G.R. No. 206673 . July 28, 2020.
FIRST PHILIPPINE HOLDINGS CORPORATION, PETITIONER, VS. SECURITIES AND EXCHANGE COMMISSION, RESPONDENT.

FACTS

Petitioner First Philippine Holdings Corporation (FPHC), a domestic stock corporation, filed an amendment to its Articles of Incorporation to extend its corporate term for another fifty years. Upon filing, the SEC’s Company Registration and Monitoring Department (CRMD) assessed a filing fee of P24,200,000.00 based on SEC Memorandum Circular No. 9, Series of 2004 (SEC M.C. No. 9, S. 2004), which prescribes a fee of 1/5 of 1% of the authorized capital stock for such an amendment. FPHC, with an authorized capital stock of P12.1 billion, paid the fee under protest, arguing it was unreasonable and excessive. It noted that a decade earlier, under SEC Memorandum Circular No. 2, Series of 1994, the fee was only P200.00. FPHC filed a position paper seeking a reduction of the fee to P200.00 and a refund of the excess. The SEC en banc upheld the fee as a valid exercise of its regulatory authority, necessary to cover the costs of monitoring and regulation for the extended 50-year corporate life. The Court of Appeals dismissed FPHC’s petition, prompting this appeal.

ISSUE

1. Whether the Securities and Exchange Commission (SEC) is authorized to prescribe the rates for incorporation and other fees.
2. Whether the fee for the extension of a corporation’s term, amounting to 1/5 of 1% of the authorized capital stock, is valid and reasonable.

RULING

1. YES, the SEC is authorized to prescribe such fees. The SEC’s authority is derived from the Corporation Code (Batas Pambansa Blg. 68) and the Securities Regulation Code ( Republic Act No. 8799 ), which grant it the power to promulgate rules and regulations reasonably necessary to perform its duties, including the imposition of fees. This authority is an incident of its regulatory power and is essential for it to effectively carry out its mandate of supervising corporations and protecting the investing public. The fee is not a tax but a regulatory fee imposed in the exercise of police power, where the primary purpose is regulation, and revenue generation is merely incidental.
2. NO, the specific fee imposed is NOT valid and reasonable. The Supreme Court held that while the SEC has the authority to impose fees, the particular fee of 1/5 of 1% of the authorized capital stock for extending a corporate term, as prescribed by SEC M.C. No. 9, S. 2004, is unreasonable, oppressive, and confiscatory. The Court found no rational basis for pegging the fee to the authorized capital stock, as the cost of processing an application for extension does not vary with the corporation’s size or capital. The fee amounted to a staggering P24.2 million for FPHC, which is grossly disproportionate to the cost of services rendered by the SEC. The Court emphasized that due process requires official action to be free from arbitrariness and oppression. The SEC failed to demonstrate that the fee was reasonably necessary for regulation or that it bore any relation to the actual cost of services. Consequently, the Court declared the specific provision of SEC M.C. No. 9, S. 2004 imposing this fee as invalid. The case was remanded to the SEC for the proper computation and refund of the excess amount paid by FPHC, guided by the principle that fees must be based on the actual cost of services provided.