Draft Revised Guidelines on Beneficial Ownership Disclosure (Philippines)

Key Proposed Reforms

Among the notable changes introduced in the Draft Guidelines are the following:

1) Lowered threshold for identifying beneficial owners

The reporting threshold for determining beneficial ownership based on direct or indirect voting rights in a reporting entity will be reduced from 25% to 20%, compared to the Existing Regulations. The SEC may further adjust this threshold in the future to align with evolving international standards and best practices.

Detailed guidance is also provided in the Draft Guidelines on calculating beneficial ownership in “special cases,” such as corporations with tiered or multi-layered ownership structures and cross-border arrangements.

For entities with complex ownership chains, indirect beneficial ownership is determined by multiplying the ownership percentages at each level of the corporate hierarchy, with no restriction on the number of layers considered. A natural person must be identified as a beneficial owner if they exercise effective control at any level, even when their computed ownership interest falls below the 20% threshold.

On the other hand, in cases involving ownership structures that span multiple jurisdictions, corporations are required to make “reasonable efforts” to trace beneficial ownership across all relevant jurisdictions. The SEC may accept certifications from foreign regulatory authorities as supporting evidence.

2) Creation of a Beneficial Ownership Registry

The SEC will establish a Beneficial Ownership Registry for the submission, maintenance, and access of beneficial ownership information. Access to the registry will be subject to data privacy compliance and information access protocols.

Verification of the accuracy, completeness, and timeliness of submitted information will be carried out by the SEC through audits and other compliance monitoring measures. To support this process, the SEC may request additional data from foreign jurisdictions and collaborate with relevant government agencies or private entities to validate the disclosed beneficial ownership details.

3) Changes to the reporting timelines

Under the Existing Guidelines, newly registered corporations were required to disclose beneficial ownership information within thirty (30) days from the issuance of their certificate of registration. In contrast, the Draft Guidelines mandate submission of such information at the time of incorporation or registration, with the issuance of a certificate of incorporation or license to do business conditioned upon compliance. Furthermore, any changes in beneficial ownership must be reported within seven (7) calendar days from the date of the change.

4) Substantially increased penalties for directors and officers

When directors or officers of a reporting entity fail to exercise due diligence in ensuring compliance with beneficial ownership disclosure requirements resulting in delayed submission or non-submission, the SEC may impose administrative fines on such directors or officers. Under the Existing Guidelines, these currently range from Php 10,000 to Php 100,000 depending on the nature and frequency of the violation. The Draft Guidelines propose increasing these penalties to Php 50,000 to Php 500,000, reflecting a more stringent approach to enforcement.

In addition to delayed reporting, cases involving false declarations will carry more severe consequences. Under the current framework, responsible directors or officers may be fined up to Php 200,000 and face disqualification from serving as corporate officers or directors for up to five (5) years. The Draft Guidelines raise the maximum fine to Php 1 million while maintaining the disqualification period.

This substantial increase in penalties suggests a stronger regulatory focus on accountability and highlights the expectation that directors and officers actively oversee compliance with disclosure obligations.

5) Encouraging whistleblowers to report violations

The Draft Guidelines encourage whistleblowers to report potential violations of the beneficial ownership disclosure requirements. Information received by the SEC shall be evaluated and, where appropriate, used to initiate formal investigations. Whistleblowers will be protected under the SEC’s whistleblower policy and may be compensated in a manner determined by the SEC.

The inclusion of whistleblower provisions in the Draft Guidelines appears to reflect an effort to enhance existing mechanisms for identifying potential regulatory breaches.

Conclusion

With regulatory reforms on the horizon, corporations are strongly encouraged to proactively evaluate and strengthen their internal controls and compliance systems. Aligning with the updated requirements, maintaining accurate records, and submitting disclosures promptly will be essential to mitigate risks and avoid potential sanctions, not only for the corporations, but also for their directors and officers, once the Draft Guidelines are adopted.