The Securities and Exchange Commission (SEC) is pushing for greater transparency in the beneficial ownership of corporations by requiring the disclosure of varying controls that owners exercise and by expanding access to such information, among other reforms.
The Commission on October 10 issued for public comment the draft memorandum circular on the Revised Guidelines on Beneficial Ownership Disclosure and Transparency.
The draft guidelines aim to consolidate all the rules and regulations promulgated by the SEC pertaining to the identification, declaration and submission of accurate beneficial ownership information by all corporations registered with the Commission.
Developed in collaboration with Open Ownership and the United Nations Office on Drugs and Crime, the policy aligns with the multi‑pronged approach of the Financial Action Task Force to beneficial ownership disclosure. It prohibits bearer shares, mandates disclosure of nominee arrangements, and imposes proportionate sanctions for non‑compliance and false declarations.
“By strengthening beneficial ownership information disclosure, we are addressing critical gaps that enable corruption and financial crime in the country, complementing broader government efforts to combat corruption and illicit financial activities,” SEC Chairperson Francis Lim said.
“This policy underscores our unwavering commitment to transparency and accountability in the corporate sector, aligning the Philippines with global standards in combating money laundering and countering the financing of terrorism,” he added.
Covered entities
The proposed rules will apply to all entities under the jurisdiction of the Commission, including domestic stock and non-stock corporations, partnerships, foreign corporations, one-person corporations (OPCs), and incorporators, directors, trustees, officers, and shareholders or members of corporations, among others.
All beneficial owners of the covered entities shall be disclosed, with their respective categories reported. There are nine categories of beneficial owners under the draft, categorized from A to I, namely: Ownership, Contractual Control, Board Election Power, Dominant Influence, Direction of Board, Property Stewardship, Nominee Arrangements, Other Control Mechanisms, and Senior Management.
Under Category A, there is beneficial ownership when a natural person owns, directly or indirectly through a chain of ownership, at least 20 percent of the voting rights, voting shares, or capital of the reporting corporation.
This provision harmonizes the existing 25 percent threshold for corporations with the 20 percent threshold applied under the Implementing Rules and Regulations of Republic Act No. 9160, or the Anti-Money Laundering Act.
The succeeding categories identify a person’s exercise of control through contract, the ability to exert dominant influence, and the ability to provide directions, instructions or wishes in conducting the affairs of the corporation be carried out by a majority of its board members, among others.
The draft guidelines also specify who are considered beneficial owners of OPCs. In the case of OPCs with trusts as their single stockholder, all beneficiaries with defined beneficial interests in the trust; all settlors or grantors who established the trust; any other natural persons who exercise effective control over the trust; and all trustees or administrators exercising control over the trust asset shall be considered as beneficial owners.
Meanwhile, OPCs with estates as their single stockholder shall disclose all heirs and legatees with beneficial interests in the estate; any other natural persons who exercise effective control over the estate; and the executor or administrator of the estate.
Information to be disclosed
Under the guidelines, a covered entity shall disclose the complete name, specific residential address, nationality, and the date of when the individual became a beneficial owner, among others.
The entity must also disclose the specific category of beneficial ownership under which the individual qualifies; the percentage of ownership or voting rights, where applicable; the specific nature and means of control exercised by the beneficial owner; and the date when beneficial ownership was acquired or established.
The SEC may also require covered entities to produce other documents related to their beneficial ownership declaration, as well as the processes on their identification of their beneficial owners.
The beneficial ownership information shall be submitted by newly registered entities at the time of their incorporation or registration. No certificate of incorporation or license to do business shall be issued until such information is provided.
For existing entities, beneficial ownership information shall be provided with the next General Information Sheet following the effectivity of the rules. Any change in beneficial ownership shall be reported within seven days.
All beneficial ownership information shall be submitted through the Commission’s designated beneficial ownership registry.
The Commission shall endeavor to provide timely access to beneficial ownership information to authorized personnel within the Commission and law enforcement agencies, competent authorities, and other government agencies or bodies.
The information may also be made accessible to covered persons, as defined under the AMLA; media organizations whose members and/or employees may be held accountable for any wrongdoing, adhering to a journalistic code of conduct or code of ethics; and the general public, to the extent allowed by law, and in compliance with RA No. 10173, or the Data Privacy Act.
Penalties
The draft guidelines provide that corporations that fail to disclose their beneficial ownership shall be penalized based on their retained earnings or fund balance.
For stock corporations with retained earnings of less than P500,000, the first violation will be fined P50,000 and up to P500,000 for the fourth violation. Non stock corporations with the same fund balance will be fined P25,000 for the first violation and up to P250,000 for the fourth.
Meanwhile, the submission of false beneficial ownership information, shall subject the corporation to a fine of up to P2 million, after due notice. The corporation shall subsequently be dissolved.
Directors, trustees and/or officers of the reporting corporation who fail to exercise the due diligence required in ensuring compliance with the disclosure requirements shall likewise be fined P50,000 for the first violation, which could reach P1 million if it reaches a fourth violation.
The Anti-Money Laundering Division of the SEC Enforcement and Investor Protection Department is accepting comments for the draft memorandum circular until November 9. Comments may be sent via e-mail at eipd amld@sec.gov.ph.
