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Frequently Asked Questions on Foundations

A. GENERAL INFORMATION ABOUT FOUNDATIONS
1. What is a Foundation?
  A Foundation is a non-stock, non-profit corporation established for the purpose of extending grants or endowments to support its goals and/or raising funds to accomplish charitable, religious, educational, athletic, cultural, literary, scientific, social welfare or other similar objectives and registered as a Foundation with the Commission. (Revised Corporation Code, SEC Memorandum Circular No. 8, series of 2006);
2. What is a non-stock, non-profit corporation?
 

A non-stock corporation, under Section 3 of the Revised Corporation Code of the Philippines (RCCP), is any corporation not organized as a stock corporation. A stock corporation is one which has capital stock, held by shareholders, and dividends which are, from time to time, distributed to said shareholders.

A non-profit corporation is one where no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution’s purpose and all its activities conducted not for profit.

A non-stock corporation, under Section 86 of the RCCP, is one where no part of its income is distributable as dividends to its members, trustees, or officers; provided, that any profit which a non-stock corporation may obtain incidental to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose/s for which the corporation was organized (RCCP, Sec 86).

A non-stock corporation is formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes like trade industry, agricultural and like chambers, or any combination thereof, subject to the special provisions of this Title governing particular classes of non-stock corporations (RCCP, Sec 87);

3. Can stock corporations register as a Foundation?
  No, only non-stock corporations may register as a Foundation;
4. If my Foundation generates profit, does that mean it loses its non-profit status?
  No, the mere generation of profit does not remove the non-profit status of a Foundation. A non-profit organization is one where no part of its income accrues to or benefits any Foundation member, trustee, officer, or specific individual. Thus, the Foundation remains non-profit so long as the profit is not distributed to its members, trustees, officers, or any specific individual;
5. Where may I apply my Foundation’s profits?
  To remain non-profit, the Foundation should bring its profits back into the Foundation for the furtherance of the purpose or purposes for which the corporation was organized;
6. What does “charitable” mean?
  A corporation’s purpose is “charitable” when it provides free goods and services to the public which would otherwise fall on the shoulders of the government (NIRC, CIR vs. St. Luke’s Medical Center, G.R. No. 203514);
7. Is “non-profit” the same as “charitable”?
  No, simply being a “non-profit” corporation does not make a corporation “charitable”. A corporation may operate to grant benefits exclusively to its members yet still remain “non-profit”. To be “charitable”, the corporation must provide free goods or services to the general public to address a public need;
8. How is a Foundation different from a regular Non-stock, Non-profit Organization or NPO?
 
  Foundations Non-stock, Non-profit Organizations (NPOs)
Minimum starting contribution needed to organize or register A minimum contribution of One Million Pesos (P1,000,000.00), evidenced by a notarized certificate of bank deposit, is required to register a Foundation No minimum contribution is required to register an NPO
Corporate name requirement Foundations are required to bear the title of “Foundation” in its corporate name NPOs are not required to indicate any such title in its corporate name
9. Is accreditation mandatory for every Foundation?
 

No. Generally, a Foundation may register as such and execute its charitable purposes without the need of any accreditation. Once a Foundation secures its primary license (Certificate of Incorporation), it may proceed with its operations without having to secure any form of accreditation

Accreditation, generally, grants Foundations with additional benefits or allows them to engage in charitable activities regulated by specific government agencies;

10. Where can I go to have my Foundation accredited?
 
a)

Department of Social Welfare and Development (DSWD)– Foundations which seek to operate social welfare programs or services under the jurisdiction of the DSWD are mandated to be registered, licensed, or accredited with the DSWD (DSWD Memorandum Circular No. 1, series of 2020 in relation to the Social Welfare Act of 1968)

For more information on the matter, you may contact the DSWD through its central or regional offices

b) Bureau of Internal Revenue (BIR) with the endorsement of the Philippine Council of NGO Certification (PCNC)– Foundations which seek to receive tax incentives may secure “donee status” with the PCNC, which will thereafter endorse the Foundation to the BIR for applicable tax incentives (Revenue Regulation 13-1998 in relation to the National Internal Revenue Code of 1997 SEC. 34(H))
c) Microfinance NGO Regulatory Council (MNRC)– Foundations which seek to avail of the preferential tax treatment and other incentives granted to accredited Microfinance NGOs may apply for accreditation with the MNRC (Microfinance NGOs Act and its Implementing Rules and Regulations)
11. Are Foundations required to secure a secondary license (Certificate of Authority)?
  No, they only need a primary license to operate as a non-stock corporation;
 
  REGISTRATION OF FOUNDATION
1. How do I register a Foundation?
  First, obtain a primary license by filling out the form provided through the SEC – Electronic Simplified Processing of Application for Registration of Company (eSPARC) portal at https://esparc.sec.gov.ph/ ;
2. What is the SEC – ESPARC Portal?
  The SEC eSPARC is a facility catering to the application for registration of One Person Corporations (OPC) and Domestic corporations (stock and non-stock) with 2 or more incorporators who may either be natural person, partnership, association or corporations, singly or jointly with others but not more than fifteen (15) in number. The system allows the applicant or his duly appointed representative to submit the proposed company name and input details of the articles of incorporation for review of the Commission;
3. Can a Foundation register as a One Person Corporation (OPC)?
  No. Section 116 of the RCCP defines OPCs as “a corporation with a single stockholder.” By implication, OPCs are exclusively stock corporations, precluding non-stock corporations such as Foundations to organize as such;
B. REPORTORIAL REQUIREMENTS OF A FOUNDATION
1. What are the reportorial requirements of a Foundation and when do I have to file them?
 
a)

General Information Sheet (GIS)– to be submitted within thirty (30) days after the annual meeting

b) Audited Financial Statements (AFS)– to be submitted depending on whether the Foundation uses a calendar year or a fiscal year not ending on December 31
  ● If Foundation follows a calendar year ending on December 31: the due date is based on the pertinent memorandum circular issued every year by the Commission
  ● If Foundation follows a fiscal year not ending on December 31: the due date is one hundred twenty (120) days from the end of such year.
2. What other documents are needed to be filed with the financial statements?
 
For fiscal year ending 31 December 2012 to 31 December 2018:
 
a)

Notarized Sworn Statement of the President and the Treasurer (SS) using the prescribed form in SEC Notice dated 18 April 2013 in relation to SEC Memorandum Circular No. 8, Series of 2006;

b) Certification of Existence of Programs/Projects/Activities(COEP), as applicable;
c) As applicable, Certification using the prescribed form in SEC Memorandum Circular (MC) No. 15 series of 2016; in lieu of the (a) and (b) (effectivity for the year 2016 to 2018 SS and CEP);
d) Statement of Willingness to allow SEC Audit (M.C. No. 8, series of 2006);
For fiscal year ending 31 December 2019 and onwards:
 
NSPO Forms and COEPs are to be submitted together with the AFS. (Templates to the NSPO Forms may be accessed through Annex 68-C of Revised Securities Regulation Code (SRC) Rule 68, available through this link: https://www.sec.gov.ph/wp-content/uploads/2019/12/2019Rule_RSRCRule68.pdf)
a) NSPO Form-1 (Sworn Statement), NSPO Form-2 (Affidavit of Willingness to be Audited), and NSPO Form-3 (Schedule of Receipts or Income or Sources of Funds Other Than Contributions and Donations) must be submitted by all registered non- stock and non-profit organizations;
b) NSPO Form-4 (Schedule of Contributions and Donations), NSPO Form-5 (Schedule of Application of Funds), and NSPO Form-6 (Certification) must be submitted by those with annual contributions or donations of Five Hundred Thousand Pesos (P500,000.00) or more
These schedules need not be covered by an Auditor’s Report;
c) First page (photocopy) of Membership Book showing SEC registration;
3. Who may sign compliance submissions for the Foundation in the absence or incapacity of the person designated by Foundation rules and regulations?
 

Where the rules call for the signature of a particular officer (i.e. President), but said officer is out of the country or otherwise incapacitated (i.e. hospitalized, quarantined, unconscious, etc.) to sign submissions for the Foundation, the following persons may sign on behalf of the unavailable officer:

 
 

The person who is, under the Foundation’s by-laws, authorized to sign on behalf of the unavailable or indisposed officer (i.e. the Foundation’s by-laws authorize the Vice- President to sign in the absence of the President);

Or

The person authorized by the board of directors through a resolution issued for that purpose to sign on behalf of the indisposed officer (The Secretary’s Certificate reflecting the board resolution shall be submitted together with the compliance submission signed by the authorized substitute signatory);

 

Please note that no one shall act as president and secretary or as president and treasurer at the same time, unless otherwise allowed in the RCCP;

4. What if the signatory is abroad?
  Signatories may seek assistance with the Philippine Consulate in the country where they are sojourning. Notarization and other services are provided by such consulates allowing the Foundation’s signatory to sign their compliance submissions there
(Note: With the effectivity of the Apostille Convention within the Philippines on 8 May 2019, the Apostille has since replaced the Authentication Certificate – commonly known to the public as “red ribbon” – affixed by Philippine embassies and consulates to documents intended to be used abroad. The change aimed to reduce the processing time for such documents.)
Alternatively, they may have their authorized representative, discussed in Number 3 above, sign on their behalf;
C. GROUNDS FOR REVOCATION OF PRIMARY LICENSE
1. What are the grounds for the revocation of a Foundation’s primary license?
 
Delinquency
 

The Foundation becomes delinquent then subsequently fails to resume operations and/or comply with SEC rules or orders for two (2) years

 

If a Foundation has commenced its operations but subsequently becomes inoperative for a period of at least five (5) consecutive years, the Commission may, after due notice and hearing, place the NSPO under delinquent status

 

A delinquent Foundation shall have a period of two (2) years to resume operations and comply with all requirements that the Commission shall prescribe. Upon compliance by the Foundation, the Commission shall issue an order lifting the delinquent status. Failure to comply with the requirements and resume operations within the period given by the Commission shall cause the revocation of the Foundation’s certificate of incorporation;

Revocation by operation of law
 

If the Foundation does not formally organize and commence its operations within five (5) years from the date of its incorporation, its certificate of incorporation shall be deemed revoked as of the day following the end of the five (5)-year period;

Revocation due to a violation of the RCCP or any of the SEC’s rules and regulations
 

As an administrative sanction, if after due notice and hearing, the Commission finds that any provision of this Code, rules or regulations, or any of the Commission’s orders has been violated, the primary license of the erring Foundation may be terminated;

For more information, please see Section 177 of the RCCP
D. MONITORING OF FOUNDATIONS
1. Who is in charge of monitoring Foundations?
  The Corporate Governance and Finance Department (CGFD) of the SEC shall monitor compliance of Foundations with existing laws, rules, and regulations and endorse infractions thereof to the SEC Enforcement and Investor Protection Department (EIPD);
2. Why do Foundations request for monitoring?
  Foundations usually request for monitoring clearance to secure a Certificate of No- Derogatory Information (CNDI). Foundations likewise need to request for monitoring should they decide to amend their Articles of Incorporation or By-laws;
3. What is a CNDI?
  A CNDI is a certification issued by the SEC upon the request of the Foundation. The certification states that the SEC has received no derogatory information which would prevent the Foundation from exercising its primary franchise;
4. What is the purpose of securing a CNDI?
  The CNDI is often requested by Foundations to secure certain certifications, benefits, and/or clearance from various government and non-governmental agencies which require the submission of the same prior to the issuance of said certifications and/or clearances;
5. Which agencies require the submission of a CNDI and for what purpose?
  The following are some agencies which require the submission of a CNDI:
 
a)

The Philippine Council of NGO Certification (PCNC) is a non-governmental agency which evaluates a Foundation or NSPO’s competence and standards. Foundations approach the PCNC in order to receive a “good donee status” or accreditation from the PCNC which will then allow Foundations to apply for tax incentives from the BIR. In order to receive such accreditation, a Foundation must first provide the PCNC with its CNDI;

b)

The Microfinance NGO Regulatory Council (MNRC) is a government agency which accredits Foundations seeking to operate as a Microfinance-NGO (MF-NGO). As part of its registration requirements, the MNRC requires the submission of a CNDI;

c)

The Department of Social Welfare and Development (DSWD) requires the submission of a CNDI for Foundations seeking to implement DSWD-covered programs and/or services and/or Foundations seeking to perform social welfare and development projects.

6. How does a Foundation request for Monitoring clearance from the SEC CGFD?
 

The Foundation need only send an email to cgfd_md2@sec.gov.ph requesting for monitoring and indicate the purpose of the request. The email processor will then list all the documentary requirements the Foundation needs to submit. The documents differ depending on the purpose of the request for monitoring.

The Foundation may likewise request for monitoring through this link:

Request for Monitoring

For more information on the matter, the Foundation may proceed to the “Request for Monitoring” tab of this web corner;