DOJ Opinion No. 012, s. 2001

DOJ OPINION NO. 012 , s. 2001 March 9, 2001 Atty. Renato B. Valdecantos Chief Privatization Officer Privatization and Management Office Makati City Sir : This pertains to your request for opinion on whether "foreign individuals and/or institutions or entities, including foreign banks, may own up to 100% of the shares of stocks of Al Amanah Islamic Investment Bank of the Philippines covering A, B, and C shares." IcTaAH The request has emerged in the wake of the process to privatize the Bank which will be spearheaded by the Privatization and Management Office (PMO), successor-in-interest of the Asset Privatization Trust, the designated disposition or marketing entity of the Bank. Pursuant thereto, the government plans to offer for sale the majority of the Bank's unissued shares totalling 8,542,879 shares as well as 50,000 PMO-held shares. Section 8 of the Bank's Charter (R.A. No. 6848) classifies the Bank's shares as follows: "SECTION 8. Classification of Shares : Its Features . The Islamic Bank's authorized capital stock shall have the following classifications and features in relation to its Islamic banking operations: (1) Series "A" shares shall comprise five million one hundred thousand shares equivalent to Five hundred ten million pesos (P510,000,000) to be made available for subscription by the present stockholders of the Philippine Amanah Bank namely: the National Government, and such other financial entities as it may designate. (2) Series "B" shares shall comprise nine hundred thousand shares equivalent to Ninety million pesos (P90,000,000) to be made available for subscription by the Filipino individuals and institutions. (3) Series "C" shares shall comprise four million shares equivalent to Four hundred million pesos (P400,000,000) to be made available for subscription in Filipino and foreign individuals and/or institutions or entities." As above classified, the Bank's "A" shares are to be subscribed by the National Government and government financial institutions (GFIs) to be designated by the National Government, while the "B" shares are open for subscription by Filipino individuals and institutions. The Bank's "C" shares may be subscribed by both Filipino and foreign individuals and/or institutions and entities. The Banks "A" and "B" shares represent 60% of the Bank's total equity, while the "C" shares constitute 40% thereof. EHCcIT The question raised is whether the Bank's "A", "B" and "C" shares may be sold to, and subscribed by, foreign investors in a privatization sale, given the above-mentioned allocation in the law of the Bank's equity ownership. We believe that the Bank's "A" shares may be transferred to foreigners, whether individuals or entities, in the event of a privatization of the Bank's ownership in the light of the express provision of Section 47 of the Bank's Charter which provides: SECTION 47. Privatization . Nothing in this Act shall be construed to preclude the Islamic Bank from privatizing its ownership. For this purpose, any limitation on the transfer of shares shall not be applicable with respect to the shareholdings of the National Government, Social Security System, Government Service Insurance System, Philippine National Bank and Development Bank of the Philippines." (Emphasis supplied) Section 47 governs a situation where the Bank will privatize its ownership, which is the case here. In that event, Section 47 expressly renders inapplicable any limitation on the transfer of the Bank's shares held by the National Government, SSS, GSIS, PNB and DBP, conceivably referring to, among others, the 40% limitation on foreign equity ownership of the Bank. Since the Bank's "A" shares are, by law, reserved for subscription by the National Government and the GFIs it may designate, such shares, in case of privatization of the Bank's ownership, may be sold and transferred to other investors, whether Filipino or foreign nationals, pursuant to Section 47. The Bank's "B" shares, which are expressly reserved for Filipino investors, cannot be acquired by foreigners, except a foreign bank in a case covered by Section 73 of R.A. No. 8791 "The General Banking Law of 2000", which expressly allows a foreign bank "to acquire up to one hundred percent (100%) of the voting stock" of only one domestic bank, subject to the guidelines issued pursuant to the Foreign Banks Liberalization Act and the approval of the Monetary Board. acITSD Upon these premises, your query is answered accordingly. Very truly yours, (SGD.) HERNANDO B. PEREZ Secretary