Reminder on year-end corporate filings
Reminder on year-end corporate filings by: Christina Panlilio-Ong
Corporate entities are acutely aware that they are required to file annual financial statements as well as periodic and annual tax returns for the various tax types for which they are registered.
Publicly listed corporations, or those whose securities are registered under the Securities Regulation Code with the Securities and Exchange Commission (SEC), have their entire staff devoted to ensuring that the company complies with all the filings and disclosures required by the SEC and the Philippine Stock Exchange.
However, other annual reportorial requirements that need to be filed with the SEC are usually filed late or not at all.
In case the same are filed on time, the accuracy of the information contained therein is not always thoroughly assured.
Non- or late filing of reportorial requirements with the SEC would subject the company to monetary penalties.
However, the more compelling reason for corporate entities to ensure that they timely file accurate reportorial requirements is that such compliance is a prerequisite for the approval of applications filed with the SEC.
Under the current SEC policy, the examiner will not even receive any application for pre-processing unless a monitoring report on non- or late filing of reportorial requirements is issued by the Law and Regulation Division and the corresponding penalties, if any, are paid.
Reports for previous years that were not filed need not be submitted provided that the penalties are paid. However, the SEC requires that the reports for the current year be filed. The confirmation of payment of penalties must be submitted together with the application and supporting documents in order for the examiner to formally receive said application, review the same, and issue the order of payment for the filing fees. Only upon payment of the filing fees will the SEC officially consider the application filed.
The annual reportorial requirements that must be filed with the SEC include the following:
1. Financial Statements. All corporate entities with authorized capital stock or paid-up capital, whichever is lower, of at least P 50,000 shall be required to submit financial statements duly audited and certified by an independent public accountant and stamped ‘received’ by the Bureau of Internal Revenue within 120 days from the end of its fiscal or calendar year.
To facilitate the orderly submission of audited financial statements (AFS), the SEC has, in recent years, issued circulars providing the filing of AFS on specific dates beginning mid-April depending on the last digit of the entities’ SEC registration or license number.
Corporate entities whose fiscal year ends on a date other than December 31 shall comply with the original 120-day filing period reckoned from the end of said fiscal year.
Where the authorized capital or paid-up capital, whichever is lower, is less than
P 50,000, the financial statements need not be audited but instead, attested and sworn to by the company treasurer.
Corporations planning to undertake certain transactions during the current year wherein the AFS for the preceding year will be the basis for such transaction should already advise their auditors that the AFS needs to be prepared using certain formats prescribed by the SEC. For instance, a corporation considering an increase in its authorized capital for the purpose of declaring stock dividend is required to submit together with other documentary requirements, the AFS for the preceding year prepared in long-form format, including a five-year analysis of the retained earnings account as well as a reconciliation of the retained earnings available for dividend declaration. In the case of an absorbed corporation in a merger with issuance of shares or creation of APIC, the AFS should also be prepared in long-form format.
2. General Information Sheet (GIS). Stock as well as non-stock corporations are required to submit General Information Sheet containing, among others, certain company information as well as information on its officers, directors and stockholders within 30 calendar days from the date of its annual stockholders’ meeting (ASM). If no meeting is held, the corporation shall submit the GIS together with an affidavit of non-holding of meeting within 30 calendar days from the date of the scheduled annual meeting (as provided in the by-laws).
However, should an annual stockholders' meeting be held thereafter, a new GIS shall be filed.
Foreign corporations such as branch, representative office, regional operating headquarters or regional headquarters with SEC license to do business in the Philippines shall also be required to submit GIS within 30 calendar days from issuance of their license and thereafter, within 30 calendar days from the anniversary date of the issuance of said SEC license.
3.Branch Securities Deposit. A branch of a foreign corporation licensed by the SEC to do business in the Philippines is required, within 60 days from the issuance of said license, to deposit with the SEC for the benefit of creditors securities with an actual market value of at least P 100,000. Acceptable securities include government debt instruments, equity instruments (shares of enterprises registered under the Omnibus Investments Code, shares listed in the stock exchange, etc.) or any combination of government and equity instruments.
Moreover, within 6 months from the close of the fiscal year of the branch, the branch will be required to deposit additional securities equivalent in actual market value to 2% of the amount by which the branch's gross income for said year exceeds P 5 Million. The SEC shall also require deposit of additional securities if the actual market value of the deposited securities decreased by at least 10% of their actual market value at the time of deposit.
The most common securities deposited with the SEC are in the form of long-term treasury bills (T-bills). While bank requirements may vary, the usual process to secure T-bills is as follows:
1. The purchasing bank will purchase T-bills and debit the branch's account with said bank (The purchasing bank will require the branch to open a bank account for settlement).
2.The purchasing bank will then issue a Confirmation of Sale of T-Bills.
3. The custodian bank (another bank that the purchasing bank has an arrangement with) will request from the Bureau of Treasury (BOT) to earmark the T-bills in favor of the SEC for the account of the branch.
4. The custodian bank will then issue a confirmation that the T-Bills have been earmarked in favor of the SEC and held and kept safe by the custodian bank.
The Confirmation of Sale of T-Bills, a confirmation that the same have been earmarked by the BOT in favor of the SEC, and covering letter will then be submitted to the SEC in compliance with the branch securities requirement.
While the submission of the foregoing reportorial requirements may seem tedious and cumbersome, corporate entities would be well-advised to devote time and resources to ensure that said reports are filed in a timely and accurate manner. By doing this, they can ensure that any future applications with the SEC are not delayed because of non-compliance issues raised by the SEC Law and Regulation Division.