Atty. Armando Q. Ongsioco

May 5, 1986 Atty. Armando Q. Ongsioco Angara Concepcion Regala & Cruz 5th Floor, ACCRA Building 122 Gamboa St.,Legaspi Village Makati, Metro Manila Sir : This refers to your letter dated April 18, 1986 requesting for an opinion on whether the Philippine Knitting Mills, Inc. registration with the Commission will be cancelled/revoked should it fail to submit audited financial statements and other reportorial requirements, or should it fail to operate for five (5) consecutive years. Anent thereto, Sections 26 and 141 of the Corporation Code are quoted hereunder: "SECTION 26. Report of election of directors, trustees and officers . Within thirty (30) days after the election of the directors, trustees and officers of the corporation, the secretary or any other officer of the corporation, shall submit to the Securities and Exchange Commission, the names, nationalities and residences of the directors, trustees and officers elected." . . . "SECTION 141. Annual-report of corporations . Every corporation, domestic or foreign, lawfully doing business in the Philippines shall submit to the Securities and Exchange Commission an annual report of its operations, together with a financial statement of its assets and liabilities, certified by an independent certified public accountant in appropriate cases, covering the preceding fiscal year and such other requirements as the Securities and Exchange Commission may require." . . . The foregoing provisions, therefore, make the submission of reportorial requirements mandatory. In case of violations thereof, the Corporation Code provides; "SECTION 144. Violations of the Code . Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine . . . If the violation is committed by a corporation, the same may, after notice and hearing be dissolved in appropriate proceedings before the Securities and Exchange Commission:" (emphasis supplied) Corollary thereto, PD 902-A, as amended, provides: "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: 1. To suspend or revoke after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations upon any of the grounds provided by law, including the following: xxx xxx xxx 6. Failure to file required reports in appropriate forms as determined by the Commission within the prescribed period." (Emphasis supplied). From the foregoing provisions, it is clear that revocation of a franchise or certificate of registration of a corporation for failure to comply with the reportorial requirements, can only be effected by the Securities and Exchange Commission after proper notice and hearing. cdlex Relative to the continuous inoperation of a corporation for a period of 5 years, the Corporation Code provides in part, to wit: "SECTION 22. Effects on non-use of corporate charter and continuous inoperation of a corporation . ....However, if a corporation has commenced the transaction of its business but subsequently becomes continuously inoperative for a period of at least five (5) years, the same shall be a ground for suspension or revocation of its corporate franchise or certificate of incorporation." ...(emphasis supplied) It is very clear from the aforecited provision that continuous inoperation of a corporation for a period of 5 years is merely a " ground " for suspension or revocation of its franchise or certificate of registration. This presupposes that there must be some steps to be taken before its corporate franchise or certificate of registration can legally be declared as revoked. PD 902-A, as amended, provides, thus: "SECTION 6. In order to effectively exercise such jurisdiction the Commission shall possess the following powers: xxx xxx xxx (1) To suspend, or revoke after proper notice and hearing ,the franchise or a certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: xxx xxx xxx 4. Continuous inoperation for a period of five (5) years. ...(emphasis supplied) Considering the foregoing, it is opined that the corporation continues to exist notwithstanding its failure to operate for 5 consecutive years, until its revocation has been lawfully ordered by the Commission. Please be advised accordingly. prcd Very truly yours, (SGD.) JULIO A. SULIT, JR. Acting Chairman