“The most significant feature of the misuse of corporate vehicle is the hiding of the true beneficial ownership.”
How to identify the beneficial owner of a corporation
The webinar covered all aspects of Beneficial Ownership of a corporation. To provide some context, the Anti-Money Laundering Division of the Enforcement and Investor Protection Department is responsible for ensuring that all SEC-registered entities adhere to the standard procedures established by the appointed international standard-setting bodies in order to avoid money laundering and terrorist financing.
Difference of Legal Ownership vs. Actual Ownership or Ultimate Effective Control
Legal Ownership is referred to as the “natural or legal person” who owns the corporation or the person who is in the corporation’s “legal title on the paper”.
Beneficial Owners are individuals who have actual ownership and have received actual advantages from the corporation’s revenue or assets. They also have influence over property rather than legal persons.
SEC Memorandum Circular No. 15, Series of 2019 (2019 Revision of GIS)
Section 3. Disclosure of Beneficial Ownership Information
To ensure timely access to adequate, accurate and current information on the beneficial ownership and control of SEC registered corporations, all SEC registered corporations are required to take reasonable measures to obtain and hold up-to-date information on their beneficial owners as defined herein and to disclose the same in a timely manner in the GIS. Accordingly, the GIS is hereby revised to include such information.
Ultimate Effective Control may refer to any situation in which ownership or control is exercised to actual or chain of ownership. This kind of control is exercise by means other than direct control through the following:
Category A: Natural person(s) owning directly or indirectly or through a chain of ownership, at least twenty-five percent (25%) of the voting rights, voting shares of the capital of the reporting corporation.
Remember: Despite the fact that he is not listed as a stockholder in the reporting company, he must be declared as a beneficial owner.
Category B: Natural person(s) who wields control either alone or in collaboration with another person via a contract, understanding, relationship, relationship, intermediary, or tiered entity.
Category C: Natural person(s) having the ability to elect a majority of the board of directors/trustees, or any similar body of the corporation.
Category D: Natural person(s) having the ability to exert a dominant influence over the management or policies of the corporation.
Category E: Natural person(s) whose directions, instructions or wishes in conducting the affairs of the corporations are carried out by majority of the members of the board of directors of such corporation who are accustomed or under an obligation to acting accordance with such person’s direction, instruction or wishes.
Category F: Natural person(s) acting as steward of the properties of corporations, where such properties are under the care or administration of said natural person(s).
Category G: Natural person(s) who actually own or control the reporting corporation through nominee shareholders or nominee directors acting for or on behalf of such natural persons.
Category H: Natural person(s) owning, controlling, or exercising ultimate effective control over the corporation through other means not falling under any of the foregoing categories.
Category I: Natural person(s) exercising control through position held within the corporation.
Revision of GIS of Foreign Corporations to Include Business Ownership
Section 2. Disclosure of Beneficial Ownership Information
All SEC registered foreign corporations are required to disclose their beneficial owners int eh GIS. For this purpose, the GIS to be submitted by the foreign corporations is hereby revised to include information on beneficial owners as provided for and defined under SEC Memorandum Circular No. 15, Series of 2019.
SEC Memorandum Circular No. 10, Series of 2022 – Non-Financial Penalties
- Suspension
- Revocation for the corporation
- Disqualification for the member of the board or corporate officers.
It also clarified matters on submission specifically.
- The allowance of submission of a passport in lieu of the TIN for foreign person; and
- Setting the reckoning date when there is a change in Beneficial Ownership from 7 days to 30 days in all circumstances giving the corporations time to comply.
Penalties for:
- Non-Disclosure of Beneficial Ownership
- Stock Corporations – 50,000 to 2,000,000
- Non-Stock – 25,000 to 1,000,000
- Directors/Officers/Trustees – 10,000 to 100,000
- False Disclosure
- Stock and Non-Stock – up to 2,000,000
- Directors/Officers/Trustees – up to 200,000
- Non-Financial Penalties
- Corporation – Suspension/Dissolution
- Directors/Officers/Trustees – Disqualification
To prevent penalties, make sure to follow the guidelines below:
Subscribe/Register in the eFAST,
Ensure that you submit on time,
Correctly declare your beneficial owner.
Resource speaker: Atty. Daniel Luis P. Macalino
Chief Counsel
Anti-Money Laundering Division
Enforcement and Investor Protection Department
Reference: https://www.facebook.com/PhilippineSEC
