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Families won’t give up control of their stock corporations

The Manila Times logo The Manila Times 10/8/2019 EMETERIO SD. PEREZ

a person with collar shirt © Provided by The Manila Times Publishing Corp. EMETERIO SD. PEREZ

(Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.)

Does the Securities and Exchange Commission (SEC) still follow the 25-percent rule in getting the subscribed and paid-up portion of a company’s authorized capital stock (ACS)? If it does, then Due Diligencer can safely assume that stock corporations should have at least 25 percent of ACS subscribed and at least 25 percent of said subscribed portion of ACS paid-up.

This is the simplest of the rules on the registration of a new stock corporation, which its owners or incorporators may have much bigger ACS. The rule requires that of this ACS, at least 25 percent should be subscribed and at least 25 percent of subscribed should be paid-up.

The SEC’s computation goes this way: 25 percent of a corporation’s ACS is considered subscribed and 25 percent of said subscribed capital stock is deemed paid-up. Thus, 25 percent of one billion shares equals 250 million shares. In turn, 25 percent of 250 million subscribed shares equals 62.5 million shares.

At par value of P1, a company’s 250 million subscribed shares equals P250 million worth of subscribed shares while 62.5 million paid-up shares equals P62.5 million.

What if aside from 1 billion common and preferred shares, a company adds preferred shares of different par value of P0.50? This means said ACS consists of two classes of stocks such as common and preferred shares but with different par value

If said company’s ACS is composed of 1 billion common shares with P1 par value, 25 percent of P1 billion equals P250 million while 25 percent of P250 million equals P62.50 million.

Preferred shares. By adding 1 billion preferred shares to the ACS, which like the common shares also carry par value of P1, the following computation applies: P1 billion plus P1 billion equals P2 billion. In turn, 25 percent of

P2-billion ACS equals P500 million worth of subscribed shares and 25 percent of P500 million worth of subscribed equals P125 million paid-up.

In other words, a company with 1 billion common shares and 1 billion preferred shares has an ACS of 2 billion with common and preferred shares having a par value of P1 each. The par value does not change at all.

However, if said ACS of a corporation consists of the same number of common with par value of P1 each but the ACS’s preferred shares have lower par value of P0.50 each, the computations would go this way: 1 billion preferred shares equals P500-million ACS of which 25 percent equals P125 million subscribed capital stock and 25 percent of P125 million equals P31.25 million paid-up.

Listed. A company that has P2 billion ACS should list its common and preferred shares on the Philippine Stock Exchange (PSE). While such stock corporation is only a product of one’s imagination, it could still exist.

What is more important to the daily clients of the SEC could be the time table they spend in following up their documents. Once a stock corporation is SEC-registered, SEC officials should not be curious about the individuals who are listed as incorporators. Instead, they should be more concerned with overseeing the operations of the stock market, PSE being one of the PSE-listed companies.

Why would the SEC’s five-person regulatory body be more interested in knowing the individuals of a new stock corporation’s incorporators and investors? They, in fact, should focus more in regulating the stock market by reading the disclosures posted by listed companies on the PSE website.

By the way, control of a stock corporation has not changed since Due Diligencer began covering the business beat many years ago. DD still covers the beat as it finds it more worthwhile to read postings on the PSE website.

Suggestion: Try reading the disclosures on edge.pse.com.ph and anyone among the public would understand why DD finds interest in each posting.

Going back to the topic at hand, a stock corporation rarely undertakes any change in its ownerships because of family control.

Will Ayala Land Inc., which happens to be the real estate subsidiary of Zobel-owned Ayala Corp., relinquish their hold on ALI? Just asking.

esdperez@gmail.com

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