SEC preparing for final ruling on ownership issue
The Securities and Exchange Commission is considering a “curing period” for Philippine companies to comply with a new definition of the term “capital,” in case the Supreme Court ruling on the foreign ownership issue involving Philippine Long Distance Telephone Co. becomes final and executory.
The Supreme Court recently ruled by a vote of 10-3 that the term “capital”—when applying the Constitutional limit of 40 percent foreign ownership in partly nationalized industries—referred to shares of stock that were entitled to vote in the election of directors. Thus, in the PLDT case, it was defined to refer only to common shares and not to the total outstanding capital stock or common and nonvoting preferred shares of the company combined.
As part of the ruling, the SEC was directed to investigate PLDT’s ownership structure. The ruling, however, is seen affecting many other companies that counted both common and preferred shares as the combined base in determining foreign ownership.
SEC Chairperson Teresita Herbosa said in an interview that aside from telecommunication, other companies that would likely be affected by the high court ruling were mining and other companies engaged in the exploration of natural resources, real estate and to a certain extent, retail trade.
PLDT and other respondents are filing a motion for reconsideration.
Assuming that ruling would be made final and executory, Herbosa said all other companies that might be affected should be ready to present documents showing they were in compliance. “It’s their own lookout,” Herbosa said.
“But as in other issuances, we always give time for compliance. It’s not realistic to expect everybody to be in compliance when the ruling has just been issued,” Herbosa said.
SEC secretary Gerard Lukban said the corporate watchdog would have to tweak its operating procedure to implement the new definition of capital in case the ruling is affirmed. But at present, Lukban said the SEC had a system for imposing fines on companies exceeding the foreign equity limit based on the Foreign Investments Act.
“A curing period is a possibility but the (SEC) Commission en banc hasn’t decided on it yet,” Lukban said.
Herbosa said all other companies to be affected by the new jurisprudence should examine their records and be ready to disclose all the legal and beneficial owners of their shares.
“Under the law, they are supposed to disclose and indicate whether (the outstanding shares are) voting or nonvoting. If you’re going to change your classes of shares, that will be by way of amendment of articles. You have to file all required documents. So it won’t be that difficult to find out the ownership of companies,” Herbosa said.
The SEC was ordered by the Supreme Court to find out whether PLDT was in violation of the foreign capital limit based on its definition of capital.
For its part, PLDT recently announced plans to amend its charter in order to issue up to 150 million voting preferred shares to Filipinos to cut the foreign ownership to about 36 percent, from 64 percent if nonvoting shares are excluded.
