MANILA, Philippines – The European Chamber of Commerce in the Philippines (ECCP) is optimistic about the Securities and Exchange Commission’s (SEC) new draft rules on foreign ownership.
In a statement, ECCP VP for external affairs Henry Schumacher said that the SEC’s new draft of rules for foreign ownership contained most of his group’s recommendations for increasing FDI inflow into the country. “We are still studying them (draft rules) but they seem to have incorporated most of the recommendations we made,” he said.
Schumacher said that the ECCP has long been urging authorities to ease foreign ownership restrictions in the Constitution. He said that the limitations must be lifted in some industries, particularly renewable energy investments in wind and solar.
Martial Beck, ECCP’s VP and general manager, said that there has been strong interest in the Philippines among European investors over the past 6 months. “However, it is crucial that the government act fast on removing the many restrictions that still exists for foreigners who desire to do business in the Philippines,” he said.
The new draft is the second version of the SEC’s rules for foreign ownership. The agency released the draft memorandum circular (MC) on Monday, March 25.
The second version of the draft is more relaxed in terms of determining foreign ownership. It removed a cap on foreign ownership for each class of company shares. This means that non-voting stocks such as preferred shares are not included in determining foreign ownership.
The law mandates a 60%-40% ownership split in favor of Filipinos for local firms. The earlier version of the SEC draft imposed the 40% limit on foreign equity on each class of shares, whether common, preferred, preferred voting or any other class.
“All covered corporations 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 (a) the total number of outstanding shares of stock entitled to vote in the election of directors; and (b) the total outstanding stock, whether or not entitled to vote in the election of directors,” the SEC draft read.
“In case the law requiring a certain percentage of ownership of shares to belong to Filipinos specifically refers to voting stock, the requirements set forth therein shall be complied with.”
The new draft complies with a Supreme Court ruling on a foreign ownership case involving PLDT. The decision determined that the term “capital” in Section 11 of Article XII of the 1987 Constitution only pertains to common shares or those with voting rights.
The SEC has posted the revised rules on its website and is asking the public to submit comments and suggestions. The agency said that it would accept comments until April 25. – Rappler.com
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