Heir of Gamboa v Teves (2012)

Facts:

Resolves the Motions for Reconsideration of the June 28, 2011 decision.

Issue:

Whether or the Court erred in its 2011 ruling on the de nition of “capital” in Sec.
11 Art 12 of the Constitution.

Ruling:

No.

SEC en banc, which is the collegial body statutorily empowered to issue rules
and opinions on behalf of the SEC, has adopted even the Grandfather rule in
determining compliance with 60-40 ownership requirement in favor of Filipino
citizens mandated by the Constitution for certain economic activities.The
purpose of the Constitution is to place in the hands of the Filipinos the
exploitation of our natural resources. Th Rule interpreting the Constitutional
provision should not diminish that right through the legal ction of corporate
ownership and control. Hence, Grandfather rule must be applied to accurately
determine the actual participation, both direct and indirect, of foreigners in a
corporation engaged in a nationalized activity or business.

Mere legal title is insu cient to meet the 60 percent Filipino owned “capital”
required in. The Constitution. Full bene cial ownership of 60 percent of the
outstanding capital stock, coupled with. 60 percent of the voting rights, is
required. The legal. And bene cial ownership of 60 percent of the outstanding
capital stock must rest in the hands of the Filipino nationals in accordance with
the constitutional mandate. Both the Voting Control Test and the Bene cial
Ownership Test must be applied to determine whether a corporation is a
“Philippine national.”

Foreign Investments Act of 1991 clearly and unequivocally de nes a “Philippine

national”” as a Philippine citizen, or a domestic corporation at least “60 percent
of the capital stock outstanding and entitled to vote” is owned by Philippine
citizens.

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