PSE faces another ‘transformation’ hurdle

With less than two months to its demutualization, the Philippine Stock Exchange (PSE) faces another "transformation" hurdle as the Securities and Exchange Commission (SEC) rejected the bourse’s plan to transfer the shares of a spin-off company to their members.

While the SEC has allowed the spin-off of the PSE’s property assets into a new company (NewCo) to detach the donated Tektike and Ayala Tower units from a demutualized Exchange, it said the shares to be issued for the value of the assets cannot be transferred to the brokers unless the PSE itself is dissolved.

"The bottomline is that there should be no distribution of assets; we imposed the condition that these shares cannot be transferred until the PSE is dissolved," SEC chairperson Lilia Bautista said.

Besides, Bautista added the spin-off and transfer of the PSE’s property assets into NewCo would need the consent of the donors – Philippine Realty Holdings and Ayala Land Inc. – both of whom have a 10-year restriction on the deeds of donation, or until 2004.

The two properties were donated to the newly-formed PSE in 1994 by Philrealty (Tektite) and ALI (Ayala Tower) as part of the functional merger agreement between the two existing stock exchanges (Manila and Makati) then.

By 2004, the PSE would have fully merged and integrated into its new headquarters at the Bonifacio Global City along with government agencies such as the SEC, DoF, DTI and BOI.

With this thorny issue, the SEC’s legal panel had suggested a different approach to wrap up the Exchange’s demutualization.

Based on the SEC’s recommended two-phase approach, the value of the appraised property donations would be lumped under a Development Fund which can be distributed only to the 184 original PSE members.

After the setting up of the Development Fund, the PSE will then proceed with the spin-off of the donated assets after demutualization without new stockholders. The PSE, together with its designed incorporators, will transfer the donated assets to a new corporation for shares to the original member brokers.

Under the Securities Regulation Code, the PSE has until Aug. 8 this year to convert from a non-stock, exclusive membership club into a stock corporation whose shares would be subsequently opened to the public.

The Exchange will hold a special membership meeting this Wednesday to discuss and possibly vote on the proper approach toward demutualization. – Conrado Diaz Jr.