Mergers and Acquisition office

vs.

City Savings bank Inc and Bangko Kabayan Inc.

PCC case no. M-2020-001

FACTS:

The case involves violation of compulsory notification requirement by City savings bank who is a
domestic corporation licensed as a thrift bank by BSP which engage in granting loans to
teachers and Bangko Kabayan who is a domestic corporation licensed as a thrift bank by BSP
which provides financial assistance to farmers, employees, entrepreneurs and other commercial
or industrial enterprises. On February 6, 2019 a share purchase agreement for the sale of
1,801,922 common shares or 49%of the total outstanding shares of Bangko Kabayan was
executed by Ganzon for himself as representative of the controlling stockholder of the Bangko
Kabayan and City Savings and Union properties Inc. As a result, UBP will now own 70% of
Bangko Kabayan’s outstanding shares through City savings. On October same year, Bangko
Kabayan and City savings and UBPIC on behalf of UBP files with the commission their Merger
notification forms pertaining to their transaction

On 2020, the commission received a complaint from MAO alleging the respondents violated
Sec. 17 of PCA and Sec. 2.1 of the Merger rules for their failure to comply with the requirement
of filing of notification within 30 days from the date of the agreement. MAO stated the
respondents filed 257 days from the date of the agreement.

City Savings contend: it will no longer contest the recommended imposition of penalty and
moved that the decision be rendered by the commission on the basis of the complaint and that
payment order be issued accordingly.

Bangko Kabayan contend: it disagree to MAO’s statement that it was a party to the
agreement but prayed that the complaint against them be dismissed and without admitting
liability praying that judgment be rendered in accordance with city savings comment and that
payment order be issued against the latter.

ISSUE: WON Bangko Kabayan is an entity required to notify the commission of the
transaction as required by Sec. 17 of the PCA

HELD:
Bangko Kabayan is an entity which required notifying the transaction with PCC. In accordance
to Rule 4, Sec. 2 of the PCA IRR stated that parties to merger or acquisition that satisfy the
threshold rule in Sec. 3 of the same rule is required to notify the commission with their
transaction. The rule further provides that each party to a merger or acquisition shall submit
notification to the commission with notification form and fees applicable. It is true that Bangko
Kabayan is not a party to such agreement but it is the proper party to satisfy the requirement
and it must still notify the commission because such entities whose assets and revenues are
assessed for the purpose of whether the entity meets the threshold for notification set by the
law. Furthermore, both parties satisfy the threshold set forth by the PCC if they obtain 35% of
the acquired entity’s outstanding shares. The agreement is at 49% of the outstanding shares of
Bangko Kabayan which satisfies the threshold test.

OPINION:

In mergers and consolidations, the surviving or consolidated corporation assumes all the
liabilities of the constituent corporations. In the same way, all property, real or personal, all
receivables due, and interests of the constituent corporations shall be taken and deemed to be
transferred into the consolidated or surviving corporation. Furthermore, in certain corporate
acquisitions, notification to the PCC is required. Notification must be given by the parties to a
mergers and acquisition transaction that is indicative of preventing, restricting or lessening
competition in the market, subject to a threshold. Another thing is that it requires the majority
vote of the board of directors of all the companies that are parties to the transaction, and an
affirmative vote of stockholders representing at least two-thirds of the outstanding capital stock
of the companies to approve the merger or consolidation.

Bangko Kabayan must still notify the commission. The purpose of such notification is to inform
the commission of the transfer of shares so that they can monitor such and prevent harmful
unfair market competition. We should not turn a blind eye to this controlling shareholder,
because shares are considered property and it has value, the merger may hide any illicit acts or
obtained through force or intimidation. Ultimately, I know that Mergers are not to eliminate small
players but rather to strengthen the economy and poverty reduction.

SOURCE: https://phcc.gov.ph/cdn06m0292020-late-notif-fine-citysavingsbank-bangkokabayan/