Philippine Veterans Bank v.

Justina Callangan
G.R. No 191995, August 3, 2011

FACTS:

Justina F. Callangan, the Director of the Corporation Finance Department of the SEC,
sent the PVB a letter, informing it that it qualifies as a public company under Section 17.2 of the
Securities Regulation Code (SRC) in relation with Rule 3(1)(m) of the Amended Implementing
Rules and Regulations of the SRC, as such, it is required to comply with the reportorial
requirements set forth in Section 17.1 of the SRC. PVB responded by explaining that it should
not be considered a public company because it is a private company whose shares of stock are
available only to a limited class or sector, i.e., to World War II veterans, and not to the general
public.

Thereafter, Director Callangan rejected the Bank’s explanation and assessed it a total
penalty P1,937,262.80 for failing to comply with the SRC reportorial requirements from 2001 to
2003. Despite a move for the reconsideration of the assessment, the same was denied. An
appeal was also denied by the SEC En Banc, hence, PVB filed a petition for review with the CA.
the petition was denied, hence this case before the SC.

ISSUE:

Is PVB a public company?

RULING:

Yes, it is. Under the SCR, the reportorial requirements of Subsection 17.1 shall apply to,
among others, an issuer with assets of at least Fifty million pesos (P50,000,000.00) or such
other amount as the Commission shall prescribe, and having two hundred (200) or more holders
each holding at least one hundred (100) shares of a class of its equity securities: Provided,
however, That the obligation of such issuer to file reports shall be terminated ninety (90) days
after notification to the Commission by the issuer that the number of its holders holding at least
one hundred (100) shares is reduced to less than one hundred (100).

Also, under Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the
SRC, public company is defined as any corporation with a class of equity securities listed on an
Exchange or with assets in excess of Fifty Million Pesos (P50,000,000.00) and having two
hundred (200) or more holders, at least two hundred (200) of which are holding at least one
hundred (100) shares of a class of its equity securities.

From these provisions, it is clear that a public company, as contemplated by the SRC, is
not limited to a company whose shares of stock are publicly listed; even companies like the
Bank, whose shares are offered only to a specific group of people, are considered a public
company, provided they meet the requirements enumerated above.

As in this case, the Bank does not dispute that it has assets exceeding P50,000,000.00
and has 395,998 shareholders. It is thus considered a public company that must comply with
the reportorial requirements set forth in Section 17.1 of the SRC.

Additionally, the Banks obligation to provide its stockholders with copies of its annual
report is actually for the benefit of the veterans-stockholders, as it gives these stockholders
access to information on the Banks financial status and operations, resulting in greater
transparency on the part of the Bank. While compliance with this requirement will undoubtedly
cost the Bank money, the benefit provided to the shareholders clearly outweighs the expense.
For many stockholders, these annual reports are the only means of keeping in touch with the
state of health of their investments; to them, these are invaluable and continuing links with the
Bank that immeasurably contribute to the transparency in public companies that the law
envisions.