Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
Parties to a merger or acquisition that satisfy the thresholds for compulsory notification are required to notify the PCC before the execution of the definitive agreements relating to the transaction or the consummation of the transaction. The failure to comply with this notification requirement shall render the agreement void and shall subject the parties to an administrative fine of 1 to 5 per cent of the value of the transaction. This was applied in In Re: Udenna Corporation, PCC Case No. M-2017-001.
Which parties are responsible for filing and are filing fees required?
Rule 4, section 4 of the PCA IRR provides that parties to a proposed merger or acquisition may request a pre-notification consultation with the PCC. To request a pre-notification consultation, the parties must provide the following information in writing:
- the names and business contact information of the entities concerned;
- the type of transaction; and
- the markets covered or lines of businesses by the proposed merger or acquisition.
During such pre-notification consultations, the parties may seek non-binding advice on the specific information that is required to be in the notification.
Under Rule 4, section 2 of the PCA IRR, if notice to the PCC is required for a merger or acquisition, then all acquiring and acquired pre-acquisition ultimate parent entities or any entity authorised by the ultimate parent entity to file notification on its behalf must each submit a Notification Form (the Form) and comply with the procedure set forth in the PCA IRR. The parties shall not consummate the transaction before the expiry of the relevant periods provided in the PCA IRR.
The Revised Rules on Payment of Fees for Notification and Review of Mergers and Acquisitions (PCC Memorandum Circular No. 17-002 issued on 15 June 2017) provides for a two-phased payment scheme: first, 250,000 Philippine pesos upon submission of the notification form, and second, 1 per cent of 1 per cent of the value of the transaction but not less than 1 million Philippine pesos or more than 5 million Philippine pesos, once the application proceeds to a Phase II review.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
Under Rule 4, section 5 of the PCA IRR, the waiting period begins after all notifying entities have filed their respective Forms, together with the corresponding certifications and affidavits, and have been notified by the PCC that the Forms are complete. The transaction must be suspended prior to the PCC’s clearance of the transaction at the risk of the transaction being voided by the PCC and the imposition of administrative sanctions (see In Re: Udenna Corporation, PCC Case No. M-2017-001).
Upon submission of the Form, the PCC shall determine within 15 days whether the Form and other relevant requirements have been completed in accordance with applicable rules or guidelines, and shall inform the parties of other information or documents it may have failed to supply, or issue a notice to the parties that the notification is sufficient for purposes of commencing Phase I review of the merger or acquisition.
The said waiting period shall commence only upon the PCC’s determination that the notification has been completed in accordance with applicable rules and guidelines.
Within 30 days from commencing Phase I review, the PCC shall, if necessary, inform the parties of the need for a more comprehensive and detailed analysis of the merger or acquisition under a Phase II review, and request other information or documents that are relevant to its review.
The issuance of the aforesaid request by the PCC has the effect of extending the period within which the agreement may not be consummated for an additional 60 days. The additional 60 day period shall begin on the day after the request for information is received by the parties. However, in no case shall the total period for review by the PCC of the subject agreement exceed 90 days from the time the initial notification by the parties is deemed complete as provided under paragraph (f) of section 5 or Rule 4 of the PCA IRR. Furthermore, should the parties fail to provide the requested information within 15 days from receipt of the said request, the notification shall be deemed expired and the parties must refile their notification. Alternatively, should the parties wish to submit the requested information beyond the 15-day period, the parties may request for an extension of time within which to comply with the request for additional information, in which case, the period for review shall be correspondingly extended.
The PCC, in its discretion, may terminate a waiting period prior to its expiry.
When the above periods have expired and no decision has been promulgated for whatever reason, the merger or acquisition shall be deemed approved and the parties may proceed to implement or consummate it.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
If the thresholds for compulsory notification are satisfied and the parties implement closing before clearance from the PCC is obtained, the transaction shall be considered void, and the parties shall be subject to an administrative fine of 1 to 5 per cent of the transaction value.
In the case of In Re: Udenna Corporation, PCC Case No. M-2017-001, the PCC voided a Philippine conglomerate’s acquisition of shares in a foreign corporation that has Philippine subsidiaries when holding substantial assets for non-compliance with the compulsory notification requirement under the PCA. The PCC also imposed a fine of around 20 million Philippine pesos. The PCC held for the purposes of the value of the transaction test that the target corporation’s shares in ‘entities it controls are excluded’ but the ‘assets of the controlled corporations are still included in the valuation’.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
The same sanctions stated in the previous question are applicable to foreign-to-foreign mergers that are covered by the PCA.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
The PCA and its implementing rules do not contain provisions permitting closing before clearance in a foreign-to-foreign merger.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
The acquisition of at least 35 per cent of the voting shares in a listed company triggers the requirement of a mandatory tender offer. In such a case, the waiting and notification period also applies as the acquirer or offeror is required to file and deliver SEC Form 19-1 to the SEC, the Philippine Stock Exchange (PSE) and the target company, to comply with disclosure requirements to security holders and to publish the terms and conditions of the tender offer in two national newspapers of general circulation. A tender offer shall, unless withdrawn, remain open until the expiry of at least 20 business days from its commencement, provided that an offer should, as much as possible, be completed within 60 business days of the date the intention to make such an offer is publicly announced.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
Rule 4, section 5 of the PCA IRR prescribes a Notification Form (the Form), which must be signed by a general partner of a partnership, an officer of director of a corporation, or in the case of a natural person, the natural person or his or her legal representative, and certified that the contents of the Form are true and accurate of their own personal knowledge, or based on authentic records. The Form is very detailed as it requires thorough disclosure of the nature of the transaction, operations of the parties in the Philippines, and horizontal and vertical relationships.
In addition to the Form, the parties may also notify on the basis of a binding preliminary agreement in any form. Each of the acquired and acquiring entities must submit an affidavit with their Forms, attesting to the fact that a binding preliminary agreement has been executed and that each party has an intention of completing the proposed transaction in good faith.
An entity found to have reported false, misleading or malicious information, data, or document may be penalised by a fine not less than the penalty imposed in the section reported to have been violated by the entity complained of.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
There are two phases in the investigation: Phase I review and Phase II review.
Upon submission of the Form, the PCC shall determine within 15 days whether the requirements are complete in accordance with the rules, and shall inform the parties of other documents needed, or issue a notice to the parties that the notification is sufficient for commencing Phase I. The 30-day period shall commence only upon the PCC’s determination that the notification has been completed.
If the PCC decides within the 30-day period the need for a more comprehensive and detailed analysis, they may request additional documents, which triggers the Phase II review. The issuance of this request has the effect of extending the period within which the transaction may not be consummated for an additional 60 days. The additional 60-day period shall commence on the day after the request for information has been received by the parties.
However, the total period for review by the PCC of the subject agreement must not exceed 90 days from the time the initial notification by the parties is deemed complete. If the parties fail to provide the requested information within 15 days, the notification shall be deemed expired and the parties must refile their notification. However, the parties may request for an extension of time to comply.
What is the statutory timetable for clearance? Can it be speeded up?
In case there is no decision from the PCC after the above-mentioned periods, the transaction shall be considered approved and the parties may proceed to consummate the transaction. Hence, if there is no decision from the PCC within the 30-day period from commencing Phase I review, then the transaction shall be deemed approved.