Who Qualifies as a Beneficial Owner Under SEC Rules?

Many corporations mistakenly assume that only registered shareholders must be disclosed in SEC filings. However, under current SEC regulations, a Beneficial Owner refers to the natural person who ultimately owns or exercises control over a corporation — whether directly or indirectly.

Understanding this distinction is essential for proper compliance, particularly when submitting the General Information Sheet (GIS) and other reportorial requirements.

The 25% Ownership Threshold

As a general rule, any individual who directly or indirectly owns 25% or more of the corporation’s outstanding capital stock or voting rights is considered a beneficial owner.

This threshold applies not only to direct shareholders but also to ownership held through other entities.

Indirect Ownership

Beneficial ownership includes individuals who hold shares through:

• Another corporation

• A partnership

• A trust arrangement

• Nominees or layered corporate structures

In these cases, ownership must be traced until the ultimate natural person is identified. The SEC requires transparency beyond the surface-level corporate structure.

Control vs. Ownership

Even if an individual does not meet the 25% ownership threshold, they may still qualify as a beneficial owner if they exercise ultimate effective control over the corporation.

Control may arise from:

• Authority to appoint or remove a majority of directors

• Significant influence over management or policy decisions

• Special voting rights or shareholder agreements

• Any arrangement that enables decisive influence over corporate actions

In short, beneficial ownership is not solely about share percentage — it is also about actual control.

Why Proper Disclosure Matters

Failure to accurately declare beneficial owners in SEC filings may result in regulatory scrutiny, penalties, and potential compliance risks. With increasing emphasis on corporate transparency and anti-money laundering measures, proper identification and disclosure are more important than ever.

If you are uncertain whether an individual qualifies as a beneficial owner under SEC rules, seeking professional advice is advisable.

Aureada CPA Law Firm assists corporations with:

• Beneficial ownership determination

• GIS compliance review

• Corporate structuring advisory

• SEC reporting compliance