SEC Opinion (02-28-2000) - Ponce Enrile, Reyes and Manalastas.docx
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February 28, 2000 Ponce Enrile Reyes & Manalastas 3rd Floor, Vernida IV Bldg., e!iste "t. "alcedo Village, Ma#ati $ity %ttention %ttys. Rossano P. 'isce & Bob . (uinto (entle)en *+is re ers to your letter dated February 8, 2000 re-uesting t+e $o))ission, on be+al o client, *+e Insular i e %ssurance $o) any, to con/r) t+e ollo ing !ie s relati!e to t+e intended 1de)utuali ation1 o t+e cor oration con!ersion o t+e cor oration ro) a 1no cor oration to a 1stoc#1 cor oration by ay o a)end)ent to its articles o incor oratio la s5. 6. *+at t+e !ote o t+e )e)bers re-uired to a ro!e t+e a)end)ents to t+e articles o incor oration and by4la s o t+e cor oration is at least t o t+irds 2735 o t+e )e)bers in attendance in erson or by ro y at a )eeting duly called or t+e ur ose, ro!ided )e)bers resent or re resented constitute a -uoru) o at least /!e 9:5 ercent o all !oting )e)bers o t+e cor oration; and 2. *+at t+e cor oration )ay con!ert ro) a non4stoc# to stoc# insurance co) any ursu to its 1de)utuali ation1 in accordance it+ t+e Insurance $ode and t+e guidelines o t+e Insurance $o))ission, and t+at t+e sa)e )ay be e<ected t+roug+, a)ong ot+ers, t+e a)end)ent o its articles o incor oration and by4la s it+out t+e necessity o /rst diss t+e co) any. Relati!e to t+e /rst !ie , lease be ad!ised t+at inas)uc+ as t+e o=ce o t+e Insurance $o))issioner I$5 +ic+ +as t+e ri)ary >urisdiction o insurance co) anies, +as already con/r)ed your osition in its letter dated 'o!e)ber 62, 6??? addressed to your a @=ce, t "ecurities and E c+ange $o))ission. "E$5 in its )eeting o February 2A, 2000, resol!ed n inter ose any ob>ection t+ereto, sub>ect, +o e!er, to t+e condition t+at all t+e olicy + are t+e )e)bers o t+e insurance /r) are ro erly noti/ed o t+e )eeting to be called o ur ose o a ro!ing t+e intended de)utuali ation. %nent t+e second issue, t+e general rule is t+at a non4stoc#, non4 ro/t cor oration canno con!erted into a stoc# cor oration by )ere a)end)ent o its articles o incor oration it /rst dissol!ing t+e sa)e. o e!er, t+is rinci le is not a licable in t+e resent case 1)utual li e insurance cor oration1 is basically a 1non4stoc#1 cor oration it cannot er under suc+ category, ta#ing into consideration its nature and ur ose. "o)e+o it +as t+e c+aracter o a 1stoc#1 cor oration. Dnli#e in ordinary non4stoc#, non4 ro/t cor oration, )e)bers t+ereo +o are t+e olicy +olders +a!e indi!idual ecuniary interest in t+e /r) because o t+eir re)iu) contributions e!idenced by t+eir insurance olicies, t+e corres !alue o +ic+ can be deter)ined and / ed, and or +ic+ corres onding s+ares o stoc#s ) be issued in e c+ange t+ere or. *+us, t+e $o))ission, in its )eeting o February 2A, 2000, li#e ise con/r)ed t+e second osition, sub>ect, +o e!er, to t+e conditions, t+at t+e cor )eets it+ all t+e tec+nical re-uire)ents or t+e issuance o ully aid s+ares and t+at de)utuali ation sc+e)e to be ado ted, t+e e isting )e)bers o t+e insurance /r) s+all re) to be olicy +olders.
description
SEC Letter
Transcript of SEC Opinion (02-28-2000) - Ponce Enrile, Reyes and Manalastas.docx
February 28, 2000Ponce Enrile Reyes & Manalastas3rd Floor, Vernida IV Bldg., Leviste St.Salcedo Village, Makati CityAttention : Attys. Rossano P. Nisce & Bob L. GuintoGentlemen:This refers to your letter dated February 8, 2000 requesting the Commission, on behalf of your client, The Insular Life Assurance Company, to confirm the following views relative to the intended "demutualization" of the corporation (conversion of the corporation from a "non-stock" corporation to a "stock" corporation by way of amendment to its articles of incorporation and by-laws).1.That the vote of the members required to approve the amendments to the articles of incorporation and by-laws of the corporation is at least two thirds (2/3) of the members actually in attendance in person or by proxy at a meeting duly called for the purpose, provided that such members present or represented constitute a quorum of at least five (5%) percent of all the voting members of the corporation; and 2.That the corporation may convert from a non-stock to stock insurance company pursuant to its "demutualization" in accordance with the Insurance Code and the guidelines of the Insurance Commission, and that the same may be effected through, among others, the amendment of its articles of incorporation and by-laws without the necessity of first dissolving the company.Relative to the first view, please be advised that inasmuch as the office of the Insurance Commissioner (IC) which has the primary jurisdiction of insurance companies, has already confirmed your position in its letter dated November 12, 1999 addressed to your Law Office, the Securities and Exchange Commission. (SEC) in its meeting of February 24, 2000, resolved not to interpose any objection thereto, subject, however, to the condition that all the policy holders who are the members of the insurance firm are properly notified of the meeting to be called for the purpose of approving the intended demutualization.Anent the second issue, the general rule is that a non-stock, non-profit corporation cannot be converted into a stock corporation by mere amendment of its articles of incorporation without first dissolving the same. However, this principle is not applicable in the present case. While a "mutual life insurance corporation" is basically a "non-stock" corporation it cannot per se fall under such category, taking into consideration its nature and purpose. Somehow it has the character of a "stock" corporation. Unlike in ordinary non-stock, non-profit corporation, the members thereof who are the policy holders have individual pecuniary interest in the firm because of their premium contributions evidenced by their insurance policies, the corresponding value of which can be determined and fixed, and for which corresponding shares of stocks may be issued in exchange therefor. Thus, the Commission, in its meeting of February 24, 2000, likewise confirmed the second position, subject, however, to the conditions, that the corporation meets with all the technical requirements for the issuance of fully paid shares and that under the demutualization scheme to be adopted, the existing members of the insurance firm shall remain to be policy holders. Very truly yours,(SGD.) PERFECTO R. YASAY, JR.Chairman
