Court upholds EPCIBank rejection of BDO nominees in board of directors

The Makati Regional Trial Court has dismissed the complaint filed by the Banco de Oro (BDO) group of the Sy family, which sought to nullify the results of last year’s elections of Equitable PCIBank’s board of directors.

The court also sustained the authority and actions of EPCIBank’s nomination committee and board of directors in disqualifying the nominees of Sysmart and BDO Capital to the board of directors of EPCIBank on the ground that they represented an interest adverse to the Go-led bank.

Owned by the Sy family, Sysmart holds a minority interest in EPCIBank.

In its order, the court likewise upheld the delegation of authority in favor of the nomination committee as specified in the EPCIBank by-laws to disqualify any nominee who represents a person or group with conflict of interest to EPCIBank, taking into account such factors of business, family and professional relationships.

EPCIBank’s founding Go family has a 24 percent stake while the Government Service Insurance System (GSIS) owns about 12 percent. Another significant shareholder is the Romualdez family. The bank has a public float of 25 percent.

The BDO group tried but failed to win a board seat in EPCIBank’s stockholders meeting in April 2004. The bank barred the entry of BDO nominees - Exequiel Villacorta, former president of TA Bank; bankers Violeta Lim and Josefina Tan; and Rafael Alunan III, Interior Secretary during the Aquino administration, citing a provision in its by-laws and a precedent set by the Supreme Court that allows a company to protect itself by preventing competitors from joining its board.

Despite the legal hurdles, BDO remains interested in EPCIBank as it positions itself among the top three banks in the country. It earlier offered to acquire EBC Investment Inc.’s 10.8 percent stake in EPCIBank for cash.

Moreover, BDO’s proposal to acquire the Social Security System’s 25.8 percent stake in EPCIBank is still standing. Even as SSS and BDO reached an agreement on the planned sale, the deal had met stiff opposition from various groups, specially lawmakers which claimed SSS could get a better price than the one offered by the Sy-owned bank.

The controversy forced the pension fund to put its 25.8 percent stake in EPCIBank up for auction. But BDO has been given the right to match the winning bid if it is higher than its offer.

The Supreme Court, however, had issued an order stopping the sale of EPCIBank shares through a Swiss challenge and directed the parties to observe the status quo prevailing before the SSS decision.

Just last Friday, the GSIS lodged a complaint against the bank’s appointment of Robert Romulo as independent director , alleging such move was done to allow the Go family to retain control of the country’s third largest lender.

GSIS said Romulo is not qualified to sit on the EPCIBank board due to a provision in the Securities Regulation Code that states that the independent director must not be an officer or employee of the corporation they serve, as well as any affiliate, subsidiary or related company thereof.

GSIS said Romulo should not be allowed to be an independent director because he is a board member of Equicom Systems Management Inc., a joint venture between the Equitable Group and Telius International.