Department of Agrarian Reform

Section 31 of R.A. No. 6657 provides the legal basis for the corporate landowners to avail themselves of the stock distribution option (SDO) in which corporations that voluntarily divest themselves of a portion of their capital stock, equity or participation in favor of their workers and other qualified beneficiaries can be considered as a form of compliance under the provisions of said Act. In view thereof, the Department of Agrarian Reform (DAR) issued Administrative Order (AO) No. 10, Series of 1988, entitled: "Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Plan Under Section 31 of RA 6657 and Superseding DAR Administrative Order No. 4' 87 (sic)". ASICDH

There are 14 corporations whose SDO plans have been approved by the Presidential Agrarian Reform Council (PARC), one of which, however, has opted to offer its property under Voluntary Offer to Sell (VOS) scheme for CARP coverage. Thus it leaves to 13 the total number of approved SDO plans for monitoring by the DAR involving 7,703 hectares of private agricultural lands.

Over the past years, some issues have been raised as regards the non-compliance by some corporations with the terms and conditions stipulated in the approved SDO plans and Memoranda of Agreement (MOA) signed between the beneficiaries and the corporation. Relative thereto, some petitions/protests were received by the DAR from concerned groups of farmworkers seeking for the revocation of the approved SDO plans.

Hence, this Administrative Order is being issued, as a supplement to A.O. 10, Series of 1988, to provide the procedures and mechanisms for the regular monitoring of the corporation on the terms and conditions set forth in the approved SDO plans and the MOA, periodic audit of books of the corporation [Section 31 (a), R.A. No. 6657], election of the beneficiaries' representatives to the corporation's Board of Directors (BOD) [Section 31 (b), R.A. No. 6657] and transfer of shares of stock [Section 31 (d), R.A. No. 6657]. In lieu of the issuance and revocation of Certificate of Compliance (Sections 11-12, A.O. No. 10, Series of 1988), this AO establishes the procedures to be observed in the disposition and resolution of complaints/protests on reported violations of the SDO plans and MOA.

II. GOVERNING POLICIES AND PRINCIPLES

A. Viability and Profitability of the Corporation's Operations

The continued operation of the corporation under the SDO scheme, with its agricultural land intact and unfragmented, should show viability and profitability such that the distribution of shares of stocks would result to increased income and greater benefits for the beneficiaries than if the lands were distributed to them individually or collectively. EHaCTA

B. Features and Transferability of the Shares of Stock

1. Any shares acquired by the workers and beneficiaries shall have the same rights and features as all other shares [Section 31 (c), R.A. No. 6657].

2. Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and registered beneficiary within the same corporation [Section 31 (d), R.A. No. 6657]. Such transfer of shares of stocks should be in accordance with the provisions set forth under Item VII of this AO.

3. The beneficiaries do not lose their rights and privileges as stockholders of the corporation even if they have retired, are incapacitated, or are separated from the service unless they opted to sell their shares of stocks.

C. Right of First Refusal

1. The beneficiaries shall have the right of first refusal over the unsubscribed capital stock in the same proportion of the par value of their shares to the total par value of the outstanding shares of stock.

2. The beneficiaries, if they so decide, may opt to immediately exercise their right of first refusal by subscribing for the proportionate number of shares, thus, affording them the preemptive right over such shares.

3. In the event that the BOD decides to call the subscriptions and/or issue additional shares in order to raise funds, the beneficiaries shall have 60 days or within a period specified in the MOA to make the payment for their subscribed shares.

D. Representation in the Board of Directors

1. Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association [Section 31 (b), R.A. No. 6657]. EaTCSA

2. The representative/s to the BOD shall be elected by the majority of the beneficiaries, through secret balloting, which shall be administered in accordance with the procedures set forth under Item VIII of this AO.

3. The representative/s to the BOD shall have a tenure of one (1) year pursuant to the provisions of the Corporation Code. He/she can be re-nominated to the BOD as long as the beneficiaries elect him/her to the post.

4. As part of his/their duties and responsibilities, the representative/s to the BOD shall render/submit reports to the officers of the association/cooperative or to the General Assembly of the beneficiaries to apprise them on the salient points of discussion and resolutions passed in the Board's meetings.

E. Organization of the Beneficiaries

The DAR Provincial Office (DARPO)-Beneficiaries Development Coordination Division (BDCD) and DAR Municipal Office (DARMO), in coordination with other agencies and non-government organizations (NGOs), shall provide technical assistance to the beneficiaries in the formation of their association or cooperative, as may be requested by these beneficiaries, to help them in the various aspects of organizational development and strengthening.

F. Audit of Books of the Corporation

1. The books of the corporation shall be the subject of an annual audit by a Certified Public Accountant (CPA), both chosen by the beneficiaries and the corporation. In the event, however, of disagreement between them as to the selection of the CPA, the choice of the beneficiaries shall prevail.

The consent of the beneficiaries on the selection of the CPA shall be made either through a Resolution passed by the Board of Directors of the beneficiaries' cooperative, officers of the association of the beneficiaries or through a Resolution signed by the majority of the beneficiaries.

2. In case there is a need for a special audit, as may be determined by the majority of the beneficiaries, it shall be conducted by a CPA solely chosen by them. However, it shall not be undertaken more than once a year.

3. In the aforementioned situations, the professional services to be rendered by the CPA shall be charged against the expenses of the corporation.

G. Ocular Inspection

The DAR shall, from time to time, conduct ocular inspection of the landholding, including the improvements made thereon, to validate the information submitted by the corporation, as well as, to determine the extent of its development and use thereby ensuring that the subject landholding is being devoted for the purpose for which the SDO plan was approved. ECTAHc

H. Filing of Protest/Petition for the Revocation of the Approved SDO Plan and MOA

1. Only the beneficiaries, through the officers of their cooperative or association, are authorized to file a petition/protest for the possible revocation of the SDO plan/MOA. A Resolution shall be passed and signed by the majority of the beneficiaries to authorize the majority members of the Board of Directors of their cooperative or officers of their association for the filing of the said petition before the PARO. For this purpose, majority shall mean to be 50 percent plus one (50% + 1) of the qualified beneficiaries. Only upon satisfying these requirements that the said petition can be accepted for disposition in accordance with the procedures set forth in this AO.

2. In the process of investigation and disposition of the foregoing protest, the corporation must be accorded with due process.

I. Allocation and Distribution of Homelots

1. As may be stipulated in the SDO plan/MOA, the corporation shall commit to distribute portions of the landholding, with good road access, to qualified beneficiaries as homelots. The size of the homelots and the responsibility for the conduct of subdivision survey and titling of the same shall be based on the agreement reached between the corporation and the beneficiaries.

2. In case the beneficiaries sell/transfer his/her shares of stock or the revocation of the approved SDO plan has been decided with finality, the ownership of the homelots and any improvements made thereon shall be governed by the MOA or related documents which conveyed the same to the beneficiaries. ASHaTc

III. COVERAGE

This AO shall cover all SDO plans approved by the Presidential Agrarian Reform Council.

IV. DEFINITION OF TERMS

Approved SDO Plan refers to the plan approved by the PARC which provides in detail the manner on how the corporation shall implement (a) the distribution of stocks to the beneficiaries, (b) the distribution of annual dividends, production and profit shares, homelots and other benefits to the beneficiaries, as appropriate; (c) the continued employment of the beneficiaries in the corporation, among others.

Arbitration means a voluntary dispute resolution process in which one or more arbitrators, appointed in accordance with the agreement of the parties, or rules promulgated pursuant to R.A. No. 9285 ("An Act to Institutionalize the Use of Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes"), resolve a dispute by rendering an award.

Equity is the beneficiaries' proportionate share (ownership interest) in the corporation's total capital stock.

Farmworker is a natural person who renders services for value as an employee or laborer in an agricultural enterprise or farm regardless of whether his compensation is paid on a daily, weekly, monthly, or "pakyaw" basis. The term includes an individual whose work has ceased as a consequence of, or in connection with, a pending agrarian dispute and who has not obtained a substantially equivalent and regular farm employment [Section 3 (g), R.A. No. 6657].

Financial Ratios are indicators of the corporation's financial performance which are used to analyze its present and anticipated trends with those of past periods, with those of comparable firms or with the industry as a whole. IHCSET

Homelot is a parcel of land used by a beneficiary as the site of his/her permanent dwelling, including the area utilized for raising vegetables, poultry, pigs and other animals. The area of the homelot depends on the agreement between the beneficiaries and the corporation.

Impact Evaluation is an activity designed to assess the possible impact of the approved SDO plan on the development objectives of the CARP and, specifically, its net impact on the socio-economic welfare of the beneficiaries.

Income Statement Analysis is a comparative analysis of sales/incomes over several years or months.

Intra-Corporate Controversy is a controversy arising out of intra-corporate relations between and among stockholders, members or between any or all of them.

Masterlist of Beneficiaries refers to the list which contains the names of the original beneficiaries, as well as, those beneficiaries who will be qualified under this AO.

Memorandum of Agreement refers to the document stipulating the terms and conditions, as contained in the approved SDO plan, that binds the beneficiaries and the corporation in the implementation of the said MOA.

Original Beneficiary refers to the beneficiary who was actually employed and included in the list of beneficiaries at the time the SDO plan of the corporation was approved by the PARC.

Potential Beneficiary is a person presently employed in the corporation either on a regular or seasonal basis and being considered as a substitute to the beneficiary.

Regular Farmworker refers to a natural person who is employed on a permanent basis by an agricultural enterprise or farm [Section 3 (h), R.A. No. 6657].

Seasonal Farmworker is a natural person who is employed on a recurrent, periodic or intermittent basis by an agricultural enterprise or farm, whether as a permanent or a non-permanent laborer, such as "dumaan", "sacada" and the like [Section 3 (i)], R.A. No. 6657].

V. MONITORING AND EVALUATION OF APPROVED SDO PLANS AND MEMORANDA OF AGREEMENT

The process flow in the monitoring and evaluation of approved SDO plans and MOA is shown in Annex A. CHDTIS

A. Implementing Mechanisms

The monitoring and evaluation of approved SDO plans shall be the main responsibility of the DARPO and DAR Regional Office (DARRO). The concerned DAR Regional Director (RD) and the Provincial Agrarian Reform Officer (PARO) are, therefore, authorized to constitute their respective Task Forces on SDO (TFS), the composition of which shall include representatives from the Legal Division, Operations Division, Support Services Division/BDCD, and from other division/unit as may be determined by the DAR RD and PARO. However, the MARO/s of the municipality/ies where the landholding is located, shall be a member of the DARPO-TFS. In addition, both Task Forces should have at least one member who is technically knowledgeable in conducting financial analysis of the corporation's financial reports. The Heads of the DARPO-TFS and DARRO-TFS shall be chosen by the PARO and the RD, respectively.

At the DAR Central Office (DARCO), a Task Force on SDO (DARCO-TFS) shall also be constituted to serve as the counterpart of the DARRO-TFS/DARPO-TFS and shall be responsible in the evaluation of reports submitted by the said field offices. The DARCO-TFS shall be composed of the Undersecretary for Field Operations as Chairman with the Directors of Bureau of Land Acquisition and Distribution (BLAD), Policy Research and Strategic Service (PSRS), Bureau of Agrarian Reform Beneficiaries Development (BARBD), Planning Service, PARC Secretariat, Bureau of Agrarian Legal Assistance (BALA) and Internal Audit Service (IAS) as members. The Chairman is authorized to constitute a Technical Working Group (TWG), which will also be headed by Field Operations, to provide technical and administrative support to the DARCO-TFS.

These entities shall have the following functions:

1. DAR Provincial Office-Task Force on SDO shall:

a. Ensure the timely submission by the corporation of its regular reports (e.g., semi-annual and annual reports) which will be the major bases for determining the compliance of the corporation in its SDO implementation; HcDSaT

b. Conduct thorough evaluation of the semi-annual and annual reports submitted by the corporation and validate these reports, including the status of the beneficiaries, through ocular and/or field inspection;

c. Conduct screening, validation and selection of potential beneficiaries, in accordance with the procedures herein prescribed (Item VII), who may be qualified as substitute to the beneficiaries;

d. Conduct preliminary investigation on the petitions/protests filed by the concerned party on the alleged violations by the corporation in the implementation of its SDO plan and submit its findings and recommendations to the PARO for his/her endorsement of same to the Regional Director; and

e. Perform related functions as may be assigned by the higher authorities of DAR.

The Provincial Agrarian Reform Coordinating Committee (PARCCOM), as part of its mandated functions, may validate the results of the monitoring undertaken by the DARPO-TFS or conduct its own monitoring and evaluation of the approved SDO plan. This shall be undertaken in collaboration with concerned agencies in the Provincial CARP Implementing Team (PCIT), it being the implementing arm of the PARCCOM.

The PARCCOM, as may be requested by the PARO, can also tap the expertise available in the PCIT to provide technical assistance to the DARPO-TFS in the evaluation of reports submitted by the corporation particularly in regard to its financial reports.

2. DAR Regional Office-Task Force on SDO shall:

a. Review the findings and recommendation of the PARO on whether or not to revoke the approved SDO plan and submit its recommendation to the RD for his/her disposition; aSCDcH

b. Review the petitions/protests filed by the concerned party on the results of the selection of the potential beneficiaries who may qualify as substitute to the beneficiaries and submit its recommendation to the RD for the resolution of said petitions/protests;

c. Address other issues affecting the implementation of approved SDO plans which may be raised by the PARO and other concerned parties; and

d. Perform other related functions as may be assigned by the higher authorities of DAR.

3. DLR Central Office-Task Force on SDO shall:

a. Review the findings and recommendations of the Regional Director on whether or not to revoke the SDO plan of the corporation and submit its recommendation to the Secretary for the latter's endorsement to and deliberation by the PARC Executive Committee;

b. Address other protests/issues raised by concerned parties/groups which were brought to its attention;

c. Conduct ocular inspection, when necessary, to validate and gather additional information on certain issues which may need its intervention; and

d. Perform related functions as may be assigned by the Secretary.

B. Foci of Monitoring and Evaluation

The monitoring and evaluation shall be focused on the outcome of implementation of the SDO plans such as the overall viability of the corporation's agricultural operations, improvement in the income level of the beneficiaries, if any, as well as the level of acceptance of SDO implementation by the beneficiaries, among others. The conduct of said activities shall be based on, but not limited to, the following documents: 1) approved SDO plan and MOA signed between the corporation and the beneficiaries; 2) annual audited financial statements submitted by the corporation; and 3) updated list of beneficiaries submitted by the corporation. SEcADa

The review and evaluation of the aforementioned documents shall be aided by the conduct of field inspection, to be undertaken by the DARPO-TFS, DARRO-TFS or DARCO-TFS, to validate information at the field level. The information to be gathered from these documents are described and/or specified in details in the reports enumerated below.

C. Submission of Reports

The corporation shall submit to the DARPO-TFS the following reports:

1. Semi-Annual Reports

a. Employment and Other Benefits Received by the Beneficiaries

These reports shall include data on employment of the beneficiaries and non-beneficiaries such as the rate or salaries/wages they received for a particular period, and other benefits granted to the beneficiaries by the corporation like medical/dental assistance, education, utilities, etc. (SDO Form Nos. 1, 1-A, 1-B, and 1-C)). These reports should be submitted one month after the end of the previous semester.

b. Updated Masterlist of Beneficiaries

The corporation shall submit an updated Masterlist of Beneficiaries (SDO Form No. 2) which shall be the subject of validation by the DARMO on a semi-annual basis. This report shall be submitted one month after the end of the previous semester.

2. Annual Reports

a. Distribution of Dividends, Production and Profit Shares and Homelots

The corporation shall submit its annual reports on the distribution of dividends on the shares of stocks, including production/profits shares (if any), and homelots to the beneficiaries, using the attached format (SDO Form Nos. 3 and 3-A). Form 3-A (Distribution of Annual Dividends, Production and Profit Shares and Homelots) must be submitted under oath by the Secretary of the BOD of the corporation. cCEAHT

b. Audited Financial Statement

The corporation shall also submit its annual audited financial statement which should be stamped and received by the Bureau of Internal Revenue (BIR).

c. General Information Sheet

In addition, the corporation shall submit its General Information Sheet (GIS) which will provide information on the names, nationality, addresses, and Tax Identification Number (TIN) of the Officers and Directors of the corporation, list of stockholders, among others (SDO Form Nos. 4, 4-A and 4-B). The GIS should be certified correct by the Secretary of the BOD of the corporation.

The abovementioned annual reports shall be submitted not later than four (4) months after the end of the previous year.

D. Evaluation of Monitoring Reports

The DARPO-TFS shall evaluate the semi-annual and annual reports to determine the degree and overall compliance of the corporation with the terms and conditions specified under the approved SDO plan and the MOA. The results or outputs of said evaluation shall be disseminated by the PARO to the concerned beneficiaries and corporation for whatever appropriate follow-up action which they may initiate.

These monitoring reports shall also be forwarded to the DARCO-TFS, through the DAR RD, as part of the DAR's overall sectoral monitoring reports. The DARCO-TFS shall be responsible for farming out said reports to the DAR Planning Service and to the PARC Secretariat. AECcTS

E. Review of Financial Statements

In addition to the evaluation of semi-annual and annual reports, the financial records of the corporation shall be reviewed based on its audited financial statements for the last three (3) years. The review will help determine whether or not the corporation's financial viability can be sustained in the long term and, consequently, its ability to provide benefits to the beneficiaries as mandated under the approved SDO plan/MOA. This shall be undertaken by the DARPO-TFS, at least every three (3) years or as the need arises, using different analytical tools such as Income Statement Analysis, Financial Ratios, among others. The DARPO-TFS, through the PARO, may seek the assistance of PARCCOM in tapping the technical expertise available in the PCIT to provide the necessary support in the said financial review.

F. Impact Evaluation of Approved SDO Plans

The DAR, through the PSRS, shall conduct or commission an impact evaluation of the approved SDO plans to determine the overall impact of these plans to the socio-economic welfare of the beneficiaries. The conduct of said activity shall be funded from the budget of the DAR-Policy, Planning and Legal Affairs Office (PPLAO). The results of said impact evaluation can be used as inputs in policy formulation with regard to the future of SDO implementation.

VI. DISPOSITION OF PROTESTS/COMPLAINTS ON THE REPORT OF VIOLATIONS IN THE SDO PLAN AND MEMORANDUM OF AGREEMENT

The complex nature of SDO arrangement necessitates that agency jurisdiction should be delineated as regards the disposition of protests or complaints arising from its implementation. Under the SDO, the beneficiaries are considered as stockholders and the law recognizes their rights for representation in the BOD while at the same time they serve as workers/employees of the corporation. There may also be a situation in which possible internal conflicts may arise between and among the labor unions or cooperatives of the beneficiaries. Thus, conflicts and/or protests on the report of violations in the implementation of the SDO plan/MOA may be brought to any of the following agencies/forums, for resolution, depending on the principal cause of action:

A. Agency Jurisdiction

1. Department of Labor and Employment and its Attached Agencies [e.g., the National Labor Relations Commission (NLRC) and Bureau of Labor Relations (BLR)] if there are violations in the appropriate provisions of the Labor Code;

2. Regional Trial Court (RTC) if the disputes are intra-corporate in nature;

3. Securities and Exchange Commission (SEC) if the issues involved are corporate in nature consistent with the provisions of the Corporation Code of the Philippines and the Securities Regulation Code; EHTIDA

4. Cooperative Development Authority (CDA) if the issues involved are intra-cooperative dispute; or

5. Presidential Agrarian Reform Council (PARC) if the issues call for the revocation/cancellation of the approved SDO plan/MOA.

On the basis of the aforementioned delineation of agency jurisdiction, the affected party should directly lodge its protests or complaints to the appropriate agency.

B. Alternative Dispute Resolution

Before resorting to the aforementioned forums, however, the concerned parties must exhaust voluntary methods, such as arbitration and mediation, in resolving their disputes in accordance with the provisions of R.A. No. 9285 ("An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes").

C. Revocation of the Approved SDO Plan and MOA

In case of protests/complaints for the possible cancellation of the corporation's approved SDO plan/MOA, the investigation and disposition of such protests shall be governed by the following:

1. Grounds for the Cancellation of Approved SDO Plan/MOA

The grounds for the cancellation/revocation of the approved SDO plan/MOA shall be as follows:

a. When the corporation fails to implement the approved SDO plan/MOA within two (2) years after its approval;

b. When the corporation fails to provide the beneficiaries with guaranteed and continuous employment in the agricultural land by deliberately curtailing or shortening farm operations and work schedules thereby resulting to decreased or low farm income by the beneficiaries;

c. When the corporation fails to provide benefits to the beneficiaries, as may be stipulated in the approved SDO plan/MOA, such as dividends, production and profit shares accruing to the shares of stock without justifiable reasons. For this purpose, situations which are beyond the control of the corporation such as force majeure can be considered as a justifiable reason.

d. When the agricultural operations are no longer financially and economically viable; or

e. When a portion of the agricultural land was converted into non-agricultural use without the prior written consent by the majority of the beneficiaries under the SDO plan.

2. Operating Procedures (Flow Chart in Annex B)

For petition/protest which calls for the revocation of the SDO plan/MOA, it shall be filed, under oath, before the PARO by the majority members of the Board of Directors of the cooperative or officers of the association. The petition shall be accompanied by Resolution, signed by the majority of the beneficiaries, which authorizes the BOD of the cooperative or officers of the association to file such petition/protest. For subsequent pleadings, these will also be signed by the majority of the aforementioned officers. EcTIDA

a. Preliminary Investigation by the PARO

On the basis of the sworn complaint filed by the majority of the officers of the cooperative or association of the beneficiaries, the PARO, through the DARPO-TFS, shall initiate the conduct of preliminary investigation on the report of alleged violations in the implementation of the approved SDO plan/MOA committed by the concerned corporation and submit his/her recommendation to the RD on whether or not to cancel the same.

b. Investigation by the Regional Director

The findings and recommendations of the PARO shall be endorsed to the Regional Director for the latter's evaluation and investigation, through the DARRO-TFS, which will be guided by the following:

b.1 Service of Notice of Investigation

The Notice of Investigation, including the sworn complaint, shall be served to the corporate landowner by the Regional Director either through personal delivery or by registered mail.

b.2 Filing of Answers

Upon receipt of the Notice of Investigation, the corporate landowner shall have a 15-day period within which to reply to the allegations in the petition, or by averring affirmative defense, counterclaims or cross claims. The filing of any motion (e.g., motion for extension of time to file an answer, bill of particulars, etc.) may be entertained provided it will not go beyond another 15-day period to answer. There shall be no declaration of default.

b.3 Nature of the Investigation

The conduct of investigation shall be administrative and non-litigious in nature. Subject to the requirements of due process, the technicalities of law and procedure, and the rules governing the admissibility and sufficiency of evidence required under the Rules of Court shall not strictly apply.

During the investigation proper, or immediately thereafter, the parties shall be required by the Regional Director to simultaneously submit their respective position papers, sworn statements or affidavits (in addition to the petition/complaints and to counter or cross claims), and the supporting documentary evidence, if any, within a 15-day period from receipt of the Order. IATHaS

b.4 Submission of Recommendation by the Regional Director to the DARCO-TFS

The DARRO-TFS shall finish the investigation within 30 days from submission of the parties' respective Position Papers or from the expiration of the period to submit thereof, in case of a review initiated motu proprio. The Regional Director shall forward his/her recommendations to the DARCO-TFS within that 30-day period on whether or not to cancel the SDO plan.

c. Review by the DARCO-TFS

The DARCO-TFS shall finish its review of the report of the

Regional Director within the 30-day period upon receipt

thereof. The DAR Secretary shall have 15 days to review

the findings and recommendations of the DARCO-TFS and endorse same to the PARC Executive Committee, through the PARC Secretariat, for the latter's deliberation.

d. Review by the PARC Executive Committee

The PARC Executive Committee, in turn, shall deliberate said investigation report and endorse its recommendation to the PARC, through a Resolution, on whether or not to revoke the approved SDO plan of the concerned corporation.

e. Decision of the PARC

The decision of the PARC, whether approving or denying the revocation of the SDO plan, shall become final and executory if no appeal is received within a 15-day period upon receipt thereof by the concerned parties

D. Investigation by the DOLE (e.g., NLRC and BLR), SEC, CDA, or the Regular Court

The investigation being undertaken by the DOLE (e.g., NLRC and BLR), SEC, CDA, or by the regular court will not, in any way, hamper the proceedings of investigation being undertaken by the DAR. Appeals on Orders/Decisions issued by these agencies shall be governed by their respective Rules of Procedures or, as appropriate, the Rules of Court.

E. Effects of the Revocation of Approved SDO Plan/MOA

1. Once the decision by the PARC or by other appropriate forum canceling the approved SDO plan/MOA became final and executory and upon receipt of such decision by DAR, the latter shall proceed with the immediate coverage of the corporation's landholding under CARP.

2. After the subject landholding has been placed under compulsory acquisition, the concerned field offices of DAR shall proceed with the documentation of said landholding in accordance with the existing policies and guidelines on the matter.

The beneficiaries under the SDO plan shall undergo the process of identification, screening and selection as set forth under DAR AO No. 7, Series of 2003 ["CY 2003 Guidelines on the Identification, Screening and Selection of, and Distribution to Agrarian Reform Beneficiaries (ARBs) of Private Agricultural Lands Under RA 6657"] as well as based on other existing or future Guidelines which may be issued on the matter.

3. Upon cancellation of the approved SDO plan/MOA, the beneficiaries shall be compensated by the corporation of the following:

a. Shares of stocks acquired or purchased by the beneficiaries in accordance with the pertinent provisions of the Securities Regulation Code and Corporation Code; and cHSTEA

b. Retirement benefits and other privileges as workers of the corporation in accordance with the appropriate provisions of the Labor Code.

4. The ownership of homelots, including the improvements made thereon, if any, shall be governed by the MOA or by any documents which conveyed the same to the beneficiaries.

5. As may be warranted, the DARPO, in coordination with concerned agencies, may provide assistance to the beneficiaries to collect their payments on the shares of stock, as may be appropriate, and benefits as workers of the corporation from the proceeds of landowners' compensation.

VII. TRANSFER OF SHARES OF STOCK

A. Transfer of Shares of Stock

Transfer of shares of stock can take place in any of the following situations: a) when the beneficiary opts to sell or dispose the same; b) when the beneficiary dies and the legal heir/s opts to sell his/her shares of stocks or opts to assume the obligations as a stockholder in the corporation; or c) when the corporation files a petition for the substitution of the beneficiaries whose whereabouts can no longer be traced in his/her last known postal address or permanent residence. Except when the legal heir opts to assume the responsibility of a stockholder, the potential beneficiary shall first undergo the screening and selection processes by the DARPO-TFS in accordance with the procedures set forth in this AO.

1. When the Beneficiary Opts to Sell His/Her Shares of Stocks

The beneficiary (or the offeror) may opt to sell his/her shares of stock by transmitting to the Secretary of the BOD of the corporation, by personal delivery, a written offer to transfer or sell said stock, specifying therein the number of shares to be sold and price per share.

Upon receipt of the written offer, the Secretary shall then submit to the PARO the list of potential beneficiaries who may be qualified to buy those shares of stock. Only after the said potential beneficiaries had been selected, in accordance with the procedures and requirements set forth in this AO, that they will be allowed to buy the shares of stock.

Any offered stock not purchased by the potential beneficiaries within the 60-day period or within a period as may be agreed upon by the concerned parties may thereafter be sold or disposed of by the offeror to other beneficiaries who are stockholders of record.

Only upon full payment by the new beneficiary of the stock offered and registration of the same that the corporation can include his/her name in the Masterlist of Beneficiaries.

2. When the Beneficiary Dies

In case of death of the beneficiary, the legal heir/s may either opt to sell the shares of stock in accordance with the procedures outlined above (Item VII, A-1) or assume the responsibility and obligation of a stockholder of the corporation. Should the legal heir/s decides to assume that responsibility, he/she shall submit proof/s to the Secretary of the BOD that he/she is the successor-in-interest of the beneficiary or that he/she is the authorized representative of the legal heirs. The corporation, in turn, will validate the identity of the successor or representative and only upon positive validation of his/her identity and registration of the same that he/she can be included in the Masterlist of Beneficiaries.

3. When the Whereabouts of the Beneficiary Can No Longer Be Traced DaECST

The corporation may also file a petition before the PARO for the substitution of a beneficiary whose whereabouts can no longer be traced in his/her last known postal address or permanent residence. The corporation, however, must have shown that it has exerted diligent efforts to reach out with the beneficiary. Thus, the petition shall be accompanied by a return card or a certification from a newspaper of general circulation that the name of said beneficiary has been published by the corporation.

The petition shall also contain the name/s of the potential beneficiary/ies who may be qualified as substitute to the beneficiary/ies in accordance with the procedures and requirements set forth in this AO. Those who can be qualified as such shall also be given 60 days to purchase the shares of stock.

Only upon qualification and full payment of the shares of stock that the new beneficiary can be included in the Masterlist of Beneficiaries.

B. Qualifications of the Potential Beneficiary

1. Legal heir of the beneficiary;

2. Regular farmworker presently employed by the corporation;

3. Seasonal farmworker presently employed by the corporation; and

4. Permanent resident of the barangay and/or the municipality, if applicable.

C. Submission of Documents

1. In case the petitioner is the corporation, it shall submit the following documents:

a. Certified list of potential beneficiary/ies indicating their address, civil status, age, and period of employment in the corporation who may be qualified as substitute to the beneficiary/ies; and

b. Latest pay slips or payroll of the potential beneficiary/ies.

2. In case of death of the beneficiary and the legal heir/s decides to assume the responsibility of a stockholder, the successor shall submit proof/s to the Secretary of the BOD that he/she is the successor-in-interest of the beneficiary or he/she is the authorized representative of the legal heirs.

D. Procedures in the Selection of Potential Beneficiaries

1. Identification, Screening and Selection of the Potential Beneficiaries

The process of identification, screening and selection of the potential beneficiaries shall be as follows: DACTSa

a. Within five (5) days, the DARPO-TFS shall conduct initial review of the preliminary list of potential beneficiaries submitted by the concerned party through cross-checking from the list regularly submitted by the corporation. It shall also check the completeness of the documents submitted by the concerned party and notify the same if there are any lacking documents which need to be submitted;

b. After the initial review, the DARPO-TFS shall notify the potential beneficiaries (SDO Form No. 5), through registered mail or personal service, to attend public hearings for purposes of information dissemination on the rights and obligations of being a beneficiary under the SDO and for conducting individual interviews of the potential beneficiaries, whenever practicable, to further validate their qualifications and to gather additional information which would be relevant in establishing their qualifications.

The hearing shall also serve as the venue for clarifying issues which may be raised on the qualifications or disqualifications of certain potential beneficiaries.

c. After 10 days of the hearing and interview, the PARO shall, then, transmit the preliminary list of potential beneficiaries, submitted by the concerned party, to the MARO for a 15-day posting period in the barangay or in other conspicuous places where the landholding is located.

d. After the 15-day posting period, the MARO shall secure Certificate of Posting (SDO Form No. 6) from the BARC Chairman or Barangay Chairman;

e. In case no protest is filed within the 15-day posting period, the DARPO-TFS shall finalize the list of qualified beneficiaries for approval by the PARO and subsequent endorsement to the corporation, copy furnished the DARRO-TFS and the DARCO-TFS. Only the names included in the said list shall be qualified to buy the shares of stock or be the successor of the beneficiary.

2. Resolution of Protests in the Selection of Beneficiaries

a. Any person or interested party may file a written protest for the inclusion or exclusion of certain potential beneficiaries from the preliminary list of beneficiaries with the Regional Director not later than 15 days from the last day of posting;

b. Upon receipt of the protest, the Regional Director shall order the PARO to transmit all pertinent records/documents of the case and resolve the protest within 30 days from receipt of the records from the latter;

c. The Regional Director, through the DARRO-TFS, shall conduct an investigation on the protest/petition to determine the merits of the case through administrative summary proceedings; ESDHCa

d. The Regional Director shall furnish the PARO and all parties concerned of his/her decision on the protest;

e. Pursuant to the Regional Director's decision, the PARO, through the DARPO-TFS, shall include and/or exclude the names of potential beneficiaries from the list and notify the concerned parties, through registered mail or personal service, of said decision.

The list becomes final and executory after the lapse of 15-day period from receipt of the Regional Director's decision on the protest.

f. In case of an appeal/motion for reconsideration is made on said decision/order by the Regional Director, the rules and procedures as provided for under DAR A.O. No. 3, Series of 2003, ("2003 Rules and Procedures for Agrarian Law Implementation Cases") shall be followed.

VIII. ELECTION OF THE BENEFICIARIES' REPRESENTATIVE/S TO THE BOARD OF DIRECTORS OF THE CORPORATION

The election of the beneficiaries' representative/s to the Board shall be held every year and will coincide one month before the expiry of the term of office of the incumbent representative/s to the BOD. It shall be administered by the cooperative or by the beneficiaries' association, through its Election Committee, with assistance from the DARPO-TFS as may be requested by said cooperative or association. Only the names included in the Masterlist of Beneficiaries shall be allowed to participate and vote in the election. No proxy voting shall be allowed.

The number of Board seats, which will be the subject of election, shall be based on the equity shares of the beneficiaries as contained in the approved SDO plan.

The expenses for the conduct of the election shall be borne by the cooperative or by the association. In the absence of the cooperative or association, the DARPO-TFS shall administer the election through secret balloting and the DARPO shall provide the supplies and materials for the conduct of such election. In either situation, the conduct of election shall be governed by the following rules and regulations: TcHCDI

A. Qualifications of the Candidate

1. Qualified beneficiary of the corporation who is included in the Masterlist of Beneficiaries under the SDO plan;

2. Must be a stockholder of record and must own at least one (1) share of the capital stock of the corporation;

3. Must not have been convicted by a final judgment of an offense punishable by imprisonment for a period exceeding six (6) years or a violation of the Corporation Code committed within five (5) years prior to the date of his/her election or appointment; and

4. Must be a member in good standing of his/her cooperative or association, if there is an existing one, as defined in its constitution and by-laws.

B. Filing of Certificate of Candidacy

The candidate shall file his/her certificate of candidacy on any day from the commencement of the election period but not later than the day before the beginning of the campaign period. It shall be filed to the cooperative's or the association's Election Committee or to the DARPO-TFS stating, among others, his/her eligibility to run for said office, his/her personal circumstances and his/her commitment to perform the duties and responsibilities attendant to the position.

C. Election and Campaign Periods

The election period shall commence 15 days before the day of the election while the campaign period shall commence five (5) days before the election day.

D. Polling Place, Official Ballots and Election Returns

The election shall be held in the corporation's premises in the presence of other stockholders. Election paraphernalia shall be prepared by the Election Committee or by the DARPO-TFS such as the voting booths, ballot boxes, tally board, and official ballots, the number or quantity of which shall depend on the number of the registered voters.

E. Casting and Counting of Votes

The casting of votes shall commence at 8:00 A.M. and shall end at 12:00 noon or earlier as soon as all the names included in the Masterlist of Beneficiaries have cast their votes and, thereafter, start the counting of votes. In the appreciation of the votes, the following rules shall be observed:

1. Where the first name or surname is only written, the vote for such candidate is valid if there is no other candidate with the same first name or surname;

2. Where only the first name of the candidate is written, which when read, has a sound similar to the surname of another candidate, the vote shall be counted in favor of the candidate with such surname. If there are two or more candidates with the same full name, first name or surname, and one of them is the incumbent, and on the ballot is written only such full name, first name or surname, the vote shall be counted in favor of the incumbent;

3. In case the candidate is a woman who uses her maiden or married surname or both and there is another candidate with the same surname, a ballot bearing only such surname shall be counted in favor of the candidate who is an incumbent;

4. When two or more words are written in the same line, all of which are the surname of two or more candidates, the same shall not be counted for any of them, unless one is the surname of the incumbent for whom the vote shall be counted;

5. A name or surname incorrectly written which, when read, has a sound similar to the name or surname of a candidate when correctly written shall be counted in his/her favor; and

6. When name of a candidate appears not in the line provided in the ballot shall be counted in his/her favor.

The relevant provisions of the Omnibus Election Code, as amended, relative to the appreciation of votes shall apply in suppletory character.

F. Proclamation of the Election Results

After the completion of election returns, the Election Committee or the DARPO-TFS shall officially announce the total number of votes received by each candidate and those receiving the highest number of votes, which correspond to the number of vacant seats, shall be declared elected. The Election Committee or the DARPO-TFS shall post the results thereof bearing the signature of their officers. DTAcIa

In case of tie, the deadlock shall be resolved through the drawing of lots and the candidate favored by luck shall be proclaimed as the eventual winner. However, in case there are only two candidates who tied in the number of votes, they may opt to serve one-half term for each of them.

G. Pre-Proclamation Controversy

In case of controversies arising from the counting and appreciation of ballots and election returns, these shall be filed in writing by the concerned candidate before the Election Committee or the DARPO-TFS within 24 hours upon termination of the counting of votes. Said protest shall be decided finality by the Election Committee or by the DARPO-TFS within three (3) days from receipt thereof.

In case of unresolved issues arising from the interpretation of the abovementioned procedures, appropriate provisions of the Securities Regulation Code and/or Corporation Code shall prevail.

IX. REPEALING CLAUSE

All Administrative Orders, Memorandum Circulars and related issuances inconsistent hereto are hereby repealed and/or modified accordingly.

X. SEPARABILITY CLAUSE

If for any reason, any provision of this AO is challenged and held to be unconstitutional by a competent court, none of the other provisions thereof shall be affected and the same shall remain in full force and effect.

XI. EFFECTIVITY

This Order shall take effect ten (10) days after its publication in two (2) national newspapers of general circulation. IacHAE

January 26, 2006, Diliman, Quezon City.

(SGD.) NASSER C. PANGANDAMAN
OIC-Secretary

Published in the Philippine Star and Philippine Daily Inquirer on January 30, 2006.