MANILA, Philippines—The Securities and Exchange Commission (SEC) will not be taking any action against Philippine Long Distance Telephone Co. (PLDT) until the Supreme Court (SC) decides with finality on whether or not the utility violates foreign ownership restrictions in the Constitution.
Reacting to a recent statement by Sen. Joker Arroyo, SEC commission secretary Gerard Lukban pointed at a pending appeal by PLDT officers against the recent Supreme Court ruling that excluded preferred shares in the computation of foreign ownership.
“The Senate cannot at present support any transaction of PLDT until it has corrected its ownership structure. To do so would be to countenance an unconstitutionality,” Arroyo said in a previous statement.
“Not being compliant with the Constitution, PLDT, if it has to continue its operations, must first correct its ownership structure,” the company said.
The high court in a previous decision limited the definition of foreign ownership only to voting shares while the SEC had been computing ownership based on all shares, including non-voting preferred shares.
But PLDT has said if preferred shares are counted as part of its capital, then foreign ownership accounts for just 13 percent to 14 percent. But if only common shares are counted, PLDT has admitted that the company would be considered 64 percent foreign-owned. The Constitution prohibits foreigners from owning more than 40 percent of any public utility.
The Supreme Court admonished the SEC for its failure to crack the whip when PLDT breached the 40 percent limit on common shares that foreign shareholders could own.
Saying that the present state of share ownership in PLDT “is a mockery of the Constitution,” the high court, speaking through Senior Associate Justice Antonio T. Carpio, directed the SEC to “perform its statutory duty” especially with the 2010 filings of the company where it was very clear that it was in breach of the 40 percent foreign share limit in respect of common shares.
“(T)he SEC has apparently unlawfully neglected (its statutory duty) based on the 2010 General Information Sheet (GIS) that respondent PLDT submitted to the commission,” the Supreme Court said.
The court pointed out that the SEC had the “power and function to suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations upon any of the grounds provided by law.”
The Supreme Court ruling stated that since “all corporations are required to submit to SEC annually,” the “SEC should be on guard against violations of the nationality requirement prescribed by the Constitution and the existing laws.”