The Securities and Exchange Commission (SEC) has drafted guidelines intended to clarify confusing rules on how companies can be exempted from having to register shares prior to their issuance.

In a statement, the SEC said the draft rules seek to clarify exempt transactions under the Securities Regulation Code (SRC), in line with efforts to improve ease of doing business and provide clear guidance to potential capital market players.

In a notice dated Aug. 15, the SEC Markets and Securities Regulation Department released for public comment the draft memorandum circular providing further guidelines on exempt transactions under Section 10 of the SRC, amending for the purpose Rules 10.1, 10.2, and 10.3 of the implementing rules and regulations of the SRC.

Section 10.1 of the SRC provides a list of certain securities that are exempt from the general registration requirement for securities that are to be sold or offered for sale or distribution in the country.

Section 10.2 grants the SEC power to exempt transactions other than those listed in Section 10.1, while Section 10.3 prescribes that any person applying for an exemption shall file with the Commission a notice identifying the exemption relied upon and shall pay a fee equivalent to one-tenth of one percent of the maximum aggregate price or issued value of the securities.

However, subsequent rules and memorandum circulars have provided varying directives on how companies can secure or confirm exemptions to the registration requirement.

“[T]here is a need for prospective guidance to the public on the applicability of the requirement to obtain confirmations of exemption under Section 10 of the SRC, consistent with the policy of the Commission to improve ease of doing business, facilitate access to the capital market, and provide predictability in government transactions, all while ensuring protection to the investing public,” the draft guidelines read.

Under the proposed guidelines, any person claiming exemption under Section 10.1 of the SRC shall file SEC Form 10.1 by checking Notice of Exemption, without need for an application for confirmation, within 10 calendar days prior to the offer or sale of the securities which are subject thereto. No filing fee shall be required for the said notice.

If the company wants a confirmation of exemption under Section 10.1 of the SRC, it shall also file SEC Form 10.1 by checking Application for Confirmation of Exempt Transaction.

The company shall then pay a fee equivalent to one-tenth of one percent of the maximum aggregate price or issued value of the securities, pursuant to Section 10.3 of the SRC.

Meanwhile, any person applying for confirmation of an exemption under Section 10.2 of the SRC shall file with the Commission an Application for Confirmation of Exempt Transaction.

Similarly, it shall pay a fee equivalent to one-tenth of one percent of the maximum aggregate price or issued value of the securities, pursuant to Section 10.3 of the SRC.

The public may access the draft memorandum circular on the SEC website. All interested parties have until Aug. 25 to submit their comments through email at [email protected].