Opinion: Public or Closed?
With the passage of time and the dynamism of business, a significant number of companies have been concentrating their property, so that the reasons to keep such companies as public, with all the regulatory aspects they must comply with, are very weak.
There are many companies in Chile that for historical reasons were incorporated as public corporations or went public for different reasons. Several of them come from the processes of popular capitalism and privatization. Others, because at some point they had a large number of shareholders and regularly quoted their securities in the capital market.
With the passage of time and the dynamism of business, a significant number of companies have been concentrating their property, so that the reasons to keep such companies as public, with all the regulatory aspects they must comply with, are very weak. They almost never place new shares in the capital market and are faced with the difficulty that, because they have more than 500 shareholders, they are still subject to obligations arising from their registration in the stock market.
PWe could say then that these are “forced” public corporations.
Since these companies have more than 500 shareholders, they must be registered in the Securities Registry by legal mandate and assume all the obligations of the public corporations, which in some cases may be particularly burdensome. For instance, they must provide periodic information to the Commission for the Financial Market and to the public, including its quarterly and annual financial statements, variations in its capital and its management, essential and relevant facts, etc. They are also obliged to submit to the special provisions on operations with related parties established in Title XVI of the Corporations Act, as well as to annually designate an external audit company for examining the financial statements of the company, among others.
An alternative that the controllers of the public companies in this situation have, is to try to go private by means of making a takeover bid. However, this alternative is often not feasible since most of their shareholders are passive, not possible to locate, have died or simply do not participate in any way in the corporate life: they do not attend to shareholders meetings to exercise their political rights and do not even collect the dividends to which they are entitled.
This issue was recently addressed by the Commission for the Financial Market in its ordinary office number 4,613 of 2018, by which it established that shareholders who for 10 consecutive years do not attend shareholders meetings or collect dividends, should not be accounted for as shareholders for determining if the respective company is public or not, for having more than 500 shareholders. Additionally, if, at any time, such shareholders attend any shareholders meeting or collect dividends, they will be considered shareholders with the right to vote for the aforementioned purposes.
The open corporations that are in the described situation and that should not be registered for other legal reasons, could request the Commission to cancel their registration in the Securities Registry, thus ceasing to be subject to the reporting obligations and regulatory compliance that said registration imposes. This opens a way to simplify their operation and generate operating economies.
Fuente: El Mercurio Legal
10 de julio de 2018
Senior Associate Guerrero Olivos