In a move aimed at supporting micro, small, and medium enterprises (MSMEs) and aligning regulatory requirements with current economic realities, the Securities and Exchange Commission (SEC) has issued Memorandum Circular No. 4, Series of 2026 dated January 20, 2026.
Under the new rules, stock and non-stock corporations exceeding Php3 Million in total assets or liabilities must submit audited financial statements. Those at or below Php3 million are exempt from audits and instead file financial statements accompanied by a sworn Statement of Management’s Responsibility (SMR).
For stock and non-stock corporations, the SMR is signed under oath by the Chairman of the Board, President/CEO, and Treasurer/CFO (authorized by the Board); for One Person Corporations (OPCs), it is signed by the President and Treasurer.
Signatories assume full responsibility for the accuracy and completeness of the statements, with penalties under the Securities Regulation Code (SRC) and Revised Corporation Code (RCC) applying to any incomplete, inaccurate, false, or misleading submissions.
This exemption does not apply to entities classified as Group A, B, or C under Revised SRC Rule 68 (e.g., those vested with public interest, such as listed companies or certain regulated firms), which remain subject to mandatory audits regardless of size. The SEC also retains authority to require audits for investor protection, enforcement, or public interest reasons.
Entity definitions have been updated accordingly:
- Micro entities (≤ Php3 Million in total assets/liabilities) may use the income tax basis or PFRS for Small Entities, with financial statements including the SMR, Statement of Financial Position, Statement of Income, and Notes (covering two-year comparative periods if applicable).
- Small entities (> Php3 Million but ≤ P100 million) follow PFRS for SMEs, based on consolidated figures for parent companies.
The amended threshold applies to financial statements for fiscal years ending on or after December 31, 2025, while earlier fiscal years follow the old Php600,000 rule.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. John Henley C. Godinez is a Partner of GVES Law.