Rules and Registration and Sale of Proprietary Rights in Golf Courses and Clubs, Resort Facilities and Similar Projects

August 18, 1975 RULES AND REGISTRATION AND SALE OF PROPRIETARY RIGHTS IN GOLF COURSES AND CLUBS, RESORT FACILITIES AND SIMILAR PROJECTS * Pursuant to the provisions of Republic Act No. 1143 and the Revised Securities Act, * the following rules on the registration and sale of the proprietary rights in golf courses and clubs, resort facilities and similar projects, to the public, are hereby promulgated for the information and guidance of all concerned. SECTION 1. ** Definition . Contracts involving the sale of proprietary rights in golf courses and clubs, resorts facilities and similar projects, which provide for returns on the investment either in the form of money or appreciation in the value thereof, as well as enjoyment of the facilities of the issuer, are investment contracts within the meaning of Section 2 of the Revised Securities Act. SECTION 2. Registration . No such contracts shall be sold to the public, that is, twenty (20) or more persons, unless they are first registered with, and/or licensed by, the Securities and Exchange Commission (SEC),except when exempted as provided under Section 3 hereof. Requirements: (1) ** The issuer must have an initial paid-up capital of at least P500,000.00 in cash or property . (2) It must have a project such study showing the feasibility and profitability of the project and the implementation thereof, prepared by a competent person. (3) It must have the necessary plans and permits to carry out its project, such as those relating to surveys, layouts and structure of buildings and other facilities, prepared by qualified surveyors, architects, or engineers, and duly approved by the proper authorities. (4) It shall file a registration statement concerning the proprietary rights together with such schedules and annexes as may be prescribed by the SEC, including its financial statements and a prospectus that shall be issued to the public. SECTION 3. Exemptions . The following are exempted from the requirement of registration and/or licensing: (a) ** All existing entities which have constructed their golf courses and clubs, resorts, recreational or athletic facilities, and are not raising funds from the public. Provided, however, that existing entities which are still selling membership certificates, units or rights on the date of effectivity of these rules are covered by these regulations. (b) Sales to less than twenty (20) persons. (c) Sales to persons who are closely connected with the enterprise, such as, employees of the issuer, as well as personnel of a sister or affiliated company who know the affairs of the issuer, or sales under circumstances where prior registration of the proprietary rights is unnecessary to protect investors, such as private offerings to friends and/or persons, who are in a position to know the projects of the issuer. Provided, that, in either of such cases no compensation, remuneration or commission is paid or given in connection with the offering of the proprietary right. In any of the foregoing similar cases, a Fact Sheet signed and verified by the President or other responsible officer of the issuer shall be filed with the SEC, and its statement or certificate of exemption secured. SECTION 4. Guaranty . Where the undertaking of the issuer is guaranteed by another person, either to assure completion of the project or the payment of the promised return on the investment, or both the guarantor shall be a signatory to the registration statement. Where there is a developer or manager who not only constructs the project and runs the business, but also sells the proprietary rights to the public, either in his own name or in behalf of the owner, he shall sign the registration statement, together with such owner. prcd In processing the application for registration and/or licensing, the capability not only of the issuer but also of the guarantor, developer, or manager shall be determined. In addition, the SEC shall ascertain the assets or properties as commensurate with the value of the membership certificates offered to prospective members. Any subsequent pricing of membership certificates being offered to the public shall be with the approval of the Commission, taking into account, among other factors, the existing improvements and assets, the actual development of the properties, and whenever advisable, the opinion of representatives of the industry. SECTION 5. ** Sales and Mortgages . No sale, mortgage or similar encumbrance on the property used as a golf course and club, or resort facility including disposition of any fixed asset of the issuer, shall be made without the consent of the stockholders representing two-thirds of the subscribed capital stock, both voting and non-voting and whether the sale is fully or partially paid, in a meeting duly called for the purpose . SECTION 6. Advertising . Any advertisement made by the issuer corporation through any newspaper, radio, television, leaflets, circulars or any other form, about its operations or activities must have factual basis and presented in a manner that will not intend to mislead the public. No such advertisement shall be made unless a copy thereof shall have first been filed with the Commission before the date of issue or publication. SECTION 7. Fees . The rate of fees now imposed and collected for filing registration statement of securities under the Securities Act, including the exemption fees, shall be applied under these rules. SECTION 8. Penalties . Any violation of these rules shall, after proper notice and hearing, be punished by a fine of P200 and an additional penalty of not exceeding P100 a day for every day of default whenever applicable. In serious cases, the SEC may suspend or revoke the license or permit issued to the guilty party. Any sale or issuance of investment contracts as defined in these rules, without any license or permit or exemption therefrom first having been secured from the Commission, shall render the offender liable to criminal and/or civil prosecution as provided under the Securities Act. SECTION 9. Transitory Provisions . Existing entities which have on-going projects on the date of effectivity of these rules shall submit to the Commission a Fact Sheet stating all material information about the company and its operations, in a form prescribed by the Commission, within one (1) month from said date. The Commission shall determine on basis of the Fact Sheet, the period within which the company shall file a registration statement with the SEC and secure the permit to sell proprietary rights, which in no case shall exceed three (3) months from date of submission of the Fact Sheet. SECTION 10. Repealing Clause . Any and all rules and regulations in conflict with, or contrary to, these rules are hereby repealed or modified accordingly. SECTION 11. Effectivity . These rules shall take effect immediately after publication in the Official Gazette and in two newspapers of general circulation throughout the Philippines. (SGD.) ARCADIO E. YABYABIN Securities and Exchange Commissioner APPROVED: August 21, 1975 (SGD.) TROADIO T. QUIAZON, JR. Secretary of Trade Footnotes * The Revised Securities Act, passed on February 23, 1986, supersedes the Securities Act of 1933 or C.A. No. 83. ** Amended by the Revised Securities Act dated January 1, 1983 excluding condominium and membership certificates issued by non-stock corporations.