SEC wants disclosures on foreign equity enhanced

The Securities and Exchange Commission (SEC) may begin requiring additional disclosures from companies following a Supreme Court ruling on foreign ownership, an SEC official said on Thursday. In an interview on the sidelines of the “2009 Corporate Governance Trends in the 100 Largest Publicly Listed Companies" in the country, SEC chair Teresita Herbosa said they would have to require certain firms to disclose in detail the classes of shares that they are issuing stockholders. "If the decision becomes final, we would have to require the [affected] companies to disclose whether or not their preferred shares are voting or non-voting, and we will compute accordingly," Herbosa said. Some of these affected companies are in public utilities, education, natural resources, and in nationalized and partly nationalized activities. The new requirement stems from a recent ruling by the SC saying that the Philippine Long Distance Telephone Co. (PLDT) may have breached Section 11, Article 12 of the Charter, which mandates the 60-40 ownership rule in a Philippine corporation. The high court ruled that the term "capital" in the provision refers only to common stocks — which gives shareholders voting rights to elect board directors — which, when strictly enforced, elevates foreign ownership in PLDT to 64 percent breaching the 40 percent ceiling. Past computations In previous computations, which includes PLDT preferred shares, Filipinos own 87 percent of the firm, while foreigners have a 13-percent ownership. When firms file their General Information Sheet or articles after their annual stockholders' meeting, they would have to attach a separate disclosure outlining the different types of company stocks, Herbosa said. "Ang problema kasi, 'yung preferred shares, ang daming variations doon. Merong mga voting shares and the like. When lives were simpler, talagang okay na ‘yung we compute it according to the total number of stocks," she explained, adding that the SC was just being up to date with its recent ruling. The SEC commissioner said the commission would not be running after corporations who violate the foreign ownership rule. But the moment the SC comes out with a final decision to this effect, Herbosa said all affected companies should start complying. "They should be mindful if they are applying the 60-40 rule (using this computation), and then do remedial steps to comply," she said. "Ngayon pa lang dapat nag-curing na sila, but only those who are covered." PLDT dilutes foreign equity In response to the SC ruling, PLDT on Tuesday decided to reduce foreign ownership in the company to 36 percent from 64 percent. In a statement and in a disclosure to the Philippine Stock Exchange, PLDT said its board created a new class of preferred shares with voting rights that are limited to Filipino ownership. http://www.gmanews.tv/story/225403/business/foreign-investors39-voting-power-in-pldt-to-shrink-to-36 "When issued, the 150,000,000 Voting Preferred Shares will be about 45% of the expanded voting shares of PLDT and the total foreign equity in PLDT’s expanded voting shares will be reduced from the current 64% to about 36%," PLDT said. The board decision will align the firm’s capital structure with those of many other listed firms in the mining, property and public utilities sectors, PLDT added. — VS, GMA News