Philippines – The Securities And Exchange Commission Issues New Form Of The General Information Sheet To Require Domestic Corporations To Disclose Beneficial Ownership Information.

29 December, 2018

 

Recent developments

 

To assist in its mandate in the implementation of the Anti-Money Laundering Act and to ensure timely access to adequate, accurate and current information on the beneficial ownership and control of corporations registered with the Securities and Exchange Commission (SEC), the SEC has issued Memorandum Circular No. 17 series of 2018 (Circular), revising the form of the General Information Sheet (GIS) to include information on beneficial ownership of Philippine domestic corporations. 

 

Implications for SEC-registered companies

 

All SEC-registered domestic corporations, stock and non-stock, are now required to disclose information on its beneficial owners in the GIS that is regularly filed with the SEC. For this purpose, an additional page called the "Beneficial Ownership Declaration" (Declaration) has been added to the form of the GIS.

 

What the regulation says

 

Under the Circular, "beneficial owner" is defined as any natural person who (i) ultimately owns or controls the corporation, and (ii) has ultimate effective control over the corporation.[1] The Circular provides that "ultimate effective control" refers to any situation in which ownership / control is exercised through actual or a chain of ownership or by means other than direct control. This may be achieved through, but not limited to, any of the following situations: 

 

• direct or indirect ownership of at least 25% of any category of voting shares or capital of a legal person, arrangement, understanding, relationship, or otherwise has or shares voting power; 
• the ability to elect a majority of the board of directors, or any similar body or a legal person or arrangement; or 
• any situation in which (i) a person has the ability in fact to exert a dominant influence over the management or policies of a legal person or arrangement; (ii) a majority of the members of the board of directors of such legal person are accustomed or under an obligation, whether formal or informal, to act in accordance with a given person's directions, instructions, or wishes in conducting the affairs of the legal person or arrangement.

 

The following information relating to the beneficial owner shall be provided: 

 

• complete name, which shall include the surname, given name, middle name and name extension (i.e., Jr., Sr., III, etc.);
• specific residential address;
• nationality;
• taxpayer identification number; and
• percentage of ownership, if applicable.

 

Where a corporation is owned through multiple layers, any intermediate layers of the company's ownership structure should be fully identified in the GIS and illustrated in an ownership chart that clearly shows the intermediate layers with ownership amounts.

 

In the case of trusts, the Declaration requires the corporation to identify the persons who control the trust and make investment decisions, trust beneficiaries, trustee and the individuals who furnish funds to the trust.

 

It should also be noted that the new form of the GIS includes an attestation on the part of the Corporate Secretary that by indicating the personal information of the relevant persons on the GIS, such persons have authorized the SEC to (i) collect, process and store the personal information, and (ii) share with and make available the GIS to interested parties in order to pursue legal purposes and legitimate interests, and comply with legal mandate. The Corporate Secretary also attests that the foregoing persons have been made aware of their rights under the Data Privacy Act.

 

The requirement on the foregoing disclosure shall be initially complied with beginning 1 January 2019.

 

Actions to consider

 

The Circular provides for new information and documents which SEC-registered corporations must submit to the SEC. To ensure compliance with the Circular, domestic corporations should familiarize itself with the new requirements and information which must be disclosed in the GIS, and institute the appropriate procedures to ensure timely gathering of the required information and consents to comply with the Circular.

 

1Under the Circular, "ultimate effective control" refers to any situation in which ownership / control is exercised through actual or a chain of ownership or by means other than direct control. This may be achieved through, but not limited to, any of the following situations:

 

• direct or indirect ownership of at least 25% of any category of voting shares or capital of a legal person, arrangement, understanding, relationship, or otherwise has or shares voting power, which includes the power to vote, direct the voting of, such security; and / or investment returns or power, which includes the power to dispose of, or to direct the disposition of such security; provided that, a person shall be deemed to have an indirect beneficial ownership interest in any security which is:
• held by members of his/her immediate family sharing the same household;     
• held by a partnership in which he/she is a general partner;
• held by a corporation of which he/she is the controlling shareholder; or
• subject to any contract, arrangement or understanding which gives him/her voting power or investment power with respect to such securities; provided, however, that a person shall not be deemed to be a beneficial owner of securities held by him/her for the benefit of third parties or in customer or fiduciary accounts in the ordinary course of business, so long as such shares were acquired by such person without the purpose or effect of changing or influencing the control of the issuer;
• the ability to elect a majority of the board of directors, or any similar body or a legal person or arrangement; or
• any situation in which:
• a person has the ability in fact to exert a dominant influence over the management or policies of a legal person or arrangement; or
• a majority of the members of the board of directors of such legal person or arrangement, or any equivalent body are accustomed or under an obligation, whether formal or informal, to act in accordance with a given person's directions, instructions, or wishes in conducting the affairs of the legal person or arrangement.

 

 

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