SEC softens stance on shares ownership rule


The Securities and Exchange Commission is no longer keen on imposing a 60-40 percent local-foreign ownership restriction on each class of shares, as originally intended by the controversial Supreme Court ruling on the capital of Philippine Long Distance Telephone Co.

In a briefing on Thursday, SEC chairperson Teresita Herbosa cited an “entry of judgment” received by the SEC from the Supreme Court on Jan. 9.  This clarified that the “dispositive” portion of the SEC decision dated June 28 was that the term “capital” as referred to in the Constitution “refers only to shares of stock entitled to vote in the election of directors, and thus in the present case, only to common shares and not to the total outstanding capital stock (common and non-voting preferred shares).”

As such, Herbosa said: “Maybe we won’t go to the strict rule of requiring 60 percent (local ownership) in each class of shares.”

“We will try to come up with rules that will lessen conflict and controversy (that are) acceptable to all, but we also see the need for foreign capital to come in,” Herbosa said.

When the draft guidelines on foreign ownership were drafted, Herbosa said this adopted the most restrictive framework.

The Supreme Court’s entry of judgment was favorable to the claim of PLDT lawyers that the dispositive portion was not modified in the Oct. 9, 2012, decision on the motion for reconsideration.

This suggests that the Supreme Court has accepted that the statements pertaining to classes of shares were in the nature of obitur dictum and do not represent a legal precedent, and that the SEC is not legally compelled to follow it.

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  • Jun Tuazon

    60/40 rule is the stumbling block for foreign investments in the Phils.More often than not the local partners equity is just influence/political & the foreign investor still have to come up with 100% of the capital.Until this anomally is sorted out very few FDI’s will come to the country maybe those short term investments will get some attentions (shares/bonds) but not those big ticket items like infra, power industries or anything that requires long term ROI’s.

  • Joseph20112012

    Abolish the 60/40 idiotic forced equity sharing against foreign individuals or corporations from the 1987 constitution and allow 100% foreign equity ownership of businesses at all economic sectors retroactively. ’nuff said.

  • John Lang Magawa

     time to pull out of the stock market, I heard the foreigner have already done that. too bad for those who just started investing. 1997 is here again.

    • barcelona03

      Instead of pulling out, most are actually pouring investments into business and the stock market.  The Philippines today is different from the one in 1997.  

  • M C

    Funds euphemistically called Foreign Direct Investments are not that important. Policy makers only need to restudy the Marshall Plan that created the “funds” used in the restructuring of Europe after the Second World War.  It only needs a certain level of ingenuity and creativity to push thru and implement all the development plans that the country needs. People who rant about FDI don’t really understand economics and finance. Recalling a conversation this writer had in China during the 80s when a person said to the effect that they do not need foreign investments because we can not spend the dollars here, instead, we need yuan to spend, our policy makers can just “create” the money and start those big ticket infrastructure projects which will surely generate a lot of downstream industries which henceforth will ultimately create the money velocity to spur economic development.  I learned in Eco 11 during the 70s under Ms. Solita that you only need to pump prime the construction and automotive industries and the whole economy will already jumpstart.

  • carlcid

    Hot money won’t raise our standard of living. It comes and goes, perhaps faster than the seasons change. Direct investments are the more permanent way of taking in investments. It creates products and employment and it doesn’t flee on the first signs of volatility.

  • Mamerto

    Is this another “ruling” to accommodate the acquisition/ownership of that “dummy” MVP..?

    • barcelona03

      Why don’t you name any other “ruling”, if you can? 

  • The Overlord

    Hay nako, buti naman. This country is drooling for FDI! We badly need it. Softening the stance is next to amending that archaic, protectionist 60-40 ownership constitutional provision.

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