The Securities and Exchange Commission (SEC) will be requiring public companies and registered issuers to submit an Annual Corporate Governance Report (ACGR) soon.

In a statement, the commission said this is part of its efforts to develop a strong corporate governance culture in the country.

Under the proposed guidelines released for public comment, public companies and registered issuers will have to report their compliance or noncompliance with SEC Memorandum Circular No. 24, Series of 2019, or the Code of Corporate Governance for such corporations. 

As defined under the Code, public companies are those with assets of at least P50 million and having 200 or more shareholders holding at least 100 shares each of equity securities. 

Registered issuers, meanwhile, refer to companies, which issue proprietary and/or non-proprietary shares or certificates; equity securities offered to the public but are not listed in an exchange; or debt securities offered to the public and required to be registered with the SEC, whether or not listed in an exchange.

The Code promotes 16 principles across different corporate governance subjects, namely: board’s governance responsibilities, disclosure and transparency, internal control and risk management frameworks, cultivating a synergic relationship with shareholders/members, and duties to stakeholders.

It adopts a comply-or-explain approach to allow companies flexibility in establishing their corporate governance practices, in line with the principle of proportionality. 

While not required to comply with the corporate governance principles, public companies and registered issuers must state in their ACGR whether they comply with the Code’s provisions, identify any areas of non-compliance, and explain the reasons for non-compliance.

Under the proposed guidelines, public companies and registered issuers will have to submit their ACGR using the proposed SEC Form-ACGR on or before May 30 while they qualify as such.

For the period covering January to December 2021, the ACGR must be submitted on or before May 30, 2022.

The ACGR shall cover all relevant information from January to December of the given year regardless of registration date. However, for their first submission, companies may indicate that they are “newly registered” in the explanation portion of the ACGR. 

Aside from the ACGR, newly registered public companies and registered issuers must file their Manual on Corporate Governance with the Commission. 

Public companies and registered issuers, which are listed on the Philippine Stock Exchange, are excluded from the new guidelines. The Commission required publicly listed companies to submit their ACGR earlier through SEC Memorandum Circular No. 15, Series of 2017. 

Once the new guidelines take effect, public companies and registered issuers will no longer have to comply with Sections 15 and 16 of SEC Memorandum Circular No. 3, Series of 2007, or the Amendments of Reportorial Requirements, for the covered period, January to December 2021. 

Section 15 of the 2007 memorandum circular mandates the submission of a certificate of compliance with the Manual of Corporate Governance for covered entities, including registered issuers, while Section 16 provides for the submission of a certificate of attendance of directors in board meetings for covered companies, including registered issuers.