SEC drafts new rule on foreign ownership to conform with SC ruling


The Supreme Court building in Manila. INQUIRER FILE PHOTO

MANILA, Philippines—The securities and Exchange Commission has drafted a new set of guidelines on foreign ownership of certain industries in line with a Supreme Court ruling that only voting shares be considered in determining compliance with the 40 percent constitutional cap on foreign ownership of local companies.

The draft guidelines, on which the SEC is seeking further public feedback, make telecommunications giant Philippine Long Distance Telephone Co.’s recent capital restructuring involving the issuance of voting preferred shares acceptable.

“Per the Supreme Court decision, our CFD (corporate finance department) inquired into PLDT ownership structure and based on its report, PLDT is compliant,” SEC chair Teresita Herbosa said in a text message, when asked whether the telecom firm’s issuance of voting preferred shares was in compliance with the new draft guidelines.

Based on the new guidelines, all covered corporations must, at all times, observe the constitutional or statutory requirement that at least 60 percent of a company must be owned by Filipinos and foreign ownership limited to no more than 40 percent.

A landmark Supreme Court ruling earlier stated that PLDT had exceeded the maximum allowable 40 percent in foreign equity prescribed by the Constitution. The ruling essentially defined a company’s capital, stating that non-voting shares should not be counted as equity when computing Filipino ownership in relation to the 60-40 percent constitutional requirement for key industries.

In the past foreign ownership in PLDT was reckoned as a percentage of both voting common shares and non-voting preferred shares, including preferred shares that all applicants for PLDT landlines were required by a martial law edict to purchase. The last Supreme Court ruling on the issue stated that only voting shares must be reckoned when determining foreign ownership of a local company.

To cure this situation, PLDT recently issued 150 million new voting preferred shares to BTF Holdings Inc., a subsidiary of its employee beneficial trust fund. This brought down the foreign holdings in PLDT to 34.5 percent from 58.4 percent.

The SEC previously drafted a more stringent rule that would have made PLDT’s voting preferred share issuance non-eligible, but the corporate regulator eased its draft after the entry of judgment issued by the Supreme Court made it clear that the 60-40 percent ownership limit favoring local shareholders would apply only to voting shares.

The two-tiered formula was meant to address concerns on use of dummies in corporate structure.  Aside from prescribing the 60-40 percent local-foreign ownership limit on voting shares, a similar 60-40 cap has been prescribed for the rest of a compny’s shares.

After this issuance of the second draft, the SEC is expected to conduct a new dialogue with stakeholders before finalizing the guidelines.

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  • Carlos_Iho

    We should allow 100% foreign ownership of companies only in the export industry and where capital requirements cannot be sufficiently funded by local investors. We cannot have foreign companies intended solely for the local market, otherwise, this will kill the small local businesses and we will all end up slaving for foreigners on our own land.

    • Crazy_horse101010

      no its better to slave for other flippinos who will probably pay less wages.

      • Carlos_Iho

        then enslave yourself to foreigners while dreaming that they are kinder and will treat you better than your fellow Filipinos who would not then be able to run even small businesses when everything else is taken over by foreigners…

  • Joseph20112012

    Why not the SEC tell the president to address the root that is to get rid of the 60/40 forced equity sharing on owning a business against foreigners from the 1987 constitution and allow 100% foreign equity ownership at all economic sectors once and for all?


    If by so we have a fair competition and people will have a freedom to choose,i agree we are monopolized like SM,its time to end contractual employment..they will eat 6mos,waiting 3 months and looking jobs and then hired again..this is in canada no age discrimination as long as u are fit..even disable person can work.sad thing about Phil employment?we have pix in our resume including age,gender,sexuality religion height,weight and so…very biased and discriminatory!here in canada just indicate ur experience and skills and state how are you fit to do the job,plain and simple..SM sucks,MVP too,Tan ans so may more

    • RocSteady

      Its crazy how these companies like SM get away with this here. There are so many people who need jobs but can’t work because of discriminatory policies. You can’t even work at Jolibee if you are over 22! Its not fair to Filipinos and drastic change is needed.

      • BOYPDAF

        Here u can even work at 50’s at any job..all is fair and equal regardless of race and pinas @ 27 ka nagaply di ka na pwede sa corporate jobs!ang ending mo magabroad..naawa ako sa mga contarctual whose salary is only 6k a month..wala pang benefits.lalo sa SM makikita mo puro bagong mukha palaging bata na may itsura..lalo ung mga saleslady..i wonder bkit ang laki ng unemployment rate..if they graduate at the age of 21,magiging tambay yan palagay na almost a year..mga 22-23 lilipat ng company ung iba namn di stable,hirap nman pumasok sa u have allowable of 3 years more to find a secure and long term job!how cruel life

  • RocSteady

    Time for constitutional change. Things would be better for a lot of Filipinos if they got rid of the 60/40 rule. Foreign owned companies would unlikely discriminate on workers because of their age, etc like they do at SM and such. Change that rule and the mentality of doing business here would change drastically because the “status quo” will be eliminated! The everyday Filipino would benefit because of more competition, jobs, and opportunities.

    • Crazy_horse101010

      he 60 40 law is one of the reasons the philippines is the 5 th worse country for foreigners to do business in along with the red tape and the power grid situation. no one wants to business here because of outages and the roller coaster voltage and on top of that it has the highest rates in asia. any way i wouldnt build a business if i only owned 40 percent .of it

  • NoWorryBHappy

    Foreign ownership of companies must be changed to 100%.

    This is the only way that we can get better services, lower prices and better competition. It will eliminate price manipulation and exploitation of employees the way that SM does by hiring only contractuals. In the retail industry for instance, the Philippines should open its doors to Walmart, Ikea, Argos, Target and Costco. The same shoudl be done to real estate and bacnking industries. To hell with SM monopoly.

    • rightist

      As long as there is reciprocal treatment for Phil companies expanding abroad, I agree. I disagree only on real estate. We should allow foreigners to own land with limits and their right to sell will come with limits also. We can also have a special land purchase tax applicable to foreigners only (residents of countries with which we have a FTA will be exempted).

      • RocSteady

        Indeed. Mr. Sy of SM is against foreign ownership but yet he has stores in Guam and China! A lot of American business success came from foreign entrepreneurs; Google is the best example. America is reciprocates so basically Mr. Sy wants his cake and and to eat it too!

      • Facebook User

        I understand Larry Page and Sergey Brin have “foreign” sounding names – ok well, only Mr. Brin does. But aren’t they American citizens?

        Also, China restricts access to any business coming in, and the Chinese government has to study and give it’s approval first.

        And as far as I know, foreigners can start a business in the Philippines. Toyota (Japan) has a plant here, Nestle (Sweden?) has a plant as well. The only restriction is when it comes to national interest. When the U.S. lets China and Iran own their phone companies, tv and radio and transportation systems, and even you’re gun manufacturing industry, that’s the time Filipinos should reconsider letting just any foreigner come in and own our lands and all our businesses.

      • Crazy_horse101010

        who says you have to sell to every country that comes along. how would you like to spend 5 or 10 million on a house and not be allowed to own the lot its on. worried someday you are going to lose it try it sometimes. foreign countries own power companies in america so what. what can they do shut them down from their home country. and china does own companies in america and so does japan..

      • Carlos_Iho

        We can sell our services, products and even our exhaustible mineral resources to foreigners but not a piece of land, even with limits on ownership period, e.g., freehold. This will push up real estate and even agricultural land prices beyond the reach of the common Filipino. This may initially be advantageous to land owners but eventually, we will be left with nothing, not even a tiny piece of land for our homes.

      • Crazy_horse101010

        but its ok for flippinos to go to america and buy 10 houses. i have friends who married a flippina who came home one day and found out their wife had a boy friend and sold everything out from under neath them and they lost everything. this happens a lot that is why you read about foreigners killing themselves because they have nothing. one lost his home because his wife was sleeping with the mayor and forged his papers. this happened 4 years ago and even though he sued the only ones who made money was crooked lawyers. and in case you havent noticed its the ofws that are pushing up house prices if we cant buy here flippinos shouldnt be able to buy anywhere else.

      • Carlos_Iho

        does it follow then that since ofw families who may have more to spend for food are pushing up food prices?

        do you think most ofw’s have substantial income that can compare with foreigners and can easily purchase properties?

        do you think that property prices now are unrealistic? it’s the ofw’s that are keeping the real estate industry alive, otherwise, it will be almost dead…currently, there is a need for more than 3 million houses and the industry only produce 200,000 annually…do you think there are that many filipinos who can afford to buy those 3 million houses?

        look at sri lanka…brits own vast tracts of agricultural land and the locals do not and cannot have the resources to purchase these lands from the brits and they are enslaved in what should be their own land…

    • Facebook User

      We’re still an emerging economy. And most Filipinos are not rich, especially when measured against the rest of the world.

      As it is, most of the land already belongs to corporations of extremely rich clans (if not to the clans out right).

      If we allow foreigners to have up to 100% ownership of companies and own our land as well, how much future do you think ordinary Filipinos will have? You wail against local monopolies, but allowing that degree of foreign ownership will only invite foreign monopoly.

      Besides, the ownership rule is more about national interest. Meaning we don’t want a country like China owning all our electrical providers and water companies and having them go down/offline to undergo “maintenance” or “system upgrading” the next time they want to go all the way to Palawan and claim it as part of their ancestral territory.

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