A significant shift has occurred for small businesses in the Philippines, offering substantial relief from complex financial reporting requirements. The Securities and Exchange Commission (SEC) has dramatically increased the asset and liability threshold for companies needing audited financial statements, a move designed to foster growth and reduce burdens on micro, small, and medium enterprises (MSMEs).
SEC Chairperson Francisco Ed. Lim emphasized the agency’s understanding of the challenges faced by micro-enterprises, often operating with limited capital. The new policy allows these businesses to submit certified financial statements instead of costly, fully audited reports, freeing up vital resources for expansion and innovation.
The change, outlined in Memorandum Circular No. 4, Series of 2026, now exempts both stock and nonstock corporations with total assets or liabilities up to P3 million from the audit requirement. This represents a considerable increase from the previous threshold of P600,000, impacting a far wider range of businesses.
However, accountability remains paramount. Companies falling under the new threshold must still submit certified financial statements accompanied by a formal Statement of Management’s Responsibility (SMR), affirming the accuracy and integrity of their financial data. This ensures continued regulatory oversight without imposing undue hardship.
The updated threshold applies to fiscal years concluding on or after December 31, 2025, providing a clear timeline for implementation. Businesses with different fiscal year-ends will continue to operate under the previous regulations until their respective year-end dates.
The SMR requires signatures under oath from key company leaders – the board chair, president or CEO, and treasurer or CFO – all duly authorized by the board. For one-person corporations, the president and treasurer must both sign, solidifying personal responsibility for the submitted information.
The SEC has made it unequivocally clear that those signing the SMR bear complete responsibility for the accuracy, completeness, and truthfulness of the financial statements. Any deliberate misrepresentation or omission will be met with penalties under existing securities and corporate laws.
Certain entities are excluded from this new threshold, including those categorized under Groups A, B, and C of Revised SRC Rule 68, as well as public interest corporations. These exclusions recognize the heightened regulatory needs and public significance of these larger and more complex organizations.
Group A encompasses public companies with substantial assets and shareholder bases, listed securities issuers, and key market infrastructure entities. Groups B and C include specialized financial institutions and large non-profit organizations, all subject to stricter reporting standards.
This policy shift is part of a broader effort to streamline business operations and promote inclusive economic development. The SEC previously reported granting over P80 million in fee discounts to over 40,000 transactions, with MSMEs benefiting from more than half of these savings.
Ultimately, the SEC’s decision represents a strategic investment in the future of Philippine businesses, empowering smaller enterprises to thrive and contribute to the nation’s economic growth by reducing unnecessary administrative burdens.
