PHILIPPINE STAR/KRIZ JOHN ROSALES

By Revin Mikhael D. Ochave, Reporter

THE PHILIPPINE Stock Exchange, Inc. (PSE) is seeking to tighten rules on voluntary delisting, in the aftermath of a wave of listed companies going private.

The bourse operator last week released a consultation paper containing proposed amendments to the rules on voluntary delisting, backdoor listing, and guidelines for fairness opinions and valuation reports.

In the paper, the PSE said it proposed to prohibit listed firms from voluntary delisting within 10 years from their market debut.

“The Exchange proposes to indicate a minimum listing period of 10 years before a listed company is allowed to apply for voluntary delisting. This is to prevent listed companies from going private before giving investors sufficient time and opportunity to recover their investments,” the PSE said.

Several companies voluntarily delisted from the PSE this year, including Metro Pacific Investments Corp., Eagle Cement Corp., Unioil Resources & Holdings Co., Inc., PICOP Resources, Inc., and construction material supplier Holcim Philippines, Inc.

Eagle Cement was only listed on the PSE for over six years when it voluntarily delisted from the local bourse on Feb. 28.

“The Exchange has decided to retain the current 95% ownership threshold. This will be beneficial to minority/public shareholders since the delisting proponents will have to reach a higher threshold and show to the Exchange that the company is no longer publicly held before voluntary delisting will be allowed,” it said.

However, the PSE suggested that voluntary delisting can be allowed even with “noncompliance with the 95% threshold if the listed company can demonstrate to the satisfaction of the Exchange that it has exerted sincere efforts to buy the shares of the remaining shareholders.”

Currently, the delisting proponent is required to obtain at least 95% of the issued and outstanding shares of the listed company after the conduct of the tender offer in order to qualify for voluntary delisting.

“In case the delisting threshold is met at the end of the original tender offer period, but the bidder decides to extend the tender offer period, the bidder is required to fully pay the shares tendered during the original tender offer period on the original settlement date,” the PSE said.

The PSE also proposed that the listed company, delisting proponent, or bidder shoulder the capital gains tax and documentary stamp tax needed to transfer the shares on behalf of the selling shareholders.

BACKDOOR LISTING
The PSE is also proposing tighter rules on backdoor listing.

“To prevent flipping of control and change of business soon after listing to the prejudice of investors who invested in the listed company on the basis of the business prospects disclosed in the prospectus and other offering materials, the exchange proposes to prohibit backdoor listing for a certain period after initial listing,” it said.

The PSE is looking to prohibit a listed firm from conducting a backdoor listing within one year from its initial listing if it has a track record and operating history, and within three years if it was exempted from these requirements.

Under current rules, any listed firm can conduct backdoor listing anytime as long as it complies with the requirements.

The PSE also wants to have the flexibility to determine if a transaction could be considered backdoor listing if it does not “strictly” fall into the criteria under the rules.

The exchange operator also sought to revise the backdoor listing fees and the fee for listing of any new shares.

Sought for comment, China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message that the proposed amendments could lessen backdoor listings and voluntary delistings. 

“The proposed amendments would significantly tighten the rules on backdoor listings and voluntary delistings. It is clear that the PSE wants to address gaps in current regulations in light of their recent experiences. The changes to the delisting rules are particularly important for protecting minority shareholders from unfair valuations and tender offer practices,” Mr. Colet said.

“The new rules might lessen backdoor listings and voluntary delistings, but the upshot is that we have a market that is more protective of public investors,” he added. 

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the proposed amendments are expected to boost protection for the investing public.

“These amendments are also part of further improvement of the local capital markets as well as to align the local bourse to global best practices or modified to local conditions, if necessary,” Mr. Ricafort said in a Viber message.

Stakeholders can send their comments on the proposed amendments to the rules to the PSE Office of the General Counsel until Dec. 28.