SEC to release draft rules on foreign ownership

By Miguel R. Camus, Business Mirror

Posted at Oct 28 2012 08:08 PM | Updated as of Oct 29 2012 07:09 PM

MANILA, Philippines -- The Securities and Exchange Commission (SEC) is releasing this coming week the draft guidelines governing the treatment of foreign ownership on Philippine corporations, which was prompted by a recent Supreme Court decision on Philippine Long Distance Telephone Co. (PLDT).

SEC chairman Teresita Herbosa said the corporate regulator is finalizing the rules to pave the way for a public consultation on the guidelines on November 9.

“The draft rules will be out next week so the public can comment on November 9,” Herbosa said in a text message last Thursday after the corporate regulator held its weekly en banc meeting.

She added that the rules will cover companies required to be at least 60% Filipino-owned. Herbosa said these are telecommunications companies, mining firms, property developers, public utilities and companies included on the Board of Investments’ foreign investment negative list.

The SEC has been in discussions with stakeholders, including the Philippine Stock Exchange, to find a “working solution” with regard to the Supreme Court ruling, which effectively gave a new interpretation to the meaning of “capital” in the context of foreign ownership.

In the Supreme Court ruling, only voting shares should be counted in calculating a company’s ownership.

The case stemmed from a case filed by Wilson Gamboa, where the Supreme Court held that the term capital in Section 11, Article 12, of the 1987 Constitution refers only to “common” shares whose owners can vote in the election of directors. It does not refer to capital stock, which is composed of “common” or voting shares and “preferred” or non-voting shares.

The High Tribunal also directed the SEC “to apply this definition of the term ‘capital’ in determining the extent of allowable foreign ownership in respondent PLDT and, if there is violation of Section 11, Article 12, of the Constitution, to impose appropriate sanctions under the law.”

In a resolution promulgated on October 9, the Supreme Court denied, with finality, motions for reconsideration on the decision.