We can help you figure out the requirements for SEC registration of non profit organization. Although these two types of corporations have different methods in achieving their goals, they are, however, covered in the same provision under the Revised Corporation Code of the Philippines.
In reality, a corporation that is formed or organized primarily for a common good and which uses the profits it generates in order to promote its objects, instead of distributing it as profit to its members, is categorized as a non-stock corporation. Non-profit, on the other hand, usually pertains to an organization which exists to provide a service or obtain a specific goal, where earning profit is not in the list of priorities for its members.
There have been instances where some institutions learned their lesson the hard way after being suspended and ordered to pay certain fines in order to settle their case with the SEC. It is a common misconception that non-stock and non-profit are synonymous terms, and hence this usually becomes the main reason why some institutions feel that they are not covered by the SEC’s statement.
The Securities and Exchange Commission (SEC) has been constantly informing the general public that certain non-stock corporations and non-government organizations which are soliciting funds from the public are required to secure a license or permit from the Commission prior to engaging in such activities. This statement by the SEC normally receives varied reactions from different non-profit institutions. Some would comply and adhere to the rules, while others do not and simply continue with their normal activities, assuming that the SEC does not include them in the statement.
Overview of SEC Registration for Non-Profit Organizations
One needs to begin with a good understanding of the requirements for registration of a non-stock corporation under the Corporation Code. Since most NPOs in the Philippines are organized as non-stock corporations, it is important to understand the implications of this status on SEC registration. A client who wishes to register an NPO in the Philippines should realize that the term “non-profit” is a misnomer in Philippine law. Although a non-stock corporation may not declare dividends and is prohibited from partaking in activities which will result in its gaining of profit, the Corporation Code does not prohibit non-stock corporations from earning profits. Only the distribution of any income or assets to the members of a non-stock corporation is restricted. Nevertheless, it is essential to establish in the articles of incorporation and the by-laws, the non-distribution constraint and the prohibition of engaging in activities or transactions which are incompatible, incidental or in preparation to its purposes as this will affect the juridical personality of the corporation and its application for tax exemption rulings. Failure to comply with the specified requirements will delay the issuance of a Certificate of Registration and should amendments to the articles of incorporation and the by-laws become necessary, these will have to be submitted to the SEC for approval.
Requirements for SEC Registration
Juridical personality Literally meaning “legal person”, juridical personality is the capacity to act as a subject in law. More precisely, this capacity is the attribute of being vested with rights and duties. Only registered NPOs having a juridical personality can enter into contracts, purchase property and incur liabilities, as corporate bodies. Unregistered group of individuals constituting an association cannot perform the above cited acts, as an unregistered association lacks capacity to act as a juridical person.
Considered as a compulsory step for NPOs to legally operate and exist, SEC registration confers corporate status to an organization and therefore, bestows it with the capacity to act as a juridical person. Any savings and loan association, non-stock corporation, foundation, business league, chamber of commerce or any organized entity established for a common non-criminal object, need to secure a Certificate of Incorporation and a License from SEC, to operate as a body corporate.
Process of SEC Registration
The registration procedure usually lasts about 1 month. All documents required must be submitted within this period. The application will not be processed unless all the documents are completed. After the assessment of the articles of incorporation and by-laws, the SEC will usually advise the applicant of the changes they must make. If the application is in order, the SEC will then issue a notice of hearing which the applicant must publish in a newspaper of general circulation. If there are no oppositions to the application and the order is compliant with the law, the SEC will issue a license to operate as a corporation. This procedure generally lasts 3-5 working days. The final step is the issuance of the certificate of registration which shall be attached to the original articles of incorporation and by-laws. The non-stock corporation shall then start its corporate existence from the date of issuance of the certificate of registration. For more information about representative office, contact FCB Law.