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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

Crescent Bank, Inc., a domestic bank, is currently 56% Filipino-owned and 44% foreign-owned, with 120,000,000 voting shares outstanding. Crescent Bank proposes to issue 25,000,000 new voting common shares to a foreign investor to fund a nationwide expansion, which would raise foreign ownership to about 53% of voting shares. (a) Identify the controlling doctrine on state policy governing banks under RA 7653, as amended by RA 11211, and the BSP’s role in enforcing it. (b) Distinguish the controlling rule on foreign participation in banks and the scope of BSP licensing/supervisory authority to enforce ownership limits. (c) Based on these authorities and the facts, should BSP approve Crescent Bank’s proposed share issue? Explain the rationale, and state permissible alternatives for Crescent Bank to raise funds without violating ownership limits.

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The policy forbids any foreign presence in domestic banks entirely; ownership and control must remain 100% Filipino; BSP’s licensing power is not involved in equity issuances that do not affect capital adequacy. BSP may approve if the foreign investor’s stake is limited to non-voting shares, so that voting rights remain within the 40% cap and the bank’s compliance with the state policy is preserved. BSP may approve if the bank uses a trust arrangement where a Filipino trustee holds the voting shares and retains control; however, this would require rigorous compliance with the anti-dummy provisions and may still be contested. BSP should not approve the proposed share issue because it would push foreign voting shares beyond the 40% cap; the bank must maintain Filipino control over voting shares; the BSP’s role is to license and supervise banks and enforce the ownership limits, and permissible alternatives include raising funds through Filipino-only equity or debt financing, or a staged offering to Filipino investors while preserving voting-control.

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