Philippines

ACCRA Law Firm Philippines In-House Community

ACCRALAW Tower, 2nd Ave. Cor. 30th St., Bonifacio Global City
Taguig City, Metro Manila, Philippines
Tel: (632) 830-8000, / Fax (632) 4037007 or (632) 4037008
E: [email protected]    W: www.accralaw.com

v14i8_Jur_PhilippinesThe Philippines Stock Exchange (PSE) issued rules on December 2, 2016 governing the listing, trading and settlement of US dollar-denominated securities (DDS).

The Rules on Dollar Denominated Securities (DDS Rules) were earlier approved by the Securities and Exchange Commission (SEC) on November 10, 2016 and aim to provide issuers and investors with more instruments to meet their specific requirements. It can provide issuers with dollar-denominated funding requirements and the opportunity to raise capital at the PSE without incurring any foreign exchange risks. In the same manner, the product can also reduce the foreign currency risk exposure of foreign investors who trade PSE-listed securities. In addition, the DDS offers local investors an alternative investment option for their dollar holdings.

The DDS Rules shall apply only to existing listed companies that will issue DDS. DDS listings through initial public offering shall be subject to such other rules, regulations and other guideline as may be prescribed by the PSE and approved by the SEC and other regulatory agencies. The general procedures for the listing of equity securities shall apply in processing listing applications for DDS.

In light of the introduction of DDS, does this mean that an eligible issuer who is a domestic corporation may now issue shares with a par value in dollars?

In an opinion by the SEC dated November 6, 1995, the SEC stated that an analysis of the provisions of the Corporation Code relating to corporate capitalisation reveals that the required “payment of capital stock” and “amount of authorised capital stock” are covered by different provisions. Section 62 of the Corporation Code allows a corporation to receive subscription payment for its capital stock not only in “cash” but also in the form of “property”. While “foreign currency” may not qualify as actual cash, still it would qualify as property payment under the provision of the Corporation Code. Therefore, there is no legal impediment for a corporation to validly accept “foreign currency” as consideration for stock subscriptions.

However, the above policy should not be construed to automatically mean that the capital stock or capitalisation of a corporation can be denominated in foreign currency. The pertinent provisions of the Corporation Code are Sections 14 and 15, which explicitly require that the amount of the authorised capital stock of a corporation must be denominated in the lawful currency of the Philippines, which is represented in pesos.

Accordingly, while payment to subscriptions to capital stock in the form of “foreign currency” is allowable under existing law and SEC policy, the shares of stocks of domestic corporations cannot be denominated in terms of any currency other than in Philippine pesos.

This notwithstanding, the SEC in a subsequent opinion dated July 8, 2003 stated that the provisions of the Corporation Code that require shares to be issued by a company shall be expressed in the legal currency of the Philippines are mere formal rules and do not apply with pedantic rigour. In fact, said provisions allow for exemptions from the requirements when so prescribed by the Corporation Code and by special laws. In that case, the SEC interposed no objection to the issuance by a Philippine bank of US dollar denominated preferred shares of stock subject to the approval of the Monetary Board on the basis of the provision of the General Banking Law.

Based on the foregoing, the introduction of DDS will only allow equity shares of a domestic corporation to be quoted, traded and settled in dollars, but the par value of the shares must remain in Philippine pesos. The introduction of DDS only pertains to the requirement by the Corporation Code on the “payment of capital stock” and not on the “amount of capital stock”.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.
This article first appeared in Business World, a newspaper of general circulation in the Philippines

 

[sharethis]
Tags: Stock Exchange
Related Articles by Firm
Fake news and its web of legal issues in the post-truth era
Oxford Dictionaries’ Word of the Year for 2016 is “post-truth” — an adjective defined as “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. ...
Cyber bullying in the Philippines
The pen is mightier than the sword or so the adage goes. When this was once said, it was to highlight the power of thoughts and ideas over brute force and violence as a way to effect change. Today, the ...
Uber/GrabCar drivers: Independent contractors or employees?
The buzz about the legality of Uber and GrabCar operating in the Philippines might have died down, but now there is another legal issue surrounding them: whether their drivers are employees or ...
Price fixing in the context of the Philippine Competition Act
In light of the enactment of the Philippine Competition Act (PCA) in 2015, competitors, manufacturers, retailers and sellers or suppliers, in general, should be ...
Implementation of the data privacy act in Philippines now in full swing
Since 2012, the Philippines has had a comprehensive law governing personal data privacy. However, full implementation ...
Taxability of service fees received by non-resident foreign companies from online advertising in the Philippines
The use of the internet for the promotion of goods and services, particularly social media (Facebook, Twitter and ...
Levelling the playing field in the Philippines
Before the enactment of the Philippine Competition Act in 2015, the Philippines was the only founding member of Asean that did not have a comprehensive competition law in place. Francisco Ed Lim, Patricia-Ann T Prodigalidad, Eric R Recalde of <...
Age discrimination in the workplace
Republic Act No. 10911 (also known as the ‘Anti-Age Discrimination in Employment Act’) lapsed into law on 21 July ...
Green jobs: greening the Philippine labour sector
With the threat of climate change, the international community created the Paris Agreement which aims to stop global warming and preserve ...
Interplay of domestic law on compulsory licensing and international agreements on medicine prices
The price of pharmaceutical products in the Philippines appears to be on the high side compared to that in other Asian ...
Restrictive covenants in employment contracts
One of the means of keeping afloat in today’s competitive market is to hire employees who are ‘fit’ for a particular job. However, before employers ...
Make our system work: litigation practice expedited
The perception that litigation is a slow and arduous process has drawn many of us closer to the idea of alternative modes of dispute resolution. ...
Department of Labor and Employment (DOLE) Department Order No. 18-A: The Rules and Regulations on Contracting
On December 4, 2011, Department of Labor and Employment (DOLE) Department Order No. 18-A (D.O. 18-A), the new Rules Implementing Articles 106 to 109 ...
An overview of Philippine Data Privacy Law
Republic Act No. 10173, or the Philippine Data Privacy Act of 2012 (RA10173), was signed into law on August 15, 2012. This is the ...
New competition law for the Philippines
The Philippine Competition Act (PCA) went into effect on August 5, 2015. The law applies not only to acts committed in the Philippines but ...
Related Articles
China’s Priorities for a Free Trade Agreement with Canada
Analysis of Chinese language commentary, news media and academic studies, reveal some of China's top priorities for a free trade agreement with Canada ...
Vietnam Update – Q2, 2017
Including electronic visas, IPRs taxes, import/export rules, new tax regulations for farmland use, management of investment projects and commercial mediation ...
Indonesia: New Regulation Regarding Public Companies’ Shareholding Reporting Obligation
The Financial Services Authority has updated public companies’ obligation to report on their shareholding by way of OJK Regulation No. 11/POJK.04/2017 regarding Report on Public Company Ownership ...
Related Articles by Jurisdiction
Restrictive covenants in employment contracts
One of the means of keeping afloat in today’s competitive market is to hire employees who are ‘fit’ for a particular job. However, before employers ...
Fake news and its web of legal issues in the post-truth era
Oxford Dictionaries’ Word of the Year for 2016 is “post-truth” — an adjective defined as “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. ...
Latest Articles
China’s Priorities for a Free Trade Agreement with Canada
Analysis of Chinese language commentary, news media and academic studies, reveal some of China's top priorities for a free trade agreement with Canada ...
Vietnam Update – Q2, 2017
Including electronic visas, IPRs taxes, import/export rules, new tax regulations for farmland use, management of investment projects and commercial mediation ...
Obituary: Kirtee Kapoor
Sad passing of Davis Polk partner and friend of the In-House Community ...