Cap
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St. Paul University Manila (St. Paul University System) 680 Pedro Gil St. Malate Manila, Philippines Case Study: College Assurance Plan Submitted By: Ignacio, Pauline Marie Lomiguen, Aura Marie Ordonez, Raphael Vitug, Justine Patricia
Submitted To: Mr. Ariel Pineda MBA, CPA Submitted Date: June 19, 2013
I.
INTRODUCTION COMPANY PROFILE The CAP Family of Companies began in 1980 with the birth of its mother
company - College Assurance Plan. CAP has since expanded its business to the areas of Pre-need Pension, Distance Learning, Health Maintenance, Life Insurance, Information Technology, Financing, Communications and General Insurance. CAP was incorporated on February 14, 1980 with Atty. Enrique A. Sobrepeña, Jr., James Marsh Thompson, Rafael E. Evangelista, Dr. Ernesto M. Espaldon and Amb. Romulo M. Espaldon as the incorporators to engage as the first pre-need educational plan company in the Philippines. From an initial paid-up capital of P570,000.00 and an authorized capital stock of P10.0 million in 1980, it now has an authorized capital stock of P300.0 million with a subscribed portion of P157.0 million and a paid-up capital of P127.0 million. Since its incorporation, the company had registered P40.0 billion worth of plans with currently over 125,000 availing plans and 290,000 fully paid but not yet availing. There are 164,000 actively paying plan holders. By June 2003, CAP had assisted 54,856 graduates and is continuing to assist 97,771 scholars. CAP has already paid P8.8 billion in tuition fees as of May 2003 and by late 2004, CAP has paid over P11.3 billion with 84,490 scholars graduated. The CAP Family of Companies. A group of companies that the Filipino family can trust for an assured and better future. To hold on to as a true and reliable partner through the next millennium. A growing and dynamic corporate family capable of serving each and every Filipino family’s pre-need and insurance requirements.
CAP CREDO “We believe in God. He reigns supreme. He is Lord and Savior. We are committed to follow His will in the pursuit of our business objectives through the channels of prayer and honest labor. Without Him, we cannot succeed. With His guidance and inspiration, we cannot fail. We believe in our country. We believe in the democratic form of government on which it is founded. We are committed to protect it and support its duly constituted authorities, who were chosen to bring greater benefits to all our people and prosperity to the natio. We are committed to contributing towards the creation of a self-reliant and self-sufficient people by helping them achieve their full potentials and capabilities as human beings living within the nation's communities. We believe in uniting for peace. Stability and progress can only be attained if tranquility prevails all over the land. We believe in truth. In packaging our services and programs, in advertising and promotional campaigns, truth is our guiding principle. We only promote and advertise what we have, what we can do and what we can deliver. We believe in service. Every customer is a VIP. He deserves all the attention and courtesies from the company and its employees and associates. Every service extended must be performed with utmost care, with efficiency and professionalism as its cornerstone. We believe in people. The most important asset of the company is people. We are committed to bring out the best in everyone through training and developmental programs designed to improve their skills, enhance their personality and sharpen their efficiency. Finally, we believe in corporate philosophy. To strive for excellence, to deliver satisfactory service, and to respect work associates.
TIMELINE OF FILED CASE
August 26, 2005 August 26, 2005 CAP filed Petition for Rehabilitation CAP filed aa Petition for Rehabilitation at the RTCMakati City at the RTCMakati City
September 2005 September 2005 RTCMakati issued Stay Order and RTCMakati issued aa Stay Order and appointed Mr. Mamerto A. Marcelo, Jr. appointed Mr. Mamerto A. Marcelo, Jr. as the rehabilitation receiver. as the rehabilitation receiver.
October 26, 2005 October 26, 2005 The first initial summary hearing was The first initial summary hearing was set. set.
November 8, 2006 November 8, 2006
Court Resolution was released for the Court Resolution was released for the Petition for Corporate Rehabilitation Petition for Corporate Rehabilitation
II.
ISSUES
1. The policy of deregulation adopted by the Department of Education which resulted in the unbridled increase in tuition fees over the years; 2. The effect of the financial crisis on CAP’s trust fund investments; 3. The onerous application by the SEC of the PNUCA starting in 2002; and 4. The refusal of the SEC to renew CAP’s dealer’s license after its expiration in September, 2004 and the cancellation of its permit to sell in August, 2004.
III.
STATEMENT OF THE PROBLEM • The CAP’s impending inability to service its debts as they cash fall due • The CAP’s assets are not sufficient to cover its liabilities.
IV.
DATA PRESENTATION AND ANALYSIS College Assurance Plan or CAP was a pioneer as a pre-need educational
company offered open-ended plans. From the time it was incorporated until the early 2000s, it has helped many scholars, especially parents who are in the middle-class who sustained their children, to graduate from college. But from late 2004 onwards, CAP has collapse and faced difficulties in terms of their financial status. CAP has unable to maintain its payments. The trust fund that supposed to cover future obligation was depleted. Its plan holders have silently suffered because of the effect of having their investments allotted to for their children would not be used due to this depletion. The funds that were allotted for the payment of obligations to pre-need plan holders were tapped and invested to finance some of the Robert John Sobrepeña’s, son of the founder of CAP, businesses like Camp John Hay Development Corporation in Baguio City, Metro Rail Transit 3 Corp project, and various high-end golf and residential projects under Fil-Estate Branch.
The SEC have barred or forbid CAP in selling new plans to holders because of having difficulties in meeting obligations of plan holders. It was in 2005 that CAP had filed a petition for rehabilitation to the Supreme Court. This petition pertains to having CAP pay off its obligation while being in a state oh rehabilitation. However, if CAP cannot comply with this, its assets would be divided among its claimants. SEC and many of CAP’s holders have requested that this petition should be denied due to CAP’s insolvency and inability to recover, thus, they wanted that the assets of CAP should be liquidated and distributed to the holders who avail CAP’s pre-need plan. Some holders approved of the rehabilitation giving a comment that it is better the destruction and some requested a clearer provision of the petition. The Supreme Court have decided that the petition should be approved but with stated terms and conditions that CAP should do to its board of directors, rehabilitation receiver, Trustee Banks that were involved, secured and unsecured creditors, employees and SEC, included in the terms and conditions was a schedule of payments to plan holders. Stated in the terms and conditions, SEC has the right to have a second look on CAP’s operation after three (3) months after the approval to see if CAP might have a chance to re-establish for the benefit and good of the majority of the plan holders. The petition, Revised Rehabilitation Plan, has duration of two (2) years ending on September 30, 2008 in compliance with the terms and conditions applied unless there was a good reason for the approval to be withdrawn.
V.
RECOMMENDATION
Since the CAP already submitted a Petition for Rehabilitation in the court might as well they should follow every proposed rehabilitation plan they have included in the said petition. They should stick to whatever agreed plan they had with the Regional Trial Court and make their best effort to attain every goal they have and sustain every shortcoming they would face. The CAP also has to show consistency when it comes to their development because a lot of people is trust them again and they were privileged enough to be approved to have rehabilitation rather than liquidation. The CAP also has to clarify the ARL done by the SEC because it affects not only the case but also the company questioned reputation.
VI.
CONCLUSION
Some people might have misjudged this case, it was not only a fault done by the CAP but also of the authorities. There were a lot of misjudgement done in this case, they were a lot of issue to be resolved but we can never hide that the CAP also has an error done. But, what is overwhelming to them is they make the best effort to bridge the mistake that they have done.
Submitted To: Mr. Ariel Pineda MBA, CPA Submitted Date: June 19, 2013
I.
INTRODUCTION COMPANY PROFILE The CAP Family of Companies began in 1980 with the birth of its mother
company - College Assurance Plan. CAP has since expanded its business to the areas of Pre-need Pension, Distance Learning, Health Maintenance, Life Insurance, Information Technology, Financing, Communications and General Insurance. CAP was incorporated on February 14, 1980 with Atty. Enrique A. Sobrepeña, Jr., James Marsh Thompson, Rafael E. Evangelista, Dr. Ernesto M. Espaldon and Amb. Romulo M. Espaldon as the incorporators to engage as the first pre-need educational plan company in the Philippines. From an initial paid-up capital of P570,000.00 and an authorized capital stock of P10.0 million in 1980, it now has an authorized capital stock of P300.0 million with a subscribed portion of P157.0 million and a paid-up capital of P127.0 million. Since its incorporation, the company had registered P40.0 billion worth of plans with currently over 125,000 availing plans and 290,000 fully paid but not yet availing. There are 164,000 actively paying plan holders. By June 2003, CAP had assisted 54,856 graduates and is continuing to assist 97,771 scholars. CAP has already paid P8.8 billion in tuition fees as of May 2003 and by late 2004, CAP has paid over P11.3 billion with 84,490 scholars graduated. The CAP Family of Companies. A group of companies that the Filipino family can trust for an assured and better future. To hold on to as a true and reliable partner through the next millennium. A growing and dynamic corporate family capable of serving each and every Filipino family’s pre-need and insurance requirements.
CAP CREDO “We believe in God. He reigns supreme. He is Lord and Savior. We are committed to follow His will in the pursuit of our business objectives through the channels of prayer and honest labor. Without Him, we cannot succeed. With His guidance and inspiration, we cannot fail. We believe in our country. We believe in the democratic form of government on which it is founded. We are committed to protect it and support its duly constituted authorities, who were chosen to bring greater benefits to all our people and prosperity to the natio. We are committed to contributing towards the creation of a self-reliant and self-sufficient people by helping them achieve their full potentials and capabilities as human beings living within the nation's communities. We believe in uniting for peace. Stability and progress can only be attained if tranquility prevails all over the land. We believe in truth. In packaging our services and programs, in advertising and promotional campaigns, truth is our guiding principle. We only promote and advertise what we have, what we can do and what we can deliver. We believe in service. Every customer is a VIP. He deserves all the attention and courtesies from the company and its employees and associates. Every service extended must be performed with utmost care, with efficiency and professionalism as its cornerstone. We believe in people. The most important asset of the company is people. We are committed to bring out the best in everyone through training and developmental programs designed to improve their skills, enhance their personality and sharpen their efficiency. Finally, we believe in corporate philosophy. To strive for excellence, to deliver satisfactory service, and to respect work associates.
TIMELINE OF FILED CASE
August 26, 2005 August 26, 2005 CAP filed Petition for Rehabilitation CAP filed aa Petition for Rehabilitation at the RTCMakati City at the RTCMakati City
September 2005 September 2005 RTCMakati issued Stay Order and RTCMakati issued aa Stay Order and appointed Mr. Mamerto A. Marcelo, Jr. appointed Mr. Mamerto A. Marcelo, Jr. as the rehabilitation receiver. as the rehabilitation receiver.
October 26, 2005 October 26, 2005 The first initial summary hearing was The first initial summary hearing was set. set.
November 8, 2006 November 8, 2006
Court Resolution was released for the Court Resolution was released for the Petition for Corporate Rehabilitation Petition for Corporate Rehabilitation
II.
ISSUES
1. The policy of deregulation adopted by the Department of Education which resulted in the unbridled increase in tuition fees over the years; 2. The effect of the financial crisis on CAP’s trust fund investments; 3. The onerous application by the SEC of the PNUCA starting in 2002; and 4. The refusal of the SEC to renew CAP’s dealer’s license after its expiration in September, 2004 and the cancellation of its permit to sell in August, 2004.
III.
STATEMENT OF THE PROBLEM • The CAP’s impending inability to service its debts as they cash fall due • The CAP’s assets are not sufficient to cover its liabilities.
IV.
DATA PRESENTATION AND ANALYSIS College Assurance Plan or CAP was a pioneer as a pre-need educational
company offered open-ended plans. From the time it was incorporated until the early 2000s, it has helped many scholars, especially parents who are in the middle-class who sustained their children, to graduate from college. But from late 2004 onwards, CAP has collapse and faced difficulties in terms of their financial status. CAP has unable to maintain its payments. The trust fund that supposed to cover future obligation was depleted. Its plan holders have silently suffered because of the effect of having their investments allotted to for their children would not be used due to this depletion. The funds that were allotted for the payment of obligations to pre-need plan holders were tapped and invested to finance some of the Robert John Sobrepeña’s, son of the founder of CAP, businesses like Camp John Hay Development Corporation in Baguio City, Metro Rail Transit 3 Corp project, and various high-end golf and residential projects under Fil-Estate Branch.
The SEC have barred or forbid CAP in selling new plans to holders because of having difficulties in meeting obligations of plan holders. It was in 2005 that CAP had filed a petition for rehabilitation to the Supreme Court. This petition pertains to having CAP pay off its obligation while being in a state oh rehabilitation. However, if CAP cannot comply with this, its assets would be divided among its claimants. SEC and many of CAP’s holders have requested that this petition should be denied due to CAP’s insolvency and inability to recover, thus, they wanted that the assets of CAP should be liquidated and distributed to the holders who avail CAP’s pre-need plan. Some holders approved of the rehabilitation giving a comment that it is better the destruction and some requested a clearer provision of the petition. The Supreme Court have decided that the petition should be approved but with stated terms and conditions that CAP should do to its board of directors, rehabilitation receiver, Trustee Banks that were involved, secured and unsecured creditors, employees and SEC, included in the terms and conditions was a schedule of payments to plan holders. Stated in the terms and conditions, SEC has the right to have a second look on CAP’s operation after three (3) months after the approval to see if CAP might have a chance to re-establish for the benefit and good of the majority of the plan holders. The petition, Revised Rehabilitation Plan, has duration of two (2) years ending on September 30, 2008 in compliance with the terms and conditions applied unless there was a good reason for the approval to be withdrawn.
V.
RECOMMENDATION
Since the CAP already submitted a Petition for Rehabilitation in the court might as well they should follow every proposed rehabilitation plan they have included in the said petition. They should stick to whatever agreed plan they had with the Regional Trial Court and make their best effort to attain every goal they have and sustain every shortcoming they would face. The CAP also has to show consistency when it comes to their development because a lot of people is trust them again and they were privileged enough to be approved to have rehabilitation rather than liquidation. The CAP also has to clarify the ARL done by the SEC because it affects not only the case but also the company questioned reputation.
VI.
CONCLUSION
Some people might have misjudged this case, it was not only a fault done by the CAP but also of the authorities. There were a lot of misjudgement done in this case, they were a lot of issue to be resolved but we can never hide that the CAP also has an error done. But, what is overwhelming to them is they make the best effort to bridge the mistake that they have done.
