Opinion No. 19-27 Re: Foreign Ownership Limit; Foreign Investment Act.

Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

July 22, 2019

SEC-OGC Opinion No. 19-27 Re: Foreign Ownership Limit; Foreign Investment Act

NOW CORPORATION

Makati City, 1229 Unit 5-I, 5th Floor, OPL Building 100 C. Palanca Street, Legazpi Village

Attention: Miguel Antonio S. Regal

Mr. Regal. Compliance Officer

regarding the foreign investment limit of NOW Corporation ("NOW Corp."). This refers to your letter dated July 31, 2018 requesting an opinion

As stated in your letter, NOW Corp. is a duly organized corporation under the laws of the Philippines and based on its Articles of Incorporation, its primary purpose is as follows -

the research, development, production, management, marketing and "To engage in the business of providing telecommunications, media and information technology products and services, such as but not limited to through companies duly licensed to engage in wired and wireless, fixed and mobile communications; software and hardware technology, business process outsourcing, call center, and other information technology applications; digital media and other media except mass media; and to do all activities directly and indirectly connected therewith or incident thereto. operation of the following: telecommunications value added services

In view thereof, you raised the following queries:

1. Whether or not NOW Corp. is subject to foreign equity limits given the purposes for which it is established; and

2.If NOW Corp. is subject to a foreign equity limits, what is the foreign limit on the Corporation.

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We note that your corporation, formerly known as "Information Capital Technology Ventures, Inc." (ICTV), has already requested for an opinion regarding the same facts and queries presently raised before us.1. In resolving the same, the Commission considered exactly the same primary purpose that you also presented here in this instant request for opinion.

OPERATION OF MASS MEDIA

Mass media in the Constitution, as opined by the Department of Justice, is "any medium designed to reach the masses and that tends to set standards, ideals and aims of the masses. The distinctive feature of which is the dissemination of information and ideas to the public or a portion thereof.2 Republic Act 92113 further defined mass media as "any medium of communication designed to reach a mass of people" which includes the use of "electronic media such as but not limited to the internet."

A careful perusal of NOW Corp.'s Articles of Incorporation shows that it engages, among others, in the "development. production. operation and marketing... xxx...of digital media except mass media". In the previous opinion involving your corporation, the Commission held, thus --

"...xx The digital media produced, marketed, and operated by ICTV appears to cover a wide range. As mentioned earlier, it is the dissemination of information and ideas to the public that makes the activity covered under the

dissemination of information to the public or a portion thereof. purview of mass media. It appears that the digital media produced and operated by ICTV are as well marketed by it. This marketing constitutes

The latter part of ICTV's primary purpose enumerates the media products and services to be digital media and other media except mass media. However, despite

previous opinion, the Commission ruled that notwithstanding the clause but in all this excluding phrase, it is the nature of the activities undertaken by a corporation that will ultimately determine whether or not it is engaged in mass media. In a

purpose, the nature of the activities the corporation engages in -- generally, acting as producer and providing production services including post-production services and facilities, fall within the activities contemplated by mass media. ..xxx" cases without however engaging in mass media' in the corporation's primary

that it may include activities that constitute mass media. Hence, notwithstanding ranging as it is not qualified or limited by any qualifying or excluding words nor does it provide for a specific type of digital media to be marketed, to the effect Digital media as used in the primary purpose of NOW Corp. is wide-

SEC Opinion 14-15, dated 07 July 2014, addressed to Information Capital Technology Ventures, 2 DOJ Opinion 40, s. 1998, dated 19 March 1998 3 RA 9211, "The Tobacco Regulation Act of 2003", $ 4(f) C

4 supra note 1.

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the excluding phrase "except mass media", the nature of NOW Corp's activities falls within the ambit of mass media.

OPERATION OF PUBLIC UTILITY

Eleventh Foreign Investment Negative List, operation of public utilities is allowed Under Article XII Section 11 of the Constitution, and as reiterated in the

only to Philippine citizens or domestic corporations or associations at least sixty per cent (60%) of whose capital is owned by Philippine citizens. In this connection, it is now settled that telecommunications business is a public utility.

As previously held by the Commission --

appear to be exhaustive. It should be noted that the phrase 'such as but not limited to' is present, which means that the telecommunications product and "Applying to ICTV's case, while the enumeration of the products and services first mentions 'telecommunications value added services,' the list does not services of the ICTV is providing is not restricted to value added services, allowing ICTV to engage in telecommunications activities.6

allowed, as it is engaged in mass media activities. Assuming that it is not engaged in mass media, foreign equity is limited to a maximum of forty per cent (40%), as it is also engaged in the operation of a public utility. Based from the foregoing, no foreign ownership of NOW Corp. is

the facts relied upon are different, this opinion shall be rendered void on the facts and circumstances disclosed and relevant solely to the particular issue raised therein. It shall not be used in the nature of a standing rule binding upon the Commission in other cases or upon the courts whether of similar or dissimilar circumstances. If, upon further inquiry or investigation, it will be disclosed that It shall be understood, that the foregoing opinion is rendered based solely

Please be guided accordingly.

CKMALMCORREA General Counsel

7 SEC Memorandum Circular 2003-15, No.7 5 DOJ Opinion No. 11, s. 1992, dated 28 January 1992 supra note I.