The Securities and Exchange Commission (SEC) is taking a significant step to ease the compliance burden on the country’s smallest businesses — a move that could translate into real cost savings and breathing room for millions of micro, small, and medium enterprises (MSMEs) across the Philippines.
In a recent development, the SEC said it has secured approval from the Department of Finance (DOF) to exempt more micro enterprises from submitting audited financial statements, a requirement that many small firms have long viewed as costly and disproportionate to their scale of operations.
The initiative forms part of a broader government push to simplify regulatory processes for MSMEs, which make up more than 99 percent of registered businesses in the country and employ a large share of the local workforce.
By lowering compliance costs, regulators hope to free up capital that small entrepreneurs can redirect toward operations, expansion, or digital transformation.
SEC raises audit exemption threshold to ₱3M
Under the proposal, the SEC plans to amend Part I, Section 1(A) of Rule 68 of the Securities Regulation Code to raise the audit exemption threshold to ₱3 million in total assets or liabilities. Currently, only corporations with assets or liabilities below ₱600,000 are exempt from mandatory audits — a limit that many micro enterprises quickly exceed even with modest growth.
If approved, both stock and non-stock corporations that fall below the new ₱3 million threshold would no longer be required to submit audited financial statements.
Instead, they would be allowed to file financial statements certified under oath by the company’s president and treasurer or chief financial officer, as authorized by the board of directors.
The SEC said certifying officers would assume full responsibility for the accuracy and completeness of the submitted documents, ensuring that accountability remains in place even as compliance is simplified.
The commission initially recommended the adjustment to the DOF in October, citing the need to relieve financial pressure on MSMEs, reduce the prevalence of “rubber-stamp” audits, and streamline reportorial requirements.
The DOF agreed, noting that the policy aligns with the government’s efforts to stimulate economic growth while maintaining robust compliance monitoring and governance standards.
“This is about proportional regulation,” the SEC previously noted, emphasizing that requirements should match the size, risk profile, and public interest impact of the entity involved.
New rules target MSMEs, exclude public-interest firms
The higher audit threshold is expected to apply to financial statements covering fiscal years ending on or after December 31, 2025, giving businesses and regulators ample time to prepare for the transition. The SEC has since released the draft guidelines for public comment, signaling openness to feedback from the business community.
However, the exemption will not apply across the board. Entities classified under Groups A, B, and C, as well as corporations vested with public interest due to their nature or regulatory role, will continue to be subject to stricter audit requirements.
Group A includes public companies, firms with at least ₱50 million in assets and 200 or more shareholders, and issuers of securities listed on an exchange.
Group B covers entities such as investment houses, brokers and dealers, and universal banks registered as securities underwriters.
Group C, meanwhile, includes larger financing and lending companies, transfer agents, and non-stock, non-profit organizations that solicit significant donations or maintain substantial fund balances.
For micro enterprises and smaller MSMEs, however, the proposed change could be a game-changer. Audit fees can easily run into tens of thousands of pesos — an amount that often represents a significant share of a small firm’s annual expenses.
Removing this requirement could make formalization more attractive for informal businesses and help registered MSMEs remain compliant without sacrificing growth capital.
As the SEC gathers public feedback, industry stakeholders are watching closely.
If finalized, the revised audit threshold could mark a meaningful shift toward a more MSME-friendly regulatory environment — one that recognizes the realities on the ground while still upholding transparency and accountability in the Philippine corporate sector.