Sie sind auf Seite 1von 4

Transcript of VMCI (Part 2)

Time context
The issue of Victorias Milling Company, Inc. regarding its First Approved
Rehabilitation Plan (ARP1) turned out in the year 1999.
Victorias Milling Company, Inc. (VMC) is an agro-industrial complex located in
Victorias City, Negros Occidental. It was founded by Don Miguel J. Ossorio on
May 7, 1919. Built on solid 600-hectare ground, it was among the earliest
modern sugar firms in the country at the turn of the century. From its lowly
beginnings of 1,500 tons raw capacity, the sugar mill has evolved into one of
the largest integrated raw and refined sugar operations in the world.
VMC is the result of the integration of two sugar mills the original VMC and
the North Sugar Company or NONSUCO, the first sugar mill built by Don
Miguel in 1917 in the Municipality of Manapla.
During the outbreak of the Japanese war, NONSUCO was almost completely
devastated while VMC suffered extensive damages.
Don Miguel thought that rehabilitating NONSUCO was too impractical to do.
He, therefore, decided to merge its assets with those of VMC.
In 1996, VMC experienced near collapse. It was granted a suspension of
payments status under the Securities and Exchange Commission (SEC). And
as a result of 15-year Alternative Rehabilitation Plan (ARP) developed by
creditor banks and upheld by the SEC and the Court of Appeals, VMC went
through quasi-reorganization as well as a conversion of debt to equity
whereby bank creditors comprised 69.5% of the companys common
In order to survive, the Company closed down, leased, and spun-off all its
non-sugar operations except Engineering Services. It has focused on
improving revenue generation and embarked on Continuing Cost Reduction
In spite of its being under rehabilitation, VMC has continued to demonstrate
strength and competitiveness as shown by its operating and financial
performance in the first 8 years of its rehabilitation program.

Discuss the OECD Principle on disclosure and transparency. What

elements of this principle were overlooked by the executive officers
of VMCI? How could they have addressed such an oversight?
Disclosure is important, but is difficult to apply. Disclosure is the key not only
to attracting capital, but also attracting new executives, new technologies,
new alliances and marketing partnerships.
The corporate governance framework should ensure that timely and accurate
disclosure is made on all material matters regarding the corporation,
including the financial situation, performance, ownership, and governance of
the company.
VMCI suffered large debts from several creditors. It shows a poor regulatory
system. In relation to this, its fate has been relegated not merely to the
desks of its Board of Directors, but already to the halls of the Securities and
Exchange Commission (SEC).
A strong and fair regulatory system should first be launched so that
transparency and disclosure can play their role in attracting more capital to
the region. It is important because it establishes confidence in the
dissemination of accurate information, and thud attracts investment.
Background of the Study
In April 1946, the integrated VMC commenced postwar operation and from
then on, the Company expanded steadily into a conglomerate involved in
non-sugar operations comprising of engineering products and services, civil
engineering services, agri-business (aquaculture, cutflower, swine and cattle
projects, organic fertilizer) a shipping component, management and
consultancy services. It has also ventured into industrial estate development
and construction.
Since then, it has taken pride in being more than just a milling company. To
its founders, to its successors, and to its generation of workers, Victorias is a
community with a purpose each with his or her own individual role to play
and together working as one.
How does VMCI fare vis--vis OECDs principle on the equitable
treatment of shareholders at this phase? Explain.

The corporate governance framework should ensure the equitable treatment

of all shareholders, including minority and foreign shareholders. All
shareholders should have the opportunity to obtain effective redress for
violation of their rights.
Specifically, members of the board and key executives should be required to
disclose to the board whether they, directly, indirectly, or on behalf of third
parties, have a material interest in any transaction or any matter directly
affecting the corporation. In the case of VMCI, the ARP1 was basically the
rehabilitation plan of the Mancom, subject to a number of conditions raised
by VMCIs board. Therefore, VMCI has failed to comply with the principle
On the other hand, the shareholders have raised their objections regarding
the issuance of new shares of stocks required. It was evidenced that the
shareholders have been deprived to exercise their preemptive rights given
that SEC approved the condition as stated in the ARP1 that the shareholders
should subscribe to the entire 194.95 million new shares of stock amounting
to P567.08 million which VMCI will issue to accumulate fresh capital. It then
suggests that stakeholders, should be able to freely communicate their
concern about illegal or unethical practices to the board and their rights
should not be compromised for doing this.

Discuss shareholders rights and key ownership functions

according to the OECD manual. In the case of VMCI, what rights
were overlooked or inadequately attended to? What functions were
inadequately attended to?
Corporate governance framework should protect and facilitate the exercise
of shareholders rights.
Basic shareholders rights should include the right to: 1) secure methods of
ownership registration; 2) convey or transfer shares; 3) obtain relevant and
material information on the corporation on a timely and regular basis; 4)
participate and vote in general shareholders meeting; 5) elect and remove
members of the board; and 6) share in the profits of the corporation.

On the other hand, shareholders should the right to participate in, and to be
sufficiently informed on, decisions concerning fundamental corporate
changes such as: 1) amendments to the statutes, or articles of incorporation
or similar governing documents of the company; 2) the authorization of
additional shares; and 3) extraordinary transactions, including the transfer of
all or substantially all assets, that in effect result in the sale of the company.
VMCI, however, didnt address some of the basic rights of its shareholders
and its key ownership functions. It didnt obtain relevant and material
information on the corporation on a timely and regular basis. If it has done
such, then shareholders would assess the performance of the corporation
and might come up with possible remedies that might sustain its financial
position and resolve its financial distress. Share in the profits of the
corporation was also claimed as an issue in relation to the deprivation of the
shareholders preemptive rights, hence, being unable to exercise such right
would result to a decrease in shares ownership which means that the
dividends that they are about to receive would be lesser.

In Principle 3 of the OECD principles, the corporate governance framework should ensure the equitable
treatment of all shareholders, including minority and foreign shareholders. All shareholders should have
the opportunity to obtain effective redress for violation of their rights. In Section A-1, the shareholders
should have the opportunity to participate in decisions in changes in voting rights. The shareholders of
VMCI opposed the plan of the ManCom to prevent them in exercising their pre-emptive right stating that
the ManCom cannot dictate and all decisions are alone made by the shareholders