CORPORATIONS that do not disclose their beneficial owners will have to pay higher penalties, as well as face nonfinancial penalties, starting next year.
The Securities and Exchange Commission (SEC) issued Memorandum Circular No. 10, which increased the penalties on corporations that fail to disclose their beneficial ownership without any lawful cause. The circular will take effect on Jan. 1.
“It has been observed that despite the promulgation of the 2019 revision on the GIS (general information sheet) to include beneficial ownership information, a significant number of corporations have yet to declare their beneficial owners with the Commission,” the regulator said.
Aside from higher fines, the SEC said additional nonfinancial sanctions should be imposed on corporations “to make them proportional, effective, and dissuasive for noncompliance.”
This is in line with the recommendation of the Financial Action Task Force (FATF), which placed the Philippines in its “gray list” of jurisdictions subjected to increased monitoring for “dirty money” risks. It has been on the list since June 2021.
Under the circular, stock corporations with retained earnings of less than P500,000 will face fines ranging from P50,000 for the first violation to P500,000 for the fourth and subsequent violations. This is significantly higher than the previous penalties ranging from P10,000 to P100,000.
Nonstock corporations which have a fund balance of less than P500,000 will now pay a fine of P25,000 for the first violation, from P5,000 previously. The penalty will rise to P250,000 for the fourth and subsequent violations, from P50,000 previously.
Meanwhile, the SEC retained the fines for stock and nonstock corporations which have a retained earnings or fund balance of P500,000 up to P10 million. These corporations may pay up to four times the penalties imposed on those with retained earnings of less than P500,000.
The SEC will slap an additional fine of P1,000 on the corporation for each day of delay in the submission of the beneficial ownership information as a continuing violation. However, this may not exceed P2 million.
If found to have submitted false beneficial ownership information, a corporation may be penalized up to P2 million and “subsequently dissolved.”
Directors and officers of the corporation will also face higher penalties.
For the first violation, the company’s directors, trustees and officers will be fined P10,000 (from P5,000 previously). This will go up to P100,000 (from P50,000 previously) for the fourth and succeeding violations.
If found responsible for noncompliance of the beneficial ownership information disclosure, the directors, trustees and officers may face a fine of up to P200,000 each. They will also be disqualified from being appointed as directors, trustees and officers for five years.
The SEC can also revoke the corporation’s certificate of incorporation if it finds willful violation of this circular.
The SEC said the circular will also be applied to foreign corporations.
The GIS should now only be submitted through SEC’s Electronic Filing and Submission Tool as over-the-counter or mailed submissions will no longer be accepted. — Justine Irish D. Tabile
