In the past few years, our country’s credit rating has improved. From being tagged as the “sick man of Asia,” the Philippines is currently rated “investment-grade” by three of the major global credit rating agencies. Based on the publications issued by the outgoing administration, the increase in rating can be attributed to the strong performance of the service sector, trade, real estate and business activities, and manufacturing and construction subsectors.
Improving the economy has always been a part of any administration’s objective. Thus, the government is always on the lookout for ideas on how to attract investors. However, while there are advantages to having competitive businesses in our country, measures to safeguard competitive conditions should still be put into place. This is among the goals of the long-awaited Republic Act (RA) No. 10667, otherwise known as the Philippine Competition Act, which was approved by the President last 21 July 2015.
To implement the national competition policy and attain its objectives of protecting consumer welfare by penalizing all forms of anti-competitive agreements, abuse of dominant positions and anti-competitive mergers and acquisitions, the Philippine Competition Act created the Philippine Competition Commission (PCC) under the Department of Justice (DoJ).
Prior to the organization of the PCC, applications for mergers were forwarded by the Securities and Exchange Commission to the DoJ to get the necessary endorsement, to prove that the proposed mergers will not result in violations of the national competition policy. Thus, the timing for getting the DoJ’s endorsement would also have to be considered in case of mergers.
It was just last 1 February 2016 that the PCC was organized. Within the same month after it was organized, the PCC issued two memorandum circulars which provide the transitory rules and guidelines for mergers and acquisitions. These rules and guidelines are to be implemented until such time the PCC has come up with the implementing rules and regulations (IRR) of the Philippine Competition Act.
Under the transitory rules, mergers and acquisitions are deemed approved if the value of the transaction is P1 billion or less, or if notice has been provided to the PCC, for transactions valuing more than P1 billion. These mergers and acquisitions are deemed to have received a favorable ruling from the PCC and may not be challenged under the Philippine Competition Act, except when the required notice contains false material information.
The notice to be provided by the parties to a merger or acquisition agreement with transactional value exceeding P1 billion should contain the following information: [a] the parties to the merger or acquisition; [b] the name and contact details of the authorized representatives of each party to whom the Commission may address any correspondence; [c] a brief description of the business of the parties; [d] the type of the transaction, whether a merger or an acquisition; [e] the consideration involved in the transaction; [f] the key terms of the transaction; and [g] the timing for the execution or implementation of the transaction. The transitory rules do not provide a specific deadline for filing the notice to the PCC except in cases where at least one party to the transaction is a listed company. However, in general, it would seem best to file the notice before the target transaction date since one of the information required in the notice is the timing of the execution or implementation of the transaction.
In case of mergers or acquisitions involving a company whose shares of stock are listed in the Philippine Stock Exchange (PSE), and with a transactional value exceeding P1 billion (Covered Transaction), the deadline for filing the notice to the PCC would depend on whether the transaction is required to be disclosed to the PSE pursuant to the Securities Regulation Code and its implementing rules. In case disclosure to the PSE is required, the parties should notify the PCC prior to the execution of the merger or acquisition. On the other hand, parties to Covered Transactions that are not required to be disclosed to the PSE should provide the said notice to the PCC before the close of business of the first working day after the Covered Transaction occurred.
Mergers or acquisitions with transactional value exceeding P1 billion that fail to comply with the required notice do not only run the risk of being questioned, but may be subject to penalties provided under RA 10667.
In case of mergers or acquisitions of special corporations governed by special laws, such as banks, banking institutions, insurance companies, public utilities and educational institutions, the required notice to the Commission should not be construed as dispensing with the requirement of securing a favorable recommendation from the appropriate government agency.
With the recently concluded elections, Filipinos and the international community are keeping an eye on how the next administration plans to improve our country’s economy. Hopefully, its proposed steps would include the needed measures to carry out the policy objectives of the Philippine Competition Act and its anticipated IRR.
The views or opinions in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.
Maria Ysidra May Y. Kintanar-Lopez is an Assistant Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of PwC network.
may.y.kintanar@ph.pwc.com
Under the transitory rules, mergers and acquisitions are deemed approved if the value of the transaction is P1 billion or less, or if notice has been provided to the PCC, for transactions valuing more than P1 billion. These mergers and acquisitions are deemed to have received a favorable ruling from the PCC and may not be challenged under the Philippine Competition Act, except when the required notice contains false material information.
The notice to be provided by the parties to a merger or acquisition agreement with transactional value exceeding P1 billion should contain the following information: [a] the parties to the merger or acquisition; [b] the name and contact details of the authorized representatives of each party to whom the Commission may address any correspondence; [c] a brief description of the business of the parties; [d] the type of the transaction, whether a merger or an acquisition; [e] the consideration involved in the transaction; [f] the key terms of the transaction; and [g] the timing for the execution or implementation of the transaction. The transitory rules do not provide a specific deadline for filing the notice to the PCC except in cases where at least one party to the transaction is a listed company. However, in general, it would seem best to file the notice before the target transaction date since one of the information required in the notice is the timing of the execution or implementation of the transaction.
In case of mergers or acquisitions involving a company whose shares of stock are listed in the Philippine Stock Exchange (PSE), and with a transactional value exceeding P1 billion (Covered Transaction), the deadline for filing the notice to the PCC would depend on whether the transaction is required to be disclosed to the PSE pursuant to the Securities Regulation Code and its implementing rules. In case disclosure to the PSE is required, the parties should notify the PCC prior to the execution of the merger or acquisition. On the other hand, parties to Covered Transactions that are not required to be disclosed to the PSE should provide the said notice to the PCC before the close of business of the first working day after the Covered Transaction occurred.
Mergers or acquisitions with transactional value exceeding P1 billion that fail to comply with the required notice do not only run the risk of being questioned, but may be subject to penalties provided under RA 10667.
In case of mergers or acquisitions of special corporations governed by special laws, such as banks, banking institutions, insurance companies, public utilities and educational institutions, the required notice to the Commission should not be construed as dispensing with the requirement of securing a favorable recommendation from the appropriate government agency.
With the recently concluded elections, Filipinos and the international community are keeping an eye on how the next administration plans to improve our country’s economy. Hopefully, its proposed steps would include the needed measures to carry out the policy objectives of the Philippine Competition Act and its anticipated IRR.
The views or opinions in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.
Maria Ysidra May Y. Kintanar-Lopez is an Assistant Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of PwC network.
may.y.kintanar@ph.pwc.com
source: Businessworld
No comments:
Post a Comment