Primer on the Beneficial Ownership Information on the Revised General Information Sheet
With the issuance of the Securities and Exchange Commission Memorandum Circular No. 15, Series of 2019, all SEC registered domestic corporations are now required to disclose their beneficial owners in their General Information Sheet (GIS). The GIS forms provided in the circular are due for submission since 31 July 2019.
What is beneficial ownership?
A “beneficial owner” refers to any natural person who (1) ultimately owns or control or (2) exercises ultimate effective control over the corporation. This definition covers the natural person who actually owns or controls the corporation as distinguished from the legal owners.
The “beneficial ownership information” pertains to the identification documents or information on the beneficial owners of the corporation as required under the aforementioned circular.
Information to be disclosed in the GIS
Under Section 3, all SEC registered corporations are required to take reasonable measures to obtain and hold up-to-date information on their beneficial owners and to disclose such in a timely manner in their GIS.
The GIS has been revised to include the information on the beneficial owner such as the complete name, specific residential address, date of birth, nationality, tax identification number, and percentage of ownership, if applicable. Nonetheless, the information will not be uploaded to the publicly accessible electronic database of the SEC. Instead, the information will be made accessible or available in a timely manner to competent authorities for law enforcement and other lawful purposes.
Beneficial ownership will be determined based on (1) the identity of the natural person who ultimately has controlling ownership interest in the corporation, (2) the identity of the natural persons exercising control of the corporation through other means, and (3) the identity of the natural persons composing the Board of Directors/Trustees or any similar body and/or the senior managing official of the reporting corporation.
Thus, a natural person who ultimately has controlling ownership interest in the corporation, it is provided that any natural person directly or indirectly, or through a chain of ownership, owning at east twenty-five percent (25%) of the voting shares or capital of the corporation, or at least twenty-five percent (25%) of the voting rights thereon will be considered as a beneficial owner under the first circumstance.
Under the third exceptional circumstance where no natural person can be identified as ultimately owning or controlling or exercising ultimate effective control over the corporation through controlling ownership interests, controlling voting rights or through other means, the identity of the natural persons composing the Board of Directors/Trustees or any similar body and/or the senior managing official of the reporting corporation must be provided. The corporation must be able to demonstrate that it has already exhausted all other means of identifying the beneficial owner, subject to verification and strict monitoring the SEC.
The Commission must be timely appraised of any relevant changes in the submitted beneficial ownership information as they rise. Under Sec. 7 of the circular, an updated GIS shall be submitted to the SEC within seven (7) working days after the occurrence or effectivity of such change.
Corporations with multiple layers of corporate stockholders are also subject to the same rule. If the said corporation failed to comply, it shall submit its updated GIS within thirty (30) working days from the time such change occurred or became effective with an explanation for the failure to submit within the prescribed period.
Obligation of Directors/Trustees and Officers
The circular requires Directors/Trustees and Officers to exercise due diligence in ensuring that the requirement of disclosure be complied with. As such, reasonable measures must be undertaken to obtain and hold updated information on the beneficial owners of the corporation and to ensure that it will be timely disclosed in their GIS.
Board and Senior Management oversight in ensuring observance of the procedures is included as part of due diligence measures.
Validation of Information
The Commission may verify the beneficial ownership information in the GIS by means of an on-site inspection of the corporation books and records and/or through other available means including but not limited to information obtained from other sources such as the books and records of other corporate entities and data gathered by law enforcement and other government agencies and/or the Anti-Money Laundering Council (AMLC) in the exercise of their respective functions.
Penalties
Under Section 11 of the circular, failure of a domestic corporation to disclose its beneficial ownership constitutes a violation of the circular subjecting the said corporation to penalties, as follows:
For Stock Corporations with retained earnings of less than Php 500,000:
First violation Php 10,000
Second violation Php 20,000
Third violation Php 50,000
Fourth and subsequent violations Php 100,000
For Non-Stock Corporations with fund balance of less than Php 500,000:
First violation Php 5,000
Second violation Php 10,000
Third violation Php 20,000
Fourth and subsequent violations Php 50,000
For stock corporations with retained earnings or non-stock corporations with fund balance of Php 500,000 or more but less than Php 5,000,000, the penalties shall be twice the amount imposed above.
For stock corporations with retained earnings or non-stock corporations with fund balance of Php 5,000,000 or more but less than Php 10,000,000, the penalties shall be thrice the amount imposed above.
For stock corporations with retained earnings or non-stock corporations with fund balance of Php 10,000,000 or more, the penalties shall be four times the amount imposed above.
After due notice and hearing, corporate Directors/Trustees and/or Officers who fail to exercise due diligence in ensuring the compliance with the disclosure of beneficial ownership requirement shall be held liable by the Commission. Penalties to be imposed on such erring directors, trustees, and/or officers are:
First violation Php 5,000
Second violation Php 10,000
Third violation Php 20,000
Fourth and subsequent violations Php 50,000
Failure to submit the GIS with the required beneficial ownership information constitutes prima facie proof of violation.