PSE board OKs new rules for distressed companies, firms under rehab

MANILA, Philippines - The local bourse announced on Tuesday that its board approved new rules for distressed companies and firms undergoing corporate rehabilitation, providing more safeguards to their minority stockholders.

The Philippine Stock Exchange said it has approved for submission to the Securities and Exchange Commission the proposed measures, which compels listed companies under financial distress to disclose information on:

1. cessation of business operations for at least six months for any reason

2. reporting of negative stockholders’ equity

3. delay in payment of loans amounting to at least ten percent of its total assets; and 

4. adverse or qualified auditor’s opinion on the financial statements of the company for three consecutive years

Upon the disclosure, the company will then be flagged as a financially distressed firm in the stock exchange's reports and website. The company may request for the removal of the notice of financial distress if it can prove otherwise within three years.

“The pre-rehabilitation guidelines are being proposed to give more information to the investing public about listed companies under financial distress and provide an effective exit mechanism for those who may wish to trade their shares of such companies experiencing financial distress,” PSE President and Chief Executive Officer Hans Sicat said.

Meanwhile, under the rules for companies under rehabilitation, the local bourse proposed a trading suspension on the shares of the company five trading days after the filing of the disclosure on corporate rehabilitation, as opposed to the current PSE rehabilitation guidelines which call for the immediate imposition of a trading suspension on the shares of a company.

The rules also include four rehabilitation schemes under the Financial Rehabilitation and Insolvency Act of 2010 namely, court supervised rehabilitation initiated either by the debtor or the creditor; pre-negotiated rehabilitation; and informal or out-of-court rehabilitation.

“The PSE is not alone in adopting such rules as other stock markets in Asia have similar rules in place. What we are doing is to align our rules with best practices. We trust that the SEC will be behind us to support this initiative,” Sicat said.