SEC Responds To Frequently Asked Questions (FAQs) On Beneficial Ownership

On 17 September 2021, the Securities and Exchange Commission (“SEC”) issued a notice to inform the public of its responses to the Frequently Asked Questions (“FAQs”), as a guide in complying with the Beneficial Ownership Disclosures.

The SEC clarified that all SEC-registered corporations, foreign and domestic stock and non-stock corporations who are required to submit the General Information Sheet (“GIS”), are mandated to disclose their beneficial ownership information. The following beneficial ownership information is required to be disclosed in the GIS annually:

1. Complete name which shall include surname, given name, middle name and name extension
2. Specific residential address
3. Date of birth
4. Nationality
5. Taxpayer Identification Number (TIN) or passport number for foreign nationals with no TIN
6. Percentage of ownership, if applicable.

In case of changes in the beneficial ownership information, an updated GIS shall be submitted to the SEC within seven (7) working days after such change occurred or became effective.

Beneficial owners of a corporation

A beneficial owner of a corporation is the natural person who: (1) ultimately owns or controls the corporation; or (2) exercises ultimate effective control over the corporation.

Beneficial owners refer to natural persons only. Hence, corporations cannot be considered as a beneficial owner.

A beneficial owner may be identified through the following: 

• Through ownership interest. The natural person who ultimately has controlling ownership interest (at least 25% of the voting shares, capital or voting rights) in the reporting corporation, directly or indirectly or through a chain of ownership. 
• Through other means. The natural person exercising control of the reporting corporation through other means. 
• Through position of control in the company. The natural person composing the Board of Directors/Trustees or any similar body and/or the senior managing official of the corporation.

In no instance can a corporation submit a Beneficial Ownership Declaration page without a named beneficial owner. If despite diligent efforts, the company is unable to identify the natural person who directly or indirectly owns at least 25% of the voting shares, voting rights or capital of the corporation, or through other means, the reporting corporation may disclose as its beneficial owner persons in control of the company by virtue of their positions therein.

The following persons may be considered as persons in control of the company:

• Members of the Board of Directors or Trustees or any similar body; and/or 
• Senior Managing Official such as the President, Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO), among others. 

Direct vs. Indirect Ownership

The SEC furthermore clarified when ownership is considered as direct, indirect or through a chain of ownership. 

Ownership is direct if the natural person himself owns the shares constituting not less than 25% of the voting capital/shares of the reporting corporation. However, ownership is indirect or through a chain of ownership if it is based on the percentage share in the voting shares or capital of the reporting corporation held by a natural person through a chain or through layers of corporate ownership. Thus, if a natural person owns 100% of the shares of A corporation that owns 25% of the shares of the reporting corporation, such a person should be disclosed as a beneficial owner since he/she indirectly owns at least 25% of the shares or capital of the reporting corporation. 

Situations or Arrangements Indicating Beneficial Ownership

The following situations or arrangements indicate beneficial ownership:

1. Owning, directly or indirectly or through a chain of ownership, at least twentyfive percent (25%) of the voting rights, voting shares or capital of the reporting corporation. 
2. Exercising control over the reporting corporation, alone or together with others, through any contract, understanding, relationship, intermediary or tiered entity. 
3. Having the ability to elect a majority of the board of directors/trustees, or any similar body, of the corporation. 
4.  Having the ability to exert a dominant influence over the management or policies of the corporation. 
5. The 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.
6. Acting as stewards of the properties of corporations, where such properties are under the care or administration of said natural person(s).
7. Actually owning or controlling the reporting corporation through nominee shareholders or nominee directors acting for or on behalf of such natural persons. 
8. Owning or controlling or exercising ultimate effective control over the corporation through other means not falling under any of the foregoing categories. 
9. Exercising control through positions held within a corporation.

Corporations must disclose the above situations in the Beneficial Ownership Declaration page of the GIS by specifying the letter indicating the situation applicable to a certain beneficial owner.