Company Tagged Delinquent or Revoked by the SEC in the Philippines: Can It Be Saved, How Is It Restored and Can It Still Operate

Step one: confirm exactly what status the company has

Do not rely on an agent's remark or a forwarded email. Obtain written proof of the status yourself. People often say a company has been 'struck off', but that phrase covers several distinct SEC statuses that are handled very differently.

• Delinquent. The corporation has been placed in delinquent status, typically for failing to file annual reports over a long period or for remaining inoperative. It still exists as a juridical entity, but it has been flagged and given a period within which to return to compliance.
• Suspended. The registration has been suspended, again usually for unmet reporting duties or a regulatory breach.
• Revoked. The certificate of registration has been revoked. At this point the corporation should not continue trading as a normal going concern. It may petition to have the order lifted or proceed to wind up.

To verify:

1. Search the SEC's online company verification facility using the full corporate name and registration number.
2. Check the SEC's published lists of delinquent, suspended and revoked corporations and the related orders.
3. Request a written certification of the company's current status from the SEC, to use when dealing with banks, customers and the immigration bureau.
4. Check your own file: the year of the last audited financial statements and general information sheet actually filed, and any SEC notice or order received. If the records sit with a former secretary or agent, recover or reconstitute them first, as described in what to do when a corporate secretary withholds company records.

Confirm one more point. SEC status, BIR tax registration and the local business permit are three separate records. A problem at the SEC does not cancel the other two, and obligations under them keep accumulating.

Delinquent status: file the arrears, pay the penalties and apply for lifting

A delinquent corporation can generally be restored. The route is to file every overdue report, settle the assessed penalties and then obtain an SEC order lifting the delinquent status. Do this early, since a corporation that does not recover within the period allowed faces revocation.

The usual sequence:

1. Take stock of the arrears. List the years for which audited financial statements and general information sheets were not filed, and check whether other statutory filings such as beneficial ownership disclosure were missed. The content of the annual sheet is covered in the general information sheet explained, and the effects of late financial statements in what happens when audited statements are late.
2. Reconstruct the books and have them audited. Each missing year needs financial statements, audited by an independent auditor where the company meets the audit threshold. This is usually the slowest part of the whole exercise.
3. Hold the meetings and pass the resolutions. The election of directors and officers must rest on real meetings and real minutes. They cannot simply be backdated.
4. File and pay the assessed penalties. The amount is assessed by the SEC under its current schedule. Do not estimate from old figures found online.
5. Apply for the lifting of delinquent status. Restoration is complete only when you hold the SEC's written order.

If the SEC happens to be running an amnesty or penalty-relief programme, assess whether you qualify. Such programmes are occasional, and you should not build a plan around waiting for one. If the company was never going to trade again, this is also the right moment to decide on formal dissolution. See closing a company in the Philippines.

After revocation: petition to lift, wind up or start a new entity

Once registration is revoked there are three routes: petition the SEC to lift the order, wind up according to law, or set up a new entity while properly dealing with the old one. Which is workable depends on why the registration was revoked, how long ago, and what the company still holds.

• Petition to lift the revocation. The SEC has a procedure for revoked corporations. It generally requires an explanation, the filing of every overdue report, payment of assessed penalties and other conditions, for instance that the corporate name has not been taken by someone else and that no complaint or case is pending. Approval is the SEC's decision and nobody can assure it in advance.
• Winding up. A revoked corporation should in principle settle its debts, dispose of its assets and distribute what remains. Where the company holds real property, bank deposits, receivables, leases or unfinished contracts, this step cannot be skipped, or those assets and contracts are left with unclear ownership.
• A new entity. When restoration is hopeless or too costly, some owners register a new company to carry on the business. It looks like the fastest route, but the old company's tax registration and tax arrears do not disappear, employees, contracts, licences and visas must each be transferred, and the old company still has to be tax-cleared and closed.

Have a lawyer and an accountant work through the numbers together: the number of years to be filed and the structure of the penalties, the value of assets and contracts held by the old company, whether licences can move to another entity, and how foreign employees' visas are tied to the sponsoring employer. On the effect of a change in the employer's status on work visas, see transferring a 9G when the employer is deregistered.

While the status is irregular: contracts, invoices and visas

A company that keeps trading while its status is irregular carries risk in three places: the standing of its contracts, cross-checks by other agencies, and the personal position of its directors and officers. Item by item:

• Contracts. A delinquent corporation still exists, but any counterparty doing due diligence will see the flag, and large customers, banks and government buyers usually pause. A corporation whose registration has been revoked and which signs new contracts as if nothing had happened invites disputes over validity and liability, and the people who signed may be pursued personally. Wait for restoration before signing new agreements, and take legal advice on existing contracts that must be performed.
• Invoices. Invoicing and tax registration belong to the BIR. An irregular SEC status does not end your filing duties, so returns still have to be filed. The mismatch between the two records tends to surface in an audit or at tax clearance.
• Banks. Banks refresh customer information periodically and ask for the latest general information sheet and financial statements. If you cannot produce them, the account may be restricted or closed. See when a bank closes or restricts a corporate account.
• Business permit. Local governments normally review corporate documents at renewal, so an irregular status can stall it.
• Foreign employees. The sponsoring company must submit its own registration and compliance documents. When its status is irregular, new applications and renewals may be held or denied, leaving the status of current foreign staff uncertain.

The practical course, once the irregular status is confirmed, is to hold back new major contracts and new visa filings, concentrate resources on restoration and manage ongoing contracts and employee statuses from a single list.

How companies end up here, and who bears the responsibility

Most corporations that become delinquent or revoked did nothing dishonest. Nobody filed the reports for several years in a row. Four routes are common:

1. The company was not trading and the owner assumed that no income meant no filing.
2. The bookkeeping agent handled the BIR side only and nobody looked after SEC filings, or the agent went silent midway. See what to do when your accounting agent botched the filings.
3. The corporate secretary resigned or disappeared, so no one signed or filed the general information sheet.
4. The company moved without updating its registered address, SEC notices went to the old one and were never seen.

Be clear about two points on responsibility. First, the reporting duty belongs to the corporation, and the consequences fall on the corporation and its directors and officers. Telling the SEC that an agent failed to file is not a defence. You may claim against the agent under the service agreement, but that is a separate matter. Second, directors and officers are responsible for the company's compliance. Prolonged neglect can, in particular circumstances, lead to personal liability for resulting loss, and foreign directors may be asked about this history in later visa or corporate applications.

So while you restore the company, establish the cause and keep a record of it: who was supposed to file, why it did not happen and where the notices were sent. That record is useful when explaining the lapse to the SEC, when claiming against an agent and when answering questions from a bank or the immigration bureau. It also tells you which part of your own process failed, so that the repair is not limited to paying this year's penalties.

Staying compliant after restoration, and what Yixing can do

Restoration only fills the hole. Without a filing routine the same thing happens again a few years later. Put these in place:

• One compliance calendar that holds the SEC's audited financial statements, general information sheet and beneficial ownership filings, the BIR returns for each tax type and the local business permit.
• A named preparer and a named reviewer for each filing, with stamped or system-generated proof of submission kept on file.
• Prompt updating of the registered address, email and telephone number with the SEC so that notices actually arrive.
• A yearly check of the company's status in the SEC system by the owners themselves, not only an agent's verbal report.
• A complete set of original corporate documents held by the company, not left entirely with a secretary or an agent.
• Formal dissolution of any company no longer in use, as early as possible.

Yixing Travel Consultancy (SEC Registration No. CS202009551, Bureau of Immigration Accredited Agency No. CA-202624381-1) provides company setup and amendment services and compliance retainer services for foreign-owned companies in the Philippines. We verify current SEC status, take stock of overdue filings, coordinate accountants and auditors to reconstruct statements, prepare and submit the late filings and the restoration application, build the compliance calendar that follows, and assess the effect of an irregular status on foreign employees' visas. Restoration is decided by the SEC and we cannot promise a result. For petitions concerning revocation, for liquidation and for disputes with a former agent, we connect clients with licensed counsel. For your specific case consult a licensed lawyer; this article is not legal advice.