Is your company in good standing? This question is usually asked by various stakeholders such as your company’s creditors, suppliers, customers, employees and potential investors. Even government regulators and authorities will be interested to know whether your company is in good standing or not.
What is a Certificate of Good Standing?
To promote transparency and ensure accountability among companies, duly registered corporations and partnerships in the Philippines are required by law to comply with the reportorial requirements of the Securities and Exchange Commission (SEC), including among others, the filing of the:
- – General Information Sheet (GIS)
– Audited Financial Statements (AFS)
– Required securities deposits (applicable only to branch and representative offices of foreign corporations)
Any corporation or partnership who fails to comply with these requirements may be subjected to penalties such as fines and revocation of its registration
To show proof of compliance with these reportorial requirements, companies can obtain a Certificate of Good Standing from the SEC. The said Certificate usually states that the requesting company is registered with the SEC and has not been dissolved nor has the SEC received any derogatory information that would prevent the company from exercising its primary franchise.
Why Do You Need It?
This Certificate of Good Standing is usually required in some transactions or applications with certain government agencies. For instance, the tax authorities or the Bureau of Internal Revenue (BIR) will require the submission of a Certificate of Good Standing for any application for tax exemption filed by a taxpayer. Likewise, the Certificate of Good Standing is also required for the accreditation of importers and customs brokers with the BIR.
Some companies in the Philippines consider their good name or reputation as their greatest asset, and they work actively to build a good image and maintain it. It cannot be gainsaid that a good reputation will definitely increase a company’s value and also provide sustained competitive advantage. And being a company “in good standing” is a preliminary step towards earning a good company reputation.
Having a good reputation enables a business to achieve its objectives more easily especially in dealing with key stakeholders such as customers, suppliers, employees, government authorities, and potential investors. A company with a good image and reputation may even be an attractive target of potential high-value transactions such as mergers and acquisitions.
As they say, “Reputation is key to a company’s success.” It is therefore indispensable for corporations to know and learn the best practices in corporate reporting and housekeeping works.
How to Obtain an SEC Certificate of Good Standing
In issuing the Certificate of Good Standing, the SEC will check the requesting company’s records for compliance with all the reportorial requirements. As shown in the SEC website, the following are the procedures for obtaining a Certificate of Good Standing from the SEC:
- 1. Prepare a letter and address it to the Head of the Company Registration and Monitoring Department (CRMD) requesting for a Certification. Attach supporting documents, if necessary and/or applicable. For the Extension Offices in Baguio, Cagayan de Oro, Cebu, Davao, Iloilo, Legaspi, Tarlac, and Zamboanga, the letter request should be addressed to the Head/Director of each Extension Office.
2. The Executive Assistant/Clerical Staff of the CRMD or of the Extension Offices (whichever is applicable) prepares the Payment Assessment Form and will advise you to pay the corresponding certification fee to the cashier.
3. Return the proof of payment as well as the letter request to the Executive Assistant/Clerical Staff.
4. The Executive Assistant of the CRMD or of the Extension Offices (whichever is applicable) will forward the said request form and other attachments directly to the handling lawyer for processing of the Certification.
5. If applicable, the handling lawyer, prior to the issuance of the Certification, will prepare a Memo to other Department/s concerned requesting its input subject of the request.
6. Upon receipt of such Memo from the other Department/s containing the request, the handling lawyer will prepare the Certification and seek the approval/signature of the Head/Director for the Certification.
7. After complying with all the requirements, the Executive Assistant/Clerical Staff will then release the Certification requested.1
How Long Does It Take to Process?
The Certificate of Good Standing can be secured from the SEC in less than a week if the requesting company is fully compliant with all its reportorial requirements. The processing time, however, will be longer if the requesting company has violations or deficiencies in its reportorial requirements, such as but not limited to, the non-filing and/or late filing of the GIS, AFS and other required reports, in which case, the requesting company shall be required to pay the applicable fines/penalties imposed by the SEC and also rectify the violations or deficiencies noted.
Before issuing the Certificate of Good Standing, the SEC will conduct strict checking and verification of the requesting company’s records to ensure compliance with all the reportorial requirements. Any inconsistencies on the information contained in the requesting corporation’s Articles of Incorporation and By-Laws with the filed AFS and GIS shall constitute a violation of SEC reportorial requirements.