Securities and Exchange Commission

 The agency that regulates and controls the operations and activities of a corporation
 The particular powers, functions and jurisdiction of the commission over corporations are enumerated
under Sec 179 of the RCC
o Has these been amended by Sec 5 of the Securities Regulation Code which also provides for the
powers and functions of the commission? – No, it was amended only insofar as jurisdiction over
disputes involving the corporation is concerned.
o The SRC was promulgated in order to conform with the provisions of PD 902-A which transferred
the jurisdiction of cases involving intracorporate disputes from the SEC to the RTC, acting as a
special commercial court by the Supreme Court
 Powers, functions and jurisdiction of the SEC:
o Exercise supervision and jurisdiction over all corporations and persons acting in their behalf
except as otherwise provided under the Code
 Two concepts of jurisdiction referred to:
 Jurisdiction over the activities of a corporation
 Jurisdiction over disputes involving corporations (no longer applicable, amended by
Sec 5 of the SRC)
o Corporation and the public in general
o Corporation and its stockholders, or among its stockholders or among the BOD
 Is provision Sec 179(a) still applicable? – Yes. Because the concept of jurisdiction here is
not merely confined to the jurisdiction to take cognizance of intracorporate disputes.
 “Except as otherwise provided under this code”
 There are certain entities which take the form of a corporation which nevertheless are
not within the jurisdiction or authority of the SEC to regulate. Examples of the
entities:
o Cooperatives because the CDA is tasked to regulate the activities and affairs of
cooperatives. The CDA is not an adjunct agency of the SEC, it is an
independent agency
 o Homeowner’s Associations and Subdivision units because these are within the
authority and jurisdiction of the Housing Land Use and Regulatory Board (now
under Department of Human Settlement and Urban Development)
o Labor Unions because although they have the structure of a corporation and
their hierarchy is akin to a corporation, it is not within the jurisdiction of the
SEC but the DOLE or the NLRC depending on the amount and the nature of
the controversy involved
o Government-owned or controlled corporations because they are an attachment
or an agency of the government and only the government can exercise
supervision over them
 As a general rule, the SEC is the governmental body which supervises, controls and
regulates the activities of all corporations in the Philippines
o Exception: as otherwise provided for by law
 Jurisdiction over the activities of a corporation
 Reportorial requirements
 Visitorial requirements
 Regulatory requirements
 Approval and disapproval of Articles of Incorporation and By-laws
 Jurisdiction over disputes involving corporations
 The authority to resolve or hear disputes
o Jurisdiction – authority to take cognizance of controversies involving parties
 Previously before the amendment, the SEC (now the RTC, acting as a special
commercial court)
o Cut-off date of the jurisdiction of the SEC over intra/intercorporate disputes is
September 1, 2000
o Composition of the SEC: 5 members, 1 chairman and 4 commissioners. But
the majority must be lawyers (SEC Regulation Code)
 Not all RTCs may take jurisdiction over cases involving corporations, only RTCs that
are given authority or are deputized by SC as commercial courts may take cognizance
of corporate disputes
 Are all corporate disputes cognizable by the RTC? – No. the RTC, acting as a special
commercial court, can only take cognizance of cases involving corporations if the
dispute involves intra/intercorporate disputes
o Intracorporate dispute:
 If the dispute is between a corporation respecting: 1. the validity of its
franchise; 2. or the legality of its operation against the state, then it is an
intracorporate dispute.
 If the dispute is between the corporation and its stockholders or the
BOD, among themselves. As long as the dispute is confined among the
members of the corporation or there is a corporate relationship between
the parties then it is an intracorporate dispute. But if the dispute is a
corporation which are branches to each other or subsidiaries to each
other, it is called an intercorporate dispute.
 Is it necessary for an intercorporate/intracorporate dispute that both
parties must have separate personality? – No. It is not necessary as long
as they have a corporate relationship with each other, then it vests them
with the personality to file a suit against one another
 Derivative suit vs intra/intercorporate dispute
 Derivative suit pertains to the right of one stockholder to
commence an action on behalf of the corporation or the other
stockholders if the commencement of a litigation is not done so by
the corporation or the stockholders themselves despite its
propriety
o Note: not all derivative suits are intra/intercorporate
disputes because a stockholder or member of a corporation
may institute a complaint on behalf of a corporation against
an entity that has no corporate relationship with the
corporation. A derivative suit may either be an
inter/intracorporate dispute or an ordinary civil action
o Test in determining whether the issue involves an intracorporate dispute
 Supposing that the dispute involves entities that have no corporate
relation? Are there situations that may still give rise to an intracorporate
dispute? – There are two tests according to jurisprudence.
 Relationship test – if the dispute is between or among shareholders or
corporations that have corporate relationship with each other, then it is
an intra/intercorporate dispute.
 But according to the Court, this is not a sufficient test because
there are instances when the grievance of the shareholder against
the corporation is not strictly because of corporate relationship but
because of a civil or criminal matter. Just because a person is a
stockholder of a corporation does not mean that if he sues the
corporation, it is already an intracoporate dispute. Thus, there is a
second test.
 Nature of the controversy test – if the nature of the controversy is such
that it arises out of the relationship between the corporation and the
stockholder. If it has something to do between the relationship of the
stockholder and the corporation, then it is an intracorporate dispute.
 Speed distribution corp. v. CA – does the probate court have the
jurisdiction over the determination of the ownership of the
properties considering that it is an intracorporate dispute because
it involves shareholders among each other as Mrs. Lim and the
adopted children are shareholders of Speed?
o According to the Court, if we are going to stick to the basic
rule in determining through the relationship test, it would
appear that the case is an intracorporate dispute and,
therefore, the probate court has no jurisdiction. The case is
not an intracorporate dispute, it is not one of an
intracorporate dispute just because the parties in dispute
are members of the same corporation, it must also be
established that the subject matter or the cause of action
 that is being raised has something to do with corporate
matters.

In this case, it is true that the parties are members of the

same corporation but the settlement of the estate has
nothing to do with corporate matters.
 Always remember the two tests: First, determine the existence of a
corporate relation; and Second, does the dispute involve corporate
matters or enforcement of corporate policies, rules and regulations? If
no, then even if the parties belong to the same corporation, it is not an
intra/intercorporate dispute
 Tomagan v. Kairuz
 The case instituted by Kairuz for forcible entry is wrong. While it is
true that she is merely asserting her superior right of possession,
she must be reminded that the parties against whom she filed the
case are members of the same corporation and the manner of
hiring a security agency in order to protect the property from
unwanted strangers or from those against whom they have a
dispute is a matter of corporate policy. Therefore, the dispute
between Tomangan and Kairuz is not merely a civil action but an
intracorporate dispute
 NOTE: again, stick to the two tests as declared in Speed
Distribution Corp v. CA
o Jurisdiction to try and hear inter/intracorporate controversies – amended by the SRC, now with
the RTC
o Impose sanctions for violations of the Code as well as the implementing rules and orders of the
Commission
 Visitorial powers – unlike the BIR, the SEC must first notify the corporation (part of due
process) and it must be conducted at a reasonable time on business hours. Noncompliance
would result to penalty
o Promote corporate governance and the protection of the minority investors through, among
others, the issuance of rules and regulations consistent with international best practices
 When a corporation is organized, there is a specific portion of the shares of stocks that
must be readily available to the public, especially corporations that are vested with public
interest, i.e., gov’t representative in the BOD
o Issue opinions to clarify the application of laws, rules and regulations
 What is the effect of the opinions that are issued by the SEC? Do they take the form of law?
– in the event that there is a conflict between an opinion and an existing law, the latter
prevails. Opinions that are rendered by government or administrative agencies are not laws
in themselves, although they have the force and effect of a law especially if the law is silent
about the matter. Administrative rules and regulations, circulars and opinions are not laws
because only the legislative department of the government may enact laws. But in case
these are contrary to existing laws and regulations or morals, customs or public policy,
then the presumption that they have the force and effect of a law will not stand.
 NOTE: it must be declared invalid by the courts otherwise it is still in effect because
it enjoys the presumption of regularity
o Issue cease and desist orders ex parte to prevent imminent fraud or injury to the public
o Hold corporations in direct and indirect contempt
o Issue subpoena duces tecum and summons to appear in proceedings before the Commission
o In appropriate cases, order the examination, search and seizure of documents, papers, files and
records of books of accounts of any entity or person under investigation as may be necessary for
the proper disposition of the cases subject to the provisions of existing laws
 The authority of the SEC to seize records or any pertinent documents of a corporation
under the guise of enforcing the police power of the state must be subjected to the
constitutional limitation on search and seizure because corporations have also the right to
be protected in their properties, papers and documents against unreasonable search and
seizures (jurisprudence)
o Suspend or revoke the certificate of incorporation after proper notice and hearing
 o Dissolve or impose sanctions on corporations upon a final court order for committing, aiding on
the commission of or in any manner furthering securities violations, smuggling, tax evasion,
money laundering, graft and corrupt practices or other fraudulent or other illegal acts
o Issue writs of execution and attachment to impose payment of fees, administrative fines and
other dues collectible under this Code
o Prescribe the number of independent directors and the minimum criteria determining the
independence of a director
 The number of directors must at least be five but not more than 15 is merely the minimum
requirement
 Can the SEC prescribe a higher or lower number of directors? – Yes, if it feels that there
should be more or less directors pursuant to this power
o Impose or recommend new modes by which a stockholder, member or trustee may attend
meetings or cast their votes as far as technology may allow
o Formulate and enforce standards, guidelines, policies, rules and regulations to carryout the
provisions of this code; and
o Exercise such other powers provided by law or those which may be necessary or incidental to
carryout the powers expressly granted to the Commission
 The authority to testify against another person regarding the result of an investigation
conducted by it
 No court below the Court of Appeals shall have the jurisdiction to issue a restraining order, preliminary
injunction or mandatory injunction in any case, dispute or controversy that directly or indirectly
interferes with the powers, duties and responsibilities of the Commission that falls exclusively within its
jurisdiction
o Does it mean that in all acts of the SEC it cannot be enjoined by a court order? – Yes as long as it
cannot be filed with the RTC or lower courts than the Court of Appeals