PROVIDING ADMINISTRATIVE PENALTIES FOR VIOLATION OF CERTAIN PROVISIONS OF DEPARTMENT CIRCULAR NO. 98-03-004, AS AMENDED BY DEPARTMENT CIRCULAR NO. 2001-05-002 IN CONNECTION WITH…

WHEREAS, Section 22 of
R.A. 8479 (“Downstream Oil Industry Deregulation Act of 1998”) has
required that “any person or entity engaged in the oil refinery business
shall make a public offering through the stock exchange of at least ten
percent (10%) of its common stock within a period of three (3) years
from the effectivity of this Act or the
commencement of its refinery operations”, except that any company which
has made the requisite public offering before the effectivity of the Act shall be exempt from such requirement;

WHEREAS, said mandate
under Section 22 of R.A. 8479 is reiterated under Section 25 of
Department Circular No. 98-03-004, dated 11 March 1998, as amended by
Department Circular No. 2001-05-002, dated 08 May 2001 which provides
for the Rules and Regulations implementing R.A. 8479;

WHEREAS, Department of
Justice (DOJ) Opinion No. 6, s. 2001, dated 12 February 2001 reiterated
the conclusion that the intention of the law is to broaden the base of
ownership of oil companies and that the three-year period fixed therein
should be construed liberally, hence, the initial public offering (IPO)
could still be conducted after the lapse of the said three-year period;

WHEREAS, to ensure the
implementation of said IPO, within the context of the intention of the
Downstream Oil Industry Deregulation Act of 1998, there is a need to
clarify when sanctions are to be applied in case of violations of the
requirements of Section 25 of Department Circular No. 98-03-004, as
amended by Department Circular No. 2001-05-002;

NOW, THEREFORE, the following supplemental rules are hereby promulgated:

SECTION 1.       Section
25-A c. of Department Circular No. 98-03-004, as amended by Department
Circular No. 2001-05-002 is hereby further amended to read as follows:

“c.     Power of DOE to Direct Conduct of IPO
— Should the Secretary of Energy determine that the socio-economic,
political, financial and technical data, and other conditions warrant
the conduct of an IPO, as guided by the assessment and determination of
an independent financial adviser mutually acceptable to the DOE and the
offer or, he shall direct the offer or to prepare for and/or conduct an
IPO within a reasonable period.”

SECTION 2.       A
new paragraph is hereby incorporated in Section 25-A of Department
Circular No. 98-03-004, as amended by Department Circular No.
2001-05-002 to read as follows:

“d.     Penalties
— Any person or entity violating the directive of the Secretary of
Energy provided in Section 25-A c. hereof shall be fined in the amount
of Fifty Thousand Pesos (P50,000.00) for every day of delay in the
conduct of its IPO reckoned from the date determined by the Secretary of
Energy for the holding of said IPO.”

SECTION 3.       This
Department Circular shall take effect immediately upon its complete
publication in at least two (2) newspapers of general circulation.

Adopted: 25 October 2002

(SGD.) VINCENT S. PEREZ, JR.
Secretary