11,600 companies facing sanctions from SEC
The Securities and Exchange Commission (SEC) has recently issued a warning to over 11,600 corporations, urging them to take advantage of the Enhanced Compliance Incentive Plan (ECIP) to avoid the risk of having their corporate registration suspended. This is all due to these corporations failing to meet important reportorial requirements.
The SEC has identified a list of corporations that could potentially face suspension of their certificates of incorporation because they have not submitted their annual financial statements (AFS) and general information sheets (GIS) for eight consecutive years, from 2015 to 2022. Under the Revised Corporation Code of the Philippines (RCC), it is mandatory for all registered corporations to submit their AFS and GIS annually. If these reports are not filed three times within five years, corporations can be classified as “delinquent” and have two years to rectify this before facing registration revocation.
To tackle this issue of non-compliance, the SEC is strongly encouraging delinquent corporations to apply for the ECIP. This program offers reduced penalties for corporations that fulfill their obligations. The deadline for ECIP applications, originally set for November 30, has been extended to December 31. Non-compliant corporations can pay a flat rate of P20,000 to settle their fines and penalties. Corporations with suspended or revoked certificates of incorporation can pay 50% of their assessed penalties plus a P3,060 petition fee to have the suspension or revocation lifted.
Corporations eligible for the ECIP must express their interest through the SEC’s Electronic Filing and Submission Tool and ensure all pending AFS and GIS filings are completed by the end of the month. Additional documentation may be required for suspended or revoked entities. Those corporations that have already taken advantage of the ECIP will not receive further notices. The final list of suspended corporations will be determined by the SEC after the program concludes.
Failure to comply with these requirements may result in steep fines under the new penalty rates introduced by SEC MC 6, Series of 2024, which have seen fines increase by 900% to 1,900% compared to previous rates. Corporations that entirely fail to file their AFS and GIS face even stricter penalties. For instance, a similar stock corporation with retained earnings of up to P100,000 could pay P10,000 per report plus P1,000 for each month of delay, totaling a penalty of P44,000.
