Guidelines on Compliance by Foreign Corporations with Reportorial and Monitoring Requirements

October 3, 2006 SEC MEMORANDUM CIRCULAR NO. 15-06 TO : All Concerned SUBJECT : Guidelines on Compliance by Foreign Corporations with Reportorial and Monitoring Requirements A) Coverage SECTION 1. This Circular is issued by the Securities and Exchange Commission (SEC) pursuant to sections 141 and 143 of the Corporation Code of the Philippines and shall, subject to the provisions of SEC Memorandum Circular No. 6, Series of 2006, apply to the following entities: a. all branch offices and representative offices of foreign corporations licensed to do business in the Philippines; and b. all regional operating headquarters (ROHQ) and regional headquarters (RHQ) established in the Philippines by multinational companies. B) Branch Office and Representative Office of Foreign Corporations SECTION 2. All branch offices and representative offices of foreign corporations shall submit the following reports to the SEC: a. General Information Sheet (GIS), in the form prescribed by the SEC, within 30 days from the anniversary date of the issuance of the SEC license; and b. Financial Statements (FS), stamped "received" by the Bureau of Internal Revenue, within 120 days after the end of the fiscal year indicated in the FS. SECTION 3. The FS of the following foreign corporations shall be audited by an independent certified public accountant registered with the Board of Accountancy: a. branch office of stock foreign corporation (the "stock branch office") with assigned capital of P50,000.00 or more; b. branch office of a non-stock foreign corporation (the "non-stock branch office") with total assets of P500,000.00 or more; and c. representative office of a foreign corporation (the "representative office") with total assets of P500,000.00 or more. SECTION 4. The FS of the following foreign corporations shall, at the minimum, be certified under oath by the treasurer of the corporation: a. stock branch office with assigned capital of less than P50,000.00; b. non-stock branch office with total assets of less than 500,000.00; and c. representative office with total assets of less than 500,000.00. SECTION 5. The fines for failure to submit the GIS and FS within the prescribed period shall be computed on the basis of the Accumulated Income of the stock branch office and, for non-stock branch office and representative office, on their Fund Balance, as reflected in the FS of the preceding fiscal year. For the purpose, the following scale of fines shall be used: NON-STOCK BRANCH OFFICE & STOCK BRANCH OFFICE REPRESENTATIVE OFFICE Accumulated Income Fines Fund Balance Fines Up to P100,000.00 P2,500.00 Up to P100,000.00 P1,500.00 P100,000.01 to P500,000.00 P4,000.00 P100,000.01 to P500,000.00 P3,000.00 P500,000.01 to P5,000,000.00 P6,000.00 P500,000.01 to P10,000,000.00 P5,000.00 P5,000,000.01 to P10,000,000.00 P8,000.00 P10,000,000.01 to P100,000,000.00 P7,000.00 Above P10,000,000.00 P10,000.00 Above P100,000,000.00 P10,000.00 Deficit or Negative Fund Balance P1,500.00 P1,000.00 Capital Deficiency P1,000.00 --- The fines shall be computed on a "per report" basis, but shall not exceed P10,000.00 annually or for every year of violation. SECTION 6. If the foreign corporation is not in operation, it shall submit to the SEC an Affidavit of Non-Operation signed by its resident agent, GIS and Balance Sheet within 120 days after the end of the fiscal year indicated in the FS. Partial compliance with this requirements shall be considered as non-compliance. SECTION 7. The fines for failure to submit the aforesaid reports shall be as follows: a. for the stock branch office P2,500.00 per year; and b. for the non-stock branch office or representative office P2,000.00 per year. SECTION 8. In case of substitution or addition of a resident agent, the foreign corporation shall file with the SEC a petition for change or substitution of resident agent within 30 days after the acceptance of the appointment by the new resident agent. A fine of P1,000.00 per month of delay, but not to exceed P10,000.00 per year, shall be imposed for failure to file the said petition within the prescribed period. CSDTac SECTION 9. Subject to the provisions of Section 126 of the Corporation Code and other applicable laws, a branch office of foreign corporation shall deposit with the SEC securities in accordance with the following schedule: a. within 60 days after the issuance of its SEC licensee, securities within an actual market value of at least P100,000.00; b. Additional securities shall be deposited within six months after the end of the fiscal year indicated in the FS in the following situations: i. if the licensee's gross income within the Philippines for that fiscal year exceeds P5,000,000.00, additional securities with an actual market value equivalent to 2% of the increase in said gross income; and ii. if the actual market value of the securities deposited has decreased by at least 10% per cent from the time it was deposited, additional securities with an actual market value that would cover the decrease. SECTION 10. The fines for the late deposit of securities shall be as follows: a. for the initial deposit basic fine of P10,000.00; and surcharge of P500.00 per month of delay b. for the additional deposit a. Initial b. Additional 1st violation Securities Deposit Securities Deposit basic fine of P10,000.00; basic fine of P7,000.00; surcharge of P500.00 surcharge of P500.00 2nd violation per month of delay per month of delay basic fine of P10,000.00; basic fine of P7,000.00; surcharge of P1,000.00 surcharge of P1,000.00 3rd violation per month of delay per month of delay basic fine of P10,000.00; basic fine of P7,000.00; surcharge of P1,500.00 surcharge of P1,500.00 per month of delay per month of delay A fraction of a month shall be considered as one month for purposes of computation of the surcharge. C) Regional Operating Headquarters and Regional Headquarters of Multinational Companies SECTION 11. All ROHQs and RHQs shall submit the following reports to the SEC: a. GIS, in the form prescribed by the SEC, within 30 days after the issuance of the certificate of registration and license; b. GIS, in the form prescribed by the SEC, within 30 days from the anniversary date of the issuance of the certificate of registration and license; and c. FS, stamped "received" by the Bureau of Internal Revenue, within 120 days after the end of the fiscal year indicated in the FS. ESCcaT SECTION 12. The FS of an ROHQ with assigned capital of P50,000.00 or more and an RHQ with total assets of P500,000.00 or more shall be audited by an independent certified public accountant registered with the Board of Accountancy. SECTION 13. The FS of an ROHQ with assigned capital of less than P50,000.00, and an RHQ with total assets of less than P500,000.00 shall, at the minimum, be certified, under oath, by the treasurer of the corporation. SECTION 14. The fines for the failure to file the GIS and FS within the prescribed period shall be based on the Accumulated Income of the ROHQ or Fund Balance of the RHQ, as reflected in the FS for the preceding fiscal year. For this purpose, the following scale of fines shall be used: ROHQ RHQ Accumulated Income Fines Fund Balance Fines Up to P100,000.00 P2,500.00 Up to P100,000.00 P1,500.00 P100,000.01 to P500,000.00 P4,000.00 P100,000.01 to P500,000.00 P3,000.00 P500,000.01 to P5,000,000.00 P6,000.00 P500,000.01 to P10,000,000.00 P5,000.00 P5,000,000.01 to P10,000,000.00 P8,000.00 P10,000,000.01 to P100,000,000.00 P7,000.00 Above P10,000,000.00 P10,000.00 Above P100,000,000.00 P10,000.00 Deficit or Negative Fund Balance P1,500.00 P1,000.00 Capital Deficiency P1,000.00 --- The fines shall be computed on a "per report" basis, but shall not exceed P10,000.00 annually or for every year of violation. SECTION 15. If the ROHQ or RHQ is not in operation, it shall submit to the SEC an Affidavit of Non-Operation signed by its resident agent, GIS and Balance Sheet within 120 days after the end of the fiscal year indicated in the FS. Partial compliance with this requirement shall be treated as non-compliance. SECTION 16. The fines for failure to submit the aforementioned reports shall be: a. for the ROHQ P2,500.00 per year b. for the RHQ P2,000.00 per year SECTION 17. Subject to the provisions of Articles 58 and 59 of the Omnibus Investments Code, as amended, the ROHQ and RHQ shall submit a certificate of inward remittance as follows: Remittance Period Amount ROHQ RHQ at least US$200,000.00 at least US$50,000.00 or within 30 days or its equivalent in other its equivalent in other Initial after the issuance of the foreign currencies, foreign currencies, SEC certificate of converted to converted to registration and license Philippine currency Philippine currency within 30 days at least US$50,000.00 or from the anniversary date --- its equivalent in other Annual of the issuance of the foreign currencies, SEC certificate of converted to registration and license Philippine currency during the past year SECTION 18. The fines for the late submission of the certificate of inward remittance shall be as follows: a. for the initial remittance basic fine of P10,000.00; surcharge of P500.00 per month of delay b. for the annual remittance 1st violation basic fine of .003 of the actual remittance; surcharge of P500.00 per month of delay 2nd violation basic fine of .004 of the actual remittance; surcharge of P1,000.00 per month of delay 3rd violation basic fine of .005 of the actual remittance; surcharge of P1,500.00 per month of delay If there is no proof of inward remittance, the fine shall be based on the latest required inward remittance. A fraction of a month shall be considered one month for purposes of computation of the surcharge. D) Late Reports and Subsequent Violations SECTION 19. If the GIS, FS, and, where applicable the Affidavit of Non-Operation, GIS and Balance Sheet are filed beyond the prescribed period, but the delay does not exceed 30 days, an additional fine equivalent to 50% of the fine for non-filing shall be imposed; provided, however, that if the delay exceeds 30 days, the reports shall be considered as non-compliant. SECTION 20. No extension of the period within which to comply with the reportorial and monitoring requirements shall be allowed. SECTION 21. Subsequent violations of the reportorial requirements shall be penalized as follows: a. 2nd violation assessed fines plus 10% surcharge b. 3rd violation assessed fines plus 15% surcharge c. 4th violation revocation of the certificate of registration or license E) Use of the Revised General Information Sheet SECTION 22. The branch offices and representative offices of foreign corporations shall use the revised official GIS form: GIS-FOREIGN (v.2006), and ROHQs and RHQs shall use GIS-ROHQ/RHQ (v.2006), copies of which are attached to this Circular. SECTION 23. Upon the effectivity of this Circular, the official GIS forms shall be available for downloading at the SEC website ( www.sec.gov.ph ) or from any of the SEC's extension offices. Only filings that conform to the format of the official GIS forms shall be accepted. Filings that deviate from these forms shall be considered as non-compliant. F) Transitory Provisions and Effectivity of the Penalties SECTION 24. The penalties provided for in this Circular shall take effect on 01 January 2007. However, after the publication of this Circular, all registered foreign corporations are directed to visit the SEC's Company Registration and Monitoring Department (CRMD) before 31 December 2006 to settle any obligations they may have incurred for non-filing or late filing of the required reports. The settlement of these obligations shall be made in accordance with the old scale of fines. If no settlement is made on or before 31 December 2006, the penalties provided for in this Circular shall apply. All other circulars, rules, orders and issuances, or parts thereof, that are inconsistent with this Circular are hereby repealed or modified accordingly. ECaTDc This Circular shall take effect after its publication in a newspaper of general circulation. Mandaluyong City, Philippines. (SGD.) FE B. BARIN Chairperson