The Securities and Exchange Commission (SEC) is easing capital-raising rules for smaller businesses, removing a costly auditing hurdle in a bid to accelerate corporate expansion and reduce bureaucratic friction.

The regulator issued Memorandum Circular No. 6 on Jan. 22, which expands the use of subscription contracts as a substitute for Special Audit Reports (SARs) when companies apply to increase their authorized capital stock.

Under the new guidelines, the SEC has scrapped the previous ₱50 million minimum cash payment threshold that was required to bypass the audit report.

By removing the floor, the commission effectively allows a broader range of corporations—particularly micro, small, and medium enterprises—to document cash-based capital hikes through simple legal agreements rather than complex external audits.

Subscription contracts typically outline the number of shares, the amount contributed, and the payment method, whereas SARs require the engagement of external auditors to verify and attest to the flow of funds.

“Expanding the scope for the adoption of subscription contracts is in line with our commitment to make the Commission’s processes simpler, easier, and more cost-efficient,” SEC Chairperson Francis Lim said in a statement.

He noted that the streamlined process is intended to reduce the financial burden on smaller firms, allowing them to redirect resources toward growth and economic contribution.

The move marked a shift in the SEC’s regulatory approach, prioritizing ease of doing business for private entities while maintaining tighter grip on firms that tap public funds. While smaller private companies benefit from the exemption, the commission will continue to require SARs for entities “imbued with public interest.”

This category includes publicly listed companies, firms that sell securities to the general public, and those holding secondary licenses issued by the SEC.

For eligible companies, the subscription contract must be signed by the subscriber along with the company’s president and treasurer. The document must specify the additional shares subscribed and the total paid-up amount.

In instances where the primary officers are unavailable, the SEC will require a board resolution authorizing a specific director or officer to sign on their behalf.

The reform follows a series of digitalization and modernization efforts by the Philippine regulator to align local corporate governance with international standards while lowering the cost of compliance for the domestic private sector.