SEC revokes Rappler’s certificate of incorporation

The Securities and Exchange Commission (SEC) has revoked the certificate of incorporation of Rappler Inc. and Rappler Holdings Corp. for supposedly violating the foreign ownership restrictions on mass media companies.

In a decision dated Jan. 11, 2018 posted on its website and emailed to reporters on Monday, the regulator revoked the certificates of both companies for supposedly failing to comply with Philippine laws.

“Revocation of Certificate of Incorporation on each respondent—Rappler Inc. being the mass media entity that sold control to foreigners, and Rappler Holdings Corporation being its alter ego, existing for no other purpose than to effect a deceptive scheme to circumvent the Constitution,” the SEC decision read.

"The decision, which is tantamount to killing the online news site, sends a chilling effect to media organizations in the country," the Foreign Correspondents Association of the Philippines (FOCAP) said in a statement.

The SEC cited the Foreign Equity Restriction of the Philippine Constitution, which states that "(t)he ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such citizens."

According to the SEC, Rappler welcomed Omidyar Network—which the media organization said is "the fund created by eBay founder and entrepreneur Pierre Omidyar and his wife Pam—as an investor in the online mass media outlet.

"The Foreign Equity Restriction is very clear. Anything less than One Hundred Percent (100 percent) Filipino control is a violation," the SEC decision read.

"Conversely, anything more than exactly Zero Percent (0 percent) foreign control is a violation," the SEC added.

The SEC said Rappler also issued derivatives to another foreign investor, North Base Media, in 2015. But the derivatives did not carry the same terms as that of Omidyar's.

"Because Omidyar was the later purchaser ... it caused the insertion of certain provisions that assure control over other PDR Holders, and also over the corporate policies of Rappler Inc. and its alter ego Rappler Holdings Corporation," the SEC noted.

Senators Risa Hontiveros, Franklin Drilon, Grace Poe, Francis Pangilinan, Antonio Trillanes, and Richard Gordon expressed concerns about the matter.

Rappler said it will contest the decision and exhaust all legal means to do so.

“We intend to not only contest this through all legal processes available to us, but also to fight for our freedom to do journalism and for your right to be heard through an independent platform like Rappler,” it said in a separate statement posted on its website.

"Every year since we incorporated in 2012, we have dutifully complied with all SEC regulations and submitted all requirements even at the risk of exposing our corporate data to irresponsible hands with an agenda," Rappler said.

Rappler questioned the timing of the decision, labeling it as harassment.

"In a record investigation time of five months and after President Duterte himself blasted Rappler in his second SONA in July 2017, the SEC released this ruling against us," it said.

"This is pure and simple harassment the seeming coup de grace to the relentless and malicious attacks against us since 2016," it added.

"The SEC has apparently decided to reject Rappler's contention that its foreign investors merely placed money in the outfit but do not own it, which it issued after President Rodrigo Duterte, in his state of the nation address last year, threatened to have its ownership investigated," the National Union of Journalists of the Philippines said separately.

During his State of the Nation Address (SONA) in July 2017, President Rodrigo Duterte raised the issue of foreign ownership against Rappler.

"I can look at your corporate earnings, corporate identity even diyan sa mga newspaper. Pag newspaper ka, you are supposed to be 100 percent Filipino and if you start to pierce their identity, it is pala fully owned by Americans," Duterte said.

"It is just matter of piercing ... ABS, Rappler kayo ba yan? Have you tried to pierce your identity?... Rappler try to pierce the identity and you will end up American ownership," the Preisdent noted.

During his presidential campaign in 2016, Duterte said he was open to amend the Constitution to give foreign investors more leeway in terms of business ownership in the country.

"I can be comfortable with 30-70  (percent in favor of the foreign investor). I can maybe convince the country if we decide to change the Constitution," he said before businessmen in February 2016.

The SEC clarified that the decision to cancel Rappler's incorporation papers is not yet executory and may still be challenged in court. —Jon Viktor Cabuenas/VDS, GMA News