SEC keeps hands-off policy on EPCI Bank treasury shares issue

The Securities and Exchange Commission (SEC) has taken a hands-off policy with respect to the shares of EBC Investments Inc. in Equitable PCI Bank, saying such issue involves an intra-corporate dispute which is now under the jurisdiction of regular courts.

The SEC said it cannot issue any ruling on to the query posed by Transmiddle East Phils. Equities Inc., a shareholder of EPCI Bank, on how the 10-percent "treasury shares’ being held by EBC Investments shall be voted in the bank’s upcoming stockholders meeting on July 19.

"We cannot render any ruling considering that the issue involved partakes the nature of intra-corporate disputes which are now properly cognizable by the regular courts," the SEC said.

The central bank’s policy-making Monetary Board is considering imposing administrative sanctions against EBC for continued failure to dispose of the 10-percent block, in violation of a 1999 resolution directing the investment bank to divest its shares within two years or by 2001.

The 10-percent block represented bank funds used by the family of PCI Bank chairman Antonio Go, in partnership with the Social Security System and the Government Service Insurance System, to acquire a much bigger bank, PCIBank.

Since last year, the SSS and the GSIS have demanded that the 10-percent block be voted pro-rata among the major shareholders, not just the Gos using the block to maintain their "artificial majority. "

However, the Go family maintained that the board of EBC is free to vote the block to whichever nominees it chooses.

The SEC also said it cannot issue any opinion on what by-laws of EPCI Bank is binding due to a case pending with the Court of Appeals concerning the bank’s by-laws.

The Court of Appeals issued Wednesday an order preventing the bank’s board of directors from implementing any provision of the amended by-laws that were revoked by the SEC.

The amendments prevent competitors from getting into the board of directors of EPCI Bank.

According to the SEC, the amended by-laws would disenfranchise the majority shareholders of the bank and deprive them of their right to participate in internal affairs.

In its order, the CA said great and irreparable injury would result should the bank implement its amended by-laws.

The CA’s order is in response to the petition filed by Sysmart Corp., a company owned by the group of mall magnate Henry Sy, which alleged that the amendments had been made without the requisite approval of two-thirds of the bank’s stockholders.

In its petition, Sysmart said the group of Go could use the disapproved by-laws to take over the bank during its annual stockholders’ meeting.

The amended by-laws, according to Sysmart, would allow the Go family to use a lesser number of votes to disqualify and/or approve the disqualification of nominees to the board of directors.

Sysmart further said the amended by-laws states that the decision of the nomination committee, once confirmed by the board of directors, rejecting the nomination or disqualifying the nominee is made final and may no longer be questioned.

Sysmart pointed out that the nomination committee is effectively composed of members of the Go family and their allies.

This gives the Go group control over the bank despite having only 20-percent interest while the SSS and GSIS have only five board seats of the 15-man board despite their combined 40-percent stake.

The Sy group tried but failed to win a board seat in EPCI Bank during the bank’s stockholders’ meeting in April 2004. Its nominees to the board were rejected by EPCI Bank management, citing conflict of interest.

EPCI Bank argued that its by-laws and a precedent set by the Supreme Court allowed it to protect itself by preventing competitors from getting into its board. A Supreme Court ruling in the 1980s had barred businessman John Gokongwei from entering the board of beverage and food conglomerate San Miguel Corp. because he had a competing food company, Universal Robina Corp.