The Securities and Exchange Commission (SEC) is warning corporations of stringent enforcement actions for their failure to comply with their reportorial requirements, pursuant to Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC).
Section 177 of the RCC provides that every corporation, domestic or foreign, doing business in the Philippines shall submit to the SEC annual financial statements (AFS) and a general information sheet (GIS), among other reportorial requirements, annually and within such period as may be prescribed by the Commission.
Section 129 of the RCC also requires a one person corporation to submit AFS; a report containing explanations or comments by the president on every qualification, reservation, or adverse remark or disclaimer made by the auditor in the latter’s report; a disclosure of all self-dealings and related party transactions entered into between the One Person Corporation and the single stockholder; and other reports as the Commission may require.
In a notice dated October 18, the SEC released a list of 22,403 ordinary corporations in danger of having their certificates of incorporation revoked for failure to submit their GIS within five years from the date of their incorporation.
Under Section 21 of the RCC, if a corporation does not formally organize and commence its business within five years from the date of its incorporation, its Certificate of Incorporation shall be deemed revoked as of the day following the end of the five-year period.
Section 177 of the RCC provides that the Commission may place a corporation under delinquent status should they fail to submit their reportorial requirements three times, consecutively or intermittently, within a period of five years.
“Corporations’ timely submission of their AFS, GIS, and other reportorial requirements is vital in maintaining a healthy and vibrant corporate sector, as this helps us identify active versus inactive corporations, enhance and organize the Commission’s digital database, and protect the public from fraud,” SEC Chairperson Emilio B. Aquino said.
The increased supervision complies with standards set by international standard-setting bodies such as the Financial Action Task Force (FATF), to ensure relevant corporate information, including beneficial ownership information in the GIS, is readily available within the Commission.
This also forms part of the Commission’s efforts to strengthen the effectiveness of its anti-money laundering/combatting the financing of terrorism (AML/CFT) framework, in order to get the Philippines out of FATF’s so-called grey list, which enumerates “Jurisdictions under Increased Monitoring” due to strategic deficiencies in its AML/CFT regime.
Failure to comply with reportorial requirements will subject the erring company to penalties ranging from monetary penalties, placement under delinquency status, and suspension and revocation of certificate of incorporation, as provided under the RCC.
“We reiterate our reminder to corporations to avail of the SEC Amnesty Program now, to avoid getting their certificates of incorporation revoked, or to avoid being placed under delinquent status,” Mr. Aquino added.
Corporations that fail to avail of the amnesty will likewise incur higher fines, as the SEC will be implementing an updated scale of fines and penalties for reportorial requirements on November 7. Basic penalties for the late and nonfiling of reports are set to increase by as high as 1,900%.
Applications for the amnesty program have been extended until November 6, and the submission of the requirements until December 4, per SEC Memorandum Circular No. 17, Series of 2023.
Corporations may avail of the amnesty by accepting the web-based Expression of Interest form on their SEC Electronic Filing and Submission Tool (eFAST) accounts.
Non-compliant corporations must upload and submit their latest due GIS and AFS on eFAST on or before December 4. Suspended and revoked corporations must submit their respective petitions to lift their suspension or revocation on eFAST, along with their latest GIS and AFS, within the same period.
For suspended and revoked corporations, additional requirements such as copies of their certificates of incorporation, latest mayor’s or business permits, and certificates of registration with the Bureau of Internal Revenue must be submitted to the SEC Company Registration and Monitoring Department or to the nearest SEC Extension Office initially through email by December 4.
Should an applicant fail to submit the complete set of requirements by December 4, the amnesty fee paid by non-compliant corporations, as well as the P3,060 petition fee initially collected from suspended/revoked corporations, shall be forfeited.
Corporations applying for amnesty may proceed to the SEC Amnesty Microsite at amnesty.sec.gov.ph for the step-by-step guidance on how to avail of the program.