EDITORIAL: Here’s how Rappler violated law

A lot has said in the case of online news site Rappler and the revocation of its registration by the Securities and Exchange Commission (SEC.)

To clearly understand the whole thing, the Law-firm Dizon and Orbe-Dizon has published a factual explanation on how Rappler had violated the law, prompting the SEC to revoke Rappler’s registration as a Philippine corporation.

In a January 16 article in the law firm’s website, lawyer Peter Michael Dizon said Rappler had violated the Constitution, which requires 100-percent Filipino control for any media entity.

Dizon said Rappler violated this provision when it granted foreign firm Omidyar Network control of the media outfit through some clauses in the foreign investor’s provision of Philippine Depositary Receipts (PDRs).

Simply put, PDRs are a form of a capital infusion of a foreign entity so a local firm can keep its operations going.

“There is nothing wrong with the issuance of PDRs,” Dizon said. The problem, the lawyer pointed out, was with the conditions linked to the PDRs issued by Rappler to Omidyar Network, prompting the SEC to revoke the news site’s registration as a Philippine corporation.

“The provisions included a condition that Rappler and Rappler Holdings cannot alter, modify, or change their Articles of Incorporation and Corporate By-Laws without discussion with the Omidyar Network PDR holders and obtaining the approval of at least two-thirds of all issued PDRs,” Dizon explained.

Rappler Holdings was the company established by Rappler to get foreign investments via PDRs, Dizon noted. Rappler Holdings fully acquired the Rappler news site in 2015.

Dizon stressed that under the Securities Regulation Code (SRC), control goes beyond ownership of shares. In the case of media firms, there should be no foreign firm control at all, based on Philippine laws.

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