Is control equivalent to ownership? Civil Law Bar reviewers Barzaga, Del Castillo lock horns on ABS CBN PDRs
Is the control granted to foreign investors of Philippine Depositary Receipts (PDRs) issued by ABS-CBN Corp. the same as ownership of the TV giant which is barred under the 1987 Constitution?
This was the crux of the exchange between two Civil Law Bar reviewers, Cavite Rep. Elpidio Barzaga Jr. and ABS-CBN Corp. legal counsel Cynthia Roxas-Del Castillo during the House franchise committee hearing on June 11.
Barzaga, a magna cum laude graduate of Far Eastern University Institute of Law, argued that foreign investors’ control of ABS-CBN shares pledged in its PDRs (62 percent or 180 million of its total 290 million PDRS are held by foreigners) equate to ownership and is therefore in violation of the constitutional ban on foreing ownership in media.
“Ang sinasabi natin and I think all lawyers will agree, when it comes to ABS-CBN, it should be zero control of the foreign owner. When we speak of control, anything that limits shareholders and restricts their rights, amounts to control. Ewan ko kung ‘yan ang magiging position ng ABS-CBN but as far as I’m concerned, based on court decision, that will be the decision of our courts,” said Barzaga.
“I understand you are a reviewer in Civil Law and one of the attributes of ownership is for somebody to dispose something which he owns. Pero ang problema dito, ABS-CBN cannot dispoe 187 million shares, nakapledge nga…their hands are tied. Foreigners cannot buy PDRs unless there is a security,” he added.
Del Castillo, however, stood pat on ABS-CBN’s stand that foreigners do not own the ABS-CBN shares underlying their PDRS.
“I agree that there is a restriction on your right to dispose. Pero po, it is also a principle po of ownership, that if you want to restrict your right by pledging and encumbering, then it is also part of your ownership right to encumber those shares,” said the senior partner of Romulo Mabanta Buenaventura Sayoc & De Los Angeles.
“The restriction not to sell is really because of the pledge but ABS-CBN continues to exercise ownership of the shares,” added the former dean of Ateneo School of Law.
Del Castillo, who laid down the blueprint in the sale of ABS-CBN PDRs (“We did not invent it, we are just the first to introduce it”) in 1999, pointed out that the ABS-CBN shares pledged in the PDRs were owned by ABS-CBN Holdings and not the media giant directly.
“Ang rights po ng PDR holders are only against ABS-CBN Holdings, hindi po against ABS-CBN,. PDRs are purely financial instruments. Hindi po siya shares. Hindi po siya nakakaboto sa ABS-CBN Broadcasting at hindi po siya nakaka-participate sa management ng ABS-CBN Broadcasting,” said Del Castillo.
But Barzaga dismissed Del Castillo’s move to make a distinction between the media giant and its holding company as nothing but “corporate layering” and stressed that “what cannot be done directly, cannot be done indirectly.”