Disclosure via website

With the Internet already a part of our daily life, it has become standard practice for private and government offices to maintain websites to disseminate information or communicate with the public.

Today’s websites are marvels of creativity. Designed to be user-friendly and interactive, they can be accessed 24/7 by interested parties through computers, cell phones or other gizmos with Internet capability.

This modern medium of communication has been recognized as an effective means for promoting or encouraging transparency in government.

The first major law enacted under the Aquino administration—Republic Act 10149, or the GOCC Governance Act of 2011—requires all government-owned and -controlled corporations to maintain websites that allow unrestricted access by the public.

By way of background, this law prescribes, among others, the qualifications of and procedures for the appointment of directors and executives of GOCCs, including their compensation.

Aware of the bureaucratic hurdle that often accompanies requests for information in government offices, the law directs GOCCs to make significant facts and figures about their operations available to the public through their websites.

Information

On top of the disclosure list are the latest annual audited financial and performance reports, which must be posted in the website within 30 days from their receipt.

These documents have to be accompanied by audited financial statements for the immediate past five years, quarterly and annual reports, trial balance and current operating budget.

Also included in the enumeration are data about local and foreign borrowings, performance scorecards, government subsidies and borrowings guaranteed by the government.

The facts and figures required to be within easy reading reach by the public pertain to the financial health of the GOCCs and so the viewers can immediately check if the GOCCs are making good use of the public money invested in them.

With the public watching, in particular, feisty investigative media reporters, the GOCCs will have to be on their toes to justify their continued existence and operation.

Taking a leaf from the law, the Securities and Exchange Commission is currently using the websites as a mechanism by which investors can easily get information about securities offerings by private companies.

Under existing regulations, a company that wants to offer for sale or sell to the public its securities (through initial public offering or secondary offering) is required to submit the covering registration statement and prospectus to the SEC.

Transparency

These documents contain the terms and conditions of the offering, i.e., price, interest, maturity date, risks involved, and other data that investors need to know to be able to make an informed judgment on whether or not to buy the securities.

Upon approval of the offering, an announcement to this effect is published in a newspaper of general circulation with the notation that these documents can be reviewed by interested parties at the SEC office.

To make life easier for prospective investors and, at the same time, promote public interest in these transactions, the SEC now requires companies that want to sell securities to the public to, in addition to submitting hard copies, upload these documents in their websites.

Depending on the needs of the viewer, he can download all the contents of the documents (which can range from a low of 50 pages to a high of 200, depending on the nature of the transaction involved) or print only the portions that interest him.

In posting the registration statement and prospectus in the website, the companies should bear in mind that, unless a password is required, access to their website is available to anybody anywhere in the world with Internet connection.

Some countries have strict rules on the sale of securities or solicitation of investments by companies within their territory. If an offering or solicitation can be viewed by people living in a certain country, through flyers, publications and the Internet, the securities may have to be registered with or licensed by the regulatory authorities of that country.

Registration

Failure to secure that registration or license could expose the company to monetary fines or penalties. The fact that it does not have a physical presence in the country does not mean it is immune from such sanctions.

Who knows, the company may, in the future, decide to tap the capital market of that country. The offering may not be allowed unless the fines are paid first. Or the company may be blacklisted in the region where the country is located.

So, if an offering of a Philippine corporation is intended only to be conducted within the country and for the exclusive benefit of Filipinos or foreigners residing or licensed to do business in the country, that fact must be clearly spelled out (preferably highlighted) to show the company’s intention to make it a purely domestic transaction.

It would also help if the viewer is required to affirm by tapping a pre-arranged box that he is a Filipino citizen or otherwise eligible to avail of the offering before he is allowed further access to the website.

With these filtering measures in place, the possibility of a company running afoul with the securities laws of another country where its website can be read by the latter’s residents is minimized, if not eliminated.

The situation is different if the company wants to tap the international market for its offering. In this case, it has to make sure no securities regulation of any country where the website can be viewed and whose residents may want to invest in the securities is breached.

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