The Philippines is still one of the worst places to start a business; main culprit is the SEC

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AL S. VITANGCOL III

AL S. VITANGCOL III

THE Wall Street Journal published in October 2016 the highlights of the World Bank’s flagship report, “Doing
Business.” The report showed the ranking of 190 economies around the world in their competitiveness in attracting new investments. The country indexes, based on the World Bank’s “distance to frontier” index, are based on a variety of indicators surrounding the business climate such as tax payments, company registration, issuance of permits, and contract enforcement.

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New Zealand topped the list with an index of 87.01 (out of a possible 100.00). It was followed by Singapore with a score of 85.05 and Denmark with 84.87.

Libya (33.19), Eritrea (28.0), and Somalia (20.29) occupied the 188th to 190th places in the list, respectively.
The Philippines is ranked at 99th place among the 190 countries. The lower half of the ranked economies are counted as the hardest places to start and run business.

News like this is considered insignificant, especially to the working Filipino, much more the daily wage earner.
I myself would not have minded this country ranking of the Philippines until I experienced the inefficiency, incompetence and ignorance of some of the people manning the Securities and Exchange Commission (SEC).

It all starts with a name

Any entrepreneur, investor, or businessman, before setting up any business, has to choose a name that is appropriate to his line of dealings. Unless there is an approved and duly registered name, the company cannot print business cards, letterheads, company documents, much more, cannot enter into any contract.

Thus, the registration of a company name is the starting point of the “distance to frontier” index. Which agency is responsible for business name registration? The SEC. (The Department of Trade and Industry handles business name registration for sole proprietorships.)

The fast way to register a new business name is by visiting the website of the SEC at www.sec.gov.ph and clicking Online Services and then selecting “Reserve a Company Name.” After a series of screens and several steps, the Reservation Notice would then be printed. The printed Reservation Notice has to be brought to the main office of the SEC for payment of reservation fee and final approval. If the SEC’s online system is effective and correct, it should have ended here. The system’s approval should have been final. Unfortunately, the online system is wanting.

But wait, there’s more. The SEC wants the applicant to suffer and he has to go to the SEC office for “manual” approval of the reserved business name. Is this not craziness? The Reservation Notice states, “Please file you SEC Registration forms within the reservation period at SEC office.”

The SEC’s office address, appearing in its website, is at the SEC Building EDSA, Greenhills, Mandaluyong, Metro Manila. Presumably, this is the place where one should go. However, once at the SEC Building, you will be told to go to the Philippine International Convention Center (PICC) for business name registration. What the heck? Why can’t they just indicate that location in their website in the first place? This is sheer inefficiency, if not stupidity.

By the way, the Company Registration and Monitoring Department (CRMD) was moved to the PICC by virtue of SEC Resolution 688, series of 2016.

What is in a business name?

The Corporation Code of the Philippines (Batas Pambansa Blg. 68) governs the establishment and regulation of corporate entities in the country. Section 18 mandates that, “No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws.”

In the case of Coffee Partners, Inc. vs. San Francisco Coffee Roastery, Inc., the Supreme Court ruled:
“Of course, this does not mean that respondent has exclusive use of the geographic word San Francisco or the generic word coffee. Geographic or generic words are not, per se, subject to excusive appropriation. It is only the combination of the words Sand Francisco Coffee, which is respondents trade name in its coffee business, that is protected against infringement on matters related to the coffee business to avoid confusing or deceiving the public.” (This particular portion appears in all capital letters in the original decision.)

It is rather clear then that generic words are not subject to exclusive appropriation. A generic word may appear in one’s company name and the same generic word may appear in another company’s name. This is allowed by the law.

However, it seems that the woman manning the desk at the SEC-CRMD does not know this basic principle.
Further, the SEC Guidelines on Corporate Names states that, “If the proposed name contains a word similar to a word already used as part of the firm name or style of a registered company, the proposed name must contain two other words different from the name of the company already registered.”

Again, it seems that the woman by the name of Carissa Furugganan at the SEC-CRMD does not even know their own guidelines. Ignorance or stupidity?

A real case scenario

A group of my friends came together to form a new business in the field of information technology with the specific line of software development. They wanted to register the name I-Tech Systems Security &Solutions Co. Ltd. The name was reserved at the SEC website and a Reservation Notice duly printed.

On December 29, 2016, the business name was denied. According to Furugganan, there are other registered companies bearing the words Security and Systems. Doesn’t she know that these are generic words (i.e., Security, Systems) and can never be appropriated?

Giving her the benefit of the doubt, the proposed business name was changed to ITS Solutions Co. Ltd. with alternate names of IT Source Co. Ltd and ITSS Co. Ltd.

On January 3, 2017, Furugganan again denied the business name registration. She said that there are other corporations using the word Solutions. Here is a partial listing that she provided–-Response Solutions Inc., Harmony Solutions Inc., Fortec Solutions Inc., Prosys Solutions Inc., ADEC Solutions Inc., GLAVS Solutions Inc., NGC Solutions Inc. How the hell were these names registered in the first place if we follow Furugganan’s erroneous logic? ITS Solutions Co. Ltd will be in the same breadth as these companies. They differ only in their first word!

The proposed business name was again changed. I lent to my friends my copyrighted word “technoLAWgy” and allowed them to use it. On January 4, 2017, the same Furugganan wielded her power and denied its registration. This time she claimed that changing the spelling of a word is not allowed. She believed that it conflicts and is deceptively confusing with the names of TechnoLogika Solutions Inc. and Techno Systems Inc. Does technoLAWgy sounds the same as TechnoLogika? Is it deceptively similar with Techno Systems (which was in fact already revoked as of August 2003,)? Maybe, she is the only one confused here.

My insight tells me that no professional business-sounding name will be registered unless this Carissa Furugganan is moved out of the SEC’s CRMD. She is deceiving the public that she knows what she is doing but in fact she does not. Maybe the SEC should just send her back to Cagayan where she hails from instead of her abusing the little power she wields at the expense of the registering public.

Meanwhile, the registrants were asked to pay the reservation fee of P40 pending the approval of the proposed business name. They already paid twice. Is this not estafa in the first place?

SEC is a major culprit

All told, the SEC is a major culprit in the dismal ranking of the Philippines in the World Bank’s “Doing Business” report. A delay in the approval of the proposed business name delays everything in the pipeline – tax registration, design of company logo, printing of official receipts, etc.

We, Filipinos, should no longer wonder why the Philippines is not taking off. The country is in a moribund state because of the likes of Furugganan, government employees who are ineffective, incompetent and ignorant.

The Wall Street Journal noted that, “it is no coincidence that some of the worst performers overall also are those whose populations are suffering the worst economic conditions.”

Does this government even know what is going on at the SEC-CRMD?

Well, managing the government, and improving the lives of our people, involves a lot of other things and issues. However, it does not rest on eradicating illegal drugs alone.

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7 Comments

  1. Why not file a case or complaint instead of writing columns which only covers your side of the story which narrow-minded people easily believed? FYI putting harm to an innocent person’s integrity will not salvage yours. God Bless you man!

  2. im not a lawyer. But isnt this article tantamount to libel :)

    From a person who had cases of graft and corruption.. what more can we expect :)

  3. Such are the present-day Filipinos manning the front lines of government offices: stupid, ignorant, incompetent (not to mention arrogant). I guess it’s a generational thing. Their brains have been soaked in too much telenovelas, Pnoy Big Brother, Kris Aquino and American Idol that they fail in the simplest of all functions which is to use their common sense.

  4. My grandmother (may she rest in peace) told me this, in exact words: “Little knowledge is dangerous.” Does that apply to Ms. Carissa? Or just “ignorance or stupidity” (borrowing Sir Al’s words)? Calling President Duterte, Sir. Please check on her.

  5. Mr Vitangcol, you are one of the most corrupt government employees. You do not have any credibility at all” in fact’ I did not read your column.