Manila—In a move seen as a major relief for small businesses, the Securities and Exchange Commission (SEC) has proposed to exempt micro, small, and medium enterprises (MSMEs) with total assets or liabilities of ₱3 million or less from the requirement to submit audited financial statements (AFS).
The proposal, currently under review by the Department of Finance (DOF), seeks to ease regulatory and financial burdens by allowing eligible corporations to submit financial statements certified under oath by their treasurer or chief financial officer (CFO) instead of undergoing a full audit by an independent Certified Public Accountant (CPA).
“This initiative forms part of the SEC’s ongoing efforts to create a more enabling business environment for micro and small entrepreneurs,” the Commission said in its policy paper, as cited by GMA News.
Raising the Threshold: From ₱600,000 to ₱3 Million
Currently, all corporations with total assets or liabilities of at least ₱600,000 are required to file audited financial statements.
The new proposal raises that threshold to ₱3 million, significantly expanding the number of businesses that can file certified (but unaudited) statements.
According to the Department of Trade and Industry (DTI), MSMEs comprise 99.6% of all registered enterprises in the country, with micro enterprises (those with assets up to ₱3 million) making up nearly 90%. The SEC said this adjustment aligns financial reporting requirements with the economic realities of smaller firms and the definitions under the Magna Carta for MSMEs (RA 9501).
Why It Matters to Small Businesses
The SEC’s proposal directly addresses one of the most persistent pain points for MSMEs — the cost of mandatory audits, which can range from ₱15,000 to ₱50,000 or more annually.
By allowing small firms to submit statements certified by their CFO or treasurer, the Commission hopes to reduce compliance costs, simplify filing procedures, and encourage greater voluntary compliance.
“By right-sizing compliance, we are helping MSMEs grow and stay compliant without undue financial strain,” SEC Chairperson Emilio Benito Aquino said in a statement.
Oversight Still in Place
Despite the proposed exemption, the SEC stressed that this does not reduce its oversight capacity. The Commission retains its visitorial powers under the Revised Corporation Code, allowing it to order audits or further examinations if public interest demands.
The SEC also clarified that the exemption will primarily benefit non-public, smaller enterprises, and will not cover companies in heavily regulated or capital-intensive sectors, which generally exceed the ₱3 million asset threshold.
Timeline and Implementation
If approved by the DOF, the new rules are expected to take effect for fiscal years ending on or after December 31, 2025.
Until the official circular or memorandum is released, existing audit requirements remain in force.
The SEC has also encouraged MSMEs to continue maintaining accurate and transparent financial records, noting that certified statements must still be truthful and compliant with applicable accounting standards.
Part of a Broader MSME Support Push
The measure forms part of a larger SEC reform agenda designed to simplify regulatory compliance for smaller enterprises. Earlier this year, the Commission announced reduced registration fees and online filing enhancements for MSMEs to further support ease of doing business.
Industry observers note that the ₱3 million audit exemption aligns with other MSME-friendly government initiatives and mirrors the BIR’s thresholds for mandatory audit filing, thereby streamlining compliance across agencies.
What MSMEs Should Do Now
Kzen PH Consultancy recommends the following proactive steps for business owners and corporate officers:
- Monitor official SEC announcements for DOF approval and final implementation timelines.
- Assess total assets and liabilities to determine potential eligibility under the ₱3 million threshold.
- Prepare internal certification protocols, ensuring CFOs or treasurers understand their oath-based responsibilities.
- Maintain complete and accurate records, since the SEC may still request audits under specific circumstances.
- Seek professional guidance to align your accounting practices with both SEC and BIR requirements.
A Step Toward Inclusive Compliance
If adopted, the SEC’s proposal could mark a significant milestone in making corporate compliance more inclusive, affordable, and practical for MSMEs; all without sacrificing transparency and accountability.
The reform promises to reduce red tape and lowering operational costs, ultimately empowering small businesses to focus on what matters most: innovation, growth, and sustainable enterprise.
