Establishing a foundation in the Philippines is a noble endeavor, often driven by philanthropic, educational, or charitable goals. Legally, a foundation is classified as a non-stock, non-profit corporation. The primary regulatory body overseeing its creation and operation is the Securities and Exchange Commission (SEC).
Unlike stock corporations, foundations do not issue shares and do not distribute dividends to members. Any profit generated must be plowed back into the organization’s operations to further its declared purpose.
I. The Definition of a "Foundation"
Under SEC Memorandum Circular No. 8, Series of 2006, a "Foundation" is a non-stock, non-profit corporation established for the purpose of extending grants or endowments to support objects in education, character-building, charity, health, or other similar public interests.
To use the word "Foundation" in its corporate name, the entity must meet specific capital requirements:
- Initial Contribution: A minimum of PHP 1,000,000.00 is required to be held by the corporation to ensure financial capability to carry out its programs.
II. The SEC Registration Process
Registering a foundation follows the Revised Corporation Code of the Philippines (RA 11232).
1. Name Reservation
The name must include the word "Foundation" and the suffix "Inc." or "Incorporated." It must not be identical or deceptively similar to existing registered entities. This is done through the SEC Espasyo or Electronic Simplified Processing of Application for Registration of Company (eSPARC) system.
2. Preparation of Incorporating Documents
You will need to draft and submit the following:
- Articles of Incorporation (AOI): This outlines the foundation's name, purpose, principal office address, the names and residences of incorporators (minimum of 5, maximum of 15), and the term of existence (usually perpetual).
- Bylaws: These define the internal rules of the foundation, including membership qualifications, meeting schedules, duties of trustees, and officers.
- Affidavit of Willingness to Certify: A statement from the Treasurer certifying the initial contribution.
3. Board of Trustees and Officers
- Trustees: In a non-stock corporation, the board is composed of "Trustees" rather than "Directors."
- Officers: The board must elect a President (who must be a trustee), a Treasurer (who must be a resident), and a Corporate Secretary (who must be a Filipino citizen and resident).
III. Post-Registration Compliance
Securing the Certificate of Registration from the SEC is only the first step. To maintain legal standing and enjoy tax benefits, a foundation must comply with several other agencies.
| Agency | Requirement |
|---|---|
| Bureau of Internal Revenue (BIR) | Register for a Tax Identification Number (TIN), apply for tax-exempt status (under Section 30 of the Tax Code), and secure Authority to Print (ATP) receipts. |
| Local Government Unit (LGU) | Obtain a Business/Mayor's Permit and Barangay Clearance for the principal office location. |
| Social Agencies (optional/required) | If the foundation deals with social welfare, it must register with the Department of Social Welfare and Development (DSWD). |
IV. Annual SEC Mandatory Filings
To keep the foundation in "Good Standing," the following must be filed annually:
- General Information Sheet (GIS): Filed within 30 days after the annual members' meeting. It summarizes the current trustees, officers, and members.
- Annual Financial Statements (AFS): Audited by an SEC-accredited independent Certified Public Accountant (CPA) if assets or gross annual sales exceed certain thresholds.
- Mandatory Disclosure Form (MDF): Required under SEC rules to combat money laundering and terrorist financing.
- Affidavit of Sources and Utilization of Funds: Specifically for foundations, detailing where the money came from and how it was spent on charitable projects.
V. Key Legal Reminders
The "No Distribution" Rule: No part of the income of a non-stock corporation shall be distributable as dividends to its members, trustees, or officers. Any violation of this can lead to the revocation of the foundation's SEC registration and its tax-exempt status.
- Dissolution Clause: The AOI must contain a provision stating that in the event of dissolution, the remaining assets will be transferred to another similar non-profit organization or to the government, rather than being distributed to the members.
Next Steps
Establishing a foundation requires careful legal drafting to ensure your charitable goals align with Philippine law. Would you like me to draft a sample "Purpose Clause" for the Articles of Incorporation tailored to a specific cause (e.g., education or environmental protection)?