SEC slaps fines for failed attempt to take over Medical City

Published November 26, 2019, 12:00 AM

by manilabulletin_admin

By James A. Loyola

The Securities and Exchange Commission (SEC) has slapped penalties currently amounting to ₱50.25 million against the majority shareholders of Professional Services, Inc. (PSI) for having surreptitiously taken over the company behind The Medical City.

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In a resolution issued on November 22, the SEC special hearing panel (SHP) found Viva Healthcare Limited, Viva Holdings (Philippines) Pre. Ltd. and Felicitas Antoinette, Inc. (FAI) liable for failing to disclose their acquisition of more than 5 percent of PSI as required by the Securities Regulation Code (SRC).

The SHP likewise held Fountel Corporation alongside Viva Healthcare, Viva Holdings and FAI accountable for failure to disclose their plan to acquire 35 percent of PSI and make a tender offer.

It was also found that they performed acts that were fraudulent, deceptive or manipulative through the omission to state a material fact.

For violation of Section 18 of the SRC, the SHP imposed the penalty of ₱1 million plus ₱2,000 for each day of continuing violation from August 1, 2013 up to the time that SEC Form 18-A is filed.

Meanwhile, each respondent must pay ₱1 million plus ₱2,000 for each continuing violation, from July 31, 2013 to May 15, 2018 for violating SRC Rule 19.2.A, in relation to Rules 19.3.A and 19.3.B. The SHP imposed the same penalty for the respondents’ violation of SRC Rule 19.12.

The SEC on September 6, 2018, resolved to create the SHP after several shareholders, including PSI Chief Executive Officer Alfredo R.A. Bengzon, questioned the acquisition by the respondents of the company’s majority shares.

The SHP filed a formal charge against Viva Healthcare, Viva Holdings, FAI and Fountel on November 8, 2018 for violation of Sections 18, 19 and 26 of the SRC and its Amended IRR.

In its resolution, the SHP found Viva Healthcare, Viva Holdings, FAI and Fountel to have acquired majority of PSI shares through omission of material facts, which misled the board of directors (BOD) and other shareholders to approve increases in the company’s capital stock and allow the respondents to increase their shareholdings.

Viva Healthcare, Viva Holdings, FAI and Fountel managed to increase their collective shareholding to over 50 percent largely through subscriptions during the company’s capital stock increases in November 2013, July 2014, August 2017 and October 2017, from 1 million to 2 million shares.

The respondents intended to acquire 35 percent or more of the equity shares in PSI as early as 2013.

However, the oneness of respondents, including their plan to acquire majority of the shares in PSI, was not communicated or could not be inferred during the BOD meetings, where increases in the company’s capital stock were discussed and approved.

Unknowingly to PSI, Viva Healthcare, Viva Holdings, FAI and Fountel on August 1, 2013 entered into a Cooperation and Shareholders Agreement (CSA), where the respondents agreed that Viva and Fountel groups would bring their interests in PSI to at least 25 percent and 25.1 percent, respectively.

They further agreed to “subsequently continue to work together to increase their respective shareholdings in PSI.”

The directors and other shareholders of PSI only learned about the CSA in 2017, as a consequence of a failed negotiation for Ayala Healthcare Holdings, Inc. to acquire shares in the company.