Regulatory Compliances Post-Acquisition
By: Noel C Ducusin
Let's say you just acquired your new company and are eager to start operating. One of the first questions that will come to mind is what are the regulatory compliances that you need to watch out for on an ongoing basis as the new owner of the company?
This article will address the basics of that question. The content here will also apply if you have freshly started your new company.
1. Securities and Exchange Commission
This is the main corporate regulator of the government. Each year, you will need to file the company General Information Sheet which is basically a statement as to who the company directors and shareholders are and any movements or changes in that directors set including changes in capital structure. There is also a required declaration on beneficial ownership of shares.
For more information on these reports, you can click here.
2. Bureau of Internal Revenue
The Bureau of Internal Revenue is the national taxing agency of the government. The procedure is the same for corporations like in Western countries whereby you need to file your quarterly reports and then your annual report. Your reports will include the usual income statement and balance sheet. The Philippines adheres to the international financial reporting standards and therefore it should not be that much different from Western-based economies.
It is recommended that you work closely with a good accountant as there are monthly reports that also need to be filed which are the basis of these quarterly and annual reports.
It’s important to get things right at the very beginning of the monthly stage. Once your systems and procedures are good at the monthly level this will translate to a smoother output for the quarterly and annual reports.
For an overview of your required tax reports, you can click here and scroll to the section for corporations.
3. Local Government Business Permits
Your company will need a permit to operate from the local city where it is stationed. This permit must be renewed annually, and it’s usually done before the close of January of each year. There is a standard minimum permit fee of one-half (1/2%) of gross sales. It is through this business permit fee among several others, that the local government can generate revenue for itself instead of having to just rely on a share of national tax collection.
Please note that this business permit fee is applied on the gross sales and not on the net as is the case with most national taxes. In the same manner, please note that this is just the minimum fee. While the fee range will be hovering close to this number, each city can impose higher or lower rates in the range. Thus, it is important to choose wisely where you will locate your company headquarters as some business districts charge much lower fees than others.
4. Mandatory Employee Benefits
This is pretty much the same in Western countries and the specific implementation in the Philippines is that you have the Social Security System for pensions, disability benefits, maternity and paternity benefits, and the occasional salary loan to name a few. Next would be PhilHealth which is the mandatory healthcare system for which employees will be able to get discounts on medical care. Last but not the least, is the Home Development Mutual Fund or Pag-ibig fund which is an employee housing benefit.
Standard procedure is that based on the salary of the employee a certain contribution to the system/government agencies is required and part of that will be paid by the employer and part of that will be paid by the employee via salary deduction.
It would be advisable to hire a good human resources consultant to take care of these details for you if you don't have one that does this in-house. It may be tedious, but you should have someone focusing on it so that you can devote your time and energy to the primary business concerns.
You can get an overview of these requirements by clicking on the official government websites for these systems here.
5. Department of Labor and Employment
This mostly applies to manufacturing enterprises that utilize a lot of employees. The most important thing to note here is the regulations on occupational health and the safety of employees. Other reports are usually regarding employee statistics.
Please note that this department has what you call “visitorial power” wherein they can send agents from time to time during reasonable business hours to do spot audits and checks and even interview some employees as to their wages, benefits, and work conditions. It's important to prepare for this and be compliant so you will not be taken by surprise.
For more information, you can click on this link and then scroll down to the reports section.
These are the main compliances that you need to watch out for. Please note that if you have secondary licenses for specifically regulated industries such as banking, insurance, telecommunications, or energy, then you will need to comply with those additional specific annual reports as well.
The important thing is that you know what to expect so that you are not caught by surprise. The best practice is to hire a consultant or if you can, get someone in-house to handle these details so that you can focus on the key drivers of your business. Again, for those that are starting, there is no need to hire an employee for this and you can use consultants for cost management purposes while you are still testing the business climate and exploring opportunities.
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About the Author
Atty. Noel C. Ducusin is the senior and founding partner of the N. Ducusin & Partners Law Offices - a law firm based in Metropolitan Manila, Republic of the Philippines that specializes in Corporate Advisory, Cross Border Regulatory Matters, Mergers & Acquisitions, and Commercial Litigation.
Atty. Ducusin is also the President & Sole Director of DoingBusinessPH OPC - a company dedicated to empowering foreign investors to do business in the Philippines through online executive education programs, digital books, seminars, as well as online and offline events.
His mission for this Community is to help foreign investors, business owners, and managers by breaking down complex legal concepts and dense technical material into simple, straightforward, and actionable legal information for better business decisions. For easy reading, articles and briefs will be in simple everyday language without legal jargon.
This is not the place for academic writing and legalese will not be tolerated here.
The simpler and the more practical the better.
“Everything should be made as simple as possible, but no simpler.” – Albert Einstein