Criminal charges were filed by the Department of Justice (DoJ) against trader George Sycip, son of the late tycoon Washington Sycip, and officers and members of Alliance International Inc. (Alliance), a tuna canning firm, for violation of Sections 74 and 75, in relation to Section 144 of the Corporation Code of the Philippines.
Alliance is a publicly listed company currently embroiled in a management conflict as a result of the acquisition of Strong Oak Inc. of the firm’s 430.286 million shares worth P563.674 million. The sale has caused dilution of the stake of the company’s foreign shareholders.
The case was filed by Alliance’s foreign shareholders namely Harvest All Investment Limited, Victory Fund Limited and Bondeast Private Limited against Annsley Bangkas, Alliance’s Assistant Corporate Secretary; George Sycip, Chairman of the Board of Directors; and Alvin Dee, Jonathan Dee and Ibarra Malonzo, members of the Board of Directors.
The complaints, initially filed before the Office of the City Prosecutor in Pasig City, stemmed from the alleged denial of the respondents of the complainants’ right to inspect the corporate books and records.
Section 74 of the Corporation Code provides that “the records of all business transactions of the corporation and the minutes of any meetings shall be open to inspection by any director, trustee, stockholder or member of the corporation…” and that refusal to allow the records to be examined will be liable for damages and is punishable under Section 144 of the code.
Section 144 states that violators of the code shall be punished by a fine of not less than P1,000 but not more than P10,000 or imprisonment of not less than 30 days but not more than five years.
Section 75, meanwhile, underscores the right of any stockholder or member of his right to financial statements.
In an eight-page resolution dated December 4, 2017, acting on a petition for review filed by the complainants, the DoJ found probable cause to indict the respondents for the violation of the Corporation Code.
“Respondents denied the said right to inspect by employing a scheme to repeatedly refer the issue between the board and certain lawyers. Respondents, consisting of members of the board and Assistant Corporate Secretary, voted in favor of such actions and/or implemented the same. The scheme notably amounted to a delay of at least 72 days and yet even with opinions from lawyers, there is no resolution to allow the inspection.
“This tactic, as shown by clear evidence, of continuously delaying any decision on the matter indicates an evasive scheme adopted by respondents to defeat the rights of complainants to inspect the corporate books and records of Alliance,” the resolution penned by DoJ Undersecretary Deo Marco said.
The complainants pursued the case after Alliance had twice denied their request for inspection of the corporate books and records, with the respondents telling them that their request has been “deferred” pending instruction from the board.
The first request was made on January 15, 2014 via the complainants’ representative Dr. Albert Hong Hin Kay, a stockholder and member of the Alliance’s board, while the second request was made via a final demand letter to Alliance on January 23, 2014.
The request was prompted by the “substantial financial downturn” suffered by Alliance that has adversely impacted its share price in the market.
In their counter-affidavits, the respondents denied the accusations, saying “there was no denial of the request to inspect the corporate books of Alliance but merely referred the matter to the board.”
The DoJ, however, was convinced that the elements of the crime committed by the respondents are present in the case, saying there is indeed a denial of the rights of the complainants.
“Complainants are stockholders of Alliance and thus have the right to inspect the corporate books and records.
Complainants twice served Notices of Inspection to conduct the inspections on 22 and 27 January 2014 and identified their representatives. The inspections were to be conducted during reasonable hours and even at the office of Alliance and its corporate secretary. The inspections by complainants were denied by respondents on 22 and 27 January 2014,” the DoJ resolution stated.