SEC reforms help improve Philippine ranking in EODB

MANILA, Philippines — The Philippines accelerated upward in the World Bank Group’s ranking for ease of doing business, thanks to reforms implemented by the Securities and Exchange Commission (SEC).

The Philippines climbed 29 notches to 95th place from 124th previously in a ranking of 190 economies, while its overall score improved to 62.8 from 57.68 points, posting the most significant improvement within the Association of Southeast Asian Nations.

SEC chairperson Emilio B. Aquino said the SEC would continue to explore opportunities within its mandate as registrar and overseer of the corporate sector, regulator of the capital market and champion of investor protection to help improve the ease of doing business in the Philippines.

“Among others, we will work further on the automation of our processes, the establishment of data exchanges with other government agencies, and the empowerment of shareholders in corporate governance,” he said.

The World Bank noted the Philippines’ initiatives to strengthen minority investor protection by requiring greater disclosure of transactions with interested parties, a move implemented by the SEC.

The SEC also enhanced director liability for transactions with interested parties.

Furthermore, the SEC issued the Rules on Material Related Party Transaction for Publicly-Listed Companies on April 25, 2019 through Memorandum Circular No. 10, Series of 2019.

The rules regulate transactions, either individually or in aggregate over a 12-month period with the same party, amounting to 10 percent or higher of the company’s total assets, to promote good corporate governance and the protection of minority investors.

Under the rules, a publicly listed companies shall adopt a group-wide material related party transactions (RPTs) policy encompassing all entities within the conglomerate, taking into account its size, structure, risk profile and complexity of operations.

The Philippines recorded the biggest improvement of 60 notches in the area of protecting minority investors, rising to 72nd from the 132nd place, while improving its score to 60.0 from 43.33 points.

The World Bank also cited the Philippines as one of the 42 economies that implemented regulatory reforms in three or more of the 10 ease-of-doing-business indicators covered by the Doing Business 2020 study.

Furthermore, the World Bank also recognized the removal of the minimum capital requirement for domestic companies, saying this made starting a business in the country easier.

The reform is part of the enactment of Republic Act No. 11232, or the Revised Corporation Code of the Philippines, on Feb. 23, 2019.

Previously, at least 25 percent of a corporation’s authorized capital stock must be subscribed at the time of incorporation and at least P5,000 or 25 percent of the total subscription must be paid upon subscription.

The SEC also pushed for the amendment of the country’s corporate regulatory framework to encourage business formation, among others. The removal of the minimum capital requirement, for one, was aimed at allowing entrepreneurs to start a business with as little capital or funding as possible.