First of two parts
The COVID-19 pandemic has pushed government agencies to kick-start, if not step up, their digitalization programs to deliver essential services while managing health risks.
For the Securities and Exchange Commission (SEC), the mandate to digitalize and adopt technology in the ways we work came with the effectivity of the Revised Corporation Code (RCC) in early 2019.
The RCC replaced the almost 40-year-old Batas Pambansa 68 or the old Corporation Code. Even with the rise of digital technology at the turn of the century, it has taken nearly 20 years for the conduct of meetings through remote communication, the submission of corporate documents bearing digital signatures, and filing forms and documents through electronic mail or through a dedicated online portal to become part of the mainstream corporate compliance process.
The RCC paved the way but it was COVID-19 which truly accelerated digital transformation. From the incorporation of new entities and filing of applications such as the increase in the authorized capital stock to cashless payment systems and the launch of the Online Submission Tool, the SEC has taken great strides in not just promoting the ease of doing business but also efficiently providing government services, consistent with Republic Act 11032.
The SEC has gone on record to emphasize its commitment to staying the course on its digital transformation and technology modernization roadmap, with the end goal of being able to serve its stakeholders from the safety of their homes and workplaces. As the gateway to doing business in the Philippines, the SEC has said that it must continuously innovate and leverage information and communications technology (ICT) to remain “service-focused and interoperable.”
This article focuses on the five ways in which the SEC has harnessed the power of technology in the areas of company registration; online reports submission; lodging of applications and requests; compliance requirements; and payments — all of which are targeted to minimize personal interactions while the virus remains a threat.
Even early into the implementation of these projects, it is evident that these innovations have improved regulatory efficiency and voluntary corporate compliance of registrants. Stakeholders have the opportunity to focus on their companies’ operations more than complying with tedious requirements.
The SEC launched the eSPARC or the Electronic Simplified Processing of Application for Registration of Company on April 19, replacing the Company Registration System (CRS), the old online platform. As of last published official count, the SEC has processed nearly 27,000 virtual business registration applications.
Before the pandemic, the SEC had tested the waters of web-based registration and licensing with the CRS. While the system eliminated the cumbersome procedure of manually filling up forms, the incorporation process could still not proceed without the submission of the hard copies of documents for review of SEC examiners.
With eSPARC, the incorporation process is now fully automated and needs no intervention from SEC processors at any stage, from the name verification on the proposed corporate name to the issuance of the digital Certificate of Incorporation. Those who have tried the system have found that its use significantly enhances the company registration experience.
eSPARC was initially available only for the registration of One Person Corporations but this has since been expanded to include all types of domestic corporation regardless of the number of incorporators. Applications for partnerships and foreign corporations may now also be lodged using eSPARC. A subsystem, the One day Submission and E-registration of Companies (OneSEC), even allows for the registration of domestic stock corporations in as little as one day.
In his latest report to the Department of Finance, SEC chairman Emilio Benito Aquino said the fastest time recorded for eSPARC processing after the payment of the registration fee is one minute and 14 seconds, while the longest time was two hours and 37 minutes.
eSPARC is fairly easy to navigate provided all information and documents are complete. Many of the fields are pre-filled and the required information need only to be supplied. Among the issues that a registrant may encounter and could delay the process include failure to reserve a preferred name that is not distinguishable from a name already reserved or registered under Sec. 17 of the RCC. Under this scenario, the applicant has the option to either appeal the name rejection or apply for a different name.
Another possible cause of delay, particularly in the issuance of the final certificate, is the submission of documents, which vary depending on the company type and the review of the SEC processor.
However, if all the requirements lodged online are deemed in order, the SEC can issue the digital incorporation certificate, with the original to be released upon the additional presentation of the proof of payment of the assessed registration fees and the submission of originally signed, authenticated, or notarized hard copies of the documentary requirements, as applicable. The submission may be done any time within one year from the date stated in the Interim Certificate of Incorporation.
Nevertheless, registrants must remain mindful of the documentation requirements. For instance, although the RCC has removed the subscribed and paid-up capital minimums under Sec. 13 of the old Corporation Code, capitalization requirements under special laws, such as the $200,000 minimum paid-in capital for foreign corporations under the Foreign Investments Act, as amended, must still be complied with. As such, there must be proof of inward remittance of the required capital by the foreign investor.
Consistent with its goal of easing doing business, the SEC also accepts registration of locally-executed Articles of Incorporation (AoI) that are accompanied by a Certificate of Authentication signed by all incorporators. The AoI and the Certificate of Authentication need not be notarized; however, documents executed outside the Philippines must still be consularized or contain the Apostille Certification to be recognized by government agencies including the SEC.
In the second part of this article, we will discuss the other digital transformation projects of the SEC that are positively impacting compliance and the processing of applications of registered corporations.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of EY or SGV & Co.
Cecille S. Visto is a Tax Senior Director and Senior Lead Manager of the Entity Compliance and Governance Services of SGV & Co.