For Frontline PBS news organization on the decision against Rappler for its dissolution made by the SEC (interview question sent yesterday the Contact form of this blog site)
The following opinion is based on existing laws and on published news reports of the SEC Decision ordering the dissolution of Rappler corporation. (i have no access to the full length decision).
The decision against Rappler for its dissolution made by the SEC is based supposedly on the issuance of PDRs, which PDRs have been transferred to Filipinos who are also members of the corporation or members of the Rappler staff.
In the first place, PDRs are not shares of stock nor evidence of any kind of ownership of the corporation as they do not confer any rights of ownership nor any rights of a shareholder of a corporation.
PDRs are contracts between an investor and an investee-company, whereby the investor, in exchange for the deposit of funds in favor of the investee-company, is given the right to be given the proceeds of any sale of a named or specified share of stock; and/or a right , a revocable right, to buy a named or specified share of stock in a possible future should any offer for sale be made by the investee-company.
The SEC anchored its decision on the reasoning that: “After careful study of all the pleadings and arguments of the parties, the special panel concluded that the purported donation of the PDRs to the staff of Rappler neither created nor transferred any right in favor of the donees which would mitigate or cure the violation already committed,” (news-published portion of the decision).
Note that the SEC itself had in the past allowed the use and the practice of PDR-issuances — as these are publicly filed and registered with regulatory agencies. In other words, even if the SEC itself had allowed the issuance of PDRs as regular and lawful, the SEC reasoning now is based on the notion that they should not have allowed it before — and now in the case of Rappler, even if the PDRs has already been transferred to Filipinos, its previous and past use is considered by the SEC as ground for punishment thru the outright dissolution of a corporation — proceeding punitively and retroactively to past practices it had allowed and previously considered legal and legitimate.
The language of the 1987 Constitution upon which this action was based is not punitive but preventive in nature:
“Article XVI. General Provisions. Section 11. (1) The ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such citizens. The Congress shall regulate or prohibit monopolies in commercial mass media when the public interest so requires.” (1987 Constitution)
In other words, Art. XVI Sec. 11 prevents the incorporation or registration of any media company that is foreign-owned. Should an applicant be found to be foreign-owned, it shall be denied registration. Should a Philippine media corporation be found to be foreign-owned, a proceeding can be instituted for its dissolution but if in the meantime it had become Filipino-owned, such a proceeding would become moot and academic — if any relief is still to be desired, if any ground exists at all, it would be against officials or individuals, if any fraud was committed (in this case, the PDRs were allowed by the SEC and registered with regulatory agencies) or if violations were made.
Furthermore, under the Revised Corporation Code, the following are the grounds for the involuntary dissolution of a corporation:
“Section 138. Involuntary Dissolution. — A corporation may be dissolved by the Commission motu proprio or upon filing of a verified complaint by any interested party. The following may be grounds for dissolution of the corporation:
“(a)Non-use of corporate charter as provided under Section 21 of this Code;
“(b)Continuous inoperation of a corporation as provided under Section 21 of this Code;
“(c)Upon receipt of a lawful court order dissolving the corporation;
“(d)Upon finding by final judgment that the corporation procured its incorporation through fraud;
“(e)Upon finding by final judgment that the corporation:
“(1)Was created for the purpose of committing, concealing or aiding the commission of securities violations, smuggling, tax evasion, money laundering, or graft and corrupt practices;
“(2)Comitted or aided in the commission of securities violations, smuggling, tax evasion, money laundering, or graft and corrupt practices, and its stockholders knew of the same; and
“(3)Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers, or employees.” (Revised Corporation Code).
The complainant here has to prove fraud, and the SEC has to make findings of fraud — absent which , this case does not fall under any of the grounds for involuntary dissolution.
The decision of the SEC therefore is not supported by any law and is arbitrary and whimsical. -marichu c. lambino