SEC orders companies to certify compliance with governance code

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THE Securities and Exchange Commission (SEC) is requiring companies to submit on or before Jan. 30 certifications in relation to its new Code of Corporate Governance for Public Companies and Registered Issuers.

In a statement over the weekend, the country’s corporate regulator said companies must submit to it a Compliance Officer Certification, a document that indicates its compliance with the Revised Code of Corporate Governance, and a Corporate Secretary Certification, which has the attendance record of the company’s board meetings in 2019.

This is in line with the new corporate governance code, or Memorandum Circular No. 24 Series of 2019, that the SEC published on Dec. 27 requiring stricter standards for public companies.

Covered by the policy are public companies that have assets of at least P50 million and have at least 200 shareholders holding a minimum of 100 shares of equity securities each.

Among the requirements of the new code is strengthening diversity in a company’s board of directors through having a majority of non-executive directors and having at least two independent directors, or at least one-third of the total board members, whichever is higher.


Companies are also asked to form an audit committee, corporate governance committee and board risk oversight committee within the board of directors to perform oversight roles of its functions.

To take into account the rest of the provisions of the code — which includes transparency initiatives and improved communication efforts that the SEC wants from companies towards its shareholders — a revised manual of corporate governance must be submitted by companies within six months from the memorandum’s effectivity in January, together with an annual corporate governance report.

The SEC noted, however, that while the new code wants to elevate the level of corporate governance in the country to be competitive with internationally recognized principles, the guidelines are still recommendatory in nature and will be followed through a “comply or explain” approach.

“Companies do not have to comply with the code, but they must state in their Annual Corporate Governance Reports whether they comply with the code’s provisions, identify any areas of non-compliance, and explain the reasons for non-compliance,” it said.

SEC Chairperson Emilio B. Aquino said if companies comply with the new code, it is expected to “translate to better value propositions for shareholders and customers, minimized risks, growth and sustainability.” — Denise A. Valdez