Advance approval from the Philippine Insurance Commission (IC) is now required to acquire a stake in a Philippine corporation that is licenced as an insurance broker or reinsurance broker. This is based on the IC's circular letter number 2017-09 dated February 14 2017 which prescribes guidelines on the documentation requirements for acquiring a domestic insurance or reinsurance broker.
Section 3 of the circular begins with the statement 'no person will acquire ownership of any domestic insurance broker and reinsurance broker without the prior written approval of the Insurance Commissioner'. This is a new requirement which appears to mirror the requirement under section 302 of the Insurance Code of the Philippines, as amended, with respect to the acquisition of control of a domestic insurance company. An insurance broker and reinsurance broker, like an insurance company, can be wholly foreign-owned.
The circular refers to section 302 of the Insurance Code and imposes requirements similar to those under that section, such as providing advance notice in writing to the target company of the 'investor's intention to acquire control'. The first sentence of section 3 of the circular relates to an approval to acquire 'ownership' of a broker, but it does not specify the percentage of shares to be acquired for the requirement to apply. However, since an investor has to send advance notice of its intention to acquire control to the target company, it might be advisable for investors planning only to be minority shareholders to request the IC to clarify whether they have to comply with the circular.
The other requirements under the circular pertain to the financial standing of the investor (a sworn declaration of assets, liabilities and net worth, and income tax returns) and information on the board of directors of the investor company. A separate list of requirements for an investor who is a natural person is set out in the circular. The circular states that these documents are requested to enable the IC to verify the financial status and trustworthiness of the investor.
An investor that intends to acquire a stake in a broker company by subscribing to new shares instead of through a share purchase may wish to verify with the IC if the requirement will apply to its subscription.
The circular provides that the requirement of advance consent of the IC may be waived 'for a valid reason'.
|Hiyasmin H Lapitan|
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