When is it a Sale of All or Substantially All of Property and Assets by a PLC?

The Securities and Exchange Commission (SEC) issued SEC Memorandum Circular No. 12, Series of 2020 providing guidelines to publicly-listed companies (PLC) on what constitutes a sale of all or substantially all of its property and assets and the required stockholders’ approval of such sale.

Briefly, SEC MC No. 12 provides that a sale or disposal of corporate property and assets amounting to at least 51% of the corporation’s total assets shall be considered a sale of all or substantially all of the corporate property and assets, whether such sale accrued in a single transaction or in several transactions taking place within one (1) year from the date of the first transaction (Aggregate Sale Transactions).

The determination whether a sale amounts to at least 51% of the corporation’s assets must be computed based on its total assets as shown in its latest audited financial statement (AFS). The computation may also be based on the latest quarterly financial statement or a special purpose financial statement prepared in connection with the sale transaction.

The vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock (OCS) in a stockholders’ meeting duly called for the purpose of approving such sale shall be required prior to the execution of the sale transaction. In cases of Aggregate Sale Transactions, shareholder approval shall be required for the sale transaction that breaches the 51% corporate asset threshold.

A PLC found, after due notice and hearing, to have violated SEC MC No. 12 may be held liable for penalties/sanctions under Section 158 of the Revised Corporation Code.

Click here to read the entire text of SEC MC No. 12 dated 07 April 2020.