PHILIPPINES Law and Practice Contributed by: Rose Marie M. King-Dominguez, Melyjane G. Bertillo-Ancheta and Franco Aristotle G. Larcina, SyCip Salazar Hernandez & Gatmaitan
exist, the approval of the SEC has been obtained. The prohibited transactions are: • the issuance of any authorised but unissued shares; • the issuance or granting of options with respect to any unissued shares; • the creation or issuance of, or permitting the crea - tion or issuance of, any securities carrying rights of conversion into, or subscription to, shares; • the sale, disposition of or acquisition, or agreement to acquire, any asset whose value amounts to 5% or more of the total value of the assets prior to acquisition; and • entering into contracts that are not in the ordinary course of business. 9.4 Directors’ Duties The directors owe the same fiduciary duties whether they are enacting defensive measures against hostile tender offers or in the regular performance of their responsibilities as a director of the company. Among other things, the Revised Corporation Code makes directors liable jointly and severally for all damages suffered by the corporation, its stockholders or mem - bers and other persons if they wilfully and knowingly vote for, or assent to, patently unlawful acts of the corporation; are guilty of gross negligence or bad faith in directing its affairs; or acquire any personal or pecu - niary interest in conflict with their duty as directors or trustees. The law also prohibits directors from attempting to acquire, or acquiring, any interest adverse to the corporation in respect of any matter that has been divulged to them in confidence, and upon which equi - ty imposes a disability upon themselves to deal on their own behalf; otherwise, the director, trustee or officer will be liable as a trustee for the corporation and must account for the profits that otherwise would have accrued to the corporation. 9.5 Directors’ Ability to “Just Say No” The directors cannot “just say no” and take action that prevents a business combination without any clear justification. The fiduciary duty of a director imposes on them the obligation to consider whether the busi - ness combination will be in the best interest of the
company and its shareholders. Such fiduciary duty requires that the director should act in the interest of the company and its shareholders, not just a particular group.
10. Litigation 10.1 Frequency of Litigation
Litigation is not common in M&A deals in the Phil - ippines. Joint venture partners in larger projects will generally rely on existing agreements to disengage or negotiate a termination of arrangements. 10.2 Stage of Deal Since litigation in M&A deals is not common in the Philippines, the stage at which it is brought is not rel - evant. 10.3 “Broken-Deal” Disputes See 10.1 Frequency of Litigation . There have been no significant changes or new lessons learned as regards the manner by which parties deal with disputes. Shareholder activism is not a particularly significant force in the Philippines. The market is a small one, and where shareholders are active, these activists’ concerns focus mostly on information or an expla - nation for any fall in share price. Lately, shareholder activism has been visible in instances when a public company decides to pursue voluntary delisting from the exchange and the tender offer price in connection with such delisting is not satisfactory to the minority shareholders. The PSE has required listed companies to establish an investor relations programme that should include providing information on investor contact, such as an email address for feedback or comments, and share - holder assistance and service. The institution of the investor programme, along with the proliferation of social media, has facilitated the feedback process between companies and minority shareholders, and 11. Activism 11.1 Shareholder Activism
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