SEC drafts rules to empower minority investors
By Denise A. Valdez, Reporter
THE Securities and Exchange Commission (SEC) is drafting rules to allow minority investors of listed companies to call for meetings and add items to meeting agendas.
The corporate regulator issued a draft memorandum circular on Wednesday seeking to grant additional powers to shareholders that represent five to 10% of a listed company’s outstanding capital stock.
Under the draft rules, shareholders, who represent at least 10% of a company’s capital stock, will have the right to call for a special stockholders’ meeting as they may deem necessary.
The meeting will be guided by provisions in Republic Act No. 11232 or the Revised Corporation Code of the Philippines, which says all stockholders must be notified of special meetings at least one week prior through a written notice.
Another proposed change is to allow shareholders to include items in the agenda of regular and special meetings. This would apply to shareholders that represent at least 5% of the company’s outstanding capital stock.
The draft rules state any officer or agent of a company that would not allow minority shareholders to exercise these rights may face administrative sanctions as indicated in the Revised Corporation Code. These include a P2-million fine, a cease and desist order, suspension or revocation of a company’s certificate of incorporation, and dissolution of the corporation and forfeiture of its assets.
The SEC said these proposals are in line with its goal to “promote good corporate governance and the protection of minority investors.”
Comments on the draft memo are now being sought from the public, which may be submitted to the SEC until April 22.
For Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan, the proposal will give more protection to minority shareholders, especially in cases where companies plan to delist from the stock exchange.
“I think this is in line with the strengthening of investors’ protection following the delisting of several publicly listed companies which are not in favor with minority shareholders,” he said via text.
Mr. Tan said if measures like this are in place, companies would be compelled to listen to minority shareholders’ views on plans such as delisting.
“This adds fairness to the shareholders who invest money (in a listed company) on the assumption that these investors believe in the company’s potential and growth,” he added.
The recent delistings of Melco Resorts and Entertainment (Philippines) Corp. and Travellers International Hotel Group, Inc. drew unfavorable reaction from minority investors as companies bought their shares at a much lower price than when they had bought it.
This eventually pushed the bourse operator Philippine Stock Exchange, Inc. to work on rules that would change the required approvals and tender offer price for voluntary delistings.
