This as the Exchange called off its scheduled general membership meeting originally slated last June 13 when the member-brokers would have decided on the preferred mode of demutualization.
Under the Securities Regulation Code that took effect last year, 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.
Earlier, the PSE – upon the recommendation of its external auditor SGV – batted for the "de facto merger" through a spin-off property company from the donated assets in the Tektite and Ayala trading floors.
But while the SEC approved of the spin-off new company (NewCo), it rejected the transfer of the shares to be issued to the brokers unless the donors (Philippine Realty and Holdings Corp. and Ayala Land Inc.) consent to the move and the PSE is dissolved.
"The assets of the Exchange cannot be used as a basis for issuing shares to the brokers since these assets already belong to the Exchange and not to the individual members pending dissolution of the Exchange," SEC Chairwoman Lilia Bautista said.
She added that since this proposal requires the clearance of donors as well as the brokers, "it might be necessary to consider the submission of other options."
The SEC’s legal panel had suggested that instead of spinning-off a NewCo before demutualization, the Exchange could spin-off the donated assets after it has demutualized.
However, the appraised present value of the donated assets would be first segregated into a development fund which can only be distributed to the PSE’s 184 original members upon demutualization.
Bautista said allowing PSE members to enjoy a share in the assets of the corporation at conversion would violate the Corporation Code and the PSE’s own by-laws (which do not provide for the distribution of assets except upon dissolution) and would "go against the very premise of the Commission’s concession to the Exchange to allow them to effect demutualization by mere amendment of their articles of incorporation, without dissolution.