JPE backs Calida: ABS-CBN Holdings a ‘shell company’, PDRs used by Lopezes to get around foreign ownership ban

Former Senator Juan Ponce Enrile is backing Solicitor General Jose Calida’s quo warranto case seeking to revoke the franchise of ABS-CBN Corp. which he called the “most powerful and influential media entity in the country.”

In a Facebook post, Enrile said Calida as correct to question before the Supreme Court the true nature of the the Philippine Depository Receipts (PDRs) issued by ABS-CBN to go around the Constitutional provision banning foreign ownership in media.

“It is about time for the Supreme Court to clarify this issue once and for all for the benefit of the nation,” said Enrile.

Enrile said the PDRs emanated from Worldtech Holdings Corp. which was formed by bilyonaryo Gaby Lopez and other shareholders of Lopez Inc. in March 1999 and renamed ABS-CBN Holdings within the same year.

“Until today, Worldtech Holdings, which is now ABS-CBN Holdings, never had any business of its own. It is more of a shell corporation created with no other business purpose of its own than as sole issuer of PDRs and as a receptacle and custodian of common shares of ABS-CBN Corp. transferred to it from Lopez, Inc. pursuant to a financial scheme devised by its Filipino owners,” said Enrile.

“Clearly, the creation of ABS-CBN holdings was intended simply to circumvent and overcome the Filipino ownership requirement of the Constitution for mass media. These can be gleaned from its financial records in the Securities and Exchange Commission (SEC)… it is clear that it is nothing but an alter ego of Lopez, Inc. Its corporate existence was an expedient measure to skirt something that was probably prohibited by law. Its corporate veil could, therefore, be pierced,” he added.

Enrile has three questions on the creation of the PDRs:

1) Did Lopez, Inc. get paid when it transferred to ABS-CBN Holdings 132 million ABS-CBN shares before the closing of the PDRs offering? Was it the 132 million PDRs with an issue value each of P46.00, or, in
monetary terms, P6,.072 billion

2) Did they pay taxes when the 132 million ABS-CBN shares were transferred from Lopez, Inc. to ABS-CBN Holdings free from income taxation?

3) Can Lopez, Inc. or ABS-CBN Holdings, or both, trigger on their sole discretion the sale of any of those 13 million ABS-CBN shares without any holder of a PDR exercising the option attached to a PDR? Enrile pointed out that the power to trigger the sale of 132 million ABS-CBN shares was removed from Lopez, Inc. and ABS-CBN Holdings and transferred to the holders of PDRs.

Enrile said dubbed the PDRs, which have ballooned by 142 percent to 312.412 million shares as of 2019, as “clones or virtual replications of the 132 million ABS-CBN shares it acquired from Lopez, Inc.”

For Enrile, the PDRs gave its holders all the earmarks of ownership.

“The holders of PDRs have possession of their PDRs; they enjoy the fruits or dividends accruing to those 132 million ABS-CBN shares; and they can trigger the disposition of any of those 132 million ABS-CBN shares through the exercise of the option attached to each PDR. The only right denied to them is the voting rights of those 132 million ABS-CBN shares,” he said.

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