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The Securities and Exchange Commission (SEC) is finalizing new guidelines to uphold the right of stakeholders to inspect corporate records in line with efforts to improve corporate governance and transparency.
Seeking public feedback until July 3, the SEC released a draft memorandum circular on the conduct of investigations of violations of the right to inspect and/or reproduce corporate records.
The draft guidelines dated June 23 seek to flesh out Section 73 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines, which provides that corporate records, regardless of the form in which they are stored, must be open to inspection by any director, trustee, stockholder or member of the corporation.
The director, trustee, stockholder or member may inspect the corporate records in person or through a representative at reasonable hours on business days, as well as demand in writing and at his/her expense for copies of such records.
The law further provides that an aggrieved party may report the non-compliance of a corporation to the SEC and, within five days from receipt of such report, the corporate watchdog must conduct a summary investigation and issue an order directing the inspection or reproduction of the requested records.
Any officer or agent of the corporation who refuses to allow the inspection and/or reproduction of records is liable to the requesting party for damages and, in addition, may be guilty of an offense punishable under the law.
Under the draft guidelines, the following may constitute a violation of the right of a director, trustee, stockholder or member to inspect and/or reproduce corporate records:
– Outright refusal to allow the director, trustee, stockholder, or member of the corporation, to peruse any of the corporate records in person, or by a representative;
– Failure to take, within a reasonable amount of time, the necessary steps that would allow the director, trustee, stockholder, or member of the corporation, to peruse any of the corporate records in person, or by a representative;
– Failure to give the director, trustee, stockholder, or member a reasonable amount of time to peruse any of the corporate records in person, or by a representative;
– Outright refusal to allow the director, trustee, stockholder, or member of the corporation, to reproduce any of the corporate records in person, or by a representative, at his/her own expense;
– Failure to take, within a reasonable amount of time, the necessary steps that would allow the director, trustee, stockholder, or member of the corporation, to reproduce any of the corporate records in person, or by a representative, at his/her own expense; or
Failure to give the director, trustee, stockholder, or member a reasonable amount of time to reproduce any of the corporate records in person, or by a representative, at his/her own expense.
An aggrieved party may file a verified report with the SEC Company Registration and Monitoring Department (CRMD), or any of the SEC extension offices. The SEC has put in place a process and specific timetable to address the complaint.
The SEC may impose any or all of the sanctions under Section 158 of the Revised Corporation Code, taking into consideration the extent of participation, nature, effects, frequency and seriousness of the violation. It may assist in the prosecution of the violation of the right to inspect and/reproduce corporate records.