CBP Memorandum

September 12, 1974 CBP MEMORANDUM TO : All Non-Bank Financial Intermediaries The Monetary Board, in its Resolution No. 1744 dated August 9, 1974, adopted the following "Guidelines" to ensure the full and effective implementation of citizenship requirements imposed by existing applicable laws on financial institutions and to prevent circumvention of such an objective by means of provisions in articles of incorporation, by-laws or similar documentation: 1. Where at least a majority of the equity is reserved by law to be held by Filipino citizens and foreign stockholders are occupying or will occupy a substantial minority position, no corporation in a financial sector will be permitted to provide in its articles of incorporation, by-laws or similar documentation a provision that certain corporate transactions * would require a voting concurrence of greater than 70% of the subscribed capital stock entitled to vote for banks, investment houses, finance companies and such other corporations similarly subject to regulation by the Central Bank. The 70% ceiling on the voting concurrence requirement shall extend to all levels of corporate decisions: (a) stockholders, (b) board of directors, as well as (c) sub-committees of the board (which for this purpose refer to such bodies the voting members of which are composed exclusively of members of the board of directors and whose decisions are binding on the board as a whole without the need for further confirmation). For the board of directors, or sub-committees of the board, the 70% ceiling on the voting concurrence may refer to the entire membership rather than the quorum present. cdpr 2. The foregoing policy shall be applied prospectively; hence, it shall not affect the articles of incorporation or by-laws of financial institutions, where foreign stockholders occupy a substantial minority position, already approved by the Central Bank and/or registered with the Securities and Exchange Commission (SEC). Any investment agreement, management contract, memorandum of agreement, or similar agreements shall be submitted to the Central Bank for review and evaluation. (SGD.) AMADO R. BRIAS Senior Deputy Governor LIST OF PERMISSIBLE SPECIAL TRANSACTIONS WHICH WOULD REQUIRE A GREATER THAN SIMPLE MAJORITY VOTE OF THE DECISION-MAKING BODY CONCERNED 1. Amendment, repeal or adoption of new by-laws. 2. Issuance of any share of stock of any class, or of any security convertible into or exchangeable for any share of stock, or the grant of an option to purchase any such share or convertible or exchangeable security. 3. Increase or decrease of the number of directors. 4. Incurring or increasing of bonded indebtedness. 5. Appointment of legal counsel or external auditors. 6. Amendment, repeal or adoption of new by-laws where such power has been duly delegated to the board of directors. 7. Entering into a Management Contract, any contract with third persons, firm or corporation for the general management, administration and operation of the company's business and properties. 8. Amendment, termination (other than by expiration of term), cancellation, extension or modification of the contract referred to in the immediately preceding item. 9. Investing the funds of the Non-Bank Financial Intermediary in the equity of any other corporation or business or for any purpose other than the main purpose for which the Non-Bank Financial Intermediary is organized. 10. Selling, exchanging, leasing or otherwise disposing of all or substantially all of the properties and assets of the Non-Bank Financial Intermediary including its goodwill, and entering into a merger or consolidation. 11. Issuing stock or bonded dividends. 12. Substantial participation of foreigners in the equity of the non-bank financial intermediary. 13. Increase or decrease of capital stock which would dilute the voting equity of foreign stockholders. 14. Substantial capital expenditures, borrowings, and loans. 15. Concentration of credit to affiliated groups of borrowers. 16. Loans to directors, officers, stockholders and/or their related interest. Footnotes * Such as those enumerated in the attached list.