SEC issues draft rules on protection of minority shareholders

MANILA, Philippines – The Securities and Exchange Commission (SEC) has released draft rules, which aim to protect minority shareholders of public companies during takeovers.

The SEC issued “Guidelines on the Conduct of Valuation and Issuance of a Fairness Opinion” for investors eyeing to take control of a listed company.

The guidelines, which are open for public comment until June 30, will “align the rules of the commission with best practices in other jurisdictions.”

The draft rules state that investments resulting in ownership of over 51% of a listed company will trigger a mandatory tender offer, whose price is “supported by a fairness opinion provided by an independent financial advisor or equivalent third party.”

The rules also state that only firms accredited by the Philippine Stock Exchange may conduct valuation and issue fairness of opinion.

“An expert shall use more than one valuation methodology and compare the values derived from using different methodologies to minimize the risk that opinion is unreliable,” the regulator said.

“If an expert’s valuation of a company differs from the price of the company’s securities prior to the announcement of a proposed transaction, the expert should comment on the difference and factors underlying it,” it added.

The SEC issued the draft rules as some listed companies seeking to go private move to buy out public shareholders.

San Miguel Properties Inc., for one, conducted a tender offer in March as part of its planned delisting from the bourse.

It offered to buy its shares held by the public for P134.12 apiece, significantly lower than its P700 closing price when it last traded on November 13.

Public shareholders snubbed the offer. San Miguel Properties was able to buy back only 1.37% of its shares. – Rappler.com