Saturday, September 6, 2008

Name that Corp (SEC Guidelines on the Use of Business Names)

By Siesta-friendly

The SEC recently released their latest Guidelines and Procedures on the Use of Corporate and Partnership Names (in particular, SEC Memorandum Circular No. 5, Series 2008, dated July 17, 2008). The provisions of said MC are discussed below.


Even if you have all the documents ready such as the Articles and By-laws, you cannot proceed without an available name. Aside from being a legal requirement, a name can be important for branding purposes, to set apart the service or activity for which your company will be known for.

Must Haves

In applying for approval of your business names, the following terms are required:

1. the corporate name must contain ” corporation”, “incorporated”, “corp.” or inc.”

2. a partnership name must contain “company” or “co.”. If a limited partnership, “Limited” or “Ltd.”. And if a professional partnership, “company”, “associates” or “partners”, or other similar descriptions (say, bros.)

The Circular doesn’t specify but the terms above are expected to be attached at the end of the entities’ names. Try not to test the SEC Legal Division with a name like “The Corporation of XYZ”, unless you have plenty of days to argue your choice and more days to wait for the decision.

And one other ‘must have’ is that 1 business must have only 1 business name.

Choosing specific terms/names

If a term (not a particular name) is used in the entity’s name, it must refer to its primary business purpose. If 2 terms are used, the 1st term shall refer to the primary purpose and the 2nd to the secondary purpose. So you shouldn’t put “trading” if you’re in the salon business and, of course, vice-versa. And if you’re a hotel with a restaurant, you could use “ABC hotel and restaurant”, not the other way around.

Here go other rules you should know. The name –

a) should not be identical, misleading, deceptive or confusingly similar to a name already registered with the SEC or with the Department of Trade and Industry (DTI), nor contrary to public morals, good customs or public policy.

b) if similar to one already registered, must be changed to include 1 or more words that would make it dissimilar to a name already registered. This is why it is best to submit for approval a name containing at least 3 words. A name like “ABC Manufacturing” will not be accepted because “manufacturing” is already part of hundreds of names (if not thousands). To differentiate it from other manufacturing companies a 3rd word is needed, say, “DEF”. And if ABC DEF Manufacturing, Inc, already exists then you need to add GHI, and so on if necessary.

c) if already registered but the owning entity has been dissolved or its SEC registration revoked, will be only allowed:

a) when 3 years have lapsed since the SEC approval of dissolution, or

b) when 6 years have already lapsed since the revocation; or

c) immediately upon either dissolution or revocation, once approved by stockholders / members / partners owning a majority of the outstanding capital stock or membership or partnership, respectively.

d) must not consist solely of punctuation marks or symbols. And if forming part of the applied for name, these marks and symbols shall not be deemed words for the purpose of differentiating the name from a similar one already registered.

e) may include the name of a person provided the latter is a stockholder / partner / member of the applicant and has consented thereto. To use a deceased person’s name, the latter’s estate must give consent.

In this regard, the applicant may be required to explain the reason behind its choice of a real person’s name. Also, if there are initials included, their meaning shall be indicated.

f) may not be that of a foreign corporation to which the applicant is not related and when the former has not consented. So consent is required either way.

g) if in a foreign language, shall not be allowed if it is against good morals, public order or public policy or has an offensive or indecorous meaning in the country from which it originates.

h) of a subsidiary or affiliate of a foreign entity, which is similar to that of the latter, shall include “Philippines” or “Phil”.

i) cannot solely be that of a location, so a descriptive term must be included. You cannot just call your corporation “Manila Shop, Inc.” You can use “Manila Car Shop, Inc.” or “Manila Dress Shop, Inc.”

Choosing particular business terms

Pursuant to existing laws, the following words can only be used by applicants engaged in the relevant business as follows:

a) “Finance Company”, “Financing Company”, “Finance And Leasing Company”, and “Leasing Company” by those organized as financing and investment entities;

b) “Lending Company” or “Lending Investor” by lending companies;

c) “Pawnshop” by (of course) pawnshops;

d) “Bank”, “Banking”, “Banker”, “Savings And Loan Association”, “Trust Corporation”, “Trust Company”, or words of similar meaning, by those engaged in the banking or trust business;

e) “United Nations” or “U.N.” by the United Nations or its attached agencies;

f) “Bonded” by those with licensed warehouses:

g) “SPV-AMC” by stock corporations authorized as special purpose vehicles. No, these have nothing to do with the transportation business. These entities are usually organized to acquire or invest in non-performing assets of financial institutions.

On the other hand, unless the SEC authorizes, the following terms may only be used by applicants engaged in the relevant business as follows:

a) “Investment” or “Capital” by an applicant organized as an investment house, company or holding company;

b) “Asset Management”, “Investment Management”, “Fund Management”, “Financial Management”, or “Asset Adviser”, “Investment Adviser”, “Fund Adviser”, “Financial Adviser”, or similar words, by those organized as investment company advisers or holders of investment management activities (IMA) license from the Bangko Sentral;

c) ”National”, “Bureau”, “Commission”, “State”, and other words or acronyms that have gained wide acceptance in the Philippines as associated with government, by entities that perform government functions;

d) “Association” or “Organization” or similar words related with non-profit activities, by entities engaged in non-profit activities (naturally);

e) “Stock Exchange”, “Futures Exchange”, “Derivatives Exchange”, “Stock Broker”, “Securities Broker”, “Derivatives Broker”, “Commodity Merchant”, “Financial Futures Merchant”, “Commodity Broker”, “Financial Futures Broker”, “Securities Clearing Agency”, “Stock Clearing Agency”, “Plans” or similar words by those organized as exchanges, brokers, dealers, commodity futures broker, clearing agency, or pre-need company under the Securities Regulation Code.

Remember these names may be used by any non-related businesses if the SEC authorizes their use.

Remember, you can’t assume that however unique your business name is that it will be surely approved. You need to reserve your name with the SEC just like everybody else. Barring system downtimes, the SEC does have an on-line registry and reservation system which you can use to check the availability of corporate names as well as to reserve your chosen names.

With all the rules applicable as well as the possibility of a previously registered similar name, maybe you can name that corp in 3 tries. Good luck!


NEWER POST       |       PREVIOUS POST

No comments: