SEC hikes penalties on late annual reports 

The Securities and Exchange Commission (SEC) is increasing the fines and penalties to be imposed on corporations for the late submission and non-filing of certain annual reports, in an effort to boost compliance with reportorial requirements, according to a report by BusinessMirror.

Under the proposed adjusted rates, the SEC will raise the penalty by 20 percent from the base penalty per offense. The monetary penalty will be imposed on a per report and per year basis.

The agency on April 26 issued for public comment draft guidelines on the updated scale of fines for the late and non-submission of audited financial statements and general information sheet, as well as non-compliance with SEC Memorandum Circular (MC) No. 28, Series of 2020.

The proposal to increase fines follows the SEC’s grant of amnesty to non-compliant and suspended and revoked corporations under SEC Memorandum Circular No. 2, Series of 2023, which gave corporations a chance to avail of lower fines and penalties for the late and non-filing of their AFS, GIS, and MC 28 report.

The scale of penalties will be based on the retained earnings for domestic stock corporations, fund balance for domestic non-stock corporations, and accumulated income for foreign stock corporations, including branches, representative offices, and regional headquarters, as well as foreign non-stock corporations.

The proposed guidelines provide that the base penalty for the late filing of reportorial requirements for domestic stock and non-stock corporations with retained earnings of less than P100,000 is at P5,000 for the first offense and up to P9,000 for the fifth offense.

The SEC will also impose a P1,000 monthly fine for every month of continuing violation.

Non-filing of reportorial requirements will incur fines amounting to P10,000 for the first offense up to P18,000 for the fifth offense both domestic stock and non-stock corporations with retained earnings of less than P100,000. Continuing violation will result in an additional fine of P1,000 per month.

Meanwhile, the base penalty for late filing of reports by foreign stock corporations with an accumulated income of less than P100,000 is at P10,000 for the first offense, up to P18,000 for the fifth offense, plus P1,000 per month of continuing violation.

The fine is lower for foreign non-stock corporations with the same accumulated income, which will incur fines worth P5,000 for the first offense up to P9,000 for the fifth offense, plus P1,000 per month of continuing violation.

The lowest penalty for foreign stock and non-stock corporations for the non-filing of reportorial requirements will be at P10,000 for the first offense, up to P18,000 for the fifth offense.

Meanwhile, a fine of P20,000 will be imposed on those who fail to comply with MC 28.

In addition to the monetary fines that will be imposed, the SEC may declare a corporation under delinquent status in case of failure to submit reportorial requirements for 3 times consecutively or intermittently within 5 years.

A fourth offense may also constitute a revocation of a corporation’s registration if it has been given reasonable notice regarding its delinquent status.