SEC drafts rules for inspection of company records

The Securities and Exchange Commission (SEC) has drafted guidelines that would affirm the right of directors, trustees, stockholders and members to inspect the records of corporations. The Commission has released the draft memorandum circular providing the Guidelines in Conducting Investigations of Violations of the Right to Inspect and/ or Reproduce Corporate Records for public comment. The draft Guidelines will operationalize Section 73 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines, which provides that corporate records, regardless of the form in which they are stored, shall be open to inspection by any director, trustee, stockholder or member of the corporation. The director, trustee, stockholder or member may inspect the corporate records in person or through a representative at reasonable hours on business days, as well as demand in writing and at his/her expense for copies of such records. The Revised Corporation Code further provides that an aggrieved party may report the noncompliance of a corporation to the SEC and, within five days from receipt of such report, the Commission shall conduct a summary investigation and issue an order directing the inspection or reproduction of the requested records. Any officer or agent of the corporation who shall refuse to allow the inspection and/ or reproduction of records in accordance with the Revised Corporation Code shall be liable to the requesting party for damages and, in addition, shall be guilty of an offense punishable under the law. Under the draft Guidelines, the following may constitute a violation of the right of a director, trustee, stockholder or member to inspect and/or reproduce corporate records: a. Outright refusal to allow the inspection any of the corporate records in person, or by a representative; b. Failure to take, within a reasonable amount of time, the necessary steps that would allow the inspection any of the corporate records in person, or by a representative; c. Failure to give a reasonable amount of time to peruse any of the corporate records in person, or by a representative; d. Outright refusal to allow the the reproduction any of the corporate records in person, or by a representative, at his/her own expense; e. Failure to take, within a reasonable amount of time, the necessary steps that would allow the reproduction of the corporate records in person, or by a representative, at his/her own expense; or f. Failure to give a reasonable amount of time to reproduce any of the corporate records in person, or by a representative. An aggrieved party may file a verified report with the SEC Company Registration and Monitoring Department (CRMD), or any of the SEC Extension Offices.