Beginning 31 July 2019, all General Information Sheet (GIS) due for submission by corporations shall include a Beneficial Ownership Declaration in the form prescribed by SEC Memorandum Circular No. 15-2019.
Corporations are now required to disclose in the Declaration the beneficial owner/s of their corporate shareholders. Previously, corporations were only required to disclose their direct shareholders regardless of whether or not these consisted of natural or corporate persons.
A “beneficial owner” is defined under the SEC Circular as the NATURAL PERSON/S who ultimately own/s or control/s, or exercise/s ultimate effective control over the corporation.
The Circular also provides for categories of beneficial owners arranged in order of priority for determining the beneficial owners of corporations. At the top of the list are the beneficial owners who directly and/or indirectly own at least twenty-five percent (25%) of the shares in the corporation. For corporations with multiple layers of corporate shareholders, this will entail tracing both the direct and indirect ownership of shares. If the beneficial owners cannot be determined based on the first category, the next category will apply and so forth.
Only after exhausting all the categories can the members of the board of directors or trustees be declared as the beneficial owners of the corporation.
Non-compliance with the beneficial ownership disclosure rules will expose not only the reporting corporation but also the directors or trustees to liability.
SEC-OGC Opinion No. 16-29 cites Section 2 of the Anti-Dummy Law in clarifying that management positions – such as that of a President or Vice President – may not be held by aliens. Likewise, SEC-OGC Opinion No. 16-02 cites the same provision of law in saying that an alien national cannot act as President/Chairman of the Board.
But, is an alien likewise prohibited from acting as the Chairman of the Board only and not holding another position concurrently? Based on SEC-OGC Opinion No. 07-07
, it appears that chairmanship can be so vested. Thus: “for as long as the association is not engaged in nationalized activity, a non-Philippine national may serve as a member of its board of trustees or be the chairman of the board… On the other hand, if the association engages in partly nationalized activities, foreign nationals may sit in the board in proportion to their allowable membership therein. In the same vein, an alien national may assume the post of the Chairman of the board whose act shall be limited to that of a presiding officer during board meetings.”
The Supreme Court recently upheld the constitutionality of SEC Memorandum Circular No. 8, Series of 2013. The salient points of said Memorandum Circular are as follows:
a. The covered corporations are those involved in areas of activities or enterprises specifically reserved, wholly or partly, to Philippine Nationals by the Constitution, the Foreign Investments Act, and other existing laws.
b. All covered corporations shall, at all times, observe the constitutional or statutory ownership requirement.
c. The required percentage of Filipino ownership must be met in both (a) the total number of outstanding shares of stock entitled to vote in the election of directors, and (b) the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors.
d. Corporate Secretaries of covered corporations are directed to monitor and observe compliance thereto. The Corporate Secretary may not delegate this responsibility without an express authority from the Board of Directors or Trustees.
e. Failure to comply will be punished with the administrative sanctions provided in Section 14 of the Foreign Investments Act as amended, summarized below:
Fine of ½ of 1% of the paid-in capital, but not more than Php5,000,000.00
President / officials responsible
Fine not exceeding Php200,000.00
Any person, firm, or juridical entity
Forfeiture of all benefits granted under the Foreign Investments Act as amended
The Securities and Exchange Commission (SEC) formally adopts the judicial affidavit rule in SEC Memorandum Circular No. 4 (series of 2016). The judicial affidavit rule will now have to be observed in all actions, proceedings and incidents requiring the reception of evidence before the SEC.
An alien cannot be elected as president/chairman or officer of a corporation that is engaged in a nationalised activity pursuant to the Anti-Dummy Law. This rule has been reiterated by the SEC in Opinion No. 16-02. The Anti-Dummy Law, however, allows an alien to be elected as director in proportion to his allowable participation or share in the corporation’s capital.
Petitions to set aside revocation orders pursuant to failure to comply with reportorial requirements may now be filed anytime subject to compliance with MC No. 5-2016. Thus, if you have a company that had its registration revoked because of failure to submit reportorial requirements (e.g., general information sheet, audited financial statements, etc.), and the deadline to file the petition to revoke the order has lapsed, you may still proceed to do so.
The newly elected President of the Philippines has announced a crackdown on online gambling facilities. It appears from the statements made that the new President is against gambling in general. This policy may affect the Philippine gaming industry.
Sales to the general public, through a single outlet owned by a manufacturer of products manufactured, processed or assembled in the Philippines, irrespective of capitalisation is not considered as retail, pursuant to Section 3(d) of the Retail Trade law and Section 2(d) of its Implementing Rules and Regulations. Please refer to SEC Opinion No. 16-03.
The Philippine Competition Commission issued recently issued the rules and regulations to implement Republic Act No. 10667, or the Philippine Competition Act. The regulations came into force on June 18, 2016 after being published on JUne 3, 2018. A copy of the regulations may be downloaded here.