G.R. No. 207246 , November 22, 2016
Jose M. Roy III, Petitioner, vs. Chairperson Teresita Herbosa, the Securities and Exchange Commission, and Philippine Long Distance Telephone Company, Respondents.

FACTS

The Petition assails the validity of SEC Memorandum Circular No. 8, Series of 2013, which provides guidelines for corporations to comply with constitutional and statutory Filipino ownership requirements. The specific provision in Section 2 mandates that the required percentage of Filipino ownership shall be applied to BOTH (a) the total number of outstanding voting shares and (b) the total number of all outstanding shares, whether voting or non-voting. The circular thus bases compliance solely on the numerical count of shares.
The core contention is that this numerical approach is insufficient. Shares within a corporation, such as common and various types of preferred shares (cumulative, noncumulative, participating, convertible), can have different par values and entitlements to dividends. Consequently, a structure where Filipinos own the required 60% of the number of shares may still result in foreigners, holding fewer but higher-par-value preferred shares, receiving a larger portion of the corporate earnings, thereby undermining the beneficial ownership intent of the constitutional rule.

ISSUE

Whether the SEC committed grave abuse of discretion in issuing Memorandum Circular No. 8, which determines compliance with Filipino ownership requirements based solely on the number of shares, without considering the par value and dividend rights attached to different classes of shares.

RULING

The Concurring Opinion of Chief Justice Sereno voted to DENY the petition, finding the SEC’s issuance not a proper subject for certiorari at this stage. The legal logic is that any judicial determination on the validity of the circular would be premature absent a prior factual determination by the SEC of the actual equity structure of the covered corporations, particularly PLDT. The Opinion reiterates the directive in Gamboa v. Teves for the SEC to apply the correct definition of “capital” and to ascertain factual compliance, which includes analyzing the complex interplay of share numbers, par values, and dividend earnings.
The Opinion emphasizes that the constitutional requirement aims for beneficial ownership. A purely numerical test can be illusory if foreigners hold a minority of shares that, due to higher par value and dividends, confer majority economic benefits. However, the Court cannot rule on an alleged grave abuse of discretion by the SEC based on hypothetical permutations of share structures. The SEC must first gather the necessary data and perform its statutory duty to investigate and sanction any violation. Therefore, the petition is procedurally infirm, as the shareholders’ cause and the precise impact of the circular require a concrete factual foundation developed through the SEC’s implementation of the Gamboa directive.