Meet 10% public ownership or face suspension, listed firms told

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New rules on minimum public ownership are part of capital market reforms to ensure that rights of minority shareholders are protected and companies are not in the hands of the few

MANILA, Philippines – Companies that trade their shares in the local stock exchange must meet the required public float or face a six-month suspension or automatic delisting in 2013.

The amended rules on public ownership, which took effect on Jan. 1, 2012, was published on the site of the Philippine Stock Exchange (PSE) on Tuesday, Jan. 3.

As of November 2011, 41 listed companies still did not meet the 10% required public float.

They have one year to comply with the new PSE rules. If they fail to meet these by Jan. 1, 2013, trading of their shares will be automatically suspended for six months.

Immediately after the suspension period, erring firms would be automatically delisted and must conduct a tender offer to all their stockholders.

The rules provide for a grace period for erring firms that would have shortfalls due to tender offer and merger-and-acquisition transactions. These firms would have to present a concrete program to meet the requirement.

Otherwise, non-compliant firms could not re-list within five years.

Listed companies are now required to report their public ownership 15 calendar days after the end of each quarter.

These amendments, which were approved by the Securities and Exchange Commission in Dec. 2011, were viewed as a compromise to the Bureau of Internal Revenue, which earlier threatened to impose the capital-gains tax of 5% to 10% on stock transactions involving erring companies.

Listed firms, which raised additional funds by selling their shares to the public, currently enjoy a preferential rate of one-half of 1%.

Governance advocates have pushed for capital market reforms, including raising the minimum public float, to ensure that rights of minority shareholders are protected and that companies are not in the hands of the few. –

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