IN Monday’s piece, Due Diligencer asked the Securities and Exchange Commission if it had fully complied with the order of the Supreme Court for it to review the foreign ownership of Philippine Long Distance Telephone Co.
Apparently, the high court recognized the competence of the SEC as the securities industry regulator that it tossed to its officials the sensitive task of penalizing PLDT for violating the 60-40 ownership rule between Filipinos and foreigners.
The penalty may be imposed only if the company is found in violation of the 60-40 rule in favor of Filipinos.
Since Due Diligencer failed to find anything either for or against PLDT that the SEC should have posted on its website, it is expanding its poser. This time, it wants to know if the SEC should also apply the SC’s ruling on PLDT ownership to other companies engaged in industries where Filipinos should own at least 60 percent of outstanding capital stock.
If the answer is yes, then why has the SEC, led by Chairperson Teresita J. Herbosa, not even made the first step in reviewing the ownership profiles of companies registered with it? The commission’s examiners, if the commissioners would allow them, may want to start with the ownership filings posted on the website of the Philippine Stock Exchange by publicly listed companies.
Of course, SEC officials may not agree with a layman’s reading of a court decision. Being lawyers, they may have different interpretation of a court decision that may be so full of legalese it is beyond this writer’s comprehension.
For example, the SEC’s five-man body may have a different interpretation of the SC’s ruling on the Gamboa-PLDT case that its members may not agree with this writer. But Due Diligencer has been rereading said decision too often that it could not forget a very intriguing portion that deals on the 60-percent minimum Filipino ownership.
“Thus, if a corporation, engaged in a partially nationalized industry, issues a mixture of common and preferred non-voting shares, at least 60 percent of the common shares and at least 60 percent of the preferred non-voting shares must be owned by Filipinos,” the SC said in its ruling written by Associate Justice Antonio Carpio.
Then the SC elaborated: “In short, the 60-40 ownership requirement in favor of Filipino citizens must apply separately to each class of shares, whether common, preferred non-voting, preferred voting or any other class of shares.”
The SC went on: “This uniform application of the 60-40 ownership requirement in favor of Filipino citizens clearly breathes life to the constitutional command that the ownership and operation of public utilities shall be reserved exclusively to corporations at least 60 percent of whose capital is Filipino-owned.
“Applying uniformly the 60-40 ownership requirement in favor of Filipino citizens to each class of shares, regardless of differences in voting rights, privileges and restrictions, guarantees effective Filipino control of public utilities, as mandated by the Constitution.”
By its ruling, the SC did not mean adding all the shares whether common or voting or non-voting preferred shares and dividing the total by the number of shares owned by Filipinos. If the quotient is less than 60 percent, then the ownership ratio of the company is in violation of the law.
To a layman, the SC simply means computing separately each class of shares in a company’s outstanding capital stock to determine if Filipinos control at least 60 percent of the common voting shares, 60 percent of the voting preferred shares and 60 percent of the non-voting preferred shares of public utilities.
Due Diligencer hopes it is wrong in concluding that the issuance of preferred shares would not effectively dilute the foreign ownership in a company to the legal limit of 40 percent. If it is right, then the SEC examiners who are underpaid and overworked may have to extend their working hours beyond eight hours in reviewing the ownership profiles of companies to see to it that foreigners should not own more than 40 percent of the outstanding capital of public utilities.