The Securities and Exchange Commission (SEC) announced a major policy recommendation aimed at significantly reducing compliance costs and easing the regulatory burden on micro, small, and medium enterprises (MSMEs).
The SEC has proposed increasing the threshold for mandatory submission of audited financial statements (AFS) from P600,000 to P3 million in total assets or liabilities.
The recommendation, submitted to the Department of Finance (DOF) on October 28, seeks to exempt corporations whose total assets or liabilities do not exceed P3 million from mandatory external audits. Instead of an AFS, these micro-enterprises would instead be required to submit annual financial statements certified under oath by their treasurer or chief financial officer.
If approved by the DOF, the new policy is set to apply to financial statements covering fiscal years ending on or after December 31, 2025.
“We have repeatedly said that MSMEs are the backbone of the Philippine economy, which is why the SEC remains committed to implementing measures that will foster a business environment that is easier to navigate for our budding entrepreneurs,” said SEC Chairperson Francis Lim. “Our proposed policy will not only improve the ease of doing business but will also cut unnecessary compliance requirements for micro entities, in support of the government’s goal of driving inclusive economic development.”
The proposed increase from the current P600,000 threshold, which is stipulated in the Revised Corporation Code (RA No. 11232), is expected to provide substantial financial relief and simplify compliance obligations for thousands of small businesses.
The SEC highlighted that beyond relieving financial pressure, the new threshold would reduce incidents of “rubber-stamp” audits, cut barriers to registration, and allow the Commission to reallocate its supervisory efforts toward higher-risk entities.
Chairperson Lim further reassured the public that this proposal will not weaken the regulatory environment. “We assure the public that the proposal will not dilute oversight over corporations, including entities engaged in public infrastructure projects or other regulated sectors, as they generally exceed the P3 million threshold,” he stated.
The Commission will maintain regulatory oversight through its visitorial powers under the Revised Corporation Code, allowing it to require audits if warranted by public interest.
The authority to determine the appropriate threshold for the submission of audited financial statements is recognized under Section 74 of the Revised Corporation Code and is subject to the final approval of the DOF. Currently, corporations with assets or liabilities below P600,000 are already exempt and only required to submit certified financial statements.
