SEC to double public float requirement to 20%

MANILA, Philippines – The Securities and Exchange Commission (SEC) plans to increase the public float requirement of Philippine listed companies to 20% from the current 10% of issued and outstanding shares.

In a proposed SEC memorandum circular disseminated for public comment on Wednesday, May 31, the securities regulator said it will be effective starting July 1 this year.

“All companies filing a registration statement pursuant to Sections 8 and 12 of the Securities Regulation Code (SRC) and with intention to list their shares for trading in an Exchange [should] apply for registration with a public float of at least 20% of their issued and outstanding shares,” the SEC said in the circular.

The public float of a company refers to the portion of the issued and outstanding shares that are freely available and tradable in the market and are non-strategic in nature or those not meant for the purpose of gaining substantial influence on how the company is being managed.

Significant shareholdings of 10% or more of the total issued and outstanding shares of the company are considered strategic and thus, excluded from the public float of a company.

The minimum public ownership of a company is measured by its minimum public float.

Attention: listed companies

The regulator said companies with existing registration statements filed with the SEC and whose shares are currently listed and traded in the Philippine Stock Exchange (PSE) will be required to increase their public float to at least 15% on or before the end of 2018.

These companies will then have to increase their minimum public float to at least 20% on or before the end of 2020.

“Non-compliance [with] the minimum public ownership requirements may result to publicly listed companies being subjected to the administrative sanctions provided under Section 54 of the SRC,” the SEC said.

Companies found non-compliant may also be subject to a higher tax rate.

Under Bureau of Internal Revenue (BIR) Revenue Regulations No. 16-2012, all publicly listed companies are required to maintain a minimum public ownership as prescribed by the SEC to enjoy preferential tax treatment.

“The sale, barter, exchange, or other disposition of shares of stock of publicly-listed companies that meet the minimum public ownership through the local stock exchange other than the sale by a dealer in securities, is subject to stock transaction tax of 1/2 of 1% of the gross selling price,” the SEC said.

“However, the sale, barter, transfer and or assignment of shares of stock of publicly-listed companies that fail to meet the minimum public ownership is subject to final tax of 5% or 10% on the net capital gains, and documentary stamp tax.”

Since the start of the year, the SEC has approved 5 initial public offerings (IPOs). The first 3 were Wilcon Depot Incorporated, Pure Energy Holdings Corporation, and Bermaz Auto Philippines Incorporated.

Eagle Cement Corporation on Monday, May 29, made its debut on the local bourse. Also slated to list with the PSE this Friday, June 2, is Cebu Landmasters Incorporated.

Several applications are still pending with the SEC, including Xeleb Technologies Incorporated and AudioWav Media Incorporated. – Chrisee Dela Paz / Rappler.com