Micro enterprises are now exempt from the submission of audited financial statements as part of their reportorial requirements, as the Securities and Exchange Commission (SEC) moves to streamline compliance and reduce regulatory burdens for small companies.
The Commission on January 20 issued Memorandum Circular No. 4, Series of 2026, providing the Amendments to the Application and Definition of Terms under Revised Rule 68 of Republic Act No. 8799, or the Securities and Regulation Code (SRC), in Relation to the Adjustment of the Audit Threshold.
The memorandum circular exempts both stock and nonstock corporations with total assets or liabilities not exceeding P3 million from submitting audited financial statements.
Previously, only stock and nonstock corporations with total assets or liabilities less than P600,000 were exempted from mandatory audit.
“This reform recognizes the realities faced by micro enterprises, which often operate with very limited resources. 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,” SEC Chairperson Francis Lim said.
“At the same time, the new threshold preserves accountability by requiring management to formally assume responsibility for the accuracy and integrity of their financial statements, ensuring that regulatory oversight remain firmly in place,” he added.
The higher threshold will apply to financial statements covering fiscal years ending on or after December 31, 2025. Corporations with fiscal years ending prior to the effectivity of the memorandum circular will follow the threshold in effect at the close of their fiscal year.
In lieu of audited financial statements, a corporation that does not meet the audit threshold must submit financial statements accompanied by a Statement of Management’s Responsibility (SMR).
For stock and non-stock corporations, the SMR must be signed under oath by the chairman or the board, president or chief executive officer, and treasurer or chief financial officer, all duly authorized by its board of directors. The president and treasurer should sign the SMR for one person corporations.
The signatories shall assume full responsibility for the accuracy, completeness and truthfulness of the submitted financial statements.
Any incomplete, inaccurate, false or misleading statements will be subject to penalties under the SRC and Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC), without prejudice to the Commission’s authority to require audited financial statements when necessary for investor protection, regulatory enforcement, or public interest.
The new threshold will not apply to entities classified under Groups A, B and C, as enumerated under Part I, Section 3 (B) of the Revised SRC Rule 68, and corporations vested with public interest due to the nature of their regulatory obligations and the degree of public interest they represent.
Group A covers corporations such as public companies or those with at least P50 million worth of assets, and with 200 or more holders, each holding at least 100 shares; issuers of securities listed in an exchange; and stock and securities exchanges, and other self-regulatory organizations, among others.
Group B includes issuers of registered timeshares, proprietary and non proprietary membership certificates, and corporations applying for the registration of such securities; investment houses; brokers and dealers; government securities eligible dealers; and universal banks registered as underwriters of securities.
Group C is composed of financing companies with assets of over P10 million in the preceding year; lending firms with assets of over P5 million the year before; transfer agents; and non-stock, non-profit corporations, including foundations, which solicit or receive annual donations or contributions and/or with fund balance of more than P25 million, among others.
