The Securities and Exchange Commission (SEC) on Wednesday announced it has affirmed its order revoking the certificates of incorporation of Rappler Inc. and Rappler Holdings Corp. for supposedly violating the foreign ownership restrictions on mass media companies.
In a statement, the SEC confirmed the issuance of an order dated June 28, 2022, affirming the revocation of the certificates of incorporation of the two companies.
The latest order affirms the corporate regulator’s decision dated January 11, 2018, which found Rappler liable for violating the constitutional and statutory foreign equity restrictions in mass media when it issued questionable Philippine Depositary Receipts (PDRs) that granted Omidyar Network, a foreign entity, control over the media organization.
The PDRs included a provision requiring the Filipino stockholders of Rappler to seek the approval of Omidyar Network on fundamental corporate matters, a violation of the absolute constitutional and statutory prohibition on foreign control of mass media, the SEC said.
“Accordingly, the SEC revoked the certificates of incorporation of Rappler, being the mass media entity that sold control to foreigners, and of RHC, being an alter ego that existed for no other purpose aside from effecting a scheme aimed at masking the former’s Constitutional violation,” it added.
In a separate statement, Rappler said, “We were notified by our lawyers of this ruling that effectively confirmed the shutdown of Rappler.”
“We are entitled to appeal this decision and will do so, especially since the proceedings were highly irregular,” the company said.
At a virtual press conference, Rappler legal counsel Atty. Francis Lim said the media company strongly disagrees with the SEC's order.
"Fortunately for us, we have legal remedies available to question the decision before our courts of law," he said. "So, rest assured that we will do so on behalf of the Rappler Group and we are confident that at the end of the day we shall prevail."
Lim stood firm that Rappler's issuance of PDRs does not equate to ownership of shares of stocks in the company.
"We do not admit that the ownership of the PDRs by the foreigners equates to equity interest in the Rappler Inc. and Rappler Holdings," he said.
"I came from the Stock exchange, there is a very big difference between depositary receipts and shares of stocks. That’s one area of contention," Lim added.
Lim said that the media company has 15 days to file a petition for review to the Court of Appeals. With this, he said the SEC cannot implement its shutdown order against Rappler “while we appeal.”
Meanwhile, SEC also declared Rappler’s PDRs void pursuant to Section 71.2 of Republic Act No. 8799, or the Securities Regulation Code, “for being a fraudulent transaction within the ambit of Section 26.1 of the law.”
Court of Appeals
SEC said Rappler appealed its decision before the Court of Appeals (CA), and while the appeal was pending, Omidyar Network, through its representative, Stephen King, announced its intention to donate the PDRs to the Filipino staff of Rappler, the regulator said.
“In a decision dated July 26, 2018, the CA upheld the finding of the SEC that Rappler sold control to foreigners,” the SEC said.
“The appellate court, however, directed the Commission to conduct an evaluation of the legal effect of the alleged supervening donation by Omidyar Network of the PDRs to the staff of Rappler and accordingly remanded the case to the Commission,” it added.
The SEC said that the CA affirmed and reiterated its 2018 decision in a resolution dated February 21, 2019.
The Supreme Court on September 25, 2019 then issued a resolution declaring the case closed and terminated.
With this, the CA proceeded to issue another resolution dated December 4, 2019 declaring that its 2018 decision has attained finality as of 21 March 2019.
Consequently, an entry of judgment was issued in the instant case, the SEC said.
In compliance with the directive of the CA, the SEC, through the Office of the Solicitor General (OSG), filed on February 17, 2021 a manifestation containing the findings of a special panel convened by the commission for the purpose of evaluating the legal effect of the supervening donation.
“After a careful study of all the pleadings and arguments of the parties, the special panel concluded that the purported donation of the PDRs to the staff of Rappler neither created nor transferred any right in favor of the donees which would mitigate or cure the violation already committed,” the regulator said.
On March 16, 2021, Rappler and RHC filed with the SEC their Ex Abundanti Ad Cautelam Motion for Reconsideration seeking the setting aside of the special hearing panel’s compliance.
On March 19, 2021, Rappler and RHC filed with the CA their Counter-Manifestation informing the appellate court that they have filed a motion for reconsideration with the Commission.
On June 21, 2022, the SEC, through the OSG, received a copy of a document issued by the Court of Appeals (former Special Twelfth Division) quoting its resolution dated June 21, 2022, merely noting its manifestation and Rappler’s counter-manifestation.
“It is in this light that the SEC issued the order dated June 28, 2022 affirming the revocation of the certificates of incorporation of Rappler and RHC,” the regulator said.
“With the latest resolution issued by the CA, which noted the compliance of the Commission and the counter-manifestation of Rappler and RHC, the instant order is now warranted considering that the appellate court’s 2018 decision has already attained finality,” it added.
The SEC noted that the revocation of the certificates of incorporation of Rappler and RHC was ordered by the Commission as early as January 11, 2018 and that the ground for such was affirmed by the CA repeatedly – first, on July 26, 2018; then, on February 21, 2019; and again, on December 4, 2019.
“The decision of the CA has attained finality and the latest resolution of the appellate court only bolsters the Commission’s position that Rappler and RHC violated the Constitution and that their certificates of incorporation should therefore be revoked,” it said.
“The contentions raised by Rappler and RHC have been squarely and adequately addressed by the SEC and the CA in their respective decisions, resolutions and orders, including the latest issuance from the Commission,” it added.
In this light, the SEC said that the latest order issued by the Commission en banc merely puts in effect its earlier decision and those of the Court of Appeals.
'Business as usual'
For her part, Rappler CEO and Nobel Peace Prize winner Maria Ressa said they will continue "holding the line."
"We continue to work, it is business as usual," Ressa told reporters, adding "we can only hope for the best" under President-elect Ferdinand Marcos Jr., who is set to formally assume the presidency on Thursday.
"We have plans A through Z… We’re not gonna voluntarily give up our rights," Ressa said during the press briefing.
"We will continue to report and will continue to demand. I appeal to journalists in the Philippines, around the world that we hold our rights together cause if we give it up, just a little we begin to lose,"
While the SEC claims that its decision has attained finality, Lim said that it can still be appealed to the Court of Appeals.
If the Court of Appeals rules against Rappler, the legal counsel said, “We will have the final opportunity to appeal all the way up to the Supreme Court.”
"So it’s not the end of the world for us," Lim said. —with Agence France-Presse/KBK, GMA News