SEC makes shareholder vote mandatory for auditor changes

THE Securities and Exchange Commission (SEC) has issued a memorandum circular ordering all publicly listed companies (PLCs) to obtain shareholder approval for every change of external auditor.

SEC Memorandum Circular No. 8 Series of 2018, posted on its website, orders all listed firms to seek shareholders’s approval “on any change/s in the company external auditor.

The agency also ordered PLCs to restrict audit committee membership to board members only.

The memorandum circular cited Administrative Order No. 38, which sets up the Task Force to Initiate, Implement Ease of Doing Business Reforms.

Armando A. Pan, Jr., officer- incharge of the Office of the Commission Secretary, said shareholder approval for a change of auditor is practiced by about 93% of PLCs, but making it mandatory is expected to raise the country’s score in the area of Protecting Minority Investors, one of the World Bank’s ease of doing business criteria.

“A regulatory issuance or legislation is required for the points to be considered even if this is broadly practiced by the PLCs,” Mr. Pan said.

Mr. Pan added that 2% of PLCs have no policy on shareholder approval for external auditor appointments.

Trade Undersecretary for Ease of Doing Business Rowel S. Barba said the SEC issuance may be taken into account by the World Bank in rating the country for the 2019 Ease of Doing Business list.

The World Bank’s 2019 report covers the period June 2017 to May 2018.

In the Doing Business 2018 report released in October, the Philippines placed 113th among 190 economies, down from its 2017 ranking of 99th. —