PHILIPPINES Law and Practice Contributed by: Rose Marie M. King-Dominguez, Melyjane G. Bertillo-Ancheta and Franco Aristotle G. Larcina, SyCip Salazar Hernandez & Gatmaitan
9.3 Common Defensive Measures As hostile tender offers are not common in the Phil - ippines, it is likewise not usual for directors of listed companies to adopt defensive measures in anticipa - tion of future hostile tender offers. However, it is also not unheard of for a listed company in the Philippines to prepare itself for a possible hostile tender offer. For instance, in 1998, a locally listed company announced its adoption of a shareholders’ rights plan that it deemed would protect the company and its shareholders from hostile and potentially abusive takeover attempts. The plan involved the right of a common shareholder to subscribe to 1/100th of a pre - ferred share at a pre-determined exercise price (sub - ject to adjustment by the board of directors). According to the disclosure by the company: “The rights become exercisable (and rights certificates are distributed and become transferable) ten days after a person or group (Acquiring Person) acquires 10% or more of the common stock, or ten days (or such later date as may be determined by the Board) after a per - son or group announces an offer the consummation of which would result in such person or group owning 10% or more of the common shares. From and after the occurrence of such event, any rights that are or were acquired by any Acquiring Person shall be void and shall not be exercisable [...] the objective of the plan is to induce the Acquiring Person to negotiate with the Board so as not to trigger the rights. Once the rights are activated, the Acquiring Person would be diluted and the value of his holdings would cor - respondingly decline.” The present implementing regulations of the SRC pro - vide for certain standstill provisions that may limit the anti-takeover defensive measures that a listed compa - ny may make unless applicable exceptions apply. The regulations provide that in the case of a tender offer (other than by an issuer), the target company shall not engage in certain transactions during a tender offer, or before its commencement if its board has reason to believe that an offer might be imminent, except if such transaction is pursuant to a contract entered into earlier, or with the approval of the shareholders in a general meeting, or, where special circumstances
ble for acts or contracts performed with the exercise of their business judgement. The following actions are exceptions to the business judgement rule: • a director voting for or assenting to patently unlaw - ful acts of the corporation; • a director acting in bad faith or with gross negli - gence in directing the corporate affairs; • a director who is guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons; • a director consenting to the issue of watered stocks or who, having knowledge of it, does not file their written objection to it with the corporate secretary; • a director agreeing to hold themselves personally liable to the corporation; and • a director being made, by a specific provision of law, to personally answer for their corporate action. 8.4 Independent Outside Advice The management would typically engage the servic - es of external financial, tax and legal advisers whose reports and recommendations would be given to the board and considered by the board in evaluating the business combination. 8.5 Conflicts of Interest In pertinent cases, the courts and the regulators would highlight and emphasise the duties of a corporation’s directors, corporate officers and advisers to avoid conflict of interest situations.
9. Defensive Measures 9.1 Hostile Tender Offers
There is nothing in the law that prohibits hostile tender offers, although these are not common in the Philip - pines. 9.2 Directors’ Use of Defensive Measures There is nothing in the law that prevents directors from using defensive measures.
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