SEC tightens rules on corporate governance

MANILA, Philippines — The Securities and Exchange Commission (SEC) is tightening rules governing corporate governance in the country.

It will soon require public companies and registered issuers to submit an annual corporate governance report (ACGR).

Public companies are those with assets of at least P50 million and having 200 or more shareholders holding at least 100 shares each of equity securities.

Under the proposed guidelines released for public comment on June 25, public companies and registered issuers will have to report their compliance or noncompliance with the Code of Corporate Governance for such corporations.

Public companies need to ensure that their report promotes 16 principles across different corporate governance subjects.

These include the board’s governance responsibilities, disclosure and transparency, internal control and risk management frameworks, cultivating a synergic relationship with shareholders/members, and duties to stakeholders.

The Code adopts a comply-or-explain approach to allow companies flexibility in establishing their corporate governance practices, in line with the principle of proportionality.

While not required to comply with the corporate governance principles, public companies and registered issuers must state in their ACGR whether they comply with the Code’s provisions, identify any areas of non-compliance, and explain the reasons for non-compliance.

The SEC gave public companies and registered issuers up to May 30, 2022 to submit their reports for the period covering January to December this year.

Aside from the ACGR, newly registered public companies and registered issuers must file their manual on corporate governance with the Commission.

However, the SEC noted that public companies and registered issuers, which are listed on the Philippine Stock Exchange, are excluded from the new guidelines.

Violators will be penalized, the SEC warned.

Late or non-submission of the ACGR could lead to a basic penalty of P20,000 plus a monthly penalty of P2,000. Incomplete disclosures, such as those with no explanation provided and no alternative practices to achieve overall principle, will lead to a penalty of P10,000 and a monthly penalty of P1,000.

“Meanwhile, public companies and registered issuers which will commit misrepresentation or provide misinformation in their ACGR will be subject to a penalty of P50,000 and a monthly penalty of P5,000. Those with incomplete or incorrect signatories will be fined for P5,000 plus P500 monthly,” the SEC also said.