SEC Urges Over 11,600 Corporations to Apply for ECIP to Avoid Suspension for Missing Reports

​The Securities and Exchange Commission (SEC) has advised more than 11,600 corporations to avail themselves of its Enhanced Compliance Incentive Plan (ECIP) or else their corporate registration will be suspended for noncompliance with their reportorial requirements.

In a notice dated December 13, the SEC released a list of 11,677 corporations, which have been subjected to evaluation for the possible suspension of their certificates of incorporation for their failure to submit their annual financial statements (AFS) and general information sheets (GIS) for the last eight reporting years, from 2015 to 2022.

Section 117 of the Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC), requires all registered corporations to submit to the SEC their AFS and GIS annually, and other reports within such periods as may be prescribed by the Commission.

Under the RCC, the SEC may put a corporation under a “delinquent” status if it fails to submit reportorial requirements three times, either consecutively or intermittently, within a five-year period. Delinquent corporations have two years to resume their operations; otherwise, their registration will be revoked.

The RCC, as well as Presidential Decree No. 902-A and Republic Act No. 8799, or the Securities Regulation Code, further gave the SEC the power to suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations upon any of the grounds provided by law. One of the grounds for the suspension or revocation of the certificate of incorporation or registration of a corporation is failure to comply with the reportorial requirements.

Incentive for compliance

Accordingly, the SEC encourages corporations facing suspension to apply for ECIP, which allows non-compliant and delinquent corporations, as well as those with suspended and revoked certificates of incorporation, to settle their penalties for non-compliance with their reportorial requirements at significantly lower rates.

The deadline for applications for ECIP was initially set on November 30. The SEC, however, extended the incentive program until December 31.

Under ECIP, non-compliant corporations and those placed under the delinquent status will only have to pay P20,000 to settle their fines and penalties.

Suspended/revoked corporations, meanwhile, will only pay 50% of their assessed fines and penalties, and a P3,060 petition fee to lift their order of suspension or revocation.

To apply for ECIP, eligible corporations will have to submit their Expression of Interest using their company accounts on the Electronic Filing and Submission Tool (eFAST).

They must also submit their latest due AFS and GIS before December 31, 2024 to complete their ECIP application. Suspended/revoked corporations will also have to submit other supporting documents to the designated email addresses of SEC extension offices that cover their jurisdiction.

Those corporations, which have already availed of ECIP, may disregard the notice issued by the SEC. The list of corporations with suspended certificates of incorporation will be finalized after ECIP ends.

New penalty rates

Aside from the possible suspension of their certificates of incorporation, corporations included in the list will be subject to the updated scale of fines and penalties that took effect in April.

The Commission issued SEC MC No. 6, Series of 2024 providing for the new rates, which are around 900% to 1,900% higher than the rates, which had been in effect for the last two decades.

For example, a stock corporation with retained earnings of up to P100,000 that filed its AFS and GIS late had to pay a P500 fine per report, resulting in a total penalty due of P1,000, under the old scale.

Under the new scale, the same corporation that filed its AFS and GIS five months after the prescribed deadline will now have to pay P5,000 per report, plus P1,000 for every month of delay but not to exceed 12 months. In total, the corporation will pay a total penalty of P20,000.

Meanwhile, a stock corporation with retained earnings of up to P100,000 but did not file its AFS and GIS had to pay a P1,000 base penalty per report under the old scale, for a total penalty of P2,000.

Under the new scale, the corporation will have to pay P10,000 per report with an additional P1,000 for every month of delay, bringing the total penalty due to P44,000.