SEC to tighten rules on beneficial ownership

MANILA, Philippines —  The Securities and Exchange Commission (SEC) is set to introduce reforms for greater transparency in corporations’ beneficial ownership.

To push for greater transparency, the SEC has issued a 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.

The SEC said that the policy, developed in collaboration with Open Ownership and the United Nations Office on Drugs and Crime, 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.

Among the reforms are requiring the disclosure of varying controls that owners exercise and expanding access to such information.

“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,” Lim said.

The SEC’s 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) as well as incorporators, directors, trustees, officers and shareholders or members of corporations.

All beneficial owners of the covered entities must be disclosed, with their respective categories reported.

The draft guidelines also specify who are considered beneficial owners of OPCs.

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.

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.

Newly registered entities must submit their beneficial ownership information at the time of their incorporation or registration.

The SEC said that no certificate of incorporation or license to do business would be issued until such information is provided.

According to the SEC, it would 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.

Corporations that fail to disclose their beneficial ownership will 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 will 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.