The Market Monitor Minding the Nation's Business
By Riza Lozada
Local trade groups are up in arms against new Securities and Exchange Commission (SEC) requirements for local firms, including the need to make official the new locations of their principal offices through amendments to their articles of incorporation that would require approval of stockholders and submission to the SEC.
The SEC said the rules were being implemented to protect the integrity of stockholders’ meetings, but groups led by the Philippine Chamber of Commerce and Industry (PCCI) and the Philippine Exporters Confederation (Philexport) said the rules were impractical and should be scrapped.
The PCCI, whose members include small- and medium-scale exporters, said complying with the SEC rule would entail unnecessary costs and effort.
In a joint statement addressed to the Department of Trade and Industry (DTI) and to the National Competitive Council, the PCCI, along with trade groups Philexport and the Employers Confederation of the Philippines (Ecop) said the rule goes against the pursuit of local businesses to improve competitiveness.
The statement was signed by the PCCI President George Barcelon, Philexport President Sergio Ortiz-Luis Jr., and ECOP President Edgardo Lacson. It was addressed to Trade and Industry Secretary Adrian Cristobal Jr. and Guillermo Luz, private-sector co-chairman of the National Competitiveness Council (NCC).
The business groups enumerated other SEC policies that they also sought to be reviewed or repealed because they “adversely affect” business competitiveness.
“Considering the traffic, we also face the difficult task of coming up with a quorum in a stockholders’ meeting with only this agenda of amending the address,” their joint statement also said.
The PCCI, Philexport and the Ecop were partners with the DTI and NCC in expressing their common desire to create an environment in the local business sector that would enhance the country’s advantage in luring investments.
The groups said the DTI and NCC must look at the issues raised because they affect the competitiveness of local businesses that were included the SEC impositions.
A position paper sent to the SEC suggested that a board resolution be “enough compliance with the memorandum circular, to avoid the additional cost and time to process the amendment application” instead of approval from stockholders.
“This is especially true for our member-business support organizations composed of small and medium enterprises, many of whom are only renting office space and would tend to re-locate to other facilities offering lower rent,” the paper added.
In January, the SEC also ruled that a stockholders meeting or voting cannot be conducted through teleconferencing or videoconferencing.
SEC General Counsel Camilo Correo cited the Corporation Code to support the SEC stand: “Section 51 of the Corporation Code provides that the stockholders meeting or members meeting, whether regular or special, shall be held in the city or municipality where the principal office of the corporation is located, and if practicable in the principal office of the corporation.”
He then cited SEC Opinion 16-01 that said: “This provision presupposes that the attendees to the stockholders meeting or to the members meeting are in the same place during the meeting. This is in contrast to the teleconferencing where the participants are in different places, although their communications are facilitated through electronic medium, making their presence in the meeting merely virtual or electronic.”
The trade groups also sought the review of SEC Memorandum Circular (MC) 20-2013, “which directs all board directors and key officers of publicly listed firms to attend at least once a year trainings on corporate governance conducted by SEC-accredited training providers.”
The business groups recommended, instead, that board members be given the freedom to participate in seminars that the company chooses to increase their competitiveness.
“There are already a number of these that their foreign buyers and partners may require, including those relating to management, human resources and manufacturing processes. There are also cases when they even need certifications on these governance practices and training programs,” the groups said.
The business groups also called for the review or repeal of SEC MC 10-2014, or the guidelines to implement RR 1-2014, which requires the submission of an alpha list disclosing specific income and taxes paid.
“We propose that the policy be suspended, as it poses a grave threat to our ability to attract local and foreign investments,” the group said.
“This is another grave abuse of discretion in issuing regulations without regard to the right to privacy. This disclosure may compromise the safety of people and companies if they are identified by unauthorized third parties. Further, the integrity of a particular market of the taxpayer could be affected by the release of such information.
“We propose that the policy be suspended, as it poses a grave threat to our ability to attract local and foreign investments for the following reasons,” the groups said.
The trade groups also sought the review and suspension of the new policy of the Board of Accountancy (BOA) requiring companies with revenues above P10 million a year to engage certified public accountants (CPAs) to prepare financial statements and to sign a ertificate of Preparation and Disclosures Notes to be attached to annual financial statements.
The BOA rule is “unnecessary and redundant” since all financial statements submitted to the SEC and the Bureau of Internal Revenue are already required to submit a duly signed Statement of Management’s Responsibility, the groups said.
“MSMEs (micro, small and medium enterprises) may not have CPAs as chief accountants or finance managers. There are cases when the chief accountant/finance manager is the owner himself who may not be a CPA. Hiring a CPA will clearly be another unnecessary cost, especially if the company does not have shareholders accountable to. If required by his buyer or a government regulator, the MSME may opt to have an external auditor who is necessarily a CPA,” the groups said.