Securities and Exchange period and ownership shall vest upon
Commission full payment in favor of the borrower.
(SEC Reorganization Act) [P.D. 902-A as amended] b. the borrowers pays the periodic monthly rentals for the use of the goods, merchandise, or equipment THE SEC EXERCISES SUPERVISION for a specific period. AND REGULATION OVER THE -ownership is retained by the FOLLOWING: financing company and the borrower is a mere lease 1. Corporation, association, partnerships, grantees of primary *financial leasing is especially favorable franchise from the state. to those who want to start a business.
2. All investment houses under the 4. All entities engage in securities
Investment Houses Act transactions:
Investment houses- entity engaged in a. Securities Dealer- one who
the business of underwriting buys, sells, and trade securities for its own account Securities underwriting- business of with the intent of reselling the guaranteeing the sale of any class of same in its ordinary course if securities in the Philippines business -makes profit out of increment *note: all license underwriters are also securities dealers b. Securities Broker- one who buys and sells securities for 3. All financing Companies the account of others -jointly exercised with the BSP -makes profit by way of commissions Financing- specific kind of loan agreement for consumer goods and c. Stock Exchanges- facility for similar agricultural equipment and buyers and sellers if securities facilities to be brought together with - Originally retail loan to end- the assistance of broker users or consumer -public market for stock exchanges Financial Leasing- specie of financing; It is a service where the financing d. Other SROs (Self- company can advance the purchase regulatory Origins) price of certain goods, merchandize and -may be a stock exchange or equipment and the borrower has 2 clearing houses or any other options: entity that facilitates the a. pay back the financing consummation of securities company, the amount advanced and the transactions, including the monthly installment at a stipulated settlement of payment and or prejudice to the investing public, delivery of certificates grounds which could justify the issuance -must be accredited as such of a cease and desist order under by the SEC Section 64 of the SRC. (Primanila POWERS OF SEC: Plans, Inc., Herein Represented by Eduardo S. Madrid vs. Securities and 1. Enact and promulgate implementing Exchange Commission, G.R. No. rules and regulations 193791, August 6, 2014.)
2. Conduct investigation As an administrative agency with both
-it may issue subpoena, deputize regulatory and adjudicatory functions, other government agencies or offices, the SEC was given the authority to impose administrative fines and delegate some of its functions to, inter penalties alia, its various operating departments, -it does not have prosecutorial such as the SECCFD, the Enforcement powers and Investor Protection Department, and the Company Registration and 3. Issue, suspend, or revoke Certificate Monitoring Department. In this case, the of registration Court disagrees with the findings of both -it is concurrent with the court through the SEC En Banc and the CA that the quo warranto Revocation Order emanated from the SEC En Banc. Rather, such Order was Cases: merely issued by the SEC-CFD as one The authority of the SEC and the of the SECs operating departments. In manner by which it can issue cease and other words, the Revocation Order is desist orders are provided in Section 64 properly deemed as a decision issued of the SRC. The law is clear on the point by the SEC-CFD as one of the that a cease and desist order may be Operating Departments of the SEC, and accordingly, may be appealed to the issued by the SEC motu proprio, it being SEC En Banc, as what Cosmos properly unnecessary that it results from a did in this case. Perforce, the SEC En verified complaint from an aggrieved Banc and the CA erred in deeming party. A prior hearing is also not required Cosmoss appeal as a motion for whenever the Commission finds it reconsideration and ordering its appropriate to issue a cease and desist dismissal on such ground. (COSMOS order that aims to curtail fraud or grave BOTTLING CORPORATION vs. COMMISSION EN BANC of the or irreparable injury to investors. It is SECURITIES AND EXCHANGE beyond dispute that Primasa plans were COMMISSION (SEC) and JUSTINA F. not registered with the SEC. Primanila CALLANGAN, in her capacity as was then barred from selling and Director of the Corporation Finance offering for sale the said plan product. A Department of the SEC, G.R. No. continued sale by the company would 199028, November 12, 2014) operate as fraud to its investors, and Composition of SEC would cause grave or irreparable injury -compose of 5 members - In cases when there is an -at least three must be a member of the allegation of corporate fraud Philippine Bar Corporate fraud- devises or Quasi-Judicial Powers of SEC schemes amounting to fraud or -transferred already to Special misrepresentation committed by Commercial Court which is a branch of corporate directors, officers, or trustees RTC designated as such. including their agencies.
Case: -e.g. recovery of sum of
money/property, specific performance, Upon the enactment of Republic Act No. breach of contract 8799, the jurisdiction of the SEC over -includes all fraud under intracorporate controversies and the the guise of corporation regardless of the amount. other cases enumerated in Section 5 of P.D. No. 902-A was transferred to the c. Shareholders, members, Regional Trial Court. The jurisdiction of directors, trustees and other officers the Sandiganbayan has been held not to extend even to a case involving a Cases: sequestered company notwithstanding that the majority of the members of the It is essential for the complaint to show on its face what are claimed to be the board of directors were PCGG fraudulent corporate acts if the nominees. (Roberto L. Abad, Manuel complainant wishes to invoke the courts D. Andal, Benito V. Araneta, Philip G. special commercial jurisdiction. This is Brodett, Enrique L. Locsin and because fraud in intra-corporate Roberto V. San Jose vs. Philippine controversies must be based on Communications Satellite devises and schemes employed by, or any act of, the board of directors, Corporation, G.R. No. 200620, March business associates, officers or 18, 2015) partners, amounting to fraud or misrepresentation which may be INTRA-CORPORATE detrimental to the interest of the public CONTROVERSIES and/or of the stockholders, partners, or members of any corporation, Two tiered test to determine WON the partnership, or association, as stated Special Commercial court has under Rule 1, Section 1 (a)(1) of the jurisdiction Interim Rules. The act of fraud or misrepresentation complained of A. Relationship Test becomes a criterion in determining -corporation vis--vis the: whether the complaint on its face has a. State merits, or within the jurisdiction of -e.g. quo warranto petition to special commercial court, or merely a revoke the Certificate of Registration in nuisance suit. (Simny G. Guy, case of involuntary dissolution Geraldine G. Guy, Gladys G. Yao and b. Public the Heirs of the late Grace G. Cheu vs. Gilbert Guy/Simny G. Guy, nature of the question that is the subject Geraldine G. Guy, Gladys G. Yao and of their controversy. Under the nature of the heirs of the late Grace G. Cheu the controversy test, the dispute must vs. The Hon. Ofelia C. Calo, and not only be rooted in the existence of an Gilbert Guy G.R. No. 189486/G.R. No. intra-corporate relationship, but must 189699. September 5, 2012 also refer to the enforcement of the parties correlative rights and obligations An intra-corporate dispute is understood under the Corporation Code as well as as a suit arising from intra-corporate the internal and intra-corporate relations or between or among regulatory rules of the corporation. The stockholders or between any or all of combined application of the relationship them and the corporation. Applying test and the nature of the controversy what has come to be known as the test has, consequently, become the relationship test, it has been held that norm in determining whether a case is the types of actions embraced by the an intra-corporate controversy or is foregoing definition include the following purely civil in character. Strategic suits: (a) between the corporation, Alliance Development Corporation partnership or association and the vs. Star Infrastructure Development public; (b) between the corporation, Corporation Corporation, BEDE S. partnership or association and its Tabalingcos, et al., G.R. No. 187872, stockholders, partners, members, or November 17, 2010. officers; (c) between the corporation, partnership or association and the State B. Nature of the Controversy Test insofar as its franchise, permit or license -ask whether the case would to operate is concerned; and, (d) among survive without the intra-corporate the stockholders, partners or associates relationship between the parties themselves. As the definition is broad -if yes: not an intra-corporate enough to cover all kinds of controversy, it is merely incidental to the controversies between stockholders and issue corporations, the traditional -if no: it is an intra-corporate interpretation was to the effect that the controversy relationship test brooked no distinction, qualification or any exemption *The dispute must revolve around the whatsoever. enforcement of rights and obligations under: However, the unqualified application of a. the corporation code; or the relationship test has been modified b. the articles or by by-laws on the ground that the same effectively divests regular courts of jurisdiction over cases for the sole reason that the suit is When does intra-corporate between the corporation and/or its relationship begin? corporators. It was held that the better policy in determining which body has 1. Stock- from the perfection of jurisdiction over a case would be to the subscription contract consider not only the status or whether or not there is a relationship of the parties but also the payment. 2. Non-stock- from the moment board of directors were PCGG a person is admitted as a nominees. (Roberto L. Abad, Manuel member in accordance with D. Andal, Benito V. Araneta, Philip G. the qualifications Brodett, Enrique L. Locsin and 3. Transferee of Shares of Roberto V. San Jose vs. Philippine Stock- from registration of the Communications Satellite transfer in the books of the Corporation, G.R. No. 200620, March corporation 18, 2015)
Cases:
The law is clear that in order for a When does intra-corporate
transfer of stock certificate to be relationship ends? effective, the certificate must be properly 1. Stock- from the moment that indorsed and that title to such certificate the transfer of shares to of stock is vested in the transferee by another has been recorded the delivery of the duly indorsed certificate of stock. Since the certificate 2. Non-stock- upon full payment of stock covering the questioned 1,500 to the shareholder exercising shares of stock registered in the name his rights of appraisal or in some reasons the shares of of the late Juan Chuidian was never the shareholder were indorsed to the petitioner, the inevitable reacquired by the corporation conclusion is that the questioned shares to become treasury shares of stock belong to Chuidian. (Enrique Razon vs. Intermediate Appellate Cases: Court and Vicente B. Chuidian, in his An action to correct entries in the capacity as Administrator of the General Information Sheet of the Estate of the Deceased Juan T. Corporation; to be recognized as a Chuidian, G.R. No. 74306, 16 March stockholder and to inspect corporate 1992) documents is an intra-corporate dispute Upon the enactment of Republic Act No. which does not constitute a continuation 8799, the jurisdiction of the SEC over of corporate business. As such, intracorporate controversies and the pursuant to Section 145 of the other cases enumerated in Section 5 of Corporation Code, this action is not P.D. No. 902-A was transferred to the affected by the subsequent dissolution Regional Trial Court. The jurisdiction of of the corporation. The dissolution of the the Sandiganbayan has been held not to corporation simply prohibits it from extend even to a case involving a continuing its business. However, sequestered company notwithstanding despite such dissolution, the parties that the majority of the members of the involved in the litigation are still corporate actors. The dissolution does transfer book, which duty is ministerial not automatically convert the parties into on its part, is to render nugatory and total strangers or change their intra- ineffectual the spirit and intent of Section corporate relationships. Neither does it 63 of the Corporation Code. (Rural change or terminate existing causes of Bank of Salinas, Inc. vs. Securities action, which arose because of the and Exchange Commission, et al., corporate ties between the parties. G.R. No. 96674, June 26, 1992) Thus, a cause of action involving an intra-corporate controversy remains and A.M. NO. 01-2-04-SC: must be filed as an intracorporate [IN RE: PROPOSED INTERIM RULES dispute despite the subsequent OF PROCEDURE GOVERNING dissolution of the corporation. (Aguirre INTRA-CORPORATE vs. FQB +7, Inc, GR No. 170770, CONTROVERSIES UNDER RA 8799] January 9 2013.) CASES COVERED: Conformably with Section 25 of the Corporation Code, a position must be 1. Derivative suit to enforce expressly mentioned in the By-Laws in personal liability of erring directors and officers. order to be considered as a corporate 2. Action for balances and office. Thus, the creation of an office subscription. pursuant to or under a By-Law enabling 3. All actions pertaining to provision is not enough to make a annulment of contract of self- position a corporate office. (Matling dealing director at the instance of Industrial and Commercial the corporation. Corporation, et al. vs. Ricardo R. 4. Actions to annul the retention of profits of designated director. Coros, G.R. No. 157802, October 13, 5. Mandamus to compel the 2010) declaration and payments of dividends Where a stockholder executed a Special 6. Mandamus to compel the Power of Attorney in favor of his wife registration of shares or transfer who, by virtue of said SPA, sold the thereof or open books or records shares, the corporation cannot refuse to for inspection. register the shares in favor of the 7. All election disputes within the assignee on the ground that upon the corporation death of the stockholder, the shares of Reglementary Period stock became the property of his estate -period to answer: 15 days which should be settled and liquidated -except: election disputes: first before any distribution could be 10 days. made. For the petitioner Rural Bank of Salinas to refuse registration of the *note: criminal cases arising from acts transferred shares in its stock and or omissions done by corporate agents are not intra corporate controversy CORPORATION, petitioner, vs. THE Cases: HON. JOSE C. CAMPOS, JR. OF THE COURT OF FIRST INSTANCE, and Not every purchaser of a condominium AGUILAR-BERNARES REALTY, unit is a shareholder in the corporation. respondents. (G.R. No. L-52361 April The Mater Deed determines when 27, 1981) ownership of the unit and participation in the corporation vests in the purchaser. The award to petitioners of the The share of stock appurtenant to the management and operation of its unit win be transferred accordingly to canteen at a monthly rental of P80.00, the purchaser of the unit only upon full even if awarded to a stockholder, is payment of the purchase price at which outside or merely incidental to the time he will also become the owner of central operations of an educational the unit. Consequently, even under the institution. Petitioners thus convincingly contract, it is only the owner of a unit argue that "the controversy is not one who is a shareholder of the where petitioners are bringing the action Condominium Corporation. Inasmuch as as stockholders but rather as operators owners is conveyed only upon full of the canteen under an agreement with payment of the purchase price, it said Board. In short, the cause of action necessarily follows that a purchaser of a here is for damages arising from a unit who has not paid the full purchase violation of a contract of management price thereof is not The owner of the unit operation of the College canteen (JOSE and consequently is not a shareholder PENEYRA and MILAGROS of the Condominium Corporation. In this CALDERON vs. HON. INTERMEDIATE case, the Master Deed provides APPELLATE COURT and that ownership is transferred only upon HONORABLE GODOFREDO full payment of the purchase price. RILLORAZA, G.R. No. L-68935 Private respondents have not yet fully January 22, 1990) paid the purchase price, hence they are not shareholders and the SEC has no jurisdiction over the claims. (SUNSET VIEW CONDOMINIUM