SEC Adm. Case No. 05-10-200 Amendment of Articles of Incorporation of Philusa Corporation

Securities and Exchange Commission SEC Bidg., EDSA, Greenhills, Mandaluyong City Republic of the Philippines

EN BANC

INCORPORATION OF PHILUSA RE: AMendMent oF ArtICLeS oF CORPORATION. SEC En Banc Case No. 05-10-200

DECISION

(hereinafter referred to as "PHILUSA? of the denial of its application for extension of corporate term. Before the Commission En Banc is the appeal by PHILUSA Corporation

FACTS OF tHE CASE

"engage in the business of manufacturing and compounding drugs, chemicals, medicinals, veterinary compounds and other goods and wares of all kinds and PHILUSA was registered2 with this Commission on 28 October 1957 to

description; to establish, own maintain, operate and lease laboratories, plants and

manufacturing operations."3 lease or otherwise deal in all kinds of machinery, equipment, scientific apparatus and instruments, chernicals, extracts, compounds and other materials required for other facilities for the manufacture of the aforementioned products; to buy, sell,

business of wholesalers and distributors, buying, selling or otherwise dealing in chemicals, drugs, pharmaceuticais, medicinal and veterinary compounds, hospital, PHILUSA was also formed to "establish, operate, conduct and carry on the

3 Second Article, Amended Articles of Incorporation of PHILUSA. 2 SEC Registration No. 13220. 1 Annex " A" of Memorandum on Appeal.

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medical, dental and laboratory supplies and equipment, food preparations, toilet articles and general merchandise of all kinds and description; to import and export or indent orders or in any other representative capacity for natural or juridicat all lawful objects of commerce and to acts as manufacturers' representative, or agent, commission merchant, commercial broker; factor, agent, upon consignment persons and entities, whether domestic or foreign."

in June 2003. The application was allegedly sent via registered mail5 and allegedly Department (hereinafter referred to as "CRMD') on 02 September 2009 and shortly after, had a clarificatory conference with CRMD lawyer Atty. Alvin Cape on 16 October 2009.8 received by the Records Division of the Commission on 18 June 2003.7 PHILUSAl wrote to Director Benito A. Cataran of the Company Registration and Monitoring PHILUSA avers that it applied for an extension of its corporate term sometime

filing fee of one million and ten thousand pesos (P1,010,000.00).1 AIlowed to proceed by the CRMD, PHILUSA paid9 on 28 October 2009 the

When the original records of PHILUSA were checked, it was noted that the

PHILUSA inside the original records foider.11 application for arnendment were fastened together with other corporate records of original of the cover sheet, as well as the accomparying documents in support of the The CRMD then asked the Central Receiving and Records Division ("CRRD") of the Human Resource and Administrative

not go through the pre-processing stage.12 Department (HRAD) of the Commission to confirm if, indeed, the application was officially received in 2003. The CRMD noticed that the alleged submission in 2003 did

show any proof of receipt by its division.13 The CRRD suggested that the matter of Upon checking with the CRRD, the CRRD said that the application did not

5 Affidavit of Mailing executed on 26 July 2010 by Rocky Feller Ferrer, General Clerk assigned to the 6 During the Clarificatory Conference held on 21 July 2010, counsel for PHILUSA submitted a 4 Second Article, Amended Articles of Incorporation of PHILUSA photocopy of the cover sheet bearing a stamp mark with the letters "LCU" and a signature with Legal Division of Mercury Group of Companies, Inc. "6-18-03""beside it. PHILUSA claimed that the photocopy of the Cover Sheet was submitted by the

company messenger after he was instructed to verify if the application for amendment was indeed

7 Par." A" of the Memorandum on Appeal. received by the Commission.

10 The filing fee was P1,000,000.00 while the photocopy of the receipt submitted by counsel for 13 Par. 1.8, Ibid. 9 Par. 1.4, Statement of Facts, Reply Memorandum. 11 Par. 1.4, Statement of Facts, Reply Memorandum. 12 Par. 1.6, Ibid. 8 Par."A," Ibid. PHILUSA reflects P10,000.00 for t.he payment of fines/ penalties.

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CFRD cannot confirm nor deny whether such application was received.16 verification be referred to the Corporate Filings and Records Division (`CFRD' 14 the logbooks covering the periods .2000-2005 are no longer available. Thus, the Unit ("LCU'.15 However, upon checking the LCU's records, it was discovered that since the acknowiedgment stamped on the cover sheet was from its License Control

which was received by PHILUSA on 29 March 2010.17 The CRMD denied the application of PHILUSA in a letter dated 16 March 2010

of the application for extension of term. On 05 April 2010, PHILUSA filed a letter seeking reconsideration of the denial

which was received by PHILUSA on 01 May 2010. 19 directed PHILUSA to file its request for reconsideration with the Commission En Banc In his reply dated 13 April 201018 Director Benito A. Cataran of the CRMD

Hence, the instant Appeal.

ISSUE

PHILUSA's application for amendment of its Articies of Incorporation to extend its corporate life. The issue to be resolved is whether or not the CRMD erred in denying

RULING

The Appeal has no merit.

to wit: Relevant to the resolution of this case is Section 11 of the Corporation Code.

sooner dissolved or uniess said period is extended. The corporate instance by an amendment of the articles of incorporation, in "Sec. 11. Corporate term. - A corporation shall exist for a period not exceeding fifty (50) years from the date of incorporation uniess term as originally stated in the articles of incorporation may be extended for periods not exceeding fifty (50) years in any singie

accordance with this Code; Provided, That no extension can be made

16 Par. 1.10, Ibid. 18 Annex "C," Ibid. 19 Par. 5, Memorandum on Appeal. 14 Ibid. 15 Par. 1.7, Ibid. 17 Ibid.

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may be determined by the Securities and Exchange Commission. m2o earlier than five (5) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as

PHILUSA wrote to CRMD Director Benito A. Cataran that the processing of its papers started.21 waited for further action from the Commission but there was none. It was only after PHILUSA maintains that it filed its application for extension in 2003 and

position that an application is oniy considered filed after payment of the filing fee.22 In the clarificatory conference held with the parties, CRMD clarified its

part. 23 As PHILUSA admits, after instructing the company messenger to verify if the application for amendment was indeed received, there was no further action on its PHILUSA's attempt to iay the blame at the CRMD's door cannot be sustained.

failure to complete the pre-processing stage shouid not have escaped PHILUSA's after six (6) years. PHILUSA's allegations of a heavy workload or a misconception that there was a luxury of time24 to file the application does not constitute sufficient excuse to attend to what would have been an otherwise simple procedure and yet important to the corporation's existence. vigilance. PHILUSA oniy took the initiative to check on the status of its applicationl Even assuming that the original application was, indeed, received in 2003, the

importance of a corporation's term of existence in this wise: The case of Benguet Consolidated_ Mining_ Co...y._ Pineda25 ratiocinated the

And the State is naturally interested that this privilege be enjoyed "The State and its officers also have an obvious interest in the term of life of associations, since the conferment of juridical capacity upon them during such period is a privilege that is derived from statute... to the detriment of other parties; and for this reason, it has been ruled that 'the limitation (or corporate existence) to a definite (emphasis supplied)26 only under the conditions and not beyond the period that it sees fit to grant, and particularly, that it be not abused in fraud and period is an exercise of control in the interest of the public."

21 Paragraph A, Arguments, Memorandum on Appeal. 22 Minutes of the Clarificatory Conference held on 21 July 2010. 20 Corporation Code of the Philippines. 3atas Pambansa Big. 68 (1980). 23 Ibid 24 Ibid. 25 98 Phil 711 (156), cited in Villaneuva, Philippine Corporate Law, p. 203 (2001) 26 Citing Smith v. Eastwood Wire Manufactoring Co, 43 Ati. 568, Ibid.

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the corporation's existence. The iaw is clear and provides a straightforward procedure for extending a corporation's life. Any other interpretation of the law will be prejudicial to the interest of the public. It is incumbent upon PHILUSA to be vigilant about matters which are vital to

for lack of merit. One hundred percent (100%) of the filing fee paid shall be credited in full for future filings of the company. Let the Company Registration and Monitoring Department be furnished with a copy of this Decision for its appropriate action. WHEREFORE, premises considered, the instant appeal is hereby DENIED

SO ORDERED

Mandaluyong City, 12 August 2010.

Pe B. Barin $ b. be

Chairperson

G0r Ma. Juanita e. cueto RAUL J. PALABRICA

Commissioner Commissioner

manuel HUBERTO B. GAITE ELAdIO MJALA

Commissioner Commissioner