SECTION 2 of Republic Act 8799, or the "Philippines' Securities Regulation Code," declares that the State shall establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprises, enhance democratization of wealth, promote the development of the capital market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.
In recognition of this provision, the Securities and Exchange Commission (SEC) published a proposed Draft Regulations for cross-shareholding structure for publicly listed companies (Draft Regulations) in 2021. The Draft Regulations provide that a subsidiary is prohibited from acquiring the shares of its parent company, except for shares without voting rights, e.g., non-voting preferred shares, which shall in no case exceed 10 percent of the total shares belonging to the same series or class of shares.
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