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Introduction
The Securities and Exchange Commission (SEC) in the Philippines plays a crucial role in regulating and supervising various business entities. To ensure transparency, protect investors, and promote good corporate governance, the SEC issues guidelines and circulars that businesses must comply with. SEC Memorandum Circular No. 28 (MC No. 28) is one such directive that focuses on strengthening rules concerning the protection of minority shareholders. In this article, we will provide an overview of SEC Memorandum Circular No. 28 and its implications for business owners in the Philippines.
Overview of SEC Memorandum Circular No. 28
SEC Memorandum Circular No. 28 was issued on September 6, 2021, and aims to address significant concerns related to corporate governance, specifically the protection of minority shareholders in listed companies. It highlights the need to enhance transparency, integrity, and accountability among corporations by establishing clearer rules and guidelines.
Key Features and Implications
1. Foreword on Good Corporate Governance: MC No. 28 emphasizes the significance of good corporate governance in maintaining investor confidence, safeguarding shareholders' interests, and ensuring sustainable business growth. It advocates for transparency, fairness, accountability, and responsibility from all corporate stakeholders.
2. Independent Directors: The circular emphasizes the role of independent directors in upholding corporate governance. It outlines the qualifications, appointment process, responsibilities, and limitations for independent directors. They are expected to possess relevant expertise, integrity, and independence from management, ensuring balanced decision-making.
3. Enhanced Protection for Minority Shareholders: MC No. 28 introduces measures to protect minority shareholders from potential abuse by majority shareholders. It reinforces the principle of equal treatment and safeguards the rights of minority shareholders, including the right to access information, participate in crucial decisions, and recourse to remedies.
4. Strengthened Audit Committees: The circular enhances the obligations and responsibilities of audit committees. It requires independent directors, who comprise the majority of audit committee members, to possess accounting or finance qualifications. The audit committee's role involves ensuring effective internal controls, verifying the accuracy of financial statements, and overseeing compliance with relevant laws and regulations.
5. Disclosure and Transparency: MC No. 28 promotes greater transparency by mandating companies to disclose pertinent information promptly. This includes financial statements, significant events, and key transactions that may affect shareholders' interests. The circular also emphasizes the need for accurate, complete, and timely disclosure to protect shareholders' rights.
Compliance and Implementation
To ensure compliance with SEC Memorandum Circular No. 28, business owners and leaders should:
1. Study and Familiarize: Thoroughly understand the circular's provisions and requirements to assess their impact on the company's corporate governance practices.
2. Review Existing Policies: Evaluate and update internal policies and procedures to align with MC No. 28's guidelines and principles. This may include revisiting corporate charters, auditing processes, shareholder communication, and board compositions.
3. Appoint Independent Directors: Comply with the circular's guidelines for appointing independent directors by assessing qualifications, expertise, and independence to strengthen board dynamics and decision-making processes.
4. Enhance Transparency and Disclosure: Ensure that the company's disclosure practices adhere to the circular's requirements, providing accurate and timely information to shareholders and stakeholders.
5. Training and Education: Provide training and education to board members, directors, and key executives regarding their obligations, roles, and responsibilities under MC No. 28.
Conclusion
SEC Memorandum Circular No. 28 represents an important step towards strengthening corporate governance and protecting minority shareholders in the Philippines. By embracing its guidelines and fostering a culture of transparency, accountability, and fairness, businesses can enhance investor confidence, promote sustainable growth, and contribute to a robust and responsible business environment. It is essential for business owners and key stakeholders to fully comprehend and implement MC No. 28's provisions to ensure compliance and uphold the rights and interests of shareholders.