More liberal foreign equity rule looms

SEC draft makes PLDT capital structure ‘acceptable’


The Securities and Exchange Commission has drafted a new set of guidelines on foreign ownership in partly nationalized industries—a more liberal framework wherein the 40-percent foreign equity limit is prescribed on both the voting shares and total outstanding shares.

The draft guidelines, which the SEC is releasing for further public feedback, make the recent capital restructuring of telecom giant Philippine Long Distance Telephone Co. 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 suitable as compliance under the new draft of guidelines.

Based on the new guidelines, all covered corporations must, at all times, observe the constitutional or statutory ownership requirement, referring to the 60-40 percent local-foreign ownership requirement.

“For purposes of determining compliance therewith, the required percentage of Filipino ownership shall be applied to both a) the total number of outstanding shares of stock entitled to vote in the election of directors; and b) the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors,” the new draft said.

“In case the law requiring a certain percentage of ownership to belong to Filipinos specifically refers to voting stock, the requirements set forth therein shall be complied with,” the draft said.

All covered corporations were also required to adopt a system of internal controls that will enable them to monitor and observe compliance with the provisions on ownership requirements provided in the Constitution.

The new draft guidelines issued by the SEC were seen as more liberal compared to the first draft, which required that all classes of shares follow the 60-40 percent limit.

A landmark Supreme Court ruling earlier stated that PLDT had exceeded the maximum allowable 40-percent foreign equity cap prescribed by the 1987 Constitution. The ruling essentially redefined foreign capital, stating that non-voting shares did not count as equity when computing a company’s Filipino ownership level for purposes of compliance with the 40-percent foreign equity limit on key industries like property and utilities.

To cure the situation, PLDT adopted a solution wherein it issued 150 million new voting preferred shares to BTF Holdings Inc., a subsidiary of its employees’ beneficial trust fund.

This brought down the voting rights of foreign shareholders in PLDT to 34.5 percent from the previous 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.

Meanwhile, the two-tier formula is meant to address concerns on the use of dummies in corporate structure. Aside from prescribing the 60-40 percent local-foreign ownership limit on voting shares, another tier of 60-40 percent cap was prescribed for the rest of the shares.

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

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Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.

  • joboni96

    ito ang mga foreign collaborators sa sec

    uubusin pa lalo ang kayamanang pilipino
    sipain at i deport na ang mga ito

    pilipino economy for pilipinos

    • Crazy_horse101010

      i agree lets send all the ofws back and build a fence around this country no more business no more tourists have fun commie

      • joboni96

        the kolonisadong utak mind

        brand the pro pilipino
        as commie

        turo ng among cia
        fearing impotence in bansang pilipino

      • Crazy_horse101010

        because t you talk like one smell like one so you must be one. or else your girl friend got tried of you beating her and dumped you for foreigner so which is it racist

  • ewanski tolongges

    Liberalization for more FDIs FTW! Expect the oligarchs to move heaven and earth so that this doesn’t happen. Multinationals coming will, at the very least, raise the salary bargaining powers of our local human capital. I am excited at the positive multiplier effect this brings to the economic table.

  • Joseph T. Pascual

    Time to let foreigners own 100% of everything. More investments equals more jobs and more competition. Only the Ayala’s, Sy’s, and about another 10 families have gained from this protectionism as they own practically 95% of the economy! Really sad.

    • Phillip Drm

      If you want to wake-up one day to have a pay that is not enough to buy you a decent piece of land in the Philippines, then that’s the way to go. While Israel and Palestine are fighting for a piece of land to call home, you, however, is willing to sell your country to foreigners . . . stinking Colonial mentality and unbelievable lack of patriotism.

      If you envy the Ayala’s, Sy’s, etc., why not build your own business empire to help create jobs and to enhance competition.

  • tadasolo

    Get rid of this 60-40 equity it was meant to protect rich Filipinos who are afraid of competition and are content on making money under the protection of monopolistic and nationalistic rules which are a thing of the past. 100 % investments in key industry is what we need to prospers and create jobs for our people not money for the select few

    • kismaytami

      Wala namang rich Filipino sa Pilipinas. Ang meron lang ay rich tsekwa at mga insulares. Ang meron lang sa mga Filipino ay mga dummy.

    • Facebook User

      I disagree. This foreign ownership rule on properties and utilities is for national interest.

      Meaning, we don’t want China coming in, buying our electricity providers, water companies and shutting them off haphazardly the next time they decide to claim Spratleys, Batanes, Babuyan Islands, and maybe even Palawan if they felt like it.

      Instead of using military might and provoking other states, they can just buy our power, water, and maybe even oil companies and squeeze us while insisting its in our best interest to just sell off parts of our country one by one.

      • Crazy_horse101010

        what do you think is happening now in mindanao with rolling blackouts every day. i dont live there but its a rare week i dont have outages as many as 5 a day some lasting from 8 am till 7 pm. . i ve seen 9 in one week and my voltage on a good day is 200 volts. if they shut the power proclaim national emergency and sent the army in to turn it back on. they have to be here to turn it off not in china, iv e worked for 40 years for power companies in america and some there are owned by foreign companies and they arent worried about it. america where the power is much lower but the overhead is many times higher.

      • joboni96

        isa pang
        miseducated kolonisadong utak collaborator

      • Crazy_horse101010

        miseducated retard

      • joboni96

        good you accepted
        your kolonisadong utak

      • Crazy_horse101010

        oh my breaking heart haw haw haw

      • tadasolo

        You reasoning is based on paranoia. If you are so worried about the Chinese there are the Japanese, Koreans, Germans, Americans, Canadians, Brazilians, Russians, Australians, British, Italians, French. You want some more

    • joboni96

      miseducated kolonisadong utak collaborator

  • Weder-Weder Lang

    Specifically for the telco industry, I think PHL is ready for fully foreign-owned competition. The legislators should open up this industry to allow the two big duopoly Globe and PLDT-Smart to shape up or ship out.

  • Phillip Drm

    Thank you to SEC for working to close this loophole and on dummies.

    If possible, please require Publicly Listed Corporations to have Management Succession Programs that will empower Filipinos to assume Top Management positions. The Management Succession Programs should be in line with the requirement of Article II Section 19 of the Constitution quoted below as follows:
    “Section 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.”

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