Is there a connection between the breach of the constitutional limit on the foreign ownership in the listed firm Philippine Racing Club Inc. (PRCI) with a forthcoming real-estate play in the 21-hectare prime lot in Sta. Ana Racetrack conservatively valued at P10 billion?

This is a question swirling over the ongoing corporate brawl at the listed firm between the Malaysians, on one hand, and the Filipino directors, on the other, that has caught the attention of market watchers.

That breach was flagged by no less than the Philippine Stock Exchange (PSE) two years ago and yet nothing has come out of the violation of the foreign ownership cap, which is set at 40 percent.

Perhaps, the PSE, which has obtained self-regulatory organization status, is awaiting for guidance from the Securities and Exchange Commission (SEC). It has to be noted here, though, that the breach of the foreign-ownership limit could similarly open PRCI to violations of the property-ownership limits.

Market pundits point out that there could be a connection between the PSE alert on the foreign-ownership breach and the limit on property ownership of foreigners to the protested corporate move of the PRCI board to have the prime Sta. Ana property, valued at over P10 billion, folded into JTH Davies, a small company with just P25 million under its name and whose provenance is yet to be established.

This is what some directors of the PRCI are crying foul about and are seeking court redress against the planned move.

That planned move would have as an effect the transferring of the crown jewel of the listed racing firm to JTH Davies, a corporate maneuver which is protested not just for lack of transparency but for the imbalance in the swapping of assets.

How could one explain the transfer of a P10-billion property to a P25-milllion firm? It is this corporate maneuver that is said to be at the center of the board controversy at the PRCI, and it is said that it holds the key to the announced violation of the foreign-ownership limit.

We understand that the main argument of the Filipino directors questioning the move on the asset swap—actually that of having a vote in the board of directors of the PRCI—is that there should be full disclosure, which is what a listed firm should do.

Indeed, what are the antecedents of the planned swap in the light of the breach of foreign-ownership limits and the possible violation of property-ownership rules with the ascendancy of Malaysians into the board?

Under the SEC rules, there is the so-called control test in determining the nationality of a corporation. This has to be differentiated with the grandfather rule, which seeks to determine the foreign ownership in a corporation by tracing back the foreign interests up to the grandfather of the firm being subjected to the foreign-ownership test.

In essence, the control test is a more liberalized interpretation of the nationality of a corporation, whereby the SEC determines whether a corporation is Filipino or not.

The question then arises: Is the property swap envisioned by the PRCI board a way for the company to solve its problems related to the foreign-ownership limit breach and that of the property-ownership limits insofar as foreign interests are concerned? We have to remember here that foreigners can own up to 40 percent of a property, but this is limited to condominiums, not to land, as per the Condominium Law.

Thus, the PSE announcement on the breach of the foreign cap on shareholdings of the PRCI is significant, since such a breach, in effect, constitutes a violation of the property-ownership limit insofar as the 21-hectare, P10- billion Sta. Ana Racetrack property is concerned. When the breach was reached, ownership of the land falls under scrutiny under the land ownership doctrine, specifically for foreign interests.

The Malaysian interest at the PRCI is represented by the Kuala Lumpur-based Magnum Investments Berhad, which has four board seats in the racing club. The directors representing the Malaysian firm are Lim Teong Leong, Thank Ka Hon, Lawrence Lim Swee Lin and Datuk Surin Upatkoon. Datuk is known in Malaysia as Lau Khin Koon.

Interestingly, Datuk Surin figured in the so-called Temasek scandal that embroiled ousted Thai premier Thaksin Shinawatra, whose family-owned Shin Corp. was bought by Singapore-based Temasek.

In a complex transaction that included several companies, Datuk Surin initially paid $70 million into a company called Kularb Kaew, which is a majority shareholder of another firm called Cedar, a majority owner of Shin Corp.

There are interesting facets in the eventual takeover by Temasek of Shin Corp., the seventh-largest company in Thailand. These developments that saw the fold-in of Shin Corp. into Temasek have to be studied thoroughly in the light of the planned fold-in of the PRCI’s prized Sta. Ana Racetrack property.

Just what would come about, eventually, in the property swap is anyone’s guess but, this early, market pundits want to be apprised on the ongoing corporate brawl that features Malaysian and Filipino directors.

Email:hugagni@yahoo.com

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Is there a connection between the breach of the constitutional limit on the foreign ownership in the listed firm Philippine Racing Club Inc. (PRCI) with a forthcoming real-estate play in the 21-hectare prime lot in Sta. Ana Racetrack conservatively valued at P10 billion?

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