Professional Documents
Culture Documents
P.D. 902-A
P.D. 902-A was amended by R.A. 8799 or the SECURITIES REGULATION
CODE in the year 2000
The jurisdiction of SEC for cases falling under section 5 thereof was
transferred to the courts of general jurisdiction designated by the SC, they
were called special commercial courts, the only exceptions were revocation of
corporate franchise and calling of elections
However the SEC retained receivership or suspension payments within
June 20,2000
Jurisdiction of special commercial courts are exclusive and original,
jurisdiction is conferred by law; 1 Special Commercial Court per region except
MAKATI and QUEZON CITY which has two
Devices or Schemes
- Pyramid scheme (misrepresentation)-Special Commercial Courts
- Syndicated estafa- not bailable
Alleje case
- Falls squarely under sec. 5 (a) Special Commercial Courts
- Allegation corporate officers employing schemes in diverting
- Not only detrimental to corporation, but general membership
- Fraud must be stated with particularity
Abad vs. CFI of Pangasinan
- Fraud must be stated with particularity otherwise it may be filed to any
court
Intra-corporate
- Exclusive and original jurisdiction of special commercial courts
- Sole criteria is there must be an intra-corporate relationship
- Pertaining to a controversy (speaks also of intra-partnership
controversy, that partnership must be registered with the SEC)
Rule now
1. Necessarily be an intra-corporate relationship; and,
2. The controversy must arise out of said relationship
Intra-corporate relationship alone will not suffice to put it in the ambit
of special commercial courts and courts of general jurisdiction may take
cognizance
Case of a transferee of shares of stock to compel the corporation to
recognize him as a stockholder
How can it be intra-corporate when he is not yet fully paid
- When the transferee has done all he can be required to do to render
the transfer effectual and the corporation refuses to register the transfer, the
requirement of the registration is waived and the transferee is considered
technically a stockholder who may sue to enforce the right to have the
transfer registered
Florendo vs. rivera, Embassy Farms
- The transferor withheld the delivery, they are not yet prima facie; it will
not be considered intra-corporate
Controversies in the appointment (asked in the bar)
- Cases involving election, appointment and removal
In Andaya the court said that a corporate officer elected or appointed
by the BOD is always a corporate act
- The fact that petitioner sought payment of his back wages, other
benefits as well as moral and exemplary damages and attorneys fees in his
complaint will not operate to prevent the SEC from exercising its jurisdiction
under P.D. 902-A. The jurisdiction will not wrest on the NLRC just because of
that
Tabang vs. NLRC
- Jurisdiction lies originally and exclusively to special commercial courts
and not in the NLRC
- SEC has jurisdiction over cases of removal from employment of
corporate officers
- The relationship of a person to a corporation, whether as officer or as
agent or employee or not determined by the nature of the servides
performed, but by the incidents of the relationship on they actually exist
- Corporate officers dismissal is always a corporate act or intra-corporate
controversy
Midland construction vs. Movilla
- NLRC will be possessed of jurisdiction exception will not apply to mere
recovery
Main consideration
- Asserts his right to the office or questions the propriety or validity of
his ouster or removal, it will be the special commercial courts and not the
NLRC
Securities Regulation Code
- Transferred jurisdiction of the SEC to Special Commercial Courts
- Suspension of payment, appointment of management receivership
What is the reason for suspension of all claims?
- The reason for suspending actions for claims against the corporation is
not really to enable the management committee or the rehabilitation receiver
to substitute the defendant in any pending action against it before any court,
tribunal or body. The real justification is to enable the management
committee or rehabilitation receiver to effectively exercise his powers free
from any Judicial or extra-judicial interference that might unduly hinder or
prevent the rescue of the debtor company. To allow such other actions to
continue would only add to the burden of the management committee pr
rehabilitation receiver, whose time, effort and resources would be wasted in
defending claims against the corporation instead of being directed towards
restructuring and rehabilitation.(PAL vs. Spouses Sadic and Kurangking)
- To enable the receiver to effectively exercise his or her power free form
any judicial or extra-judicial that may disturb
3 types of suspension of payments
1. Simple suspension of payments
- where deferment of payment of claims against a distress company;
ask the court to be given time to the payment of liability by postponing the
payment
- When it has sufficient assets and liabilities but forces the impossibility
of meeting them when they respectively fall due
2. Suspension of receiver with a management committee with a
rehabilitation play or suspension of payments accompanied by a proposal for
rehabilitation (with or without rehabilitation)
- corporation has sufficient assets to cover its liabilities, but sees the
possibility; is or without rehabilitation plans; normally would attach the
rehabilitation plan
- For purpose of economic development
3. Suspension of payments when the corporation has no sufficient assets
to its liabilities
May it still be revived?
- Yes, it may still be revived
How can a corporation with more liabilities than assets continue its
operations profitably?
- Even if the distressed company has no sufficient assets and liabilities it
can go for suspension
- It asked for a management committee without a receiver plan
(Victorius Milling case)
Convert their claims into equity
- Their liability was almost wiped out they became stockholders instead
of creditors
- After 5 years those who converted sold it back to the corporation,
thereby making profits
Amendment is for the economic development of the country
What if walang amendment, e mas maraming liabilities kesa assets
Suspension order- all actions for claims against the corporation are
accordingly suspended at whatever stage the proceedings maybe
Effect of suspension- you cannot foreclose
What are claims?
- Debts or demands of pecuniary nature. Assertion of a right to have
money paid
- Claims against the corporation shall be suspended, assertion of a right
to have money paid; it must present a monetary claim, liquidated or
unliquidated
Nullification of corporations does not present a monetary claim of
pecuniary nature
Union vs. CA
- It does not allow a mere individual to file the petition which is limited to
corporations partnership or associations.
- Where no authority is granted to hear petitions of individuals for
suspension of payments, such petition are beyond the competence of the
SEC
What happens if there is a suspension order?
Explain the key phrase quality is equity
- All creditors stand on equal footing, secure or unsecure, holding or lien
or without a lien, no creditor may enforce his lien while rehabilitation is going
(Alemar case)
- No preference shall be given
RCBC vs. IAC
- Decided on motion for reconsideration
- It court 7 years to decide authentication
Rule of the thumb
- Automatic suspension even if not decreed in the decision itself
- Once lifted the preferred creditors will regain their preference
Appointment of a management committee
- Take over the management committee of the distressed corporation
- Extraordinary and drastic remedy
- Without any remedy
What is an intra-corporate controversy?
- Section 5(B)
- Sole criteria is whether there exists an intra-corporate dispute is that if
there is an intra-corporate relationship
Why is there suspension of all actions against claims when a receiver is
appointed?
- To enable the management committee to exercise its powers
Sy Chim vs. Sy Siy Ho (before a management committee may be opt
by a court)
- 2 requisites for a valid appointment of management committee
1. Imminent danger of dissipation, loss, wastage or destruction of assets
or other corporate properties
2. Paralysis of business operations, the mere apprehension of future
misconduct based upon prior management
- Save and except in the case of a close corporation in case of deadlock
management committee is allowed to take over right away
Jacinto case
- 2nd par of page 676
- 2 requisites where present
- Wala ng mapautang, there was a paralyzation
Sy Chim
- Did not appoint a management committee
- In the absence of a strong showing of an imminent danger of
dissipation, loss wastage or destruction of assets or other properties of a
corporation and paralysis of its business operations, the mere apprehension
of future misconduct based upon prior mismanagement will not authorize the
appointment of a management committee
Section 5 and 6(D) governed by separate rules; interim rules and intra-
corporate controversy
Venue of actions
- Rules of court- where the parties are residing
- Intra-corporate- no matter where the parties are residing it will be in
the city or municipality where the principal office is located
Rehabilitation proceedings venue
- In rem
- Acquired upon publication without furnishing the creditors a copy of
the petition and attachments thereof
- A creditor may now file the suspension proceedings; provides that
creditors owns at least 25%
Intra-corporate- rule 1 section 6
Service of summons- rule 2 section 5
- Summons may be made to anyone
In case of intra-corporate dispute, elections, fraud, etc; if they are
governed by interim rules of procedure on intra-corporate controversies
Venue
- Special commercial courts where principal office is located/established
(section 5 rule 1)
- Matters of payment/suspension must be filed in the city/ municipality
where corporation is located
Under old rule, creditors have no right to institute an action for
receivership; now creditors, if they sold 20% they can institute an action for
receivership
Section 5
- Service of summons may be made by fax/e-mail
E.B. Villarosa vs. Benito
- Will apply only if it is not an intra-corporate controversy
If the controversy arose out of an intra-corporate dispute rules on
interim rules of procedure of intra-corporate controversies shall govern
Rule 4 section 17- immunity from suit
Rehabilitation receiver shall not subject to any action, claim or demand
in connection with any act done omitted by him in good faith in the exercise
of his functions and powers herein conferred
Claim
- Right to payment, whether or not it is reduced to judgment, liquidated
or unliquidated, fixed or contingent, matured or unmatured, disputed or
undisputed, legal or equitable and secured or unsecured
Investment contracts
- A contract, transaction or scheme whereby a person invests his money
in a common enterprise and is led to expect profits primarily from the effects
of others
The management committee and rehabilitation receiver are
empowered to:
1. Take custody and control of all assets of the corporation
2. Evaluate assets and liabilities, earnings operations of the corporation
3. Determine the best way to protect the investors and creditors
4. Study, review evaluate the feasibility of continuing operation and
structures
5. Submit recommendations to the RTC regarding rehabilitation plan
6. Rehabilitate the corporation if determined to be feasible by the RTC
7. Report to the RTC until the corporation is dissolved
THE SECURITIES REGULATION CODE (RA8799)
- Also known as the Blue Sky Law since it was enacted to protect the public
from unscrupulous promoters who stake business which have no basis and
sell shares and interest therein to investors, who are then left holding
certificates representing nothing more than a claim to a square of the blue
sky.
BROKER - person who buys and sells securities for the account of others.
DEALER - person who buys and sells securities for his/her own account in the
ordinary course of business.
GR: Securities shall not be sold or offered for sale or distribution within the
PH, without a registration statement filed with and approved by SEC. Prior to
such sale, information on the securities, in such form and with such
substance as the Commission may prescribe, shall be made available to each
prospective purchaser. (Sec 8)
PROXY SOLICITATION
NOTE: A broker or dealer who holds or acquires the proxy for at least ten per
centum (10%) or such percentage as the Commission may prescribe of the
outstanding share of the issuer, shall submit a report identifying the
beneficial owner within ten (10) days after such acquisition, for its own
account or customer, to the issuer of the security, to the Exchange where the
security is traded and to the Commission. (Sec 20.5)
Note: Wash sale and matched orders become illegal when they are used as a
means to create false appearance of active trading in the security concerned.
3. Marking the close placing the purchase order, at or near the close of
the trading period. The price that was closed will then be the price that will
be posted on the following trading day.
4. Painting the tape involves a series of transactions that are reported
publicly to give the impression of an activity in a security.
5. Squeezing the float the part of an outstanding security intentionally
held by dealers or other persons with a view of reselling them later for profit.
6. Hype and dump Act employed by a person or group of persons of
purchasing the outstanding capital stock of a dormant public shell company
for a nominal amount and merge it with their privately held company. They
would then gain control of the majority stocks of the merged entity. Stock
certificates are often re-issued in the name of the merged entity to relatives
and associates who act as nominees of the person or persons employing the
device. They would then look for a broker-dealer who would be willing to
make a hype of the securities. The broker-dealer then generates volume
and advance bid price. When the market reaches a high price, they would
dump their shareholdings and bail out.
7. Boiler Room Operations involves an intensive selling campaign
through numerous salesmen by telephone or through direct mail offerings for
securities of either a certain type or from a specific issuer. Investors are
induced to purchase through hard-sell based on unfounded predictions and
mailing of misleading market letters.
Note: Marking the close, Painting the tape, Squeezing the float, Hype and
dump, Boiler Room Operations become unlawful if it is effected to either raise
the price or induce the purchase of a security or of a controlling, controlled,
or commonly controlled company by others or to depress the price to induce
the sale of a security, whether of the same or of a different class, of the same
issuer or of a controlling, controlled company or common controlled company
by others or to create active trading to induce the purchase through said
devices or schemes.
Note: When is information material non-public? - if: (a) It has not been
generally disclosed to the public and would likely affect the market price of
the security after being disseminated to the public and the lapse of a
reasonable time for the market to absorb the information; or (b) would be
considered by a reasonable person important under the circumstances in
determining his course of action whether to buy, sell or hold a security.
Note: Who is an insider? - Insider means: (a) the issuer; (b) a director or
officer (or person performing similar functions) of, or a person controlling the
issuer; (c) a person whose relationship or former relationship to the issuer
gives or gave him access to material information about the issuer or the
security that is not generally available to the public; (d) a government
employee, or director, or officer of an exchange, clearing agency and/or self-
regulatory organization who has access to material information about an
issuer or a security that is not generally available to the public; or (e) a
person who learns such information by a communication from any of the
foregoing insiders.
INDEPENDENT DIRECTOR
Person other than an officer or employee of the corporation, its parent or
subsidiaries, or any other individual having a relationship with the
corporation, which would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director.
OPTION TRADING
Put a transferrable option or offer to deliver a given number of shares
of stock at a stated price on any given time during the stated period.
Call a transferrable option to buy a specified number of share at a
stated price
Straddle a combination of put and call.
SETTLEMENT OFFERS
At any time, during an investigation or proceeding under this Code,
parties being investigated and/or charged may propose in writing an offer of
settlement with the Commission. The Commission may only agree to a
settlement offer based on its findings that such settlement is in the public
interest. Any agreement to settle shall have no legal effect until publicly
disclosed. Such decision may be made without a determination of guilt on the
part of the person making the offer.
DAMAGES
All suits to recover damages shall be brought before the Regional Trial
Court, which shall have exclusive jurisdiction to hear and decide such suits.
The Court is authorized to award damages in an amount not exceeding triple
the amount of the transaction plus actual damages.
NOTES
If there are goods involved in the multimarket, it is beyond the
jurisdiction of SEC (Ex First Quadrant)
Criminal charge for violation of SRC is a specialized dispute, hence it
must be first referred with SEC (Baviera vs. Paglinawan G.R. No. 168380
Feb 8, 2007)
T3 Rule in trading of Securities Trading day + 3 more days you must
comply with your obligations.