Taxwise Or Otherwise
By Cyril B. Pestilos
In the last decade, there have been both substantial and minor revisions in government policy affecting not only corporate governance but also registrations. One of these was Republic Act (RA) No. 11232 or the Revised Corporation Code (RCC) of the Philippines, passed early last year. A notable amendment introduced by the RCC is that investors are now permitted to form One Person Corporations (OPCs) and corporations with two to four incorporators, directors, and stockholders.
With the constant revisions in our laws and regulations and the shift to the new normal, many businesses have turned to online channels and platforms to carry on. Many small online businesses have in fact sprouted, with business owners who might find the OPC to be an attractive prospect. Has the Company Registration System (CRS), the online registration portal launched by the Securities and Exchange Commission (SEC) back in November 2017, caught up with the times on its third year?
Perhaps in response to this question, the SEC issued a notice in April, giving way to the opening of an interim registration system (IRS). This initiative is to accommodate the online registrations of corporations with less than five incorporators, including OPCs.
Yes, the system has been up for months but most of us may not yet be aware of it, with the SEC notice perhaps having escaped our watch. As a proactive initiative, on Aug. 26, the SEC created a link to the IRS under the “Online Services” tab on its website to make it more noticeable and accessible. The IRS link has a sub-tab name “OPC and 2-4 Incorporators Registration System” and can directly be accessed through https://apps004.sec.gov.ph:8001/application.
Before the IRS, registrations of corporations with less than five incorporators were still filed manually at the SEC offices since these were not captured by the CRS. When the pandemic hit, triggering a strict lockdown and quarantine protocols, the manual process was crippled. With social distancing the norm, there is a compelling need to integrate technology into existing processes and to digitalize the services offered to the public.
While the system is only for the interim, it is very timely and safer for the public that the IRS join the CRS as part of the SEC’s online portals for company registrations during the pandemic. Both online systems support the SEC’s continuous push to ease doing business in the Philippines.
The separation of the IRS from the CRS prevents the concentrated influx of transactions in one of the systems that often cause the system to slow down, or crash. Having distinct online sites for each system in place allows for a smoother flow of the application and greater control in the volume of transactions.
While the IRS works similarly to the CRS, their key difference lies in the type of applicants they cater to based on the number of incorporators. To give a better insight into how it works, below is a guide to navigating the IRS:
• The applicant or duly authorized representative must fill out the required details such as the proposed name and trade name/s (if any), industry type, principal office address, capital structures, and other pertinent and essential information to accomplish the corporate profile.
• A valid contact number and e-mail address must be indicated where all communications and notifications from the SEC will be conveyed.
• After successfully submitting the form, an application reference number will be assigned for easy tracking.
• The SEC Company Registration and Monitoring Department (CRMD) will review the application within three working days from the online submission. However, since almost all the transactions of the SEC are currently done online, the turnaround time may take longer. The results of the application will be sent to the e-mail address provided by the applicant.
• If approved, the applicant may proceed to pay the registration fees as stated on the Payment Assessment Form sent to his e-mail. The proof of payment, together with the hard copies of the complete, signed, and notarized registration documents and other supporting documents, must be submitted to the SEC within 30 calendar days from the payment of the registration fees.
• If a disapproval notice is received, the applicant may opt to reapply after considering the modifications and comments indicated on the notice.
To reduce the risk of virus transmission via face-to-face interactions, the SEC urges the public to direct queries and follow-ups regarding the status of their applications through the CRMD’s available e-mail addresses and interim hotlines as listed on the SEC website.
Unlike the CRS, the IRS does not generate any registration documents. Hence, the applicant must still manually prepare them. The Certificate will be manually released upon physical submission of the complete requirements.
With high hopes, I look forward to the day when the registration process is fully automated from start to finish. While most people may not be ready to receive only electronic registration certificates, perhaps improvements can be introduced slowly. For now, given the health risk of traveling to and from the SEC especially for those taking public transportation, perhaps the SEC can consider the option of allowing registrants to submit the hard copies of the requirements and receive the Certificates via courier.
Of course, like every pilot, the IRS is not spared from birth pains. There is the risk of a system crash or technical errors during application or submission. Indeed, the registration process still has a long way to go to be efficiently and fully automated; nonetheless, the IRS is a leap headed towards achieving that goal.
As organizations shift to the new normal during the pandemic, recognizing the growing importance and advantage of successful technology integration in system processes is a high priority, so does the SEC continue to innovate and adapt most effectively and efficiently to keep abreast of the ever-changing times.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Cyril B. Pestilos is a manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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