Frequently Asked Questions

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Frequently Asked Questions

Compliance Officers Certification

Compliance Officer’s Certification
1.	What is the Compliance Officer’s Certification?
	Compliance Officer’s Certification (COC), or CG Form-2020, is a certification required to be submitted by public companies (PCs) and registered issuers (RIs) in lieu of the Annual Corporate Governance Report (ACGR) for covered year 2020. The COC shall contain a certification that the covered company has substantially adopted in its Manual on Corporate Governance all of the recommendations under the Code of Corporate Governance (CG Code) for PCs and RIs. When applicable, the Certification shall also identify and explain any deviation to the recommendations provided under the CG Code for PCs and RIs. A sample template for the COC can be downloaded through this link.
2.	Who are required to submit a COC per SEC Memorandum Circular No. 36, Series of 2020?
	Only PCs and RIs are required to submit a COC.
3.	Is a publicly listed company that also qualifies as a public company and/or registered issuer required to submit a COC?
	No. Publicly listed companies (PLCs) shall continue to be governed by SEC issuances specific to PLCs, notwithstanding the fact that these PLCs also qualify as PCs and/or RIs.
4.	Are PCs and RIs still required to submit a Corporate Secretary’s Certificate on the attendance of Directors to board meetings?
	PCs and RIs are no longer required to comply with Corporate Secretary Certification on Attendance in Board Meetings pursuant to SEC MC No. 36, Series of 2020, which states that PCs and RIs shall no longer be required to comply with Sections 15 and 16 of SEC Memorandum Circular No. 3, Series of 2007.
5.	Who are the required signatories of the COC?
	SEC MC No. 36, Series of 2020 provides that the COC shall be signed under oath by the company’s Compliance Officer and countersigned by its President or Chief Executive Officer.
6.	Is e-signature allowed for COCs?
	SEC MC No. 36, Series of 2020 provides that the Compliance Officer’s Certification shall be signed under oath by the company’s Compliance Officer and countersigned by its President or Chief Executive Officer. The signature referred to above is wet signature on the document.
7.	When is the deadline for the submission of the COC?
	Three (3) copies of a duly accomplished, signed and notarized CG Form-2020 should be submitted to the Commission on or before 29 January 2021. (SEC MC No. 36, Series of 2020)
8.	What is the manner of submission of the COC?
	The COC may be filed either through courier services or electronic mail or both.
9.	Is there a penalty for non/late submission of the COC?
	Yes. There is a penalty for non/late submission of the COC. SEC Memorandum Circular No. 36, Series of 2020 provides for a basic penalty of Php10,000.00 and a continuing monthly penalty of Php1,000.00 until the COC is submitted.

VIOLATION	BASIC PENALTY	MONTHLY PENALTY
Non/Late Submission	Php 10,000.00	Php 1,000.00

10.	Is there a penalty for incomplete signature or incorrect signatory?
	Yes. There is a basic penalty of Php 5,000.00 and a continuing monthly penalty of Php 500.00 for incomplete or incorrect signatory of the COC. (SEC MC No. 36, Series of 2020)

VIOLATION	BASIC PENALTY	MONTHLY PENALTY
*Signatory(ies)*
a. Incomplete	Php 5,000.00	Php 500.00
b. Incorrect

11.

Is there a penalty for misrepresentation/misinformation and incomplete disclosure?

Yes. For incomplete disclosure(s) in the COC, there is a basic penalty of Php 5,000.00 and a continuing monthly penalty of Php 500.00.

For misrepresentation/misinformation on the disclosure(s) in the COC, there is a basic penalty of Php 15,000.00 and a continuing monthly penalty of Php 1,500.00.

VIOLATION	BASIC PENALTY	MONTHLY PENALTY
*Disclosure(s)*
a. Incomplete (i.e. no explanation provided)	Php 5,000.00	Php 500.00
b. Misrepresentation/Misinformation	Php 15,000.00	Php 1,500.00

	(SEC MC No. 36, Series of 2020).
12.	Is there a penalty for misrepresentation/misinformation and incomplete disclosure?
	Yes. SEC Memorandum Circular No. 36, Series of 2020 mandates the use of CG Form-2020.

Qualifications/disqualifications, Term Limit and Number of Independent Directors

1.	What are the qualifications and disqualifications of Independent Directors (IDs)?
	Under Section 38.2 of the 2015 Implementing Rules and Regulations of the Securities Regulation Code (SRC IRR) and SEC Memorandum Circular No. 19, Series of 2016, prescribing the Code of Corporate Governance for Publicly-Listed Companies, an independent director is defined as follows: “Independent director – a person who is independent of management and the controlling shareholder, and is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.”
	Disqualifications
	•	Is not a director or officer of the covered company or of its related companies or any of its substantial shareholders except when the same shall be an independent director of any of the foregoing; (SRC IRR Rule 38.2.1)
	•	Does not own more than two percent (2%) of the shares of the covered company and/or its related companies or any of its substantial shareholders; (SRC IRR Rule 38.2.2)
	•	Is not related to any director, officer or substantial shareholder of the covered company, any of its related companies or any of its substantial shareholders. Relatives include spouse, parent, child, brother, sister and the spouse of such child, brother or sister; (SRC Rule 38.2.3)
	•	Is not acting as a nominee or representative of any director or substantial shareholder of the covered company, and/or any of its related companies and/or any of its substantial shareholders, pursuant to a Deed of Trust or under any contract or arrangement; (SRC Rule 38.2.4)
	•	Has not been employed in any executive capacity by the covered company, any of its related companies and/or by any of its substantial shareholders within the last two (2) years; (SRC Rule 38.2.5)
	•	Is not retained, either personally or through his firm or any similar entity, as professional adviser, by that covered company, any of its related companies and/or any of its substantial shareholders, within the last two (2) years; (SRC Rule 38.2.6)
	•	Has not engaged within the last two (2) years and does not engage in any transaction with the covered company and/or with any of its related companies and/or with any of its substantial shareholders, whether by himself and/or with other persons and/or through a firm of which he is a partner and/or a company of which he is a director or substantial shareholder, other than transactions which are conducted at arms-length and are immaterial; (SRC Rule 38.2.7 as amended by SEC MC No. 7, Series of 2018)
	•	A regular director who resigns or whose term ends on the day of the election shall only qualify for nomination and election as an Independent Director after a two (2) year cooling off period. (SEC MC No. 9, Series of 2009)
	•	Persons appointed as Chairman “Emeritus”, Ex-Officio” Director/Officers or Members of any Executive Advisory Board, or otherwise appointed in a capacity to assist the Board in the performance of its duties and responsibilities shall be subject to a one (1) year “cooling-off period” prior to his qualification as an Independent Director; (SEC MC No. 9, Series of 2009)
	•	Securities broker-dealers are disqualified from sitting as an independent director of listed companies and registered issuers of securities. (SEC MC No.16, Series of 2006)
	•	Other grounds for disqualification of directors under Section 26 of the Revised Corporation Code of the Philippines (RCC)
	Qualifications
	•	He shall be at least a college graduate or he shall have been engaged or exposed to the business of the corporation for at least five (5) years; (SRC IRR Rule 38.6.1.2)
	•	Shall have at least one (1) share of stock of the corporation or must be a member of the corporation; (Section 22 of the RCC)
	•	He shall possess integrity/probity; (SRC IRR Rule 38.6.1.3)
	•	He shall be assiduous; (SRC IRR Rule 38.6.1.4)
	•	For government employees, the company shall be required to submit a written permission from the Head of the Department allowing him to sit as an independent director. (Office of the President Memorandum Circular No. 17 and Section 12, Rule XVIII of the Revised Civil Service Rules)
2.	What is the maximum cumulative term for IDs?
	The maximum cumulative term for IDs is nine (9) years as provided under Recommendation 5.3 of SEC Memorandum Circular No. 19, Series of 2016 for PLCs and under Recommendation 5.4 of SEC Memorandum Circular No. 24, Series of 2019 for PCs and RIs.
3.	What is the reckoning period of the nine-year cumulative term for IDs?
	For purposes of computing the cumulative years of service, the actual number of years in service reckoned from the date of the first election of the subject ID in 2012 shall be considered.
4.	Are companies allowed to retain IDs who already served beyond the nine-year term limit?
	The CG Code for PLCs (SEC MC No. 19, Series of 2016) and CG Code for PCs and RIs (SEC MC No. 24, Series of 2019) recommend that the Board’s IDs should serve for a maximum cumulative term of nine (9) years. After which, the ID should be perpetually barred from reelection as such in the same company, but may continue to qualify for nomination and election as a non-independent director. In the instance that a company wants to retain an ID who has served for nine years, the Board should provide meritorious justification/s and seek shareholders’ approval during the annual shareholders’ meeting.
5.	In the case of concurrent directorships in companies within a conglomerate, is the maximum cumulative term of nine (9) years assessed separately for each company where he/she is serving as an ID?
	Under Recommendation 5.3 of the CG Code for PLCs (SEC MC No. 19, Series of 2016) and Recommendation 5.4 of the CG Code for PCs and RIs (SEC MC No. 24, Series of 2019), the maximum cumulative term limit of nine (9) years for independent directors shall only apply if the subject ID intends to be re-elected as such in the same company and shall not extend to his/her election/re-election in other companies within the conglomerate.
6.	Does the SEC Rules on the Number of Independent Directors and Sectoral Representatives of Exchanges and Other Organized Markets apply to all PLCs?
	No. SEC Memorandum Circular No. 20, Series of 2020 only applies to Exchanges and other Organized Markets. Exchange refers to an organized marketplace or facility that brings together buyers and sellers, and executes trades of securities and/or commodities. Organized Market refers to an over-the-counter market, alternative trading system, or otherwise recognized as such by the Commission, and governed by, among others, transparent and binding rules and market conventions on membership, trading, price transparency, trade reporting, market monitoring and orderly conduct or operation of the market which are enforceable on the members and participants.

CGITP Accreditation Requirements

1.	What are the requirements for application as an SEC-accredited Institutional Training Provider on Corporate Governance (CG-ITPs)?
	a) Written application (1 original)
	b) Certification that the applicant complies with the procedural requirements and meets the minimum standards (1 original);
	c) Supporting documents such as the following: (1 original or photocopy per document)
	•	Summary of business experience and plan
	•	Credentials of resource persons
	•	Course program and training materials
	•	Latest Audited Financial Statement
	•	Latest General Information Sheet
	(SEC Memorandum Circular No. 14, Series of 2002)
2.	How much is the processing fee?
	The processing fee for the application for accreditation or renewal thereof is Five Thousand and Fifty Pesos (Php 5,050.00) pursuant to Section A.3.d. of SEC Memorandum Circular No. 11, Series of 2012. This includes the additional fee of 1% for the Legal Research Fund.
3.	Is there a prescribed format for the written application for accreditation as CG-ITP?
	There is no prescribed format for the written application for accreditation as an CG-ITP.
4.	What is the term of the accreditation?
	CG-ITPs shall be accredited for a period of three (3) years from the date of the approval of its accreditation, without prejudice to the revocation of the accreditation should the CG-ITPs be found to have violated the terms of its accreditation. After the accreditation period, the accreditation of an ITP shall expire or automatically be delisted, unless an application for its renewal is filed with the Commission not later than thirty (30) business days before its expiration.

Integrated Annual Corporate Governance Report

1.	What is an Integrated Annual Corporate Governance Report?
	The Integrated Annual Corporate Governance Report (I-ACGR) is a tool used to disclose publicly listed companies’ (PLC) compliance or non-compliance with the recommendations provided under the Code of Corporate Governance for PLCs. The I-ACGR harmonizes the corporate governance reportorial requirements of the SEC and the Philippine Stock Exchange (PSE). (SEC Memorandum Circular No. 15, Series of 2017)
2.	Is there a prescribed form for the I-ACGR?
	Yes. The prescribed I-ACGR form is provided under SEC Memorandum Circular No. 15, Series of 2017.
3.	Who are required to submit an I-ACGR?
	Only PLCs are required to submit an I-ACGR. (SEC Memorandum Circular No. 15, Series of 2017)
4.	What is the “comply or explain” approach?
	The I-ACGR follows a “comply or explain” approach. The “comply or explain” approach combines voluntary compliance with mandatory disclosure. Companies do not have to comply with the CG Code for PLCs, but they must state in their annual corporate governance reports whether they comply with the Code provisions, identify any areas of non-compliance, and explain the reasons for non-compliance. (SEC Memorandum Circular No. 15, Series of 2017)
5.	Is there a penalty for Non/Late Submission?
	Yes. There is a basic penalty of Php 50,000 and a continuing monthly penalty of Php 5,000 until the I-ACGR is submitted.

VIOLATION	BASIC PENALTY	MONTHLY PENALTY
Non/Late Submission	Php 50,000.00	Php 5,000.00

Is there a penalty for misrepresentation/misinformation and incomplete disclosure?

Yes. For incomplete disclosure(s) in the I-ACGR, there is a basic penalty of Php 25,000.00 and a continuing monthly penalty of Php 2,500.00.

For misrepresentation/misinformation on the disclosure(s) in the I-ACGR, there is a basic penalty of Php 100,000.00 and a continuing monthly penalty of Php 10,000.00.

VIOLATION	BASIC PENALTY	MONTHLY PENALTY
*Disclosure(s)*
a. Incomplete (i.e. no explanation provided; no alternative practices to achieve over-all principle)	Php 25,000.00	Php 2,500.00
b. Misrepresentation/Misinformation	Php 100,000.00	Php 10,000.00

	(SEC Memorandum Circular No. 15, Series of 2017).
7.	Is there a penalty for incorrect or incomplete signature?
	Yes. There is a basic penalty of Php 10,000.00 and a continuing monthly penalty of Php 1,000.00 for incomplete or incorrect signatory of the I-ACGR.

VIOLATION	BASIC PENALTY	MONTHLY PENALTY
*Signatory(ies)*
a. Incomplete	Php 10,000.00	Php 1,000.00
b. Incorrect

(SEC Memorandum Circular No. 15, Series of 2017).

Frequently Asked Questions

Corporate Governance