SEC Exempts Micro Enterprises from Audited Financial Statements to Ease Regulatory Burden
The Securities and Exchange Commission (SEC) has announced a significant regulatory adjustment, exempting firms with capital and liabilities of up to P3 million from the requirement to submit audited financial statements. This move is designed to streamline administrative processes and alleviate the compliance burden on micro enterprises, which often operate with limited resources.
New Threshold and Compliance Requirements
Previously, the exemption applied only to firms with total assets and liabilities of less than P600,000. Under the new rule, effective for financial statements covering fiscal years ending on or after December 31, 2025, corporations that do not meet the audit threshold must instead submit financial statements accompanied by a Statement of Management’s Responsibility (SMR).
SEC Chairperson Francis Lim emphasized that this change acknowledges the challenges faced by micro enterprises. "By allowing the submission of certified financial statements in lieu of audited ones, we are making compliance more proportionate, allowing them to redirect their resources to growing their business," he stated.
Ensuring Accountability and Oversight
To maintain regulatory integrity, the SMR must be sworn to and signed by key corporate officers. For stock and non-stock corporations, this includes the board chair, president or chief executive officer, and treasurer or chief financial officer, all duly authorized by the board. One-person corporations require signatures from the president and treasurer.
Lim added, "This move preserves accountability by requiring management to formally assume responsibility for the accuracy and integrity of their financial statements, ensuring that regulatory oversight remains firmly in place." The signatories are held fully responsible for the truthfulness and completeness of the submitted documents.
This policy shift aims to foster a more supportive environment for small businesses while upholding essential financial transparency standards.
