SC orders SEC: Find out the allowable foreign ownership in PLDT

The Supreme Court has ordered the Securities and Exchange Commission to determine the extent of allowable foreign ownership in Philippine Long Distance Telephone Company (PLDT) and to check whether the telecommunications giant has violated the 1987 Constitution. In its regular en banc session Tuesday, majority of the justices agreed that the term "capital" found in Section 11, Article 12 of the Charter refers to common shares, which entitle a holder to participate in the voting for the firm's directors. The SC clarified that the term "capital" does not refer to the total outstanding capital stocks, which constitute common shares and non-voting shares. Section 11, Article 12 of the Constitution mandates that foreign entities can only own up to 40 percent shares in a Philippine corporation. The high court ordered SEC chair Teresita Herbosa to apply this definition of "capital" in determining the extent of the allowable foreign shares in PLDT. The SC also directed the commission to check whether PLDT has complied with the Constitution and to impose the appropriate sanctions if any violation is found. "Wherefore, we partly grant the petition and rule that the term capital in Section 11, Article 12 of the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors and thus in the present case only to common shares and not to the total outstanding capital stock (common and non-voting preferred shares)," the SC said. "Respondent chairperson of the SEC is directed to apply this definition of the term 'capital' in determining the extent of allowable foreign ownership in respondent PLDT and if there's a violation of Section 11, Article 12 of the Constitution, to impose the appropriate sanctions under the law," the SC added. Gamboa's petition The petition that the high court partially granted was filed by human rights lawyer Wilson Gamboa in 2007. That year, Gamboa asked SC to stop the sale of the government-acquired 111,415 Philippine Telecommunications Investment Corporation (PTIC) in PLDT shares to Hong Kong-based First Pacific Co. Ltd. Gamboa argued that the sale of PTIC shares to First Pacific violates Section 11, Article XII of the 1987 Constitution. Gamboa said that if the sale would push through, First Pacific and NTT DoCoMo, a minority stockholder, would end up owning 51.56 percent PLDT — in violation of the maximum allowable 40 percent foreign equity provided by the Constitution. The lawyer claimed that as early as 2003, foreign entities have violated the Philippine Constitution. Gamboa said that as of May 2006, the foreign shareholders in PLDT are: