SC orders investigation of PLDT for possible violation of foreign ownership rule

In a resolution issued Monday, the Supreme Court denied with finality the motions for reconsideration on a prior decision which directed the Securities and Exchange Commission  to investigate the Philippine Long Distance Telephone Co. for possible violation of the constitutional limit on foreign ownership of corporations.  

 

Sections 10 and 11 in Article XII of the 1987 Constitution requires that at least 60% of the ownership of corporations and public utilities such as PLDT should be held by Filipino citizens. Foreigners may only own up to 40% of the total capital stock. 

 

According to the resolution, 64.27% of the common shares of PLDT, the class of shares which have the sole right to vote in company elections, are owned by foreigners. Filipinos own only 35.73% of the common shares and thus are a minority. Filipinos own 99.44% of preferred shares, but owners of preferred shares do not have voting rights and earn only 1/170 of the dividends that common shares earn. 

 

However, the high court limited itself to laying down the meaning of the word "capital" as intended by the Constitution and refrained from deciding whether PLDT did violate the 60-40 requirement. Instead, it directed the SEC to investigate PLDT using its guidelines. 

 

The 51-page resolution penned by Senior Justice Antonio T. Carpio reiterated its prior ruling that the 60-40 ownership requirement in favor of Filipino citizens in the Constitution not only applies to beneficial ownership of the shares, but also to voting control. 

 

The Court said that the drafters of the Constitution intended Filipinos to have the controlling interest of corporations. 

 

Therefore, if a corporation issues both 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 60-40 ownership requirement must apply separately to each class of shares, whether common, preferred non-voting, preferred voting or any other class of shares.

 

The PLDT case is a landmark decision as it defines capital for the first time and lays down these guidelines, even though the 60-40 ownership requirement in favor of Filipinos was also present in the 1935 and 1973 Constitutions. 

 

PLDT spokesperson Ramon Isberto declined to comment on the SC decision. “We have not received a copy [of the resolution]. We are deferring comment until we have a chance to study it,” Isberto said in a text message to GMA News Online.

 

By a vote of 10-3-1 vote, Chief Justice Maria Lourdes Sereno, Associate Justices Arturo Brion, Diosdado Peralta, Lucas Bersamin, Mariano Del Castillo, Martin Villarama, and Jose Mendoza concurred with Carpio’s ruling.