Philippines, Indonesia update disclosure rules

Regulators in Manila focus on shareholder meetings and cornerstone investors while Indonesia addresses share pledges, writes Specialist Advisor for Southeast Asia Chris Leahy

The Securities and Exchange Commission (SEC), the Philippines’ principal markets regulator, has tightened disclosure relating to shareholder meetings and cornerstone investors.

A rule change announced in July 2024 sets out detailed disclosure requirements and deadlines for listed companies with respect to their shareholder meetings, be they regular or special meetings.

SEC Memorandum #11/2024 states that all listed companies are required to upload onto their websites minutes of their shareholder meetings within five business days.

The minutes are required to be maintained on the website for at least five years. The minutes must, at a minimum, disclose the following:

1. The date time and place of the meeting
2. A list of all directors, officer and shareholders attending
3. How the necessary quorum for the meeting was determined
4. The agenda items and issues discussed, and resolutions reached
5. A description of the voting procedures and methodology used to tabulate results
6. A record of voting results, by each item, including separately identifying votes for, against and abstentions (ACGA emphasis)
7. A record of questions posed by shareholders and of answers given by the board (ACGA emphasis) and management or a statement that no questions were raised.

The new rules, effective immediately, should help improve corporate disclosure of voting procedures, by mandating a detailed vote count on each resolution, something that many Filipino companies have avoided in the past. Traditionally, Filipino corporations have used a “viva voce” and/or a show of hands methods of determining support for resolutions, something that this new rule should effectively abolish.

The only practical way to meet the new SEC guidelines for voting disclosure will mean the requirement to count each vote. And while the results could be disclosed more quickly under the new SEC rule (we would prefer to see immediate disclosure), the requirement to maintain the minutes of shareholder meetings on the company website for at least five years is an encouraging change. The SEC will impose penalties on companies for non-compliance.

The securities regulator has also set its sights on cornerstone investors participating in IPOs. New rules issued by the SEC in April 2024 reflect a desire by the regulator to promote more cornerstone investors in local IPOs, which it regards as providing confidence in a new local offering. The rules, issued via SEC Memorandum Circular #8/2024, define a cornerstone investor as a preferred investor with a guaranteed allocation in an IPO and as having an obligation to subscribe to or purchase such allocation at the final offer price, provided that such price is within the IPO offer price range.

A cornerstone investor must sign a cornerstone agreement with the issuer, signed on or before final pricing of the IPO. This agreement will be treated as a material contract and must be included in an issuer’s registration statement.

Cornerstone investors may not be provided with any material information that is not disclosed in the IPO prospectus or provided to the public. The IPO prospectus must disclose the identity of each cornerstone investor, including a profile and state the number and type of securities that such investor(s) has/have committed to subscribe/purchase, which must be at the IPO price.

The securities regulator has not tried to define cornerstone investors more distinctly, nor restrict or limit anyone being treated as such in an IPO. There appears to be no restriction to a related party being a cornerstone investor: the SEC has introduced some basic yet useful guardrails to prevent insiders from exploiting outside shareholders.

The additional disclosure required and the explicit prohibition from permitting cornerstone investors from acquiring shares on more favourable terms than the investing public in an IPO, are welcome additions and should help prevent some of the more egregious behaviour of insiders that occurred in some past IPOs.

Indonesia amends disclosure rules to include share pledges

In February 2024, the Otoritas Jasa Keuangan (OJK), Indonesia’s principal securities regulator issued POJK4/2024 which amends existing share disclosure rules for insiders, specifically board directors and commissioners of listed companies, shareholders owning 5% or more of a listed company and party that is a controller of a listed company. Any change in the shareholding of the above parties must be made not later than five business days after the event.

In addition, for the first time, OJK introduced a requirement that any shareholder who pledges 5% or more of a listed company’s shares, either in one or several accumulated transactions, must disclose such share pledge within five business days of the execution of a share pledge agreement.

While the deadline for disclosure at five business days is far behind what we would regard as best practice (immediately), this is the first time the OJK has included share pledges in its disclosure rules, an improvement in local corporate governance rules.