By Denise A. Valdez
THE Philippine Stock Exchange, Inc. (PSE) is seeking an amendment of rules for companies that will be involuntarily delisted from the local bourse, where a tender offer may be required to protect investors.
The bourse operator posted on its website Monday its proposed amendments to the involuntary delisting rules, which will still be subject to public comment.
The proposal looks primarily at two changes: implementing an exit mechanism and increasing penalties for directors and officers found to be involved in violations.
The PSE wants to require listed firms that will be involuntarily delisted to conduct a tender offer to all its stockholders, where the minimum offer price will be based on the fairness opinion of an independent valuation provider or its volume weighted average price for one year.
An increase in the number of years that a company may not relist may be imposed by the PSE, from the current five years to up to perpetual prohibition, if a company fails to comply with the tender offer requirement. The offer for investors to buy-back will also last for one year after a company delists.
In terms of penalties on directors and officers, the proposal wants to restrict the appointment of erring persons in any listed company for five years, or more, or forever. This is an increase in the current scope of penalty where erring directors and officer are only restricted to hold positions in companies applying to list and only for a five-year period.
“The Exchange revisited the involuntary delisting rules, following receipt of complaints from the market that, without an acceptable exit mechanism, stockholders ultimately suffer the consequences of involuntary delisting for violations committed by the listed company, through its directors and officers, while the erring directors and officers are only penalized with 5-year disqualification,” it said.
Other amendments to the rules are on the grounds for involuntary delisting, procedure for involuntary delisting and grounds for automatic delisting.
A company that incurs due and unpaid loans amounting to at least 10% of its total assets may be flagged for involuntary delisting, as well as a company that has an adverse opinion from an external auditor.
Companies that have started proceedings for involuntary delisting may also not apply for voluntary delisting until the involuntary delisting proceedings end. In the process, the PSE may decide to impose penalties on the company such as to pay a fine or conduct a tender offer.
A company will be automatically delisted if its corporate term or other regulatory registrations expire or are revoked.
Commenting on the proposed amendments, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said the new rules are beneficial especially to small investors.
“I think it’s good for the small investors because it offers better protection,” he said in a phone call Tuesday. He noted it would help that the tender offer price is based on objective parameters, that the delisting prohibition could be longer if needed and that the buy-back period lasts for one year.
The PSE also released last year its proposed amendment to voluntary delisting rules with the intention of protecting small investors. PSE President and Chief Executive Officer Ramon S. Monzon previously said the final guidelines may be released within the first quarter.