You know that the 2020 SEC compliance requirements are coming fast when the SEC publishes its annual memorandum on SEC filing deadlines!
In this article, we outline the information, requirements and filing deadlines for the Securities and Exchange Commission, or the SEC, over the coming months.
Let’s kick off with the recently issued SEC Memorandum!
SEC Memorandum Circular No.2 of 2020
SEC Memorandum Circular No.2 of 2020, or MC No.2 s.2020, was published on 21 January 2020. The purpose of MC No.2 s.2020 is to ensure that the Audited Financial Statements and General Information Sheets are filed with the SEC by businesses in the Philippines in an “organized and orderly” way.
Audited Financial Statement v GIS
While there are a number of documents that must be filed with the SEC over the coming months, in this article we focus on 2 specific documents, as referenced under MC No.2 s.2020, being:
- The Audited Financial Statement (AFS); and
- The General Information Sheet (GIS).
What is the AFS?
The Audited Financial Statement, or AFS, is the financial accounts of a company, that have been reviewed and audited by a licensed Certified Public Accountant, or CPA.
The CPA will have expressed their professional opinion that the financial statements, which usually include details regarding income, cashflow, equity, assets, liabilities, etc, have been prepared accurately and in accordance with the relevant financial reporting standards and principles.
Who is required to file an AFS with the SEC?
The General Financial Reporting Requirements provided in the Revised Securities Regulation Code (SRC) Rule 68 includes a number of qualifying threshholds for entities that must file an AFS. These are also included in Section 7 of MC No.2 s.2020, as follows:
- Stock corporations with total assets or total liabilities of P600,000 or more;
- Non-stock corporations with total assets or total liabilities of P600,000 or more;
- Branch offices/representative offices of stock foreign corporations with assigned capital of (or the equivalent of) P1,000,000 or more;
- Branch offices/representative offices of non-stock foreign corporations with total assets of (or the equivalent of) P1,000,000 or more;
- Regional operating headquarters of foreign corporations with total revenues of (or the equivalent of) P1,000,000 or more.
If a corporation does not meet any of the above thresholds, they can submit their Annual Financial Statement along with a Treasurer’s Certificate (notarized). They are not required to submit an Auditor’s Report.
What is the SEC filing deadline for the AFS?
It depends on the designated financial/fiscal year of your business.
1. Businesses with a financial year OTHER than 1 January 2019 – 31 December 2019
Companies that have a fiscal year that did not end on 31 December 2019, must file their AFS within 120 calendar days of their fiscal year end. So, if your company’s fiscal year ends on March 31 2020, the AFS must be filed with the SEC on or before July 29.
2. Businesses with a financial year from 1 January 2019 – 31 December 2019
If the financial year of your business ended on 31 December 2019, the date for filing your AFS is determined by the last numerical digit of the company’s SEC Registration or Licence Number. The SEC registration number can be found on the company’s Certificate of Incorporation.
Under MC No.2 s.2020, the AFS filing deadlines for 2020 are as follows:
- For companies with SEC registration ending in 1 or 2, the deadline is April 20, 21, 22, 23, 24
- For companies with SEC registration ending in 3 or 4, the deadline is April 27, 28 29, 30,
- For companies with SEC registration ending in 5 or 6, the deadline is May 4, 5, 6,7, 8
- For companies with SEC registration ending in 7 or 8, the deadline is May 11, 12, 13, 14, 15
- For companies with SEC registration ending in 9 or 0, the deadline is May 18, 19, 20, 21, 22
Note: There are different filing deadlines/requirements for the following: (a) Broker Dealers, (b) Corporations with securities registered and/or listed on the Philippine Stock Exchange (PSE), and (c) Corporations whose AFS is currently being audited by the Commission on Audit (COA). These requirements can be found in Section 1 (2) of MC No.2 s.2020.
What other type of information needs to be submitted with the AFS?
AFS filings with the SEC are governed by the Revised Securities Regulation Code No. 68.
When submitting the AFS to the SEC, it must:
- Include a Statement of Management’s Responsibility for Financial Statements. This affirms that the management and the Board of Directors are ultimately responsible for the information in the AFS.
- Contain a report by the Independent Auditor. Our recent article explains the importance of engaging a competent, licensed and accredited auditor in the Philippines.
- Ensure the AFS complies with the Philippine Financial Reporting Standards (PFRS) or PFRS for SMEs (for companies categorised as Small and Medium-sized Entities).
MC No.2 s.2020 provides that failure to comply with any of the requirements prescribed under SRC Rule 68 may be considered a ground for the SEC to impose penalties on the corporation. A “failure”, for example, may include using an unqualifiied or disqualified auditor or having a material deficiency or material misstatement within the AFS.
Remember – acceptance of the AFS submission by the SEC does not mean the company has done everything correctly – the SEC can review the AFS and impose penalties at a later stage!
As outlined in our recent article, Preparing for the 2020 Audit Season, the AFS must be filed with the Bureau of Internal Revenue or BIR before it is filed with the SEC.
Section 1(5) of MC No.2 s.2020 requires that an AFS being submitted to the SEC must have a BIR stamp confirming it was “received” by the BIR (or alternatively, a bank slip approved by the BIR that confirms it was submitted).
What if my AFS filing is late?
Late filings of the AFS will be accepted by the SEC from 25 May 2020 onwards. However, late filings will be subject to penalties which start accruing from the last filing schedule date (see above).
The SEC’s Consolidated Scale of Fines outlines the relevant penalties for delays or issues with AFS filings.
What is the GIS?
The General Information Sheet (GIS) is a document submitted to the SEC each year which contains up to date information on the company’s corporate profile – type of corporation, stockholder information, investments, dividend information, etc.
The GIS helps the SEC to monitor corporations and businesses under its supervision and within the securities market in the Philippines.
What is the deadline for filing the GIS?
Local corporations must submit their GIS within 30 calendar days after their annual stockholders meeting (if it’s a stock corporation) or members meeting (if it’s a non-stock corporation).
Foreign corporations must file their GIS within 30 calendar days after the anniversary date of the issuance of their SEC Licence.
When will the SEC review the GIS?
The SEC will do a preliminary review of the GIS immediately upon submission. Any clear errors will be highlighted by the SEC at once – which will give the company time to correct the submission.
As with the AFS, acceptance by the SEC of the GIS does not affirm compliance. The SEC can still proceed to audit the company and impose penalties at a later stage.
How do you file the AFS and GIS?
Companies can file their AFS and GIS directly with the SEC Head Office at the Secretariat Building, PICC Complex, Roxas Blvd, Pasay, 1307 Metro Manila.
Companies can also file at all SEC satellite offices (Ali Mall-Cubao Quezon City, SM Manila, SM North EDSA, Robinson’s Galleria, Muntinlupa City Hall and SM Mall of Asia) and SEC extension offices (Cebu, Davao and Iloilo).
Remember to apply the SEC issued number coding schedule (see above) when filing the AFS!
Companies can use the SEC Express Nationwide Submission, or SENS, or any courier or regular mail to submit the AFS and GIS. The procedures for these methods of submission are outlined in Section 3 of MC No.2 s.2020.
CloudCfo – Your Growth Partner
Corporations that have not closed their books of accounts for the last financial year are likely to experience issues and delays when filing their AFS. Outsourcing your accounting and bookkeeping services can solve this issue and help ensure no deadlines are missed!
How can CloudCfo help? If we are managing your company’s financial books and accounts during the year, we make sure that they are up to date, accurate and reliable at all times during the entire financial year. This means that when it comes to filing your AFS or GIS each year, there is no running or scrambling around. The information is ready, accessible and it makes sense! You can be confident that the information that you are filing in your AFS is accurate!
Visit us at cloudcfo.ph or contact us at firstname.lastname@example.org for more information on how we can support your business here in the Philippines.