April 15, 2020 | 12:04 am [ bworldonline.com ]
By Denise A. Valdez, Reporter
CORPORATIONS planning to sell 51% of assets and properties will now require stockholder approval, based on new rules by the Securities and Exchange Commission (SEC).
The corporate regulator has issued Memorandum Circular No. 12 which sets guidelines for corporations disposing of properties and assets amounting to at least 51% of its total assets.
Such transactions will now be considered by the SEC as a sale of all or substantially all of corporate property and assets, and therefore will require the approval of stockholders representing at least two-thirds of the outstanding capital stock of the company.
Voting of stockholders will be done in a meeting specifically called for this purpose.
“The newly issued rules reinforce the protection afforded to minority investors by enabling them to better participate in the decision-making and promoting transparency to reduce the risk of abuse,” SEC Chairperson Emilio B. Aquino said in a statement yesterday
The rules cover not only one-time transactions, but also multiple transactions within one year that would reach 51% of a company’s properties and assets. In such cases, the approval of stockholders will be obtained upon the last transaction that would breach the 51% threshold.
To measure whether a transaction or series of transactions are worth 51% of a company’s assets, the SEC will use the total assets of a company as indicated in its latest audited financial statement.
“We will continue spearheading corporate governance reforms, as part of our commitment to contribute to the inclusive development of the country’s economy through the introduction of reforms that protect minority investors,” Mr. Aquino said.
When the SEC released a draft circular on this rule in February, Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said it may have little impact to investors as the minimum public ownership requirement is 10%.
“[Even if] you require a two-thirds vote, it’s still the major shareholders or the majority owner who decides the outcome,” he said then.
But for Regina Capital Development Corp. Head of Sales Luis A. Limlingan, the SEC memo is a good step forward in giving power to minority investors.
“It should bode well for shareholders in general since they require the approval of the minority as well,” he said in a mobile message on Tuesday.
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