Playing its part in the government’s anti-corruption drive, the Securities and Exchange Commission (SEC) has drafted rules mandating the disclosure of persons who, directly or indirectly, own a substantial stake or exercise control of a registered corporation or partnership.

The SEC is now seeking feedback from stakeholders for its draft Revised Guidelines on Beneficial Ownership Disclosure and Transparency, which consolidates all the rules and regulations on the identification, declaration, and submission of accurate beneficial ownership information by all registered corporations.

The SEC stated that the rules will help prevent the misuse of corporate vehicles for illicit purposes, combat financial crimes, and enhance transparency in public procurement processes through increased beneficial ownership transparency.

It will also ensure that law enforcement, competent authorities, and other authorized agencies have timely access to adequate, accurate, and up-to-date beneficial ownership information for the

fulfillment of their statutory mandates.

The rules are also seen to promote corporate governance, protect the integrity of the Philippine Financial System, strengthen the public confidence in the corporate and finance sector, and provide appropriate access to beneficial ownership information to the public.

It will also enhance transparency in public procurement processes and in the use of public funds and resources to prevent corruption, ensure accountability, and promote the efficient allocation

of public resources.

Based on the draft rules, beneficial owners who must be disclosed are natural persons (not juridical entities) who own, directly or indirectly, at least 20 percent of the voting rights, voting shares, or capital of the registered company.

This includes persons who exercise control over the reporting corporation through any contract, understanding, relationship, intermediary, or tiered entity, as well as those who can elect a majority of the board of directors or trustees, or any similar body, of the corporation.

Also included are persons who can exert a dominant influence over the management or policies of the corporation and someone whose directions, instructions, or wishes in conducting the affairs of the corporation are carried out by a majority of the board members.

The list also includes persons who have properties of corporations under their care or administration and those who actually own or control the corporation through nominee shareholders or nominee directors.

Also considered beneficial owners are those who ultimately own or control the firm, as shown by their exclusive use of corporate assets, receipt of profits and liquidating dividends, as well as those who exercise control through senior management positions within the reporting corporation.

The rules require the firms to disclose whenever a person becomes a beneficial owner or any changes in beneficial ownership within seven calendar days.

It also gives the SEC the authority to verify the accuracy, completeness, and timeliness of beneficial ownership information by comparing other corporate records, requiring additional documents to substantiate beneficial ownership claims, performing audits, and enlisting the aid of government agencies and the private sector in the verification process.

Penalties of up to ₱2 million may be imposed if, after due notice and hearing, the Commission finds that the reporting corporation has committed a violation of the guidelines by failing to disclose, without any lawful cause, its beneficial ownership.