SEC tightens rules on asset sales to protect minority shareholders

MANILA, Philippines — The Securities and Exchange Commission (SEC) is tightening the rules governing corporations’ asset sale to protect minority shareholders. 

In a draft memorandum circular, the SEC wants the sale or disposal of corporate property and assets amounting to at least 51 percent of the company’s total assets to be approved by at least two thirds of its stockholders. 

The SEC said the sale shall be covered by the circular whether the sale is through a single transaction or several transactions taking place in a year. 

“The sale or disposal of corporate property and assets amounting to at least 51 percent of the corporation’s total assets shall be considered as sale of all or substantially all of corporate property and assets, whether such sale accrued in a single transaction or in several transactions taking place within one year from the date of the first transaction,” the SEC said in its draft circular.

In aggregate sale transactions, shareholder approval shall be required for the particular sale transaction that breaches the 51 percent corporate asset threshold. 

To determine whether or not the sale amounts to at least 51 percent of the corporation’s assets, the computation must be based on its total assets as shown in its latest audited financial statements.

The proposed circular seeks to protect the interest of minority shareholders and to strengthen overall good corporate governance among the private sector, the SEC said.

The SEC said concerned sectors have until March 7 to submit their comments.

In recent years, the SEC has been stepping up efforts to improve corporate governance in the country amid concerns raised by minority shareholders. 

Last year, the Philippines accelerated upward in the World Bank Group’s ranking for ease of doing business, with the help of reforms implemented by the 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.

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.

“Moving forward, the SEC continues 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,” SEC chairperson Emilio Aquino said.