Commercial Law Review

Atty. Carlo Vincent G. Balicas

Securities Regulation Code

Maria Zarah Villanueva - Castro

SECURITIES REGULATION CODE (R.A. 8799) (k) Compel the officers of any registered
corporation or association to call
SEC JURISDICTION: meetings of stockholders or members
thereof under its supervision;
A. Powers and Functions of the (l) Issue subpoena duces tecum and
Securities and Exchange summon witnesses to appear in any
Commission: proceedings of the Commission and in
Section 5 of RA 8799 states that: “The appropriate cases, order the
commission shall act with transparency examination, search and seizure of all
and shall have the powers and functions documents, papers, files and records, tax
provided by this code, Presidential returns and books of accounts of any
Decree No. 902-A, the Corporation Code, entity or person under investigation as
the Investment Houses law, the may be necessary for the proper
Financing Company Act and other disposition of the cases before it, subject
existing laws. Pursuant thereto the to the provisions of existing laws;
Commission shall have, among others, (m) Suspend, or revoke, after proper
the following powers and functions: notice and hearing the franchise or
(a) Have jurisdiction and supervision certificate of registration of corporations,
over all corporations, partnership or partnership or associations, upon any of
associations who are the grantees of the grounds provided by law; and
primary franchises and/or a license or a (n) Exercise such other powers as may
permit issued by the Government; be provided by law as well as those
(b) Formulate policies and which may be implied from, or which are
recommendations on issues concerning necessary or incidental to the carrying
the securities market, advise Congress out of, the express powers granted the
and other government agencies on all Commission to achieve the objectives
aspect of the securities market and and purposes of these laws.
propose legislation and amendments The Commission’s jurisdiction over all
thereto; cases enumerated under section 5 of
(c) Approve, reject, suspend, revoke or Presidential Decree No. 902-A is hereby
require amendments to registration transferred to the Courts of general
statements, and registration and jurisdiction or the appropriate Regional
licensing applications; Trial Court: Provided, That the Supreme
(d) Regulate, investigate or supervise
Court in the exercise of its authority may
the activities of persons to ensure
designate the Regional Trial Court
compliance;
branches that shall exercise jurisdiction
(e) Supervise, monitor, suspend or take
over the cases. The Commission shall
over the activities of exchanges, clearing
retain jurisdiction over pending cases
agencies and other SROs;
(f) Impose sanctions for the violation of involving intra-corporate disputes
laws and rules, regulations and orders, submitted for final resolution which
and issued pursuant thereto; should be resolved within one (1) year
(g) Prepare, approve, amend or repeal from the enactment of this Code. The
rules, regulations and orders, and issue Commission shall retain jurisdiction over
opinions and provide guidance on and pending suspension of
supervise compliance with such rules, payment/rehabilitation cases filed as of
regulation and orders; 30 June 2000 until finally disposed.”
(h) Enlist the aid and support of and/or B. Cases transferred to the RTC:
deputized any and all enforcement Sec. 5. In addition to the regulatory and
adjudicative functions of the Securities
agencies of the Government, civil or
and Exchange Commission over
military as well as any private institution, corporations, partnerships and other
corporation, firm, association or person forms of associations registered with it
in the implementation of its powers and as expressly granted under existing laws
function under its Code; and decrees, it shall have original and
(i) Issue cease and desist orders to exclusive jurisdiction to hear and decide
prevent fraud or injury to the investing cases involving:
public; (a) Devices or schemes employed by or
(j) Punish for the contempt of the any acts, of the board of directors,
business associates, its officers or
Commission, both direct and indirect, in
partnership, amounting to fraud and
accordance with the pertinent provisions misrepresentation which may be
of and penalties prescribed by the Rules detrimental to the interest of the public
of Court; and/or of the stockholder, partners,
members of associations or
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 Commercial Law Review
Atty. Carlo Vincent G. Balicas

Securities Regulation Code

Maria Zarah Villanueva - Castro

organizations registered with the as may in the future be determined by

Commission; the Commission.
(b) Controversies arising out of intra- b. Issuer – is the originator, maker, obligor,
corporate or partnership relations, or creator of the security.
between and among stockholders, c. Broker – is a person engaged in the
members, or associates; between any or business of buying and selling securities
all of them and the corporation, for the account of others.
partnership or association of which they d. Dealer – means any person who buys
are stockholders, members or and sells securities for his/her own
associates, respectively; and between account in the ordinary course of
such corporation, partnership or business.
association and the state insofar as it e. Clearing Agency – is any person who
concerns their individual franchise or acts as intermediary in making deliveries
right to exist as such entity; and upon payment to effect settlement in
(c) Controversies in the election or securities transactions.
appointments of directors, trustees, f. Exchange – is an organized marketplace
officers or managers of such or facility that brings together buyers
corporations, partnerships or and sellers and executes trades of
associations. securities and/or commodities.
(d) Appointment of Rehabilitation g. Pre-Need Plans – are contracts which
Receiver or Management Committee. provide for the performance of future
services or the payment of future
*Judico v Quiambao monetary considerations at the time of
actual need, for which planholders pay in
cash or installment at stated prices, with
Q: How does the SRC protect the public who or without interest or insurance coverage
wishes to invest in securities? and includes life, pension, education,
A: The law protects the public as follows: interment, and other plans which the
a. The law requires full disclosure of Commission may from time to time
information to the public regarding the approve.
securities that are being offered and the h. Promoter – is a person who, acting
issuers, including the filing of and alone or with others, takes initiative in
approval of the registration statement founding and organizing the business or
and the approval of the prospectus. enterprise of the issuer and receives
b. A continuing duty to regularly submit consideration therefore.
material information to the SEC. i. Prospectus – is the document made by
c. Close monitoring of the securities and or on behalf of an issuer, underwriter or
other circumstances that may affect the dealer to sell or offer securities for sale
same as well as the persons involved to the public through a registration
including brokers, issuers, the exchange statement filed with the Commission.
itself, etc. in order to ensure compliance j. Registration statement – is the
with pertinent laws and regulations. application for the registration of
d. Prohibiting and penalizing different securities required to be filed with the
fraudulent practices and transactions. Commission.
e. Providing the SEC with powers and k. Uncertificated security – is a security
functions. evidenced by electronic or similar
records.
Definition of terms: l. Underwriter – is a person who
guarantees on a firm commitment and/or
a. Securities – are share, participation or declared best effort basis the distribution
interests in a corporation or in a and sale of securities of any kind by
commercial enterprise or profit-making another company.
venture and evidenced by a certificate, m. Investment contracts – a contract,
contract, instrument, whether written or transaction or scheme (collectively
electronic in character. It includes: a. “contract”) whereby a person invests his
shares of stocks, bonds, debentures, money in a common enterprise and is
notes, evidences of indebtedness, asset- led to expect profits primarily from the
backed securities; b. investment efforts of others.
contracts, certificates of interest or n. Derivatives – financial investment,
participation in a profit sharing including options and warrants whose
agreement, certificates of deposit for a value depends on the interest in or
future subscription; c. fractional performance of an underlying security,
undivided interests in oil, gas or other but which does not require any
mineral rights; d. derivatives like option investment of principal in the underlying
and warrants; e. certificates of security.
assignments, certificates of participation, o. Options – are contracts that give the
trust certificates, voting trust certificates buyer the right, but not the obligation, to
or similar instruments; f. proprietary or buy or sell an underlying security at a
non-proprietary membership certificates predetermined price, called the exercise
in corporations; and other instruments or strike price, on or before a
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 Commercial Law Review
Atty. Carlo Vincent G. Balicas

Securities Regulation Code

Maria Zarah Villanueva - Castro

predetermined date, called the expiry *Q: When SEC can suspend or cancel certificate
date, which can only be extended in of registration?
accordance with Exchange rules. A: 1. Fraud in procuring registration;
p. Call options – are rights to buy. 2. Serious misrepresentation as to objectives of
q. Put options – are rights to sell. corporation;
r. Warrants – are rights to subscribe or 3. Refusal to comply with lawful order of SEC;
purchase new shares or existing shares 4. Continuous inoperation for at least 5 years;
in a company, on or before a 5. Failure to file by-laws within required period;
predetermined date, called the expiry 6. Failure to file reports;
date, which can only be extended in 7. Other similar grounds
accordance with Exchange rules.
Warrants generally have a longer Basic rules regarding registration of
exercise period than options. securities:
s. Commodity futures contract – means Sec. 8.1 of the Securities Regulation Code
a contract providing for the making or provides that: “Securities shall not be sold or
taking delivery at a prescribed time in offered for sale or distribution within the
the future of a specific quantity and Philippines, without a registration statement duly
quality of a commodity or the cash value filed with and approved by the Commission. Prior
thereof, which is customarily offset prior to such sale, information on the securities, in
to the delivery date, and includes such form and with such substance as the
standardized contracts having the indicia Commission may prescribe, shall be made
of commodities futures, commodity available to each prospective purchaser.”
options and commodity leverage, or Sec. 8.2 of the Securities Regulation Code
margin contracts. states that: “The Commission may conditionally
t. Commodity – means any goods, approve the registration statement under such
articles, services, rights and interests, terms as it may deem necessary.”
including any group or index of any of Sec. 8.3 of the Securities Regulation Code
the foregoing, in which commodity states that: “The Commission may specify the
interests contracts are presently or in the terms and conditions under which any written
future dealt in. communication, including any summary
u. Put – is a transferable option or offer to prospectus, shall be deemed not to constitute an
deliver a given number of shares of stock offer for sale under this Section.”
at a stated price at any given time Sec. 8.4 of the Securities Regulation Code
during a stated period. states that: “A record of the registration of
v. Call – is transferable option to buy a securities shall be kept in Register Securities in
specified number of shares at a stated which shall be recorded orders entered by the
price. Commission with respect such securities. Such
w. Straddle – is a combination put and call. register and all documents or information with
x. Insider – means (a) the issuer; (b) a the respect to the securities registered therein
director or officer (or person performing shall be open to public inspection at reasonable
similar functions) of, or a person hours on business days.
controlling the issuer; (c) a person whose Sec. 8.5 of the Securities Regulation Code
relationship or former relationship to the states that: “The Commission may audit the
issuer gives or gave him access to financial statements, assets and other
material information about the issuer or information of firm applying for registration of its
the security that is not generally securities whenever it deems the same
available to the public; (d) a government necessary to insure full disclosure or to protect
employee, or director, or officer of an the interest of the investors and the public in
exchange, clearing agency and/or self- general.”
regulatory organization who has access *In approving the registration of the securities,
to material information about an issuer the SEC is not only concerned with the
or a security that is not generally requirement that full disclosure of information is
available to the public; or (e) a person given to the public. The SEC is also concerned
who learns such information by a with the merit of the securities themselves and
communication from any of the the issuer.
foregoing insiders.
y. Material non-public information – An *Baviera v Paglinawan
information is “material non-public” if:
(a) it has not been generally disclosed to *There is no assurance on the part of the SEC
the public and would likely affect the that the securities presented are valid and good
market price of the security after being for investors. However, there is a penal sanction
disseminated to the public and the lapse in case the securities are not what were
of a reasonable time for the market to disclosed.
absorb the information; or (b) would be
considered by a reasonable person
important under the circumstances in *Q: What securities are exempt from the
determining his course of action whether requirement of registration?
to buy, sell or hold a security. A: Sec. 9.1 of the Securities Regulation
Code provides that: “The requirement of
registration under Subsection 8.1 shall not as a
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 Commercial Law Review
Atty. Carlo Vincent G. Balicas

Securities Regulation Code

Maria Zarah Villanueva - Castro

general rule apply to any of the following classes sale of such capital stock. (f) The issuance of
of securities: (a) Any security issued or bonds or notes secured by mortgage upon real
guaranteed by the Government of the estate or tangible personal property, when the
Philippines, or by any political subdivision or entire mortgage together with all the bonds or
agency thereof, or by any person controlled or notes secured thereby are sold to a single
supervised by, and acting as an instrumentality purchaser at a single sale. (g) The issue and
of said Government. (b) Any security issued or delivery of any security in exchange for any
guaranteed by the government of any country other security of the same issuer pursuant to a
with which the Philippines maintains diplomatic right of conversion entitling the holder of the
relations, or by any state, province or political security surrendered in exchange to make such
subdivision thereof on the basis of reciprocity: conversion: Provided, That the security so
Provided, That the Commission may require surrendered has been registered under this Code
compliance with the form and content for or was, when sold, exempt from the provision of
disclosures the Commission may prescribe. (c) this Code, and that the security issued and
Certificates issued by a receiver or by a trustee delivered in exchange, if sold at the conversion
in bankruptcy duly approved by the proper price, would at the time of such conversion fall
adjudicatory body. (d) Any security or its within the class of securities entitled to
derivatives the sale or transfer of which, by law, registration under this Code. Upon such
is under the supervision and regulation of the conversion the par value of the security
Office of the Insurance Commission, Housing and surrendered in such exchange shall be deemed
Land Use Rule Regulatory Board, or the Bureau the price at which the securities issued and
of Internal Revenue. (e) Any security issued by a delivered in such exchange are sold. (h) Broker’s
bank except its own shares of stock.” transaction, executed upon customer’s orders,
on any registered Exchange or other trading
Sec. 9.2 of the Securities Regulation Code market. (i) Subscriptions for shares of the
provides that: “The Commission may, by rule or capitals stocks of a corporation prior to the
regulation after public hearing, add to the incorporation thereof or in pursuance of an
foregoing any class of securities if it finds that increase in its authorized capital stocks under
the enforcement of this Code with respect to the Corporation Code, when no expense is
such securities is not necessary in the public incurred, or no commission, compensation or
interest and for the protection of investors.” remuneration is paid or given in connection with
the sale or disposition of such securities, and
*Reason: The issuer is a trusted and regulated only when the purpose for soliciting, giving or
officer. taking of such subscription is to comply with the
requirements of such law as to the percentage of
*Q: What transactions are exempt from the the capital stock of a corporation which should
registration requirement under Securities be subscribed before it can be registered and
Regulation Code? duly incorporated, or its authorized, capital
A: Sec. 10.1 of the Securities Regulation increase. (j) The exchange of securities by the
Code provides that: “The requirement of issuer with the existing security holders
registration under Subsection 8.1 shall not apply exclusively, where no commission or other
to the sale of any security in any of the following remuneration is paid or given directly or
transactions: (a) At any judicial sale, or sale by indirectly for soliciting such exchange. (k) The
an executor, administrator, guardian or receiver sale of securities by an issuer to fewer than
or trustee in insolvency or bankruptcy. (b) By or twenty (20) persons in the Philippines during any
for the account of a pledge holder, or mortgagee twelve-month period. (l) The sale of securities to
or any of a pledge lien holder selling of offering any number of the following qualified buyers: (i)
for sale or delivery in the ordinary course of Bank; (ii) Registered investment house; (iii)
business and not for the purpose of avoiding the Insurance company; (iv) Pension fund or
provision of this Code, to liquidate a bonafide retirement plan maintained by the Government
debt, a security pledged in good faith as security of the Philippines or any political subdivision
for such debt. (c) An isolated transaction in thereof or manage by a bank or other persons
which any security is sold, offered for sale, authorized by the Bangko Sentral to engage in
subscription or delivery by the owner therefore, trust functions; (v) Investment company or; (vi)
or by his representative for the owner’s account, Such other person as the Commission may rule
such sale or offer for sale or offer for sale, by determine as qualified buyers, on the basis of
subscription or delivery not being made in the such factors as financial sophistication, net
course of repeated and successive transaction of worth, knowledge, and experience in financial
a like character by such owner, or on his account and business matters, or amount of assets under
by such representative and such owner or management.”
representative not being the underwriter of such
security. (d) The distribution by a corporation *Reasons: 1. Limited character of offering; 2.
actively engaged in the business authorized by Mandated by law; 3. Stock dividends declared; 4.
its articles of incorporation, of securities to its Transaction is such that registration of the
stockholders or other security holders as a stock securities is unwarranted.
dividend or other distribution out of surplus. (e)
The sale of capital stock of a corporation to its Sec. 10.2 of the Securities Regulation Code
own stockholders exclusively, where no provides that: “The Commission may exempt
commission or other remuneration is paid or other transactions, if it finds that the
given directly or indirectly in connection with the requirements of registration under this Code is
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 Commercial Law Review
Atty. Carlo Vincent G. Balicas

Securities Regulation Code

Maria Zarah Villanueva - Castro

not necessary in the public interest or for the effecting any transaction in such security which
protection of the investors such as by the reason involves no change in the beneficial ownership
of the small amount involved or the limited thereof; (ii) By entering an order or orders for the
character of the public offering.” purchase or sale of such security with the
knowledge that a simultaneous order or orders
Sec. 10.3 of the Securities Regulation Code of substantially the same size, time and price,
provides that: “Any person applying for an for the sale or purchase of any such security, has
exemption under this Section, shall file with the or will be entered by or for the same or different
Commission a notice identifying the exemption parties; or (iii) By performing similar act where
relied upon on such form and at such time as the there is no change in beneficial ownership. (b) To
Commission by the rule may prescribe and with affect, alone or with others, a securities or
such notice shall pay to the Commission fee transactions in securities that: (I) Raises their
equivalent to one-tenth (1/10) of one percent price to induce the purchase of a security,
(1%) of the maximum value aggregate price or whether of the same or a different class of the
issued value of the securities.” same issuer or of controlling, controlled, or
commonly controlled company by others; or (iii)
*Q: What are the grounds for revocation and/or Creates active trading to induce such a purchase
rejection of the registration of or sale through manipulative devices such as
securities/statement? marking the close, painting the tape, squeezing
A: Sec. 13.1 of the Securities Regulation the float, hype and dump, boiler room operations
Code provides that: “The Commission may and such other similar devices. (c) To circulate or
reject a registration statement and refuse disseminate information that the price of any
registration of the security there-under, or security listed in an Exchange will or is likely to
revoke the affectivity of a registration statement rise or fall because of manipulative market
and the registration of the security there-under operations of any one or more persons
after the due notice and hearing by issuing an conducted for the purpose of raising or
order to such effect, setting forth its finding in depressing the price of the security for the
respect thereto, if it finds that: (a) The issuer: (i) purpose of inducing the purpose of sale of such
Has been judicially declared insolvent; (ii) Has security. (d) To make false or misleading
violated any of the provision of this Code, the statement with respect to any material fact,
rules promulgate pursuant thereto, or any order which he knew or had reasonable ground to
of the Commission of which the issuer has notice believe was so false or misleading, for the
in connection with the offering for which a purpose of inducing the purchase or sale of any
registration statement has been filed; (iii) Has security listed or traded in an Exchange. (e) To
been or is engaged or is about to engage in effect, either alone or others, any series of
fraudulent transactions; (iv) Has made any false transactions for the purchase and/or sale of any
or misleading representation of material facts in security traded in an Exchange for the purpose
any prospectus concerning the issuer or its of pegging, fixing or stabilizing the price of such
securities; (v) Has failed to comply with any security; unless otherwise allowed by this Code
requirements that the Commission may impose or by rules of the Commission.”
as a condition for registration of the security for
which the registration statement has been filed; Sec. 24.2 of the Securities Regulation Code
or (b) The registration statement is on its face provides that: “No person shall use or employ, in
incomplete or inaccurate in any material respect connection with the purchase or sale of any
or includes any untrue statements of a material security any manipulative or deceptive device or
fact required to be stated therein or necessary to contrivance. Neither shall any short sale be
make the statement therein not misleading; or effected nor any stop-loss order be executed in
(c) The issuer, any officer, director or controlling connection with the purchase or sale of any
person performing similar functions, or any security except in accordance with such rules
under writer has been convicted, by a competent and regulations as the Commission may
judicial or administrative body, upon plea of prescribe as necessary or appropriate in the
guilty, or otherwise, of an offense involving public interest for the protection of investors.”
moral turpitude and /or fraud or is enjoined or
restrained by the Commission or other
competent or administrative body for violations Acts that are considered unlawful with
of securities, commodities, and other related respect to the purchase and sale of
laws.” securities:

Devices and practices on manipulation of

security prices identified under the Sec. 26 of the Securities Regulation Code
Securities Regulation Code: states that: “It shall be unlawful for any person,
directly or indirectly, in connection with the
purchase or sale of any securities to: 1. Employ
Sec. 24.1 of the Securities Regulation Code any device, scheme, or artifice to defraud; 2.
provides that: “It shall be unlawful for any Obtain money or property by means of any
person acting for himself or through a dealer or untrue statement of a material fact of any
broker, directly or indirectly: (a) To create a false omission to state a material fact necessary in
or misleading appearance of active trading in order to make the statements made, in the light
any listed security traded in an Exchange of any of the circumstances under which they were
other trading market (hereafter referred to made, not misleading; or 3. Engage in any act,
purposes of this Chapter as "Exchange"): (i) By
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 Commercial Law Review
Atty. Carlo Vincent G. Balicas

Securities Regulation Code

Maria Zarah Villanueva - Castro

transaction, practice or course of business which Such person or group of persons shall publish all
operates or would operate as a fraud or deceit request or invitations or tender offer or
upon any person.” requesting such tender offers subsequent to the
initial solicitation or request shall contain such
Duties of an insider in case of trading information as the Commission may prescribe,
securities: and shall be filed with the Commission and sent
to the issuer not alter than the time copies of
such materials are first published or sent or
Sec. 27.1 of the Securities Regulation Code given to security holders. (a) Any solicitation or
states that: “It shall be unlawful for an insider to recommendation to the holders of such a
sell or buy a security of the issuer, while in security to accept or reject a tender offer or
possession of material information with respect request or invitation for tenders shall be made in
to the issuer or the security that is not generally accordance with such rules and regulations as
available to the public, unless: (a) The insider may be prescribe. (b) Securities deposited
proves that the information was not gained from pursuant to a tender offer or request or
such relationship; or (b) If the other party selling invitation for tenders may be withdrawn by or on
to or buying from the insider (or his agent) is behalf of the depositor at any time throughout
identified, the insider proves: (I) that he the period that tender offer remains open and if
disclosed the information to the other party, or the securities deposited have not been
(ii) that he had reason to believe that the other previously accepted for payment, and at any
party otherwise is also in possession of the time after sixty (60) days from the date of the
information. A purchase or sale of a security of original tender offer to request or invitation,
the issuer made by an insider defined in except as the Commission may otherwise
Subsection 3.8, or such insider’s spouse or prescribe. (c) Where the securities offered
relatives by affinity or consanguinity within the exceed that which person or group of persons is
second degree, legitimate or common-law, shall bound or willing to take up and pay for, the
be presumed to have been effected while in securities that are subject of the tender offers
possession of material non-public information if shall be taken up us nearly as may be pro data,
transacted after such information came into disregarding fractions, according to the number
existence but prior to dissemination of such of securities deposited to each depositor. The
information to the public and the lapse of a provision of this subject shall also apply to
reasonable time for market to absorb such securities deposited within ten (10) days after
information: Provided, however, That this notice of increase in the consideration offered to
presumption shall be rebutted upon a showing security holders, as described in paragraph (e) of
by the purchaser or seller that he was aware of this subsection, is first published or sent or given
the material non-public information at the time to security holders. (d) Where any person varies
of the purchase or sale.” the terms of a tender offer or request or
invitation for tenders before the expiration
*Q: What is the prohibition imposed on insiders thereof by increasing the consideration offered
regarding material non-public information? to holders of such securities, such person shall
A: Sec. 27.3 of the Securities Regulation pay the increased consideration to each security
Code states that: “It shall be unlawful for any holder whose securities are taken up and paid
insider to communicate material non-public for whether or not such securities have been
information about the issuer or the security to taken up by such person before the variation of
any person who, by virtue of the communication, the tender offer or request or invitation.”
becomes an insider as defined in Subsection 3.8,
where the insider communicating the
information knows or has reason to believe that *Cemco Holdings, Inc. v National Life Insurance,
such person will likely buy or sell a security of the SC held that tender offer rule is applicable in
the issuer whole in possession of such this case. Rationale: 1. The statute covers not
information.” only direct acquisition but also indirect
acquisition or “any type of acquisition”; 2. The
Tender Offer legislative intent of Sec. 19 of the Code is to
regulate activities relating to acquisition of
control of the listed company and for the
Sec. 19 of the Securities Regulation Code purpose of protecting the minority stockholders
provides that: “Any person or group of persons of a listed corporation. Whatever may be the
acting in concert who intends to acquire at least method by which control of a public company is
15% of any class of any equity security of a obtained, either through the direct purchase of
listed corporation of any class of any equity its stocks or through indirect means, mandatory
security of a corporation with assets of at least tender offer rule applies.
fifty million pesos (50,000,000.00) and having
two hundred(200) or more stockholders at least
one hundred shares each or who intends to *Q: When is tender offer mandatory?
acquire at least thirty percent(30%) of such A: It is mandatory when:
equity over a period of twelve months(12) shall 1. A person is required to make a tender
make a tender offer to stockholders by filling offer for equity shares of a public
with the Commission a declaration to that effect; company in an amount equal to the
and furnish the issuer, a statement containing number of shares that the person
such of the information required in Section 17 of intends to acquire in the following
this Code as the Commission may prescribe. circumstances:

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Atty. Carlo Vincent G. Balicas

Securities Regulation Code

Maria Zarah Villanueva - Castro

a. Any person or a group of persons c. Offer to purchase is made at a premium

acting in concert, intends to acquire over the prevailing market price, at firm
35% or more of equity shares of a rather than negotiable terms
public company pursuant to an d. An offer is contingent on the tender of a
agreement made between or among fixed number of shares; and/or
the person and one or more sellers; e. Offer is only open for a limited period of
b. The person or a group of persons time.
acting in concert, intends to acquire
35% or more of the equity shares of Any person making a tender offer shall make a
a public company within a period of public announcement of his intention, prior to
12 months; the commencement of the offer; Provided,
c. If any acquisition of even less than however, such announcement shall not be made
35% would result in ownership of until the bidder has the resources to implement
over 51% of the total outstanding the offer in full.
equity securities of a public
company, the acquirer shall be
required to make a tender offer for
all the outstanding equity securities
to all remaining stockholder.
2. In all cases when the rules provide for
mandatory tender offer, the following
rules on sales be complied with:
a. If there is mandatory tender offer,
the sale of the shares pursuant to
the private transaction shall not be
completed prior to the closing and
completion of the tender offer.
b. Transactions with any of the seller/s
of significant blocks of shares with
whom the acquirers may have been
in private negotiations shall close at
the same time and upon the same
terms as the tender offer made to
the public.
c. For paragraph (b) above where the
35% is within a period of 12 months,
the last sale meeting the threshold
shall not be consummated until the
closing and completion of the tender
offer.

*Q: When may the SEC exempt a person from

the mandatory tender offer requirement?
A: Upon written application, the SEC may
exempt from the requirement to make a
mandatory tender offer the following proposed
purchases of equity shares of a public company:
a. The purchase of newly issued shares
from unissued capital stock
b. In connection with foreclosure
proceeding involving a duly constituted
pledge or security arrangement where
the acquisition is made by the debtor or
creditor
c. Purchases in connection with
privatization undertaken by the
government of the Philippines
d. Purchases in connection with corporate
rehabilitation under court supervision.

*Q: When is a person presumed to be making

voluntary tender offer?
A: A person will be presumed to be making a
voluntary tender offer where some or all of the
following factors are present:
a. Active and widespread solicitation of
public shareholders for the shares of a
public company
b. Solicitation made for a substantial
percentage of the issuer’s stock
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