CA upholds SEC order revoking EPCIBank’s by-laws amendments

Dealing another setback to Equitable PCIBank, the Court of Appeals has issued an order preventing the bank’s board of directors from implementing any provision of the amended by-laws.

The order effectively upheld a Securities and Exchange Commission (SEC) order revoking EPCIBank’s amendments to its by-laws which prevented competitors from getting into the bank’s board of directors.

According to the SEC, the amended by-laws would disenfranchise the majority shareholders of the bank and deprive them of their right to participate in internal affairs.

The CA’s order is in response to the petition filed by Sysmart Corp., a company owned by the group of mall magnate Henry Sy, which alleged that the amendments had been made without the requisite approval of two-thirds of the bank’s stockholders.

In its order, the Court of Appeals said: "It appearing that great and irreparable injury would result to the respondent before the matter can be heard on notice, we find that there is a need to issue a temporary restraining order to enjoin the petitioner from implementing its amended by-laws."

EPCIBank was given 10 days from receipt of the order to show cause why the TRO should not be converted into a preliminary injunction.

EPCIBank earlier said the SEC had no authority to revoke the bank’s by-laws on the ground that the case involves an intra-corporate dispute which is now under the jurisdiction of the regular courts.

In its petition, Sysmart said the group of EPCIBank chairman Antonio Go could use the amended by-laws to take over the bank in its annual stockholders’ meeting scheduled on July 19.

The amended by-laws, according to Sysmart, would allow the Go family to use a lesser number of votes to disqualify and/or approve the disqualification of nominees to the board of directors.

Sysmart further said the amended by-laws states that the decision of the nomination committee, once confirmed by the board of directors, rejecting the nomination or disqualifying the nominee is made final and may no longer be questioned.

Sysmart added that the nomination committee is effectively composed of members of the Go family and their allies.

It claimed that there is an existing alliance between the Go family composed of Antonio, John Go, Peter Go Pailan and Genevieve Go with EPCIBank president Rene Buenaventura, Anthony Conway as well as independent directors Roberto Romulo, Cesar Bautista, and Antonio Basilio.

This gives the Go group control over the bank despite having only 20 percent interest while state pension funds Social Security System and Government Service Insurance System have only five board seats of the 15-man board despite their combined 40 percent stake.

The Sy group tried but failed to win a board seat in EPCIBank during the bank’s stockholders’ meeting in April 2004. Its nominees to the board were rejected by EPCIBank management, citing conflict of interest. The group of Go has a 24 percent stake in EPCIBank.

EPCIBank argued that its by-laws and a precedent set by the Supreme Court allowed it to protect itself by preventing competitors from getting into its board. A Supreme Court ruling in the 1980s had barred businessman John Gokongwei from entering the board of

food beverage and conglomerate San Miguel Corp. because he had a competing food company, Universal Robina Corp.

Banco de Oro (BDO) Universal Bank, controlled by the SM Group, had signed a deal to buy the 29 percent stake held by the Social Security System. The deal, if it pushes through, will make the SM Group the single biggest stockholder in EPCIBank and entitle it to four board seats in the 15-man board.