SEC voids majority share sale in The Medical City

The Securities and Exchange Commission (SEC) has voided a majority share sale in The Medical City operator Professional Services Inc. (PSI) after the regulator found a shareholder group to have been fraudulent in taking control of the company.

In a decision dated August 13, the SEC En Banc nullified the acquisition of PSI shares by Viva Holdings (Philippines) Pre. Ltd., Viva Healthcare Limited, Fountel Corporation, and Felicitas Antoinette Inc. in PSI beginning August 1, 2013.

"The corresponding increases in the authorized capital stock of PSI shall nonetheless remain valid. The shares shall be considered as unsubscribed and allocated for subscription by investors," the SEC said in an emailed statement.

Shares acquired from other shareholders such as Splash Corp., San Miguel Corp., and Insular Life Assurance Co. Ltd. will also be canceled and revert to PSI as treasury shares, which may be sold to other parties.

Once the shares are sold and paid for, the PSI has been instructed to reimburse Viva Holdings, Fountel, and FAI for the nullified subscriptions.

This comes as the En Banc ruled that the shareholder group, or the CSA Parties, violated Section 26 of the Securities Regulation Code which prohibits fraudulent transactions with respect to a sale of securities.

According to the SEC, the parties did not properly communicate in previous board meetings the supposed plan to take over PSI.

"The respondents managed to increase their collective shareholdings in PSI to over 50%, largely through subscriptions in the company’s capital stock increases which were approved by the Commission in November 2013, July 2014, August 2017 and October 2017, respectively," it said.

"However, the oneness of Fountel and the partner, including their plan to acquire control in PSI, was not communicated or could not be inferred during the board meetings, where the company’s capital stock increases were discussed and approved," the SEC added.

Under the SRC, a mandatory tender offer is not required for the purchase of shares from an increase in authorized capital stock or from unissued capital stock, provided that the acquisition will not result in 50% or more ownership of shares.

However, it also requires parties acting as a group, who intend to acquire 35% or more of a public company's equity shares, to disclose such intention.

The SEC said the shareholder group already intended to acquire 35% or more of the equity shares in PSI as early as 2013.

In an executive meeting on April 23, 2013, PSI director Jose Xavier Gonzales, whose family owns and operates FAI and Fountel, advanced the entry of a partner that together with Fountel would eventually own 43% of PSI.

The SEC En Banc said the CSA parties succeeded in convincing the PSI Board and shareholders that their acquisitions were independent of each other, and that it would not lead to management takeover.

"By doing so, the CSA Parties secured for themselves the opportunity of subscribing from the increase in capital/unissued stock or from the outstanding capital stock of PSI, protected such acquisitions, and used the same to their advantage by asserting that they were exempt," it said.

"This scheme afforded and provided the CSA Parties with the time needed to acquire majority shareholdings in PSI (which was their intent and plan from the very beginning) without being questioned," it added.—AOL, GMA News