Complying with the right Corporate Governance Code
Credit to Author: KELVIN LESTER LEE | Date: Tue, 18 Feb 2020 16:19:10 +0000
As the supervising commissioner of the Securities and Exchange Commission’s (SEC) Corporate Governance and Finance Department (CGFD), I aim to ensure that companies are complying with the best global practices of corporate governance.
As part of efforts to raise corporate governance standards in the country, the SEC has issued new corporate governance (CG) codes for different types of corporations. So far, the commission has issued separate CG codes for publicly-listed companies (PLCs), and for public companies and registered issuers.
But how do these CG codes differ exactly? Allow me to discuss the history of those covered under the Corporate Governance Code and its history.
On July 15, 2009, the Commission issued SEC Memorandum Circular 6, Series of 2009, otherwise known as the Revised Code of Corporate Governance (RCCG). It covered registered corporations and branches or subsidiaries of foreign corporations operating in the Philippines that: sell equity and/or debt securities to the public that required to be registered with the commission; have assets in excess of P50 million and at least 200 stockholders who own at least 100 shares each of equity securities; have equity securities listed on an exchange; or are grantees of secondary licenses from the commission.
The commission would later issue SEC Memorandum Circular 19, Series of 2016, otherwise known as the Code of Corporate Governance for PLCs (CG Code for PLCs) on Nov. 22, 2016. This superseded the RCCG, insofar as PLCs are concerned.
Unlike the RCCG, however, the CG Code for PLCs does not make any distinction between equities and debt securities. Citing SEC Resolution 760, Series of 2017, the SEC Office of the General Counsel (OGC) clarified in a recently issued opinion that the CG Code for PLCs applies only to equity securities listed on the Philippine Stock Exchange.
The CG Code for PLCs was intended to cover corporations and branches or subsidiaries of foreign corporations operating in the Philippines whose equity securities are listed on an exchange, the OGC noted.
Companies with debt securities listed on the Philippine Dealing Exchange are now covered by SEC Memorandum Circular 24, Series of 2019, otherwise known as the Code of Corporate Governance for Public Companies and Registered Issuers (CG Code for PCs and RIs).
The CG Code for PCs and RIs, which the SEC issued on Dec. 19, 2019, covers both public companies and registered issuers. A public company is defined as one with assets of at least P50 million and has 200 or more shareholders, holding at least 100 shares each of the equity securities. On the other hand, a registered issuer is a company that:
1. Issues proprietary and/or non-proprietary shares/certificates;
2. Issues equity securities to the public that are not listed in an exchange; or
3. Issues debt securities to the public that are required to be registered to the SEC, whether or not listed in an exchange.
The RCCG, along with other corporate governance rules issued earlier, shall remain in effect for other covered companies, when applicable, while the SEC works on corporate governance codes that would better suit the requirements of other types of corporations.
Through such codes, the SEC aims to steer the overall Philippine corporate sector toward higher standards of corporate governance, which should translate to better value propositions for shareholders and customers, minimized risks, growth and sustainability.
Kelvin Lester K. Lee is a commissioner of the Securities and Exchange Commission. The views and opinions stated here are his own. You may email your comments and questions to oclee@sec.gov.ph.