SEC seeks to tighten rules on sale of corporate assets
By Denise A. Valdez, Reporter
THE Securities and Exchange Commission (SEC) is proposing that companies selling at least 51% of its assets should require the approval of at least two-thirds of its stockholders.
The SEC posted on its website Friday a draft memorandum circular on sale of corporate assets, which proposes an amendment of the Revised Corporation Code of the Philippines to post stricter rules in disposing of corporate property and assets.
The draft suggests that when a company sells assets amounting to at least 51% of its total, it should be considered equivalent to selling all or substantially all of the company’s assets, regardless if the sale is done through a single transaction or several transactions within a year.
This would mean such sale would require the vote of stockholders that hold at least two-thirds of a company’s outstanding capital stock — which is the requirement in Section 39 of the Revised Corporation Code of the Companies for sale of all or substantially all of a corporation’s properties and assets.
Note that in the proposed amendments, the SEC will also impose this requirement on companies that would sell a cumulative total of at least 51% of its assets within one year. For aggregate sale transactions, the approval of shareholders will be asked for the last transaction that would breach the 51% mark.
With regard the computation, the SEC will base it on a corporation’s total assets as indicated in its latest audited financial statements.
Comments on the proposed amendments are currently being sought from the public until Mar. 7. The SEC said this draft memorandum is part of promoting good corporate governance and protecting minority investors.
For Diversified Securities, Inc. Equity Trader Aniceto K. Pangan, the proposed policy will have little impact unless the minimum public ownership requirement for listed firms is raised from the current 10%.
“I believe two-thirds vote has no effect considering the minimum public ownership is only 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 in a text message.
Sought for comment, Timson Securities, Inc. Trader Darren T. Pangan said the memorandum “doesn’t seem to be far fetched and is merely an application of the law.”
“SEC seems to have just made more precise what the law writes about,” he said. “It seems good for the investors as major decisions like these would require a lot of investors to be in agreement with one another. It may imply that investors are given importance in certain major decisions like these.”
Mr. Pangan said this new rule would be beneficial for investors, since they are “assured that the assets won’t be sold without their consent.”
