How to Incorporate a Company

So you want to start your own business. Here in the Philippines, you can do it through these common vehicles: Sole Proprietorship, Partnership or Corporation. Whatever business entity you want to adopt is entirely up to you. But if you intend to put up a corporation, prepare for much effort to keep up with the required paperwork.

To help those who want to put up a corporation, below is a brief guide on how to incorporate (at least through the Securities and Exchange Commission's [SEC] main office in Manila):

1. Reserve a company name. You can do it online (www.sec.gov.ph) where you have to register an account. You can also do it over-the-counter (SEC Name Verification Unit 2/F).

2. Pay the name reservation fee either at the SEC or any Unionbank branch (although I haven't tried paying through the latter) within four (4) days from your reservation. Get the receipt (together with the printout of your name reservation form) and proceed to the SEC Name Verification Unit (2/F) to have your payment confirmed. The good people at the SEC will then hand you Reservation Payment Confirmation (this is the Name Verification Slip). Make at least four (4) copies of this.

3. Prepare your company's Articles of Incorporation (AOI), Cover Sheet, By-Laws (if you want to submit the By-Laws simultaneous with your AOI), Treasurer's Affidavit and Affidavit of Correction. You can draft your own documents but there are pro-forma forms available at the SEC's Green Lane (3/F). Make sure the company name appearing in your documents is EXACTLY THE SAME as the one appearing in your Name Verification Slip (note: commas, periods, etc.). Prepare at least five (5) copies.

4. Submit the following documents, in the same order, to the SEC's Company Registration and Monitoring Department (CRMD) (2/F) for pre-processing:

a. Cover Sheet
b. Name Verification Slip
c. AOI
d. Treasurer's Affidavit
e. By-Laws (if applicable)
f. Undertaking to change name (if not yet included in the AOI)
g. Affidavit of correction (if there are corrections to the AOI/By-Laws)

5. The good people at SEC will pre-screen your documents and may make suggestions or require changes in your documents before they can be sent for approval. Be sure to bring liquid eraser, ballpen and a lot of patience if you want to finish this in a day.

6. After your application has been pre-processed, you will be given an Assessment Form detailing how much you have to pay as fees for the incorporation of your company.

7. Go to the cashier (G/F) and pay the amount stated in the Assessment Form.

8. Bring the Assessment Form (which is now already marked by the cashier) back to the CRMD (2/F).

9. Have the staff receive your documents. Ask for the probable date of the approval of your application.

10. Go back to the SEC (G/F) at the designated date to get your Certificate of Incorporation. You may have to pay Documentary Stamp Tax or other minimal fees upon getting your Certificate.

There you go. I hope this helps.

Technical Issues

My updates on this blog are currently on hold due to technical issues.

New posts will be out next week.

Why people can't understand how lawyers write

Some people say lawyers' writings are incomprehensible. Personally, I disagree. But then I read this book entitled Writing to Win - The Legal Writer by Steven D. Stark. In the Introduction of his book, Mr. Stark cited Robert D. White's Trials and Tribulations: Appealing Legal Humor, in identifying ten unfortunate characteristics of legal writing:

"1. Never use one word where ten will do.

2. Never use a small word where a big one will suffice.

3. Never use a simple statement where it appears that one of substantially greater complexity will achieve comparable goals.

4. Never use English where Latin, mutatis mutandis, will do.

5. Qualify virtually everything.

6. Do not be embarrassed about repeating yourself. Do not be embarrassed about repeating yourself.

7. Worry about the difference between 'which' and 'that'.

8. In pleadings and briefs, that which is defensible should be stated. That which is indefensible but you wish were true should be merely suggested.

9. Never refer to your opponent's 'argument'; he only makes 'assertions,' and his assertions are always 'bald.'

10. If a layperson can read a document from beginning to end without falling asleep, it needs work."

Then I started to doubt my earlier opinion of how lawyers write. And after going through Mr. Stark's book, my legal writing greatly improved (at least that's what my wife told me). Go figure.

What happens in cases before Labor Arbiters?

Running a business is not easy. Aside from the trouble of making sales and finding clients/customers, you also have to deal with your employees. Some employees are great. Others, well, are not so great.

So you started auditing your business. You discovered a discrepancy between your books of account and the actual cash on hand. You then called your bookkeeper or the person in charge of the cash for a meeting.

At the meeting, you confronted your employee with the discrepancy and asked where the rest of the money is. Your employee swears that all cash were properly turned-over. You do not believe him. Exasperated, you told him “You’re fired! Please leave the company immediately.”

A few weeks after, you suddenly receive a Subpoena from the National Labor Relations Commission informing you that your former employee filed a case against you for illegal dismissal. The notice states that you are to appear before a Labor Arbiter at a particular date and time.

Welcome to the world of labor disputes. Your former employee has filed a case against you. If you do not do anything, you may be commanded by the government to reinstate your former employee with full backwages.

Whether you are an employer or an employee, you may end up being involved in a labor dispute before a Labor Arbiter. What happens in this case? Below is a simple summary.

1. As in our hypothetical situation, the employer will receive a Subpoena requiring him/her to attend a Mandatory Conciliation and Mediation Conference. Both the employer and employee are required to attend this conference. The primary purpose of this conference is to find a way to amicably settle the case. This is not the time to air grievances before the Labor Arbiter – there is another time for that.

2. During the conference, the parties should exert every effort to arrive at a compromise. These Mandatory Conciliation and Mediation Conference/s may happen only once, twice, thrice, depending on the willingness of the parties to settle the case.

3. If during any of the conferences the case is settled, then that’s it. The parties will execute a compromise agreement and the case will be terminated.

4. If the case is not settled, the Labor Arbiter will order the parties to simultaneously submit their respective position papers. In the position papers, both the employer and the employee will relate the facts surrounding the dispute, present their evidence and their arguments on why they should win the case. The Labor Arbiters usually set a hearing for the purpose of simultaneously submitting and receiving copies of the parties’ respective position papers. During that hearing, the Labor Arbiter will set another hearing for the submission of the Reply.

4. A Reply is the answer to the position paper. This is where the party will contest and refute the narration made in the opposing parties’ position paper. At the hearing previously set by the Labor Arbiter, the parties will simultaneously submit and receive each other’s Reply. Sometimes, a party will request for a hearing to submit a Rejoinder. A Rejoinder is simply the answer to the Reply.

5. After the submission of the Rejoinder or Reply, as the case may be, the parties may submit the case for decision. Under the Rules, the Labor Arbiter should decide the case within thirty (30) days after the submission of the case by the parties for decision.

6. At any time before the Labor Arbiter renders a decision, the parties can amicably settle the case. If they want to do so, they must inform the Labor Arbiter immediately of their decision to end the dispute.

7. The Labor Arbiter’s decision will be mailed to both the employer and employee, or through their respective lawyers, if any. The decision may then be appealed to the National Labor Relations Commission within ten (10) days from receipt of the decision.

How do I transfer land to my name?

You just bought a house and lot. Now you want to transfer title from the seller's name to yours. If you're dealing with a real estate company, that company usually will take care of that for you. However, in some instances, especially if you bought the house and lot from an individual, you will have to work on it on your own.

So how do you do it? Here are a few tips:

1. Secure extra original copies of the Deed of Absolute Sale, if possible. Copies of this important document will be submitted to relevant government offices before the transfer can be processed. It's better if you always have an extra copy by your side. If the seller is a corporation, make sure that you also have an original copy of the Secretary's Certificate authorizing the sale of the corporation's land to you. It would also be best to personally know the lawyer who notarized the Deed of Absolute Sale. Under the law, he should have with him a copy of the Deed of Sale and, in case you lose your copy, you can always go back to the notary to get one.

2. Make sure the capital gains tax are paid. Under the law, it should be the seller who should file the Capital Gains Tax Return and pay the taxes due. However, you may be in a situation where the contract states that you will be liable for the taxes due on the sale. In this case, ask the seller for a duly accomplished Capital Gains Tax Return (because he/she has to sign), submit the Return to any Bureau of Internal Revenue (BIR) Authorized Agent Bank and pay the capital gains tax due.

3. After payment of Capital Gains Tax, secure a Certificate Authorizing Registration (CAR) from the BIR. A CAR is a document issued by the BIR which serves as proof that Capital Gains Tax for the sale of the property has been paid.

4. Make sure that the necessary transfer tax is paid to the local government unit where the property is located. Transfer taxes vary from one local government unit to another. It is best to consult with your local city/municipal/provincial treasurer regarding transfer taxes. Don't forget to get the receipt/proof of payment of transfer taxes.

5. Obtain a Realty Tax Clearance from the local government unit where the property is located. This is a document which proves that real property taxes over the property have already been paid. If there are delinquencies in the payment of real property tax, better discuss this with the seller of the property.

6. Secure a Owner's Duplicate Copy of the Title and the Certified True Copy of the latest Tax Declaration of the property you bought. You should ask the assistance of the seller in this.

7. After finishing everything, go to the Register of Deeds (RD) where the property is located with the following: (a) Deed of Absolute Sale; (b) BIR CAR/Tax Clearance Certificate; (c) Owner's Duplicate Copy of the Title; (d) Realty Tax Clearance; (e) Certified True Copy of the latest Tax Declaration of the property; and (f) Transfer Tax Receipt/Clearance. The lovely people at the RD will be more than happy to assist you.

DISCLAIMER

This is a disclaimer to all the posts in this blog:

The posts in this blog are for informational purposes only. This blog is not intended to provide legal advice nor to create any attorney-client relationship. The posts are presented solely in the view and opinion of the author and should not be taken as guarantee of the results sought by the reader.

When Should I Hire a Lawyer?

5 Signs that You Should Already Hire a Lawyer

In more than one instance, I have seen and encountered people (non-lawyers) trying to take on legal issues themselves. I have seen them draft affidavits, court pleadings and various documents which you may think only a lawyer should make. And their reason for doing so? Lawyers are expensive.

In a way, I agree. Some lawyers charge an arm and a leg for menial jobs. Some overcharge. Some fraudulently charge. When you're lucky, some don't charge at all.

However, in our defense, a job which may look clerical to a non-lawyer may lead to a very complicated situation. You may think that you’re being overcharged but you are actually getting the best deal that you’re ever going to get. Imagine: a person doing a job on his/her own may be saving on legal fees but he/she may end up facing a multi-million-peso lawsuit if things go wrong. As Murphy would have said, "anything that can go wrong will go wrong". 

So how does one know when it is already time to seek professional legal help – and actually pay for it? Below are five suggestions:

1. WHEN SOMEONE FILES A CRIMINAL CASE AGAINST YOU - Even if the criminal case is still before the prosecutor’s office, lose no time in securing the services of an able lawyer. Once the prosecutor resolves a criminal complaint, a warrant of arrest may be issued even without your knowledge. Don’t wait for the police to knock on your door before seeking professional help.

2. WHEN TRANSFERRING REGISTERED LAND – To notarize the deed of sale/donation, lawyers already charge at least 1% of the value of the land. You might as well pay them the same amount, or a little bit more, to do everything.

3. WHEN YOU’RE ABOUT TO FIRE SOMEONE – Illegal dismissal results in one nasty consequence – payment of backwages. This means that if you fire someone, and it was later found to be illegal, you become liable for the employee’s wages from the time you dismissed him/her. Imagine dismissing an employee in January and then having the dismissal declared illegal in December of the same year. You end up paying a year’s salary to someone who did not even work for it. Now, imagine if the case drags on for three more years.

4. WHEN YOU’RE TRYING TO COLLECT A DEBT AMOUNTING TO MORE THAN P200,000.00 – Thanks to the Small Claims Court, lawyers are barred from appearing in court hearings when the debt sought to be collected is P100,000.00 or less. If you’re trying to collect a debt which is not more than P200,000.00, the Rules on Summary Procedure is available at your disposal. However, once the amount goes above P200,000.00, technical rules apply and the defense would most likely resist paying such a huge amount. Get a lawyer – lawyers are skillful in the art of "persuasion."

5. WHEN IN DOUBT, CONSULT A LAWYER – This goes without saying: if you’re unsure of the consequences of your actions, it’s probably better to ask someone for a professional opinion. Don’t hesitate to look for a lawyer to consult. Some lawyers charge consultation fees, some consult for free. Seek referral from people who have previously engaged the services of a lawyer. Remember, however, that not all lawyers are created equal.