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SC asked to halt PLDT stockholders meeting.

The Supreme Court (SC) has been asked to stop the scheduled June 10 stockholders meeting of the Philippine Long Distance Telephone Company (PLDT).

In a pleading filed by lawyer Jose M. Roy, the SC was told that the stockholders meeting should not be allowed to proceed until it is determined that the acquisition by BTF Holdings Corporation (BTF) of PLDT's preferred voting shares is in line with the constitutional provision that limits foreign ownership to 40 percent in public utility corporations.

Roy pleaded for the issuance of a temporary restraining order (TRO).

According to Roy, BTF which was created out of the PLDT Beneficial Trust Fund was erroneously declared a 100 per cent Filipino corporation.

"Without any injunctive order from this Court, the foreign owners of PLDT will be able to elect directors who would then proceed to direct the affairs and resources of the corporation..., then the new board would certainly proceed towards preserving and perpetuating the foreign control of PLDT," Roy said.

The 60-40 participation of Filipinos and foreigners in public utility corporations in the country as provided for under Section 11, Article XII of the 1987 Constitution was subject of a 2011 SC decision written by Senior Justice Antonio T. Carpio.

In that landmark decision on the case involving the PLDT, the SC ruled that the term "capital" in a public utility corporation refers only to shares of stocks entitled to vote in the election of directors or the so-called "common shares" and not to the total outstanding capital stocks composed of "common" or voting shares and "preferred" or non-voting shares.

With the decision, the 60-40 participation of Filipinos and foreigners, respectively, in a public utility firm should be reckoned only the basis of their "common" shares holdings.

"Unless and until there has been a definitive ruling ... on the acquisition by the BTF Holdings of PLDT's preferred voting shares... there is no reason to allow PLDT to conduct a stockholders meeting, election of directors or perform similar powers accruing to the stockholders," Roy said.

According to Roy, the PLDT and the Securities and Exchange Commission (SEC) had failed in their comments to address the issues he raised in his petition. He wanted the SC to declare as unconstitutional the memorandum circular issued by the SEC in compliance with its directive on determining foreign ownership in public utility corporations, including the PLDT.

He said that SEC's Memorandum Circular No. 8 declared PLDT compliant with the requirement of the Constitution and the 2011 SC decision.

In MC 8, the SEC states: "All covered corporation shall, at all times, observe the constitutional or statutory ownership requirement. For purposes of determining compliance therewith, the required percentage of Filipino ownership shall be applied to both 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."

According to Roy, SEC's MC8 did not make a distinction between the different classes of shares, and "instead, offers only a general distinction between voting and all other shares."

"The standing interpretation of the SEC found in MC8 practically encourages circumvention of the 60-40 ownership rule by impliedly allowing the creation of several classes of voting shares with different degrees of beneficial ownership over the same, but at the same time, not imposing a 40 per cent limit on foreign ownership of the higher yielding stocks," he said.

At the same time, Roy said SEC's MC8 appeared to be "tailor-made" for PLDT to make it appear that the public utility company has conformed to the provision of the Constitution and the ruling of the SC on foreign ownership.

He pointed out that even before the issuance of MC8, PLDT had already sought amendment of its articles of incorporation, issued preferred voting shares and sold them to "non-complying" entities called BTF and Mediaquest Holdings, Inc.

He said the two companies which were created from the PLDT Beneficial Trust Fund, were erroneously declared as 100 per cent Filipino-owned corporations.

"The scheme employed by PLDT of creating separate corporations through the Beneficial Trust Fund is but a ruse to secure the circumvention of the nationality requirements from scrutiny," he added.

Thus, Roy also asked the SC to declare all corporations created through the PLDT's beneficial trust fund as foreign corporations.

The 2011 SC decision which became final in 2012 was filed by the late human rights lawyer Wilson Gamboa.

Gamboa wanted to annul the sale of the government-acquired 111,415 Philippine Telecommunications Investment Corporation (PTIC) in PLDTshares to Hong Kong-based First Pacific Co. Ltd. in the amount of P25.2 billion.

He said the sale violated the constitutional limitation on foreign ownership of a public utility and that the respondents committed grave abuse of discretion by allowing the sale of PTIC shares to First Pacific.

Section 11, Article XII of the 1987 Constitution provides that "no franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens...."

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Title Annotation:Latest News
Publication:Manila Bulletin
Date:May 14, 2014
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