8 May, 2016
Survey of ASEAN Regulations
Applicable Regulatory Body and Market Information
- Securities and Exchange Commission (“SEC”)
- Philippine Stock Exchange, Inc. (“PSE”) where the securities are to be listed onshore. • 265 companies listed as of 14 December 2015.
- Market Capitalization of PHP 13.21 trillion/USD 293.5 billion as of 2015.
Securities Offering and/or Registration and Exemption Requirements
In general, no security can be sold or offered for sale or distribution within the Philippines without a registration statement duly led with and rendered effective by the SEC.
Among others22, offerings which are (1) to less than 20 persons in the Philippines in any 12-month period and (2) to quali ed buyers23 are exempt from registration. Also, the issuance of (1) debt in- struments to quali ed buyers24 and (2) securities issued or guaranteed by multilateral nancial entities (MFE), or by facilities or funds established, administered, and supported by MFEs25 are also exempt. Underwriters involved in the onshore transaction must have been licensed to engage in such activities in the Philippines by the SEC.
Marketing of Securities Where Issuer/Sponsor Offshore and Investor Onshore
Where any offer of securities occurs onshore, then the securities are required to have been registered with the SEC and listed with the PSE (if applicable). It is the act of making an offer onshore that triggers the regulations, regard- less of where the sale may be settled or the securities issued/held. The execution of documents and transmittal of funds from onshore would indicate that such an offer should have been registered although not solely determina- tive of whether a regulated offer has taken place.
Generally no requirement of registration or noti cation, if all aspects of the offer remain offshore and it can be proven that onshore investor went offshore to receive the offer.26
Need to Engage Onshore Sponsor, Licensed Placement or Other Distribution Agent
None as long as the transaction is “exempt”.
Legends or Other Disclosure Requirements on Offering Materials
Required.27
Other Relevant Considerations
There are certain tax consequences to being deemed as having conducted business in the Philippines without a license for both the sponsor and its personnel.28
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22 The other transactions considered safe harbors from the registration requirement are: (a) an isolated transaction where no under- writer is involved; (b) mortgage notes sold to a single purchaser at a single sale secured by real estate or tangible personal property; (c) exchanges of a security pursuant to a right of conversion provided that the security surrendered was, when sold, exempt from registration or registered with the SEC; (d) broker’s transactions on customer orders on a registered exchange; (e) an exchange of securities by the issuer with its existing security holders exclusively, where no commission or other remuneration is paid or given for the solicitation of such an exchange
23 The following have been classi ed as quali ed buyers by the SEC: (a) Banks; (b) Registered investment houses; (c) Insurance compa- nies; (d) Pension funds or retirement plans maintained by the Government of the Philippines or any political subdivision thereof or man- aged by a bank or other persons authorized by the Philippine central bank (“BSP”) to engage in trust functions; (e) Investment companies; or (f) Such other person as the SEC may by rule determine as quali ed buyers, on the basis of such factors as nancial sophistication, net worth, knowledge, and experience in nancial and business matters, or amount of assets under management.
24 Banks, registered investment houses, insurance companies, pension funds or retirement funds maintained by the Government of
the Philippines or any of its political subdivision or managed by a bank or other persons authorized by the Bangko Sentral ng Pilipinas to engage in trust functions, investment companies, or such other persons as the SEC may, by rule, determine as quali ed buyers on the basis of such factors as nancial sophistication, net worth, knowledge, experiences in nancial and business matters, or amount of assets under management.
25 To be exempt from registration, the MFEs must be established through a treaty or any other binding agreement to which the Phil- ippines is a party or subsequently becomes a member. MFEs include international nancial institutions, multilateral development banks, development nance institutions, or any other similar entities. In lieu of registration, the issuer is required to le a disclosure to the SEC indicating, among others, information about the issuer and the security to be issued, information about the MFE, and information about the guarantee.
26 As a general rule, if the activities of the nancial sponsor are conducted outside of the Philippines, these are factors that contribute to a determination that no business is being conducted in the Philippines. For example, would be permissible to send any marketing materials from offshore electronically or by granting access to a website maintained offshore.
27 Selling restrictions typically contain statements substantially in the form of the following: the philippine securities and exchange commission has not approved these securitiesor determined if this offering documentis accurate or complete. Any representation to the contrary is a criminal offense and should be reported immediately to the philippine securities and exchange commission. Securitieswill be offered in the philippines only pursuant to exemptions under the securities regulation code (the “src”). Accordingly, securitiesmay not be offered or sold or made the subject of an solicitation for subscription or purchase nor may this offering documentor any other document or material in connection with the offer or sale, or solicitation for subscription or purchase, of securitiesbe circulated or distributed whether directly or indirectly to any person in the republic of the philippines except in a transaction exempt from the src’s registration requirements under section 10 of the src. The securities being offered or sold have not been registered with the philippine securities and exchange commission under the src. Any future offer or sale thereof is subject to registration requirments under the src unless such offer or sale quali es as an exempt transaction.
28 Philippine tax laws and regulations consider any person that is actually in the Philippines for over 180 days in any calendar year to be a
“non-resident alien engaged in trade or business in the Philippines” for income tax purposes. Thus, such a person becomes liable for income tax to the Philippine government for all earnings derived from Philippine sources at the rate of 32% for individuals and for entities deemed doing business in the Philip- pines the applicable rate is 30%.
Prepared by Lex Mundi, Romulo Mabanta Buenaventura Sayoc & de los Angeles – Lex Mundi Member Firm for Philippines
