The Philippine Stock Exchange (PSE) is proposing new guidelines for firms whose publicly traded shares fall below the minimum 10-percent level in an effort to reach a middle ground with the fiscal government that is threatening higher tax charges.

Internal Revenue Commissioner Kim Jacinto-Henares and some investment bankers welcomed the development over the weekend.

Based on the new framework, the PSE is seeking to reduce significantly the so-called grace period for noncompliant firms to meet the minimum float requirement to just one year, from the three years provided under the original rules. The original deadline was set at the end of this month.

“The exchange reserves the right to delist a noncompliant company after the 12-month grace period,” part of the November 11 memorandum signed by PSE President Hans Sicat said.

The PSE said the new guidelines, which are subject to public comments until November 18, will take effect upon approval by the Securities and Exchange Commission.

More than 40 companies still have public-ownership levels below the minimum requirement.

The BIR and the Department of Finance wanted stock transactions involving those companies to be charged with the 5-percent to 10-percent capital-gains tax instead of the preferential rate of one-half of 1 percent after the deadline on November 30.

Compromise talks started with the BIR early this year and again last month as the deadline neared and most companies not meeting the rules did little to widen their ownership profiles.  Many firms cited difficult market conditions in the Philippines and abroad.

“It’s a positive step toward resolving these things,” a wary Henares said in a phone interview over the weekend, referring to the PSE’s proposal. “But we want to see that this will be something that will be implemented irrevocably and for an unextendable period.”

The PSE proposal also brings a measure of relief to some private sector players.

“I don’t see a problem. One year is good [enough] time to prepare,” said Eduardo Francisco, president of BDO Capital and Investment Corp.  

Market insiders had said the contentious taxation issue with the BIR had threatened to overshadow other reforms planned in the Philippine capital markets, including the upcoming cross-border trading plan with the country’s Southeast Asian neighbors by the first quarter of 2012.

Since the PSE officially announced its plan to implement the minimum public-float rule, only two firms have taken concrete steps to address their public-float deficiencies before the deadline. These were San Miguel Corp., which sold $970 million worth of shares and convertible bonds in April, and Keppel Philippine Marine Inc., which delisted from the bourse in October.

Liquor maker Tanduay Holdings Inc. recently said it would proceed with its equity offering to widen its public float of 2.9 percent by December.

Large-cap firms that have yet to comply include Petron Corp., Metro Pacific Tollways Corp., San Miguel Pure Foods Co. Inc., Filinvest Development Corp. and San Miguel Brewery Inc.

The new PSE proposal also requires more stringent reporting requirements on a company’s public float and provides exceptions in cases where a compliant firm sees the percentage fall below the minimum.

In the event of a delisting, the controlling shareholders of a noncompliant company should make a tender offer for shares of the minority stockholders.