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In this
column, I will discuss how to approach the nationality
principle of share equity participation regarding the
ownership structures of two special purpose vehicles
(hereinafter referred to as “SPV 1” and “SPV 2”), which
were incorporated pursuant to Republic Act 9182 [Special
Purpose Vehicle Act].
By way
of illustration a local bank, AAA Bank (“Bank”), has a
portfolio of nonperforming loans (NPLs) and real and
other properties owned or acquired (Ropoa), which the
Bank intends to dispose of. In order to acquire the
Bank’s NPLs and Ropoas, the organization and
incorporation of two Special Purpose Vehicles with the
Securities and Exchange Commission (SEC) are necessary,
namely: SPV 1 and SPV 2.
SPV 1 is
duly incorporated and organized pursuant to the SPV Act
of 2002 and has complied with the minimum capital and
other requirements imposed by the SPV Act. SPV 1 will
be 100-percent owned by a foreign-based branch of BBB
Corp. SPV 2 is 60-percent owned by CCC Corp. and
40-percent owned by SPV 1. CCC Corp. will be owned 60
percent by Filipinos holding class “A” common shares and
40 percent by SPV 1 holding class “B” common shares.
SPV 1
will acquire (a) 40 percent of the capital stock of SPV
2, and (b) 40 percent of the capital stock of CCC Corp.,
which, in turn, will acquire 60 percent of the capital
stock of SPV 2. SPV 2 will acquire Ropoas from local
banks pursuant to the SPV Act. Note that some of the
Ropoas will consist of land, therefore, 60 percent of
the capital stock of SPV 2 must be owned by “Philippine
nationals” as defined in Sec. 3(a) of Republic Act 7042
(or the Foreign Investments Act of 1991 or FIA).
Under
the present law, SPV 1’s acquisition of the NPLs of
local banks is allowed under Section 5, Article II of
the SPV Act, which provides that an SPV has the power to
invest in, or acquire nonperforming assets (NPA) of
financial institutions (FI). On the other hand, NPLs are
included in the definition of NPAs, which are defined by
Section 3, Article II of the SPV Act as those which
consist of the NPLs and Ropoas of FIs. It is thus clear
from the foregoing, that SPV 1 can acquire NPLs of local
banks.
The
acquisition by SPV 1 of shares of stock of CCC Corp. is
legal under the SPV Act, which provides that an SPV
shall be organized as a stock corporation in accordance
with the Corporation Code of the Philippines and the
rules promulgated by the SEC for purposes of registering
the SPV provided that if it will acquire land, at least
60 percent of its outstanding capital stock shall be
owned by Philippine nationals.
By
statutory definition, an SPV is a corporation organized
in accordance with the Corporation Code. Thus, an SPV
has all the express powers of a corporation provided by
Section 36. An SPV, being a corporation, can acquire
shares in another corporation. Thus, it is clear from
the foregoing that SPV 1 can acquire shares of stock of
CCC Corp.
SPV 2’s
acquisition of real properties shall be subject to the
nationality requirement of the SPV Act. The issue here,
therefore, is whether at least 60 percent of SPV 2 is
owned by Philippine nationals. Thus, it must be
determined whether CCC Corp., which owns 60 percent of
SPV 2, is a Philippine national.
A
Philippine national is defined by Section 3 of the FIA
as follows: it shall mean a citizen of the Philippines
or a domestic partnership or association wholly owned by
citizens of the Philippines of which at least 60
percent of the capital stock outstanding and entitled to
vote is owned and held by citizens of the Philippines;
or a corporation organized under the laws of the
Philippines of which at least 60 percent of the capital
stock outstanding and entitled to vote is owned and held
by citizens of the Philippines; or a corporation
organized abroad and registered as doing business in the
Philippines under the Corporation Code of which 100
percent of the capital stock outstanding and entitled to
vote is wholly owned by Filipinos; or a trustee of funds
for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and
at least 60 percent of the fund will accrue to the
benefits of Philippine nationals; Provided, that where a
corporation and its non-Filipino stockholders own stocks
in a SEC registered enterprise, at least 60 percent of
the capital stock outstanding and entitled to vote of
both corporations must be owned and held by citizens of
the Philippines and at least sixty of the members of the
board of directors of both corporations must be citizens
of the Philippines, in order that the corporation shall
be considered a Philippine national.
As
stated above, CCC Corp. has Filipino individuals owning
60 percent of its outstanding shares and/or a Philippine
corporation, which is 100-percent owned by Filipinos. It
is, therefore, clear that CCC Corp. is a Philippine
national under the abovementioned provision. In
determining whether CCC Corp. is a Philippine national,
the computation of the 60-percent Filipino ownership
shall be based on the total number of outstanding
capital stock entitled to vote, regardless of the par
value of the shares (SEC Opinion 09-05). |
