The Securities and Exchange Commission (SEC) is looking at requiring public companies and registered issuers to submit an annual corporate governance report (ACGR), as part of efforts to develop a strong corporate governance culture in the country.
In a draft guidelines, the SEC said the mandatory reporting covers companies whose assets are at least P50 million and having 200 or more shareholders holding at least 100 shares each of equity securities.
Registered issuers refer to companies which issue proprietary and/or non-proprietary shares or certificates; equity securities offered to the public but are not listed in an exchange; or debt securities offered to the public and required to be registered with the SEC, whether or not listed in an exchange.
The draft rule is in line with the SEC’s Code of Corporate Governance that which promotes 16 principles across different corporate governance subjects – 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, according to the SEC.
“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 said.
Under the proposed guidelines, public companies and registered issuers will have to submit their ACGR using the proposed SEC Form-ACGR on or before May 30. For the period covering January to December 2021, the ACGR must be submitted on or before May 30, 2022.
“The ACGR shall cover all relevant information from January to December of the given year regardless of registration date. However, for their first submission, companies may indicate that they are ‘newly registered’ in the explanation portion of the ACGR,” the company said.
The SEC said 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.
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.
