I had an opportunity to coach a relatively small group of OFW’s in Al Khobar, Saudi Arabia last Thursday, April 11, 2013 that included mostly of couples and their young children. It was an interesting session as questions thrown in were very challenging.
One of the questions asked by a participant was, “what happens to our shares when a company we’re buying becomes delisted from the PSEi”?
And then this morning, I read another similar question asked by a forum member to COL Financial advisor, Mike Viñas who was worried as to what will happen to her shares in a company that has been delisted by the PSE. She was not aware that the delisting happened until now.
What Happens To the Investor’s Shares of a Delisted Company?
Normally, the stockbroker will advise its clients ahead of time that a particular non-compliant company is to be delisted either voluntarily or involuntarily from the PSEi. A shareholder will have to visit the stock transfer office of the company where shares of that are delisted. They are the ones that will direct you on how to go reclaiming your investment. Check with your stockbroker when this happens. (Thanks Bro. Mike Vinas for this information.)
An investor technically still owns the shares of a delisted/suspended company. One can choose to hold the position for a long while or until the delisted company complies with the Philippine Stock Exchange’s requirements.
The 10 percent minimum public ownership (MPO) rules of the PSE provide that a publicly-listed company whose shares are now under trading suspension for non-compliance with the MPO requirement as of December 31, 2012 have until June 30, 2013 to comply with the 10 percent requirement. The company will be automatically delisted from the PSE if it does not comply by that date.
A company may also buy back shares from the public as part of a reorganization or in order to issue them to their employees in accordance to some employee stock award plan.
If worse comes to worst, e.g. the delisted company decides to close down, the investor may still be able to get a proportionate share when they liquidate their assets. You may consult with the SEC through the Investor Protection and Surveillance department or through the PSE to clarify the procedures in case the company you are invested in are closing down.
But if an investor wants to sell the shares now, he/she may try to consult with the stockbroker to help in finding an off-the-market buyer of the stocks as these can not be traded in the market anymore.
An important note: Once you are warned by your stockbroker about a company being suspended for failing to comply with the PSE’s MPO requirement, it is advisable that you sell your shares immediately.
This will be subject to applicable taxes such as capital gains, documentary stamp (DST), and donor’s taxes.
How Do We Know If A Company is Experiencing Financial Troubles?
Minority shareholders in publicly-listed companies may now know whether their chosen companies are experiencing financial troubles through the proposed Rules on Companies Under Financial Distress by the Philippine Stock Exchange (PSE).
It requires that all companies under financial distress shall disclose their condition at the PSE. With this proposal, shareholders can have enough time to sell their position in these companies before they close down.
Companies that are asked to disclose their financial troubles are those that:
- Disposed its major business
- Suspended their operation for at least six months for any reason
- Negative stockholder’s equity for three consecutive years
- Experience any delay in the payment around 10% of their loans
- Received adverse opinions on their financial statements for three consecutive years
You may view the rest of the slides below for the complete details on how this proposal will protect the minority shareholders in case the companies they are invested in are experiencing financial troubles.
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P.S. 1.The OFW UsapangPiso Forum in partnership with Colayco Foundation for Education will be conducting a webinar featuring Mr. Armand Bengco who will talk about proper money management – spending, saving, planning & investing entitled “Pisobilities: Wealth Within Your Reach” on April 19, 2013 at 6PM (Philippine time). 6 days to go! Register here now!
P.S. 2. For those who will not make it to the Money By The Book event of OFW UsapangPiso group, you may attend the Personal Finance for Every Juan seminar sponsored by The Global Filipino Investors Singapore. You may visit their Facebook event page for more details.
P.S. 3. Bro. Bo Sanchez has appointed me as a coach for our young and new investors at the TrulyRichClub social site. It’s a fun, learning family with the purpose of “helping good people become rich”. I’m inviting you to join the TrulyRichClub too and email me at email@example.com if you have any questions. Click here to join!
P.S. 4. I’m inviting you to attend our entrep webinar called “Negosyo 101 for OFW’s: A Crash Course on Entrepreneurship and Business Development“ on September 28, 2013 at 3PM (Philippine time) with our ever reliable personal finance blogging celebrity Fitz Villafuerte. This online seminar is cool and fits (Fitz!) those who are based abroad and either wanting to grab business ideas or just expand/grow their existing ventures. You can get more details of the webinar by clicking here.