The Securities and Exchange Commission (SEC) now requires disclosure of beneficial owners of shares of stock in Philippine corporations. Corporate shareholdings have always been disclosed through the annual General Information Sheet, but prior to the issuance of SEC Memorandum Circular No. 17 dated November 27, 2018, disclosure of shareholders with legal title over the shares of stock was sufficient. This new Circular is intended to further tighten anti-money laundering regulations and prevent the use of corporate structures for money laundering and terrorist financing. Significantly, the Circular requires a disclosure of all intermediate layers of ownership of a company all the way up to a natural person through an ownership chart showing ownership. In case of any change in beneficial ownership, disclosure is required within 7 days.
A beneficial owner is a natural person (and individual) who ultimately owns or controls the corporation or who has ultimate effective control over the corporation. Ultimate effective control refers to a situation where ownership/control is exercised through a chain of ownership or by other means, such as:
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when an individual has the ability to elect a majority of board of directors
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when an individual has direct or indirect ownership of at least 25% of any category of voting shares or capital of a corporation
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when an individual has the power to direct voting of 25% of the shares of a corporation
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where an individual has the power to direct investment returns and disposition of 25% of the shares of a corporation
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where shares are held by members of an individual’s immediate family sharing the same household, by a partnership in which he/she is a general partner, by a corporation of which he/she is a controlling shareholders
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when an individual in fact has the ability to exert dominant influence over the management or policies of a legal person or arrangement
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where a majority of the members of the board are accustomed or under formal or informal arrangement to act in accordance with a given persons’ directions, instructions or wishes in conducting the affairs of the legal person.
The requirement to disclose beneficial ownership must be initially complied with beginning January 1, 2019.
