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Argentina curbs banks’ access to pesos amid mart turmoil

BUENOS AIRES — Argentina’s battered bonds and currency were driven still lower on Friday amid downgrades by three credit rating agencies and a new measure the central bank said was designed to “avoid any lack of money” and safeguard the liquidity of the country’s financial system.

Some private economists said the policy, which could limit the availability of hard peso currency to financial institutions, looked like a return to capital controls in Latin America’s third-largest economy.

The central bank has burned through nearly $1 billion in reserves since Wednesday alone, in an effort to prop up the rickety peso.

“Financial entities must get prior authorization from the central bank to distribute their earnings,” the central bank said in a statement.

In a follow-up statement, the bank said the measure was aimed at ensuring the liquidity of the financial system, so that depositors can withdraw money when needed.

“In times of greater uncertainty, we seek to increase the liquidity of the system to avoid any lack of money,” it said.

Central bank spokesmen were not immediately available for further comment on the measure.

“It can be seen as a capital control because if you cannot take capital out of the country, that would be a measure of restriction,” said Jose Dapena, director of the finance department for University of CEMA in Buenos Aires, referring to the new central bank policy.

US-traded shares of financial services company Grupo Supervielle extended steep losses late in the New York session to fall 8.6% while Grupo Financiero Galicia closed 8.9% lower. Banco Macro lost 6.3%.

MARKET TUMULT
The latest round of market tumult to plague Argentina started with the Aug. 11 primary election, in which business-friendly President Mauricio Macri got soundly thumped by center-left Peronist challenger Alberto Fernandez.

The general election, with Fernandez now the clear front-runner, is in late October.

“The central bank is not allowing them to distribute results, that means they cannot use their pesos. This is not a restriction of access to the FX market, but on the availability of pesos,” a source familiar with the central bank plan told Reuters.

“The central bank wants banks to be very well capitalized right now,” added the source, who requested anonymity because he was not authorized to speak to the media.

Standard & Poor’s triggered automatic selling of Argentine bonds at big pension funds Thursday night when it slashed the country’s long-term rating, saying a default was triggered by a government plan announced on Wednesday to extend the maturities of many bonds.

That resulted in an overnight ‘D’ rating on the short-term debt and a “selective default” for the long-term. S&P on Friday lifted the long-term rating to ‘CCC-‘ and the short-term to ‘C’.

Credit rating agency Fitch followed after market hours on Friday with a downgrade of Argentine debt to “Selective Default.” Then came a downgrade from Moody’s, citing the new central bank measure and heightened political uncertainty associated with a likely Fernandez victory in October.

Risk spreads blew out to levels not seen since 2005 while the local peso currency extended its year-to-date swoon to 36%.

Argentina’s “Century Bond” maturing in 2117 briefly traded at a record low below 38 cents on the dollar, according to MarketAxess, showing the kind of write-down markets are now bracing for.

The peso closed 2.72% weaker at 59.52 per dollar, extending losses so far this year to about 36%. Over the counter sovereign bonds fell an average 5.5% during the day, traders said.

Argentine spreads measuring risk of default versus safe-haven US Treasury paper blew out 261 basis points to 2,533 on Friday, their highest since 2005, according to JP Morgan’s Emerging Markets Bond Index Plus index.

CENTRAL BANK RESERVES
The central bank sold a total $387 million in reserves in four auctions Friday, aimed at stabilizing the peso. A fifth auction was abandoned due to lack of buyers, traders said.

It spent $367 million in interventions on Wednesday and $223 million on Thursday in its effort to defend the peso.

Investors in Argentina fear a return of the left to power could herald a new era of heavy government intervention in Latin America’s third-largest economy. They also fear the plan to extend maturities will do little more than buy time and fail to prevent a more serious financial crisis further down the line.

“What triggered this week’s mess was that local investors lost confidence in the government,” said Roger Horn, executive director and senior emerging market strategist at SMBC Nikko Securities America in New York.

“People are selling what they can because they want to decrease exposure to Argentina. They’ve already taken losses, they don’t see a way forward that is going to restore them, so they’re cutting exposure,” Horn said.

“It’s a classic capitulation.” — Reuters

‘Make It Great, Make It MG’ promo offers all-in low down payment or cash discounts

FOR MANY new car buyers, the main question during the process of selecting a car is: “Am I buying the right one?” Tied into this would be other queries about after-sales support, customer service, product quality, and a price tag that is within budget.

In short, customers want a great car that quells all their pre-purchase concerns.

That need for a great all-around experience with a car purchase is what fuels MG Philippines’ latest sales promo, “Make it Great, Make it MG.” From now until the end of September, you can avail of great deals on all MG cars and take advantage of the numerous perks associated with owning your very own MG, exclusively from MG Philippines.

For as low as P18,000, anyone can be the proud owner of a brand-new British-bred MG, whose iconic octagonal badge and modern styling are sure to turn heads. The “Make it Great, Make it MG” promo also extends to two new models, namely the top-spec RX5 Alpha compact SUV, with a panoramic sunroof, power adjustable driver’s seat, stylish LED headlights, and front passenger side air bags; and the MG ZS AT Style Plus, which features a new 10-inch LCD touchscreen infotainment system with both Android Auto and Apple Carplay.

Every MG purchased from MG Philippines-TCCCI comes with a 5-year or 100,000km warranty (whichever comes first), and 1-year free periodic maintenance service (PMS) to set your mind at ease. And not only that: MG owners also gain access to the My MG mobile app, which allows them to easily schedule vehicle servicing from their smartphones, a Mobile Garage service caravan that provides MG owners the convenience of having technical issues sorted out at the convenience of their homes, and MG HERO Services, which provides 24/7 roadside support through the MG Philippines hotline (+632 328 4664).

Selecting your new car is not always a straightforward path. Many questions surround this purchase, as it is an emotional one as well as one that requires a clear head. MG Philippines wants to make that decision easier for you by offering quality products that are impeccably styled, are rich in heritage, have modern driver and safety features, all for an attainable price. Now that’s sounds like a great decision.

Meet MG at any of its 11 dealerships: MG BF Parañaque, MG EDSA Centris, MG Batangas, MG Carmona, MG Dasmariñas, MG Lipa, MG Sta. Rosa, MG Cebu Mandaue, MG Davao, MG Cabanatuan (sales office), and MG Iloilo (sales office.) Seven more MG dealerships that are soon to rise include MG Alabang, MG Commonwealth, MG Quezon Avenue, MG Pampanga, MG Cabanatuan, MG Iloilo, and MG Tacloban.

Visit www.mgmotor.com.ph for more information or to book a test drive, and follow MG Philippines on social media: OfficialMGPhilippines (Facebook) and @mg_philippines (Instagram and Twitter).

The MG badge is synonymous with freedom, dynamism, innovation, individuality, and attainability. It represents a new wave of vehicles that allows discerning drivers and passengers to enjoy a distinctive automotive experience at very competitive price points. MG is a traditional UK brand established in 1924. It is an icon of British automotive history with a long-respected sporting heritage. Today, MG is a truly global brand, with financial backing of SAIC Motor: one of the world’s largest auto manufacturers and exporters, and a high-ranking Fortune 500 company. For MG, the present marks the most exciting chapter in what is an already very colorful brand story.

MG Philippines — The Covenant Car Company Incorporated — is the exclusive importer and distributor of MG automobiles and parts in the Philippines. MG Philippines is located at the G/F, ALCO Bldg., 391 Sen. Gil Puyat Avenue, Makati City.

How PSEi member stocks performed — August 30, 2019

Here’s a quick glance at how PSEi stocks fared on Friday, August 30, 2019.

 

NAIA rehabilitation project award expected by early 2020

THE Ninoy Aquino International Airport (NAIA) rehabilitation project could be awarded to its private proponents by the first quarter next year at the latest.

Transportation Secretary Arthur P. Tugade told reporters last week the government is targeting to finish its review process for the P102-billion proposal, including the Swiss challenge, in the next six months.

Gusto ko end of the year hanggang sa first quarter, OK pa rin naman ’yan, na-award na [I want to award the project by the end of the year until first quarter next year. That timeline is still OK],” he said.

The consortium proposing to rehabilitate NAIA is composed of seven of the country’s top conglomerates: Aboitiz InfraCapital, Inc.; AC Infrastructure Holdings Corp.; Alliance Global Group, Inc.; Asia’s Emerging Dragon Corp.; Filinvest Development Corp.; JG Summit Holdings, Inc.; and Metro Pacific Investments Corp.

On Aug. 1, the Department of Transportation (DoTr) gave the consortium’s proposal to the National Economic and Development Authority (NEDA) for evaluation by the Investment Coordination Committee (ICC). Mr. Tugade said the NAIA proposal is on the agenda of the NEDA-ICC in this month’s meeting.

If the project successfully hurdles NEDA-ICC, it will be forwarded to the NEDA Board for the next round of review. The NEDA Board is composed of selected cabinet members, including Mr. Tugade, and chaired by President Rodrigo R. Duterte.

Should the NEDA Board approve the project, it will then go through a Swiss challenge, in which third-party companies will be invited to submit counterproposals, which the original proponent has the option to match. If the consortium wins the Swiss challenge, it may automatically be awarded the project.

The consortium was given original proponent status by the DoTr in September for its NAIA unsolicited proposal. However, negotiations over concession terms prolonged the project’s award.

Earlier this year, Mr. Tugade called for all private entities with unsolicited proposals for airport projects to resubmit concession terms modeled on the agreement for the Clark International Airport. This decision was made to hasten the award of the projects, as the Clark concession agreement had been approved by NEDA.

Mr. Tugade said the NAIA consortium successfully complied, but added he cannot speak on behalf of NEDA to say the project’s approval is guaranteed. “Naniniwala naman ako na ’yung mga departamento ngayon nagtutulungan [But I believe all departments help each other],” he noted.

The proposal of the consortium is to rehabilitate and expand NAIA over a 15-year period, increasing its capacity from the current 30.5 million annual passengers to 47 million in two years and 65 million in four years. It initially wanted to start the project late this year. — Denise A. Valdez

Distillers complain of unfair taxation compared to wine

DISTILLERS said the uneven taxation of alcoholic beverages puts them at a disadvantage to the wine industry and called for a “level playing field” as the next round of tax reforms make their way through Congress.

In a statement over the weekend, the Distilled Spirits Association of the Philippines (DSAP) said it “supports” the proposal to increase the excise tax on alcoholic products but is seeking fair treatment relative to other segments of the industry.

“We’re currently applying a progressive tax structure for distilled spirits. There’s no reason it can’t be done across categories in the alcohol sector/industry. We just need to look for the right balance,” DSAP President Olivia Limpe-Aw was quoted as saying.

House Bill 1026, written by Albay-2nd district Rep. Jose Ma. Clemente S. Salceda hurdled third and final reading on Aug. 20.

Meanwhile, Senate Bill No. 383, incorporating drafts put forward by the Department of Finance (DoF) and the Department of Health (DoH), has been filed by Senator Emmanuel D. Pacquiao.

Ms. Limpe-Aw, who is also the president and CEO of Destileria Limtuaco, Inc., said the DoF-DoH proposal “unfairly penalizes low- income consumers.”

She said wines will have an excise tax of P40 per liter while a bottle of gin sold for P94 will be taxed P32.66.

“Let’s compare: Ginebra San Miguel Gin will be sold at P94 a bottle under this proposed tax, so the tax is P32.66 or a tax burden of 34.74%. The most expensive wine — P600,000 — the tax is only P30/bottle, or a tax burden of 0.005%,” Ms. Limpe-Aw said.

Under the Senate bill, distilled spirits will have 25% ad valorem tax on the net retail price and another P40 specific tax per liter, which will gradually increase by P5 annually up to P55 in 2023, and then further rise by 10% yearly thereafter.

Meanwhile, the excise tax on wine will increase to P40 per liter next year for those containing 14% alcohol by volume and P80 for more than 14%, with an incremental annual increase of 10% starting 2021. There is no ad valorem tax in the bill.

She also added that even high-end distilled brands will have to pay higher excise tax when compared to wine.

“Let’s use P20,000/750 ml bottle as our base price to compare taxes: the tax per bottle for this distilled spirit is P2,996.91. That’s still more than 100 times compared to the P30 tax on a P20,000/bottle wine,” she said.

On the other hand, the wine industry said at a Senate hearing last week that the bill should not impose ad valorem tax on wine as it is the “healthier alternative.”

The bill also proposes a higher excise tax on sparkling wines and fermented liquor.

The excise tax on sparkling wine will include a P335 specific tax on bottles worth P500 or less and P937 for those worth more than P500. Next year, the taxes will be P328.99 and P921.15, respectively.

Meanwhile, fermented liquor excise taxes will rise from P40 next year to P45 in 2021, P50 in 2022 and P55 in 2023. Another 10% increase will be imposed every year thereafter. — Beatrice M. Laforga

House bill seeks incentives for OFW-owned businesses

A LEGISLATOR has filed a bill seeking incentives for Overseas Filipino Workers (OFWs) setting up businesses in the Philippines.

Makati City 2nd district Rep. Luis N. Campos Jr. filed House Bill 1440 which if passed will become the Overseas Filipino Workers Business Incentive Act of 2019.

It seeks to encourage OFWs “to invest in the establishment of enterprises towards the creation of decent work, production, and trade within the country.”

The measure will include a package of measures offering fiscal incentives, access to capital, training, marketing assistance and information, ease of doing business, and provide the institutional support necessary for overseas Filipino investors to contribute to the economy and to nation building.”

The incentives include a two-year exemption from all national and local taxes.

“The exemption shall be extended to six years if the OFW business is a pioneering business in the Philippines or if it will introduce and utilize state-of-the-art technology in its operations,” the bill read.

It also exempts from tariffs and duties any imported equipment worth less than P5 million used exclusively for the business. The exemption applies to initial exclusive use in their operations shall be exempt from customs tariff and duties for the first two years of the existence of the business.

This exemption for initial equipment imports will be withdrawn after two years, and the equipment may not be resold for five years.

HB 1440 also requires that the Overseas Workers Welfare Administration (OWWA) set aside funding for a credit facility for start-up OFW businesses, with the credit facility to be managed by the Land Bank of the Philippines (LANDBANK) and the Development Bank of the Philippines (DBP).

Local government units will also be required to organize “express lanes” at their Business Permit and Licensing Offices for OFW businesses.

The measure assigns the OFW Business Council — composed of secretaries from the Department of Labor and Employment, Department of Trade and Industry, National Economic Development Authority, Department of Finance, Department of Interior and Local Government, and OFW representatives to draft the rules for accrediting OFW investors.

Mr. Campos said remittances can be tapped for entrepreneurial activity.

“There is an urgent need to start harnessing the remittances and savings into more productive endeavors, primarily through entrepreneurial or business activities. Business activities will augment the income of the OFW households and will generate much-needed local employment,” Mr. Campos said in his explanatory note. — Vince Angelo C. Ferreras

Six provinces agree to procure palay direct from farmers

AGRICULTURE Secretary William D. Dar said that six provinces have committed to buy rice from farmers during the harvest this month, including three provinces in rice country.

“We have requested our President to invite the top 30 rice-producing provinces… to participate doon sa pagbibili ng palay (in the purchasing of palay),” he said in a chance interview after a forum on Saturday.

Mas lalo na itong (Most especially this) harvest starting September hanggang (up to) October ay nakiki-usap tayo at sana (we are asking that) they open up their hearts and minds at this point in time ay kailangan natin ng tulong nila (we need their help),” he said.

He noted that Isabela, which has allotted more than P400 million for procurement, while Nueva Ecija, and Ilocos Norte have both allotted P200 million for the rice value chain. Other provinces that have made commitments are Ilocos Sur, La Union, and Pangasinan.

They will be directly buying palay, or unmilled rice, from the farmers, then dry, mill, and sell to cities in Metro Manila, like Makati City, Quezon City, Mandaluyong City, and San Juan City. The Department of Agriculture (DA) regional offices will be monitoring the activity.

Procurement by local governments is intended to assist the National Food Authority (NFA) in procuring palay, or unmilled rice, the form in which farmers sell their grain. The NFA is currently holding 4.5 million bags of imported rice, and 6.4 million bags of palay in its warehouses, limiting its capacity to carry out its domestic procurement mandate.

Nakausap na natin yung anim na (We have spoken with the six) provincial governments… at handa silang tumulong sa problema na ito (and they are ready to help in this problem). If all 30 provincial governments will buy that will be a big help to the rice farmers,” he added.

Mr. Dar said that other provinces who cannot finance their procurement can borrow from the Landbank of the Philippines (LANDBANK) or the Development Bank of the Philippines (DBP).

“Other provinces that are not financially sound can borrow money to buy needed dryers, and millers, from LANDBANK and DBP to engage in palay procurement, drying, milling and marketing operations,” he said in a statement.

Local government units (LGUs) can also pledge their internal revenue allotments as security for loans. — Vincent Mariel P. Galang

DoST touts food safety program as easing permit process

THE Department of Science and Technology (DoST) is pushing the benefits of its food safety program, which it said will help companies get on the permit and registration fast track.

In a briefing Friday, Science and Technology Secretary Fortunato T. de la Peña said that the DoST set up a Food Safety Consultancy Program to help food establishments and vendors learn about food safety policies and regulations.

While the DoST issues no permits to any businesses, he said the program can help certify firms seeking to obtain their license to operate from the Food and Drug Administration (FDA) and sanitary permits from their municipalities.

“We have been doing this (for a while) but we want to let this be known more,” he said in an interview with.

The program is a “framework of interventions” for the food industry, especially micro, small and medium enterprises (MSMEs), can use in order to ensure their compliance.

Mr. De la Peña noted that there are two components of the program: Food Safety Assessment and Food Safety Training.

“The first program component is the food safety assessment for our MSMEs which includes assistance on crop layout, food safety audit, training on good manufacturing practices (GMP)… and HACCP (Hazard and Critical Control Point Analysis System) labeling and packaging… The second component is the food safety training,” Mr. De la Peña said.

“We have helped a lot through this program,” Mr. De la Peña added.

Besides easier approvals of licenses and permits, establishments that undergo the program also experience reduced waste from production and increased productivity.

Last year, the DoST released its Unified Food Safety Training modules to its regional offices. The modules discussed basic food hygiene, food safety hazards, and GMP. — Gillian M. Cortez

DICT common-tower rules due by end-2019

THE rules governing the shared use of telecommunications towers will be issued within the year with a draft expected “in a few weeks,” the Department of Information and Communications Technology (DICT).

Secretary Gregorio B. Honasan II said the preliminary version of the common tower policy can be expected in September or October.

“We’re coming up with another meeting, after which we’ll have the first draft of the common tower policy,” he told BusinessWorld last week. “Within the year, sigurado yan [that’s for sure],” he added, referring to the timeline to complete the final rules.

The DICT started work on a new common tower policy last year after opposition to an earlier draft presented by Presidential Adviser Ramon P. Jacinto. This version limited the number of companies that may build towers, and barred network operators from building their own, which stakeholders contested.

In a stakeholders’ meeting last month, the department presented initial ideas that it wants to include in the policy, such as a requirement that towers be built within a certain from one another.

Other proposals are to require telcos to submit an annual tower rollout plan to tower companies, and subsidies for towers that will be built in missionary areas. Government support is also guaranteed only for towers that will be built by independent tower companies to facilitate infrastructure sharing.

While work on the policy is ongoing, the DICT is pushing for an accelerated tower rollout on the 2,500 sites it identified earlier this year.

“We will have the groundbreaking I hope before the end of September, for the first common tower in the Philippines,” DICT Undersecretary Eliseo M. Rio, Jr. said separately.

The chosen site has yet to be determined, but he said this is part of the department’s Accelerated Roll-out of Common Towers plan which the DICT presented in May.

Ang target namin for this year is about 400 [We target to have about 400 towers within the year],” Mr. Rio added.

Under the accelerated rollout plan, the DICT listed 2,500 sites on DICT-owned and other government-owned properties. The lease on sites owned by the DICT is free.

Aside from building new common towers, Mr. Rio said the DICT also owns around 180 towers, which it is offering to tower companies to convert into shareable infrastructure. — Denise A. Valdez

Renewable energy plan under review as share of clean sources declines

RENEWABLE energy’s dwindling share in the country’s mix of power sources has prompted the government to review its program that was meant to help ensure energy security and improve access to clean energy, an official said.

Mylene C. Capongcol, director of the Department of Energy’s (DoE) Renewable Energy Management Bureau (REMB), said the National Renewable Energy Program (NREP), drafted in 2011, is up for review.

“(NREP) covers the planning horizon of 2011-2030. The target is to triple the capacity by 2030. At the time it was issued, 5,000 megawatts (MW) ang ating existing RE (renewable energy) capacity. The target is by end of 2030, dapat nasa (it must reach) 15,000 MW,” she told reporters.

However, she said that based on the DoE’s assessment, only around 7,000 MW had been added from 2011 to 2017.

Malayo pa ang hahabulin (Catching up will take time),” she added.

Separately, the National Renewable Energy Board (NREB), a panel composed of members from the public and private sector, is looking at a longer time-frame for the new program.

“We’re targeting updated program by October,” Monalisa C. Dimalanta, chairman of the NREB board, told reporters.

She said what the board is doing is to re-evaluate the program to determine why the country failed to meet the target, and what additional work needs to be done.

“For the new NREP, we’re looking at the timeframe 2020-2040,” she said.

She said the program had been easy to implement for some technologies like solar energy, which requires a short gestation period before operation. She said solar projects have exceeded the installation target by more than three times.

“But for some technologies like geothermal, which is what we want to push further because we are rich in geothermal, there’s a long gestation period. We need to account for that gestation period as well,” she said.

Ms. Dimalanta said NREB was working closely with geothermal energy companies to understand the reason behind the slow uptake that led to the Philippines being overtaken by Indonesia as the world’s largest producer of the resource.

“That’s quite a bit disheartening, but that’s also challenging. It gives us the challenge on how we can go back to harnessing geothermal,” she said.

“Key challenge is really the exploration phase, the pre-development phase. It requires significant investment during [pre-development] period when you’re just drilling and looking for the resource, and you’re not earning anything,” she added.

Ms. Dimalanta has ruled out a feed-in tariff scheme that guarantees a fixed rate for RE output that is subsidized by consumers. The program has been previously offered for solar, wind, biomass, run-of-river projects.

She also noted that the share of renewables to the country’s energy capacity mix had dwindled.

“In the supply mix, [the target is] more than 30%, now [it’s] 23% as of last year,” she said. “Instead of increasing the share of RE in the supply mix, we’re reducing.”

She said the decrease can be explained by a bigger rise in energy capacity using non-RE technologies.

“The pie got bigger with the share of non-RE getting bigger. For RE, the increase was not proportional,” she said. — Victor V. Saulon

Redefining corporate rules

(Second of two parts)

In the first part of this article, we covered Republic Act 112321 or the Revised Corporation Code of the Philippines (RCC), which redefined the corporate rules to promote ease and flexibility in doing business, as well as take full advantage of technological innovation.

We also discussed the first two key provisions in the RCC, which make it relevant for the changing global business landscape. These were: (1) the relaxation of the minimum number of incorporators, and the residency requirement for incorporators and directors; and (2) the introduction of the One-Person Corporation (OPC). We will now continue with the other provisions in the RCC which are considered by many as significant changes highly beneficial to the Philippine business community.

ALLOWING PERPETUAL EXISTENCE AND REVIVAL OF CORPORATIONS
Under the old rules, the maximum corporate term is 50 years, unless extended for a maximum of 50 years (or sooner dissolved). The RCC, however, now allows companies to exist in perpetuity, unless majority of the stockholders elect to retain its specific term pursuant to the Articles of Incorporation (AoI).

Corporations with expired terms may also be revived under the RCC. The revival applies to their corporate existence, all their rights and privileges under the certificate of incorporation, and their existing duties and liabilities prior to the revival.

Certain types of companies, such as banks, pre-need and insurance, pawnshops and other financial intermediaries need favorable recommendation from the appropriate government agency for the revival.

While the RCC does not provide any exception to the revival of a corporation whose corporate life has expired, it appears that the SEC proposes to exclude the benefit of revival to corporations whose registration were revoked for reasons or causes other than the non-filing of reports.

Based on the draft rules on revival of corporations that the SEC has circulated, the regulatory body clarified that the revival applies only to corporations with expired terms, not to those whose registrations have been revoked due to fraud or continuous inoperation.

We hope that the final regulations will specifically address issues on corporate revival to erase any doubt on the ability of corporations whose registrations have been revoked to avail of the benefit of revival under the RCC.

INTRODUCING MEANS FOR DISPUTE RESOLUTION AND EMERGENCY ACTION
Intra-corporate disputes are inevitable but the RCC provides stop-gap measures to minimize, if not totally prevent, long-drawn intra-corporate disputes in court. Companies now have the option to include an arbitration clause in the AoI. Arbitration is an option to resolve issues between the corporation and its stockholders arising from the implementation of AoI or By-Laws or from intra-corporate relations.

With this new provision, all controversies can be referred to arbitration. However, the SEC still needs to formulate the governing rules, including the organization of an arbitral board.

The board of directors has also been given the prerogative to constitute an emergency board to undertake any emergency action sought to prevent grave damage to the corporation.

Vacancy in the board may be filled temporarily when the vacancy prevents the remaining directors from constituting a quorum and the remaining directors voted unanimously. The action of the temporary director shall be limited to the emergency action necessary and his or her term shall cease within a reasonable time from the termination of the emergency or upon the election of the replacement director. The SEC is expected to clarify in a separate issuance what may constitute grave, substantial, and irreparable loss or damage to the corporation that will necessitate the appointment of an emergency board.

TAKING ADVANTAGE OF TECHNOLOGY
From filings to notices to attendance in board meetings and voting, the law takes full cognizance of advances in technology.

AoIs and their amendments may now be filed electronically, fortifying the already established Company Registration System of the SEC.

The RCC allows written notices to be sent to regular stockholders through e-mail or such other means that the SEC will allow under its guidelines. A corporation may also specify in its By-Laws the manner of communication through notices of meetings are sent, including the extension or shortening of corporate term, increase or decrease of capital stock, and sale or other disposition of assets. Notably, shareholders may vote through any forms of remote communication such as videoconferencing or teleconferencing using available systems and computer applications or even in absentia. Voting in absentia may be done using any electronic voting platform that may be established.

Similarly, directors can remotely participate in meetings, provided they are given reasonable opportunities to participate.

In corporations vested with public interest, stockholders entitled to elect directors may do so either in absentia or remotely, even without specific provisions in the By-Laws authorizing such voting.

THE FUTURE OF THE BUSINESS LANDSCAPE
Aside from the ease of doing business, the RCC seeks to address various reform clusters, such as prioritizing corporate and stockholder protection, instilling corporate and civic responsibility, and strengthening the country’s policy and regulatory corporate framework.

As the law is new and regulations have yet to be fully formulated, the role of the SEC will be crucial in its proper implementation. The SEC has already informed registered companies that it will come up with piecemeal rules implementing the provisions of the RCC in lieu of consolidated guidelines.

The passage of the law brings much optimism and rightfully so. However, only time can tell how the RCC will be able to transform the business landscape in the short term and the whole economy in the years to come.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

 

Cecille S. Visto is a Tax Senior Director of SGV & Co.

Citizen participation and deliberation in constitutional reform

By Michael Henry Ll. Yusingco

PATHOLOGIES in a constitution can emerge during its reign. These pertain to provisions in the constitutional text itself that may have been designed with good intentions but have eventually become debilitating to the political system it purports to govern.

The 1987 Constitution is not immune from having pathologies. Ideally therefore, Filipinos should not be averse to seriously pursuing constitutional reform.

However, any proposition to amend or revise the 1987 Constitution has always been controversial. In fact, past administrations have all failed to launch charter change initiatives. And the present one seems to be facing the same old hurdles as well.

In 1986, the Constitutional Commission formed by President Cory Aquino was working under a strict deadline, drafting a new charter to formalize the country’s transition from dictatorship to democracy. Today the circumstances are vastly different. Filipinos actually have the luxury of time to pursue constitutional reform.

For constitutional law scholars and practitioners, the active engagement of the people in the entire constitution-drafting process is a key factor in demonstrating the internal legitimacy of the outcome as well as securing for it the necessary external validation. Therefore, Filipinos must not contemplate, or even tolerate, an elite-driven and -dominated constitutional reform process.

Engagement is usually implemented via citizen assemblies wherein deliberative discussions relating to constitutional reform are facilitated. Deliberation in these assemblies means the open exchange of ideas and insights with participants willing to listen, reflect and, if warranted, change their views.

But the most crucial role of these deliberations is to give the people the platform to frame the issues that need to be addressed in the constitutional reform initiative. In a way, these assemblies reflect the moment when citizens actually take ownership of what their constitution should be.

Pertinently, the Barangay Assembly mechanism in the Local Government Code meets these prescriptions quite perfectly. For one thing, it is the most convenient way to gather ordinary citizens and give them the opportunity to speak out and be heard. And indeed, by statutory mandate the barangay is a “forum wherein the collective views of the people may be expressed, crystallized and considered.”

However, utilizing the Barangay Assembly to facilitate deliberations on charter change would require the participation of constitutional experts. In this regard, groups like the Philippine Constitution Association, the Integrated Bar of the Philippines, and the Philippine Association of Law Schools can be commissioned to provide warm bodies to assume the role of moderators.

These volunteers though will not only facilitate the discussion of the relevant constitutional issues, but they must also provide some basic education about fundamental constitutional principles to the participants of the Barangay Assembly.

The program can consist of interactive lecture-style sessions first, supported by pre-session reading materials assigned to participants, and then followed by a series of deliberation sessions.

The targeted output for each Barangay Assembly should be a position paper outlining pathologies in the 1987 Constitution and the concomitant remedial action that must be undertaken. These position papers can then be formally endorsed to Congress to be utilized as resource materials in the revision process.

congress joint session
PHILSTAR/MICHAEL VARCAS

With regards to the constitution-writing process itself, the proceedings of the drafting body, whether a Constituent Assembly or a Constitutional Convention, must be open to the public. The media must have full access to records and papers related to the drafting process. The key point here is that there should be complete and absolute transparency from day one.

Moreover, there must be mechanisms that will allow civil society organizations, business groups and academic institutions to submit proposals to the drafting body as well as for private individuals to be heard during formal sessions.

The drafting body must likewise put up a website wherein updates on the working draft and the writing process are posted. Allowing the public to comment on the progress of the draft itself in matters of substance and style and for the drafting body to respond to these concerns accordingly.

Note however that when the final draft is done, there should also be an appropriate amount of time to allow the public to reflect on whether to ratify or to reject the new constitution in the plebiscite. Filipinos must be given the opportunity to get their minds ready before making this big decision.

To conclude, according to the “Guidance Note of the Secretary-General: United Nations Assistance to Constitution-making Processes” (April 2009) — “Inclusive and participatory processes are more likely to engender consensus around a constitutional framework agreeable to all.”

Now that the administration has decided to take it slow with its charter change drive, the focus can be on the quality of the process, ensuring it is truly inclusive and participatory. Indeed, more effort can be exerted to make constitutional reform a genuinely deliberative and transformative exercise for all Filipinos.

Moreover, not being bound by an unreasonable schedule makes a huge difference. The long series of deliberations will ensure a high voter turnout in the plebiscite. More importantly, Filipinos will be coming to the voting booth understanding what their vote would mean for them and the future of the nation.

But whether constitutional reform will be commenced through the Barangay Assembly mechanism or not, Filipinos just cannot leave constitutional reform in the hands of politicians.

The infamous Resolution of Both Houses No. 15, a draft charter created by the House of Representatives under the auspices of former Speaker Gloria Arroyo, is a warning that cannot be ignored.

Dynastic politicians will not hesitate to hijack charter change to perpetuate themselves in their positions of power. And the only way to keep this mob in check is for Filipinos to be actively and intelligently engaged every step of the way.

In fact, if this administration truly envisions charter change as an initiative to improve the lives of Filipinos, then they must prevent political elites from railroading the constitutional revision effort. Filipinos must keep in mind that the drafting process described here is preferable because the engagement of the people in the deliberation and drafting stages will ultimately be felt as a true act of collective decision-making. It will foster in Filipinos that sense of ownership over charter change which most likely did not happen for the 1987 Constitution.

 

Michael Henry Ll. Yusingco, LL.M is a non-resident research fellow at the Ateneo Policy Center of the Ateneo School of Government.