Constrained by tax regulations, the Philippine Stock Exchange (PSE) cannot lift the trading suspension on local beverage maker Pepsi Cola Products Philippines Inc. (PCPPI) before its delisting, making the exit of small shareholders costlier and more cumbersome.
“It’s a big problem for the shareholders. Sellers are now subject to capital gains tax aside from horrific paperwork,” said Joseph Roxas, president of Eagle Equities Inc. This, he said, was really a problem arising from the Bureau of Internal Revenue (BIR) regulations.
The final tax is either 5 percent or 10 percent on net capital gains imposed by the National Internal Revenue Code, as amended. Documentary stamp tax (DST)is also slapped and no transfer of shares of stock will be recorded unless DST is paid.
In previous cases of delisting, Roxas said small shareholders were able to exit easily because the cross of tender of shares preceded the trading suspension.
PCPPI is undergoing a voluntary PSE delisting as its public ownership had declined to 2.1 percent following a tender offer conducted by Lotte Chilsung to consolidate its shares, which led to its acquisition of 1.13 billion additional common shares of PCPPI. Trading of PCPPI’s shares has been suspended since June 18 after Lotte’s purchase of 1.13 billion common shares resulted in the decline in the firm’s public float below the 10-percent requirement for continued listing.
In its Sept. 15 report for a second round of tender offer, Lotte said it would purchase all the tendered and accepted shares “via a block sale through the facilities of, and subject to approval of the PSE, on or about Oct. 26.”
The tender offer report stated that the crossing of the tendered shares via block sale was subject to the approval of the PSE. In a memorandum, however, the PSE pointed out that the tender offer report had not made any reference to the applicability of the provisions of the BIR’s Revenue Regulations No. 16-2012 regarding the tax treatment of sales, barters, exchanges or other dispositions of shares of stock of publicly listed companies whose public ownership levels fall below the requirement.
“It is on the basis of the BIR’s RR 16-2012 that the Exchange was constrained to deny Lotte Chilsung’s request to lift the trading suspension and allow the crossing of the tendered shares as the same would be violative of RR 16-2012,” the PSE said.