The Philippines’ Securities and Exchange Commission (SEC) has issued a final ruling on the computation of foreign ownership in the country, deciding to retain the 40% foreign ownership cap in certain industry segments, including major utilities. The decision is related to a recent Supreme Court decision concerning the ownership structure of dominant operator Philippine Long Distance Telephone Company (PLDT), which triggered the debate. A legal challenge had emerged questioning the sale of government shares in PLDT to foreign groups, although the Telco has since sold additional shares to Filipino investors so it can reduce foreign ownership in the company.
In SEC Memorandum Circular 8, issued on Monday, the commission said: ‘For purposes of determining compliance therewith, the required percentage of Filipino ownership shall be applied to both (a) the total number of outstanding shares of stock entitled to vote in the election of directors; and (b) the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors’, reports BusinessMirror. ‘All corporate secretaries of covered corporations are directed to monitor and observe compliance with the provisions on ownership requirements provided in the Constitution, the FIA [Foreign Investments Act of 1991], its IRR [implementing rules and regulations], other applicable laws, rules and regulations and with the provisions of this circular,‘ the circular went on to say.
As reported by TeleGeography’s CommsUpdate, last month PLDT gave its backing to new rules on foreign ownership of domestic companies as per a SC decision. Currently, at least 60% of the telco’s voting shares are owned by Philippine nationals, partly the result of a recent SC decision that defines ‘capital’ as meaning voting shares only. PLDT took steps to issue 150 million new preferred voting shares to a subsidiary of PLDT Beneficial Trust Fund – BTF Holdings – in an effort to dilute/reduce the percentage of the company in foreign hands to 34.5% from 58.4%. At the time, the operator also reported that it considered new draft rules issued by the SEC, that would set up a two-tier system of ownership, to be ‘consistent with the constitution and other laws’. PLDT also expressed its desire that the revised rules on foreign ownership would result in ‘a more conducive and enduring atmosphere for foreign investments in the Philippines’.