SEC OKs rules giving small stockholders voice in delisting ordeal

The Philippine Stock Exchange (PSE) has obtained approval from the Securities and Exchange Commission (SEC) to tighten its rules on voluntary delisting and boost protection for minority stockholders.

The new rules will take effect immediately, based on a Dec. 21 memorandum issued by PSE president Ramon Monzon.

Among the salient provisions of the amended rules is that the delisting must be approved by at least two-thirds of the entire membership of the corporate issuer’s board, including the majority, but not less than two of all of its independent directors.

The delisting must also be cleared by stockholders owning at least two-thirds of the total outstanding and listed shares of the listed company. Furthermore, the number of votes cast against the delisting proposal should not be more than 10 percent of the total outstanding and listed shares of the listed company.

By requiring a critical mass of votes, the PSE seeks to give greater voice to minority shareholders, the parties often left out when publicly listed companies go back to private hands.

Another crucial feature of the new delisting rules pertains to the valuation to be used in the tender offer.

It states the minimum tender offer price must be whichever is higher between the following:

ʎ the highest valuation based on the fairness opinion or valuation report prepared by an independent valuation provider in accordance with Securities Regulation Code Rule 19.2.6; or

ʎ the volume-weighted average price of the listed security for one year immediately preceding the date of posting of the disclosure of the approval by the company’s board of directors of the company’s delisting from the exchange.

The PSE revisited the rules starting end-2019 amid complaints from the market that minority stockholders are essentially forced to accept a company’s decision to delist and the tender offer price offered by the listed company or delisting proponent, under the threat of being left with shares that have no secondary market.

Overall, the new rules seek to enable minority stockholders to participate in the delisting decision-making process.

The revisions in the delisting rules are in line with what peer stock exchanges in the region currently practice. —DORIS DUMLAO- ABADILLA INQ