The Securities and Exchange Commission (SEC) is exempting micro-enterprises from the requirement to submit audited financial statements, a move intended to lower the cost of doing business for the country’s smallest corporations.

Under Memorandum Circular No. 4, Series of 2026, the regulator raised the audit threshold to ₱3 million in total assets or liabilities, from the previous limit of ₱600,000.

The adjustment to the Revised Rule 68 of the Securities Regulation Code applies to both stock and nonstock corporations, allowing them to provide certified financial statements in lieu of those vetted by external auditors.

"This reform recognizes the realities faced by micro enterprises, which often operate with very limited resources," SEC Chairperson Francis Lim said in a statement.

Lim noted that the shift allows these entities to redirect capital toward growth while maintaining a layer of accountability through a formal Statement of Management’s Responsibility (SMR).

The new threshold takes effect for financial statements covering fiscal years ending on or after Dec. 31, 2025. Companies that closed their fiscal years before the circular’s effectivity must still comply with the previous ₱600,000 threshold.

While the independent audit is no longer mandatory for these smaller firms, the SEC noted that the burden of accuracy remains with corporate leadership. The SMR must be signed under oath by the chairman, president, and treasurer, or the relevant officers authorized by the board.

In one-person corporations, the president and treasurer are the required signatories. These individuals assume full legal responsibility for the integrity of the data; any false or misleading filings will trigger penalties under the Revised Corporation Code.

The commission clarified that the exemption does not apply to {public interest” entities classified under Groups A, B, and C. This group includes publicly listed companies, investment houses, brokers, and financing companies.

Large non-profit foundations with fund balances exceeding ₱25 million or those soliciting significant donations also remain subject to mandatory audits to ensure transparency.

By streamlining these reportorial requirements, the SEC aims to balance regulatory oversight with the need to foster a more inclusive environment for small businesses.

The agency maintains the authority to demand audited statements from any corporation if it determines such action is necessary for investor protection or the public interest. (James A. Loyola)