PHILIPPINES Law and Practice Contributed by: Rose Marie M. King-Dominguez, Melyjane G. Bertillo-Ancheta and Franco Aristotle G. Larcina, SyCip Salazar Hernandez & Gatmaitan
8. Duties of Directors 8.1 Principal Directors’ Duties
acquisitions that will result in 35% of the outstanding voting shares or sufficient outstanding voting shares to gain control of the board in a public company in one or more transactions within a period of 12 months, or acquisitions that will result in ownership of over 50% of the total outstanding equity securities of a public company.
The general directors’ duties of obedience (that directors must control the corporation’s affairs only in accordance with the purposes with which it was organised and must perform the duties laid down on them by law and by the by-laws of the corporation), diligence (that directors must not wilfully and know - ingly vote for or assent to patently unlawful acts or act in bad faith or with gross negligence in directing the corporation’s affairs) and loyalty (that directors must not acquire any personal or pecuniary interest in conflict with their duty as directors) apply to busi - ness combinations. Directors’ duties are owed principally to the corpo - ration and to its shareholders. However, SEC, in its Code of Corporate Governance for Publicly Listed Companies, enshrines the principle that the board of directors should consider the long-term interests of a corporation’s stakeholders. 8.2 Special or Ad Hoc Committees In the Philippines, it is quite common for business combinations to be handled first by a management team that will present its findings and recommenda - tions in relation to the combination to the board of directors for its evaluation and approval. 8.3 Business Judgement Rule As a rule, directors cannot be held liable for mistakes or errors in the exercise of their business judgement if they acted in good faith, with due care and pru - dence. Contracts intra vires (within the authority of a corporation) entered by the board of directors are binding upon the corporation, and courts will not inter - fere unless the contracts are so unconscionable and oppressive as to amount to a wanton destruction of the rights of the minority. As a consequence of the business judgement rule, the resolutions, contracts and transactions of the board of directors cannot be overturned or set aside by the stockholders (where these acts do not require stock - holder approval) or even by the courts. Directors and duly authorised officers cannot be held personally lia -
7. Disclosure 7.1 Making a Bid Public
A bid is made public by delivery of a tender offer report in the form prescribed by the regulations, which is SEC Form 19-1, to the SEC, the PSE and the tar - get company, and by publication of the terms and conditions of the offer in two national newspapers of general circulation within the period required by the regulations. The offeror may also send the tender offer
materials to each of the shareholders. 7.2 Type of Disclosure Required
The listed company will disclose receipt of a tender offer document from a bidder in the same manner as
the disclosure of other material events. 7.3 Producing Financial Statements
Philippine financial statements are prepared in accord - ance with Philippine Financial Reporting Standards, which are largely based on International Financial Reporting Standards. However, bidders are not required to produce financial statements (pro forma or otherwise) in the tender offer documents. 7.4 Transaction Documents The guidelines for completing SEC Form 19-1 require the filing as an exhibit to the tender offer of any docu - ment setting forth the terms of contracts, arrange - ments, understandings or relationships among the offerors and between these persons and any per - son with respect to any securities of the issuer. This includes the transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrange - ments, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of prox - ies, naming the person with whom such contracts, arrangements, understandings or relationships have been entered into.
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