An Overview of SEC Memorandum Circular No. 17, Series of 2018

Starting January 2019, all domestic corporations, stock and non-stock, registered with the Philippine Securities and Exchange Commission (SEC) will be required to disclose in their General Information Sheets (GIS) their beneficial owners. Using a revised GIS form, corporations are now required under SEC Memorandum Circular No. 17, Series of 2018 (SEC MC 17), to provide the following information on their beneficial owners:

1. Complete name (surname, given name, middle name and name extension);
2. Specific residential address;
3. Nationality;
4. Tax Identification number; and
5. Percentage of ownership.

SEC MC 2017 defines “beneficial owner” as any natural person who ultimately owns or controls the corporation; or has ultimate effective control over the corporation. “Ultimate effective control” is a situation in which ownership/control is exercised through actual or a chain of ownership or by means other than direct control. There is “ultimate effective control” under the following situations:

1. When there is direct or indirect ownership of at least 25% of any category of voting shares or capital of a legal person or arrangement;
2. When there is the ability to elect a majority of the board of directors, or any similar body, of a legal person or arrangement;
3. Any situation in which (i) any person has the ability to exert a dominant influence over the management or policies of a legal person or arrangement; or (ii) 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.

Where a corporation is owned through multiple layers, the corporation is further required to identify these intermediate layers of ownership in its GIS and to attach an illustration of its ownership structure showing respective ownership amounts.

The SEC explains that these additional disclosures are intended to assist in the implementation of the Philippine Anti-Money Laundering Act, as amended, and to ensure timely access to “adequate, accurate and current” information on the beneficial ownership and control of covered corporations which would then supposedly prevent their “misuse for money laundering and terrorist financing purposes.” It is worth noting as well that SEC MC 17 authorizes the SEC to validate the beneficial ownership information that a corporation provides in its GIS through on-site inspection of the corporation’s books and records and/or through other means available.