The principal place of business has been defined as the place where the central management is located and where the books and records of transactions are kept. It is considered the corporation’s place of residence. It has been held in several cases that the residence of a corporation may be important for tax purposes, in determining the venue in court cases or even in ascertaining if service of summons and notices was properly made. Its importance is emphasized in the provision of the Corporation Code stating that the principal place of business of a corporation is one of the mandatory matters that must be contained in the articles of incorporation.
Before 2006, the Securities and Exchange Commission (“SEC”/”the Commission”) allowed registrant corporations and partnerships to indicate a general address only as their principal office address, such that it refers only to a city, town or municipality where they conduct business. “Metro Manila” was accepted as a valid principal office address.
On Feb. 16, 2006, the Commission issued SEC Memorandum Circular No. 3 (“SEC MC No.3-2006”), directing registrant corporations and partnerships to state in their articles of incorporation or articles of partnership, the specific address of their principal office, which shall include, if feasible, the street number, street name, barangay, city or municipality. In addition, the specific address of each incorporator, stockholder, director, trustee, or partner must also be disclosed. It categorically stated that “Metro Manila” shall no longer be allowed as address of the principal office. Apparently, the directive of SEC MC No.3-2006 was prospectively applied so much so that all existing corporations and partnerships which state only a general address as their principal office address were not required to amend their articles of incorporation or articles of partnership in accordance with the mandate of the circular.
Last Feb. 20, 2014, having in mind the full disclosure requirements of applicable laws, the Commission expanded the coverage of SEC MC No.3-2006 by issuing SEC Memorandum Circular No. 6. Now, all existing corporations and partnerships which provided a general address as their principal office address are directed to amend their articles of incorporation or articles of partnership in order to specify their complete address as mandated by SEC MC No.3-2006. Affected corporations and partnerships are given until Dec. 31, 2014 to effect the change.
In the meantime, if an affected corporation or partnership has an application for amendment of its articles of incorporation or articles of partnership pertaining to other provisions thereof, it will be required to execute an affidavit of undertaking to effect a change in its specific address within the specified deadline. The SEC clarified that after Dec. 31, 2014, non-compliance will not be penalized. However, the Commission can impose sanctions by deferment of applications such as amendments, certifications, and clearances, and the like.
It can be gleaned from these SEC issuances that the SEC considers the specific principal office address as a material information in the proper regulation and monitoring of corporations and partnerships. Through these issuances, the SEC did not only fortify its own guidelines but it also aided the other branches of the government like the Bureau of Internal Revenue and the Courts, among others, in the efficient administration and supervision of these legal entities. At the same time, the SEC emphasizes the importance of full disclosure as a dominant theme when it comes to issues related to corporate governance. Transparency is the key in gaining the trust and confidence of the public in general. Evidently, these circulars serve as a balancing act in protecting the interest of both the general public and the corporations. Hence, affected corporations and partnerships might as well comply and specify their principal place of business.
Business ( Article MRec ), pagematch: 1, sectionmatch: 1
Roniel D. Muñoz is a supervisor from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.
The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email ph-kpmgmla@kpmg.com or rgmanabat@kpmg.com.
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