SEC Urges Corporations to Apply for ECIP by Dec. 31

The Securities and Exchange Commission (SEC) has urged over 11,600 corporations to apply for its Enhanced Compliance Incentive Plan (ECIP) to avoid suspension of their corporate registration due to missed reportorial requirements.

In a notice dated December 13, the SEC identified 11,677 corporations evaluated for potential suspension of their certificates of incorporation. These entities failed to submit annual financial statements (AFS) and general information sheets (GIS) for eight consecutive reporting years, from 2015 to 2022.

Section 117 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC), mandates all registered corporations to submit their AFS, GIS, and other required reports annually within prescribed deadlines.

Under the RCC, the SEC may declare a corporation “delinquent” if it fails to comply with reporting requirements three times, whether consecutively or intermittently, within five years. Delinquent corporations have two years to rectify their status or face registration revocation.

The RCC, Presidential Decree No. 902-A, and Republic Act No. 8799, or the Securities Regulation Code, authorize the SEC to suspend or revoke corporate registrations, following proper notice and hearings, for violations such as noncompliance with reporting obligations.

Incentives for Compliance

The SEC has encouraged corporations facing suspension to take advantage of ECIP, which allows delinquent and non-compliant corporations, as well as those with suspended or revoked certificates, to settle penalties at significantly reduced rates.

The initial application deadline for ECIP was November 30, but the SEC extended the program until December 31.

Under ECIP, non-compliant and delinquent corporations may settle their fines for PHP 20,000. Suspended or revoked corporations can settle their penalties at 50% of the assessed amount and pay a PHP 3,060 petition fee to lift the suspension or revocation order.

Eligible corporations must submit their Expression of Interest via the SEC’s Electronic Filing and Submission Tool (eFAST) and file their latest due AFS and GIS by December 31, 2024, to complete the application. Suspended or revoked corporations must provide additional supporting documents through the designated SEC extension office email addresses.

Corporations that have already availed of ECIP may disregard the SEC’s notice. The final list of corporations with suspended certificates of incorporation will be published after the ECIP deadline.

Updated Penalty Rates

Corporations that fail to comply with ECIP will face higher fines and penalties introduced in April under SEC Memorandum Circular No. 6, Series of 2024. These rates are 900% to 1,900% higher than the previous penalties in effect for two decades.

For instance, under the old scale, a stock corporation with retained earnings of up to PHP 100,000 that filed its AFS and GIS late would pay PHP 500 per report, totaling PHP 1,000. Under the new scale, the same corporation filing five months late must pay PHP 5,000 per report, plus PHP 1,000 for each month of delay, up to 12 months. This results in a total penalty of PHP 20,000.

A corporation with retained earnings of PHP 100,000 that failed to file its AFS and GIS entirely previously faced a base penalty of PHP 1,000 per report, totaling PHP 2,000. Under the new scale, it will pay PHP 10,000 per report, plus PHP 1,000 for each month of delay, resulting in a total penalty of PHP 44,000.

Corporations are strongly encouraged to comply to avoid these penalties and maintain good standing with the SEC.