Re: Company Registration and Monitoring Department

December 22, 2010 SEC EN BANC CASE NO. 08-10-211 IN RE: APPEAL FROM ORDER OF THE COMPANY REGISTRATION AND MONITORING DEPARTMENT PRIMEBRIDGE HOLDINGS, INC. , appellant . DECISION This is an Appeal from the Order of the Company Registration and Monitoring Department ("CRMD") of the Commission dated 26 July 2010 revoking the Certificate of Incorporation of appellant Primebridge Holdings, Inc. for its failure to timely submit proof of transfer of stock certificates to its name, in compliance with the Commission's Guidelines Covering the Use of Properties that Require Ownership Registration as Paid-Up Capital of Corporations. The pertinent facts are as follows: On 11 November 2004, appellant filed with the Commission an application for incorporation as a holding company, with an authorized capital stock of One Billion Two Hundred Million Pesos (P1,200,000,000.00) divided into Eighty Million (80,000,000) common shares and Forty Million (40,000,000) preferred shares, both with a par value of Ten Pesos (P10.00) per share. Of said authorized capital stock, twenty-five percent (25%) or 30,000,006 common shares have been subscribed, with SM Investments, Inc. ("SMII") owning 30,000,001 of said initial subscription. As payment for its subscription, SMII executed a Subscription Agreement with Assignment dated 9 November 2004 transferring 124,500,000 common shares of Banco De Oro Unibank, Inc. ("BDO") in favor of appellant. Said BDO shares are covered by Stock Certificate No. 04856. 1 ICTDEa On 19 November 2004, the CRMD issued a Certificate of Incorporation to appellant, with a condition that the 30,000,001 subscribed common shares of appellant shall be held in escrow by the Commission until appellant submits the stock certificate evidencing the transfer of the subject BDO shares in its name within thirty (30) days from the date of the issuance of the Certificate of Incorporation, in accordance with the Guidelines Covering the Use of Properties that Require Ownership Registration as Paid-Up Capital of Corporations 2 ("Guidelines"). On 15 December 2004 and 16 February 2005, respectively, appellant requested the CRMD for additional time within which to submit proof of the transfer of the subject BDO shares in its name. In separate letters dated 4 January 2005 and 23 February 2005, the CRMD granted appellant's requests. Despite the additional time, appellant still was unable to submit the required proof. In an Order dated 25 August 2005, the CRMD directed appellant to appear at a conference dated 6 October 2005 and to show cause why its Certificate of Incorporation should not be revoked for its failure to have the BDO shares transferred in its name. Appellant failed to appear on the scheduled conference date. On 1 April 2009, the CRMD issued a Final Show Cause Order directing the representatives of appellant to appear at a conference to discuss the matter. Again, appellant and any of its representatives failed to appear. On 26 July 2010, the CRMD issued an order revoking appellant's Certificate of Incorporation for its failure to submit proof of transfer of the BDO shares in its name pursuant to the Guidelines. Hence, this appeal. The issue to be resolved is whether or not appellant Primebridge Holdings, Inc. complied with the Guidelines that require the submission of the stock certificate confirming the transfer and corresponding registration of the subject BDO shares in its name. ACTIcS We find for the appellant. Records show that the order of the CRMD revoking appellant's Certificate of Incorporation is anchored mainly on the latter's failure to present proof that the 124,500,000 common shares in BDO, represented by BDO stock certificate No. 04856, have been transferred in the name of appellant. However, appellant in its memorandum on appeal was able to show that said shares were indeed transferred in its name, as shown by BDO Stock Certificate No. 05016 dated 5 January 2005. 3 In other words, there actually was compliance by appellant with the directive of the CRMD, though the timely submission thereof to the Commission was hampered by the alleged lack of coordination between appellant and its former counsel. Needless to state, appellant's submission of the required proof of transfer of shares, although delayed, shows that appellant had every intention to comply with the Guidelines and the orders of the Commission. This is not to say that the CRMD acted capriciously in revoking appellant's Certificate of Incorporation. On the contrary, it cannot be denied that the CRMD gave appellant numerous opportunities to comply with the Guidelines, granting two (2) requests for extension of time to submit proof of transfer by appellant and even issuing a Final Show Cause Order more than 4 years after the last request for extension, if only to give appellant one last chance to comply. These notwithstanding, appellant failed to present the proof of transfer of the BDO shares to it by SMII within the time given proof that apparently, it had all along. Nevertheless, appellant should be admonished for failing to follow the orders of the Commission and to strictly abide by the Guidelines and other rules issued by the latter. This matter would not have reached this stage had appellant been more conscious of the requirements and pertinent deadlines set by the Commission for its incorporation. In connection herewith, Section 144 of the Corporation Code 4 states: "Sec. 144. Violations of the Code. Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of not less than one thousand (P1,000.00) pesos but not more than ten thousand (P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more than five (5) years, or both, in the discretion of the court. If the violation is committed by a corporation, the same may, after notice and hearing, be dissolved in appropriate proceedings before the Securities and Exchange Commission: Provided, That such dissolution shall not preclude the institution of appropriate action against the director, trustee or officer of the corporation responsible for said violation: Provided, further, That nothing in this section shall be construed to repeal the other causes for dissolution of a corporation provided in this Code." aIcHSC The Guidelines were promulgated by the Commission to implement the Corporation Code provisions on payment of subscriptions to shares of stock, specifically with the use of property such as shares in another corporation. Thus, non-compliance with these Guidelines is deemed a violation of the Corporation Code, and Section 144 thereof shall apply. WHEREFORE, the Order of the CRMD dated 26 July 2010 is hereby MODIFIED insofar as the penalty is concerned in that instead of revoking the Certificate of Registration of Primebridge Holdings, Inc., appellant is directed to pay a fine equivalent to Ten Thousand Pesos (P10,000.00) within five (5) days from receipt of this Decision. Let a copy of this Decision be furnished the Company Registration and Monitoring Department for its information and appropriate action. SO ORDERED. Mandaluyong City, December 22, 2010. (SGD.) FE B. BARIN Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner Footnotes 1. Memorandum on Appeal, Annex "E." 2. November 15, 1994. 3. Memorandum on Appeal, Annex "J." 4. Batas Pambansa Blg. 68 (1980).