The Securities and Exchange Commission (SEC) is drafting rules that will guide companies in booting out directors, trustees and officers as part of its efforts to promote good corporate governance.
A draft rule for the disqualification of key company officials released by the agency said directors, trustees or officers shall be disqualified if, within their tenure, were convicted by final judgment of an offense punishable by imprisonment for a period exceeding six years, or for violating the Revised Corporation Code of the Philippines (RCC) or the Securities Regulation Code of the Philippines (SRC).
They can also be disqualified when found administratively liable for any offense involving fraudulent acts; or found liable by a foreign court or equivalent regulatory authority for acts, violations, or misconduct similar to the aforementioned conditions. The SEC said the removal of a disqualified director shall be without prejudice to other sanctions that it may impose on the board of directors or trustees who, with knowledge of the disqualification, failed to remove such director or trustee.
“Under the proposed guidelines, an independent administrative action for the removal of a director, trustee, and/or officer of a corporation may be commenced upon the motu proprio issuance of a formal charge by the SEC operating department that has jurisdiction over the subject matter, or upon filing of a verified complaint with the operating department,” the SEC said.
The SEC said decisions, resolutions, or final orders, as well as appeals and motions for reconsideration or execution, shall be rendered by the operating department.
“Further, the Commission may remove a director, trustee, and/or officer of a corporation as a sanction in its proceedings if, during its administrative or adjudicative proceedings, it has been established that grounds for their disqualification are present,” the SEC said.
The SEC said in addition to the removal, it reserves the right to issue a permanent cease and desist order, and/or impose a fine between P10,000 to P400,000 for each violation of the Commission’s orders, or any relevant laws and regulations.
