SEC chair Emilio Aquino

The Securities and Exchange Commission (SEC) has issued new rules aimed at curbing the potential misuse and dissipation of corporate assets at the expense of minority shareholders.

In an en banc meeting held on April 7 through video conferencing, the SEC approved rules requiring the approval of two-thirds of shareholders for the sale or disposal of properties and assets amounting to at least 51 percent of a 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 chair Emilio Aquino said in a press statement on Tuesday.

“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,” he added.

Under the rules issued through SEC Memorandum Circular No. 12, series of 2020, shareholder approval is required whether the properties and assets sold accrued to 51 percent of the corporation’s total assets in a single transaction or in several transactions taking place within one year from the date of the first transaction. 

The vote of the stockholders representing at least two-thirds of the outstanding capital stock in a stockholders’ meeting duly called for the purpose must be obtained prior to the execution of the sale transaction.

In aggregate sale transactions, shareholder approval is required for the sale transaction that will breach the 51 percent corporate asset value threshold. 

The determination of whether or not the sale breaches the threshold must be based on the total assets of the corporation as shown in its latest audited financial statements. The computation may also be based on the latest quarterly financial statement or a special purpose financial statement prepared in connection with the execution of the transaction.

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