August 2011 Philippine Supreme Court Decisions on Commercial Law

Here are selected August 2011 rulings of the Supreme Court of the Philippines on commercial law:

Securities Regulation Code; public company. The Philippine Veterans Bank (the “Bank”) argued that it is not a “public company” subject to the reportorial requirements under Section 17.1 of the SRC because its shares can be owned only by a specific group of people, namely, World War II veterans and their widows, orphans and compulsory heirs, and is not open to the investing public in general. The Bank also requested the Court to take into consideration the financial impact to the cause of “veteranism”; compliance with the reportorial requirements under the SRC, if the Bank would be considered a “public company,” would compel the Bank to spend approximately P40 million just to reproduce and mail the “Information Statement” to its 400,000 shareholders nationwide.

Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the SRC defines a “public company” as “any corporation with a class of equity securities listed on an Exchange or with assets in excess of Fifty Million Pesos (P50,000,000.00) and having two hundred (200) or more holders, at least two hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities.”

From these provisions, it is clear that a “public company,” as contemplated by the SRC, is not limited to a company whose shares of stock are publicly listed; even companies like the Bank, whose shares are offered only to a specific group of people, are considered a public company, provided they meet the requirements enumerated above.

The records establish, and the Bank does not dispute, that the Bank has assets exceeding P50,000,000.00 and has 395,998 shareholders.  It is thus considered a public company that must comply with the reportorial requirements set forth in Section 17.1 of the SRC.  Philippine Veterans Bank vs. Justina Callangan, etc. and/or the Securities and Exchange Commission G.R. No. 191995, August 3, 2011.

(Hector thanks Rachel T. Uy for her assistance to Lexoterica. This post will be updated when the remaining August 2011 cases are published.)