Philippines: a par floor below, an offering requirement above

A Philippine listed company can issue to a single subscriber, but two rules squeeze a discounted floating conversion from both sides. Stock may not be issued below par or issued price, and a subscription of 10% to 35% of the resulting capital must go through a rights or public offering, or be waived by the minority at the cost of a 180-day restriction.

Key takeaways

• Section 61 is an absolute floor. Stocks shall not be issued for a consideration less than the par or issued price thereof. A conversion price that refixes downward runs into that floor and stops, and where it sits is issuer-specific because par is set in the articles.
• Pre-emption is the statutory default, and most issuers switch it off. Section 38 gives all stockholders a pre-emptive right over all issues of shares of any class, in proportion to their shareholdings, unless denied by the articles. Read the articles first.
• Article V catches the creeping accumulation. The PSE additional-listing rule bites where new voting shares go to a party, or persons acting in concert, amounting to at least 10% but not more than 35% of the resulting capital stock, through single or creeping transactions within 12 months.
• The escape route costs six months of liquidity. The rights or public offering requirement can be waived by majority vote of the shares held by the minority, and where it is, the subscriber is restricted for at least 180 days after listing.

Section 61: the floor is in the statute, not the rulebook

Most pricing constraints in this directory come from an exchange. The Philippine one comes from the Corporation Code, and it is short enough to quote: stocks shall not be issued for a consideration less than the par or issued price thereof. The same section adds that shares shall not be issued for promissory notes or future service. Philippine par values are often small, but so are the prices of the companies most likely to want this capital. And the floor is not a national number: par is fixed in each company's articles, so the point at which a conversion formula stops working is issuer-specific.

Section 38: whether pre-emption is even switched on

Section 38 is unusually broad. It gives all stockholders a pre-emptive right to subscribe to all issues or disposition of shares of any class, unless denied by the articles of incorporation or an amendment. There is no carve-out for a small issue and no threshold below which it stops applying. Most listed Philippine corporations do deny it, which is why placements happen at all — but the diligence sequence is reversed. You start from the articles, not from a rulebook exemption.

PSE Article V: additional listing is the gate

The Exchange does not treat a new issue as automatically listed. Shares become tradable through an additional listing application, and that is where the PSE applies its policy. Article V is engaged where a listed company issues new voting shares to any party, or persons acting in concert, amounting to at least 10% but not more than 35% of the resulting total issued and outstanding capital stock, through a single transaction or creeping transactions within 12 months from the initial disclosure. Creeping transactions are not an edge case for this structure; they are a description of it.

Where the rule is engaged, a rights or public offering comes first, offered to the minority at the agreed transaction price and at a ratio that preserves their proportion. Article V carries exceptions this review could not read in full, so an issuer must check the list. The route that is clear is a waiver by majority vote of the outstanding shares held by the minority stockholders present or represented, and the waiver has a price: no sale, assignment or disposal for at least 180 days after listing. For a provider whose model is to sell as it converts, that restriction, not the pricing, is the deal-breaker.

What is workable, and what this page cannot tell you

The Philippines is not closed to convertibles. Article V contemplates listing shares arising from conversions, with approval running until the conversion period ends, so a fixed-price convertible sized below the trigger, issued by a company whose articles disapply pre-emption and whose par leaves headroom, is coherent. Two gaps remain: how the Exchange treats an application where the share count is indeterminate, and whether any maximum discount applies. A 30-trading-day averaging convention is quoted in commentary but was not traced to a rule, so it is not repeated here. Compare share subscription facilities and private placements by a public company, or send the articles and the par value.

Related reading

• All markets
• Thailand
• Rule 144

Primary sources

• Republic Act No. 11232 — Revised Corporation Code, Sections 38 and 61
• Philippine Stock Exchange — Consolidated Listing and Disclosure Rules, Article V
• SEC Philippines — Securities Regulation Code Rule 10.1

Financing a PSE-listed issuer: frequently asked questions

Can a Philippine listed company issue shares below par value?

No. Section 61 of the Revised Corporation Code is unqualified: stocks shall not be issued for a consideration less than the par or issued price thereof. For an issuer whose shares carry a par value that is an absolute floor under any conversion formula, and it is why a refixing price can stop working long before the market does.

Do Philippine shareholders have a pre-emptive right over a new issue?

By default, yes. Section 38 gives all stockholders a pre-emptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, unless denied by the articles of incorporation or an amendment. Most listed Philippine corporations do deny it, so the answer is issuer-specific.

How can the PSE rights or public offering requirement be avoided?

The route this review could verify is a waiver by majority vote of the outstanding shares held by the minority stockholders present or represented, after which the subscriber must not sell, assign or dispose of the shares for at least 180 days after listing. Article V sets out further exceptions we were not able to read in full, so counsel should check the list rather than assume the waiver is the only door.

Can shares issued on conversion of a convertible be listed on the PSE?

Article V contemplates it. Issuers may apply to list shares arising from conversions, and the approval runs until the conversion period ends. That is why the Philippines is treated here as constrained rather than closed. What this review could not establish is how the Exchange handles an application where the conversion price is indeterminate, which is exactly the refixing case.