SC asked to stop PLDT stockholders’ meeting due to foreign ownership issue

A lawyer has asked the Supreme Court to stop the Philippine Long Distance Telephone (PLDT) Co from holding its annual stockholders' meeting this year.

In a joint consolidated reply, Jose Roy III said a temporary restraining order should be issued against PLDT since the Securities and Exchange Commission (SEC) has yet to make a declaration that the telephone company has complied with a ruling that limits foreign ownership of public domestic utilities to 40 percent.

"[Without the SEC declaration], it would seem that PLDT is still a foreign owned and controlled corporation. Therefore, it is in continuing violation of the Constitution and should not be allowed to exercise the privileges of share ownership," said Roy.

The lawyer said these privileges included: voting of shares, receiving of dividends and electing directors. "For this reason, it is necessary to restrain PLDT from holding its 2014 annual Stockholders' Meeting," he said.

"Unless this is issued, the foreign owners of PLDT will continue to exercise privileges that are prohibited by our Constitution," said Roy in his reply to respondents SEC and PLDT's comment on the lawyer's petition for certiorari.

Roy filed his original petition in June last year and the respondents filed their comment, a copy of which Roy received three months later in September.

"It bears stressing that the wording of (SEC Memorandum Circular No. 8 Series of 2013) directly contravenes the Gamboa Cases, excusing the application of the 60-40-percent rule to each class of shares," said Roy in his reply.

In the Gamboa cases, the high court  in June 2011 defined the term "capital" under the 1987 Philippine Constitution as limited to foreign ownership of domestic public utilities to 40 percent.

The court said the SEC should use only common voting shares in assessing the capital stock of the firm to determine the level of foreign ownership in PLDT.

This would mean that 64 percent of PLDT is owned by foreigners, in violation of the 40-percent limit under the Foreign Investments Act of 1991.

In his original petition in June last year, Roy contested the guidelines on foreign ownership set by the SEC and called for a re-investigation of the PLDT equity structure.

Roy had alleged that Section 2 of the SEC Memorandum Circular No. 8 Series of 2013 was "tailor-made to accommodate the scheme of PLDT for conforming with the Constitution."

Roy claimed the SEC circular allowed PLDT to amend its articles of incorporation so it may issue preferred voting shares then sell the stocks to a "non-complying entity" called Beneficial Trust Fund (BTF) Holdings Inc. This, the petition noted, would address the foreign ownership limits in public utilities as set under Section 11 of Article XII of the Philippine Constitution.

Only foreign voting stock has the authority to approve a decision of a company with 60 percent foreign equity to "allocate hundreds of millions to buy additional equity," Roy said.

The "unconstitutional use" of the PLDT Beneficial Trust Fund, which Roy said was "effectively controlled by foreigners," to purchase the 150 million voting preferred shares of PLDT "should not be ignored.

Roy asked the SC to declare the PLDT Beneficial Trust Fund as a non-Philippine “... national and that any corporation in which it owns more than 60 percent of the outstanding capital stock should also be declared as a foreign corporation."

The SC should direct the SEC to re-investigate PLDT and determine if the telco giant violated Section 11, Article XII of the Constitution, which sets foreign ownership of a company at a maximum of 40 percent of the capital, according to the petition. — Mark Merueñas/BM, GMA News