Mr. Jose S. Tayag, Jr.

April 22, 1983 Mr. Jose S. Tayag, Jr. Joaquin Cunanan & Co., CPA's 8th Flr., Rufino Building 6784 Ayala Avenue, Makati Metro Manila Sir : This refers to your letter dated January 31, 1983, inquiring as to whether representative offices of foreign corporations are required to submit annual financial statements. cdlex Please be informed that representative offices of foreign corporations, although they merely operate as coordination, supervision, communication or liaison center of a foreign company is considered foreign corporations doing business in the Philippines within the context of the provisions of Title XV of the Corporation Code of the Philippines. Complementing the provisions of the Corporation Code relative to foreign corporations is Article 65 of P.D. 1789, otherwise known as the Omnibus Investments Code which defines the phrase "doing business" as follows: " Definition of Terms . . . . and the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices, whether called "Liaison" offices or branches; appointing representative or distributors who are domiciled in the Philippines for a period or periods totalling one hundred eighty (180) days or more. (emphasis supplied) Similarly, Section 1(g), Rule 1 of the Rules and Regulations to Implement Presidential Decree No. 1789, provides: "Doing business" shall be any act or confirmation of acts, enumerated in Article 65 of the Code. In particular "doing business" includes: xxx xxx xxx (2) Appointing a representative . . . who is domiciled in the Philippines, . . . . (4) Opening offices, whether called ' liaison ' offices , agencies or branches, unless proven otherwise . . . (emphasis supplied). From the foregoing provisions, it is very clear that representative offices are considered foreign corporations doing business in the Philippines, hence subject to the SEC Rules and Regulations relative to the filing of financial statements of foreign corporations. Moreover, the Rules Requiring the Keeping of Accounting Records and Filing of Annual Financial Statements of Corporations does not qualify that only foreign corporations actually engaged in a business for profit are required to file financial statements. The Rules provides, thus: "In order to keep stockholders and those dealing with the corporations transacting business in the Philippines whether domestic or foreign , properly informed as to their financial status, and for the proper execution of all the laws administered by this Office, the Commission, pursuant to the powers vested in it by Republic Act 1143 and Commonwealth Act 287 , hereby promulgates the following rules for the information and guidance of all concerned: 1. All corporation, whether domestic or foreign transacting business in the Philippines, excepting those hereinafter specified, shall keep proper books of accounts and other financial records, vouchers and papers showing all business transactions including the receipts and disbursements of funds, the purposes for which they have been spent and the authorization therefore. xxx xxx xxx 3. A copy of the balance sheet and related profit and loss statement, certified and sworn to as aforesaid, must be filed with the Commission. (emphasis supplied). Likewise, it is worth mentioning that non-stock domestic corporations, although they do not derive any income out of their operations are now required to file financial statements. The Rules Requiring Non-stock corporations to Keep Accounting Records and to Submit Financial Statements provides, thus: "In order to enable the Securities and Exchange Commission to closely supervise and monitor the operations and activities of non-stock corporation for the purpose of protecting the membership participation therein as well as the interest of the public in general , all non-stock corporations, duly registered with the Commission are hereby required to keep proper accounting records and to prepare and submit to the Commission their annual financial statements, consisting of a balance sheet and income statements in accordance with the following provisions: 1. The annual financial statements of non-stock corporations must be submitted to the Commission within 105 days after the end of their fiscal year. . . . (emphasis supplied. Applying the rationale behind the foregoing Rules, representative offices of foreign corporations are required to submit their annual financial statements. Section 129 of the Corporation Code provides, thus: "SECTION 129. Law Applicable . Any foreign corporation doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class , save and except such only as provided for in the creation, formation, organization or dissolution of corporations or such as fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporations." (emphasis supplied). Please be advised, however, that regional or area headquarters of multi-national companies in the Philippines registered pursuant to P.D. No. 218, as amended, are not required to file their respective financial statements with this Commission. Nevertheless, Section 3 of the Rules and Regulations to implement P.D. No. 2 1 8 requires every registered regional or area headquarters of a multi-national company to submit to this Commission, among others, "an annual report showing its operations in the Philippines, including proof of inward remittances amounting to at least 50,000 U.S. dollars or its equivalent in other foreign currencies converted into Philippine Pesos, and its expenditures in the Philippines during the past year. Very truly yours, (SGD.) JESUS J. VALDES Associate Commissioner