Disclosure of Beneficial Ownership for Companies Engaged in Mineral, Oil and Gas Industries in the Philippines

The Philippine Extractive Industries Transparency Initiative (PH-EITI) is an initiative instituted pursuant to Executive Order No. 147, series of 2013. PH-EITI is mandated to mainly ensure its commitment to the implementation of the EITI Standards which is a set of global standards that promote transparency and accountability in extractive industries and in government. Implementing countries, such as the Philippines, are required to file annual EITI Reports to ensure adherence with the EITI Standards.

Section 2.5 of the EITI Standards recommends that implementing countries maintain a publicly available register of the beneficial owners of the companies engaged in exploration or production of oil, gas or mining; and that if possible, the beneficial ownership information should be incorporated in existing filings by companies to corporate regulators. Pursuant to this, companies that are engaged in mineral, oil and gas industries are required to disclose beneficial ownership information to PH-EITI who, in turn, will report such compliance of the companies to EITI in a report to be submitted by 01 January 2020.

In the implementation thereof, the PH-EITI also coordinates with the Securities and Exchange Commission as part of the latter’s regulatory functions and pursuant to its role to combat money laundering. Previously, the SEC has explained that the rules of disclosure on beneficial ownership are intended to assist in the implementation of our anti-money laundering laws.

Consequently, SEC Memorandum Circular (MC) No. 15, s. 2019, which contains the corresponding guidelines and the template for the Beneficial Ownership Declaration (BOD) form to be submitted to the SEC together with the General Information Sheet (GIS), shall apply in the determination of beneficial ownership of companies reporting to PH-EITI. The following categories outlined in SEC MC No. 15 on who is the beneficial owner of a company shall apply:

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 or capital of the reporting corporation.

B. Natural person(s) who exercise control over the reporting corporation, alone or together with others, through any contract, understanding, relationship, intermediary or tiered entity.

C. Natural person(s) having the ability to elect a majority of the board of directors/trustees, or any similar body, of the corporation.

D. Natural person(s) having the ability to exert a dominant influence over the management or policies of the corporation.

E. Natural person(s) whose directions, instructions, or wishes in conducting the affairs of the corporation are carried out by majority of the members of the board of directors of such corporation who are accustomed or under an obligation to act in accordance with such person’s directions, instructions or wishes.

F. Natural person(s) acting as stewards of the properties of corporations, where such properties are under the care or administration of said natural person(s).

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.

H. Natural person(s) ultimately owning or controlling or exercising ultimate effective control over the corporation through other means not falling under any of the foregoing categories.

I. Natural person(s) exercising control through positions held within a corporation (i.e., responsible for strategic decisions that fundamentally affect the business practices or general direction of the corporation such as the members of the board of directors or trustees or similar body within the corporation; or exercising executive control over the daily or regular affairs of the corporation through a senior management position). This category is only applicable in exceptional cases where no natural person is identifiable who ultimately owns or exerts control over the corporation, the reporting corporation having exhausted all reasonable means of identification and provided there are no grounds for suspicion.

In a Workshop on Beneficial Ownership held last 18 October 2019 in Makati City by the PH-EITI in cooperation with the SEC, participating companies were reminded that they are given the latitude to identify the applicable category of beneficial ownership, as described under SEC MC No. 15, and that disclosure is not limited to one beneficial owner or one category. In filling up the new BOD form, the SEC requires disclosure of the full name of the individual beneficial owner, residential address (not office address), nationality, date of birth, tax identification number, percentage of ownership (for stock corporations) or percentage of voting rights (for non-stock corporations), type of beneficial ownership, and category/ies of beneficial ownership.

Considering the nature of the information requested in the BOD form, concerns have been raised on the privacy of the information to be submitted. The SEC, however, explained that the BOD form will not be uploaded to the SEC i-View but the SEC can validate the accuracy of the information recorded therein i.e. if the disclosed beneficial owner is correct based on available records.

For more information, you may call the Enforcement and Investor Protection Department of the SEC at 02 8818-5704.

Click here for a copy of the EITI Standard.

Click here for a copy of SEC MC No. 15, series of 2019.

Click here to read related article of “An Overview of SEC Memorandum Circular No. 17, series of 2018.”

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