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The issuance of Philippine Deposit Receipts (PDRs) by media networks like ABS-CBN Corporation does not violate the constitutional requirement of 100% Filipino ownership and management of mass media.

PDRs are not vested with voting rights and full beneficial ownership to which shares of stock are entitled.

In Gamboa vs. Teves (G.R. No. 176579, October 9, 2012), the Supreme Court ruled that the term Filipino “capital” in Section 11 of Article XII of the 1987 Constitution refers to “shares with voting rights, as well as full beneficial ownership”, which ruling must necessarily be applied to the 100% Filipino ownership and management of mass media as required by Section 11.1 of Article XVI.

Consequently, since PDRs do not enjoy voting rights and full beneficial ownership, they do not dilute the 100% ownership and management of mass media.

PDR holders are only entitled to: (1) receive dividends accruing to the underlying shares after operating costs and other expenses are deducted from the profits; and (2) the option to convert the underlying shares to shares of stock, if qualified as a Filipino.

The issuer of the PDRs retains the voting rights since PDRs are mere instruments of investment, not evidence of corporate ownership.

The issuer of the PDRs is the ABS-CBN Holdings Corporation, to which ABS-CBN Corporation’s shares were assigned, and over which it constituted PDRs.

ABS-CBN Holdings Corporation secured beforehand the authority to offer PDRs as securities pursuant to the “Certificate of Permit to Offer Securities for Sale” issued by the Securities and Exchange Commission (SEC) on October 4, 1999 and another permit on January 7, 2014.

The PDR certificate specifically provides that: “The PDR represented by this Certificate does NOT represent shares of stock but only confers a right to delivery or sale of existing shares of stock of ABS-CBN Corporation owned by the Issuer (ABS-CBN Holdings Corporation) under the terms and conditions stated herein and in the PDR instrument”. 

The PDR instrument likewise provides that: “Neither the Security Agent nor the Holder shall have voting rights with respect to the shares,” and it is further provided that “if the person to whom the shares are to be delivered upon the exercise of a PDR is not a person (not a Filipino) to whom delivery of shares is permitted under Philippine Law”, the share shall be sold in the “open market” and the net proceeds of the sale delivered to the ineligible PDR holder.

Incidentally, other corporations where there is a requirement of at least 60% Filipino ownership are also entitled to issue PDRs, like the Philippine Long Distance Telephone Company (PLDT) which availed of this corporate practice in 1988, then known as “Global Depository Receipts” or “American Depository Receipts” since majority of the investors were American citizens or foreigners.