A Recap of COVID-Related SEC Issuances For Publicly Listed Companies

By: Kristin Charisse Siao and Marie Kristine F. Reyes

As the Philippines enters a new four-tiered quarantine classification and as the lockdown on specific industries eases inch by inch in Metro Manila, many Publicly Listed Companies (“PLCs”) are slowly reopening their doors back to normal operations after a two-month period of temporary setbacks. In this article, we recap the issuances of the Securities and Exchange Commission (“SEC”) in response to the challenges brought about by the COVID-19 pandemic on the compliance requirements of PLCs, in an effort to guide these companies in an unprecedented occasion of collective transition.

Extension of Time to Submit Annual Reports and/or Audited Financial Statements

The SEC, in recognizing the degree of difficulty in the preparation of financial statements and statutory audits brought about by travel restrictions and temporary suspension of business operations during the COVID-19 pandemic, issued Memorandum Circular No. 05-2020 (“SEC MC No. 05-2020”),  Notice dated 18 March 2020 and SEC Memorandum Circular No. 17-2020 (“SEC MC No. 17-2020”), extending the deadlines for the submission of Annual Reports (SEC Form 17-A) and/or Audited Financial Statements (“AFS”) required from PLCs, and Quarterly Reports  (SEC Form 17-Q) for the 1st Quarter of 2020.

In a nutshell, the extended filing deadlines for PLCs based on current SEC COVID-19 issuances are consolidated and illustrated as follows:

Note that for PLCs with fiscal year ending on 30 November 2019 or 31 December 2019 and with both domestic and foreign operations, the deadlines may be further extended to 60 days from the date of lifting of travel restrictions/ban by the concerned government authorities, if such 60-day period goes beyond 30 June 2020.

PLCs that may want to avail the extended period for filing of the SEC Form 17-A and SEC Form 17-Q Reports pursuant to current SEC regulations shall file a special disclosure form called SEC Form 17-LC not later than five calendar days before the regular filing deadline. The SEC Form 17-LC shall be uploaded by PLCs via the Philippine Stock Exchange (“PSE”) Electronic Disclosure Generation Technology portal (“EDGE”).

It can be recalled that the SEC had previously withdrawn their initial requirement for PLCs to first submit a written request to the SEC for an extension of time1 accompanied by Sworn Certifications signed by the covered company’s President and Treasurer and by the External Auditor.2

Other Extended Filing Deadlines

In separate issuances dated 21 April and 22 April 2020, the SEC likewise extended the deadline for the submission of the Sustainability Report (“SR”) and Integrated Annual Corporate Governance Report (“I-AGCR”) of PLCs, respectively.

In Memorandum Circular No. 13-2020 (“SEC MC No. 13-2020”) dated 21 April 2020, the SEC extended the deadline for submission of the SR, as an attachment of the Annual Report, until 30 June 2020 or the extended period provided for the submission of the Annual Report under SEC MC No. 05-2020 as discussed above. This extension shall automatically be applied without the need for PLCs to file a request.

PLCs that have filed or will file their Annual Report without the SR attached thereto shall not be considered to have filed an incomplete Annual Report, provided that the SR shall be filed until 30 June 2020 by filing an Amended Annual Report (SEC Form 17-A). For PLCs that will opt to submit their SR by filing an Amended Annual Report (SEC Form 17-A), the submission must be accompanied by a copy of the previously submitted Annual Report and a Certification signed by the PLC’s authorized representative and attested by its President stating that the Amended Annual Report is filed solely for the purpose of submitting the SR attached thereto and that no other changes were made to the Annual Report as previously filed.

PLCs that submit their SRs in accordance with SEC MC No. 13-2020 shall not incur penalties for an incomplete Annual Report.

Likewise, in an effort to ease the regulatory burden on the business sector, the Corporate Governance and Finance Department of the SEC issued a Notice on 22 April 2020 extending the deadline for the filing of the I-ACGR until 30 July 2020. Originally, the I-AGCR is required to be submitted every May 30 for each year that the PLC is listed in the PSE pursuant to SEC Memorandum Circular No. 15, Series of 2017. The extension shall automatically be applied without the need for a request from PLCs. This extension notwithstanding, PLCs are not precluded from submitting their I-AGCR on the original deadline (i.e. 30 May 2020).

Reminder to Continuously Observe Disclosure Obligations

Both SEC MC No. 05-2020 and SEC MC No. 17-2020 also included reminders for PLCs to continuously observe their disclosure obligations under the Securities and Regulation Code (“SRC”) and the PSE Consolidated Listing and Disclosure Rules. Thus, all material information, whether price-sensitive or trade-sensitive, must be disclosed on a timely basis. Where the company’s operations are materially affected by the COVID-19 outbreak, disclosure on the financial impact or any other material aspects should be made immediately.

Electronic Filing of Structured Reports, Current Reports and Communications with the SEC

In its Notice dated 17 March 2020, the SEC-MSRD directed all PLCs to file their respective Structured and Current Reports (“Reports”) by uploading the same through the PSE EDGE in accordance with the relevant PSE rules and procedures.

All reports filed with the PSE EDGE during the effective period shall be considered as having been filed with the SEC. However, the SEC reserves the right to require PLCs to submit a copy to the SEC at a later time as may be necessary. The SEC shall also make the proper arrangement with the PSE for the latter to furnish the SEC with the reports filed in the PSE EDGE.

As for other communications, PLCs are directed to submit them via electronic mail.

Postponement of the Annual Stockholders’ Meeting

Under Rule of the Implementing Rules and Regulations of the SRC (the “SRC Rules”), the general rule is that no postponement of an annual stockholders’ meeting (“ASM”) shall be allowed except for justifiable reasons to be stated in writing under oath by the President or Secretary of the corporation.

SEC Notice dated 3 April 2020 provides that in lieu of filing an Affidavit of Postponement, PLCs and other concerned companies shall file SEC Form 17-C disclosing said postponement, accompanied by a Secretary’s Certificate reciting the resolution of the Board of Directors postponing the ASM. For PLCs, the SEC Form 17-C shall be uploaded through the PSE EDGE, which shall be considered compliant with the requirement under Rule of the SRC Rules.

Alternative Modes for Distributing and Providing Notices of Meeting and Other ASM Documents

Recognizing that the restriction in movement and temporary business suspension has affected the physical distribution of ASM document to stockholders, the SEC issued a Notice on 20 April 2020  (“SEC Notice dated 20 April 2020”) providing an alternative mode for distributing copies of the Notice of Meeting, Information Statement, and other requirements to conduct the ASM for 2020.

Under SEC Notice dated 20 April 2020, PLCs that would hold its ASM for 2020 may notify their stockholders about the ASM by causing the publication of the Notice of Meeting to inform shareholders of the date, time and place of meeting and other information required under the Revised Corporation Code, other issuances of the SEC or the by-laws of the PLC. The Notice of Meeting shall also inform shareholders of the availability of an electronic copy of the Information Statement, Management Report, SEC Form 17-A and other pertinent documents in the PLC’s website and PSE EDGE.

The Notice of Meeting must be published in the business section of two newspapers of general circulation, in print and online format, for two consecutive days, provided that, the last publication of the Notice of Meeting shall be made no later than twenty-one days prior to the scheduled ASM.

In case the PLC shall hold its 2020 ASM through teleconferencing, video conferencing and other remote or electronic means of communication as allowed under SEC Memorandum Circular No. 06-2020 issued on 12 March 2020 (“SEC MC No. 06-2020”), the Notice of Meeting must also include the requirements and procedures to be followed when a stockholder elects the option to attend and vote by means of remote communication and must inform the stockholder that a visual and audio recording of the meeting shall be made as required under SEC MC No. 06-2020.

[1] SEC Notice dated 3 April 2020.

[2] SEC Notice dated 18 March 2020.