Jan 11 Special Laws 1st Part.docx

JURISDICTION OF THE SPECIAL INTRA-CORPORATE COURT Last time we took up the classes of cases that are now under the jurisdiction of the SPECIAL INTRA-CORPORATE COURT.

which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed. 1.

This is so because of the special provision in R.A. 8799 (The Securities Regulation Code) which transferred these cases that are enumerated in PD. 902-A Section 5. FOUR CLASSES OF CASES There are four classes of cases that have been transferred out of the jurisdiction of the SEC. Remember those cases. PD. 902-A Section 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving. a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission. b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations

RA 8799 Section 5. Powers and Functions of the Commission.– 5.1. The commission shall act with transparency and shall have the powers and functions provided by this code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions: XXX 5.2. The Commission’s jurisdiction over all cases enumerated under section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over the cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution

PONZI SCHEME or popularly known as in the Philippines as PYRAMIDING SCHEME

a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission. 2.

INTRA-CORPORATE CONTROVERSIES. These are all classified as intra-corporate controversies: a) b) c) d)

Stockholder vs Director Stockholder vs. Officer of the corporation Director vs Director Corporation vs. SEC.

b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; 3.

ELECTION CONTROVERSIES.

c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. The Supreme Court has asserted that it is the intra-corporate court that has jurisdiction over the validity and issues arising from proxies in an election of directors. If there is a controversy as to proxy, the adequacy, regularity, and validity of proxies is normally the sole and an exclusive jurisdiction of the SEC but if it is an annual meeting elections of directors then it is under the jurisdiction of the INTRA-CORPORATE COURT. No longer the SEC. The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when proxies are obtained to vote on matters unrelated to the cases enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies are solicited in relation to the election of corporate directors, the resulting controversy, even if it ostensibly raised the violation of the SEC rules on proxy solicitation, should be properly seen as an election controversy within the original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section 5 (c) of Presidential Decree No. 902A. (SEC vs. CA G.R. 187702 October 22, 2014)

4.

PETITIONS FOR SUSPENSION OF PAYMENTS.

What is a petition for suspension of payments? Originally, petition for suspension of payments was provided by the Insolvency Law. Then PD. 902-A transferred petitions for suspension of payments, when the corporation is the petitioner, to the SEC. Now, technically speaking it is an insolvency proceeding. When is the suspension of payments proper? If the petitioner has more assets than liabilities, so it is technically not yet insolvent. But why it cannot pay its liabilities? Because the assets of the corporation is not ripening at the same time that the liabilities are coming due. Therefore, the corporation cannot access the value of the assets that is why it has to go to an authority and ask for a suspension of payments. The authority will issue an order suspending the ripening of the liabilities. In the Insolvency Law, the petition for suspension of payments are of two kinds: a. b.

Individual Corporate or partnership

Under the new law, R.A 10142 Financial Rehabilitation and Insolvency Act (FRIA), Congress has abolished petition for suspension of payment for individuals. There is no more petition for suspension for individual only corporations. FRIA has assigned petitions for suspension of payments under the jurisdiction of the special court of insolvency or financial rehabilitation. RA 8799 transferred petition for suspension of payments to the INTRA-CORPORATE COURT. But FRIA in 2010 transferred petition for suspension of payments to THE SPECIAL INSOLVENCY AND FINANCIAL COURT. So now this particular class of cases, petition for suspension of payments, is now with the SPECIAL INSOLVENCY AND FINANCIAL COURT. It is not with the INTRA-CORPORATE COURT.

What happens if you file an intra-corporate court case as an ordinary case? This question is answered in Gonzales vs.