contact
10. Presentation of original identification documents
11. Use of new or developing technologies
12. Third party reliance
13. Outsourcing the conduct of customer identification
14. Prohibited accounts
 Anonymous accounts
 Fictitious name accounts
 Incorrect name accounts
 And the like
B. Personal Customers
Obtain the following information:
1. complete name and names used
2. present address
 3. permanent address
4. mailing address
5. date and place of birth
6. nationality
7. contact details (avoid prepaid cellular phone numbers)
8. nature of work, name of employer or nature of self-employment or business
9. tax identification number, Social Security number or government service and
insurance system number
10. specimen signature
11. sources of funds
12. names of beneficial owner or beneficiaries
13. complete name, address and contact information of beneficial owner
C. Risk-Assessment/Risk-Profiling of Customers
 Covered Institution should:
1. Formulate risk-based and tiered customer acceptance, identification and retention
policy
a. Reduced customer due diligence (CDD) for potentially low risk clients
b. Enhanced CDD for higher risk accounts
2. Specify the criteria and description of the types of customers (documented &
regularly updated)
In designing this, the following should be taken into account:
a. Nature of the service or product to be availed, purpose of the account or
transaction
b. sources of funds or nature of business activities
c. public or high profile position of the customer or any authorized signatory
d. country of origin and residence of operations
e. existence of ST indicators
f. Watch list of individuals and entities engaged in illegal activities or terrorist
related activities
g. other factors such as the amount of funds, size of transaction, regularity or
duration of transaction
h. financial profile of juridical entities; other relevant information of the active
authorized signatories
3. Specify standards in applying reduced, average and enhanced due diligence
a. Reduced Due Diligence (RDD)
i. Financial institutions where they are subject to requirements to
combat money laundering and financing terrorism consistent with
the Financial Action Task Force (FATF) recommendations, and are
supervised for compliance with those controls
ii. public companies that are subject to regulatory disclosure
requirements
iii. government institutions and its instrumentalities
*RDD shall not be applied if there is suspicion of ML/TF
b. Enhanced Due Diligence (EDD)
Additional Procedures:
i. Gather additional customer information and/or identification
documents
ii. Contact validation procedures on any or all of the information
provided
iii. Secure senior management approval to commence or continue
business relationship or transacting with the customer
iv. Conduct enhance ongoing monitoring of the business relationship
 increasing the number and timing of controls applied
  selecting patterns of transactions that need further
examination
v. Require the first payment to be carried out through an account in the
customer's name with a bank subject to similar CDD standards
vi. Perform such other measures as the covered institution may deem
reasonable or necessary
* Failure to conduct or complete EDD - the client to establish the
relationship with the customer or to execute the requested transaction
*Conducting EDD will tip off the customer - file an STR and closely monitor
the account and review the business relationship
4. Set of conditions for the denial of account opening or services
D. Covered Institution should give special attention to
1. High risk customers
2. Politically exposed persons
 Establish and record the true and full identity of PEPs, as well as their
immediate family members and entities related to them
3. Single Proprietorships, Corporations, Stock or Non-Stock and Partnerships
 That business applicant has not been or is not in the process of being
dissolved, struck off, wound-up or terminated
4. Shell Companies
 Obtain BODs’ Certification and satisfactory evidence of identities
5. Trust, Nominee and Fiduciary Accounts
6. Transactions Undertaken on Behalf of Account Holders or Non-Account Holders
7. Bearer Shares
8. Wire Transfers

Chapter 6
Record Keeping
 All records – 5 years
 Except: Records relating to pending case – retained until case has been closed and
terminated
 Designate ate least two (2) persons in the safekeeping

Chapter 7
Reporting of Covered and Suspicious Transactions
Covered Institutions shall:
 Institute a reporting system
 Register with the AMLC’s electronic reporting system
 File a Covered Transaction Report (CTR) with the AMLC
o Transaction of more than Php 500,000 in cash or other equivalent monetary
instrument within 1 banking day
 File Suspicious Transaction Reports (STR) with the AMLC transactions, regardless of the
amount, where any of the following circumstances exists:
o There is no underlying legal or trade obligation, purpose or economic justification
o the client is not properly identified
o the amount involved is not commensurate with the business or financial capacity of
the client
o taking into account all known circumstances, it may be perceived that the client's
transaction is structured in order to avoid being the subject of reporting
requirements under the AMLA
o any circumstance relating to the transaction which is observed to deviate from the
file of the client and/or the client's past transactions with a covered institution
 o The transaction is in any way related to unlawful activity or offence under the AMLA
that is about to be, is being, or has been committed; or
o any transaction that is similar or analogous to any of the foregoing
 File STR for suspicious attempted transactions
 Report to AMLC within 5 working days, unless prescribed a different period not more than
15 working days, from the occurrence
o Occurrence – date of determination of the suspicious nature of transaction;
determination should be made not exceeding 10 calendar days from the date of
transaction unless in the event of collusion
 Report customer’s unlawful activities
 Maintain a register of CT or ST
o Including those not reported
 Not warn their customers, or inform anyone other than the AMLC in cases of filing reports
 Safe Habor Provision - No administrative, criminal or civil proceedings shall lie against any
person for having made a CTR or an STR in the regular performance of his duties and in
good faith, whether or not such reporting results in any criminal prosecution under the
AMLA or any other Philippine law.

Chapter 8
Compliance
Each covered institution shall appoint:
 Compliance officer
 Adviser regarding AML matters
*Compliance of AMLA is the ultimate responsibility of the covered institution and its board of
directors

Chapter 9, 10 & 11
Internal Control and Procedures, Internal Audit and Training
Covered Institutions shall:
 Establish and implement the written internal control policies and procedures and internal
reporting procedures
 Have an internal audit function and reporting line independent from the office being audited
o Not less frequently than once every 2 years
 Provide education and continuing training for all its staff and personal including directors
and officers to ensure full awareness of responsibilities

Chapter 12
Sanction and Penalties
 Section 54.1(a) (i), (ii) and (v) of SRC without prejudice to the penalties that may be imposed
by the AMLC RIRR
 May impose any or all of the following:
o Suspension or revocation of any registration for the offering of securities
o A fine of no less than Php 10,000 nor more than Php 1,000,000 plus not more than
Php 2,000 for each day of continuing violation
o Other penalties within the power of the Commission to impose
*these shall not prejudice the filing of criminal charges against the individuals responsible for
criminal actions and liability

3. MC No. 15 s.2018 – Guidelines for the protection of SEC Registered Non-Profit

Organizations from Money Laundering and Terrorist Financing Abuse (“NPO
Guidelines”) 9 November 2018

CHAPTER I
 PURPOSE: (Section 1.1)
1. Protect Non-Profit Organizations ("NPOs") from money laundering and terrorist financing
abuse
2. Enhance its registration and monitoring system in order to obtain the necessary information
on NPOs for regulatory and risk assessment purposes
3. Provide additional measures pursuant to its regulatory and supervisory powers
 SCOPE (Section 1.2): all registered Non-Stock Corporations
 DEFINITION OF TERMS: (Section 1.3)

TERM DEFINITION
1. Applicant - Organization/entity applying for registration with the
Commission as a Non-Stock Corporation
- Any registered corporation applying for amendment to its
Articles of Incorporation in order to become a Non-Stock
Corporation
2. COEP - Certificate of Existence of Program/Activity
- in accordance with the relevant guidelines prescribed by
the Commission
3. Commission - Securities and Exchange Commission
4. Foundation - non-stock, non-profit corporation established for the
purpose of extending grants or endowments to support its
goals and/or raising funds to accomplish charitable,
religious, educational, athletic, cultural, literary, scientific,
social welfare or other similar objectives.
5. Non-Stock Corporation - corporation with no authorized capital stock and no part of
its income is distributable as dividends to its members,
trustees, or officers.
6. Non-Profit Organization - SEC registered Non-Stock Corporation that primarily
(NPO) engages in raising or disbursing funds for purposes of good
works
7. NPO at Risk - NPO classified as medium or high risk based on an
assessment of the risk factors as stated in Section 4.2,
Chapter IV of these Guidelines or in accordance with a
risk-based points system
8. Politically Exposed - Individual entrusted in a public function in:
Person (PEP) a. the Philippines
b. a foreign state
c. an international organization
- include immediate family members, and close relationships
and associates that are reputedly known to have:
a. joint beneficial ownership of a legal entity with the
PEP
b. sole beneficial ownership of a legal entity that is known
to exist for the benefit of PEP
8.1. Immediate family - Spouse or partner, children and their spouses, parents and
members of PEPs parents-in-law, and siblings
8.2. Close Associates of - Persons who maintain a particularly close relationship
PEPs with the PEP
- May include:
a. beneficial owner of a legal entity that is known to exist
for the benefit of PEP
b. business partners or associates
c. persons who are otherwise connected to the PEP (e.g.
 joint membership of a company board)
d. prominent members of the same political party, civil
organization, labor or employee union
e. persons (sexual and/or romantic) partners
outside the family unit
9. SS - Sworn Statement by the President and Treasurer of the
Sources, Amount, and Application of Funds and
Program/Activity Planned, Ongoing, and Accomplished
10. UN Sanctions List - Consolidated United Nations Security Council Sanctions
List of countries, persons and/or entities

CHAPTER II

 PURPOSE OF RISK ASSESSMENT (Section 2.1)

To ensure that NPOs are not misused by terrorist organizations
 The Risk-Based Approach for the protection of NPOs (Section 2.2)
1. Identifying threats of terrorist financing abuse => results of the national risk assessment of
the AMLC
2. Identifying vulnerabilities among NPOs => types and characteristic features of such NPOs
3. Identifying the consequences of such threats and vulnerabilities on NPOs.
 ASSESSMENT (Section 2.5)
- Level of risk of NPOs will be periodically re-assessed.
- Commission shall ensure that the affected NPO is notified of any subsequent changes in its
risk assessment (notification letter, show cause order, or some other manner).

CHAPTER III

LEVEL OF RISK COMPLIANCE REQUIREMENTS

Reportorial Requirement Additional
LOW RISK - General Information Sheet 1. Duly filled up membership book
- Annual Financial (available for inspection).
Statements 2. Other minimum requirements
MEDIUM RISK - General Information Sheet 1. SS (Sworn Statement of Sources,
- Annual Financial Amount, and Application of Funds
Statements (audited by and Program/Activity Planned and
accredited independent Accomplished)
CPA) 2. COEP (Certificate of Existence of
Program/Activity)
3. Internal Audit System
4. Mandatory attendance in sustained
outreach program of SEC
HIGH RISK - General Information Sheet 1. Mandatory background checks of
- Annual Financial the officers and trustees
Statements (audited by 2. Mandatory audit by the Commission
accredited independent
CPA)
BLACKLISTED - Registration will be denied outright.
- NPO Blacklisted SUBSEQUENT to registration:
 process of revocation of registration will be initiated and
publicized
 subject to notification and grace period for compliance granted
 CHAPTER IV

 MANDATORY DISCLOSURES FOR ALL SEC REGISTERED NON-STOCK CORPORATIONS

(Annex A) (Section 4.1)
- Passed within 6 months from effective date of the guidelines
- Department: Operating Departments having supervision over such Non-Stock Corporations
- Copy => Anti-Money Laundering Division (AMLD) of the Enforcement and Investor
Protection Department (EIPD)
- Failure to comply: cause for revocation of the registration of the non-complying Non-Stock
Corporation
 BASIC INFORMATION (To be provided by NPOs) (Section 4.2)
a. Objectives and purpose of their stated activities;
b. Identity of the person(s) who own, control or direct their activities, including senior officers,
board members and trustees;
c. Nature of operations or projects;
d. Actual raising or disbursing of funds for charitable, religious, cultural, educational, social or
fraternal purposes, or for the carrying out of other types of "good works;"
e. Contribution;
f. Fund Balance;
g. Location of operations
h. Source of Funds (as to person and geography)
i. Intended beneficiaries (as to person and geography); and
j. Existing license/accreditation from another government agency.
 MAINTENANCE OF INFORMATION (Section 4.3)
- Department: Information and Communications Technology Department (ICTD)
- Database shall be made accessible to the EIPD-AMLD and the respective Operating
Departments having supervision over NPOs

CHAPTER V

 CHARACTERISTICS OF A GOOD GOVERNANCE (Section 5.2)

CHARACTERISTICS DESCRIPTION
1. Organizational integrity - BOT maintains oversight by establishing:
a. strong financial and human resource policies,
b. meeting on a regular basis, and
c. actively monitoring activities.
2. Partner relationships - BOT ensures proper due diligence is carried out through:
a. donate money or funds
b. receive money
c. work closely with the NPO
d. executing agreements to outline the expectations and
responsibilities with partners
3. Financial accountability - BOT:
and transparency a. approves an annual budget and follows a process to
monitor the use of funds
b. mandates that its NPO keep adequate and complete
financial records
- NPOs clearly state program goals when collecting funds,
and ensure that funds are applied as intended and
consistent with the purpose of the organization
 4. Record keeping - BOT mandates its NPOs to maintain, for a period of at
least five years, records of domestic and international
transactions.
- Made available to the Commission
5. Program planning and - BOT requires its NPO to establish appropriate internal
monitoring controls and monitoring systems to ensure that funds and
services are being used as intended

ADDITIONAL GUIDELINES

 INTERNAL AUDIT SYSTEM (Chapter VI)

- Purpose: To strengthen adherence to good governance principles and to ensure a high
standard of best practice for the NPO and its members, the board of trustees must conduct
itself with honesty, integrity and competence in the performance of its duties and functions.
- Responsibility: Perform the audit functions on the NPOs
- Composition: 3 Trustees (preferably have accounting and/or finance backgrounds and/or
with audit experience)
 SUSTAINED OUTREACH PROGRAMS AND SEMINARS (Chapter VII)
- Commission will conduct regular sustained outreach/consultation programs, awareness
training and workshops on money laundering and/or terrorist financing issues,
vulnerabilities, and risks as well as practical and effective mitigation measures
 At least 1 a year
 PREVENTIVE MEASURES (Chapter VIII)
- NPOs shall establish and record the true and full identity of their donors/sources of funds
identified as PEPs
- Donors from a foreign jurisdiction with inadequate AML and CFT Standards – subject to
enhanced monitoring.
- Examples of Preventive Measures:
a. Establish a system that will enable them to know who their donors are and where the
funds are coming from;
b. Ensure that they know who their beneficiaries are and where they are located;
c. Ensure that the funds actually reach their target beneficiaries or that they are used for
the purpose intended; and
d. Report to the Commission any fact within its knowledge that gives rise to a suspicion that
such NPO is being exploited for money laundering and/or terrorist financing purposes.
 PENALTIES (Chapter XII)
- The penalties and sanctions provided for under current laws, SEC M.C. No. 8, series of 2009
entitled Scale of Fines for Non-Compliance with the Financial Reporting Requirements of the
Commission, SEC M.C. No. 8, series of 2006 on the Revised Guidelines on Foundations.
- May impose the following sanctions:
a. Fine of no less than Ten Thousand Pesos (PhP10,000) nor more than One Million Pesos
(PhP1,000,000) plus not more than Two Thousand Pesos (PhP2,000) for each day of
continuing violation
b. Revocation of registration of a Non-Stock Corporation or NPO if there is a high risk of
money laundering or terrorist financing abuse within such Non-Stock Corporation or
NPO
c. Other penalties within the power of the Commission to impose
 EFFECTIVITY: 15 days after its publication in 2 national newspapers
4. MC No. 13 s.2018 – Adoption of Accounting Standards and Interpretations 6
September 2018

ACCOUNTING STANDARDS

TITLE (Amendments and Practices) EFFECTIVITY

1. PFRS 9 – Prepayment Features with - Annual periods beginning on or after January 1,
Negative Compensation 2019 or earlier
2. PAS 28 - Long-term Interest - Annual periods beginning on or after January 1,
in Associates and Joint Ventures 2019 or earlier
3. PFRS Practice Statement - Applicable to financial statements prepared from
2: Making Materiality November 8, 2017
Judgments
4. Guidance on Financial - Immediate
Reporting (June 2017 edition)
5. PFRS 15 - Implementation Issues - Consensus in these Q&A are effective on the
Affecting the Real Estate same date as the effective date
Industries
6. PAS 2 - Q&A No. 2017-02 and - From the date of approval by the FRSC
PAS 16 - Capitalization of operating
lease cost as part of construction
costs of a building
7. PAS 28 - Elimination of profits and - From the date of approval by the FRSC
losses resulting from transactions
between associates and/or joint
ventures (Q&A No. 2017-02)
8. PAS 2, 16 and 40 - Accounting for - From the date of approval by the FRSC
Collector's Items (Q&A 2017-06)
9. Accounting for Common Areas and - Retrospectively for annual periods beginning on
the Related Subsequent Costs by or after January 1, 2018 or earlier
Condominium Corporations (Q&A
2016-03)
10. PAS 24 - Related Party - From the date of approval by the FRSC
Relationship Between Parents,
Subsidiary, Associate and Non-
Controlling Shareholder
11. PFRS 7 - Frequently Asked
Questions on the Disclosure
Requirements of Financial
Instruments (Q&A 2017-05)
12. PFRS 10 - Accounting for
Reciprocal Holdings in Associates
and Joint Ventures (Q&A 2017-07)
13. PFRS 10 - Requirement to
Prepare Consolidated
Financial Statements Where
an Entity Disposes of its Single
Investment in a Subsidiary,
Associate or Joint Venture (Q&A
No. 2017-08)
14. PAS 17 and Philippine
Interpretation SIC 15 - Accounting
 for Payments Between and
Among Lessors and Lessees (Q&A
No. 2017-09)
15. PAS 40 - Separation of Property
and Classification as Investment
Property (Q&A No. 2017-10)
16. PFRS 10 and PAS 32 - Transaction
Costs Incurred to Acquire
Outstanding Non-Controlling
Interest or to Sell Non-
Controlling Interest Without a Loss
of Control
17. Subsequent Treatment of Equity - Retrospectively from the date of approval by the
Component Arising from FRSC
Intercompany Loans

5. MC No. 09 s.2018 – Amendment of Guidelines and Procedure on the Use of

Corporate and Partnership Names 18 July 2018
 Purpose: To prevent the formation of bogus organizations that could potentially misrepresent
itself as an affiliate of an international governmental organization, and usurp the authority
pertaining to said international governmental organizations.
 Amendment:
 Use of international government organization is not allowed to be used as part of
corporate or partnership name.
 Succeeding paragraphs be renumbered
 Take effect immediately.

6. MC No. 08 s.2018 – 1) Shareholders’ Approval on Any Change/s in the Company’s

External Auditor; 2) Audit Committee Composed Entirely of Board Members 23
April 2018
 Rules to Implementation of initiatives to improve the Philippine’s ranking in Protecting
Minority Investors indicator of the Ease of Doing Business (EODB) Report:
1. All Publicly-listed Companies (PLCs) shall seek shareholders’ approval on any
change/s in the company’s external auditor.
2. All PLCs shall have an Audit Committee that are composed only of Board Members.
- Effective: immediately after 2 newspapers publication

7. MC No. 07 s.2018 – Amendment to Rule 38.2.7 of the 2015 Implementing Rules and
Regulation of the Securities Regulation Code (SRC) 23 April 2018
 REQUIREMENTS on Nomination and Election of Independent Directors (Amendment)
- Rule 38.2.7.
- Has not engaged within the last 2 years and does not engage in any transaction with the
covered company and/or with any of its related companies and/or with any of its
substantial shareholders
  whether by himself and/or with other persons and/or through a firm of which he is a
partner and/or a company of which he is a director or substantial shareholder, other
than transactions which are conducted at arms length and are immaterial.
- Effective: 15 days from newspaper publication

8. MC No. 06 s.2018 – Adoption of New Accounting Standards and Amendments to

Existing Accounting Standards 6 April 2018

AMENDMENTS EFFECTIVITY
1. Leases – PFRS 16 - Application: Annual Period beginning on or after
January 01, 2019
- Early application: NOT allowed unless:
 FRSC adopts IFRS 15 in revenue
recognition and entity adopts the same
2. Disclosure Initiative – PAS 7 - Application: Annual Period beginning on or after
January 01, 2017
3. Recognition of Deferred Tax Assets for - Application: Retrospectively for annual period
Unrealized Losses - PAS 12 beginning on or after January 01, 2017
9. MC No. 05 s.2018 – Adoption of Philippine Financial Reporting Standards for Small
Entities 28 March 2018

GENERAL GUIDES TO FINANCIAL STATEMENTS PREPARATION

A. Financial Reporting Framework

TYPES OF ENTITIES DESCRIPTION (Criteria) STANDARDS

1. LARGE AND/OR - Assets: more than P350 Philippine Financial Reporting
PUBLICLY- Million; Standards (PFRS)
ACCOUNTABLE - Liabilities: more than P250
ENTITIES Million
- Required to file financial
statements under Part II of
SRC Rule 68
- In the process of filing their
financial statements
(purpose: issuing any class
of instrument in a public
market)
- Holders of secondary
licenses
2. MEDIUM SIZED - Assets: more than P100 Philippine Financial Reporting
ENTITIES Million to P350 Million Standards for Small and Medium
- Liabilities: more than P100 Entities (PFRS for SMEs)
Million to P250 Million
- Not required to file Exempted SMEs: (provide
financial statements under discussion in Notes)
Part II of SRC Rule 68 1. Subsidiary of a parent
- Not in the process of filing company reporting under the
their financial statements full PFRS
- Not holders of secondary 2. subsidiary of a foreign parent
licenses company which will be
moving towards IFRS
3. part of a group that is
 reporting under the full PFRS
4. branch office or regional
operating headquarter of a
foreign company reporting
under the full IFRS
5. has a subsidiary that is
mandated to report under the
full PFRS
6. short term projection
breaching quantitative
threshold set in criteria for
SME
7. has a concrete plan to
conduct an initial public
offering within the next 2
years
8. preparing financial
statements using full PFRS
and decided to liquidate
9. Such other cases

- Breach in floor or ceiling of

size criteria: (based on
management’s judgement)
a. Significant and continuing
– transition to applicable
framework
b. Not SAC – remain use
3. SMALL ENTITIES - Assets: more than P100 PFRS for Small Entities
Million to P350 Million
- Liabilities: more than P100 Exempted Small Entities:
Million to P250 Million 1. Have operations or
- Not required to file investments that are based on
financial statements under a different country with
Part II of SRC Rule 68 different functional currency
- Not in the process of filing 2. Subsidiary of a parent
their financial statements company reporting under the
- Not holders of secondary full PFRS or PFRS for SMES
licenses 3. Subsidiary of a foreign
parent company which will
be moving towards IFRS
4. Part of group that reports
under full PFRS
5. branch office or regional
operating headquarter of a
foreign company reporting
under the full IFRS
6. short term projection
7. Preparing FS under full
PFRS and liquidates
8. Such other cases
4. MICRO ENTITIES - Assets or Liabilities: below PFRS for Small Entities
P3 Million (with Statement of Management
- Not required to file Responsibility, Auditor’s Report,
financial statements under SFP, Income Statement and Notes
 Part II of SRC Rule 68 – cover 2 Comparable periods)
- Not in the process of filing
their financial statements
- Not holders of secondary
licenses

10. MC No. 01 s.2018 – Adoption of Revised Auditing Standards and Amendments to

Existing Accounting Standards and Interpretations 10 January 2018
 Additional part of SEC’s Rules and Regulation on Financial Reporting:
A. REVISED AUDITING STANDARDS (Philippine Standards on Auditing – PSA)

REVISED PSA #S TITLE DESCIPTION

800 Special Considerations – Audits of - Effective for audits of FS
Financial Statements Prepared in periods ending on or after
Accordance with Special Purpose December 15, 2016.
Framework and Conforming - Supersedes PSA 800 (2009)
Amendments to PSA 700 (Revised) - Does not override the
Forming an Opinion and requirements of other PSAs
Reporting on Financial Statements - Does not purport to deal
with all special
considerations
805 Special Considerations – Audits of - Effective for audits of FS
Single Financial Statements and periods ending on or after
Specific Elements, Accounts or December 15, 2016.
Items of a Financial Statements - Supersedes PSA 805 (2009)
(2016)
810 Engagements to Report on - Effective for audits of FS
Summary Financial Statements periods ending on or after
(2016) December 15, 2016.
- Supersedes PSA 810 (2009)

B. AMEDMENTS TO EXISTING STANDARDS and INTERPRETATIONS

AMENDMENTS, EFFECTIVITY
INTERPRETATIONS and
IMPROVEMENTS
1. PAS 40 – Transfers of Invesment - Application: Annual periods beginning on or
Property after January 01, 2018.
2. IFRIC 22 (Philippine - Application: Annual periods beginning on or
Interpretation) – Foreign after January 01, 2018.
Currency Transactions and
Advance Consideration
3. Annual Improvements to PFRSs - PFRS 12 Amendments effective for annual
2014 – 2016 Cycle periods beginning on or after January 01, 2017
- PFRS 1 and PAS 28 amendments are effective
beginning on or after January 01, 2018
 OPINIONS

2021

1. Opinion No. 21-05

Re: Increase of Authorized Capital Stock; Registration of Shares of Stock to be
Issued Therefor

Opinion about: Whether the additional shares of stock that may be issued as a consequence of the
increase in authorized capital stock (“ACS”) of the corporation which is subject to the stockholder’s
pre-emptive rights need to be registered.

Situation: The stockholders of an entity engaged in the operation of a hospital and medical center
(the “corporation”) have, during the annual stockholders’ meeting, ratified a board resolution
increasing the corporation’s ACS from P100M to P250M, thereby increasing the number of shares
from 50,000 to 125,000 at a par value of P2,000 per share. Further, you stated that the corporation is
planning to include in the shares to be issued relative to the exercise of the stockholder’s pre-emptive
rights, certain medical benefits which effectively increased the par value of each share from P2,000
to P3,500.

The SRC defines ‘securities’ as shares, participation or interests in a corporation or in a

commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument,
whether written or electronic in character. It includes shares of stock, bonds, debentures, notes,
evidences of indebtedness, and asset-backed securities, among others.

As a general rule, securities shall not be sold or offered for sale or distribution within the
Philippines without a registration statement duly filed with and approved by the Commission.

However, the SRC provides for certain exemptions accorded to selected classes of securities where
the registration requirement is not made applicable. In addition, the IRR of the SRC provides for
other exempt securities.

Considering that the shares of stock to be issued by the corporation to stockholders exercising their
pre-emptive right are not among the securities enumerated under Section 9 of the SRC and Rule 9.1
of the SRC-IRR, they are not exempt securities.

The foregoing notwithstanding, it should be noted that the corporation has, in the instant case,
approved the increase of its authorized capital stock and its existing shareholders may exercise their
pre-emptive rights in relation to such increase and/or the unissued shares of the corporation. In
relation thereto, Sections 10 (e) and (i) of the SRC which covers sale of unissued shares and sale from
the increase in the authorized capital stock, respectively, of a corporation provides for exempt
transactions where the requirement for registration also does not apply, to wit:

(e) The sale of capital stock of a corporation to its own stockholders exclusively, where no
commission or other remuneration is paid or given directly or indirectly in connection with the sale
of such capital stock.

(i) Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof
or in pursuance of an increase in its authorized capital stock under the Corporation Code,
when no expense is incurred, or no commission, compensation or remuneration is paid or given in
connection with the sale or disposition of such securities, and only when the purpose for
soliciting, giving or taking of such subscriptions is to comply with the requirements of such law as to
the percentage of the capital stock of a corporation which should be subscribed before it can be
registered and duly incorporated, or its authorized capital increased.”

It bears emphasis that the exemptions provided under Section 10.1 (e) and (i) cannot be availed if a
commission or fee is paid, directly or indirectly, in connection with the sale of such capital stock, or
the corporation incurs an expense in the sale or disposition of such securities. In such case, the sale
will have to be registered with the Commission.
 It should be noted that the phrase “in connection with the sale of capital stock” qualifies the
phrase “where no commission or other remuneration is paid or given”. As such, for the
transaction to be exempt, it must be shown that (a) no amount in addition to the sale price of the
capital stock is paid/given in relation to such sale as this is covered by the concept of
“direct commission or remuneration”, or (b) no transaction or service is carried out or performed
which will benefit another person/entity other than the stockholder purchasing the capital stock, as
this is covered by the concept of “indirect commission or remuneration”. Thus, the sale of
unissued capital stock of a corporation to its own stockholders exclusively under Section 10.1 (e) or
the sale of capital stock of a corporation to its own stockholders pursuant to an increase in its
authorized capital stock under Section 10.1 (i) will not be exempt if the same is carried out with the
assistance of a financial advisor because expenses are deemed to have been incurred. Applying the
afore-quoted provisions, this Office opines that based on the information provided and in the absence
of any showing that the corporation has incurred or will incur expenses in connection with its sale of
the capital stocks pursuant to an increase in its authorized capital stock exclusively to its
shareholders, such sale is an exempt transaction that does not require to be registered with the
Commission.

A corporation may thus secure a confirmation of exemption under Section 10.1.5.1 of the IRR of the
SRC by filing SEC Form 10.1 with the Commission for added protection.

It must be noted, however, that while there is an available exemption for the Issuer, the same shall not
be granted or allowed if the same is resorted to as a part of a scheme to evade compliance with the
registration requirements, to wit: “10.1.10. Exemption Not Available for Scheme to Evade
Compliance

A request for confirmation of exemption under Section 10 of the Code shall not be available to any
Issuer or other persons to any transaction or chain of transactions that, although it may appear to be
in compliance with the Code and these Rules, is a part of a plan or scheme to evade compliance with
the registration requirements of the Code. In such cases, registration shall be mandatory.”

As a final note, the Commission understands that through the increase in ACS, the corporation
intends to issue shares with medical benefits which can be enjoyed by stockholders who are
purchasing the same in the exercise of their pre-emptive rights thereby effectively creating two (2)
distinct types of shares: (1) the previously issued shares without medical benefits; and (2) additional
shares with medical benefits.

In this regard, it is strongly suggested that the corporation amends and clearly defines in its Articles
of Incorporation the features of this new set of shares to be issued from the increase in ACS to
substantially differentiate and/or distinguish them from the previously issued shares.

2. Opinion No. 21-04

Re: Quorum in By-Laws

Opinion about: Whether the By-laws of The Infinity Condominium Corporation (TICC) can provide
therein and require as quorum for members’ meeting the presence of members in good standing
representing at least thirty percent (30%) of the relevant number of units entitled to be represented
and vote.

Situation: TICC is a non-stock, non-profit, condominium corporation duly organized on 5 July 2011
with Company Registration No. CN201110847. You stated that TICC would like to seek confirmation
from the Commission in relation to its intention to amend its By-law provisions on quorum in
members’ meeting.

Article VI, Section 5 of the By-laws of TICC embodies the provision on quorum, to wit:

“ Quorum”

The presence of members in good standing representing at least a majority of the relevant number of
units entitled to be represented and vote at the meeting shall constitute a quorum. A majority of the
quorum (50% +1) shall be competent to decide on any matter, unless the Corporation Code or the
Condominium Act requires the affirmative vote of a greater proportion. A smaller number of votes
insufficient to constitute a quorum may adjourn the meeting from time to time and may take up
only social or ceremonial matters.”

“Section 51. Quorum in Meetings. – Unless otherwise provided in this Code or in the
bylaws, a quorum shall consist of the stockholders representing a majority of the outstanding capital
stock or a majority of the members in the case of nonstock corporations.”

“Section 46. Contents of Bylaws. – A private corporation may provide the following in its
bylaws: x x x

(c) The required quorum in meetings of stockholders or members and the manner of voting
therein;”

The Commission, citing Section 52 of the Corporation Code2 has opined that any corporation,
whether stock or non-stock, is authorized to provide in its by-laws a specific number of stockholders
or members necessary to constitute a quorum for the transaction of corporate business, except in
those instances where the Corporation Code or applicable special law explicitly prescribes the
proportion of stockholders or members necessary to resolve or carry out a particular corporate
proposal, to wit:

“Stock corporations or non-stock corporations are authorized to define what constitutes a

quorum based on its by-laws. The Commission has opined that any corporation whether stock or
non-stock is authorized to provide in its by-laws a specific number of stockholders or members
necessary to constitute a quorum for the transaction of a corporate business.

However, the provision in the by-laws relative to quorum will not hold true in those instances
where the Corporation Code or applicable special law explicitly prescribes the proportion of
stockholders or members necessary to resolve or carry out a particular corporate proposal. In
such cases, a quorum all consist of such ratio of stockholders or members as may be
declared by statutory provisions. It is a cardinal rule that a by-law providing what shall
constitute a quorum is invalid if it is in conflict with the provisions of a statute on the subject
matter. Where the number necessary to constitute a quorum is prescribed by a statute, a by-law
requiring less than the proportion required by the particular legislation is subordinate to the
statute.

“Thus, any corporation, whether stock or non-stock, is authorized to provide in its by-
laws a specific number of stockholders or members necessary to constitute a quorum for the
transaction of corporate business, except in cases where the law requires a minimum
stockholders' or members' vote for a certain corporate action (e.g., 2/3 of the stockholders
representing the outstanding capital stock or the members in case of amendment of articles of
incorporation) which would in effect be the required quorum.”

3. Opinion No. 21-03

Re: Deed of Trust and Assignment over Share of Stock

Opinion about: Whether or not a company with nominee shareholders can register in its Stock and
Transfer Book and General Information Sheet the changes in nominee shareholders pursuant to an
existing Deed of Trust and Assignment without the need of an actual sale; and (2) whether there is a
need to declare/report to the Commission, through the company’s GIS, the said new nominee
director.

Situation: Sysmex Philippines, Inc. (Sysmex) is a wholly owned subsidiary of Sysmex Asia Pacific
Pte. Ltd. (SAP) of Singapore. Sysmex has five (5) nominee shareholders who also constitute the
Board of Directors. (1) nominee shareholder/director is no longer connected with Sysmex; thus, the
latter intends to appoint a new shareholder/director. However, Sysmex is in quandary on whether to
execute a Deed of Trust and Assignment or Deed of Absolute Sale to effect such change. Hence,
queries.

1. Whether or not Sysmex, a company with nominee shareholders, can report in its GIS to the
Commission changes in nominee shareholders as long as a Deed of Trust and Assignment is
executed instead of a Deed of Absolute Sale

“For purposes of complying with the statutory minimum number of stockholders/directors, the
owner may transfer one (1) qualifying share to each nominee stockholders for purposes of
qualifying them to become members of the Board, without giving them the beneficial
ownership of the shares. Said transfer would be more of a “trust” and not a transfer of
“ownership”, hence, the beneficial interest in such shares will remain with he assignor while the
assignee will hold only the legal title to the stock.

In such case, the transferee should be described in the Deed of Assignment, corporate books
and certificate of stock merely as a qualifying shareholder or nominee of he transferor. The fact
that the stock standing on the corporate books is in the name of the person only as a
qualifying shareholder or that the holder of the stock certificate is described merely as a nominee
serves as a notice to the corporation and third parties that the holder thereof does not hold the share
in his own right but holds it only as a nominee for the benefit of the real owner.”

Based on the foregoing, Sysmex can validly report in its GIS to the Commission changes in nominee
shareholders pursuant to a validly executed Deed of Trust and Assignment.

2. Whether there is a need to declare with the Commission through Sysmex’s GIS the said new
nominee director.

“Section 25. Within thirty (30) days after the election of the directors, trustees and officers of
the corporation, the secretary, or any other officer of the corporation, shall submit to the
Commission, the names, nationalities, shareholdings, and residence addresses of the directors,
trustees, and officers elected.

The afore-quoted provision which categorically mandates the submission of information

relating to the election of directors, trustees and officers is intended to timely apprise the
Commission of any relevant changes in the submitted information on file with the latter as they arise.
 The election or appointment of a new director is a circumstance of Sysmex’s governance
structure that needs to be reported to the Commission through its GIS as it involves a material
change in the Board’s composition.

4. Opinion No. 21-02

Re: Nationality Rules; Public Utility or Mass Media

Opinion about: Whether a corporation which establishes, operates, maintains and/or

manages commercial radio and television broadcasting station is a public utility or a mass
media entity.

Situation: A corporation in which a client is interested in investing is engaged in

establishing, operating, maintaining, and/ or managing commercial radio and television
broadcasting stations. Also, while commercial radio and television broadcasting stations
help to deliver information to the public, they do not produce the messages disseminated, nor do
they dictate what the message will state. Further, the distinction of public utility and
mass media entity, it that view that a corporation which establishes, perates, maintains
and/or manages commercial radio and television broadcasting stations is an operator of public
utility.

Section 11, Article XVI of the 1987 Constitution provides:

“(1) The ownership and management of mass media shall be limited to citizens
of the Philippines, or to corporations, cooperatives or associations, wholly- owned and
managed by such citizens.

The term “mass media” refers to any medium of communication designed to reach the
masses and that tends to set the standards, ideals and aims of the masses.

In addition, the term “mass media” shall mean the gathering, transmission of news,
information, messages, signals, and forms of written, oral and all visual communications and shall
embrace the print medium, radio, television, film, movies, wire and radio communication services.

The distinctive feature of any mass media undertaking is the dissemination of information
and ideas to the public, or a portion thereof.

The citizenship requirement is intended to prevent the use of such facility by aliens to influence
public opinion to the detriment of the best interests of the nation.

In SEC-OGC Opinion No.18-22 dated November 28, 2018, the Commission opined that “the
activities of live productions, short and full-length television shows and movies, and direct to
audience, all constitute the dissemination of information and ideas to the public, and tend to
influence the public's standards, ideals, aims and opinion.

Construed in light of the above-quoted definition of “mass media” which involves not
only the transmittal but also the creation/publication, gathering and distribution of the
news, information, messages and other forms of communications to the general public, it is
clear that a corporation which establishes, operates, maintains and/or manages
commercial radio and television broadcasting station is a mass media entity.

By maintaining and operating a commercial radio and television broadcasting station, the
company will essentially be disseminating information, messages, signals and all forms of written,
oral and visual communications to the public which will, or may have an influence on the
standards, ideals, aims and opinion of the latter.
Accordingly, it falls within the coverage of the constitutional mandate limiting ownership
and management of mass media to citizens of the Philippines or wholly owned and managed
Philippine corporations.

Court of Appeals, et al., defined “Public Utility” as follows:

“A ‘public utility’ is a ‘business or service engaged in regularly supplying the public

with some commodity or service of public consequence such as electricity, gas, water,
transportation, telephone or telegraph service, xxx as its name indicates, the term “public utility”
implies public use and service to the public.

The principal determinative characteristic of a public utility is that of service to, or readiness to
serve, an indefinite public or \portion of the public as such which has a legal right to
demand and receive its services or commodities. Stated otherwise, the owner or person in
control of public utility must have devoted it to such use that the public generally or that part of
the public which has been served and has accepted the service, has the right to demand that use or
service so long as it is continued, with reasonable efficiency and under proper charges.

Unlike a private enterprise which independently determined whom it will serve, a “public
utility holds out generally and may not refuse legitimate demand for service.”

Although the operation and maintenance of radio and television broadcasting

station can be considered “public service” as the same is covered by the phrase “wire or
wireless broadcasting stations”, and even assuming that the services of such company may fall under
the definition of a “public utility”, the same are still considered mass media entities, for which the
Constitution provides a stricter rule (i.e., must be 100% Filipino-owned).

On the basis of the foregoing, it is our opinion that while radio and television
broadcasting stations are entities engaged in “Public Service”, the same are considered as
engaged in “MassMedia” activities and are therefore covered by the nationality rules governing
mass media. The constitutional provision on mass media is intended to prevent the use of such facility
by aliens to influence public opinion to the detriment of the best interest of the nation.

5. Opinion No. 21-01

Re: Filling-up of Vacancies in the Board of Trustees

Case Questions:
1. How to fill-up vacancies in a corporation’s Board of Trustees resulting from the resignation
of some of its members?
 Section 28 of the SRC states that vacancies in the BOT caused by reasons other than
removal or expiration of term may be filled by:
o the vote of at least majority of the remaining trustees, if still constituting a
quorum; or
o stockholders or members in a regular or special meeting called for that purpose.
 In cases such as resignation of trustees, an election for replacement director must be held
no later than forty-five days from the time the vacancy arose.
o Such replacement must serve only for the unexpired term of the predecessor in
office.
 Underlying policy of the Corporation Code: business and affairs of a corporation must
be governed by a BOD whose members have stood for election and have been elected by
stockholders in an annual basis.
 o This way continued accountability and legitimacy of their decisions can be
assured.

2. Do the remaining trustees (i.e., 2 out of the original 5) have the power and authority to
merely appoint the replacement of the members of the BOT who resigned?
 NO. On the ground that the remaining 2 trustees no longer constitutes a quorum and thus
have no legal authority to fill-up the vacancies through a majority vote.
 Filling-up of the BOT must be done by the general membership of the corporation in a
regular or special meeting called for that purpose.

2020

1. Opinion No. 20-03

Re: Power to invest Corporate Funds for any other purpose; primary and secondary
purpose

Case Question:

Can a corporation whose primary purpose is to extend loans, credit or any and all types of financial
accommodations engage in credit card activities as part of its investing its corporate funds without
the need for stockholder ratification?

SEC Opinions:

 Yes.
 A private corporation may invest its funds in any corporation, business or for any purpose
other than the primary purpose for which it was organized when approved by the BOT/BOD
and ratified by at least 2/3 of the SHs.
o However, when an investment is by the corporation is reasonably necessary to
accomplish its primary purpose as stated in the AOI, the approval of the
aforementioned shall not be necessary.
 The grant/extension of loan/credit through the issuance of credit cards is an activity which is
reasonably necessary in furtherance of the primary purpose of such business.
 Thus, the ratification of the SHs of the said act is no longer required.

2. Opinion No. 20-02

Re: Corporate Term under the Corporation Code

Details: SOS-Calbayog was incorporated on 1970 when Batas Pambansa Blg 68 was still in force
which limited the corporate term to 50 years. SOS-Calbayog’s corporate term was effective until
2020 under this Corporation Code.

Question: Has SOS-Calbayog’s corporate term expired or does the new corporate code allow it to
exist perpetually.

Opinion: SOS-Calbayog shall be deemed having a perpetual corporate term. Corporations

incorporated before the effectivity of the RCC(Revised Corporation Code) and continue to exist upon
the effectivity of the RCC are ipso jure(by the law itself) granted perpetual existence if there has been
no majority vote in the part of the corporation to maintain it’s limited corporate term.
3. Opinion No. 20-01
Re: Publicly Listed Company

Details: Energy Development Corporation (EDC) filed a petition with PSE to delist its common
shares. PSE approved this and delisted EDC’s commons shares. EDC still has debt securities at
present.

Question: is EDC still considered a publicly-listed corporation after being delisted from PSE? Is
EDC covered by the Corporate Governance Code for Publicly-Listed Companies?

Opinion: EDC is excluded from the coverage of the Corporate Governance Code for Publicly-Listed
Companies. However, it is covered by the Memorandum Circular No. 24, Series of 2019.

2019

1. Opinion No. 19-54

Re: Pre-Need Products as Securities

FIRST QUERY: Whether or not, prior to the promulgation of the Pre-Need Code, the SEC
considered pre-need plans as securities, and if so, the legal basis for the same.

THIRD QUERY: What does the SEC consider as "non-traditional" securities, and whether or not
pre-need plans were classified as such.

 The following opinions are for the 1st and 3rd queries:
 The law governing pre-need plans was the Revised Securities Acts (“RSA") of 1982. Under
Section 2(a) of the RSA, pre-need plans were specifically identified as securities. The
pertinent provision states:
"Securities" shall include pre-need plans, pension plans, life plans, joint venture
contracts, and similar contracts and investments where there is no tangible return on
investments plus profits but an appreciation of capital as well as enjoyment of
particular privileges and services.”

Under Section 3.1 of the SRC, the definition is as follows:

"Securities" are shares, participation or interests in a corporation or in a

commercial enterprise or profit-making venture and evidenced by a certificate,
contract, instruments, whether written or electronic in character. It includes:

(a) Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-

backed securities;

(b) Investment contracts, certificates of interest or participation in a profit sharing

agreement, certifies of deposit for a future subscription;

(C) Fractional undivided interests in oil, gas or other mineral rights;

(d) Derivatives like option and warrants;

(e) Certificates of assignments, certificates of participation, trust certificates, voting

trust certificates or similar instruments;
 (f) Proprietary or nonproprietary membership certificates in corporations; and

(g) Other instruments as may in the future be determined by the Commission."

 That pre-need plans are securities is further confirmed by Section 3.9 of the SRC:
"Pre-Need Plans” are contracts which provide for the performance of future services
or the payment of future monetary considerations at the time of actual need, for
which plan holders pay in cash or installment at stated prices, with or without
interest or insurance coverage and includes life, pension, education, interments and
other plans which the Commission may from time to time approve.

 The Commission had included pre-need plans as one of the non-traditional securities
regulated and supervised by Non-Traditional Securities and Instruments Department (NTD).
SECOND QUERY: What are the attributes of securities that the SEC considers as important, in
order that they fulfill their function as investment vehicles and trustworthy assets (e.g. determinate
growth, ease of liquidation and transferability, etc.)

 the Commission does not prescribe, the attributes of a security for it to be considered as a
trustworthy asset. Opinions issued by the academe, professionals, and financial analysts, may
be relied on by the market on this matter.
 It is the Insurance Commission which has the power to determine whether or not pre-need
plans are admissible assets for investment by insurance companies and other potential
clients.

2. Opinion No. 19-51

Re: Classification of Corporations; Express powers; Right of first refusal;
Procedure in transferring shares of stock; Qualifications of directors; and Probative
Value of the stock and transfer book

FIRST QUERY: Is UDZ a stock and profit corporation? If it is, does this mean that its stockholders
may request for the declaration of dividends since it has exorbitant retained earnings over the years?

 UDZ is a stock but non-profit corporation as stated in paragraphs 7 and 9 of its Amended
AOI:
“7. That the capital stock of said corporation is SIX HUNDRED THOUSAND
PESOS (P600,000.00), divided into ONE THOUSAND TWO HUNDRED (1,200)
shares at the par value of FIVE HUNDRED PESOS. “

“9. That, since said corporation is a NON-PROFIT CORPORATION, no stock shall

be entitled to dividends during the lifetime of said corporation, the right of the
holders thereof being limited to the repayment of the value of the said stocks upon the
repurchase from their holders by said corporation in accordance with the
Corporation Law and the By-Laws, or upon the expiration of its terms of existence or
upon its dissolution in accordance with law”

 During UDZ's registration/incorporation in 1954, Philippine laws allowed educational

institutions to incorporate as stock but non-profit corporations as evinced by RA 6055 on 4
August 1969.
 Section 1 states that:
 "Any educational institution organized as a stock corporation, which for at least ten
years has been conferring baccalaureate degrees and has maintained good standing
as required by Section two, paragraph (b) of this Act, may convert itself into a non-
stock, non-profit education foundation "

 Considering that UDZ's records fail to show any circumstance that it was converted to a non-
stock and non-profit corporation, UDZ is considered a stock and non-profit corporation
which may not declare dividends to its stockholders.
SECOND QUERY: Whether or not Nos. 2(f); 2(j) and 2(l) of UDZ's 2004 Amended Articles of
Incorporation (AOI) serve its primary purpose?

 Amended AOI of UDZ states that the corp. has the following powers:
"To engage in any/all of the following activities and enterprises, the earnings
therefore, if any, shall be devoted to the furtherance of the main purposes above-
mentioned:

(f) To donate and/or give gifts for charity and/or to recognized charitable and/or
educational institutions.

(j) To rent, erect, construct and lease, buy and sell buildings and other real and
personal property necessary for the conduct of its business, subject to the limitation
provided by law.

(l) Subject to the limitations established by law, to acquire by purchase, exchange,

assignment, gift, or otherwise, and to hold, own and use for investment or otherwise,
and to sell, assign, transfer, exchange, mortgage, pledge, traffic and deal in and with,
and otherwise to enjoy and dispose of, any bonds, debentures, promissory notes,
shares of capital stock and/or other securities, and/or obligations, created,
negotiated or issued by any corporation, association, or other entity, foreign or
domestic, and while the owner thereof, to exercise all the rights, powers and
privileges of ownership, including the right to receive, collect, and dispose of, any
and all dividends, interest and income, derived therefrom, and the right to vote on
any shares of the capital stock, and upon any bonds, debentures and/or other
securities, having voting power so owned.”

 SEC. 35. Corporate Powers and Capacity. - Every corporation incorporated under this Code
has the power and capacity:
(g)To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage,
and otherwise deal with such real and personal property, including securities and
bonds of other corporations, as the transaction of the lawful business of the
corporation may reasonably and necessarily require, subject to the limitations
prescribed by law and the Constitution;

(i)To make reasonable donations, including those for the public welfare or for
hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no
foreign corporation shall give donations in aid of any political party or candidate or
for purposes of partisan political activity;
 (k)To exercise such other powers as may be essential or necessary to carry out its
purpose or purposes as stated in the articles of incorporation."

 The Commission pronounced that:

"a corporation has only such powers as are expressly granted in its charter or in the
statutes under which it is created or such powers as are necessary for the purpose of
carrying out its express power. A corporation has both express and implied or
incidental powers. Express powers are those which are enumerated in Section 36 of
BP 68 (now Section 35 of the RCC) and those which are sanctioned by the State in
the corporation's articles of incorporation. Implied or incidental powers, are the
corporation's powers attributes and properties incident to its existence, which may be
essential or necessary to carry out its purpose or purposes as stated in its articles of
incorporation."

"Whether or not such power is included in what the corporation could do and
perform under its articles of incorporation, it is nevertheless, deemed to be within the
scope of its corporate powers by express declaration of Section 36 of the Code."

 UDZ's AOI are essentially mere restatements of Section 35 of the RCC, the same are
deemed automatically granted by law upon incorporation.
THIRD QUERY: That for several years, it has been observed that there are adverse opinions coming
from the external auditors.

 The Commission shall refrain from rendering an opinion on queries involving justiciable
issues that are litigated or may be eventually litigated in the future.
 The commission advise to refer said concern to the Office of the General Accountant of this
Commission for its proper action, considering that the matter involved therein is within its
expertise.
FOURTH QUERY: In the absence of the right of first refusal in UDZ's AOI and By-Laws, can a
stockholder sell his/her share without offering to other stockholders?

 The right of first refusal is a right that arises only by virtue of contractual stipulations, the
right is construed strictly against the right of persons to dispose of or deal with their
property.
 It may also be provided for in specified statutory provisions. Unlike pre-emptive right which
pertains to stockholders by common law and does require any statutory enabling provision,
the right of first refusal, if not provided for by law or by AOI, does not exist at all.
 The commission advise to check the corporation's AOI or By-Laws to determine whether a
right of first refusal is granted to its stockholders. In case the AOI or By-Laws are silent, a
stockholder may freely sell his shareholdings without offering it to the corporation or to its
stockholders.
FIFTH QUERY: What is the procedure in transferring a common/voting stock and when is it legal?

 Section 62 of the RCC states:

“Shares of stock so issued are personal property and may be transferred by delivery
of the certificate or certificates indorsed by the owner, his attorney-in-fact, or any
other person legally authorized to make the transfer. No transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the books of the
 corporation, showing the names of the parties to the transaction, the date of the
transfer, the number of the certificate or certificates, and the number of shares
transferred."

 This Commission pronounced that:

"Mere endorsement of the certificate of stock shall be sufficient to legally effect the
transfer of title to a share of stock, even without executing a deed of assignment of
the shares, provided the same is coupled with delivery and recorded in the stock and
transfer book of the corporation. An unrecorded transfer, though valid between the
parties, cannot be effective as against the corporation. The right of a stockholder
accrues only upon entry of his name in the books of the corporation."

 The use of the word “may” means that the transfer may be effected in a manner different
from that provided for in the law. In Section 62 of RA 11232, the Supreme Court (Court) held
that:
“It is to be noted, however, that section 35 of the Corporation Law (Act No. 1459)
enacts that shares of stock "may be transferred by delivery of the certificate endorsed
by the owner or his attorney in fact or other person legally authorized to make the
transfer." The use of the verb "may" does not exclude the possibility that a transfer
may be made in a different manner, thus leaving the creditor in an insecure position
even though he has the certificate in his possession."

 The Court reiterate this in the case of Alfonso S. Tan vs Securities and Exchange Commission
(G.R. No. 95696,3 March 1992) that:
Contrary to the understanding of the petitioner with respect to the use of the word
"may", in the case of Shauf v. Court of Appeals, this Court held, that "Remedial law
statues are to be construed liberally." The term 'may' as used in adjective rules, is
only permissive and not mandatory.

Years before the above rulings concerning the interpretation of the word "may", this
Court held in Chua v. Samahang Magsasaka, that "the word "may" indicates that the
transfer may be effected in a manner different from that provided for in the law."

 While it is usual to effect the transfer of shares by indorsement on the certificate, a

conveyance may be made by an assignment or sale in a separate instrument in lieu of the
indorsement of the certificate, unless the by-laws expressly provide that the transfer shall be
made exclusively in the manner authorized by the statute.
SIXTH QUERY: Can any heir of a deceased stockholder sit down as a member of the board of
directors?

 Section 22 of the RCC provides for the qualification of a director, that he must own at least
one (1) share of stock of the corporation under his/her name.
 "the only mandatory qualification prescribed for a director is that he should appear in the
corporate books (i.e. stock and transfer book) as a stockholder or member of the corporation.
Additional qualifications may be imposed in the by-laws. In the absence of a provision in the
by-laws, a corporation cannot require additional qualifications for directors other than the
mandatory requirement under Section 23”
  Thus, any person, including any heir of a deceased stockholder, may become a member of the
Board of Directors provided that he/she owns at least one (1) share of stock of the
corporation under his/her name, which must be duly registered in the STB of the corporation,
and provided he/she has all the other qualifications and none of the disqualifications as may
be provided by the AOI or the By-Laws.
SEVENTH QUERY: Can the Securities and Exchange Commission do an independent audit of UDZ,
especially on its stock and transfer book (STB)?

 The only function of the Commission with respect to STBs is the registration. As for contents,
STB pertains to ownerships of shares of stocks, which is intra-corporate in nature and within
the jurisdiction of the ordinary courts. Commission may not conduct an audit over STBs and
its contents.
EIGHTH QUERY: Which is a more legal document between the General Information Sheet (GIS)
and the STB? In case the corporate secretary is unable to produce STB, what could be the basis in
identifying a true stockholder?

 Commission pronounced:
"STB is the quintessential record of all stockholders and their corresponding
stockholdings in the corporation. Only in the event that the said STB is lost or
destroyed should the corporation resort to gathering extrinsic evidence or parol
evidence of stock ownership following the general rules on the presentation of
secondary evidence."

 STB is considered the best evidence to prove the status of a person as a stockholder.
However, it is not conclusive in nature. Should the STB be lost or destroyed, other pieces of
evidence such as the latest GIS of the corporation or the certificate of stock may be
presented.

LAST QUERY: Request for the latest GIS of UDZ.

 Any request for the GIS of a corporation should be directed to the Company Registration and
Monitoring Department of this Commission (CRMD for its appropriate action since the latter
serves as the repository of such document).

3. Opinion No. 19-48

Re: Corporate Term of Educational Institutions

QUERY: If the corporate life of UNEP started anew on 1980 and that it shall end fifty (50) years
therefrom basing on the reason of Section 148 of the Corporation Code.

 No maximum corporate term of existence was prescribed for educational institutions, in cases
where the Articles of Incorporation (AOI) does not specify a term, the term is deemed
perpetual.
 Section 11 of BP 68 (took effect on 1 May 1980), requires the corporate term of existing and
new corporations to be limited to fifty (50) years from incorporation unless sooner dissolved
or period is extended.
  Section 148 of BP 68, reads:
"All corporations lawfully existing and doing business in the Philippines on the date
of the effectivity of this Code and heretofore authorized, licensed or registered by the
Securities and Exchange Commission, shall be deemed to have been authorized,
licensed or registered under the provisions of this Code, subject to the terms and
conditions of its license, and shall be governed by the provisions hereof: Provided,
That if any such corporation is affected by the new requirements of this Code, said
corporation shall, unless otherwise herein provided, be given a period of not more
than two (2) years from the effectivity of this Code within which to comply with the
same.
 In case an affected educational corporation fails to amend its AOI and to comply with the
applicable provisions on or before 1 May 1982, the expiry date, the respective provisions will
be considered written into the AOI as of the date of the effectivity on 1 May 1980. The fifty
(50) year period will be counted from 1 May 1980.
 The 50-year would affect the operations of pre-war schools established for more than fifty
(50) years as it would result to its dissolution.
 To avoid unintended consequences, it would be appropriate to reckon the 50-year period
from the date of effectivity of the Corporation Code. This promotes public interest, enabling
educational corporations to continue serving the locality where the schools are located.
 These shall only apply to educational institutions with perpetual corporate terms prior to the
effectivity of BP 68.
 If the educational institution amended its AOI prior to the effectivity of BP 68, specifically
limiting its corporate term after its incorporation, the fixed or definite term should be
followed.
 The reason is that the corporation waived its right or option to have a perpetual term by
adopting a specific one.
 Considering that UNEP's corporate term was expressly limited to fifty (50) years from 1968,
the fifty (50) year period shall be reckoned from 1968 instead of from 1 May 1980.
 If UNEP failed to extend its term on or before 2018, it is deemed dissolved.
 Section 11 of the RCC (took effect last 23 February 2019) provides that
“a corporation whose term has expired, may, at any time, apply for a revival of its
corporate existence”

4. Opinion No. 19-47

Re: Corporate Term of Existing Corporations under the Revised Corporation Code

QUERY: If The Nielsen Co. is deemed amended of perpetual existence pursuant to RCC, without any
further or positive act of the Company. Incorporation is prior to effectivity of RCC, corporate term is
until 3 November 2020

Section 11 of the RCC provides:

"Corporations with certificates of incorporation issued prior to the effectivity of this Code,
and which continue to exist, shall have perpetual existence, unless the corporation, upon a
vote of its stockholders representing a majority of its outstanding capital stock, notifies the
Commission that it elects to retain its specific corporate term pursuant to its articles of
incorporation. Provided, That any change in the corporate term under this section is without
prejudice to the appraisal right of dissenting stockholders in accordance with the provisions
of this Code.”
  Corporate term existing prior to, and which continues to exist upon the effectivity of the RCC
shall be deemed perpetual without any further action on the part of corporation.

5. Opinion No. 19-43

Re: Non-holding of Annual Membership Meeting

FIRST QUERY: Whether or not a GIS submitted within Jan. 2019 be valid despite failure to conduct
Annual Membership Meeting for 2018.

SEC MC No. 3 series of 2007 provides that:

“If the corporation is unable to hold the meeting for the calendar year, the GIS shall be filed
not later than January 30 of the following year”

Addendum (From GIS form for Nonstock Corp):

“Should an annual members’ meeting should be held thereafter; a new GIS should be
submitted/filed”

 Non-holding of an annual meeting is a violation of Section 49 of the Revised Corporation

Code (RCC) and subject to a corresponding penalty pursuant to Section 170 of RCC.

SECOND QUERY: How a vacancy in Board of Trustees due to resignation be reflected in the GIS.

Section 25 of RCC provides that:

“Should a director, trustee or officer die, resign or any manner cease to hold office, the
secretary, or the director, trustee or officer of the corporation, or in case of death, the
officer’s heir shall, within seven (7) days from knowledge thereof, report in writing such fact
in commission”

 Resignation of a Trustee is considered a change in the composition of BOT which must be

reflected in an amended GIS to be submitted by authorized persons within 7 days from
knowledge of resignation.
 In absence of replacement trustee, the same may be reflected as vacant.
Filling up of vacancy (Section 28 of RCC):

Any vacancy occurring in the BOD other than by removal or expiration of term may be filed
by the vote of at least a majority of the remaining directors or trustees, if still constituting a
quorum; otherwise, said vacancies must be filled by the stockholders or members in a
regular or special meeting called for that purpose.

Election must be held no later than 45 days from the time the vacancy arose. A director or
trustee elected shall be referred to as a replacement director or trustee and serve only for
the unexpired term of the predecessor.

 If still constitute a quorum, a replacement may be elected without holding AMM.

THIRD QUERY: Recourse to hold recalcitrant members failing to participate AMM.

  Commission refrains from rendering opinion involving right of private parties who would
contest in court if the opinion is adverse to their interest.
 For information, a corp. cannot coerce its members to attend meetings as it should be
voluntary. But if the non-attendance results to no quorum for at least 2 attempts of meetings
for electing officers, Section 25 of RCC applies.

6. Opinion No. 19-40

Re: Paid-Up Capital; PSE Rules
 Issue:
i. Opinion whether Additional paid-in capital (APIC) can be considered as Paid-up
capital
 Corporation code and section 2 Memorandum Circular No. 11:
i. Paid in capital – Amount of outstanding capital stock and additional paid-in
capital or premium over the par value of shares
ii. Additional paid in capital – any contribution of stockholders over the par value
of shares, (AKA share premium)
iii. Paid up capital – portion of the authorized capital stock which has been
subscribed and then paid
 Verdict:
i. Thus, Paid-up capital differs from paid-in capital

7. Opinion No. 19-38

Re: Corporate Term of Corporation Sole
 Issue:
i. Opinion whether the corporate term of Colegio de San Jose which is registered
as a Corporate sole is limited to 50 years
 Section 110 and 116 Revised corporation code:
i. The revised corporation code do not provide for a term of existence of religious
corporations, whether classified as corporation sole or religious society
 Verdict:
i. The law never intended to limit the corporate life of religious corporations.
Hence they may be allowed to exist perpetually

8. Opinion No. 19-37

Re: Mustering the required quorum; representation of the dormant/inactive
stockholders
 Issue:
i. Opinion whether the practice of representing inactive/dormant stockholders in
the stockholders’ meeting by Philippine Veterans Bank without consent, to
muster the required quorum, is acceptable.
 Section 57 Revised Corporation Code
i. “...a proxy to be valid must be in writing and signed by the stockholders…”
ii. “The right to vote is inseparable from the right of ownership of stock without the
owner’s consent”
  Verdict:
i. It would be illegal for a corporation to decide that a stockholder who fails to
attend the meeting or appoint a proxy is deemed to have appointed the Chairman
of the meeting as his proxy.
 Notes:
i. To solve the problem of inactive/dormant stockholder resulting in “no quorum-
no meeting” and the standstill of operations, the Code provides an emergency
meeting for the purpose of conducting elections, where the shares/members
entitled to vote at such meeting shall constitute quorum for conducting elections.

9. Opinion No. 19-36

Re: Notice and Quorum in membership meetings
 Issue:
i. Opinion on the notice and quorum requirement as well as voting rights in the
membership meetings of Le Marben Association
 1st query: Since the notice of meeting was not compiled with, are the decisions or
resolutions adopted during the meeting considered void?
i. Based on the written by-laws of the company notices of meetings shall either be
through mail or personal delivery, notifying stockholders through publishing is
not valid
ii. Verdict: Hence, the meeting was improperly called. However, even it was
improperly called, all proceedings and business transacted at such meeting shall
be valid, provided the following
1. Proceeding and transactions are within the powers of the BOD
2. Quorum is satisfied
 2nd query: Is it appropriate for Legrand to cast 8 votes on the basis of its ownership of 8
individually titled condo units in the project?
i. General rule of Nonstock Corporation is 1 member is entitled to 1 vote, unless it
is stated in the articles of incorporation or by laws. Unless stated in the by-laws
of Le Marben Association. It has stated a formula in computing a member’s
number of votes, the number of votes can be computed through the floor size of
the condo units owned by the members.
ii. Verdict: It was not appropriate for Legrand to have 8 votes based on number of
titles condo units. The number of votes should be computed as stated in the by-
laws.
 rd
3 query: What is the quorum requirement in order that the decision in a meeting may be
considered valid if there are 62 individually titled condo units owned by 36 persons,
natural and corporate?
i. General rule is that a quorum shall consist of the stockholders representing a
majority members for a nonstock corporation, unless otherwise stated in the by-
laws of the association.
ii. Since the by-laws of La Marben Association provided the quorum, it shall then be
followed
iii. Verdict: Since the voting rights of the members are determined by the percentage
which the floor areas of units bear thee total floor area of all units , the quorum
shall be such number of members representing a majority of the total floor area
covered by the 62 units.
 4th query: Will the quorum requirement change Legrand’s execution Deed of assignment?
 i. The quorum required is fixed in the by-laws of the association and cannot be
changed by the assignment of the condominium unit or its concomitant rights.
ii. Hence, the quorum requirement will not change with Legrand’s execution of the
Deed of assignment.
 th
5 query: is the assignee entitled to vote in the next meeting of Le Marben Association?
 6th query: If the Deed assignment is coupled with a trust agreement, is the assignee still
entitled to vote in the next meeting of Le Marben Association?
i. General rule of membership in a non-stock corporation has personal elements,
thus it is not transferable to other people who wants to be members. Unless the
articles or by-laws provides otherwise. Membership from a condominium
corporation is inseparable ownership of condo unit
ii. Verdict: Any restriction as to the transfer, lien or encumbrance of condo unit, to
be valid, must be expressly provided in the by-laws, Master Deed or Declaration
of Restrictions duly annotated in the certificate of title registered under that Land
Registration act.

10. Opinion No. 19-35

Re: E-Commerce mode of Retail Trade
 Issue:
i. Opinion on whether Rustan Commercial Corporation (Rustan’s) needs to further
amend its Amended articles of Incorporation to include Electronic Commerce (E-
commerce) as part of its purposes as a retail trade business
 Section 3 of RTLA - Definition of retail trade:
i. “any act, occupation or calling of habitually selling direct to the general public
merchandise, commodities or goods of consumptions.”
 Verdict:
i. Based on the definition, the law does not distinguish between retail trade carried
through physical stores or online channels.
ii. Thus, as long as a corporation is authorized to engage in retail trade, it may do
so by any means or mode.
iii. THUS, RUSTAN’S DOES NOT NEED TO AMMEND ITS AMMENDED
ARTICLES OF INCORPORATION TO INCLUDE E-COMMERCE AS PART OF
ITS PURPOSE AS A RETAIL TRADE BUSINESS.

11. Opinion No. 19-34

Re: Rights of a corporation under liquidation
 Issue:
i. Opinion on whether or not your client, Arca & Company, Inc. (ARCA), whose
corporate term has expired, is allowed to continue selling and transferring the
ownership of its remaining assets.
 Section 139 Revised Corporation Code:
i. “A corporation whose corporate existence is terminated, shall continue as a
body corporate for 3 years for the purpose of liquidation to enable it to settle and
close its affairs, dispose of and convey its property, and distribute its assets.”
 Verdict:
i. The sale and transfer of the remaining assets of ARCA are acts in line with the
purpose of its liquidation.
 ii. Thus, ARCA, AS A CORPORATE ENTITY, MAY VALIDLY DO SO WITHIN 3
YEARS AFTER THE EXPIRATION OF ITS CORPORATE TERMS

12. Opinion No. 19-33

Re: Term of License to do Business of a Foreign Corporation
 Issue:
i. Confirmation of the opinion that the license to do business in the PH granted by
the commission to a foreign corp. is co-terminus with the life of the foreign corp.
 Definition of Co-terminus:
i. to describe things that are equal in scope
 Section 143 Revised corporation code:
i. …Upon issuance of the license, such foreign corporation may commence to
transact business in the Philippines and continue to do so for as long as it retains
authority to act as a corporation under the laws of the country or State of its
incorporation, unless such license is sooner surrendered, revoked suspended, or
annulled in accordance with this Code or other special laws…
 Verdict:
i. As long as the foreign corporation still exist legally in its place if incorporation,
its license to do business in the PH remains valid, unless sooner surrendered,
revoked, suspended, or annulled in accordance with RCC or other special laws.
ii. TERM OF LICENSE OF FOREIGN CORP. = LIFE OF FOREIGN CORP

13. Opinion No. 19-32

Re: Quorum in Members’ Meetings
 Issue:
i. Opinion whether or not the quorum in a general assembly (GA)/meeting to
transact business (MTB) is the same quorum required in the election of board of
trustees
 Definition of Quorum:
i. “That number of members of the body which, when legally assembled in their
proper places, will enable the body to transact its proper business…”
 Quorum required for GA/MTB:
i. General rule: A quorum shall consist of stockholders representing a majority of
the outstanding capital stock or a majority of the members in the case of a
nonstock corporations.
ii. Exceptions: Otherwise provided in this code or in the by laws
 Quorum required in board elections:
i. General rule: It is mandatory that at least a majority of all members entitled to
vote must be present either in person or by proxy at the meeting held for the
purpose. Thus, in absence of the required quorum there cannot be a valid
election of trustees
 Verdict:
i. Unless the Code or bylaws provides otherwise, the quorum required in the
GA/MTB is the same quorum necessary in meetings held for the purpose of
electing trustees to the Board.
ii. BOTH KINDS OF MEETINGS REQUIRES THE SAME QUORUM WHICH IS
MAJORITY OF THE MEMBERS ENTITLED TO VOTE.
  Notes:
i. Must be entitled to vote:
1. Stock corporations: 1 share = 1 vote
2. Nonstock corporation: 1 person = 1 vote
ii. Nominees receiving highest number of votes shall be declared elected, as the law
required only plurality of the votes vast at the election

14. Opinion No. 19-28

Re: Corporate Term of Existing Corporations under the Revised Corporation Code.

Case Question:

Is the corporate term of a corporation established prior to the effectivity of the RCC be automatically
deemed to have perpetual existence even without the affirmative vote of 2/3 of the outstanding
shares?

SEC Opinions:

 Corporations with certificates of incorporation issued prior to the effectivity of the Code, and
which continue to exist shall have perpetual existence, unless:
o A majority vote of the stockholders notifies the SEC that it elects to retain its specific
corporate term pursuant to its articles of incorporation.
 Any change in the corporate term is without prejudice to the appraisal right
of dissenting stockholders.
 Further, since the automatic conversion of the corporate term to perpetual does not require
the amendment of the AOI, the 2/3 affirmative vote of the outstanding shares to amend the
AOI would not be required.

15. Opinion No. 19-23

Re: SEC Approval of Issuance of Cash and Stock Dividends.

Case Question:

Is it necessary for a corporation to wait for the written approval of the SEC before they can validly
issue cash and stock dividends to its stockholders?

SEC Opinions:

 It is not mandatory for the corporation to seek prior approval from the SEC to declare cash
and stock dividends provided the following are complied with:
o For cash dividends:
 BOD approval of the cash dividend declaration; and
 Sufficient unrestricted RE as of the last fiscal or calendar year.
o For stock dividends:
 BOD approval of the stock dividend declaration;
 Stockholders’ approval representing at least 2/3 of the outstanding capital
stock and sufficient portion of the present authorized capital; and
 Sufficient unrestricted RE as of the last fiscal or calendar year.
 At their option, corporations can apply for acknowledgment notice of their declaration of
cash or stock dividend out of the unissued portion of their previously approved authorized
capital stock.
  Further, if the stock dividend declaration results to increase of authorized capital stock, an
application to SEC is mandated to be filed with the SEC pursuant to Section 37 of RCC.

16. Opinion No. 19-22

Re: Secondary purpose.

Case Question:

Will a corporation be authorized to enter into lawful arrangements with third parties for businesses
not expressly stated in its primary purpose in the AOI?

SEC Opinions:

 A corporation has both express and implied or incidental powers:

o Express powers- those enumerated in Section 35 of the RCC and those that are
sanctioned by the State in the corporation’s AOI.
o Implied or incidental powers- are the corporation’s “powers, attributes, and
properties… incident to its existence” which may be “essential or necessary to carry
out its purpose as stated in its AOI.”
 Section 35 of the RCC enumerates the general powers of every corporation whether or not
such powers are stated in its AOI.
 The question of whether a particular transaction is necessary in the pursuit of the business is
for the management to determine.
 Thus, any corporation can enter into agreements with third parties so long as these remain
necessary in the conduct of its corporate business even without express statement in its
primary purpose in its respective AOI, and so long as these agreements confer with the
pronouncements of Section 35 of the RCC.

17. Opinion No. 19-20

Re: Redemption of Preferred Shares; Subscribed Capital Stock.

Case Question:
1. Can corporations redeem preferred shares without retained earnings and without violating
existing laws as well as the trust fund doctrine?
 Corporations have the power to acquire own shares provided it has sufficient unrestricted
retained earnings to cover shares to be acquired.
o The requirement of unrestricted RE is based on the trust fund doctrine.
 An exemption to this rule: redeemable shares of any kind may be issued when expressly
provided in the AOI. With this, they may be repurchased regardless of the existence of
unrestricted RE as stated in the AOI or certificate of stock representing such shares.
o Moreover, redemption may be done regardless of the existence of unrestricted RE,
provided that the corporation still has sufficient assets to cover for liabilities after
such redemption.
o
2. Can insolvent corporations redeem shares of any kind?
 The right to redeem shares is subject to the condition that the redemption would not render
the corporation insolvent and that the corporation has sufficient funds to satisfy its liabilities.
 Corporations that have issued redeemable shares shall maintain a sinking fund to meet the
redemption price at specified dates in the future.
3. Will the redemption of preferred shares not result to insolvency?
  Redeemed preferred shares will form part of treasury shares.
 Two types of treasury shares:
o Non-reissuable: this will be considered retired and can no longer be
reissued. This will decrease the capital stock of the corporation. When the
AOI is silent, this is the status of treasury shares.
o Reissuable: reissuable and thus not retired. This will not decrease the capital
stock of the corporation.

18. Opinion No. 19-19

Re: Section 23.2 of the Securities and Regulation Code.

Case Question:

Is it necessary to prove that a corporate director who buys and sells shares of stocks of the issuer
during a six-month period took advantage of or used material non-public information before he can
be held liable under Section 23.2 of the SRC?

SEC Opinions:

 This pertains to short-swing profit which provides that any profit made by a director, an
officer, or a 10% beneficial owner of a reporting company within a period of less than six
months belongs to the issuer.
 Therefore, it is not required that there be insider trading to constitute a violation of Section
23.2 of the SRC.
 The following elements must be present to sustain an SRC Subsection 23.2 action against any
director or officer:
o Transaction must involve an equity security of the reporting company;
o There must be a matching purchase or sale.
 Thus, neither intent nor actual use of inside information is required to constitute violation of
Section 23.2 of SRC, only profit made from a matching purchase and sale of equity securities
within a period of six months by a director, officer, or a beneficial owner of such issuer.

19. Opinion No. 19-17

Re: Board of Trustees.

Case Question:

Are the appointed trustees of an SEC-registered corporation already considered duly constituted
officers of the corporation without election?

SEC Opinions:

 The SEC shall refrain from rendering opinion on matters:

o involving substantive and contractual rights of private parties that may be subject to
contest in court.
o which would necessarily require a review and interpretation of contracts, or an
opinion on the validity thereof.
o that will entail gathering of legal materials since the SEC should not function as a
legal counsel.
  All corporations organized under the Code shall file to the SEC their AOI in any of the
official languages duly signed and acknowledged by all of the incorporators, containing the
following:
o The names, nationalities, residences of persons who shall act as directors or trustees
until the aforementioned officers are duly elected and qualified.
 Should the corporation conduct its first election for the positions of official directors or
trustees, the provisions of the corporation’s by-laws must be followed.
 Amendments to the by-laws shall be certified by the SEC that the same are not inconsistent
with the provisions thereof.
 By-laws shall be made to apply prospectively and not retroactively.

20. Opinion No. 19-16

Re: Corporate Terms of Existing Corporations under the Revised Corporation
Code.

Case Question:

Are the corporate terms of corporations established before the effectivity of the RCC automatically
deemed perpetual without need for any positive acts?

SEC Opinions:

 Corporations with certificates of incorporation issued prior to the effectivity of the Code, and
which continue to exist shall have perpetual existence, unless:
o A majority vote of the stockholders notifies the SEC that it elects to retain its specific
corporate term pursuant to its articles of incorporation.
 Any change in the corporate term is without prejudice to the appraisal right
of dissenting stockholders.

21. Opinion No. 19-15

Re: Pre-emptive right.

Case Question:

How does an existing investor ensure its 90% proportionate share to its investee that plans to issue a
new set of shares to increase its capitalization?

SEC Opinions:

 The proportionate share of an investor to another company may be maintained by exercising

its pre-emptive rights.
o PRE-EMPTIVE RIGHTS refer to the right granted to the stockholders to have the
first option to subscribe to any issuance or disposition of shares from the capital
stock in proportion to their respective shareholdings in the corporation.
 Under the Corporation Code, the grant of pre-emptive right is mandatory, except in cases
where such right:
o is denied by the articles of incorporation (AOI) or an amendment thereto.
o extends to shares to be issued in compliance with laws requiring stock offerings or
minimum stock ownership by the public.
 o extends to shares to be issued in good faith with the approval of the stockholders
representing 2/3 of the outstanding capital stock, in exchange for property needed for
corporate purposes or in payment of a previously contracted debt.
 Unless denied in the AOI or the issuance of shares falls under any of the enumerated, all
shareholders are entitled to exercise their pre-emptive right.
 Underlying basis of this right: to maintain the proportionate interest and voting strength of
existing shareholders.
 This right is based on the principle that an investing stockholder does so by understanding
that his equity is fixed on the number of shares he subscribes and therefore should not be
diluted by the issuance of additional shares to affect his right to vote, to dividends, and to
distribution of assets without giving him the opportunity to subscribe to such shares in
proportion to his holdings.
 The SEC shall refrain from rendering opinion on matters:
o involving substantive and contractual rights of private parties that may be subject to
contest in court.
o which would necessarily require a review and interpretation of contracts, or an
opinion on the validity thereof.
o that will entail gathering of legal materials since the SEC should not function as a
legal counsel.

22. Opinion No. 19-09

Re: Assignment of Shares of Stock between Husband and Wife.

WHAT: Validity and registrability of shares of stock assigned by a husband to his wife.

FACTS: The Corporate Secretary received a Deed of Assignment of Michael Angelo H. Santiago, a
registered owner of four thousand (4000) shares of stock in Hersan Realty Corporation ("HRC"),
assigned, ceded, transferred, and conveyed to his wife, Karen B. Santiago two thousand (2000) of the
said 4000 shares of stock, for the purpose of jointly administering their community property pursuant
to Article 96 of the Family Code)

JUSTIFICATION IN VALIDITY:

Shares of stock in a corporation are personal property and the owner has an inherent right as an
incident of his ownership, to transfer the same at will. Restricting the transferring of it tantamount to
a limitation on the free alienation of property.

i. In relation to the governing law of Family Code Article 75 relating to the property of
husband and wife, spouses are given the freedom to choose which property regime may
govern them during the marriage.
a. Unless a different system of property relation is agreed upon by the spouses, the property
relation shall be governed by the system of absolute community of property.

Opinion in such case:

Selling of property between the spouses is prohibited by law as well as donations between them
during marriage. This is because allowing transfers or conveyances between spouses during
marriage would jeopardize the civil law principle of conjugal partnership (or absolute community). It
was also created to defend the institution of marriage, which is the cornerstone of family law, by
preventing one spouse from exerting excessive influence over the other.
 b. Assuming, the husband and wife failed to agree on what property regime to adopt, the
shares they used to own individually deemed to be community property and shall be
governed by the rules on co-ownership

Opinion in such case:

As co-owners, the spouses may, at their discretion, request the Corporate Secretary that the
certificate be issued in the names of Mr. and Mrs. Santiano even if the stock certificates are still in
their names.

c. If the shares are one of the excluded properties under Section 92 of the Family Code, or
the spouses have chosen a marriage settlement other than absolute community of
property.

Opinion in such case:

Sale and assignment of shares between husband and wife must be recorded in the stock and transfer
book only delivery of the certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation showing the names of the parties
to the transaction, the date of the transfer, the number of the certificate or certificates and the number
of shares transferred (Section 63 12 of the Corporation Code)

JUSTIFICATION IN REGISTRABILITY:

It is the duty of the corporate secretary to record a transfer of stock except when the transferee's title
to said shares has no prima facie validity or is uncertain.

Opinion in such case:

If the assignment is valid, the said shares shall be transferred in accordance with Section 63 of the
Corporation Code.

GENERAL OPINION:

The transfer must be recorded in the corporate books with the names of the parties to the
transaction, the date of the transfer, and the amount of shares transferred in order to be effective
against third parties and the company so that the transfer will be valid and registrable.

23. Opinion No. 19-08

Re: Effective Date of Merger.

WHAT: Effective Date of Merger

FACTS: A letter dated May 17, 2018 has requested an opinion whether the parties to a merger,
MultiLine Structures Corporation ("MSC" the surviving corporation) and MultiLine Systems Inc.
("MSI"), may stipulate in the Plan of Merger the date of merger effectivity (effective on January 1,
2018), which will be subject to SEC approvals in Articles of Merger and its issuance of the
Certificate of Filing of the Articles of Merger.
Opinion: Section 79 provides that the merger shall only be effective upon the issuance of the
Certificate of Merger by the Commission. Thus, the effective date of the merger will be January
1, 2018, according to the proposed requirement in the Plan of Merger. It's worth noting that this
deadline has passed with no sign of whether the merger's Articles of Merger have been filed with
the Commission.

Conditions before issuance of Certificate of Merger

i. Approves the Articles of Merger, and

ii. Issued after the effective date of merger set by the parties
iii. Confirm that it will not harm any third parties or result in a reduction in the tax
obligations of the firms concerned.

24. Opinion No. 19-05

Re: Declaration of Cash Dividends.

Case Question:

Can a corporation declare cash dividends from the RE adjusted after the reconciliation of RE
available for dividend declaration (READD) (i.e., adjusting for foreign exchange loss sustained by
the corporation)?

SEC Opinions:

 Yes. Foreign exchange losses are supposedly not part of RE available for dividend
declaration and must be adjusted from the company’s RE.
 The SEC shall refrain from rendering opinion on matters:
o involving substantive and contractual rights of private parties that may be subject to
contest in court.
o which would necessarily require a review and interpretation of contracts, or an
opinion on the validity thereof.
o that will entail gathering of legal materials since the SEC should not function as a
legal counsel.
 Dividends of any kind shall be declared out of unrestricted RE such that surplus profits must
be bona fide income founded upon actual earnings or profits.
 The following shall not be available for dividend declaration and thus must be
adjusted/reconciled on the RE:
o Share/equity in net income of the associate or joint venture accounted for using the
equity method until actually realized;
o Unrealized foreign exchange gains;
o Unrealized actuarial gains;
o Fair value adjustments;
o Deferred tax asset;
o Adjustment due to deviation from PFRS/GAAP; and
o Other unrealized gains or adjustments.
 Foreign exchange losses are not recognized in P/L because changes in exchange rates have
little to no direct effect on the present and future cash flows from operations.

25. Opinion No. 19-03

Re: Computation of Retained Earnings Available for Dividend Declaration.
Case Question:

Will the cash dividend declaration based on the unrestricted RE gross of the treasury shares (TS)
from the redemption of preferred redeemable shares be held invalid for insufficiency of unrestricted
RE?

SEC Opinions:

 No. The cost of TS acquired from the redemption of redeemable shares is not deducted;
rather, it forms part of the ‘RE available for dividend declaration (READD),
 The inquiry stems from the basis of the trust fund doctrine which states that “the BOD may
declare dividends out of the unrestricted RE.
o The disposition of corporate funds to the prejudice of creditors is null and void.
o The declaration of dividends is dependent upon the availability of surplus profit or
unrestricted RE.
 Generally, TS shall be deducted from the unrestricted RE to arrive at the READD but an
exception is drawn from the same Section where this is taken:
o Redeemed redeemable shares, although part of the TS, is NOT subtracted from
unrestricted RE to arrive at the READD.
 But this exception is still subject to the condition that redemption may not be
made where the corporation is insolvent or if such redemption will cause
insolvency.

26. Opinion No. 19-01

Re: Assignment of All or Substantially All of the Assets of a Corporation.

WHAT:

Opinion regarding a proposed assignment by a corporation ("Corporation A") of the assets of one of
its branches to another entity would require stockholders' approval.

FACTS:

Corporation A is a domestic corporation whose primary purpose is to provide cable TV services and
maintains five (5) branches in different areas of the Philippines. It intends to assign all assets of one
of its branches (Davao del Norte) to a single proprietorship. The assets of the five branches are more
or less about the same size, subscriber base and cable set up

OPINION

The assignment of asset constitute only to a part of Corporation's assets and not assignment of all or
substantially all of the assets of the corporation since it it will not render Corporation A incapable of
continuing its business or accomplishing the purpose for which it was incorporated. With this regard,
the proposed assignment can be made by a mere majority vote of its Board of Directors.

Requisites to be a Assignment of All or Substantially All of the Assets of a Corporation

 i. if it would be rendered incapable of continuing the business or accomplishing the
purpose for which it was incorporated,
ii.  an authorized vote of stockholders representing at least two-thirds (2/3) of the
outstanding capital stock, or in the case of a non-stock corporation, by the vote of at
least two-thirds (2/3) of the members, in a stockholders' or members' meeting duly
called for the purpose.

Section 40. Sale or other disposition of assets. - Subject to the provisions of existing laws on illegal
combinations and monopolies, a corporation may, by a majority vote of its board of directors or
trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its
property and assets, including its goodwill, upon such terms and conditions and for such
consideration, which may be money, stocks, bonds or other instruments for the payment of money or
other property or consideration, as its board of directors or trustees may deem expedient, when
authorized by the vote of the stockholders 

2018

1. Opinion No. 18-19

Re: Annual Stockholders’ Meeting and Election of Officers.

Case Question:

Will the pendency of an intra-corporate case bar the corporation from conducting its annual
stockholders’ meeting and election of the officers and members of the BOD?

SEC Opinions:

 No specific provision.
 Section 50 of the Corporation Code states that regular meetings of stockholders or members
shall be held annually on a date fixed in the by-laws thus this cannot be suspended or
postponed without valid and meritorious reasons.
 SEC cannot make a categorical opinion on whether the issue of an intra-corporate case be a
valid and meritorious reason due to insufficiency of facts presented.

2. Opinion No. 18-18

Re: Merger of a Domestic Corporation with a Foreign Corporation Licensed To Do
Business in the Philippines.

Details: Converga Asia Incorporated(domestic corporation) wishes to merge with Harbour IT Hong
Kong(foreign corporation), which is licensed to do business in the Philippines under the name
Harbour IT Asia.

Question: May Converga Asia Incorporated merge with Harbour IT Hong Kong?
Opinion: Section 132, Paragraph 1 of the Corporation Code of the Philippines states that the
domestic and foreign corporation may merge or be consolidated IF such merger is permitted by the
laws of both states-that is the Philippines and Hong Kong. Section

3. Opinion No. 18-13

Re: Effectivity of Memorandum Circular No. 16, Series of 2002; Chairman as
Independent Director.

Case Questions:
1. Is the SEC’s Memorandum Circular No. 16 still in force?
 MC No. 16 as embodied in Section 38 of the SRC states that any corporation with:
o Assets in excess of P50,000,000.00;
o 200 or more holders and at least 200 of which hold 100 shares;

Shall have at least 2 independent directors (ID) or such IDs shall constitute at least
20% of the members of such board whichever is lesser.
 Moreover, there are no issuance declaring that MC NO. 16 is no longer effective, the
presumption is it is still in force and effect.

2. Is it a violation to MC No. 16 that an independent director becomes a Chairman of the Board

of the corporation of which he is an ID?
 No. In corporate governance, the general rule is that the CEO is an officer of the
corporation while the Chairman of the board is not.
 Since a Chairman is not considered an officer and thus is not involved with the day-
to-day operations, an ID that becomes the Chairman is not in violation of MC No.
16.

4. Opinion No. 18-12

Re: Corporate Term of Religious Corporations.

Case Question:
What should be the corporate term of Philippine Mission Churches of Christ of Northern Luzon, Inc.
(PMCCNLI)?

SEC Opinions:
 Corporate term of a religious corporation
o Old Corporation Code – need not be specified
o Present Corporation Code
 Provides a term for corporations in general but does not apply to religious
corporations
 Special Corporations – no provision as to term of religious corporations
(whether corporation sole of religious society); allowed to exist perpetually
o However, if a fixed term is stipulated in the AOI, it should be followed
 Charter of a corporations – contract between three parties:
1. The State and Corporation
2. Stockholders/Members and the State
3. Corporation and Stockholders/Members
 Unless amended, all the provisions of the charter shall bind all the persons
composing it
5. Opinion No. 18-09
Re: Legal Capacity of a Dissolved Corporation in Corporate Liquidation.

Case Question:
What is the legal capacity of a dissolved corporation to institute and file actions in court and other
appropriate for a for the recovery and disposition of its properties during liquidation?

SEC Opinions:

General Rule (Corporation):

 After dissolution
o No juridical personality
o Exemption: Liquidation
 3 years to wind up its affairs
 Prosecuting and defending suits by and against it
 Enabling it to settle and close affairs
 Dispose and convey property
o Trustees
 Distribute corporate assets

Instances wherein an action in court may be brought for the benefit of the defunct corporation even
beyond the 3-year period:
 The three-year limitation period shall not apply if there is a designated trustee
o The designation should be made within that period
 With or without transfer of property within three years, the legal interest
passes to the assignee
o Appointed trustee may act beyond the three-year period
 No time limit within which the trustees must complete a liquidation placed in
their hands
 Unless limitation is stated in the deed of trust
 Conveyed trustees may sue and be sued with liquidation matters even beyond
the three-year period
 If the three-year period expired without expressly designating a trustee or receiver
o The BOD may be permitted to continue as ‘trustees’
 Legal implication needed
 To complete the liquidation
 Absence of any, make proper representations with SEC
o Work out final corporate settlements

6. Opinion No. 18-08

Re: Delegation of the power to amend or repeal by-laws.

What: Proposed amendment to the by-laws of Union Bank of the Philippines, delegating to the Board
of Directors (the "Board") the power to amend or repeal said by- laws

Facts: BSP did not give the proposed modification fair consideration, citing various Securities and
Exchange Commission ("SEC") opinions to the effect that the delegation should be enshrined in a
Stockholders' Resolution ("Resolution") to be presented to the SEC rather than the By-Laws. Some
publicly-traded commercial banks have placed the power to delegate to the board the authority to
amend or repeal their by-laws in their separate by-laws, comparable to that of UnionBank, which
was recognized by the SEC.
Opinion:

The UnionBank's proposed modification to the bylaws just declares that its stockholders have the
right to delegate to the Board the authority to amend or repeal the bylaws, the text of which is taken
straight from Section 48 of the Code, rather than the actual delegation. Owners of at least 2/3 of the
outstanding capital stock must adopt the necessary Resolution in a shareholders meeting to make the
delegation effective. The delegation's scope and boundaries, as well as when it is regarded 'functus
officio,' may be specified in the Resolution. As a result, the power to Delegate the power to amend
or repeal by-laws by a director is not affected.

Reason unbarring the opinion:

1. Power to amend the by-laws may be delegated to the Board of Directors, however, such
delegation is temporary in nature and may be revoked at any time by the vote of a majority
Of the outstanding capital stock. (Refer to Sec 48 of the Corporation code of the Philippines)
2. It cannot be permanently embodied in the by-laws but merely in a Stockholders' Resolution.

Sec.48. Amendment to by-laws.

The board of directors or trustees. by a majority vote thereof, and the owners Of at least a majority of
the outstanding capital stock or at least a majority of the members of a non-stock corporation, at a
regular or special meeting duly caned for the purpose, may amend or repeal any by-laws or adopt
new by-laws. The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) Of the
members in a non-stock corporation may delegate to the board of directors or trustees the power to
amend or repeal any by-laws or adopt new by laws: Provided. That any power delegated to the board
Of directors or trustees to amend or repeal any by-laws or adopt new by-laws shall be considered as
revoked whenever stockholders owning or representing a majority of the outstanding capital stock or
a majority of the members in nonstock corporation. shall so vote at a regular or special meeting.

7. Opinion No. 18-07

Re: Qualifications of Members of the Board of Directors/Trustees.

What: Qualifications of the members of the Board of Directors

Facts: Board of Directors of PACUCOA issued a Resolution to upgrade the qualifications of the
candidates for the Board to include "ten (10) years of experience as accreditor with at least one
assignment per semester” dated 24 April 2017. Section 3, Article Il of the PACUCOA's By-laws,
provides that "nominations and election shall be supervised by the Board of Directors according to
the approved guidelines.

Opinion:

The qualifications is favorable since it is stated in the by-laws of the company.

In the Absence of By-laws:

 a. corporation cannot require additional qualification for directors other than the mandatory
requirement under Section 23 and 92 of the Code.
b. Mere board resolution or approval is not sufficient to legally enforce a
qualification/disqualification.
c. Guidelines issued by the management requiring additional qualifications for directors,
president, and vice-president, or a corporation's committee on election issue a ruling
requiring additional qualification for a director are ineffective unless stated in by laws

To resolve such absence the corporation must amend its by-laws in accordance with Section 48 of
the Code.

8. Opinion No. 18-02

Re: Manner of Voting; Nature and Amendment of By-Laws.

What: Compliance of officers and members of a SEC-registered professional organization with its
Constitution and By-laws.

Opinions:

1. An on-line election for the member of Board of Directors, which is covered by the phrase
"other similar means" in Section 89, can only be resorted to if it is expressly set-forth in the
by-laws of the corporation
2. While under Section 89 of the Code, members of a non-stock corporation may be allowed to
vote by mail or other similar means, the same should be treated as a general provision
applicable only in the absence of a specific provision in the Code on a particular subject
matter.
 Such voting procedure is not allowed in the case of amendments to corporate by-laws as
Section 48 of the Code explicitly requires the casting of votes at a meeting duly called for
the purpose.
3. A corporation's BOD and COMELEC, cannot vote for, or promulgate rules and regulations
on matters that are contrary or in conflict with the provisions of the corporation's
constitution and by-laws. The rules set in the by-laws are mandatory for every member of the
corporation to respect. They are the fundamental law of the corporation with which the
corporation and its officers and members must comply.

Basis:

a. Section 89 of the Corporation Code

Voting by mail or other similar means by members of non-stock corporations may be
authorized by the by-laws of non-stock corporations with the approval of, and under such
conditions which may be prescribed by, the Securities and Exchange Commission.

Section 89 of the Code is explicit that voting by mail or other similar means must be clearly
set forth in the by-laws, subject to SEC approval and such terms and conditions that may be
imposed by the SEC before it can be exercised by the members.

b. Section 48 provides that the by-laws may be amended in two-ways. The first is by a majority
vote of the board of directors or trustees and at least a majority of the outstanding capital
stock or members of a non-stock corporation. The second is by delegating this power to the
 board of directors or trustees by the vote of 2/3 of the outstanding capital stock or of
members in a non-stock corporation.

In amending the by-laws, Section 48 of the Corporation Code requires the actual presence of
the stockholders/members casting their votes at a meeting duly called for the purpose.
Accordingly, amendments to the by-laws cannot be legally done by a mere referendum
without the necessity of a meeting. The rationale behind the law is to give all the
stockholders/members the opportunity to participate during the deliberation of the
amendment to be voted

c. The general rule is that a corporation, through its board of directors, should act in the
manner and within the formalities, if any, prescribed in its charter or by the general law.

The by-laws of a corporation are its own private laws which substantially have the same effect as the
laws of the corporation. They are in effect, written, into the charter. In this sense they become part of
the fundamental law of the corporation with which the corporation and its directors and officers must
comply

9. Opinion No. 18-01

Re: Corporate Term of Educational Institutions Registered under the Corporation
Law.

What: Status of St. Peter's College, Inc. ("SPCI") as a corporate entity and if SPCI had been legally
dissolved, what is the recourse available for the purpose of continuing its corporate existence, other
than to reincorporate.

Facts: SPCI was incorporated on 05 November 1962. SPCI is a non-stock, non-profit educational
institution which was registered with the Commission under the provisions of the Corporation Law,
Act No. 1459 ("Corporation Law"), and no corporate term was specified in its AOI submitted to the
Commission. Further, SPCI has not filed an Amended AOI amending its corporate term.

Opinion:

The Commission had already opined that in case an affected educational corporation fails to amend
its A01 to comply with the applicable provisions of the Corporation Code on or before 01 May 1982,
the expiry date of the two (2) year period mentioned in Section 148, the respective provisions will be
considered written into the articles of incorporations as of the date of the effectivity of the
Corporation Code or on 01 May 1980.

Although originally registered with the Commission in 1967 with a perpetual corporate term, SCA is
now deemed to exist only for a period of fifty (50) years reckoned from 01 May 1980.

In view of the foregoing, the second query is deemed moot and academic

Basis:

Under the Corporation Law, no maximum corporate term of existence was prescribed for educational
institutions, a thus in case where the A01 does not specify a term, the corporate term of such
institution is deemed perpetual.
Subsequently, Batas Pambansa Blg. 68 (the "Corporation Code") took effect on 01 May 1980, and a
maximum period of fifty (50) years was provided for corporate existence.

Section 148. Applicability to existing corporation - Provided, that where any such corporation is
affected by the new requirements of this Code, said corporation shall unless otherwise herein
provided be given a period of not more than two (2) years from the effectivity of this Code within
which to comply with the same.