SECTION 1. Section seven of Republic Act Numbered Seven
Hundred and Twenty, as amended, is hereby further amended to read as
follows:
"SEC. 7. To provide supplemental capital to any Rural Bank
until it has accumulated enough capital of its own to stimulate private
investments in Rural Banks, the Development Bank of the Philippines shall, upon
certification of the Monetary Board which shall be final, of the existence of
such need, subscribe within thirty days to capital stock or any Rural Bank from
time to time in an amount equal to the total equity investment of the private
shareholders which shall be paid in full at the time of subscription but not
exceeding one million pesos: Provided, however, That shares of stock
issued to the Development Bank of the Philippines, pursuant to this section,
may, at any time, be paid off at par and retired in whole or in part if, in the
opinion of the Monetary Board, the Rural Bank has accumulated enough capital
strength to permit retirement of such shares; or if an offer is received from
private sources to replace the equity in investments of the Development Bank of
the Philippines with an equivalent investment or more in the common stock of
such Bank. In case of such retirement of stock or replacement of equity
investments of the Development Bank of the Philippines, the registered private
shareholders of the Rural Bank shall have the right of pre-emption within one
year from date of offer in proportion to their respective holdings.
Stock held by the Development Bank of the Philippines, under the terms of
this section, shall be made preferred only as to assets upon liquidation and
without the power to vote and shall share in dividend distributions not
exceeding two percent thereof without preference: Provided, however,
That if such stock of the Development Bank of the Philippines is sold to private
shareholders, the same shall be converted automatically into common stock of the
class provided for in section nine: Provided, further, That pending the
amendment on the Articles of Incorporation of the Rural Bank, if necessary, for
the purpose of reflecting the conversion into common stock of the referred stock
sold to private shareholders, the transfer shall be recorded by the Rural Bank
in the stock and transfer book and such shareholders shall thereafter enjoy all
the rights and privileges of common stockholders. The preferred stocks so
transferred shall be surrendered and cancelled and the corresponding common
stocks shall be issued.
The corporate secretary of the Rural Bank shall submit to the Central Bank
and the Securities and Exchange Commission a report on every transfer of
preferred stock to private shareholders, and such report received by the
Securities and Exchange Commission shall form part of the corporate records of
the Rural Bank. When all the preferred shares of stock of a Rural Bank have been
sold to private shareholders, the articles of Incorporation of the Rural Bank
shall be amended to reflect the conversion of the preferred shares of stock into
common stock. For this purpose, the President, the corporate secretary, and a
majority of the Board of Directors shall issue a certificate that all preferred
shares have been sold and transferred to private shareholders which, together
with a copy of the articles of Incorporation, as amended, duly certified correct
by the said President, corporate secretary, and a majority of the Board of
Directors, shall be filed with the Securities and Exchange Commission, which
shall attach the same to the original Articles of Incorporation on file with
said office.
The Securities and Exchange Commission shall not register the amended
articles of incorporation unless accompanied by the certificate of authority
required under Section nine of Republic Act Numbered Three Hundred and
Thirty-Seven, as amended."
