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MERGER AND CONSOLIDATION
Merger – Two (2) or more corporations may merge into a single corporation which shall be one of the constituent corporations. Consolidation – Two (2) or more corporations may consolidate into a new single corporation which shall be the consolidated corporation. Plan of Merger or Plan of Consolidation o The names of the corporations proposing to merge or consolidate. o The terms of the merger or consolidation. o A statement of the changes in the articles of incorporation. o Such other provisions as are deemed necessary or desirable. Stockholders’ or Members’ Approval
- Majority vote of each of the board of directors or trustees of the constituent corporations of the plan of merger or consolidation.
- The affirmative vote of stockholders representing at least 2/ of the outstanding capital stock of each corporation in the case of stock corporations or at least 2/3 of the members in the case of nonstock corporations. Articles of Merger or Articles of Consolidation – executed by each of the constituent corporations, to be signed by the president or vice president and certified by the secretary or assistant secretary. Effectivity of Merger or Consolidation – If SEC is satisfied that the merger or consolidation of the corporations concerned is consistent with the provisions of the RCC and existing laws, it shall issue a certificate approving the plan and articles of merger
or of consolidation, at which time the merger or consolidation shall be effective. Effects of Merger or Consolidation – The merger or consolidation shall have the following effects:
- The constituent corporations shall become a single corporation.
- The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation.
- The surviving or the consolidated corporation shall possess all the rights, privileges, immunities, and powers.
- The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and franchises of each constituent corporation; and all real or personal property, all receivables due on whatever account, including subscriptions to shares and other choses in action, and every other interest of, belonging to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation without further act or deed.
- The surviving or consolidated corporation shall be responsible for all the liabilities and obligations of each constituent corporation. Any pending claim, action or proceeding brought by or against any constituent corporation may be prosecuted by or against the surviving or consolidated corporation. The rights of creditors or liens upon the property of such constituent corporations shall not be impaired by the merger or consolidation.
Resident Agent o A resident agent may be either an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines. o An individual resident agent must be of good moral character and of sound financial standing. o In case of a domestic corporation who will act as a resident agent, it must likewise be of sound financial standing and must show proof that it is in good standing as certified by SEC. A foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except those which provide for the creation, formation, organization or dissolution of corporations or those which fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation. Amended License – in the event the foreign corporation changes its corporate name, or desires to pursue other or additional purposes in the Philippines.
Doing Business Without a License o The foreign corporation shall not be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines. o But such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. Revocation of License – The license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the SEC for the violation of the law, rules and regulations. Withdrawal of Foreign Corporations – A foreign corporation licensed to transact business in the Philippines may be allowed to withdraw from the Philippines by filing a petition for withdrawal of license. No certificate of withdrawal shall be issued by SEC unless all the following requirements are met: o All claims which have accrued in the Philippines have been paid, compromised or settled. o All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions, have been paid.
of participation, nature, effects, frequency and seriousness of the violation: o Fine – P5,000 to P2,000,000, and not more than P1,000 for each day of continuing violation but in no case to exceed P2,000,000. o Issuance of a permanent cease and desist order. o Suspension or revocation of the certificate of incorporation. o Dissolution of the corporation and forfeiture of its assets. Unauthorized Use of Corporate Name – FINE of P10,000 to P200,000. Violation of Disqualification Provision – When, despite the knowledge of the existence of a ground for disqualification, a director, trustee or officer willfully holds office, or willfully conceals such disqualification. o FINE of P10,000 to P200,000 and the director, trustee or officer of any corporation shall be permanently disqualified. o FINE of P20,000 to P400,000, when the violation is injurious or detrimental to the public. Violation of Duty to Maintain Records, to Allow their Inspection or Reproduction – o FINE of P10,000 to P200, o FINE of P20,000 to P400,000, when the violation is injurious or detrimental to the public. Willful Certification of Incomplete, Inaccurate, False, or Misleading Statements or Reports –
o FINE of P10,000 to P200, o FINE of P20,000 to P400,000, when the violation is injurious or detrimental to the public. Independent Auditor Collusion – An independent auditor who, in collusion with the corporation’s directors or representatives, certifies the corporation’s financial statements despite its incompleteness or inaccuracy, its failure to give a fair and accurate presentation of the corporation’s condition, or despite containing false or misleading statements, shall be punished. o FINE of P80,000 to P500, o FINE of P100,000 to P600,000 – when the statement or report certified is fraudulent or has the effect of causing injury to the general public. Obtaining Corporate Registration Through Fraud – o FINE of P200,000 to P2,000, o FINE of P400,000 to P5,000,000, when the violation is injurious or detrimental to the public. Fraudulent Conduct of Business – A corporation that conducts its business through fraud shall be punished. o FINE of P200,000 to P2,000,000.
o A whistleblower refers to any person who provides truthful information relating to SEC or possible commission of any offense or violation under the RCC. o Any person who, knowingly and with intent to retaliate, commits acts detrimental to a whistleblower such as interfering with the lawful employment or livelihood of the whistleblower, shall be punished - FINE of P100,000 to P1,000,000. Other Violations of the RCC – FINE of P10,000 to P1,000, Liability of Directors, Trustees, Officers, or Other Employees
- If the offender is a corporation, the penalty may, at the discretion of the court, be imposed upon such corporation and/or upon its directors, trustees, stockholders, members, officers, or employees responsible for the violation or indispensable to its commission. Liability of Aiders and Abettors and Other Secondary Liability – o Anyone who shall aid, abet, counsel, command, induce, or cause any violation of the RCC, or any rule, regulation, or order of SEC shall be punished – FINE not exceeding that imposed on the principal offenders, at the discretion of the court, after taking into account their participation in the offense.
REPUBLIC ACT NO. 8799
THE SECURITIES REGULATION CODE
REGISTRATION OF SECURITIES
" Securities " are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character. It includes:
- Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-backed securities.
- Investment contracts, certificates of interest or participation in a profit sharing agreement, certifies of deposit for a future subscription.
- Fractional undivided interests in oil, gas or other mineral rights.
- Derivatives like option and warrants.
Exempt Securities –
- Any security issued or guaranteed by the Government of the Philippines, or by any political subdivision or agency thereof, or by any person controlled or supervised by, and acting as an instrumentality of said Government.
- Any security issued or guaranteed by the government of any country with which the Philippines maintains diplomatic relations, or by any state, province or political subdivision thereof on the basis of reciprocity.
- Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body.
- Any security or its derivatives the sale or transfer of which, by law, is under the supervision and regulation of the Office of the Insurance Commission, Housing and Land Use Rule Regulatory Board, or the Bureau of Internal Revenue.
- Any security issued by a bank except its own shares of stock.
Exempt Transactions –
- At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy.
- By or for the account of a pledge holder, or mortgagee or any of a pledge lien holder selling of offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding the provision of the SRC, to liquidate a bona fide debt, a security pledged in good faith as security for such debt.
- An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner therefore, or by his representative for the owner’s account, such sale or offer for sale or offer for sale, subscription or delivery not being made in the course of repeated and successive transaction of a like character by such owner, or on his account by such representative and such owner or representative not being the underwriter of such security.
- The sale of securities to any number of the following qualified buyers: a. Bank. b. Registered investment house. c. Insurance company. d. Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or manage by a bank or other persons authorized by the Bangko Sentral to engage in trust functions. e. Investment company. f. Such other person as the SEC may rule by determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management. o Any person applying for an exemption, shall file with the SEC a notice identifying the exemption relied upon. REPORTORIAL REQUIREMENTS Periodic and Other Reports of Issuer 1. Within 135 days, after the end of the issuer’s fiscal year, an annual report which shall include, a balance sheet, profit and loss statement and statement of cash flows certified by a public accountant, and a management discussion and analysis of results of operation. 2. Such other periodical reports for interim fiscal periods and current reports on significant developments of the issuer as the SEC may prescribe as necessary to keep current information on the operation of the business and financial condition of the issuer. This will apply to the following:
- An issuer which has sold a class of securities. This obligation shall be suspended for any fiscal year, if such issuer has less than 100 holders of such class securities.
- An issuer with a class of securities listed for trading on an Exchange.
- An issuer: a. With assets of at least P50,000,000. b. Having 200 or more holder. c. Each holding at least 100 share of a class of its equity securities. Every issuer shall furnish to each holder an annual report. SEC may prescribe an annual meeting of the holders of any equity security of a class entitled to vote at such meeting, the issuer shall transmit to such holders an annual report. Reports by 5% Holders of Equity Securities o Any person who acquires directly or indirectly the beneficial ownership of more than 5% of a class of securities, shall, within 10 days after such acquisition, submit to the issuer of the securities, to the Exchange where the security is traded, and to the SEC a sworn statement containing the following information in the public interest or for the protection of investors:
- The personal background, identity, residence, and citizenship of, and the nature of such beneficial ownership by, such person.
- If the purpose of the purchases or prospective purchases is to acquire control of the business of the issuer of the securities, any plans or proposals
Who are required to make a tender offer?
- Any person or group of persons acting in concert, who intends to acquire at least 15% of a public company.
- Any person or group of persons acting in concert, who intends to acquire at least 30% of a public company over a period of 12 months. The purpose of the tender offer rule is to protect minority shareholders against any scheme that dilutes the share value of their investments. It gives the minority shareholders the chance to exit the company under reasonable terms, giving them the opportunity to sell their shares at the same price as those of the majority shareholders. What are the obligations of a person making a tender offer? A person who intends to make a tender offer shall:
- Make an announcement of his intention in a newspaper of general circulation, prior to the commencement of the offer.
- At least 2 business days prior to the date of the commencement of the tender offer.
- File with the SEC a required form for tender offer.
- Deliver a copy of such form to the target company and to the Exchange where such class of target company’s securities are listed for trading.
- Report the results of the tender offer by filing with the SEC.
Proxy Solicitations – Proxy – a person authorized to act or speak for another. In law, a proxy is an agent endowed with authority by the principal to act in the latter’s behalf. In corporations, a proxy has a distinct function, that is, to exercise the voting rights of the stockholder-principal. This is so provided in the Revised Corporation Code stating that stockholders may vote in person or by proxy in all meetings of stockholders. Proxy voting has several purposes.
