Justice Secretary Jesus Crispin Remulla said over the weekend that government shares in the North Luzon Expressway Corporation can only be sold by offering them first to existing shareholders.

In its legal opinion addressed to Maan Vanessa Doctor, chief of the Privatization Management Office, Remulla said 10 percent of the government shares in NLEX should be allotted to small local investors.

He said NLEX Corporation's Amended and Restated Shareholders' Agreement dated 30 September 2004 provides a "right of first refusal" clause.

"Only after the other shareholders of NLEX Corporation have declined or failed to exercise their Right of First Refusal may the company proceed to offer the NLEX Shares to other interested buyers," Remulla said.

The PMO, he added, should also bear in mind that 10 percent of the shares held by the government must be allocated to small investors pursuant to Executive Order 323 series of 2000.

The PMO was created under EO 323 as an agency under the Department of Finance tasked with "the continuing privatization of government assets and corporations."

The PMO sought the legal opinion of the DoJ, which serves as the Privatization Council's "ex-officio legal counsel," following its approval of the PMO's recommendation to dispose of the government's shares at NLEX via negotiated sale.

The DoJ was requested to resolve the conflict between the provisions of EO 323 and the NLEX Amended Articles of Incorporation and By-Laws.

The PMO said EO 323 requires "to reserve a minimum of ten percent of the sale of assets in corporate form to small local investors." However, NLEX's articles of incorporation and by-laws provide for the "Right of First Refusal."

Remulla advised the PMO that "a mere offer of the sale of assets in corporate form to small local investors will not suffice."

Any of the following shall be deemed compliant with the sale to small local investors: a) Initial Public Offering and b) Employee Stock Option/Ownership Plans.

The second option, Remulla said, hinges on the Social Security System and Government Service Insurance System granting loans to qualified employees of the firms under privatization who would like to avail themselves of the 10 percent stock offering as provided in the EO.

Another option is selling to private and government employees, overseas workers, small farmers/fishermen, and cooperatives through Government Financial Institutions such as GSIS, Land Bank of the Philippines, Development Bank of the Philippines and Home Development Mutual Funds.