SEC tightens sustainability, ownership disclosure rules for companies

By Alexandria Grace C. Magno

THE Securities and Exchange Commission (SEC) has mandated publicly listed companies (PLCs) and large non-listed entities (LNLs) to adopt Philippine Financial Reporting Standards (PFRS) S1 and S2 for sustainability disclosures, with phased implementation starting in fiscal year 2026.

Memorandum Circular (MC) No. 16, Series of 2025, provides guidelines for sustainability reporting and a roadmap for PLCs and LNLs to implement the new standards.

Beginning 2026, covered entities must follow PFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and PFRS S2, Climate-related Disclosures, in a tiered approach based on market capitalization or annual revenue.

Tier 1 covers PLCs with market capitalization over P50 billion as of Dec. 31, 2025, with reporting starting in 2027. Tier 2 includes PLCs with market capitalization from P3 billion to P50 billion, with reporting starting in 2028.

Tier 3 comprises PLCs with market capitalization of P3 billion or less and LNLs with annual revenue exceeding P15 billion, with reporting starting in 2029.

“Market capitalization shall refer to the market value of a PLC’s outstanding equity securities, calculated as the total number of outstanding shares multiplied by their respective closing or last traded prices as of 31 December 2025,” the SEC said. Companies listed after Dec. 31, 2025, will base capitalization on the listing date.

MC No. 16 also provides transition reliefs, including delayed reporting timelines, exemptions from comparative disclosures, and phased mandatory limited assurance on Scope 1 and 2 greenhouse gas emissions.

LNLs are exempt if their parent company already prepares sustainability disclosures in the Philippines.

In a separate move, the SEC issued MC No. 15, Series of 2025, imposing stricter rules on beneficial ownership (BO) disclosure.

The rules aim to “reduce the risk of corporate entities being misused for illicit activities,” SEC Chairperson Francis Ed. Lim said.

The circular requires domestic and foreign corporations, partnerships, and one-person corporations to disclose detailed information on natural persons who own or control at least 20% of the entity or otherwise influence its affairs.

Companies must maintain accurate records, including names, addresses, tax identification numbers, nationalities, and ownership percentages.

A dedicated web-based BO registry will replace the current GIS system, and annual attestation of prior submissions will be required unless changes occur. Failure to disclose BO information will result in fines, which vary depending on retained earnings or fund balance, and may include disqualification of responsible officers. False information can incur fines of up to P2 million and may lead to corporate dissolution.

The new rules will take effect on Jan. 1, 2026.

This regulatory overhaul aims to improve corporate transparency, align sustainability reporting with global standards, and streamline beneficial ownership disclosures for better regulatory oversight, the SEC said.