SEC Exempts Micro Enterprises from Audited Financial Statements
The Securities and Exchange Commission (SEC) has announced a new exemption for micro enterprises, removing the requirement to submit audited financial statements (AFS) as part of their annual reporting.
Under Memorandum Circular No. 4, Series of 2026, issued on 20 January, both stock and non-stock corporations with total assets or liabilities not exceeding PHP 3 million are now exempt from the mandatory audit.
Previously set at PHP 600,000, the new limit represents a substantial increase in the exemption threshold.
SEC Chairperson Francis Lim stated that the reform aims to make compliance more proportionate for smaller businesses.
Corporations that qualify for the exemption must instead submit financial statements accompanied by a Statement of Management’s Responsibility (SMR).
This document must be signed under oath by the corporation’s key officers, such as the chairman, president, or treasurer, who assume full responsibility for the accuracy of the submission.
The new threshold applies to financial statements for fiscal years ending on or after 31 December 2025.
The exemption does not apply to certain entities vested with public interest, such as public companies, investment houses, and financing companies, which remain subject to stricter reporting requirements.
Featured image: Edited by Fintech News Philippines based on an image by user11877524 via Freepik.
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