Securities and Exchange
Commission full payment in favor of the borrower.
(SEC Reorganization Act)
[P.D. 902-A as amended]
THE SEC EXERCISES SUPERVISION
AND REGULATION OVER THE
FOLLOWING:
1. Corporation, association,
partnerships, grantees of primary
franchise from the state.
2. All investment houses under the
Investment Houses Act
Investment houses- entity engaged in
the business of underwriting
Securities underwriting- business of
guaranteeing the sale of any class of
securities in the Philippines
*note: all license underwriters are also
securities dealers
3. All financing Companies
-jointly exercised with the BSP
Financing- specific kind of
agreement for consumer goods
similar agricultural equipment
facilities
- Originally retail loan to
users or consumer
Financial Leasing- specie of financing;
It is a service where the financing
company can advance the purchase
price of certain goods, merchandize and
equipment and the borrower has 2
options:
a. pay back the financing
company, the amount advanced and the
monthly installment at a stipulated
period and ownership shall vest upon
b. the borrowers pays the
periodic monthly rentals for the use of
the goods, merchandise, or equipment
for a specific period.
-ownership is retained by the
financing company and the borrower is
a mere lease
*financial leasing is especially favorable
to those who want to start a business.
4. All entities engage in securities
transactions:
a. Securities Dealer- one who
buys, sells, and trade
securities for its own account
with the intent of reselling the
same in its ordinary course if
business
-makes profit out of increment
b. Securities Broker- one who
buys and sells securities for
the account of others
-makes profit by way of
commissions
loan
and c. Stock Exchanges- facility for
and buyers and sellers if securities
to be brought together with
end- the assistance of broker
-public market for stock
exchanges
d. Other SROs (Self-
regulatory Origins)
-may be a stock exchange or
clearing houses or any other
entity that facilitates the
consummation of securities
transactions, including the
 settlement of payment and
delivery of certificates
-must be accredited as such
by the SEC
POWERS OF SEC:
1. Enact and promulgate implementing
rules and regulations
2. Conduct investigation
-it may issue subpoena, deputize
other government agencies or offices,
impose administrative fines and
penalties
-it does not have prosecutorial
powers
3. Issue, suspend, or revoke Certificate
of registration
-it is concurrent with the court through
quo warranto
Cases:
The authority of the SEC and the
manner by which it can issue cease and
desist orders are provided in Section 64
of the SRC. The law is clear on the point
that a cease and desist order may be
issued by the SEC motu proprio, it being
unnecessary that it results from a
verified complaint from an aggrieved
party. A prior hearing is also not required
whenever the Commission finds it
appropriate to issue a cease and desist
order that aims to curtail fraud or grave
or irreparable injury to investors. It is
beyond dispute that Primasa plans were
not registered with the SEC. Primanila
was then barred from selling and
offering for sale the said plan product. A
continued sale by the company would
operate as fraud to its investors, and
would cause grave or irreparable injury
or prejudice to the investing public,
grounds which could justify the issuance
of a cease and desist order under
Section 64 of the SRC. (Primanila
Plans, Inc., Herein Represented by
Eduardo S. Madrid vs. Securities and
Exchange Commission, G.R. No.
193791, August 6, 2014.)
As an administrative agency with both
regulatory and adjudicatory functions,
the SEC was given the authority to
delegate some of its functions to, inter
alia, its various operating departments,
such as the SECCFD, the Enforcement
and Investor Protection Department,
and the Company Registration and
Monitoring Department. In this case, the
Court disagrees with the findings of both
the SEC En Banc and the CA that the
Revocation Order emanated from the
SEC En Banc. Rather, such Order was
merely issued by the SEC-CFD as one
of the SECs operating departments. In
other words, the Revocation Order is
properly deemed as a decision issued
by the SEC-CFD as one of the
Operating Departments of the SEC, and
accordingly, may be appealed to the
SEC En Banc, as what Cosmos properly
did in this case. Perforce, the SEC En
Banc and the CA erred in deeming
Cosmoss appeal as a motion for
reconsideration and ordering its
dismissal on such ground. (COSMOS
BOTTLING CORPORATION vs.
COMMISSION EN BANC of the
SECURITIES AND EXCHANGE
COMMISSION (SEC) and JUSTINA F.
CALLANGAN, in her capacity as
Director of the Corporation Finance
Department of the SEC, G.R. No.
199028, November 12, 2014)
Composition of SEC
-compose of 5 members - In cases when there is an
-at least three must be a member of the allegation of corporate fraud
Philippine Bar
Corporate fraud- devises or
Quasi-Judicial Powers of SEC schemes amounting to fraud or
-transferred already to Special misrepresentation committed by
Commercial Court which is a branch of corporate directors, officers, or trustees
RTC designated as such. including their agencies.

Case: -e.g. recovery of sum of

money/property, specific performance,
Upon the enactment of Republic Act No. breach of contract
8799, the jurisdiction of the SEC over -includes all fraud under
intracorporate controversies and the the guise of corporation regardless of
the amount.
other cases enumerated in Section 5 of
P.D. No. 902-A was transferred to the c. Shareholders, members,
Regional Trial Court. The jurisdiction of directors, trustees and other officers
the Sandiganbayan has been held not to
extend even to a case involving a Cases:
sequestered company notwithstanding
that the majority of the members of the It is essential for the complaint to show
on its face what are claimed to be the
board of directors were PCGG
fraudulent corporate acts if the
nominees. (Roberto L. Abad, Manuel complainant wishes to invoke the courts
D. Andal, Benito V. Araneta, Philip G. special commercial jurisdiction. This is
Brodett, Enrique L. Locsin and because fraud in intra-corporate
Roberto V. San Jose vs. Philippine controversies must be based on
Communications Satellite devises and schemes employed by, or
any act of, the board of directors,
Corporation, G.R. No. 200620, March
business associates, officers or
18, 2015) partners, amounting to fraud or
misrepresentation which may be
INTRA-CORPORATE
detrimental to the interest of the public
CONTROVERSIES
and/or of the stockholders, partners, or
members of any corporation,
Two tiered test to determine WON the
partnership, or association, as stated
Special Commercial court has
under Rule 1, Section 1 (a)(1) of the
jurisdiction
Interim Rules. The act of fraud or
misrepresentation complained of
A. Relationship Test
becomes a criterion in determining
-corporation vis--vis the:
whether the complaint on its face has
a. State
merits, or within the jurisdiction of
-e.g. quo warranto petition to
special commercial court, or merely a
revoke the Certificate of Registration in
nuisance suit. (Simny G. Guy,
case of involuntary dissolution
Geraldine G. Guy, Gladys G. Yao and
b. Public
the Heirs of the late Grace G. Cheu
vs. Gilbert Guy/Simny G. Guy,
Geraldine G. Guy, Gladys G. Yao and
the heirs of the late Grace G. Cheu
vs. The Hon. Ofelia C. Calo, and
Gilbert Guy G.R. No. 189486/G.R. No.
189699. September 5, 2012
An intra-corporate dispute is understood
as a suit arising from intra-corporate
relations or between or among
stockholders or between any or all of
them and the corporation. Applying
what has come to be known as the
relationship test, it has been held that
the types of actions embraced by the
foregoing definition include the following
suits: (a) between the corporation,
partnership or association and the
public; (b) between the corporation,
partnership or association and its
stockholders, partners, members, or
officers; (c) between the corporation,
partnership or association and the State
insofar as its franchise, permit or license
to operate is concerned; and, (d) among
the stockholders, partners or associates
themselves. As the definition is broad
enough to cover all kinds of
controversies between stockholders and
corporations, the traditional
interpretation was to the effect that the
relationship test brooked no distinction,
qualification or any exemption
whatsoever.
However, the unqualified application of
the relationship test has been modified
on the ground that the same effectively
divests regular courts of jurisdiction over
cases for the sole reason that the suit is
between the corporation and/or its
corporators. It was held that the better
policy in determining which body has
jurisdiction over a case would be to
consider not only the status or
relationship of the parties but also the
nature of the question that is the subject
of their controversy. Under the nature of
the controversy test, the dispute must
not only be rooted in the existence of an
intra-corporate relationship, but must
also refer to the enforcement of the
parties correlative rights and obligations
under the Corporation Code as well as
the internal and intra-corporate
regulatory rules of the corporation. The
combined application of the relationship
test and the nature of the controversy
test has, consequently, become the
norm in determining whether a case is
an intra-corporate controversy or is
purely civil in character. Strategic
Alliance Development Corporation
vs. Star Infrastructure Development
Corporation Corporation, BEDE S.
Tabalingcos, et al., G.R. No. 187872,
November 17, 2010.
B. Nature of the Controversy Test
-ask whether the case would
survive without the intra-corporate
relationship between the parties
-if yes: not an intra-corporate
controversy, it is merely incidental to the
issue
-if no: it is an intra-corporate
controversy
*The dispute must revolve around the
enforcement of rights and obligations
under:
a. the corporation code; or
b. the articles or by by-laws
When does intra-corporate
relationship begin?
1. Stock- from the perfection of
the subscription contract
whether or not there is a
payment.
 2. Non-stock- from the moment
a person is admitted as a
member in accordance with
the qualifications
3. Transferee of Shares of
Stock- from registration of the
transfer in the books of the
corporation
Cases:
The law is clear that in order for a
transfer of stock certificate to be
effective, the certificate must be properly
indorsed and that title to such certificate
of stock is vested in the transferee by
the delivery of the duly indorsed
certificate of stock. Since the certificate
of stock covering the questioned 1,500
shares of stock registered in the name
of the late Juan Chuidian was never
indorsed to the petitioner, the inevitable
conclusion is that the questioned shares
of stock belong to Chuidian. (Enrique
Razon vs. Intermediate Appellate
Court and Vicente B. Chuidian, in his
capacity as Administrator of the
Estate of the Deceased Juan T.
Chuidian, G.R. No. 74306, 16 March
1992)
Upon the enactment of Republic Act No.
8799, the jurisdiction of the SEC over
intracorporate controversies and the
other cases enumerated in Section 5 of
P.D. No. 902-A was transferred to the
Regional Trial Court. The jurisdiction of
the Sandiganbayan has been held not to
extend even to a case involving a
sequestered company notwithstanding
that the majority of the members of the
board of directors were PCGG
nominees. (Roberto L. Abad, Manuel
D. Andal, Benito V. Araneta, Philip G.
Brodett, Enrique L. Locsin and
Roberto V. San Jose vs. Philippine
Communications Satellite
Corporation, G.R. No. 200620, March
18, 2015)
When does intra-corporate
relationship ends?
1. Stock- from the moment that
the transfer of shares to
another has been recorded
2. Non-stock- upon full payment
to the shareholder exercising
his rights of appraisal or in
some reasons the shares of
the shareholder were
reacquired by the corporation
to become treasury shares
Cases:
An action to correct entries in the
General Information Sheet of the
Corporation; to be recognized as a
stockholder and to inspect corporate
documents is an intra-corporate dispute
which does not constitute a continuation
of corporate business. As such,
pursuant to Section 145 of the
Corporation Code, this action is not
affected by the subsequent dissolution
of the corporation. The dissolution of the
corporation simply prohibits it from
continuing its business. However,
despite such dissolution, the parties
involved in the litigation are still
corporate actors. The dissolution does transfer book, which duty is ministerial
not automatically convert the parties into on its part, is to render nugatory and
total strangers or change their intra- ineffectual the spirit and intent of Section
corporate relationships. Neither does it 63 of the Corporation Code. (Rural
change or terminate existing causes of Bank of Salinas, Inc. vs. Securities
action, which arose because of the and Exchange Commission, et al.,
corporate ties between the parties. G.R. No. 96674, June 26, 1992)
Thus, a cause of action involving an
intra-corporate controversy remains and
A.M. NO. 01-2-04-SC:
must be filed as an intracorporate [IN RE: PROPOSED INTERIM RULES
dispute despite the subsequent OF PROCEDURE GOVERNING
dissolution of the corporation. (Aguirre INTRA-CORPORATE
vs. FQB +7, Inc, GR No. 170770, CONTROVERSIES UNDER RA 8799]
January 9 2013.)
CASES COVERED:
Conformably with Section 25 of the
Corporation Code, a position must be 1. Derivative suit to enforce
expressly mentioned in the By-Laws in personal liability of erring
directors and officers.
order to be considered as a corporate
2. Action for balances and
office. Thus, the creation of an office subscription.
pursuant to or under a By-Law enabling 3. All actions pertaining to
provision is not enough to make a annulment of contract of self-
position a corporate office. (Matling dealing director at the instance of
Industrial and Commercial the corporation.
Corporation, et al. vs. Ricardo R. 4. Actions to annul the retention of
profits of designated director.
Coros, G.R. No. 157802, October 13,
5. Mandamus to compel the
2010) declaration and payments of
dividends
Where a stockholder executed a Special
6. Mandamus to compel the
Power of Attorney in favor of his wife registration of shares or transfer
who, by virtue of said SPA, sold the thereof or open books or records
shares, the corporation cannot refuse to for inspection.
register the shares in favor of the 7. All election disputes within the
assignee on the ground that upon the corporation
death of the stockholder, the shares of
Reglementary Period
stock became the property of his estate -period to answer: 15 days
which should be settled and liquidated -except: election disputes:
first before any distribution could be 10 days.
made. For the petitioner Rural Bank of
Salinas to refuse registration of the *note: criminal cases arising from acts
transferred shares in its stock and or omissions done by corporate agents
are not intra corporate controversy

Cases:
Not every purchaser of a condominium
unit is a shareholder in the corporation.
The Mater Deed determines when
ownership of the unit and participation in
the corporation vests in the purchaser.
The share of stock appurtenant to the
unit win be transferred accordingly to
the purchaser of the unit only upon full
payment of the purchase price at which
time he will also become the owner of
the unit. Consequently, even under the
contract, it is only the owner of a unit
who is a shareholder of the
Condominium Corporation. Inasmuch as
owners is conveyed only upon full
payment of the purchase price, it
necessarily follows that a purchaser of a
unit who has not paid the full purchase
price thereof is not The owner of the unit
and consequently is not a shareholder
of the Condominium Corporation. In this
case, the Master Deed provides
that ownership is transferred only upon
full payment of the purchase price.
Private respondents have not yet fully
paid the purchase price, hence they are
not shareholders and the SEC has no
jurisdiction over the claims. (SUNSET
VIEW CONDOMINIUM
CORPORATION, petitioner, vs. THE
HON. JOSE C. CAMPOS, JR. OF THE
COURT OF FIRST INSTANCE, and
AGUILAR-BERNARES REALTY,
respondents. (G.R. No. L-52361 April
27, 1981)
The award to petitioners of the
management and operation of its
canteen at a monthly rental of P80.00,
even if awarded to a stockholder, is
outside or merely incidental to the
central operations of an educational
institution. Petitioners thus convincingly
argue that "the controversy is not one
where petitioners are bringing the action
as stockholders but rather as operators
of the canteen under an agreement with
said Board. In short, the cause of action
here is for damages arising from a
violation of a contract of management
operation of the College canteen (JOSE
PENEYRA and MILAGROS
CALDERON vs. HON. INTERMEDIATE
APPELLATE COURT and
HONORABLE GODOFREDO
RILLORAZA, G.R. No. L-68935
January 22, 1990)