Media Representatives, Inc.

June 23, 1986 Media Representatives, Inc. Ground Flr.,Corinthian Plaza Paseo de Roxas, Legaspi Vill. Makati, Metro Manila Gentlemen: This refers to the voting trust agreement executed by the stockholders of Media Representatives, Inc. namely: Concepcion J. Valeriano, Teresita Alvina, Emma Miranda, Josefina T. Hernandez and Erlinda E. Robles, in favor of Albert C. Capotosto (Trustee),filed with this Office on February 1, 1985. LibLex A perusal of the records of subject corporation shows that the above-mentioned trustees who are all Pilipinos own 60% equity in the corporation while the Trustee who is an American owns 40%. In connection therewith, please be advised that Commonwealth Act No. 108, as amended, otherwise known as the "Anti-Dummy Law", penalizes the intervention of aliens in the management, operation, administration or control of a nationalized enterprise or activity. It has been settled, however, by PD No. 715, under Section 1 thereof, amending Section 2-A of Commonwealth Act 108, as amended, "that election of aliens as members of the Board of Directors of governing body of corporations or associations engaging in partially nationalized activity shall be allowed in proportion to their allowable participation or share in the capital of such entities." While the above-quoted section of P.D. 715 speaks of application to partially nationalized activity, it can be deduced from the objective in the enactment of PD 715 that the limitation on alien participation in the Board likewise applies to permitted investments under Section * 67 of PD 1789, (Omnibus Investments Code). The prefatory clause of PD 715 provides thus: "Whereas, it is fair and equitable and in line with the constitutional policy expressed in Article XIV, Section 5 of the constitution, that foreign investors be allowed limited representation in the governing board or body of corporations or associations in proportion to their allowable participation in the equity of the said entities." Accordingly, the Commission, in its previous opinions ruled that the intention of the law is to grant alien investors only proportionate representation in the Board of Directors (SEC Opinion dated October 3, 1983 and March 25, 1986). cdlex Under the present voting trust agreement, the voting trustee shall possess and shall be entitled to exercise in person or by his nominees all rights and powers of an owner in respect of all the stocks of the company held by him. Considering that all the existing stockholders are privies to the voting trust agreement, entrusting all their rights as stockholders to the trustee, naturally, it follows that he will be entrusted with the absolute control of the corporation which is a clear violation of the SEC ruling granting alien investors only proportionate representation in the management of the corporation which is vested with the Board of Directors. Likewise, the Board of Investments (BOI) in its letter dated May 8, 1986, is of the view that the voting trust agreement is violative of the intent and provisions of Book II of PD 1789, as amended, a copy of which is attached herewith for ready reference. In the light of the foregoing, we regret to inform you that the Commission cannot approve said trust agreement, and said document is returned to you herewith. We also would like to call your attention on the pertinent provisions of the Philippine Constitution which provides as follows: "SECTION 7 (1.) The ownership and management of mass media shall be limited to citizens of the Philippines or to corporations or associations wholly owned and managed by such citizens ." (emphasis supplied) xxx xxx xxx The term "mass media" includes the gathering, transmission and distribution of news, information, messages, signals, and all forms of written, oral and visual communications and shall embrace the print medium, radio, television, films, movies, wire and radio communication services, advertising in all its phases, and their business management. ( Chapter 1, Rules and Regulations For Mass Media in the Philippines ). A perusal of the articles of incorporation of subject corporation on file with this Office shows that the corporation was incorporated primarily: "To conduct a media representative business ,that is, to represent publishers, commercial broadcasting stations and/or other media in the United States or elsewhere for the purpose of securing from the manufacturers, advertising agencies and/or other sources in said place or places that advertising which is generally known as "national advertising" as related to various types of media owned by such publishers, commercial broadcasting stations and/or other media; to enter into contracts with said publishers, commercial broadcasting stations and/or other media for the purpose aforesaid, to foster and provide the sale of advertising for such media as the corporation may from time to time agree to represent either as advertising agents or publishers or public relations counsels. (As amended on January 2, 1974)" (emphasis supplied) It appears from the aforesaid purpose clause that the corporation is merely engaged in "advertising agency".In an opinion by the Secretary of Justice dated February 3, 1975, it was pointed out that advertising agencies do not necessarily disseminate the materials they prepare as they have to utilize or avail of the facilities of mass media for the purpose. The Ministry of Justice thus ruled that "advertising agencies are not "mass media".Said opinion partly provides: "There would seem to be no doubt that advertising agencies do not operate or control any medium of communication designed to reach the masses (See Op. No. 163, S. 1973) although activities of such agencies by their nature, are closely related to those of mass media.) The conclusion that advertising agencies do not fall within the scope of the citizenship requirement imposed on mass media, is bolstered by the comparison of the text of Article XV, Section 6 of the Revised Official Working draft of the New Constitution, . . . and the language of Article XV, Section 7 (1) in the final draft of the Constitution earlier quoted. The deletion of " advertising agencies " from the final text is a strong persuasive intent to exclude the same from its purview .(emphasis supplied) It appearing that Media Representatives, Inc. is merely an advertising agency, Mr. Alberto C. Capotosto, who is an American may be qualified to be a stockholder of the corporation. It should be noted, however, that if the advertising agency actually disseminates information, or operates or controls, or otherwise engages in the business of mass media, it would come within the purview of the constitutional limitation; (Opinion No. 22, S. 1975, Sec. of Justice). llcd The company, therefore, is advised to refrain from engaging in any activity that would come within the scope of the citizenship requirement imposed on mass media. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Acting Chairman * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .