Creation of Subsidiary Corporation

May 24, 2007 SEC-OGC OPINION NO. 10-07 Creation of Subsidiary Corporation Movie Workers Welfare Foundation, Inc. 66 Rosano Drive, Cubao Quezon City Attention: Mr. Emilio R. Dollete Assistant to the Executive Director Gentlemen : This refers to your letter dated 08 August 2006 addressed to Director Benito A. Cataran of the Company Registration and Monitoring Department wherein you listed several queries regarding the creation of a subsidiary corporation by mere resolution of the members of the Movie Workers Welfare Foundation, Inc. ("Mowelfund"). Section 2 of the Corporation Code provides that "a corporation is an artificial being created by operation of law." This means that a corporation, be it a subsidiary or a principal corporation, cannot come into existence by mere agreement of the parties. The consent of the State is required before a corporation can be created. The State gives its consent to persons wishing to organize a corporation (called incorporators) after they comply with all the registration requirements prescribed by the Corporation Code, the law which governs the formation and organization of the private corporations in the Philippines. It is only after the issuance by this Commission of a Certificate of Registration that a corporation acquires juridical personality a personality separate and distinct from its incorporators, stockholders, directors or officers. In your case, the subsidiary corporation will have a personality separate and distinct from Mowelfund. Thus, the By-Laws of Mowelfund need not limit or restrict the creation, management of properties or purpose of the subsidiary corporation. Your query therefore is answered in the negative. EaScHT Without registration with this Commission, what is created is a mere association which cannot perform corporate acts like enter into contracts or acquire properties under its name. 1 For your reference, attached herewith is a copy of the Citizen's Manual for the Registration of Corporation and Partnerships . Your other queries are rendered academic by the above answer. It shall be understood that the opinion rendered is based solely on the facts disclosed in the query and relevant solely to the particular facts raised therein and shall not be used in the nature of a standing rule binding upon the Commission in other cases whether similar or dissimilar circumstances. 2 Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel Footnotes 1. SEC Opinion dated 28 May 1991 addressed to Ms. Erminda C. Cruz, Ed.D. 2. SEC Memorandum Circular No. 15 (2003). A CITIZEN'S MANUAL FOR THE REGISTRATION OF CORPORATIONS AND PARTNERSHIPS REGISTRATION OF CORPORATIONS AND PARTNERSHIPS WITH THE SEC 1. What laws govern the registration of corporations and partnerships at the SEC? Corporation Code of the Philippines Civil Code (Partnerships) Securities Regulation Code (R.A. 8799) P.D. 902-A as Amended 2. What entities are registered with the SEC? Stock corporations (Including foreign corporations e.g. branch offices, representative offices, regional headquarters or regional operating headquarters) Non-stock corporations (Foundations, associations, non-government organizations, religious organizations, etc.) Partnerships (General and limited partnerships) 3. Where do I go if I want to incorporate a corporation or partnership? The Company Registration and Monitoring Department (CRMD) 4. What do I do? a. General Procedure The general procedure is given in Table 1. The required documents are given in Table 2. Additional requirements for foreign corporations are given in Table 3. TABLE 1: STEPS IN REGISTRATION 1 Verify/reserve proposed name with the Name Verification Unit. 2 Draw up the Articles of Incorporation and By-laws in accordance with the Corporation Code. Blank forms are also available from the CRMD. 3 If required, get endorsements from other government agencies as given in Table 4. In addition, the CRMD obtains clearances from other SEC departments whenever these are deemed appropriate. 4 Deposit paid-up capital/contribution (for foundations only) in the bank. Table 5 gives the minimum paid-up capital requirements for certain types of corporations. 5 Present 6 sets of the accomplished forms and documents for pre-processing at the CRMD. Only complete application documents are accepted for processing. All documents executed outside the Philippines must be authenticated by the appropriate Philippine embassy or consulate in the area concerned. 6 Pay the filing fees to Cashier. 7 Claim the Certificate/License from the Releasing Unit, Records Division upon presentation of the official receipt issued for payment of filing fee. * * Applicants can buy and register their Stock & Transfer Book or Membership Book immediately after the issuance of the Certificate of Incorporation or within 30 days upon issuance thereof. b. Registration via the SEC-iRegister The SEC-iRegister will enable applicants to verify and reserve company names, 24 hours, 7 days a week, as well as allow them to fill-up the registration documents on-line. These documents can be downloaded and presented to SEC for approval. Applicants only need to access the SEC web site at http://www.sec.gov.ph. and follow the instructions provided by the system. 5. What do I get? For incorporation of stock or non-stock Certificate of corporation Incorporation For formation of partnership Certificate of Recording For establishment of foreign branch or License to Do Business in representative office, regional headquarters or the Philippines regional operating headquarters The above Certificates grant juridical personality to the applicant corporation or partnership. These do not authorize said entities to undertake business activities that require Secondary Licenses or Permits to Operate from the SEC or other government agencies, such as but not limited to: broker or dealer in securities, government securities eligible dealer (GSED), investment adviser of an investment company, close-end or open-end investment company, investment house, transfer agent, commodity or financial futures exchange/broker merchant, financing company, pre-need plan issuer, general agent in pre-need plans and time shares/club shares/membership certificates issuers or selling agents thereof. The Licenses granted to branch/representative offices or regional/regional operating headquarters likewise do not authorize said entities to engage in activities requiring secondary licenses from the SEC as indicated above. 6. How long does it take? Assuming all required documents are submitted and all information therein provided is in order, applications for registration of new corporations/partnerships with the SEC are processed within 24 hours from date of filing. 7. What are the fees I should pay? For the appropriate fees and charges, please refer to Pamphlet No. 3 Schedule of SEC Fees and Charges. 8. What reports do I submit after I register with the SEC? All registered corporations are required to submit a yearly General Information Sheet (GIS) and Audited Financial Statement (AFS) in the appropriate formats specified by the Commission. Details are given in Pamphlet No. 4. 9. Where can I obtain further information? The Public Assistance Unit at the ground floor, SEC Building The Public Assistance Hotline (Tel. Nos. 724-1271 or 726-0930 to 39 loc. 243 or 279) The CRMD Corporate & Partnership Division (Tel. No. 726-9245) The SEC web site at http://www.sec.gov.ph TABLE 2 REQUIRED DOCUMENTS FOR APPLICANT STOCK NON- PART- CORPORATION & PARTNERSHIP CORP STOCK NERSHIP Name Verification Slip x x x Articles of Incorporation and By-laws or Articles of Partnership x x x Treasurer's Affidavit/Authority to Verify Bank Account x Bank Certificates of Deposit (notarized in place where bank is located) x Written Undertaking to Change Corporate Name by any Incorporator or Director, Trustee, Partner ** x x x Registration Data Sheet x x x Clearance from other government agencies (if needed) x x Resolution of the Board of Trustees that the corporation will comply with SEC requirements for non-stock corporations ** x List of members certified by the Secretary and undertaking to submit list of additional members to SEC from time to time ** x List of contributors and their corresponding contributions certified by the Treasurer ** x Affidavit of Affirmation or Verification by the Chief Priest, Minister, Rabbi or Presiding Elder (for religious organizations) x Customs Broker Licenses and PTR of at least 2 Officers or Partners (for customs brokerages) x x Articles of Partnership (For Limited Partnerships, this should be executed under oath.) x Foreign Investment Application Form (for subsidiaries of foreign corporations) x ** Already incorporated in the available blank forms for applications TABLE 3 REQUIRED DOCUMENTS FOR FOREIGN CORPORATIONS SUBSI- BR. REP RHQ/ (in Addition to those in Table 2) DIARY OFC OFC ROHQ Proof of Inward Remittance by Non-Resident Aliens or Partners x x x x Form F-100 x Form F-103 x Form F-104 x Application for Regional Headquarters (RHQ)/Regional Operating Headquarters (ROHQ) x Authenticated Board Resolution authorizing establishment of office in the Phil.; designating Resident Agent; and stipulating that in absence of Resident Agent or upon cessation of business in the Phil., any summons may be served to SEC as if same is made upon corporation at its home office. x x Authenticated Financial Statement of Applicant certified by independent CPA in home country x x Authenticated copies of Articles of Incorporation and By-laws of applicant x x Resident Agent's Acceptance of Appointment (if not signatory in application form) x x Affidavit that mother company is solvent and of sound financial condition x Authenticated Certification that it is engaged in international trade with affiliates, subsidiaries, or branch offices in the Asia-Pacific region and other areas x Authenticated Certification from principal office of foreign entity that it was authorized by its Board of Directors or governing body to establish RHQ or RHOQ in the Phil. x TABLE 4: ACTIVITIES WITH ENDORSEMENTS * a. Air Transport Civil Aeronautics Board b. Banks, Pawnshops or other Financial Intermediaries with Quasi-Banking Functions Bangko Sentral ng Pilipinas c. Charitable Institutions Department of Social Welfare and Development d. Educational Institutions: (for stock or non-stock) Elementary to High school Department of Education (DepED) College, Tertiary Course Commission on Higher Education Technical Vocational Course Technical Education and Skills Development Authority (TESDA) f. Electric Power Plants Department of Energy g. Hospitals/Health Maintenance Organizations Department of Health h. Insurance Insurance Commission i. Professional Associations Professional Regulation Board j. Radio, TV, telephone National Telecommunications Commission k. Recruitment for Overseas Employment Philippine Overseas Employment Administration l. Security Agency Philippine National Police m. Water Transport/Shipbuilding/Ship Repair Maritime Industry Authority n. Manufacture, repair, storage &/or distribution of products &/or ingredients of firearms, gun Philippine National Police (PNP) powder, & all those indicated in EO 389 S. 2004 Foreign Investments Negative List o. Manufacture, repair, storage &/or distribution of products i.e. guns/ammunition for warfare, Department of National Defense military ordinance, & all those indicated in (DND) EO 389 S. 2004 Foreign Investments Negative List * Indorsements should be included in the registration papers to be filed MINIMUM PAID-UP CAPITAL REQUIREMENT Based on Industry: Break Bulk Agent P250,000.00 Cargo Consolidator P400,000.00 Financing Company Metro Manila and other 1st class cities P10,000,000.00 Other classes of cities P5,000,000.00 Municipalities P2,500,000.00 Freight Forwarders Domestic P250,000.00 International P2,000,000.00 Foundations (Non-stock corporations) P1,000,000.00 (Working Capital) Health Maintenance Organization P10,000,000.00 Insurance Insurance Broker P250,000.00 General Agent P250,000.00 Reinsurance Broker P500,000.00 Investment Adviser/Manager P10,000,000.00 Investment Company P50,000,000.00 Investment House P300,000,000.00 Mining P2,500,000.00 Non-Vessel Operating Common Carrier P4,000,000.00 Pawnshop P100,000.00 Pre-Need Plan Issuer P100,000,000.00 Pre-Need Plan Agent P5,000,000.00 Recruitment for Local Employment Corporation P500,000.00 Partnership P200,000.00 Recruitment for Overseas Employment P2,000,000.00 Retail Trade with Foreign Equity US$ 2,500,000.00 School (for stock corporation) Elementary Education P1,000,000.00 Elementary & Secondary Education P2,500,000.00 Elementary, Secondary, Tertiary P5,000,000.00 Post/Graduate Education Security Agency P500,000.00 Securities Broker/Dealer P100,000,000.00 (New/SRO-Member) Securities Broker/Dealer P10,000,000.00 (Existing/SRO-Member) Securities Broker/Dealer in Proprietary Shares (Non- P5,000,000.00 SRO-Member) Special Purpose Vehicle P31,250,000.00 Transfer Agent P1,000,000.00 Based on Foreign Equity: Corporation with more than 40% foreign equity - Domestic Market Enterprise US$ 200,000.00 - Export Market Enterprise P5,000.00 Foreign Branch Office - Domestic market enterprise US$ 200,000.00 - Export market enterprise P5,000.00 Partnership with foreign partner - Domestic Market enterprise US$ 200,000.00 - Export Market enterprise P3,000.00 Foreign Representative Office US$30,000.00 Regional Area Headquarters (RHQ) US$50,000.00 Regional Operating Headquarters (ROHQ) US$ 200,000.00