PHILIPPINES Law and Practice Contributed by: Rose Marie M. King-Dominguez, Melyjane G. Bertillo-Ancheta and Franco Aristotle G. Larcina, SyCip Salazar Hernandez & Gatmaitan
with the regulations that may be issued by the SEC, and taking into account that the government agency has yet to lift the suspension of the rules on futures trading. Doubt as to Use for Speculation Additionally, certain derivative transactions may be viewed as games of chance rather than being based on skill or ability, such as those entered into for spec - ulating on interest or exchange rate movements. In cases of uncertainty regarding the nature of a gam - ing contract, a Philippine court will presume that the transaction involves chance. The Civil Code stipulates that the winner cannot initiate action to collect what they have won, while it allows the loser to recover their losses, including legal interest from the time of payment of the amount lost. Furthermore, the Civil Code states that “if a contract which purports to be for the delivery of goods, securi - ties or shares of stock is entered into with the inten - tion that the difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser to the winner, the transaction is null and void. The loser may recover what he has paid.” Validity of Hedging Transactions If it can be shown, nevertheless, that a Philippine party to a derivative transaction has an actual economic interest in the fluctuation of the relevant index or ref - erence price (eg, as a hedge against movements in an interest rate, currency rates, a commodity price or an equity index), it may be sufficient to establish that such a transaction is valid and enforceable against the Philippine party. The SRC and the regulations implementing the law provide for disclosure of beneficial and legal owner - ship of shares in a reporting company; eg, a public company. Under the regulations, there is beneficial ownership when any person who, directly or indirectly – through any contract, arrangement, understanding, relation - ship or otherwise – has or shares voting power (which 4.5 Filing/Reporting Obligations Reporting Obligations Under the SRC
includes the power to vote or direct the voting of such security) and/or investment returns or power (which includes the power to dispose of, or direct the dispo - sition of, such security). Moreover, a person shall be deemed an indirect beneficial owner of any security that is held by a corporation in which they are a con - trolling shareholder, among other instances. In addition, a person shall be deemed to be the ben - eficial owner of a security if they have the right to acquire beneficial ownership within 30 days from the exercise of any option, warrant or right, or conversion of any security; or pursuant to the power to revoke a trust, discretionary account or similar arrangement; or pursuant to the automatic termination of a trust, discretionary account or similar arrangement. Applicability to Derivatives Thus, to the extent that the terms of the derivative instrument give the holder the right to convert or oth - erwise acquire its underlying equity securities within 30 days, the holder is required to make a beneficial ownership disclosure where the conversion or acqui - sition will reach the trigger thresholds of 5% or 10% of the equity securities. 4.6 Transparency Response Requirement to Disclose the Purpose of the Acquisition The SEC-prescribed forms for beneficial ownership disclosure of 5% and 10% shareholdings, which are SEC Form 18-A, SEC Form 23-A (in respect of those who previously owned 5% or more but less than 10%), and SEC Form 23-B (in respect of material changes in beneficial ownership), respectively require the dis - closure of the purpose or purposes of the acquisition of securities of the issuer, and a description of any plans or proposals that the reporting persons may have that relate to, or would result in, among other things, an extraordinary corporate transaction – eg, a merger, reorganisation or liquidation – involving the issuer or any of its subsidiaries and any change in the present board of directors or management of the issuer, including any plans or proposals to change the number or term of directors, or to fill any existing vacancies on the board.
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