Risks of Penalty for not Disclosing the Company’s Beneficial Ownership under the SEC MC No. 15, Series of 2019
MC No. 15 s.2019 – Amendment of SEC Memorandum Circular No. 17, Series of 2018 on the Revision of the General Information Sheet (GIS) to include Beneficial Ownership Information (“2019 Revision of the GIS”)
In preparing a General Information Sheet to be submitted with the Securities and Exchange Commission, we should be truly mindful of the blanks we leave behind.
Under Sec. 11 of Memorandum Circular No. 15, Series of 2019, if after due notice and hearing, the Commission finds that the reporting corporation has committed a violation of this Circular by failing to disclose, without any lawful cause, its Beneficial Owner in accordance with the provisions thereof, the reporting corporation shall be penalized as follows:
If a stock corporation had retained earnings of less than Php500,000.00, there would be penalties for violating certain rules.
The first violation would result in a penalty of Php50,000.00. This was meant to be a warning to the corporation to follow the rules in the future. If they failed to heed the warning, and committed a second violation, the penalty would increase to Php100,000.00. For the third violation, the penalty was increased to Php250,000.00. This was a substantial amount, meant to make the corporation think twice before committing any further violations. For the fourth and subsequent violations, the penalty was increased to Php500,000.00. This was the maximum penalty that could be imposed on a corporation, and it was meant to be a strong deterrent against further violations.
And for non-stock corporations with retained earnings of less than Php500,000.00, penalties are as follows:
For first violation, the corporation will be penalized Php25,000.00, for the second violation, the corporation will be penalized Php50,000.00, and for the third violation, the corporation will be penalized Php100,000.00, and for the fourth and subsequent violations, corporations involved will be penalized Php250,000.00.
As a reminder, for Stock Corporations with retained earnings or Non-Stock Corporations with fund balance of Php500,000.00 or more but less than Php5,000,000.00, the penalties shall be twice the amount of the penalties imposed for those with retained earnings or fund balance of less than Php500,000.00.
For Stock Corporations with retained earnings or Non-Stock Corporations with fund balance of Php5,000,000.00 or more but less than Php10,000,000.00, the penalties shall be thrice the amount imposed for those with retained earnings or fund balance of less than Php500,000.00.
For Stock Corporations with retained earnings or Non-Stock Corporations with fund balance of Php10,000,000.00 or more, the penalties shall be four times the penalties imposed for those with retained earnings or fund balance of less than Php500,000.00
The reporting corporation will be subject to an additional fine of Php1,000.00 per day of delay in submitting beneficial ownership information. However, the total amount of the fine shall not exceed Php2,000,000.00.
In this regard, disclosure under the GIS is a must. For instance, a stock corporation with a retained earnings or fund balance of Php20,000,000.00 will be penalized as follows: for the first violation, Php40,000.00; Php160,000.00 for the second violation; and Php200,000.00 for the third violation. For the fourth and subsequent violations, the penalty will be Php400,000.00 for failure to disclose beneficial ownership information.
If Directors/Trustees and Officers of the Corporation fail to exercise due diligence in ensuring compliance without lawful cause, they may be held liable after due notice and hearing.
But before that, the SEC will send the corporation a letter or Notice of Discrepancy reflecting the violations incurred and the total amount to be paid. The SEC will give the corporation a period of 10 days to contest the imposition of the penalty by showing lawful cause for the failure to disclose in your GIS, with the necessary documentary requirements to support your cause. Failure to submit such shall be construed as a waiver of right and makes the penalty/assessment final.
For your reading pleasure, you may refer to https://www.sec.gov.ph/mc-2019/mc-no-15-s-2019-amendment-of-sec-memorandum-circular-no-17-series-of-2018-on-the-revision-of-the-general-information-sheet-gis-to-include-beneficial-ownership-information-2019-revisio/#gsc.tab=0
DISCLAIMER: The advisory is not a substitute for an expert opinion and is purely a general research that may have not considered the entirety of other related topics. Any tax and/or compliance advice is not intended or written by the author to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on by the regulatory bodies, or (ii) promoting, marketing, or recommending to another party any matters addressed herein.
The opinion or advice expressed in this advisory is based on the facts and circumstances gathered. Any inaccuracy in any of the assumptions set forth above may have the effect of changing all or part of this report, and this report may not apply. The advice is based on our interpretation of the provisions of the Code, the Revenue Regulations promulgated and issued by the tax bureau, BIR positions as set forth in published Revenue Rulings, other pronouncement, orders and circulars, and judicial decisions in effect on the date of this report, any of which could be changed at any time. Any such changes may be retroactive and could significantly modify the statements and opinions/ advice expressed herein In effect, this might render the advisory obsolete or incorrect in partial or in full. We undertake no obligation to advise you of changes that may hereafter be brought to our attention.