PDRs allow foreigners to invest without violating PH laws, says Monsod


Posted at Jun 13 2020 01:45 AM | Updated as of Jun 13 2020 04:32 AM

MANILA - One of the framers of the 1987 Constitution on Friday said that issuing Philippine Deposit Receipts (PDRs) is not an innovation of ABS-CBN, and that similar instruments are being issued by other countries to attract foreign investors.

“It’s not an innovation or creation of ABS-CBN. This is allowed in many countries and the purpose of this is to allow foreign investors to invest without violating any laws of the land. What is the benefit to the foreign investor are the distributions of the holding company that issues a PDR. In the case of ABS-CBN, ABS Broadcasting is listed in the stock exchange,” said Atty. Christian Monsod.

Monsod, on ANC’s Headstart, said 66 percent of shares of ABS-CBN are owned by ABS-CBN Holdings Corp, and it is the latter which issued PDRs to foreign investors.

“So, the foreign investors have no ownership of the shares,” Monsod said.

ABS-CBN has maintained that PDRs do not violate the Constitutional mandate that media companies should be 100-percent owned and controlled by Filipinos.

“The foreign investors are not entitled to receive dividends directly from ABS-CBN Broadcasting, and the feature of this PDR is that for every PDR that’s issued by ABS-CBN Holdings, there is a corresponding underlying pledge of ABS-CBN Broadcasting shares but that is not owned by the PDR holder, it is continuously owned by ABS-CBN Holdings,” said Monsod.

Rep. Michael Defensor said on Thursday that ABS-CBN was engaged in company-layering, and that PDR holders have some control of the corporation.

ABS-CBN's legal counsel has said that these financial instruments do not amount to ownership of shares, nor do they give holders the right to vote for the company's board of directors.

Other media companies, including ABS-CBN's chief rival, GMA Network, have holding firms that sell PDRs. These holding firms, not the PDR holders, have stakes in the broadcasting firms.

Monsod said the ruling of the Securities and Exchange Commission (SEC) on Rappler’s PDR does not apply to ABS-CBN Holdings' PDR.

“Because in the case of Rappler, there was a provision or requirement of a good faith discussion with the PDR holder on certain matters, including amendments of the articles of incorporation and the requirements of two-thirds vote of PDR holders. There is no such provision in the PDR issued by ABS-CBN Holdings,” he said.

Some congressmen want to scrutinize the PDRs issued by all local broadcasting companies for possible violation of the constitutional restriction on foreign ownership in mass media.

“If the Supreme Court changes the ruling in the Gamboa case, then ABS-CBN and GMA-7 can correct in accordance with the Supreme Court decision. That’s their right because of the operative fact doctrine that at the time they did it, it was fully approved, fully legal and therefore, if the ruling of Gamboa is changed, they have a right to correct in order to comply with the Supreme Court decision,” said Monsod.

ABS-CBN President and CEO Carlo Katigbak said on Thursday the company was willing to "modify or alter" its PDRs should government disqualify these financial instruments "equally across the entire media industry."

The SEC, in a Senate hearing in February, said that the PDRs issued by ABS-CBN Holdings were compliant with existing regulations at the time of issuance.

In a statement on Thursday, GMA Network said it maintains the legality of its issuance of PDRs saying this was done in compliance with the regulations of the SEC and of the Philippine Stock Exchange.

During the franchise hearings, some congressmen also questioned the citizenship and allegiance of ABS-CBN Chairman Emeritus Eugenio “Gabby” Lopez III.

Lopez was born to Filipino parents Eugenio "Geny" Lopez Jr. and Conchita Lao-Lopez, ABS-CBN said. Under the 1935 Philippine Constitution which was in effect at that time, he is automatically a Filipino citizen.

Lopez is also an American citizen by virtue of the fact that he was born in 1952 in the United States.

“The question is, is dual citizenship forbidden in the Constitution? No, it is not prohibited and therefore it’s allowed,” he said.

He added: “The Constitution doesn’t ban it, otherwise Republic Act 9225 [Citizenship Retention and Re-acquisition Act of 2003] would be unconstitutional. That would allow natural-born Filipinos who are naturalized in another country to reacquire Filipino citizenship and are considered natural-born. If they are natural-born, they lost it by naturalization, they reacquire, they are again classified as natural-born with full civil and political rights with, of course, certain exceptions.
“You are not allowed to vote or be appointed to or elected to public office if you serve in the government of your naturalized citizenship country, or if you are members of the commission or non-commissioned armed forces of the country of your naturalization,” he said.

Monsod said it is the Supreme Court that can decide on the issue of citizenship. He said that while it is Congress' prerogative to do so, it is open to question on many grounds, including equal protection of the law.

“If they want to insert that in the franchise of ABS-CBN there is also a question of equal protection of the law," he said.

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