Unauthorized Use of Corporate Name: Penalties for Operating Under a Deactivated Entity (Philippines)
Introduction: why this issue comes up
In the Philippines, companies sometimes keep doing business—issuing invoices, signing contracts, maintaining signage, and operating bank accounts—using a corporation’s name even after the Securities and Exchange Commission (SEC) has revoked its certificate of incorporation or otherwise deactivated its registration. This commonly happens after prolonged non-filing of reports or non-operation, when the owners believe the corporation is merely “inactive” but still usable.
This article explains the fines and other legal consequences that may apply when a business continues to use a corporate name despite SEC action that has already removed or disabled its authority to operate.
Governing law and SEC authority over corporate names
The main statute is R.A. No. 11232 (Revised Corporation Code), which gives the SEC power to regulate corporate names and prevent confusion and deception among the public. Under the Revised Corporation Code, a corporate name must be distinguishable from names already reserved or registered, and the SEC may act against improper name use.
Two Supreme Court decisions emphasize that the SEC has broad authority to protect corporate names and prevent confusing use, including ordering a corporation to change its name when another has a prior right:
GSIS Family Bank v. BPI Family Bank, G.R. No. 175278, 23 September 2015, recognized that enforcement of the protection for corporate names is lodged in the SEC and that it may prohibit or stop the continued use of confusingly similar names to protect both corporations and the public.
Indian Chamber of Commerce Phils., Inc. v. Filipino Indian Chamber of Commerce in the Philippines, Inc., G.R. No. 184008, 13 July 2016, likewise affirmed the SEC’s authority to prevent confusion in corporate names and to de-register names likely to mislead.
What “operating under a deactivated entity” usually means
For purposes of enforcement, the risk typically arises when a corporation’s registration has been revoked or the corporation has been declared delinquent, yet the persons behind it continue presenting themselves to customers, suppliers, banks, and government agencies as if the corporation were still valid.
Common real-world examples include:
1) continuing to issue official receipts/invoices, purchase orders, or service contracts under the revoked corporate name;
2) maintaining store signages, social media pages, and advertisements using the corporate name;
3) representing to the public that the corporation is still operational and in good standing, when SEC records show otherwise.
Unauthorized use of corporate name: the specific statutory fine
Under R.A. No. 11232, the unauthorized use of a corporate name is punishable with a fine ranging from PHP 10,000 to PHP 200,000.
This statutory fine is distinct from other SEC sanctions. In enforcement settings, it may be invoked where the use of the name is not authorized under the Revised Corporation Code and SEC rules, including circumstances where a corporation should no longer be holding itself out under that name due to SEC action.
SEC orders to stop using a non-compliant corporate name (and compelled name change)
Separate from the fine for unauthorized use, the Revised Corporation Code authorizes the SEC, upon finding that a corporate name is not distinguishable, is already protected by law, or is contrary to law/rules, to summarily order the corporation to cease and desist from using the name and to register a new one. The SEC may also cause the removal of visible signages, marks, advertisements, labels, prints, and other effects bearing the corporate name.
If the corporation fails to comply, the SEC may hold the corporation and responsible directors/officers in contempt and/or expose them to administrative, civil, and/or criminal liability, and may even proceed to revoke the corporation’s registration where appropriate under the Code.
Administrative sanctions: higher fines and stronger measures may apply
Beyond the specific fine for unauthorized use of a corporate name, the SEC may impose administrative sanctions if it finds violations of the Revised Corporation Code, SEC rules, or SEC orders after due notice and hearing.
These may include:
(a) a fine ranging from PHP 5,000 to PHP 2,000,000, plus up to PHP 1,000 per day of continuing violation (subject to the statutory ceiling described in the Code);
(b) issuance of a permanent cease and desist order;
(c) suspension or revocation of the certificate of incorporation; and
(d) dissolution and forfeiture of assets under conditions provided by law.
Where a corporate name continues to be used despite a revocation and despite SEC directives, the exposure is often not limited to a single fine; the SEC may treat continued operation as an ongoing violation that justifies stronger administrative measures.
Revoked or dissolved names: restrictions on re-use of corporate names
When a corporation’s registration is revoked or it has been dissolved, SEC rules also affect whether its corporate name can be re-used by another entity within certain periods and subject to conditions.
SEC Memorandum Circular No. 6, series of 2015 sets guidelines on the use of corporate names of corporations with dissolved and revoked certificates of registration, including restrictions on when such names may be used again and documentary requirements when re-registration is allowed.
From a compliance standpoint, the point is simple: once the SEC has revoked a registration, business owners should not assume the name remains freely usable for ongoing trade—either by the same people under the old entity or by a new entity trying to adopt the old name—without satisfying SEC conditions.
Fraud-related exposure when corporate registration is misused
Some cases go beyond mere continued name use and involve misrepresentations to obtain or maintain an appearance of corporate legitimacy. The Revised Corporation Code penalizes obtaining corporate registration through fraud with a fine ranging from PHP 200,000 to PHP 2,000,000, and if injurious or detrimental to the public, PHP 400,000 to PHP 5,000,000.
Whether continued operation under a revoked entity rises to “fraud” depends on the acts done (for example, submitting false documents or misrepresenting SEC status to customers or regulators). When the facts show deception, owners and organizers should treat this as a serious escalation in risk.
Typical enforcement pattern and what to expect
While case handling varies, the exposure commonly unfolds in the following way:
1) Verification of SEC status. A customer, competitor, bank, government agency, or the SEC itself checks records and sees the corporation has been revoked/delinquent.
2) SEC notice or proceedings. The SEC may require explanations, order cessation of prohibited name use, and require corrective action.
3) Sanctions. Depending on the violation and compliance behavior, the SEC may impose fines, issue cease and desist orders, and pursue further measures allowed by the Revised Corporation Code.
Compliance guidance for business owners
To reduce exposure to fines and related sanctions, business owners should consider these steps:
Confirm SEC status before using the corporate name. If the corporation is revoked or declared delinquent, do not continue issuing documents in the corporate name as if the entity were active.
Stop “holding out” immediately once deactivation is confirmed. Update signages, websites, and marketing materials; pause contract signing in the corporate name pending legal correction.
Assess whether reinstatement, re-registration, or a new entity is needed. If the business must continue, consult counsel on the correct corporate solution and the required SEC process under the applicable memorandum circulars.
Document corrective actions. If the SEC asks for compliance proof, keep records of removed signage, revised letterheads, client notices, and internal resolutions.
Summary table: penalties and consequences to consider
| Issue | Possible consequence | Primary authority |
|---|---|---|
| Unauthorized use of corporate name | Fine of PHP 10,000 to PHP 200,000 | R.A. No. 11232 (Revised Corporation Code) |
| Violation of the Code, SEC rules, or SEC orders | Administrative fines up to PHP 2,000,000; cease and desist; suspension/revocation; dissolution (as applicable) | R.A. No. 11232 (Revised Corporation Code) |
| Non-compliant corporate name use (e.g., not distinguishable/contrary to rules) | Summary cease and desist; compelled name change; removal of signages and materials; potential contempt and liabilities for noncompliance | R.A. No. 11232 (Revised Corporation Code) |
| Fraud-related conduct connected to corporate registration | Fine of PHP 200,000 to PHP 2,000,000 (or PHP 400,000 to PHP 5,000,000 if injurious to the public) | R.A. No. 11232 (Revised Corporation Code) |
| Attempt to re-use a revoked/dissolved corporate name | Restriction periods and conditions; documentary requirements | SEC Memorandum Circular No. 6, series of 2015 |
Final observations
Continuing to operate under a corporate name after SEC revocation or comparable deactivation can expose business owners not only to a specific statutory fine for unauthorized name use, but also to higher administrative penalties and coercive SEC orders if the conduct persists. The safest course is to confirm SEC status early, stop holding out under a deactivated entity, and regularize the business through the correct SEC process before resuming operations under a corporate identity.
About Nicolas and De Vega Law Offices
Nicolas and de Vega Law Offices is a full-service law firm in the Philippines. You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines. You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website https://ndvlaw.com.
