The Securities and Exchange Commission (SEC) has issued more stringent rules on the sale of corporate assets to safeguard the interest of minority investors.
SEC Memorandum Circular 12- 2020 requires companies to seek the approval of shareholders regarding the sale or disposal of assets amounting to at least 51 percent of the corporation’s total assets.
“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 chairman Emilio Aquino said.
“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,” Aquino said.
Shareholder approval is required on properties and assets sold are at least 51 percent of the total in a single transaction or in several transactions taking place within a year from the date of the first transaction, the SEC said.
Prior to the execution of the transaction, corporations are required to secure the vote of stockholders representing at least two-thirds of the outstanding capital stock in a stockholder’s meeting to be held for the purpose.
The SEC said that determining whether or not the sale breaches the threshold will be based on the firm’s total assets as shown in its latest audited financial statements or a record prepared for the execution of the transaction.
The SEC said it may impose sanctions under Section 158 of Republic Act 11232 or the Revised Corporation Code of the Philippines, for those who will violate any provision in the circular.