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PSE tightens rules on backdoor registration

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MANILA, Philippines — The Philippine Securities Exchange (PSE) plans to provide an additional layer of protection to shareholders and potential investors in companies with the release of stricter rules on hidden listing.

Under the stricter PSE rules, a disguised listing is deemed to occur if the listed company acquires the shares or assets of an unlisted company or person or group of persons and that transaction results in a change of control or de facto control of the listed company and a change in the business of the listed company.

“The change of control takes place when the buyer acquires more than 50% of the voting rights of the listed company, while de facto control is acquired if the buyer becomes the largest significant shareholder of the listed company after the transaction leading to disguised listing,” the PES said.

Any backdoor listing will require the approval of at least two-thirds of all board members, including a majority (but not less than two) of its independent directors, the PES said in the new rules. stipulated in a recent circular memorandum issued by the local stock exchange.

In addition, the PSE will require a listed company to make a public offering of at least 10% of its issued and outstanding shares within one year of the closing or completion of the transaction. .

An offer of stock rights will not be considered a public offer for the purposes of this rule.

Prior to the conduct of the public offering, the listed company shall not conduct any private capital raising activities except for the stock offering, employee stock option plan and declaration of dividends in shares, unless necessary to comply with the minimum 20% public ownership requirement.

Transactions considered disguised listings are those which would result in a change of control or de facto control of the listed company, or a change in the composition of the board of directors of the listed company, or those which would result in a substantial change in the activity of the listed company.

Under current backdoor listing rules, it is considered a backdoor if a listed company acquires, merges or combines with an unlisted company, or if a listed company is acquired by, merged or combined with a unlisted company and this acquisition, merger or combination results in a substantial change in the activity, the composition of the board of directors or the voting structure of the listed company.