SEC Releases Guidelines for Mandatory Disclosure of Beneficial Ownership of Registered Corporations in the Philippines

In an effort to further combat money laundering and terrorist financing activities in the Philippines, the Securities and Exchange Commission (SEC) issued SEC Memorandum Circular (MC) No. 01-2021, otherwise known as the Beneficial Ownership Transparency Guidelines. 

The Transparency Guidelines seeks to supplement SEC’s existing framework on beneficial ownership disclosure to stop the misuse of corporate vehicles for illegal activities. 

Who is Affected by the Transparency Guidelines?

The provisions of the guidelines apply to the following: 

• nominee directors/trustees and nominee shareholders; 
• incorporators/applicants for incorporation; and
• all concerned corporations subject to the supervision and jurisdiction of SEC. 

Highlight Provisions of the Beneficial Ownership Transparency Guidelines

1. Nominee incorporators are required to disclose the beneficial owner of their corporation to SEC. The disclosure must be made within 30 days from SEC’s issuance of the Certificate of Registration. 
2. Nominee shareholders/directors/trustees are required to disclose their principals or nominators to SEC. They must make the disclosure within 30 days from the date they became nominee shareholders or directors/trustees.
   What Information About the Principal or Nominator is Required to be Disclosed to SEC?
   Newly-registered and existing corporations are required to disclose information about their nominator/principal to SEC, which shall include the following:

   Type of Principal/Nominator	Information About the Principal/Nominator
   Individual	Full name Country of residence Nationality Tax Identification Number (TIN) or passport number
   Corporation	Registered name Country of registration Names of incorporators and directors Beneficial owner TIN, if any
   Trust	Name Nationality Country of residence  TIN or Passport number of the trustor/s, trustee/s, and beneficiary/ies of the trust

   
   Who is Exempted from Submitting the Mandatory Disclosure Requirement?
   The following are not required to submit to SEC information about their principal/nominator:

   • PCD Nominee Corporation; and
   • All covered institutions enumerated under Section 3(a) of the Anti-Money Laundering (AML) Act, which are as follows:
     • Banks;
     • Non-banks; 
     • Quasi-banks;
     • Trust entities;
     • Foreign exchange dealers;
     • Pawnshops;
     • Money changers;
     • Remittance and transfer companies; and
     • Other similar entities and persons (including their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas).

   However, the exemption of the covered institutions is limited only to the nominee arrangements related to products or services already subject to Customer Identification Requirements under the AML Act.

3. The alienation, sale, or transfer of shares of stock shall be disclosed and recorded in the stock and transfer book (STB) of the issuing corporation within 30 days, subject to compliance with the requirements for the recording or registration of transfers under applicable regulations. No transfer or assignment of ownership or rights over shares of stock shall be effective unless the name of the transferee is properly indicated and said transferee is properly identified and the transaction is recorded in the STB of the issuing corporation in accordance with the Transparency Guidelines. The transfer of shares in a publicly-listed company made through the Philippine Stock Exchange (PSE) is not covered by the disclosure requirement. However, the disclosure of beneficial ownership information is still required in the General Information Sheet (GIS) of the publicly-listed company.
4. Payment of dividends shall be made only to the shareholder of record (i.e., person or entity whose name appears in the records of the corporation as the owner of shares of stock for which dividends are being paid), except for dividend payments made by publicly-listed companies to the depositary or custodian of shares for purposes of trading in the stock exchange.

Penalties for Non-Compliance

The SEC may impose sanctions if, after due notice and hearing, the agency finds that:

1. There is a willful violation of the circular or any related orders of SEC;
2. In the Mandatory Disclosure, there are untrue statements of any material fact required to be stated or necessary to make the statements therein not misleading; or
3. Any person has refused to permit any lawful examination in its affairs. 

The penalties that SEC may impose include the following:

1. Beginning March 1, 2021, a fine in the amount of at least ₱5,000 but not more than ₱2 million, plus an amount that is not more than ₱1,000 for each day of continuing violation but in no case to exceed ₱2 million. 
2. Suspension or revocation of the Certificate of Incorporation of the issuing corporation; or
3. Other penalties that SEC may impose.

Deadline for Submission of Mandatory Disclosure

The SEC requires newly-registered and existing corporations in the Philippines to submit their Mandatory Disclosure forms on or before March 31, 2021. 

For the step-by-step process of submitting the Mandatory Disclosure, you can access SEC’s notice for submission here. 

Definition of Terms

Beneficial Owner – shall refer to the natural person/s who ultimately owns/controls/exercises ultimate effective control over the corporation as defined and required to be disclosed in the General Information Sheet (GIS) pursuant to SEC Memorandum Circular No. 15, series of 2019 or any amendment thereto. 

Nominee Incorporator/Director/Trustee/Shareholder – shall refer to any natural person who acts for and on behalf of another person as incorporator, director, trustee, or shareholder. 

Principal/Nominator – shall refer to any person or entity for and on whose behalf another person acts as incorporator/applicant/director/trustee/shareholder. 

Bearer Shares – shall refer to equity securities owned by the person or entity that holds the physical certificate which enables the transfer of ownership of shares of stock by mere delivery of such certificate; it also refers to instruments that accord ownership in a juridical person to the person or entity who possesses or is the holder of the bearer share certificate. 

Bearer Share Warrant – shall refer to a document certifying that the bearer is entitled to a certain amount of the fully paid shares of stock of a corporation. 

Want to know more about the Beneficial Ownership Transparency Guidelines? Visit this link to get access to the official copy of the issuance. 

If this corporate advisory is not applicable to you, please disregard this email.