Legal BlogConstant Change at the Philippines SEC

October 25, 2013

We all believe that the most significant constant in the universe is CHANGE.  The success of a system depends on change, the ability to adapt to all possibilities necessary for continuance. Difficult it may seem, but change is inevitable that everyone has to embrace.

Change is evident in all aspects; to all individuals; to all governments.  Particular to this are the varying changes in the policies that consistently affect the system of service in the government.  Again, this is presumably geared to a better and more workable system, however, it can all be said at the end, if indeed, the rationale behind the so called change has been achieved.

Sometime in 2012, the Securities and Exchange Commission has revised the supporting documentary requirements to be submitted by foreign corporations applying for a license to do business in the Philippines.

As a general rule, Audited Financial Statements (AFS) as of date not exceeding one year immediately prior to filing of the application for a license to transact business in the Philippines is required to be submitted before the SEC.  Since there applicants (foreign corporations), which could not easily comply with this requirement because of unavailability of AFS within the prescriptive period at the time of filing with SEC and that there are countries where their own law do not require their financial statements audited, the SEC by  virtue of SEC Resolution No. 165, s. of 2012 has eased the requirements on financial statements, allowing applicants to submit in the meantime, UNAUDITED FINACIAL STATEMENTS (UFS) within the prescriptive period with an undertaking however, that applicant shall submit the audited version of the said FS within 105 days from issuance of license.  Likewise, said resolution has recognized countries which do not require audited financial statements, thus allowing applicants to submit their unaudited FS with a certification, however from a responsible regulatory institution that corporation operating in their country are not required to prepare and submit AFS with a citation of the law or regulation on which it is based.  This indeed has eased the process in establishing a branch or representative office in the Philippines.

Not so recent ago, however, the SEC has issued yet another change revising the requirements on financial statements in line with its Administrative Order No. 38, on Ease of Doing Business Reforms.  To wit:

1. For those whose home country requires audited financial statements, the applicant shall submit the AFS as of date not exceeding 1 year prior to the filing of application;

If the date of the AFS exceeds the 1 year requirement, UFS that are available as of date of filing of the application and UFS as of date not exceeding 1 year immediately prior to the filing of the application must be submitted.

2.  For those whose home country does not require audited Financial Statement, applicants may still be given due course provided it submits a (a)UFS as of date not exceeding one (1) year prior to filing of the application and (2) Certification that the applicant is not required to prepare and submit UFS, with a citation of the law or regulation on which it is based and  signed under oath,  by an officer of a responsible regulatory institution or by the applicant’s legal counsel.

It is important to note as well that the aforementioned AFS and UFS must be signed under oath by the president or any other person authorized by the corporations.  No authentication shall be necessary if the signatory to the said financial statements is the same as that in the corporation’s application.

The changes in the SEC, particular to the AFS as a precondition for issuance of a license to transact business in the Philippines can create an impact to some foreign corporations particularly those newly created.

Stringent to a certain extent it may seem, there are, however no reasons not to comply.  With the current changes in the SEC, Triple i can certainly rise above them and assist foreign corporations establishing an office in the Philippines with ease.

By: Atty Grace Rubio- Pangilinan

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