In an era of increasing digital transactions and investment opportunities, the risk of encountering "fly-by-night" operations or fraudulent schemes is significant. For consumers, investors, and business partners, conducting due diligence is not just a precaution—it is a legal necessity.
In the Philippine jurisdiction, verifying a company’s legitimacy involves cross-referencing records with three primary regulatory bodies: the Securities and Exchange Commission (SEC), the Department of Trade and Industry (DTI), and the Local Government Units (LGUs).
1. Distinguishing Business Structures
Before verifying, you must identify the legal nature of the entity. This determines which agency holds the primary record.
- Sole Proprietorship: Owned by one individual. Registered with the DTI.
- Corporation or Partnership: A juridical entity separate from its owners. Registered with the SEC.
2. SEC Verification (For Corporations and Partnerships)
The SEC is the national government agency responsible for supervising the corporate sector. If a company claims to be a corporation (Inc.) or a partnership (Ltd.), it must be registered here.
Step-by-Step Check:
- SEC Express System / Search Portal: Access the official SEC website to use the company search tool. You can search by the company name or the SEC Registration Number.
- Certificate of Registration: A legitimate corporation should be able to present a Certificate of Incorporation.
- Articles of Incorporation and Bylaws: These documents outline the company’s purpose, principal office address, and the names of its incorporators/directors.
- General Information Sheet (GIS): This is an annual requirement. The GIS provides an updated list of the company's current directors, officers, and stockholdings. If a company has not filed a GIS in years, it may be "delinquent" or under a "revoked" status.
Warning: Being "registered" with the SEC does not automatically mean a company can solicit investments. For investment schemes, the company must possess a separate Secondary License or an Order of Registration of Securities.
3. DTI Verification (For Sole Proprietorships)
If an individual is doing business under a "Trade Name" or "Business Name," they must register that name with the DTI to protect it and operate legally.
How to Verify:
- DTI Business Name (BN) Progress Inquiry: Visit the DTI Business Name Registration System (BNRS) website.
- Scope of Registration: Check if the business name is registered for Barangay, City/Municipality, Regional, or National scope.
- Validity: DTI Business Name registrations are valid for five (5) years from the date of registration. Check if the registration has expired.
4. Business Permit and Mayor’s Permit (LGU Level)
Even with SEC or DTI registration, a business cannot legally operate in a specific physical location without an occupancy permit and a Business (Mayor’s) Permit from the LGU where the office is located.
Verification Points:
- Physical Display: Republic Act No. 11032 and various local ordinances require businesses to display their original Mayor's Permit in a conspicuous place within the establishment.
- Business Permit and Licensing Office (BPLO): You may contact the BPLO of the specific city or municipality to verify if a business has a valid permit to operate for the current year.
- Zoning and Fire Safety: A valid permit ensures the business has passed health, sanitary, zoning, and fire safety inspections.
5. Tax Verification (Bureau of Internal Revenue)
A legitimate business must be registered with the BIR for tax purposes.
- Certificate of Registration (BIR Form 2303): This document displays the Taxpayer Identification Number (TIN), the registered activities, and the taxes the business is liable for.
- Official Receipts (ORs): Check if the business issues BIR-registered receipts or invoices. Fraudulent entities often use "white slips" or non-official acknowledgment receipts to avoid a paper trail.
Summary Checklist for Due Diligence
| Document | Issuing Agency | Purpose |
|---|---|---|
| SEC Certificate | Securities & Exchange Commission | Proof of Juridical Personality (Corp/Partner) |
| DTI Certificate | Dept. of Trade and Industry | Proof of Business Name (Sole Prop) |
| Secondary License | SEC | Required for Investment/Lending/Financing |
| Mayor's Permit | Local Government Unit (LGU) | Authority to operate in a specific location |
| BIR Form 2303 | Bureau of Internal Revenue | Proof of Tax Registration |
Legal Recourse
If you discover a company is operating without the necessary permits or is engaging in unauthorized activities (such as illegal investment solicitation), you may file a formal complaint with the SEC Enforcement and Investor Protection Department or the DTI Consumer Protection Group.
Operating a business without registration or under a revoked license is a violation of the Revised Corporation Code or the Business Name Law, which can lead to cease-and-desist orders, administrative fines, and criminal prosecution.
Would you like me to draft a formal letter of inquiry addressed to the SEC or a BPLO to verify a specific company's status?