Understanding beneficial ownership and the new GIS requirements

The General Information Sheet (GIS) is an important document that companies submit to the Securities and Exchange Commission (SEC) every year. It includes pertinent information, such as:

 

  • The address of the corporation’s principal office
  • SEC registration date and registration number
  • Fiscal year-end
  • Complete addresses and TIN numbers of each company director

 

New rules on declaring beneficial ownership of companies

 

The SEC released Memorandum Circular No. 17 in November 2018. It states that domestic stock and non-stock corporations that are registered with the agency must include beneficial ownership information in their General Information Sheets effective January 1, 2019.

 

Beneficial ownership applies to the natural person who owns the corporation and has “ultimate effective control” over it, whether through shares, voting power, or investment returns. Natural persons who have at least 51% control or ownership of a corporation automatically qualify as a beneficial owner.

 

Persons who have indirect beneficial ownership in the company must also be declared in the GIS. Indirect beneficial ownership applies to people who are:

 

  • Members of the beneficial owner’s immediate family who share the same household
  • Partners in a general partnership
  • Controlling shareholders of a corporation
  • Those given voting or investment power through a contract or formal arrangement

 

A person is not considered a beneficial owner if the shares he or she owns do not give him or her any power or control over the company.

 

Addition of beneficial ownership information

 

In the updated GIS, the Beneficial Ownership Declaration page must contain the following information:

 

  • he beneficial owner’s complete name
  • esidential address
  • ationality
  • ax identification number
  • ercentage of ownership (if applicable)

 

The information stated in the Beneficial Ownership Declaration page will be verified through an inspection of the books and records of the company conducted by the SEC. Any changes in beneficial ownership information must be reflected through an updated GIS, which needs to be submitted within seven (7) days after the change is put into effect.

 

The SEC has stopped accepting GIS submissions that do not include beneficial ownership information since March 1, 2019. Should a company fail to submit their GIS, it will be considered as a non-filer and will be subject to corresponding penalties.

 

Regulations for companies owned through multiple layers

 

If the company has multiple layers of ownership, it is required to identify the structure of ownership through an ownership chart attached to the GIS. This chart should indicate all the intermediate layers of ownership and the natural persons with their respective ownership amounts.

 

How the updated GIS helps the implementation of the Anti-Money Laundering Act of 2001

 

The Anti-Money Laundering Act of 2001 (Republic Act No. 9160) is a law that aims to put a stop to any unlawful monetary transactions that occur behind closed doors.

 

The addition of beneficial ownership information as a requirement in companies’ General Information Sheets is a means to prevent the misuse of legal business entities as money laundering and terrorist financing vehicles. Through the GIS, the SEC improves the transparency of companies, providing them with a formal means to declare the true terms of their ownership.

 

Learn more about the important legal requirements you need to understand when running a business in the Philippines. Contact FilePino today at +1.806.553.6552 (USA) or +63.917.892.2337 (Philippines).