Corporations and associations are given a new lease on corporate life, thanks to an amnesty program being offered by the Securities and Exchange Commission (SEC) until September 30.
Registration with the SEC marks the first step toward legitimately setting up a corporation in the Philippines. This entails certain duties and responsibilities in order to maintain a good standing with the Commission, including compliance with reportorial requirements provided under Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC).
Over the years, the SEC has observed that numerous companies have fallen behind in submitting their annual reports. Such non-compliance has led to many companies incurring hefty fines and penalties, with some having their registrations suspended or revoked for continued failure to comply.
Non-compliant and suspended or revoked corporations lose the benefits and privileges tied to being a duly registered business with the SEC, effectively affecting overall activity in the corporate sector.
To encourage compliance, the Commission, through SEC Memorandum Circular No. 2, Series of 2023, launched an amnesty program that gives corporations a chance at a clean slate.
Under the memorandum circular, non-compliant and suspended or revoked corporations who failed to file their General Information Sheet (GIS), Annual Financial Statement (AFS), and compliance with SEC Memorandum Circular No. 28, Series of 2020, can settle their fines and penalties at a lower cost, while regaining their good standing with the SEC.
“The SEC Amnesty Program is a chance for corporations and associations to get a fresh start in their compliance with reportorial requirements, so they continue to enjoy the benefits and privileges of being a registered corporation,” SEC Chairperson Aquino said.
With the amnesty program, non-compliant corporations need only pay P5,000 for failure to submit their GIS, AFS, or MC 28 report, regardless of the number of years of non-submission.
Meanwhile, suspended or revoked corporations will pay only half of their total fines and penalties, plus the petition to lift order of suspension/revocation fee of P3,060, subject to the submission of additional documents.
On June 30, the Commission streamlined the amnesty process where companies only have to answer a web-based form available on their Electronic Filing and Submission Tool (eFAST) account.
Thousands of companies have completed their amnesty applications and reclaimed their good standing and/or corporate registration with the SEC.
“The reduction of penalties was a big financial relief to us given our school’s limited resources,” said Georgina D. Alipio of the Little Flower Children’s Home Foundation, Inc. in Baguio City, who availed of the amnesty program through the SEC Baguio Extension Office.
A group of agricultural corporations in Bacolod City also noted that they were able to save around P370,000 in fines due to the amnesty program, saying: “We are grateful that we were given a fresh start, as we continue to work on growing our businesses not only for us but for the community as well.”
The amnesty program also comes at an opportune time for businesses that experienced financial difficulties during the pandemic, and could no longer manage their registration with the SEC for fear of having to pay the penalties.
“Since the amnesty program’s launch in March, we have made it our mission to encourage as many companies as we can to avail, since we know this is a huge financial relief for our registered corporations,” Mr. Aquino said.
Higher fines and fees
The program also serves as a buffer for the SEC, while it prepares new guidelines that will provide impose higher penalties for non-compliance with reportorial requirements.
On April 26, the Commission released for public comment the draft memorandum circular that contained the proposed scales of fines and penalties for late and non-submission of a corporation’s reportorial requirements.
The proposed guidelines state that 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 offence which will increase up to P9,000 for the fifth offense. There will also be a P1,000 monthly fine for every month of the continuing violation.
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 an additional monthly fine of P1,000 per month of the continuing violation.
These proposed fines and penalties are around 90% higher than the existing scale.
Moreover, should a company fail to submit its reportorial requirements for three consecutive times or intermittently within five years, the SEC may declare said company under delinquent status. If a company had incurred a fourth offence, the Commission may also revoke its registration given that the company is sent a reasonable notice regarding its delinquent status prior to the revocation.
The SEC plans to implement these higher fines and penalties starting October 1, immediately after the last day of the amnesty program. For more details on the Memorandum Circular on the Revised Fines and Penalties on Reportorial Requirements, visit the SEC website.
The amnesty program is a means for the SEC to encourage more companies to properly comply with the law, maintain the capital market’s integrity, and update the Commission’s database to the benefit of the investing public. It is also an opportunity for companies to regain their good standing, return to their normal operations, and gain the trust of potential investors.
With fees and penalties increasing on October 1, the SEC strongly encourages companies to regain their good standing with the Commission and take advantage of the lower fines offered by the program.