In the Philippines, performing due diligence on a corporation or partnership is essential for potential investors, business partners, or legal litigants. Transparency is mandated by various laws, primarily the Revised Corporation Code (Republic Act No. 11232), which empowers the public to verify the standing of entities registered with the government.
Checking for government fines, penalties, and compliance involves navigating several key regulatory agencies.
1. Securities and Exchange Commission (SEC)
The SEC is the primary registrar and overseer of corporations in the Philippines.
Certificate of Good Standing: This is the "gold standard" for compliance. You can request this from the SEC to verify that a company is not "Delinquent" or "Revoked."
SEC Express System / ESP (Electronic Simplified Processing): You can request copies of a company’s General Information Sheet (GIS) and Audited Financial Statements (AFS).
The GIS reveals if the company has failed to hold annual meetings or update its officers.
The AFS may contain "Notes to Financial Statements" that disclose pending litigations, tax assessments, or significant government penalties.
Verification of Penalties: If a company fails to file reports on time, the SEC imposes fines. You can inquire through the SEC Compliance Monitoring Division (CMD) to see if the entity has outstanding "Monitoring" issues or unpaid penalties for late filings.
2. Bureau of Internal Revenue (BIR)
Tax compliance is a critical metric for any Philippine business.
- Tax Clearance: A "Tax Clearance for Bidding Purposes" or "Tax Clearance for General Purposes" confirms that the company has no "Open Cases" (unfiled returns) or delinquent tax liabilities.
- eFPS Status: While private tax records are confidential under the National Internal Revenue Code (NIRC), asking a company to provide its latest BIR Form 2303 (Certificate of Registration) and proof of its last three months of tax payments is standard practice in private due diligence.
3. Department of Labor and Employment (DOLE)
For companies with many employees, labor compliance is a major risk factor.
- Certificate of No Pending Labor Case: This can be requested from the National Labor Relations Commission (NLRC) or DOLE. It indicates whether the company is facing lawsuits from employees regarding wages, illegal dismissal, or unfair labor practices.
- Compliance Orders: You can check if the company has been issued "Compliance Orders" regarding Occupational Safety and Health Standards (OSHS) or General Labor Standards (GLS).
4. Local Government Units (LGU)
Every business must have a Mayor’s/Business Permit to operate legally.
- Business Permit Office: You can verify with the specific LGU (e.g., Makati, Quezon City, Cebu) if a company’s permit is active.
- Negative List: LGUs often maintain a list of businesses with "Cease and Desist" orders due to unpaid local business taxes, sanitary violations, or lack of fire safety certificates.
5. Philippine Government Electronic Procurement System (PhilGEPS)
If the company deals with the government:
- Blacklisting: Check the PhilGEPS website or the Government Procurement Policy Board (GPPB) website. They maintain a list of "Blacklisted Entities" who have been penalized for failing to fulfill government contracts or committing fraud.
Summary of Key Documents to Request
| Agency | Document to Check | What it Reveals |
|---|---|---|
| SEC | Certificate of Good Standing | Official corporate legitimacy |
| BIR | Tax Clearance | Absence of delinquent taxes |
| NLRC | Certificate of No Pending Case | Labor law compliance |
| LGU | Valid Business Permit | Authority to operate locally |
| Supreme Court | Clearances | Pending civil or criminal litigation |
Legal Limitations and Privacy
Under the Data Privacy Act of 2012 (Republic Act No. 10173), some detailed records (like specific amounts of fines or internal audit findings) may not be accessible to the general public without a court order or the company’s written consent. However, the "Status" of a company (e.g., Active, Delinquent, Suspended) is generally considered a matter of public record.
Pro-Tip: When dealing with a private entity, it is standard to include a "Representations and Warranties" clause in contracts, requiring them to declare any outstanding government fines or non-compliance issues under pain of perjury or breach of contract.
Would you like me to draft a sample "Request for Information" letter that you can send to a company or a government agency to verify these details?