The deadline for the amnesty program being offered by the Securities and Exchange Commission (SEC) is fast approaching. As more and more corporations see the benefits of availing of this opportunity, the Commission is presenting five more reasons why corporations should hurry to beat the September 30 deadline.
1. Enjoy the fixed amnesty rate of P5,000 for non-compliant corporations, or 50% of total assessed fines for suspended or revoked corporations
The SEC Amnesty Program was launched in March to give companies a reprieve from the fines and penalties that are associated with the late or non-filing of their General Information Sheet (GIS), Annual Financial Statement (AFS), and non-compliance with Memorandum Circular No. 28, Series of 2020.
Through SEC Memorandum Circular No. 2, Series of 2023, companies can now regain good standing with the Commission at a lesser cost.
Non-compliant corporations need only pay a P5,000 fine for failure to submit any of their annual reports, regardless of the number of years they failed to comply with the requirements.
If the corporation’s registration was suspended or revoked, it will pay only half of the total fines and penalties, plus the P3,060 petition to lift order of suspension/revocation fee. Such corporations must also submit the necessary documents to complete the process of lifting the order of suspension/revocation imposed by the SEC.
Say a domestic stock corporation with retained earnings of P100,000 failed to submit its GIS and AFS for the past three years. On top of that, it was also unable to submit its MC 28 Report. Under the current rates, the corporation would have to pay P16,000 in fines to the SEC, or P1,000 for every year of non-filing of each report, plus the P10,000 penalty for noncompliance with MC 28.
These rates are set to rise further after the amnesty program, as the Commission seeks to encourage corporations to strictly comply with their reportorial requirements.
2. Avoid hefty fines once the amnesty program ends
If the reduced fines are not enough to convince corporations to avail of the amnesty program, then the imminent increase of penalties and fines should push them toward applying.
The amnesty program acts as a buffer for the Commission and corporations before a new scale of fines and penalties are imposed.
Once the amnesty program closes, basic penalties for the late and nonfiling of GIS, AFS or MC 28 report will increase by as high as 1,900%.
Penalties for the late filing of reportorial requirements by domestic stock and non-stock corporations with retained earnings of less than P100,000 shall be at a base amount of P5,000 for the first offense, which will increase up to P9,000 for the fifth offense. An additional P1,000 per month of the continuing violation will also be added to the total fines imposed.
Non-filing of reportorial requirements by both stock and non-stock corporations with retained earnings of less than P100,000 will incur fines amounting to P10,000 for the first offense up to P18,000 for the fifth offense alongside the additional P1,000 per month of the continuing violation.
Should a company fail to submit its reportorial requirements for three consecutive times or intermittently within five years, the SEC may place it under delinquent status. If a company incurs a fourth offense, the Commission may also revoke its registration given that the company is sent a reasonable notice regarding its delinquent status prior to the revocation.
3. Get good standing as a corporation
The higher penalties serve as a reminder that registration with the Commission is merely the first step towards legitimately setting up a corporation in the Philippines.
Corporations must maintain good standing with the SEC, so as not to lose the benefits and privileges tied to being a duly registered business.
There are several benefits to being a registered corporation with the SEC. For one, a corporation has a separate juridical personality from that of its stockholders. This allows it to enter into contracts and transactions the same way a real person would.
Because it has a separate personality, a corporation is not affected by the death of its owners or stockholders. It can exist continuously; in fact, it can exist forever under the Revised Corporation Code of the Philippines.
Further, a corporation enjoys limited liability, which means that creditors cannot generally go after the properties of its stockholders to satisfy the debts and obligations of the business.
Among the largest businesses in the Philippines are those that have consistently submitted their reportorial requirements to the SEC, protecting their business from disruption due to noncompliance with existing laws.
4. Attract more investors for business expansion
Corporations in good standing have the potential to attract more investors, as they will be able to prove their legitimacy to the investing public.
The badge of legitimacy offered by the SEC will assure potential investors that their hard-earned money is in good hands, while also helping them manage their risk better.
But investors should note that being a registered corporation is not enough proof that an entity is authorized to solicit investments from the public. They must still stake extra precautions in checking that the entity they are dealing with have all the necessary permits and licenses to conduct investment-taking activities.
Note that a corporation may only solicit investments from the public after it has secured from the SEC a certificate of permit to sell securities, and an order of registration for the investment contract. The agents of the corporation must also be registered and licensed by the SEC.
5. Help the SEC in its mission toward making the Philippine corporate sector among the best in Southeast Asia
The SEC has observed that there are a concerning number of companies that have fallen behind in submitting their annual reports, leading to many incurring hefty fines and penalties including suspension or revocation of their registration with the Commission.
Compliance with reportorial requirements mutually benefits corporations and the SEC, as this helps the Commission prudently identify active and inactive corporations, enhance and organize its digital database, and cultivate a healthy and vibrant corporate sector.
With this, the SEC will be able to efficiently perform its mandate as overseer of the corporate sector, regulator of the capital markets, and protector of the investing public.
