In a recent opinion, the Securities and Exchange Commission (“SEC”) provided guidance on the proper treatment of shareholders who cannot be located or who fail to respond despite repeated notices from the corporation. In said opinion, the corporation attempted to reach out to its shareholders by publishing notices of the shareholders’ meetings in newspapers of general circulation and sending notices via registered mail to the shareholders’ last known addresses, however, some of the shareholders remained unresponsive.

According to the SEC, shareholders who can be identified but who are not responsive to the corporation’s notices may be considered dormant or inactive shareholders. The SEC clarified several important points regarding the legal status and rights of these shareholders.

The SEC opined that:

• The shares held by dormant or inactive shareholders continue to form part of the outstanding share capital of the corporation. As such, the dormant or inactive shareholders remain shareholders of record with full property rights. Accordingly, shares held by dormant or inactive shareholders must continue to be considered in determining the presence of a quorum for the holding of an election. Excluding such shareholders from the quorum count would unduly restrict the dormant or inactive shareholders’ right to vote.
• The SEC emphasized that the right to vote is an act of ownership available to the shareholder. Accordingly, the corporation or a corporate officer, acting as trustee, may not exercise the voting rights emanating from the shares unless proper authority exists, such as through a written proxy, a voting trust agreement, or a court appointment as executor, administrator, or receiver. The corporation may only act in a limited fiduciary capacity with respect to dormant or inactive shareholders. In particular, the corporation may safekeep the stock certificates of the latter, while exhausting all available means to locate the shareholders.
• Dormant or inactive shareholders remain entitled to any dividends declared by the corporation. These dividends, if any, must be credited in full to the shareholders. The mere lapse of time following a shareholder’s failure to claim dividends does not give rise to a presumption of ownership in favor of the corporation. Instead, the corporation should hold such dividends in trust for the benefit of the true owner who remains to be the dormant or inactive shareholder.

What if, as a result of factoring in the shares held by dormant or inactive shareholders, the corporation could not reach a quorum for purposes of holding an election?

The SEC recognized that the continued inclusion of the shares held by dormant or inactive shareholders in quorum computations may sometimes result in a corporation’s inability to obtain the required quorum for the election of directors or trustees. In such cases, the corporation or its shareholders may resort to the remedy provided under Section 25 of the Revised Corporation Code. Under this provision, the SEC may, upon the application of a shareholder, member, director, or trustee, and after verifying that an election has been unjustifiably not held, summarily order that an election take place. The SEC may also issue other appropriate orders, including the issuance of notice of the election, the designation of a presiding officer, and the setting the record date for determining shareholders or members entitled to vote.

Notably, Section 25 further provides that, notwithstanding any contrary provision in the articles of incorporation or bylaws, the shares of stock or membership represented at such meeting and entitled to vote shall constitute a quorum for purposes of conducting the election under said section.

The SEC’s opinion highlights that even where shareholders become unresponsive or difficult to locate, their ownership rights remain protected under the law. Corporations must therefore continue to recognize these rights while utilizing the remedies available under the Revised Corporation Code to address practical corporate governance challenges.

This article also appears here.

The content on this website is for general information only and does not constitute legal or other professional advice. You should not rely on it as a substitute for advice from a qualified lawyer who is familiar with your particular circumstances.

For legal advice, please book an appointment and/or contact us.

The 2026 Revised Beneficial Ownership Disclosure Rules took effect on 1 January 2026.

What does the 2026 Revised Beneficial Ownership Disclosure Rules require?

The 2026 Revised Beneficial Ownership Disclosure Rules requires the identification and disclosure to the SEC of the “beneficial owners” of a reporting entity.

To whom does the 2026 Revised Beneficial Ownership Disclosure Rules apply?

The 2026 Revised Beneficial Ownership Disclosure Rules apply to all natural and juridical persons within the jurisdiction of the Securities and Exchange Commission (“SEC”) of the Philippines. This includes:

• all domestic corporations;
• foreign corporations (ROHQ, Regional HQs of MNCs, representative offices, branch offices, and other foreign corporations licensed to do business in the Philippines);
• partnerships;
• one-person corporations (“OPCs”);
• incorporators, directors, trustees, officers, shareholders, or members, and beneficial owners of corporations; and
• persons filing for incorporation or registration with the SEC.

Who is a beneficial owner?

A beneficial owner refers to any natural person who ultimately owns or controls or exercises ultimate effective control over a corporation or legal entity.

What are the ways by which beneficial owners exercise ownership or ultimate effective control over a reporting entity?

Natural persons who are entitled to, and/or able to do any of the following with respect to a reporting entity may be deemed as beneficial owners:

Who do not qualify as beneficial owners?

The following do not qualify as beneficial owners:

• Those acting solely as agents, nominees, trustees, or in similar capacities on behalf of or under the direction of another person;
• The employees who do not have any ownership stake and effective control over a reporting entity, except those falling under Category I (Senior Management), if applicable;
• Those who act as executors, administrators, or legal representatives, unless falling under Category F (Property Stewardship); and
• Those holding shares or exercising control solely in their professional capacity as regulated service providers, unless falling under Category B (Contractual Control).

Is there a limit on the number of beneficial owners that may be declared by a reporting entity?

No limit.

May a single natural person simultaneously qualify as a beneficial owner under several categories?

Yes.

In the case of an OPC, who shall be deemed as a beneficial owner?

How is beneficial ownership computed where a reporting entity’s ownership structure is tiered?

A reporting entity is deemed to have a “tiered ownership structure” when the ownership stake in a reporting entity is held by entities that are, in turn, owned by other entities. In this scenario:

• Indirect beneficial ownership shall be computed by multiplying ownership percentages at each tier of the ownership structure;
• Ownership shall be traced through all types of legal entities and arrangements, without limit to the number of corporate layers; and
• A natural person shall be deemed as beneficial owner when he/she exercises effective control (through any of the categories of beneficial ownership mechanism) at any level of the ownership chain, even if his/her resulting ownership percentage does not reach 20%.

Does the beneficial ownership declaration include shareholders abroad?

Yes, as long as the shareholders have direct or indirect ownership stake in a reporting entity.

What are the disclosure requirements with respect to nominee arrangements?

Where a person (i.e., the nominee) acts as incorporator, director, trustee, or shareholder for another person (i.e., nominator), the nominee must disclose (i) his/her nominee status, and (ii) his/her nominator to the SEC. If the nominator is a corporation, its beneficial owners shall be disclosed to the SEC. If the nominator is a trust, the trustor, trustee, and beneficiary must be disclosed.

Where a person applying for incorporation or registration of an entity with the SEC does not act as nominee for any other person (in relation to an incorporation or registration application), such fact must also be declared to the SEC.

When should the disclosures required under the 2026 Revised Beneficial Ownership Disclosure Rules be submitted?

For newly-registered entities, the beneficial ownership declaration shall be made at the time of incorporation or registration.

For existing entities, the beneficial ownership declaration shall be made when they file their annual General Information Sheet (“GIS”). Note that the GIS should be submitted to the SEC within 30 calendar days after the annual shareholders’/members’ meeting, and if no such meeting was held, on or before 30 January of the following year.

Any change in beneficial ownership shall be reported within 7 calendar days from the occurrence of such change.

How is the beneficial ownership declaration made?

The beneficial ownership declaration shall no longer form part of the GIS. The beneficial ownership declaration will be made through the SEC designated platform for the purpose (i.e., Hierarchical and Applicable Relations and Beneficial Ownership Registry (“HARBOR”)) available at https://harbor.sec.gov.ph/login. Note that only the authorized filers of a reporting entity may access HARBOR.

This article also appears here.

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When Annie went to the Register of Deeds (“RD”), the RD refused to register the transfer of title unless Annie could present, among others, the Electronic Certificate Authorizing Registration (“eCAR”) from the Bureau of Internal Revenue (“BIR”). The eCAR serves as proof of payment of the national taxes due from the transfer. Annie thinks she is not required to pay any taxes to the BIR given that the subject property was sold in a public auction by the local government.

Are there taxes to be paid to the BIR following the non-redemption of delinquent real property sold in a public auction by the local government?

Yes. In case of non-redemption of properties sold during involuntary sales, regardless of the type of proceedings and personality of mortgagees/sellers, the following taxes shall be due from the sale:

In the above cases, the buyer/winning bidder of the subject property is deemed to have withheld the CGT or CWT due from the sale. The buyer/winning bidder shall then file the CGT or CWT return and remit the tax due to the BIR.

The following taxes also generally apply unless the taxpayer has a legal basis for exemption:

Anyone intending to bid for delinquent real properties for sale at public auctions conducted by the local governments should consider these taxes, among others, in their budget for the purchase of the properties.

The content on this website is for general information only and does not constitute legal or other professional advice. You should not rely on it as a substitute for advice from a qualified lawyer who is familiar with your particular circumstances.

For legal advice, please book an appointment and/or contact us.

Notarization refers to the process of having a document certified by a duly commissioned notary public.

Why have a document notarized?

Having a transaction document properly notarized converts such transaction document into a public document. A public document is admissible as evidence in court without further proof of its authenticity.

Assuming that everything else is properly done and the subject transaction is not among those specifically required by law to appear in a public instrument, a transaction document (e.g., a contract) is however generally valid and enforceable between the parties irrespective of whether it has been notarized or not.

Where should you have a document notarized?

To ensure proper notarization, you should bring the document for notarization to a duly commissioned notary public in the place of execution/signing of the document. For example, if the document has been/will be signed in City A, (i) the notary public should be duly commissioned, and (ii) the act of notarization should also be done in the same City A.

How can you verify that the notary public is duly commissioned in the place of execution of the document?

You may ask the notary public for a copy of (i) his/her certificate of membership in the Philippine bar, (ii) his/her Integrated Bar of the Philippines (IBP) identification card, (iii) the court order appointing him/her as notary public, and (iv) the corresponding notarial commission issued by the court.

The place and validity period of his/her notarial commission are provided in the court order and notarial commission. The place of commission should cover the place of execution/signing of the document. The date of execution/signing of the document should be within the validity period of the notary public’s notarial commission.

What should you do before going to/during your appointment with the notary public?

To ensure a smooth notarization process, set aside time for the following:

1. Understand the subject transaction. If you do not yet have a document covering the transaction, have the notary public or your go-to lawyer prepare the document. If you already have the document intended to cover such transaction, read and understand the document. Ensure that the document properly captures the subject transaction. The notary public will verify that you understand the consequences of the transaction, and you are voluntarily entering into said transaction.
2. Allocate sufficient originals of the document for the parties, the notary public, and other third parties, as applicable. 
3. Set aside time to personally appear before the notary public. A notary public may not properly notarize a document without having the relevant signatory/ies to the document personally appear before him/her to attest to the truth of what is provided in the document.
4. Bring valid (i.e., current and not expired) government identification cards (for example, passport, driver’s license, UMID, Philippine national ID) that bear your photograph and signature. This allows the notary public to properly identify you. This applies to the signatories and witnesses, if any.

Why should you care that a document is properly notarized?

Improper/defective notarization has specific consequences per document type. Ordinary documents that have defective notarization remain effective between the parties but are stripped of their public character (i.e., effectively deemed unnotarized). Solemn contracts or those that require certain legal formalities, however, may be deemed invalid or unenforceable, as the case may be, if they are improperly notarized.

Observing proper notarization may be deemed inconvenient by some. At the end of the day, however, it is a means to protect the underlying transaction as well as the parties.

The content on this website is for general information only and does not constitute legal or other professional advice. You should not rely on it as a substitute for advice from a qualified lawyer who is familiar with your particular circumstances.

For legal advice, please book an appointment and/or contact us.

KM Law is a full-service law office based in the Philippines with special focus on corporate and transactional work.

Kim Magtoto established KM Law after working for more than eight years in reputable law firms in the business districts of Ortigas and Makati and in the corporate legal department of the oldest bank in the Philippines. Her past work experience allowed her to deepen her knowledge and hone her skills in the fields of corporate law, banking and finance, project development, construction, mergers and acquisitions, data privacy, and technology.

KM Law aims to provide thorough but pragmatic, and hands-on legal solutions to its clients.

For legal advice, please book an appointment and/or contact us.