Philippine Veterans Bank Act

Case Overview and Summary

Summary of the Philippine Veterans Bank Act:

Declaration of Policy (Section 2):
- Promote welfare of Filipino war veterans and retired military personnel by extending support for livelihood and income-generating projects through the revitalized Philippine Veterans Bank (Veterans Bank).

Corporate Powers and Duties (Section 4):
- The Veterans Bank shall have powers to:
• Promulgate bylaws (4a)
• Adopt and use a seal (4b)
• Sue and be sued (4c)
• Carry on a trust business (4d)
• Grant loans and advances, with preference to veterans (4e)
• Invest in stocks and other instruments (4f)
• Issue bonds and certificates of indebtedness (4g)
• Contract obligations and enter agreements (4h)
• Appoint and dismiss officers and employees (4i)
• Create and make equity investments in subsidiaries and affiliates (4j)
• Exercise powers granted in this Act and incidental powers for general banking (4k)
• Exercise general powers under the Revised Corporation Code and General Banking Law (4l)

Authorized Capital Stock (Section 5):
- Capital stock of P10 billion divided into 75 million common shares and 25 million preferred shares with par value of P100 each (5a)
- Common shares include original shares subscribed by government for World War II veterans, stock dividends, and shares from capital increases (5b)
- Preferred shares include original shares subscribed by veterans and stock dividends (5b)
- Unsubscribed shares to be opened for subscription by veterans and their heirs (5b)
- Majority of common shares must be held by veterans (5b)
- Board of Trustees of Veterans of World War II (BTVWW II) to be trustee of undelivered shares (5c)

Definition of Veterans (Section 6):
- "Veteran" includes persons who served in military units in the Philippines during World War II, recognized by the Philippines or U.S. (6a)
- Also includes widows, orphans, and compulsory heirs of deceased veterans (6a)
- Post-World War II veterans and AFP retirees can enjoy benefits after investing in the bank (6a)
- "Organized veterans' organizations" are those recognized by PVAO and AFP (6b)
- Equal share in benefits and ownership for veterans, widows, orphans, and heirs (6c)

Loans, Investments, and Liabilities (Section 7):
- The bank can grant loans for enterprises, with preference to veteran applicants (7a)
- The bank can invest in stocks and other instruments (7b)
- The bank can issue bonds and certificates of indebtedness (7c)

Board of Directors (Section 8):
- 15-member Board of Directors, 5 of whom are independent directors (8a)
- Directors elected annually by stockholders, in proportion to shareholdings of veterans and non-veterans (8a)
- Directors must have business training/experience in banking and finance, and meet BSP qualifications (8a)
- No director, officer, or employee of another bank can be on the Board, except independent directors (8a)
- Directors receive per diem for meetings attended, set within banking industry rates (8a)
- Board elects Chairperson, Vice-Chairperson, and Secretary (8b)

Powers and Functions of Board of Directors (Section 9):
- Formulate policies and adopt bylaws, rules and regulations (9a)
- Determine organization and create necessary departments (9b)
- Establish branches or agencies in other countries, subject to Monetary Board approval (9c)
- Create executive committee and other committees (9d)

President and Vice Presidents (Section 10):
- President is chief operating officer, chosen by Board of Directors (10)
- President assisted by Vice Presidents elected and removed by Board (10)
- President must have 10 years' experience in banking and finance as top executive (10)
- Vice Presidents must have 5 years' experience in banking and finance (10)
- Salaries of President and Vice Presidents set by Board within reasonable limits (10)

Duties and Powers of President (Section 11):
- Execute policies, measures, orders, and resolutions approved by Board (11)
- Direct and supervise operations and administration of bank (11)
- Approve loans, investments, and instruments up to 5% of paid-up capital and surplus (11a)
- Make contracts on behalf of bank with Board's advice and consent (11b)
- Report monthly to Board on operations and suggest changes (11c)
- Exercise other powers directed by Board (11d)

Legal Counsel and Bank Auditor (Sections 12-13):
- The bank shall have its own legal department and appoint a chief and members (12)
- The bank shall have its own auditing department, with head appointed by Board preferably from among veterans who are CPAs (13)
- Auditor shall report to Board and regulators on bank's condition, with frequency set by Board (13)

Appointments, Salaries of Other Officers (Section 14):
- Other officers appointed and removed by Board on recommendation of human resources committee (14)
- Preference given to veterans and their heirs who meet qualifications (14)
- Duties and compensation of officers set by human resources committee with Board approval (14)

Supervision and Examination by BSP (Section 15):
- The bank shall be subject to supervision and examination by BSP (15)

Prohibition on Owning Stock or Incurring Debt (Section 16):
- Secretary of Finance, BSP Governor, Monetary Board members, and bank's Head of Auditing Department (except if veteran stockholder) are prohibited from owning stock in or being indebted to the bank (16)

Loans to Officers, Directors, Employees (Section 17):
- The bank cannot grant loans to its directors, officers, employees, or agents (17)
- No loans to corporations where a director is a shareholder, agent or employee, except by unanimous Board vote excluding interested member (17)
- Total liabilities of such corporations cannot exceed 5% of bank's paid-up capital and surplus (17)

Real Estate Acquisition and Disposal (Sections 18-19):
- The bank can acquire real estate necessary for its business or from debt collection (18)
- Real estate acquired from debt collection must be sold within 5 years (18)
- Mortgagor has 1 year after foreclosure sale to redeem property by paying amount fixed by court, interest, costs, and expenses (19)

Additional Securities, Disposal, Maturity, Deficiency (Sections 20-21):
- Bank's right to demand additional securities, dispose of securities, advance maturity of credits in case of loss/decline in collateral value, default, or non-performance, and collect deficiency shall be subject to General Banking Law and rules (20)
- If sale proceeds of collateral don't cover full loan amount plus interest and charges, bank may proceed against debtor for difference (21)

Prohibition on Fees for Securing Loans (Section 22):
- No fee, charge or commission shall be exacted for obtaining loans by any director, officer, employee, or agent of the bank (22)
- Violation punishable by fine up to P100,000 or imprisonment up to 5 years, or both (22)

Allocation of Net Profit and Retained Earnings (Section 23):
- 20% of net profit shall accrue to reserve account (23a)
- Remaining net profit after reserve deduction shall be used to pay guaranteed earnings of preferred shares and 10% dividends on common shares (23b)
- 20% of remaining net profit after dividends, or P30 million (whichever is lower), shall be paid to BTVWW II for grants-in-aid to veterans and organizations, subject to increase and auditing (23)
- Remaining profits at disposition of Board in accordance with laws and regulations (23)

Board of Trustees of Veterans (Section 24):
- When shareholdings of post-World War II veterans and AFP retirees surpass those of World War II veterans, BTVWW II shall be reorganized into Board of Trustees of Veterans (24)
- 11-member Board elected by stockholders from among all veterans (24)
- Board elects Chairperson and Vice-Chairperson, serves without compensation except for expenses (24)
- Board appoints Secretary and other officials/employees with reasonable compensation (24)
- All powers, privileges, duties and responsibilities of previous BTVWW II transferred to new Board (24)

Term of Legal Existence (Section 25):
- Legal existence of Veterans Bank under this Act shall be perpetual (25)

Prohibition on Use of "Veterans" (Section 26):
- Banks other than Veterans Bank and those already licensed with "veterans" in name are prohibited from using the word "veterans" (26)
- Violation subject to fine of at least P10,000 per day, enforced by Veterans Bank (26)

Penalties for Violation (Section 27):
- Any director, officer, employee, or agent of bank who violates or permits violation of this Act, or any person aiding/abetting violation, shall be punished by fine up to P100,000 or imprisonment up to 5 years, or both (27)

Authority as Government Depository (Section 28):
- Secretary of Finance, National Treasurer, city/municipal treasurers, and custodians of public funds are authorized to deposit government or corporate funds with Veterans Bank as an official government depository (28)

Articles of Incorporation (Section 29):
- This Act shall be deemed the statutory articles of incorporation or charter of Veterans Bank (29)
- Veterans Bank shall continue to be deemed registered and authorized to operate as a private commercial bank from date of this Act's approval (29)

Separability Clause (Section 30):
- If any provision is held unconstitutional or invalid, other provisions shall remain valid (30)

Repealing Clause (Section 31):
- Republic Act No. 3518 (as amended) is repealed (31)
- Provisions of Republic Act No. 7169 and existing Articles of Incorporation inconsistent with this Act are repealed or modified (31)
- Insofar as not inconsistent with this Act, operations, capital structure changes, license upgrade/downgrade, address change, and other amendments shall follow relevant laws (31)
- Inconsistent provisions of existing bylaws are repealed or modified (31)
- All other inconsistent laws, acts, orders, rules and regulations are repealed or modified (31)

Effectivity (Section 32):
- This Act shall take effect 15 days after publication in Official Gazette or newspaper of general circulation (32)