By: Euney Marie J. Mata-Perez on January 17, 2019

All corporations are now required to disclose their ultimate beneficial owners. This requirement is no longer limited to publicly-listed corporations.

In Securities and Exchange Commission’s (SEC) Memorandum Circular No. 17, Series of 2018, SEC has required all SEC-registered domestic corporations, both stock and non-stock, to disclose their “beneficial owners” in their respective General Information Sheets (GIS) effective January 1, 2019. The SEC has revised the GIS form or template to include such information. The memorandum was issued pursuant to the SEC’s mandate to assist in the implementation of Republic Act No. 9160, or the “Anti-Money Laundering Act of 2001, as amended (AMLA), more specifically the Anti-Money Laundering Council Regulatory Issuance A, B, and C, No. 3, Series of 2018 (issued on Nov. 23, 2018) which outlines the Guidelines in Identifying Beneficial Ownership (the AMLC Guidelines).

Like the AMLC Guidelines, the memorandum defines “beneficial owner” as “any natural person who: (1) ultimately owns or controls the corporation; or (2) has ‘ultimate effective control’ over the corporation.”

“Ultimate effective control” refers to any situation where control or ownership is exercised through actual or a chain of ownership or other means, such as the following: (a) direct or indirect ownership of 25 percent of the voting stock of a corporation, (b) ownership of shares of the immediate family sharing the same household, (c) ability to elect majority of the directors or trustees, and (d) ability to exert a dominant influence of the management or policies of the entity.

The following information on the beneficial owner are required to be stated in the GIS: (1) complete name, which shall include the surname, given name, middle name and name extension, (2) specific residential address; (3) nationality; (4) tax identification number; and (5) percentage of ownership, if applicable. The ownership of the corporation through multiple layers shall be illustrated in an ownership chart to be attached to the GIS.

Banks also now require the applicants to submit documents to prove the identity and existence of the controlling foreign shareholder or parent entity when new corporations with substantial foreign shareholdings apply to open bank accounts. Thus, they require the submission of articles of association or incorporation and list or registry of stockholders of the foreign beneficial owner.
Because the entity is registered abroad, the documents must be duly authenticated or consularized by the Philippine consulate or embassy abroad.

It should also be recalled that in Revenue Memorandum Circular No. 73-2014, the Bureau of Internal Revenue (BIR) has required the withholding of dividends paid to Filipino Philippine Central Depository (PCD) nominees at the rate of 10 percent (unless it is proven that the stockholder is a domestic corporation which should be exempt) or 30 percent, if the PCD is non-Filipino, since it is deemed to be a non-resident foreign corporation (unless it is proven that the stockholder is a resident/non-resident alien or a resident foreign corporation which is entitled to a lower rate). In effect, the BIR is requiring the disclosure also of the beneficial owners of the PCD accounts to determine the appropriate taxes; otherwise, it shall impose the higher taxes. To prove that the income recipient is entitled to lower or preferential tax rate, information and document—such as Articles of Incorporation or Certificate of Non-Registration—which will reveal the identity of the income recipients will have to be submitted.

Publicly-listed companies have been required to disclose their beneficial owner thresholds (5 percent and 10 percent) pursuant to the Securities Regulations Code. Banks have also been required to disclose to the Bangko Sentral ng Pilipinas (BSP) their beneficial owners and related interests, and to seek approval from the BSP for their holdings as per specific BSP rules (Circular 238 on
“Beneficial ownership disclosure of bank shares” and Circular 332 on “Substantial shareholding reporting of all shares” when the beneficial ownership in the bank stocks reaches certain levels).

With this new GIS requirement, the obligation to disclose ultimate beneficial owners has been extended to all corporations alike. Also, the threshold for control is 25 percent ownership of the voting shares. Generally, it is ownership of more than a majority of the stocks or voting stocks that is deemed to give rise to control. The SEC has apparently reduced the threshold for control for GIS reporting purposes. It should be noted that all GIS filed with the SEC are deemed public documents, which could be accessed in the SEC website by anybody.

These new GIS disclosure rules show that the SEC is requiring more transparency on entities doing business in country, in light of the objectives of the AMLA.

#CorporationLaw #Beneficialowner #Disclosure #AMLA #SEC #BeneficialOwnershipDisclosureofbankshares #GIS 

Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com.

From The Manila Times website on January 17, 2019

https://www.manilatimes.net/all-corporations-required-to-disclose-beneficial-owners/497505/