By Aimee Rose DG. dela Cruz, 13 March 2014
The place of the principal office of a corporation is part of the vital information that must be specified in its Articles of Incorporation (AOI). Section 14 of the Corporation Code mandates that the AOI state the "place where the principal office of the corporation is to be established or located, which place must be within the Philippines."
In a decided case, the Supreme Court held that the place where the principal office is located determines the corporation’s residence and the venue where an action may be brought by or against it. The Court went further to declare in another case that the purpose of this requirement is to fix the residence of the corporation in a definite place, instead of allowing it to be ambulatory, for effective supervision and regulation of the corporation. All records of its business transactions and corporate documents are likewise kept at the principal office of the corporation. The stockholders and the directors have the right to inspect the corporate records at the principal office of the corporation during reasonable hours on business days. Further, stockholders’ meetings are required under the Corporation Code to be held in the city or municipality where the principal office of the corporation is located.
Before, it used to be sufficient to state a general address for the principal office of the corporation. However, in 2006, the Securities and Exchange Commission (SEC) issued Memorandum Circular No. 3 (MC 3-2006), which required corporations to state in their AOIs the specific addresses of their principal offices.By being specific, it meant that the following information, if feasible, must be included: street number, street name, barangay, city or municipality.
Thus, merely indicating "Metro Manila" or a city, town or municipality as the address of the principal office was no longer allowed. The 2006 circular, however, was prospectively applied and was enforced for strict compliance only in the case of corporations applying for registration. Existing corporations at the time of the issuance of MC 3-2006 were not required to amend and reflect their specific business addresses in their AOIs. For purposes of ensuring corporate compliance with the full disclosure requirements under applicable laws, the SEC recently issued Memorandum Circular No. 6. Through this latest issuance, the SEC now mandates all registered corporations to indicate the specific addresses of their principal offices as required under MC 3-2006, and if applicable, the address should also specify the name and number of the building, the name of the room or the number of the unit. Thus, all corporations with AOIs that indicate only a general principal office address are directed to file an amended AOI in order to detail their complete address.
Changing the principal address of the corporation involves an ordinary amendment of the AOI, which is governed by Section 16 of the Corporation Code. Under the Code, any provision or matter in the AOI may be amended by a majority vote of the board of directors and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock. The application for amendment of the AOI, together with supporting documents, should be filed with the Company Registration and Monitoring Department of the SEC or any of its extension offices within the Philippines. The affected corporations are given until Dec. 31, 2014, to submit an application for amendment of their AOI with the SEC. While failure to do so shall not subject the affected corporations to penalties for non-compliance, the SEC can impose sanctions by deferring applications filed by the affected corporations such as amendments, certifications, clearances, among others.
With this new rule requiring the specific principal office address in the AOI, it will necessarily follow that all corporations transferring their principal office to another location will now also have to amend their AOIs to reflect the new address. Previously, corporations with general addresses such as "Metro Manila" in their AOIs were allowed to notify the SEC of the transfer of address by merely submitting an updated General Information Sheet (GIS), provided that the new address is still within Metro Manila. Under the new rules, however, amendment of the AOI will be necessary for every change of address. While corporations have until the end of the year to apply for an amendment, the SEC has started requiring affected corporations with pending applications to simultaneously effect the amendment, or as stated under the circular, at least execute an affidavit of undertaking that the corporation will submit an application for amendment of its AOI to reflect its specific address within the given time frame. Trifling as it may sound, the new rules deserve attention. With a compliance deadline set for Dec. 31, 2014, companies should act without delay in addressing the SEC’s specific requirements. No pun intended.
The author is an assistant manager at the tax services department of Isla Lipana & Co., the Philippine member firm of the PwC network. Readers may call (02) 845-2728 or e-mail the author at email@example.com for questions or feedback. The views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.