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.