SEC CIRCULARS AND ISSUANCES

CODE OF CORPORATE GOVERNANCE (SEC MC No. 6 Series of 2009)

What is a Corporate Governance?

It refers to the framework of rules, systems and processes in the corporation
that governs the performance by the Board of Directors and Management of their
respective duties and responsibilities to the stockholders.

Board of Directors: the governing body elected by the stockholders that exercises the
corporate powers of a corporation, conducts all its business and controls its properties.

General Responsibility of the Board:

1. To foster the long term success of the corporation, and to sustain its
competitiveness and profitability in a manner consistent with its corporate
objectives and the best interest of its stockholders.
2. Should formulate the corporation’s vision, mission, strategic objectives,
policies and procedures that shall guide its activities, including the means to
effectively monitor Management’s performance.

Specific Duties and Responsibilities of a Director

A director’s office is one of trust and confidence. A director should act in the best
interest of the corporation in a manner characterized by transparency, accountability
and fairness. He should also exercise leadership, prudence and integrity in directing
the corporation towards sustained progress.

A director should observe the following norms of conduct:

(i) Conduct fair business transactions with the corporation, and ensure that his
personal interest does not conflict with the interests of the corporation.
(ii) Devote the time and attention necessary to properly and effectively
perform his duties and responsibilities.
(iii) Act judiciously.
(iv) Exercise independent judgment.
(v) Have a working knowledge of the statutory and regulatory requirements
that affect the corporation, including its articles of incorporation and by-
laws, the rules and regulations of the Commission and, where applicable,
the requirements of relevant regulatory agencies.
(vi) Observe confidentiality

Board Meetings and Quorum Requirement. The members of the Board should
attend its regular and special meetings in person or through teleconferencing conducted in
accordance with the rules and regulations of the Commission.
To monitor the directors’ compliance with the attendance requirements,
corporations shall submit to the Commission, on or before Janaury 30 of the following
year, a sworn certification about the directors’ record of attendance on Board
meetings. The certification may be submitted through SEC Form 17-C or in a separate
filing.

Remuneration of Directors and Officers:

Corporation may establish formal and transparent procedures for the
development of a policy on executive remuneration or determination of remuneration levels
for individual directors and officers depending on the particular needs of the corporation. No
director should participate in deciding on his remuneration.
The corporation’s annual reports and information and proxy statements
shall include a clear, concise and understandable disclosure of all fixed and variable
compensation that may be paid, directly or indirectly, to its directors and top 4 management
officers during the preceding fiscal year.

Commitment to Good Corporate Governance.

All covered corporations shall establish and implement their
corporate governance rules in accordance with this Code. The rules shall be embodied in
a manual that can be used as reference by the members of the Board and Management. The
manual should be submitted to the Commission for its evaluation within 180 business
days from the date this Code becomes effective to enable the Commission to determine its
compliance with its Code taking into consideration the nature, size and scope of the business
of the corporation; provided, however, that corporations that have earlier submitted their
manual may, at their option, continue to use the said manual as long it complies with the
provisions of this Code.
The manual shall be made available for inspection by any shareholder
at reasonable hours on business days.
FILING OF GIS AND AFS

The GIS, AFS, General and Special FS reports should be printed on an A4-sized
(8.27”x11.69”) bond paper under a standard cover page or sheet. The original and all
conformed pages should use only one side of the paper.

The corporation may choose to avail of the following options for filing:
a. SEC Express Nationwide Submission (SENS)
b. Any Courier/Regular Mail with no return of copy of reports submitted.

The reckoning date of submission of GIS and AFS through courier is the date
the courier has actually sent or delivered the file reports to the SEC.

GENERAL INFORMATION SHEET (GIS) – SEC MC No. 1 Series of 2019

The GIS should be certified and sworn to by the corporate secretary.

Under SEC MC No. 17 Series of 2018, all SEC registered corporations are
 required to disclose their beneficial owners in their General Information Sheet.

Beneficial Owner refers to any natural person who:

1. Ultimately owns or control the corporation;
2. Has ultimate effective control over the corporation.

Ultimate Effective Control refers to any situation in which ownership/control is

exercised through actual or a chain of ownership or by means other than direct control.
Example:
1. Direct or indirect ownership of at least 25% of any category of voting shares.
2. Ability to elect a majority of the board of directors, or any similar body.

In the submission of the General Information sheet (GIS), the 30- calendar day
period shall be counted:
A. Stock Corporations - from the date the annual stockholders’ meeting
was actually held
B. Non-stock corporations – date of actual annual members meeting
C. Foreign Corporations – anniversary date of the issuance of the SEC
License

If the corporation is unable to hold the meeting for the calendar year, the
GIS shall be filed not later than January of the following year.

If the corporation is not in operation, it should submit an Affidavit of Non-

Operation within 120 calendar days after the end of the fiscal year as specified in the
by-laws, with the GIS and FS.

ANNUAL FINANCIAL STATEMENTS (AFS) SEC MC No. 1 Series of 2019

1) The FS of the following domestic corporations shall be audited by an independent

certified public accountant (CPA) registered with the Board of Accountancy:
a) stock corporations with paid-up capital of PhP50,000.00 or more; and
b) non-stock corporations with annual gross receipts of PhP100,000.00 or
more, or total assets of PhP50,000,000.00 or more

2) The FS of the following domestic corporations shall, at the minimum, be certified

under oath by the treasurer of the corporation:
a) stock corporations with paid-up capital of less than PhP50,000.00; and
b) non-stock corporations with annual gross receipts of less than
PhP100,000.00 or a total assets of less than PhP500,000.00.

3) The FS of the following foreign corporations shall be audited by an

independent Chartered Financial Analyst (CFA) registered with the Board of
Accountancy:
a) branch office of a stock foreign corporation with total assets of PhP500,000.00
or more;
 b) branch office of a non-stock foreign corporation with total assets of
PhP500,000.00 or more;
c) representative office of a foreign corporation with total assets of
PhP500,000.00 or more;
d) regional operating headquarters of multinational companies with
assigned capital of PhP50,000.00 or more;
e) regional headquarters of multinational companies with total assets of
PhP50,000.00 or more.

4) The FS of the following foreign corporations shall, at the minimum, be certified

under oath by the treasurer of the of the corporation:
a) branch office of a stock foreign corporation with assigned capital of less than
PhP50,000.00;
b) branch office of a non-stock foreign corporation with total assets of less than
PhP500,000.00;
c) representative office of a foreign corporation with total assets of less than
PhP500,000.00;
d) regional operating headquarters of multinational companies with assigned
capital of less than PhP500,000.00;
e) regional operating headquarters of multinational companies with total
assets of less than PhP500,000.00

Filing of AFS depends on the last numerical digit of their SEC registration or license number
in accordance with the following schedule:
April 22, 23, 24, 25, 26: 1 and 2
April 29, 30, May 2 & 3: 3 and 4
May 6, 7, 8, 9. 10 : 5 and 6
May 20, 21, 22, 23, 24: 7 and 8
May 27, 28, 29, 30, 31: 9 and 0

This schedule does not apply to following corporations:

1. Filing of AFS of the company whose fiscal year ends other than Dec 31,
file AFS within 120 days from the end of their fiscal year.

2. Filing of AFS for Broker Dealer whose fiscal year ends other than
December 31, shall file SEC Form 52-AR, 110 calendar days after the close of such
fiscal year.

3. Entities whose securities are listed on PSE and those whose securities
are registered but not listed in PSE and Public Companies shall file their AFS
within 105 calendar days after the end of their fiscal year.

4. Those whose AFS are being audited by the COA provided that the
following documents are attached to their AFS:
 a. An Affidavit by the President and Treasurer attesting to the fact that the
company timely provided COA with the financial statements and supporting
documents and that the audit of COA has just been concluded; and
b. A letter from COA confirming the information provided in the above
Affidavit.

Penalties shall be computed from the date of the last day of filing schedule.

The AFS, other than the consolidated FS, shall have the stamped “received by the BIR or
its authorized banks, unless the BIR allows an alternative proof of submission for its
authorized banks e.g bank slips.

FILING OF ARTICLES OF INCORPORATION, BY-LAWS, AMENDMENT

The Articles of Incorporation spells out the pertinent information concerning:

a. The name of the Corporation

b. The primary and secondary purposes of the Corporation
c. Place of principal office of the Corporation
d. Term of existence of the Corporation (normally 50 years)
e. Names, nationalities, and residences of the incorporators The Corporation Code
requires incorporators to be any number of natural persons not less than five (5) but
not more than fifteen (15), all of whom must be of legal age and must own or be a
subscriber of at least one (1) share of the capital stock of the corporation.
f. Number of directors, which should not be less than 5 and not more than 15
g. Names, nationalities and residences of the persons who shall acts as directors until
the first regular directors are duly elected and qualified in accordance with the
corporation code
h. The amount of the authorized capital stock of the Corporation, which must be
stated in Philippine Pesos, and the number of shares into which it is divided
i. Names, nationalities and residences of the original subscribers, and the amount
subscribers and paid by each on his subscription
j. The Corporate Treasurer

The aforementioned information can be found in the Articles of Incorporation and

shall govern the corporation until duly amended.

It bears great emphasis that there is a proper procedure for amending the Articles of
Incorporation in the Philippines. Any revision thereto cannot be done by mere
corporate memo or notice. Hence, should one wish to change the corporate name,
principal office address, number of directors or purpose of the corporation,
compliance with Section 16 of the corporation code is mandatory, to wit:

“Sec. 16. Amendment of Articles of Incorporation. – Unless otherwise prescribed

by this Code or by special law, and for legitimate purposes, any provision or matter
stated in the articles of incorporation may be amended by a majority vote of the
board of directors or trustees and the vote or written assent of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, without
prejudice to the appraisal right of dissenting stockholders in accordance with the
provisions of this Code, or the vote or written assent of at least two-thirds (2/3) of the
members if it be a non-stock corporation.

The original and amended articles together shall contain all provisions required by law
to be set out in the articles of incorporation. Such articles, as amended shall be
indicated by underscoring the change or changes made, and a copy thereof duly
certified under oath by the corporate secretary and a majority of the directors
or trustees stating the fact that said amendment or amendments have been duly
approved by the required vote of the stockholders or members, shall be submitted
to the Securities and Exchange Commission.

The amendments shall take effect upon their approval by the Securities and Exchange
Commission or from the date of filing with the said Commission if not acted upon
within six (6) months from the date of filing for a cause not attributable to the
corporation.”

As can be gleaned from the foregoing, there are three (3) basic requirements for
amending the Articles of Incorporation, namely:

1. Majority vote of the board of directors

2. Written assent of the stockholders representing at least 2/3 of the outstanding capital
stock
3. Approval by the Securities and Exchange Commission

Anent the first 2 requisites, a meeting must be held, whether it be during the regular
annual meeting or a special meeting called for such purpose. The rules regarding the
meeting (i.e. notice, place, etc.) can be found in the corporate by-laws.

The meeting of the stockholders must first take place and the issue of the amendment
must be assented to by stockholders representing at least 2/3 of the outstanding
capital stock. Thereafter, it must be approved by at least a majority of the board of
directors and duly certified by the Corporate Secretary.

To prove that these acts have been complied with, the following documents will be
executed:

1. Resolution of the Stockholders

2. Board Resolution
3. Directors’ Certificate
4. Secretary’s Certificate

The aforementioned documents, together with the amended Articles of

Incorporation must be submitted to the Securities & Exchange Commission. If
the amendment refers to the corporate purpose which requires a secondary
license from a government agency, then the endorsement or license from such
government agency must also be submitted. If there is an increase in the
authorized capital stock, then a Treasurer’s Affidavit and corresponding Bank
Certificate must be submitted to prove such fact.

The amendment of the Articles of Incorporation may be disapproved pursuant to

Section 17 of the corporation code which states:

“Sec. 17. Grounds when articles of incorporation or amendment may be rejected

or disapproved. – The Securities and Exchange Commission may reject the articles
of incorporation or disapprove any amendment thereto if the same is not in
compliance with the requirements of this Code: Provided, That the Commission
shall give the incorporators a reasonable time within which to correct or modify the
objectionable portions of the articles or amendment. The following are grounds for
such rejection or disapproval:

1. That the articles of incorporation or any amendment thereto is not substantially in

accordance with the form prescribed herein;
2. That the purpose or purposes of the corporation are patently unconstitutional,
illegal, immoral, or contrary to government rules and regulations;
3. That the Treasurer’s Affidavit concerning the amount of capital stock subscribed and/or
paid if false;
4. That the percentage of ownership of the capital stock to be owned by citizens of the
Philippines has not been complied with as required by existing laws or the
Constitution.

No articles of incorporation or amendment to articles of incorporation of banks,

banking and quasi- banking institutions, building and loan associations, trust
companies and other financial intermediaries, insurance companies, public utilities,
educational institutions, and other corporations governed by special laws shall be
accepted or approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency to the effect that such
articles or amendment is in accordance with law.”

Furthermore, the names of the incorporators, the first set of directors and
subscribers, the initial treasurer, their original subscription and the place and
date of execution of the first Articles of Incorporation cannot be amended.

If the Securities & Exchange Commission finds the amendment in order, it shall
correspondingly issue a Certificate of Amendment of Articles of Incorporation. It is
worth emphasizing that if a corporation does not properly amend its Articles of
Incorporation, the Corporation shall be penalized by the Securities & Exchange
Commission with an initial fine of Ten Thousand Pesos (P10,000.00) for the first
violation.
FINES AND PENALTIES

Definitions
(a) The definitions, as provided in the various laws and rules being
implemented by the Commission, shall be adopted in the Revised Scale.
(b) “Persons” as hereinafter referred to are corporations, associations,
partnerships and individuals. It is understood that violations such as offering
or selling of securities to the public or acting as a broker or dealers without
permit or license may be committed by persons that are not registered under
the Corporation Code.
(c) “Non-filing” shall mean continuous failure to submit a report on due date
and even after the next reporting deadline. “Late filing” shall mean
submission of the report after due date but before the next reporting deadline.

Reckoning date of Computation of Penalty (MC No. 1 Series of 2011 amending the MC No.
8 Series of 2009)
The daily penalty shall be computed from the date of receipt of the letter
informing the company of its non-compliance with the reporting requirements of Section
141 of the Corporation Code of the Philippines, Section 68 of the Securities Regulation Code,
the Investment Company Act, Financing Company Act, the Lending Company Act, and the
Investments Houses Law, up to the time that the company has submitted the following
documents:
a. Sufficient explanation for the non-compliance
b. An audit committee or board resolution taking cognizance of the non-compliance
c. Corrective measures the company shall undertake to prevent future violations of SEC
Memorandum Circular No, 8 Series of 2009.

The Commission may, in addition, require the company to submit the revised financial
statements or an addendum to the financial statements.

Test of Materiality of Deficiencies or Deviations in the Financial Reports

The guidelines provided under SRC Rule 68 or any of its amendments shall be
observed in determining the materiality of any deficiency or deviations in financial
reports.

Frequency of Offense
a. The penalty of suspension (30, 60, 90 days) or revocation of
registration/license shall be imposed starting from fourth offense in addition
to the maximum fine based on third offense, except for certain violations under
which a suspension or revocation of license or accreditation is imposable even for
first to third offense due to its adverse impact to public interest.
b. For individuals covered by the Scale, the penalties for fourth offenses onwards
shall be a multiple of three based on the immediately preceding assessed fine.
 c. For domestic stock and non-stock corporations with no secondary license
that committed a violation beyond the third offense, an additional fine shall be
imposed representing 30% of the total fine for late or non-filing of General
Information Sheet and/or Annual Financial Statements. An increment of 10%
on said fine shall be added for every subsequent offense.
d. For corporations that filed a Petition to Set Aside Revocation of Registration,
an additional fine shall be imposed representing 100% of the total fine for
late or non-filing of General Information Sheet and/or Annual Financial
Statements.

Table of Fines and Penalties: http://www.filepino.com/philippine-business-blog/sec-

reportorial-requirements-what-are-the-penalties-for-non-compliance/

DOCUMENT CONDITIONS VIOLATION PENALTIES

General Four Copies Late Filing First Offense: Based on the Total Assets indicated
Information required in the latest FS:
Sheet (GIS)
Up to Php 100,000 – Php 500
Due within 30 Php 100,001 to Php 500,000 – Php 1,500
days from the Php 500,001 to Php 5,000,000 – Php 2,500
date of the Php 5,000,001 to P10,000,000 – Php 3,500
annual Above Php 10,000,000 – Php 5,000
stockholders’ or
members Second Offense: Total fine, plus 10% of the total
meeting fines computed

Third Offense: Total fine, plus 15% of the total

fines computed
Non-filing First Offense: Based on the Total Assets indicated
in the latest FS:

Up to Php 100,000 – Php 1,000

Php 100,001 to Php 500,000 – Php 3,000
Php 500,001 to Php 5,000,000 – Php 5,000
Php 5,000,001 to P10,000,000 – Php7,000
Above Php 10,000,000 – Php 10,000

Second Offense: Total fine, plus 10% of the total

fines computed

Third Offense: Total fine, plus 15% of the total

fines computed
Audited Four copies Late filing First Offense: Based on the Total Assets indicated
Financial required in the latest FS:
Statements
Due within 120 Up to Php 100,000 – Php 500
calendar days Php 100,001 to Php 500,000 – Php 1,500
after the end of Php 500,001 to Php 5,000,000 – Php 2,500
the fiscal year, Php 5,000,001 to P10,000,000 – Php 3,500
as indicated in Above Php 10,000,000 – Php 5,000
the Financial
Statements Second Offense: Total fine, plus 10% of the total
fines computed
Must be
stamped Third Offense: Total fine, plus 15% of the total
“RECEIVED by fines computed
the BIR”
Non-filing First Offense: Based on the Total Assets indicated
in the latest FS:

Up to Php 100,000 – Php 1,000

Php 100,001 to Php 500,000 – Php 3,000
Php 500,001 to Php 5,000,000 – Php 5,000
Php 5,000,001 to P10,000,000 – Php7,000
Above Php 10,000,000 – Php 10,000

Second Offense: Total fine, plus 10% of the total

fines computed

Third Offense: Total fine, plus 15% of the total

fines computed
Material First Offense: Based on the Total Assets indicated
Deficiency in the latest FS:

Up to Php 100,000 – Php 500

Php 100,001 to Php 500,000 – Php 1,000
Php 500,001 to Php 5,000,000 – Php 2,000
Php 5,000,001 to P10,000,000 – Php3,000
Above Php 10,000,000 – Php 4,000

Second Offense: Based on the Total Assets

indicated in the latest FS:

Up to Php 100,000 – Php 1,000

Php 100,001 to Php 500,000 – Php 2,000
Php 500,001 to Php 5,000,000 – Php 4,000
Php 5,000,001 to P10,000,000 – Php 6,000
Above Php 10,000,000 – Php 8,000

Third Offense: Based on the Total Assets indicated

in the latest FS:
 Up to Php 100,000 – Php 2,000
Php 100,001 to Php 500,000 – Php 4,000
Php 500,001 to Php 5,000,000 – Php 8,000
Php 5,000,001 to P10,000,000 – Php 12,000
Above Php 10,000,000 – Php 16,000

Material An amount based on the above scale or 1/10 of 1%

Misstatement of the amount misstatement, whichever is higher.
or
misrepresentati An amount based on the above scale or 2/10 of 1%
on of the amount misstatement, whichever is higher.

An amount based on the above scale or 4/10 of 1%

of the amount misstatement, whichever is higher.
Other non- First Offense: Based on the Total Assets indicated in the l
compliance the latest FS:
with the
requirements Up to Php 100,000 – Php 200
of SRC Rule Php 100,001 to Php 500,000 – Php 300
68 Php 500,001 to Php 5,000,000 – Php 500
Php 5,000,001 to P10,000,000 – Php 1,000
Above Php 10,000,000 – Php 2,000

Second Offense: Based on the Total Assets indicated in th

in the latest FS:

Up to Php 100,000 – Php 400

Php 100,001 to Php 500,000 – Php 600
Php 500,001 to Php 5,000,000 – Php 1,000
Php 5,000,001 to P10,000,000 – Php 2,000
Above Php 10,000,000 – Php 4,000

Third Offense: Based on the Total Assets indicated in the

the latest FS:

Up to Php 100,000 – Php 800

Php 100,001 to Php 500,000 – Php 1,200
Php 500,001 to Php 5,000,000 – Php 2,000
Php 5,000,001 to P10,000,000 – Php 4,000
Above Php 10,000,000 – Php 8,000
Schedule of Fees and Charges as per SEC Memorandum Circular No. 3 Series of 2017

Particulars Rates
Articles of Partnership 1/5 of 1% of the Partnership Capital but not
less than Php 2,000
Amendment of Articles of Partnership Php 2,000
Articles of Incorporation

A. Stock Corporation with par value 1/5 of 1% of the Authorized Capital stock but
not less than Php 2,000 or the subscription
price of the subscribed capital stock whichever
is higher.

B. Stock Corporation without par value 1/5 of 1% of the Authorized Capital stock
computed at Php 100 per share but not less
than Php 2,000 or the issue value of the
subscribed capital stock whichever is higher
Articles of Incorporation of Non-Stock Php 1,000
Corporation
By-laws of Stock and Non-stock Corporation Php 1,000
Amendment of Articles of Incorporation Php 1,000
(Stock and Non-Stock Corp)

References:
1. SEC Circulars and Issuances
2. Nicolas & De Vega Law Offices. Retrieved from https://ndvlaw.com/how-to-
amend-the-articles- of-incorporation.