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PCC wants early look at competition issues in PPP projects

THE Philippine Competition Commission (PCC) said it drafted a circular which will allow the agency to address competition concerns at the pre-bidding phase of public-private partnerships.
“We would want to have a more smooth process for reviewing transactions related to government procurement projects particularly those infrastructure projects under BOT (build, operate-transfer) projects… To make that happen its very important that we coordinate our actions with other government agencies in this case PPP,” chairman Arsenio M. Balisacan told BusinessWorld in an interview in Quezon City on Monday.
“Just like in the third telco, the PCC comes in to lay out, to provide the competition lens or the factors that bidders will have to be aware of and have to take into account when they submit their bids. PCC helps in such a way that competition concerns are already incorporated,” Mr. Balisacan added.
The draft is in line with the agency’s mandate under Republic Act 10667, or the Philippine Competition Act of 2015.
The proposed rules will apply solely to solicited projects undertaken by agencies and instrumentalities of the national government, including government-owned and controlled corporations, government financial institutions, and state universities and colleges, pursuant to the BOT Law and its implementing rules and regulations.
It will not cover solicited projects undertaken by local government units; unsolicited proposals; and joint ventures, which the PCC will address with separate issuances.
Under the proposed measure, the PCC may provide inputs “on the terms of reference of the transaction advisor or consultant to be procured by the agency for the development of the project feasibility study.”
The commission may also provide input on how the pre-qualification documents, bid documents, PPP contract, and other related documents for review may affect competition in the markets affected by the project, using the substantive standards and practices as provided under the PCC Merger review guidelines and other PCC related issuances.
The PCC may require undertakings from the prospective bidders, likewise to be incorporated in the project documents. The undertakings are a list of commitments that the PCC will require the prospective bidders to make in order to address any potential competition issues identified by the PCC.
Under competition law, joint ventures are notifiable.
In the proposed circular, agencies may also seek exemptions from compulsory notification in connection with their solicited projects.
The approval of the exemption of the solicited project will be determined by the PCC by considering the nature and scope of the project; the bidding design and process; and competition concerns that may arise from the nature and/or composition of prospective bidders and the winning project proponent.
The PCC is seeking comment on the draft circular until March 26. — Janina C. Lim

Tax treatment of unlisted shares sold for less than fair market value

With the advent of Republic Act (RA) No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, taxpayers and tax practitioners have lauded the amendment made under Section 100 of the National Internal Revenue Code (NIRC). Section 100 imposes donor’s tax on the transfer of property for less than adequate or full consideration in money or money’s worth. The amendment provides an exception to the general rule. In this case, a transaction that is bona fide, at arm’s length, and free from any donative intent will be considered made for an adequate and full consideration, even if the selling price is lower than the established fair market value (FMV).
One year from the effectivity of RA No. 10963, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 30-2019, clarifying the application of Section 100 to the sale of shares not traded on the stock exchange. RMC No. 30-2019 provides that, when shares of stock not traded on stock exchange are sold for less than FMV, the excess of the FMV over the selling price shall be treated as a gift subject to donor’s tax, except for when it is sold at arm’s length and free of any donative intent.
RMC No. 30-2019 emphasized that the issue of whether the transaction is arm’s length is a question of fact and not of law. The parties must present proof of business purpose to fall within the exception to the rule on the imposition of donor’s tax on transfer of shares for less than its FMV. Thus, the facts claimed by the parties must be adequately established by supporting documents. The decision on whether the parties have sufficiently proven the business purpose is solely subject to the discretion of the BIR. While RMC No. 30-2019 has clarified the application of Section 100 and its exception, it did not provide for safe harbor rules or examples of acceptable proof of bona fide business transactions.
This recent issuance is a mere reiteration of the position of the BIR in its rulings prior to the amendment of the NIRC. There have been several instances in the past where the BIR imposed the donor’s tax, despite the transfers being legitimate business transactions, all because there was no exception provided under the old Section 100 of the NIRC. These instances included the sale of shares via public bidding, which resulted in a winning bid lower than fair market value of shares, sale of shares owned by a company undergoing liquidation, and divestment of shares of a company wanting to exit the Philippine market. Given the amended provision of Section 100, investors may now find Philippine tax rules more reasonable, since they would not be subject to unnecessary taxes on the transfer of shares, as long as they have sufficiently satisfied the requirements of bona fide and arm’s length transaction under the law and the regulations.
Further, since RMC No. 30-2019 provides that the difference between FMV of the shares and the selling price will be subject to donor’s tax, does this mean that the transaction shall be eligible for the donor’s tax exemption for the first P250,000? The circular is not clear, but this is the logical interpretation of the phrase “the amount by which the FMV of the property exceeded the values of the consideration shall be deemed as gift and shall be included in the computing the amount of gifts made during the calendar year” under Section 100 of the NIRC, as amended. Therefore, even if the shares were sold at an amount less than its FMV, the transaction may still be exempt from donor’s tax, provided the amount of the difference is P250,000 or less for a given year.
While this added exception is commendable, the rule is prone to abuse by unscrupulous and ingenious taxpayers. Considering that the donor’s tax is a lower rate of 6% compared to the capital gains tax of 15%, taxpayers may just opt to pay the donor’s tax on the difference between the FMV and the selling price. Under current rules on computing for the FMV of shares of stock not traded through the stock exchange, the BIR insists on computing for the capital gains tax based on the adjusted net asset value of the shares. With RMC No. 30-2019 clarifying that the imposition of the donor’s tax is still the general rule absent convincing proof that the transaction was done at arm’s length, can the taxpayer now pay the lower donor’s tax on the difference?
Prior to the amendment of the NIRC, the donor’s tax rate for strangers, which includes corporations, was 30%. The high rate of donor’s tax served as a deterrent for parties against simulating their sales agreement. Given the current rules, we are now facing an absurd situation where, even if the parties simulate the selling price for the sale of the shares by adopting a price lower than FMV, they will still pay the lower donor’s tax. A difference of 9% tax may lead to huge tax savings, especially if the transaction involves millions of pesos.
In view of the change in the rates of capital gains tax on the sale of shares and donor’s tax, Section 100 should have been reconsidered or repealed altogether. The imposition of donor’s tax instead of capital gains tax is counterproductive to the government’s goal of plugging tax leakages and collecting “forgone revenue” for transactions with lower consideration than the FMV of the property.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
 
JennYlyn V. Reyes is a manager from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.
pagrantthornton@ph.gt.com.

Managing change under the RTA law

Despite the rice tariffication law or RA 11203, there is a chance rice prices can go up this year if the government fails to manage well the changes it causes. The law is about a month old. But from what I know, it is not implemented yet.
Its implementing rules and regulations had not been issued yet. Those assigned to issue the IRRs — the DA, NEDA, and DBM, particularly the first two — are still exchanging views on few remaining issues like who decides on and how to set the special safeguards duty; how to allocate the minimum access volume of imported rice; or how to implement the spending from the rice competitive enhancement fund or RCEP, amounting to P10 billion yearly.
There is no question that the IRRs must be crafted well to ensure a good implementation of the RTA law. We all have a stake in it, our food security. But I do hope that they issue the IRR next week.
Why? We are now in the middle of March, three and a half months before the start of the rice-lean quarter of the year. If we recall, under the old policy regime the NFA has to have rice stocks worth at least 30 days by July 1 to stabilize rice prices.
The RTA law assigns the NFA to maintain the country’s rice buffer stocks. But these stocks are meant for emergencies, when the rice markets get temporarily disrupted by natural or man-made calamities.
But what about the task of making sure we have enough rice to keep rice prices from spiking as we approach the lean months of the year? With the RTA law just about ready to be implemented, the NFA management would no longer consider itself accountable for that task.
If we don’t have adequate rice supply by July, then we are back to the situation we were in 2018. Rice prices went up then because the NFA did not import rice on time.
The RTA law replaces the NFA’s imports with private sector imports of rice. It dismantled the import monopoly of the agency in rice. Any one of us can start a rice import business and the only restrictions we have to comply with in importing rice is that we apply for a sanitary and phyto-sanitary clearance from the Bureau of Plant Industry, and pay the customs duty, which is 35% if rice is imported from the rest of ASEAN.
Policy analysts would easily agree that private sector imports of rice would effectively ensure that the country can have enough rice by July 1 this year under the new law.
If there is enough time to import rice before then, if we manage this change in rules well. But the problem is the Joint Departmental Circular prescribing the IRRs for the RTA law is not issued yet. Private sector importers could not initiate the import business without the IRRs. And the way we are proceeding, we are getting closer to July 1 without adequate rice stocks. By now the rice imports of NFA last year had already been used up or whatever remain of it is not enough for this year’s requirement for stabilizing rice prices. If the change had not happened, by now the NFA should have placed its order to import rice. But it would not do that precisely because the RTA law has changed the rules.
So there is urgency in issuing the IRRs. There is always time to refine the IRRs. Filipinos would certainly not be happy to see the IRRs in April or May 2019, only to find out also that rice prices would start to go up because there is not enough rice in the country today.
Assuming the IRRs are issued next week, the NFA Council, which remains to be a policy-setting body created by Presidential Decree 4 as amended, has a task to do. It should monitor the supply-use situation in rice. With the IRRs issued, the government may have enabled the rice importers to start importing rice, but do we know for sure all these are ready to bring in, analysts estimated, nearly three million metric tons of rice?
I doubt that the figure would happen this year. But even if we import just half of that volume, there should be enough buffer to prevent price speculation by those who have the local rice stocks this year.
In managing this change, the NFA Council or whoever it would deputize to do this should check with the Bureau of Plant Industry the applications for SPS and the respective volume of rice imports. That should give us a first source of information in finding out intended rice imports in the next few months.
Secondly, it should monitor with the Bureau of Customs arrivals of rice imports. This information is crucial, as it gives policy makers the data to update the country’s supply-use table for rice.
A possible shortfall in rice stocks may happen simply because there is transactions cost that the private sector faces in this import business. They may first try out with a smaller volume, and if all of them adopt this precautionary attitude, then import arrivals may not be enough to stabilize rice prices this year.
Fortunately, the RTA law had prescribed for unlimited rice imports from ASEAN at 35%. The rice importers would not see a need for applying from whomever the right to import the minimum access volume. In fact, the ASEAN rice duty is the lowest we have and that facilitates private sector imports from ASEAN.
Compared with other laws, this one is relatively fast. In about a month from President Duterte’s signing into law of the RTA, there is already a very good draft of the IRRs that is being circulated for final comments. If I am not mistaken it is just about ready to be issued. The agencies responsible for the IRRs had worked very hard to meet this deadline, other laws have had much months spent before the authorities issued the IRR.
But let us just suppose some issue divides the NEDA and the DA, delaying the issuance of the IRRs. The NFA Council has the important task to do in coming up with Plan B, now that there is no longer the NFA which carries out this task. I suppose the NFA can still legally import rice for as long as the RTA is not implemented yet due to a delay in coming out with the IRRs. But the agency just has more to worry for now, after the RTA law stripped it of several regulatory powers under PD 4.
The RTA law is a game changer in how we do agricultural development in our country. We had waited for it for nearly a quarter of a century, since 1995 when we applied for special treatment in the WTO. Now that the reform has finally arrived, it can still evaporate into thin air with the government’s mistake in managing the change it causes, and its benefits snatched away from us.
 
Ramon L. Clarete is a professor at the University of the Philippines School of Economics.

MORE tax relief in CIT

Starting this week, this column will produce a series of Market-Oriented Reforms for Efficiency (MORE) articles related to recently enacted laws and proposed legislations in the Philippines on various sectors. Thus, recent Republic Acts (RA) and some pending bills for bicameral committee meetings after the May 2019 elections will be discussed.
First on the list is the need to simplify and reduce tax rates for business that create sustained jobs for Filipinos. Currently in East Asia, the Philippines has (a) the highest corporate income tax (CIT), (b) among the highest in withholding tax for dividends and interest income, (c) the highest withholding tax for royalties, and (d) among the highest VAT or gross sales tax (GST).
These non-attractive fiscal policies plus the Constitution restrictions on foreign investments, among others, contribute to the Philippines having the lowest foreign direct investments (FDI) stock among more mature economies in the region (see table 1).
Comparative tax rates in East Asia in %, FDI stock in $ billion
The main bill under deliberation is HB 8083, the “Tax Reform for Attracting Better and High-Quality Opportunities” or TRABAHO bill. Originally it was called the “TRAIN 2” bill but with the generally adverse impact of the TRAIN law of 2017, the DOF changed its moniker to TRABAHO.
Among the important provisions is the reduction of CIT from the current 30% to 28% in 2021, 26% in 2023, 24% in 2025, 22% in 2027, and 20% in 2029. In exchange it intends to remove certain fiscal incentives that supposedly “lower” DOF tax collections, especially the 5% gross income earned (GIE).
The Senate version intends to cut CIT from 30% to 25% in year 1 of implementation and not staggered to 10 years.
TRABAHO bill has been passed on third reading in the House last September 2018, awaiting action from the Senate for a possible bicameral meeting in late May this year.
If the government is sincere in really attracting more local and foreign investments, it should either (a) cut CIT to low, flat 15-16% within year 1 of implementation and abolish the GIE, or (b) cut CIT to 21-25% and raise the GIE to 7%.
There is real, not fictional, CIT competition in the region. For instance, Singapore’s 17% is positioned near Hong Kong’s 16.5%. Socialist Vietnam until 2013 has 25%, became 20% in 2016 (see table 2).
Tax cut in East Asia
Let us hope that when Senators and Congressmen/women meet for a bicameral meeting after the May elections, or when they refile the bill in the next Congress in July, they will be more aware that capital and people are more mobile these days. Both the national and local governments should not be too tax-hungry and reducing the tax rates, lowering the number of permits and payments, will greatly help in attracting both local and foreign investments, and retaining them for the long-haul.
 
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers
minimalgovernment@gmail.com

Vox populi, vox Dei?

Vox populi, vox Dei. The voice of the people is the voice of God, so let the people decide come election time, say personages of national stature.
Free and democratic elections were restored after the approval of the new Constitution in 1987. Since then the people have elected as president Joseph Estrada, a college dropout turned actor best known for his portrayal of the underworld character Asiong Salonga, and Gloria Arroyo, who was made to look like the singer/actress Nora Aunor during her candidacy for various national positions, from senator to vice-president to president. Actor Fernando Poe, Jr. claimed he won over Gloria Arroyo in the presidential election of 2004 but the Nora Aunor look-alike, who was the incumbent president then by virtue of the ouster Joseph Estrada, had the results of the election altered.
People have also elected to the Philippine Senate, where the voices of intellectual giants like Manuel L. Quezon, Manuel A. Roxas, Jose P. Laurel, Claro M. Recto, Lorenzo M. Tañada, and Jose W. Diokno once reverberated, celebrities from show business and the sports world. Elected to the Senate by virtue of their popularity as entertainers have been the aforementioned actor Joseph Estrada, Ramon Revilla, Sr., the actor who gained fame and fortune for portraying another gangland character, Nardong Putik, their actor sons Jinggoy Estrada and Bong Revilla, Tito Sotto, star of the TV noontime variety show, Eat Bulaga, the No. 1 medium of toilet humor, Lito Lapid, movie stuntman turned actor. Except for Sotto, the men do not have a college degree, some of them never had tertiary education.
There are others who rode to the Senate on the wings of their show business partners like Ralph Recto, husband of Box Office Queen Vilma Santos, and Francis Pangilinan, husband of Megastar Sharon Cuneta. It should be noted though that their academic attainments prepared them better for their role in the Senate. There is Grace Poe, daughter of Da King FPJ and movie queen Susan Roces. Then there are/were TV personalities, newscasters Noli de Castro and Loren Legarda.
Elected to the Senate by virtue of the fame gained in the sports arenas were former Olympic and professional basketball players Freddie Webb, who later went into show business as the star of the TV sitcom Chicks to Chicks, and Robert Jaworski, also a movie bit actor. And of course, Manny Pacquiao, 8-division world boxing champion.
In the senatorial race of 1992, crowded out of the winning circle by the show business people were President Cory Aquino’s Health Secretary Alran Bengzon, Trade and Industry Secretary Joe Concepcion, and Solicitor-General Francisco Chavez. In 1998 it was Yale Law master and Commission on Elections chair Haydee Yorac and University of Michigan master of Business Administration and President Fidel Ramos’ Secretary of Finance Roberto de Ocampo.
The people had spoken. They had elected Joseph Estrada president and subsequently Gloria Arroyo. They had elected Juan Ponce Enrile, Jinggoy Estrada, Bong Revilla, and Lito Lapid senators.
If the voice of the people is the voice of God, were Joseph Estrada and Gloria Arroyo the choice of God? Gloria Arroyo herself has told the Associated Press that “Divine providence put me here. The Lord is a very good manager of my career.” On another occasion, she told Time magazine, “Where I am is where God wants me to be.”
Estrada had been convicted of plunder. Arroyo was also accused of plunder. She was acquitted though for “insufficiency of evidence” — not for lack of evidence. Enrile, Jinggoy Estrada, and Bong Revilla have been accused of plunder and Lapid still has to explain the source of the huge amount of US dollars his wife tried to smuggle into the United States. They could not have been God’s choice.
According to Wikipedia, the Latin phrase was first used by Alcuin, an English clergyman, scholar, teacher and adviser of Charlemagne, the Holy Roman Emperor who ruled much of western and central Europe during the Early Middle Ages. Alcuin wrote Charlemagne a letter advising him “not to listen to those who keep saying ‘The voice of the people is the voice of God.’ because the tumult of the crowd is always close to madness.”
“See, judge, and act,” a present-day apostle of Christ, Archbishop Socrates Villegas, exhorts the faithful. The exhortation is unnecessary for the faithful do see, judge and act. But the problem is the frame of reference for their judgment. I read in social media a young woman will vote for Bong Revilla because she finds him handsome.
Ronald de la Rosa has said voters come to campaign sorties not to listen to a discussion of national issues but for the entertainment. That is why he resorts to some comical antics to entertain the crowd. In fact, he was clowning all throughout his stint as chief of police. Public opinion surveys show him to be among the top 15 senatorial candidates.
The latest Pulse Asia election survey indicates that people will elect to the Senate Imee Marcos, Jinggoy Estrada, Lito Lapid, and Bong Revilla. Ah, the voice of the people is indeed always close to madness, oftentimes it is madness.
 
Oscar P. Lagman, Jr. is a member of Manindigan! a cause-oriented group of businessmen, professionals, and academics.
oplagman@yahoo.com

Why should there be election debates?

To many people, ‘election debates,’ is a means to inform voters of how the issues of the day are framed and discussed by candidates. The exchange of ideas that happens between opposing candidates is supposed to reveal information that voters need especially in knowing and evaluating candidates — what they stand for, what their plans are, among Pothers. Equipped with this knowledge, voters are said to be more capable of making informed decision of who to vote for or not.
Broadcast debates, are assumed to amplify this function by allowing people to hear or see the actual discussions between candidates on various pressing issues. For more than four decades, the use of communication technologies, in particular, television, in election debates, has been an effective means of disseminating information. With more and more people who are tuned in their television and radio, election debates have become one of the sought-after moments in a campaign period.
What is an election debate? What is its purpose? Why should we care about it?
Election debate, first and foremost, is commonly understood as one of the campaign events that allows candidates (and even parties) to engage their rivals, on various controversial issues that may likely affect their policy proposals, legislative agenda, platforms, among others. It essentially comes from the old practice in Ancient Greece where people profusely talk about opposing views on a particular topic in their city-states. Later on, Roman Senators, medieval scholars, and modern politicians appropriated this practice to shape and determine the legislative agenda, political frameworks, among others.
Debates usually entail three things: the systematic way of arriving at a claim or logic, art of public speaking or oratory, and the creative use of words or rhetoric. In election debates, appearance or the projected image of a person adds new dimension to the debate by giving emphasis to image, gestures and body language vis-à-vis the claims in the debate.
Its purpose is two-fold: first, it gives the candidates the opportunity to have a stage to introduce themselves to the public, to know their opponents, vilify a fiercest rival, etc.; second, it allows voters to examine the candidates or parties by observing how they behave, their platform, programs, etc. Election debate is major part of the campaign where candidates and parties are forced to learn also about their opponents. Voters, on the other hand, are given a chance to have a closer look at the candidates and their parties apart from the typical campaign ads, jingles, posters, etc.
The advent of new communication technologies, such as radios, television, brought a new dimension in the election debate because of the entry of media as the “moderator” of this political event. Since the time of the first televised election debate (between Kennedy and Nixon in 1960), the media has become the constant “gatekeeper” of issues, framings, discourses, interpretations, among others, of an election debate. This phenomenon has created a new reality called “mediated politics.” Mediated politics happens when the perception and understanding of the people are heavily influenced by the media (broadcast or printed).
Most of the scholars today (from Political Communication such as William Benoit, Stephen Coleman, etc. and Political Science like Alan Abramowitz, Andre Blais, etc.) agree that the effects of mediated politics in an electoral practice such as election debates are mixed, complex and multifaceted. The information that come from these broadcasted election debates, according to them, do not automatically lead to an informed voting (other factors include confidence, disposition, etc.).
The view that election debates are a neutral ground where real exchange of ideas really takes places is erroneous and misplaced. First of all, they are performative displays that can be predetermined and rehearsed. The debaters will definitely say what they think the people would want to hear from them. Media people can also make use of this event as a way to favor their preferred candidate or vilify their unwanted candidate.
Second, this is a candidate-centered event that tends to limit the discussion to issues, framings, interpretations that are alien to most people. The discussion between the candidates and the media actor, far from educating the people, tends to impose their views or understanding to the people.
Third, as a campaign event, campaigners tend to reduce this as a mere electoral fanfare where candidates are forced to simply comply to this imperative. In this situation, debaters or even media actors are not prepared for the debate or completely not aware of the things to be debated upon.
Voters should really care about election debates because there is something wrong with how we practice this age-old tradition in politics. Election debates, just like any debate, always need an audience for feedback or participation from the people — to applaud or approve/ to reject or rebuke a claim. It should become a dialogue between the voters, candidates and the media where we can also inform the candidates and media about our issues and sentiments.
 
Arjan P. Aguirre is an Instructor at the Department of Political Science, School of Social Sciences of the Ateneo de Manila University. He handles courses on Politics and Governance, History of Political Theory, Contemporary Political Theories, Electoral Reforms in the Philippines, and, Social Movements and Civil Society. He also works as Consultant for Legal Network for Truthful Elections (LENTE) and Simbahang Lingkod ng Bayan (SLB).
aaguirre@ateneo.edu

Gauging the SEC CG Codes against the ‘CG’ Provisions of the Corporation Code

1. Hierarchical placement of the SEC’s CG Codes vis-à-vis the Corporation Code and Securities Regulation Code

It would be helpful to discuss briefly the hierarchical value of the SEC Corporate Governance (CG) Codes in relation to the provisions of the Corporation Code (CC) and the Securities Regulation Code (SRC) that actually have within their frameworks systems of CG.
The Original CG Code, the Revised CG Code, and the CG Code for PLCs were promulgated by the SEC in the exercise of its rule-making power, otherwise known in Administrative Law, as its quasi-legislative power, and constitute therefore what is termed “subsidiary legislation.” Section 143 of the CC defines the rule-making power of the SEC, thus:

… The SEC shall have the power and authority to implement the provisions of this Code, and to promulgate rules and regulations reasonably necessary to enable it to perform its duties hereunder, particularly in the prevention of fraud and abuses on the part of the controlling stockholders, members, directors, trustees or officers.

Section 72.1 of the SRC provides for a more expanded authority for the SEC, thus:

… This Code shall be self-executory. To effect the provisions and purposes of this Code, the Commission may issue, amend, and rescind such rules and regulations and orders necessary or appropriate. … For purposes of its rules or regulations, the Commission may classify persons, securities, and other matters, within its jurisdiction, prescribe different requirements for different classes of persons, securities, or matters, and by rule or order, conditionally or unconditionally exempt any person, security, or transaction, or class or classes of persons, securities or transactions, from any or all provisions of this Code.

Failure on the part of the Commission to issue rules and regulations shall not in any manner affect the self-executory nature of this Code.

There is controversy of how much leeway and power can be exercised by the SEC on the basis of the language of Section 72.1 as not to offend well-established principles in Constitutional Law of non-delegation of legislative powers. For example, the power of the SEC under Section 72.1 “by rule or order, conditionally or unconditionally exempt any person, security, or transactions … from any or all provisions of this Code,” is tantamount to granting SEC the discretion to override the prohibitory or mandatory rules of the SRC, which essentially amounts to power to “unmake” the law.
The prevailing theory in our jurisdiction is that the exercise of the quasi-legislative power of any administrative agency like the SEC cannot amount to “law-making” (or unmaking for that matter), but can only cover “law-execution;” that administrative regulations are intended only to implement the law and to carry out the legislative policy, but that “[t]he discretion to determine what the law shall be is exclusively legislative and cannot be delegated.”
No matter what language may be used in statutory provisions defining SEC’s rule-making power, there can be no doubt that SEC has no power to violate constitutional precepts, particularly those found in the Bill of Rights. For example, the Bill of Rights provides for due process and prohibits undue classification: “No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied equal protection of the law.”
Therefore, although Section 72.1 of the SRC empowers the SEC to “classify persons, securities, and other matters,” for purpose of determining application or non-application of the provisions of the SRC, such provision cannot be used to unreasonably discriminate against a person or class of persons under the principle “that no person or class of persons shall be deprived of the same protection of the laws which is enjoyed by other persons or other classes in the same place and in like circumstances.”
In evaluating therefore the various provisions of the SEC CG Codes that seek to expand the powers of the Boards of Directors over their composition, the manner of election, the providing for additional qualifications and disqualifications, as well as the setting-up of competitive remunerations rates for directors, we shall be guided by the principle that such exercise of SEC’s quasi-legislative power would be illegal and void when they violate or are contrary to the terms of, or the policy behind, the specific statutory provisions, or they extend the coverage thereof beyond the original intention provided under the statutory provisions sought to be implemented.

2. Approaches of the SEC CG Codes in empowering the Boards of Directors of Publicly-Held Companies

a. Original and Revised CG Codes: Mandatory and Rules-Based in Character

When the SEC initiated in 2002 the CG reforms within the entire PHC Sector, the CG principles and best practices contained in the original CG Code were mandatory in character, and yet the only penalty clause referred to the non-submission of the manual of CG, thus:

VIII. Commitment to CG

Corporation shall promulgate and adopt its CG rules and principles in accordance with this Code. Said rules shall be in manual form and available as reference by the directors. It shall be submitted to the Commission, which shall evaluate the same and their compliance with this Code taking into account the size and nature of business. The said manual shall be available for inspection by any stockholder of the corporation at reasonable hours on business days.

IX. Administrative Sanction

Failure to adopt a manual of CG as specified therein shall subject a corporation, after due notice and hearing, to a penalty of P100,000.00.

The enforcement approach of the Original CG Code was to compel publicly-held companies to formally adopt a manual of CG for their particular corporate situation that would become part of the charter and thereby legally enforceable by the SEC and their stakeholders. The adoption and formal registration with the SEC of a manual for CG ensured that every PHC Board and Management reviewed the provisions thereof on the basis of their corporate setting and the unique demands of the industry in which they operate, and thereupon adopt a manual of CG that translates the CG principles and leading practices thereof to their particular corporate situation. The results would be that on the corporate front, each publicly-held company would then begin to “own” the terms of the governance principles and practice which it has on its own adopt under the terms of the manual. The manual itself, being submitted formally with the SEC, serves as a contractual commitment on the part of each publicly-held company, its Board of Directors and Management, to which it can be made accountable, and the failure to comply with its terms and conditions would always be construed against the company itself, for it is the very proponent of the terms thereof.
It was rather curious therefore that in 2009 when the Revised CG Code replaced the Original CG Code, it provided for a penalty clause for non-compliance or violations of the provisions thereof, thus:

Article 11: Administrative Sanctions

A fine of not more than Two Hundred Thousand Pesos (P200,000) shall, after due notice and hearing, be imposed for every year that a covered corporation violates the provisions of this Code, without prejudice to other sanctions that the Commission may be authorized to impose under the law; provided, however, that any violation of the Securities Regulation Code punishable by a specific penalty shall be assessed separately and shall not be covered by the abovementioned fine.

Fines and other penalties imposed by the SEC are serious matters, not only because of the pecuniary burdens placed on the company, but more importantly, under the CC, and in the Revised SEC Code itself, a violation may constitute as a ground for the disqualification of a director, or constitute as “proper cause,” for his removal by the requisite vote of stockholders.
Although there is no doubt that the failure to comply with the requirement of filing the manual is punishable under Article 11 of the Revised CG Code, it seems difficult to see how any other “violation” thereof may be properly punished by a fine of P200,000 “for every year that a covered corporation violates the provisions of this Code.”
Firstly, instead of the fine being imposed on every violation of the provisions of the Revised CG Code, the penalty that is imposable is limited to “P200,000 every year.” This would come to the dubious end that a covered corporation may commit various infractions under the Code, and only be liable to a maximum penalty of “P200,000 per year.”
Secondly, CG principles and best practices are primarily to be followed or practiced by the directors and key officers of a covered corporation, and the infraction would be a personal liability on their part. Yet the provisions of Article 11 of the Revised CG Code apply the penalty only to a violation by the “covered corporation,” and not the director or officer guilty of an offense under the Code.
Thirdly, although the non-filing of the manual on CG constitutes a situation that “a covered corporation violates the provisions of this Code,” simply because the original provisions of the original SEC Code specifically covered only such violation, it is not clear what other violations may be punishable under Article 11 of the Revised CG Code.
The then SEC Secretary, Atty. Gerard M. Lukban, was quoted as saying that “The previous code had provisions that use ‘may’. … Here some were changed to ‘shall’ so they are no longer just recommendatory.” That would mean that every provision that imposes an obligation with the use of the word “shall” would be a violation of the Revised CG Code that would be punishable with the fine under Article 11 thereof.
For example, under Art. 2(F), it is provided that “The Board should formulate the corporation’s vision, mission, strategic objectives, policies and procedures that shall guide its activities, including the means to effectively monitor Management’s performance.” Obviously, compliance with such duty may find its expression in the manual of CG submitted with the SEC. But if the manual duly submitted does not contain one or some of the items enumerated, or what are submitted are not effective or complete, does that constitute a violation of the Revised CG Code, triggering the imposition, after notice and hearing, of the P200,000 fine? Who is to judge what is “effective”?
Another example would Article 6(B) of the Revised CG Code which reads —

B) The Board should be transparent and fair in the conduct of the annual and special stockholders’ meetings of the corporation. The stockholders should be encouraged to personally attend such meetings. If they cannot attend, they should be apprised ahead of time of their right to appoint a proxy. Subject to the requirements of the bylaws, the exercise of that right shall not be unduly restricted and any doubt about the validity of a proxy should be resolved in the stockholder’s favor.

In a situation where there are issues in the implementation of by-law provisions on proxy, and the Board, upon advice of counsel, takes a position which is deemed restricted of the right of a stockholder, would that trigger the imposition of the penalty under Article 11 of the Code? Would the fine be imposable against the covered corporation or against the members of the Board? Who is to say what is “unduly restrictive”?
If we were to presume that the clear intention under Article 11 of the Revised CG Code is that the penalty imposed would be personally against the offending director or officer, it would have a chilling effect on the exercise of business judgment on the part of the Board of Directors, and would even discourage qualified professional directors to accept appointment to publicly-held companies simply because they are not certain exactly what action or inaction would constitute punishable offense under said provision.
In any event, what is important to consider is that the net effect of the changes introduced by the Revised CG Code was to make the provisions thereof mandatory to publicly-held companies, and non-compliance therewith may involve the imposition of administrative and penal sanctions. Such penalty provisions are often necessary to get any system going, but effective only when they are evenly enforced. However, the use of coercive measures in fact misses the whole point of what CG reform movement is all about — it is meant to show to businessmen that doing good is consistent with doing well in business. As they say, piety obtained out of fear is mere pretense.
The second important feature of both the Original and Revised CG Codes is that they both presented with the same format: they start each section by stating the CG principle in a certain area of concern, and then provide under each principle a set of duties and responsibilities or best practices that would enforce the principle highlighted. In short, both SEC CG Codes are “rules-based” codes, as contrasted from “principles-based” approach in CG reforms.
The main objection against rules-based codes, especially those that carry sanctions, is that they do not promote a “change of hearts and minds,” in the sense that they merely impel directors and officers to right away refer the matters to their legal counsel, and the organization ends up with “ticking the boxes,” to ensure compliance with the required or indicated measures of the code.
In addition, since a rules-based code cannot possibly anticipate all situations that may occur in the corporate setting, then pursuit of CG reforms ends up with the Board and Management looking for loopholes, or of pursuit a set of actions that are not clearly within the mandatory coverage of the rules or measures indicated in the code.
Finally, CG codes that are the product of the exercise by the supervising agency of its quasi-legislative powers tend to be challenged by covered companies as being unlawful when the area covered is clearly not within the powers of the agency to promulgate or tend to conflict with existing statutory provisions on the matter.
The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.
 
Cesar L. Villanueva is Chair of the MAP Corporate Governance Committee, the Founding Partner of the Villanueva Gabionza & Dy Law Offices, and the former Chair of the Governance Commission for GOCCs (GCG).
cvillanueva@vgslaw.com
map@map.org.ph
http://map.org.ph

UAAP: Rondina, Laure lead volleyball scoring

By Michael Angelo S. Murillo
Senior Reporter
THE first round of the eliminations of Season 81 University Athletic Association of the Philippines women’s volleyball came to an end on Sunday with the University of Santo Tomas Golden Tigresses figuring prominently in key statistics, particularly in the scoring department.
Led by the explosive duo of veteran player Sisi Rondina and top-class rookie Eya Laure, UST, currently at joint second place with a 5-2 record, is getting it done offensively which has considerably helped its cause in the ongoing season of the UAAP.
Rondina is the top scorer in the league after the first seven games, averaging 17.4 points per match while coming in second is Laure with 16.7 points.
The two are also the best spikers, with the rookie at number one with a 37.88% success percentage in her spikes while the graduating Rondina is at second at 34.26%.
Their efforts have made the Tigresses the best spiking team in UAAP Season 81 with a success percentage of 31.38%.
Interestingly, UST had another steady double-digit scorer in Filipino-Italian Milena Alessandrini before she saw her year cut with a season-ending knee injury just four games into the tournament. At the time of her injury, Alessandrini, last year’s rookie of the year, was averaging 13 points a game.
Laure said key to their success to date is just enjoying the game as a team and trusting the ability of one another.
“We’re just playing with a lot of heart and enjoying the game. We hope to continue doing that in the second round,” said Laure following their straight-sets win over the University of the East Lady Warriors on Sunday.
Meanwhile, third in individual scoring for the season is University of the Philippines wing spiker Tots Carlos at 15.7 points followed by Kat Tolentino (15.3 points) of the league-leading Ateneo Lady Eagles at number four.
Rounding out the top five is rookie Princess Robles of the National University Lady Bulldogs with 14.4 points.
At sixth place is Isa Molde of UP with 14.3 points, followed by Judith Abil (14.1) of UE, Ivy Lacsina (13.7) of NU, Lycha Ebon (13.7) of the Far Eastern University Lady Tamaraws, and Cel Domingo (12.9) also of FEU.
In blocking, it is Ateneo’s Maddie Madayag who is tops, followed by FEU’s Domingo, Ateneo’s Tolentino, Rosielyn Doria of NU and Seth Rodriguez of UE.
Robles is best in serves, punctuated by a league-best 18 aces, with Kyle Negrito of FEU at second followed by Michelle Cobb and Aduke Ogunsanya of the De La Salle Lady Spikers, and Doria of NU.
Best in digs is Adamson Lady Falcons libero Tonnie Rose Ponce with a 7.2 average per set, followed by Ria Duremdes (6.9) of FEU, Kath Arado (6.4) of UE, Jennifer Nierva (5.2) of NU and Carmel June Saga (4.3) of La Salle.
In setting it is Cobb of La Salle who leads with a 6.3 average per set with Ayel Estranero of UP second with a 6.2 average, followed by Laizah Bendong (6.2) of UE, Deanna Wong of Ateneo (5.3) and Negrito (5.1) of FEU.
UE’s Arado leads in receives with a 59% efficiency rate, followed by Nierva (51.4%) of NU, Adamson’s Ponce (47.3%), FEU’s Duremdes (46.8%) and La Salle’s Des Cheng (41%).

McIlroy wins Players Championship by one stroke in Florida

PONTE VEDRA, FLORIDA — Rory McIlroy celebrated St. Patrick’s Day in style by becoming the first player from Northern Ireland to win the Players Championship, emerging as the last man standing to beat Jim Furyk by one stroke in Ponte Vedra, Florida on Sunday.
On a day when 15 players at one stage were within two shots of the lead, McIlroy eventually emerged from the pack, overcoming an early double-bogey by displaying enough maturity to hang tough before moving in for the proverbial kill.
McIlroy carded two-under-par 70 at the famous TPC Sawgrass course in Ponte Vedra Beach to win a championship that was first held in 1974, when it was won by Jack Nicklaus.
McIlroy finished at 16-under 272 to edge American Furyk, who with a gimme birdie at the final hole threatened to become the event’s oldest winner at the age of 48.
“Sawgrass and I didn’t have the greatest relationship starting off,” McIlroy told reporters, referring to missed cuts in his first three appearances from 2009-11.
“It’s a massive win on a course (where) I’ve had mixed results. I had to show a lot of character out there. Any time I looked at the leader board I was pleasantly surprised I hadn’t fallen two or three shots behind.
“That gave me a little bit of encouragement to keep going and play a great back nine. I am just thankful that it was my turn this week.”
With Furyk already in the clubhouse, the 29-year-old McIlroy knew what he had to do as he played the final three holes.
After a birdie at the par-four 15th, he used his power to reach the par-five 16th in two shots and a two-putt birdie gave him the lead.
McIlroy then safely negotiated the water-lined final two holes with tap-in pars to clinch the most prestigious tournament outside the four majors.
Furyk shot 67 to finish alone on 15-under.
FURYK DISAPPOINTED
“There’s a little disappointment, thinking maybe I played well enough to win,” said the American. “Rory obviously felt differently.”
It was Furyk’s 31st runner-up finish on the PGA Tour, the same number as Tiger Woods who has also won 80 times compared to his compatriot’s 17.
Englishman Eddie Pepperell (66) and Venezuelan Jhonattan Vegas (66) finished two strokes behind McIlroy in a tie for third.
Pepperrell and Vegas sank monster birdies at the par-three 17th, Pepperell sinking a rollercoaster 50-footer before Vegas one-upped him with a 70-footer.
Overnight leader Jon Rahm floundered, the Spaniard making three bogeys in the first four holes and compounding his misery by dunking his tee shot into the water at the par-three 17th.
He shot 76 and finished equal 12th on 11-under.
McIlroy’s win came after close calls at all five of his previous starts this year.
He will head to the Masters next month brimming with confidence, needing a victory at Augusta National to complete the grand slam of all four modern majors.
“I’m just really proud of myself the way I played the last few holes,” he said.
“(I was thinking) why not me? This is my tournament and I’ve got to finish it off.
“I kept telling myself on the way to the 17th tee, just make three more good swings, that’s all you need to do and this thing is yours.
“To step up and make those three good swings, it’s very satisfying knowing that it’s in there when it needs to be.” — Reuters

Loman, others did well in introducing themselves to local fans — analyst

WHEN BRAVE Combat Federation held its first-ever event in Manila on Friday, an underlying narrative was introducing Filipino fighters under its wing to be known in their home turf. It was something that was successfully achieved, one local fight analyst said, after the hometown bets performed very well on fight night.
Played under “Brave 22: Storm of Warriors” at the Mall of Asia Arena on March 15, the Filipino fighters competing in the Bahrain-based promotion were able to highlight what they are capable of with quality performances, led by bantamweight champion Stephen “The Sniper” Loman, who retained his title with an impressive fourth-round technical knockout victory in the headlining fight.
Seeing action in the Philippines for the first time with Brave, Mr. Loman (12-2) of Team Lakay of Baguio City did not disappoint the hometown fans as he treated them to an exciting match that culminated in him stopping challenger Elias “Smile” Boudegzdame of Algeria in devastating fashion in the fourth round.
It was a performance that was worth noting, said fight analyst Nissi Icasiano, especially in relation to what Mr. Loman and Brave wanted to accomplish.
“Indeed, it was a showcase to introduce our other Filipino mixed martial artists to the rest of the world, especially when it comes to Team Lakay because the team is built on their big names such as Eduard Folayang, Kevin Belingon and so on. The spotlight was shined upon Mark Sangiao’s new batch of Team Lakay, including Stephen Loman who did not disappoint with his performance against Elias Boudegzdame,” Mr. Icasiano shared with BusinessWorld.
Apart from Mr. Loman, other Team Lakay winners at Storm of Warriors were bantamweights Jeremy Pacatiw and Harold Banario and flyweight Jomar Pa-ac.
Other Filipino winners were featherweight Rolando Dy and Jayson Margallo.
PERFECT GAME PLAN
Asked for his thoughts on the showing of Mr. Loman, the fight analyst said the Filipino had a perfect game plan and gave credit to how he played to his strengths to emerge victorious.
“Stephen Loman had the perfect game plan against Elias Boudegzdame. He avoided rolling with his challenger on the mat as much as possible and dictated the pace of the fight in the stand-up. His key weapons in the fight were the left cross and push kicks to the body, which paid dividends later on in the bout,” said Mr. Icasiano.
“It was the icing on the cake when he got the stoppage with just one second remaining in the fourth round to successfully defend his bantamweight crown,” he added.
Moving forward, Mr. Icasiano said the ceiling for Mr. Loman to soar in Brave is still high and he expects the fighter, with help from his team, to be capable in taking on all comers that would stand in his way.
“Brave is a young company. I believe they are still in the process of filling up every division they have, including the bantamweight division. They have yet to make it a stacked weight class, which is completely understandable. So far, Loman has defeated the likes of Frans Mlambo, Felipe Efrain, and now Elias Boudegzdame. I won’t be surprised if the promotion brings in a new guy from the free agent market who has good credentials to challenge Loman for the title,” Mr. Icasiano said.
Brave said that “Brave 22” was the first of many it plans to stage in the Philippines, seeing the country as a market it has to be in.
In the country, Brave tied up with ESPN5 as its official broadcast partner. — Michael Angelo S. Murillo

Sixers down Bucks to clinch playoff spot

LOS ANGELES — Joel Embiid scored 40 points and grabbed 15 rebounds to lead the visiting Philadelphia 76ers past the Milwaukee Bucks 130-125 on Sunday.
It was Embiid’s 52nd double-double and the 25th time he has scored at least 30 points and swept 10 rebounds in a game. He scored 18 points alone in the fourth quarter.
Jimmy Butler had 27 and JJ Redick 19 for the Sixers, who won their fourth in a row and officially clinched a playoff spot.
Giannis Antetokounmpo was terrific for the Bucks with a career-high 52 points to go along with 16 rebounds and seven assists. Khris Middleton added 19 points.
The Bucks played without guard Malcolm Brogdon, who will be sidelined for at least six weeks with a plantar fascia tear in his right foot.
The Sixers built a 62-53 lead at halftime thanks in large part to Embiid’s double-double of 16 points and 10 rebounds.
Antetokounmpo paced the Bucks with 17 points and seven rebounds. Middleton struggled offensively and missed eight of his 10 shots.
Antetokounmpo drove to the basket, nudged Boban Marjanovic out of the way and threw down a nasty dunk to get the Bucks within 81-74 with 5:04 left in the third quarter.
Antetokounmpo appeared to tweak his ankle with 1:40 remaining in the third but remained in the game to shoot the two free throws as the fans chanted “MVP!”
76ers still led 89-82 after 3 quarters.
Philadelphia came out aggressive in the fourth and extended its advantage to 98-86 with 9:34 left when Mike Scott drained a 3-pointer.
After Antetokounmpo reached the basket, got fouled and made one of two shots, the Bucks trailed 107-99 with 4:49 to go.
Butler responded in a big way with a 3-pointer to put the Sixers back ahead by 11.
Butler knocked down two more shots to stay hot and the Philadelphia lead was 116-103 with 3:02 remaining.
Leading 120-116, Embiid hit a trey from the top of the key for a seven-point lead with 34.9 seconds left.
Embiid made two free throws in the waning seconds to help seal the win. — Reuters

Bacoor Strikers’ center undergoes face, nose surgery

KING Destacamento, the 22-year-old homegrown center of the Bacoor Strikers, successfully underwent surgery on his fractured face and nose he received from a wayward elbow of Denmar Mahaling of the General Santos Warriors.
At around 8 p.m. on Sunday, the promising 6-foot-4 frontliner who became a revelation in the Strikers’ two-game sweep of their southern swing MPBL playoffs series against the Warriors, underwent successful operation.
Team executive Dennis Abella wrote to BusinessWorld that they are considering to provide Destacamento a protective mask if ever the young player decides to return to action.
“Most probably naka-mask siya,” Abella wrote in an online interview.
Abella added that he was told by the doctor that Destacamento’s return depends on the healing process.
“It’s a good thing our next series will be in two weeks time. Hopefully, Destacamento has recovered a bit and be fit enough to play,” added Abella. “But the doctor’s recommendation is really a month’s time.”
Chaye Cabal-Revilla, wife of Bacoor Strikers co-owner Congressman Strike Revilla, was the one who facilitated Destacamento’s hospitalization at Asian Hospital in Alabang.
“We sought second opinion as King complained of headache and difficulty in breathing,” said Ms. Revilla. “He is advised to rest for a month, but the good thing about King is his youth and the doctor said his recovery might be even faster.”
Destacamento was trying out his luck for a spot with the Laguna Heroes and nearly gave up his hopes continuing his basketball career until he was able to crack the line up of Bacoor where he was inserted as a homegrown player.
He had shown his potential the past few games, including the series clinching victory over Gen San where he ended up with 12 points, six rebounds and six blocks before he was taken out of the game after receiving an elbow from Mahaling while the latter was making a short stab.
Mahaling decided to embrace the role of an enforcer when he was seen kicking a fallen Mark Montuano during a loose ball scramble before Roger Malig-on came to the aid of his teammate and used his body as a shield.
Montuano, according to Abella, will also undergo CT scan as the player complained of headache. — Rey Joble

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