G.R. No. 171815, 7 August 2007


Union Cement Corporation (UCC), a publicly-listed company, has two principal stockholders – UCHC, a non-listed company, with shares amounting to 60.51%, and petitioner Cemco with 17.03%. Majority of UCHC’s stocks were owned by BCI with 21.31% and ACC with 29.69%. Cemco, on the other hand, owned 9% of UCHC stocks. In a disclosure letter, BCI informed the PSE that it and its subsidiary ACC had passed resolutions to sell to Cemco BCI’s stocks in UCHC equivalent to 21.31% and ACC’s stocks in UCHC equivalent to 29.69%.

The SEC en banc had resolved that the Cemco transaction was not covered by the tender offer rule. Feeling aggrieved by the transaction, respondent National Life Insurance Company of the Philippines, Inc., a minority stockholder of UCC, sent a letter to Cemco demanding the latter to comply with the rule on mandatory tender offer. Cemco, however, refused.

Respondent. filed a complaint with the SEC asking it to reverse its Resolution and to declare the purchase agreement of Cemco void and praying that the mandatory tender offer rule be applied to its UCC shares.

The SEC ruled in favor of the respondent by reversing and setting aside its Resolution and directed petitioner Cemco to make a tender offer for UCC shares to respondent and other holders of UCC shares similar to the class held by UCHC in accordance with Section 9(E), Rule 19 of the Securities Regulation Code.


1. Whether or not the SEC has jurisdiction over respondent’s complaint and to require Cemco to make a tender offer for respondent’s UCC shares.
2. Whether or not the rule on mandatory tender offer applies to the indirect acquisition of shares in a listed company, in this case, the indirect acquisition by Cemco of 36% of UCC, a publicly-listed company, through its purchase of the shares in UCHC, a non-listed company.


1. As a regulatory agency, it has the incidental power to conduct hearings and render decisions fixing the rights and obligations of the parties. In fact, to deprive the SEC of this power would render the agency inutile, because it would become powerless to regulate and implement the law.

A definite inference may be drawn from the provisions of the SRC that the SEC has the authority not only to investigate complaints of violations of the tender offer rule, but to adjudicate certain rights and obligations of the contending parties and grant appropriate reliefs in the exercise of its regulatory functions under the SRC. Section 5.1 of the SRC allows a general grant of adjudicative powers to the SEC which may be implied from or are necessary or incidental to the carrying out of its express powers to achieve the objectives and purposes of the SRC. We must bear in mind in interpreting the powers and functions of the SEC that the law has made the SEC primarily a regulatory body with the incidental power to conduct administrative hearings and make decisions. A regulatory body like the SEC may conduct hearings in the exercise of its regulatory powers, and if the case involves violations or conflicts in connection with the performance of its regulatory functions, it will have the duty and authority to resolve the dispute for the best interests of the public.

This Honorable Commission is a highly specialized body created for the purpose of administering, overseeing, and managing the corporate industry, share investment and securities market in the Philippines. By the very nature of its functions, it dedicated to the study and administration of the corporate and securities laws and has necessarily developed an expertise on the subject. Based on said functions, the Honorable Commission is necessarily tasked to issue rulings with respect to matters involving corporate matters and share acquisitions. Verily when this Honorable Commission rendered the Ruling that ” … the acquisition of Cemco Holdings of the majority shares of Union Cement Holdings, Inc., a substantial stockholder of a listed company, Union Cement Corporation, is not covered by the mandatory tender offer requirement of the SRC Rule 19,” it was well within its powers and expertise to do so. Such ruling shall be respected, unless there has been an abuse or improvident exercise of authority.

2. Tender offer is a publicly announced intention by a person acting alone or in concert with other persons to acquire equity securities of a public company. A public company is defined as a corporation which is listed on an exchange, or a corporation with assets exceeding ₱50,000,000.00 and with 200 or more stockholders, at least 200 of them holding not less than 100 shares of such company. Stated differently, a tender offer is an offer by the acquiring person to stockholders of a public company for them to tender their shares therein on the terms specified in the offer. Tender offer is in place to protect minority shareholders against any scheme that dilutes the share value of their investments. It gives the minority shareholders the chance to exit the company under reasonable terms, giving them the opportunity to sell their shares at the same price as those of the majority shareholders.

The SEC and the Court of Appeals accurately pointed out that the coverage of the mandatory tender offer rule covers not only direct acquisition but also indirect acquisition or “any type of acquisition.” The legislative intent of Section 19 of the Code is to regulate activities relating to acquisition of control of the listed company and for the purpose of protecting the minority stockholders of a listed corporation. Whatever may be the method by which control of a public company is obtained, either through the direct purchase of its stocks or through an indirect means, mandatory tender offer applies.

*Case Digest by Meriam Rika R. Wong, JD – 4, Andres Bonifacio College, SY 2019-2020