• Complicated computations of corporate ownership

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    ARE foreigners actually limited to owning a maximum of 40 percent in companies engaged in business activities reserved for control by Filipinos? The answer is in how government regulators would compute the ownership profile of a company to determine if it complies with the 60-40 percent ratio in favor of Filipinos.

    A few words of clarification: This piece is neither supporting nor opposing any view on the proposed amendments to existing investment laws. The analysis here, which is meant only to inform, is based on my personal computations of potential foreign ownership ratios in 60-40 percent enterprises, the results of which tend to allow foreigners more than the ownership limit.

    Let me name my example X Corp., which has only two stockholders named Aco Inc. and Bco Inc. Of X’s outstanding capital stock, Aco owns 60 percent and B, which is 100-percent owned by foreigners, holds 40 percent.

    The question is which between A and B would end up the majority stockholder of X after subjecting their investments under closer scrutiny.

    Aco, which happens to be 60 percent Filipino and 40 percent foreign, is treated as 100-percent Filipino when investing with Bco in another company, which is X, which has a 10-man board. As such, it is entitled to six seats while Bco gets four.

    Again the question is who among the stockholders of Aco should decide on the nomination of six directors. Shouldn’t the foreign stockholders who own 40 percent also participate in choosing Aco’s six nominees to X’s 10-man board? Going by computation, 40 percent of 6 equals 2.4 seats.

    At this point, Filipinos remain in control of X as far as A’s six seats are concerned but not of the entire 10-man board. With foreign-owned B getting four of 10 seats, Bco becomes the majority stockholder with more seats —4 plus 2.4 equals 6.4—leaving Filipinos with only 3.6 seats, a number that makes them the minority stockholders of X.

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    On a personal note, liberalizing investment laws may be good for the economy. More foreign investments would mean more jobs available for Filipinos and less control of the economy by the Philippines’ very rich and, more often than not, also very famous for their wealth.

    Nobody knows how Congress will amend the corporate ownership provisions of the law without complicating the task of computing the ownerships of more than 300,000 stock corporations registered with the Securities and Exchange Commission.

    With Congress’ amendment of existing investment laws, particularly those concerning corporate ownership, the SEC would be faced with the difficult task of reviewing the stockholders’ profile of possibly more than 300,000 stock corporations, including 254 companies listed on the Philippine Stock Exchange.

    By the way, as the registry and corporate regulator of businesses, the SEC has been publicly known more for imposing the rules on the public. As a matter of fact, for instance, SEC officials led by Chairperson Teresita Herbosa should have studied their lessons well and the public pulse before coming out with any kind of innovation. Imagine making a researcher pay more than P1,000 for three to five companies via SEC’s website when he or she could have spent much less, say only P500, under the old system?

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    Cihangir Arslan from Turkey is here for the long term. As president of Pacific Dialogue Foundation Inc., he ties up the Turkish foundation with local schools and universities in promoting “harmony in diversity” thru seminars and conferences. Arslan said the foundation’s efforts are focused on strengthening tie-ups with various schools in the country.

    Arslan should be careful in dealing with bogus NGOs, of which there are many in this country.

    Welcome to the Philippines. Also from Turkey is Dr. Yusuf Ozdemir, who is in town on a learning tour of the Philippines. I happen to have met him a few years ago when I covered a business conference in Istanbul attended by a group of Filipino businessmen. Ozdemir was among the hosts, who guided us on a tour of some of Turkey’s historical sites.

    It is too late perhaps to extend my gratitude to the Turkish people for their hospitality, but what I would cherish most for the rest of my life is the rare chance of visiting the house that served as a safe haven for the Virgin Mary after the crucifixion of Jesus Christ.

    esdperez@gmail.com.

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    2 Comments

    1. Do you really know the owners of corporations big or small.
      Most of the time theyuse dummys to register with SEC.
      That is the real truth anyway. They have plans to get 100%
      control as they are not to have large land as this is stated
      in our constitution, If this will be approve trhe very first to be
      hit will be the farmers that thats the time we will suffer more.

      We are just selling our country to the dogs, That is my
      bottom line.

    2. This law often makes foreigners its best not to do business here especially if the company is founded on the foreigners money. As the foreigner can easily lose the money invested. As a foreigner I think the best Business in the Philippines is no business.