Rappler CApetition (29 January 2018) FINAL

REPUBLIC OF THE PHILIPPINES
COURT OF APPEALS
Manila
THIRTEENTH DIVISION
RAPPLER, INC. AND

RAPPLER HOLDINGS
CORPORATION,
Petitioners,
- versus - C.A.-G.R. No. 154292

(SEC En Banc – SP Case No. 08-
17-001)
SECURITIES AND
EXCHANGE COMMISSION
SPECIAL PANEL CREATED
PURSUANT TO SEC
RESOLUTION NO. 436 SERIES
OF 2017,
Respondent.
x------------------------------------------x
PETITION FOR REVIEW
Petitioners RAPPLER, INC. (“RAPPLER”) and RAPPLER

HOLDINGS CORPORATION (“RHC”), by counsel, respectfully
state:
PREFATORY STATEMENT
“Government is powerful. When unlimited, it becomes

tyrannical. The Bill of Rights is a guarantee that there are certain
areas of a person’s life, liberty, and property which governmental
power may not touch.”1
RAPPLER and RHC come before this Honorable Court to seek

redress for the travesty by the State, through the Securities and
Exchange Commission (“SEC”) En Banc, which summarily revoked
their certificates of incorporation and cancelled an investment, in
violation of their Constitutional rights.

1 Bernas, J.G., 1987 Philippine Constitution: A Comprehensive Reviewer 23 (2011 ed.).

The SEC En Banc took the position that through Clause 12.2.2 of
the Philippine Depository Receipt (“PDR”) Instrument RHC issued to
Omidyar Network Fund, L.L.C. (the “OMIDYAR PDR”), RAPPLER
sold control over it to Omidyar Network Fund, L.L.C. (“OMIDYAR”)
in violation of Section 11 (1) of Article XVI of the Constitution. The
problem with this is —
a. OMIDYAR never exercised control over RAPPLER. The

SEC En Banc found that OMIDYAR is not a stockholder of
RAPPLER or RHC. There is likewise no finding that OMIDYAR
participated in the management of RAPPLER. Further, SEC
records reveal that from the time RHC issued the OMIDYAR
PDR, RAPPLER has not amended its Articles of Incorporation
or By-Laws. Thus, there was no occasion for OMIDYAR to
exercise its rights under Clause 12.2.2 of the OMIDYAR PDR.
b. Before the Assailed Decision was rendered, OMIDYAR

executed an 11 December 2017 Waiver, through which it
affirmed that it “never exercised its rights under Section 12.2.2
[of the OMIDYAR PDR]” and “waive[d] its rights under
Section 12.2.2 [of the OMIDYAR PDR].”
c. All the stockholders, directors and officers of RAPPLER

and RHC are Filipinos.
d. Prior to issuing the OMIDYAR PDR, RHC issued a PDR

Instrument to NBM Rappler, L.P. (the “NBM PDR”). RHC
issued 4,811,461 more PDRs to NBM than to OMIDYAR. The
SEC En Banc did not take issue with the NBM PDR.
e. The SEC En Banc approved PDRs (of parent holding

companies of listed companies with nationality restrictions), the
terms of which are similar to those of the OMIDYAR PDR.
g. RAPPLER is not engaged in the business of “Mass

Media” as contemplated by Section 11 (1) of Article XVI of the
Constitution.
Through the Assailed Decision, the SEC En Banc (a) punished

RAPPLER and RHC for an act that was never committed, (b) singled
out the OMIDYAR PDR when there exists PDRs with similar
conditions that have been long standing and approved by the SEC,
and (c) applied a definition for “Mass Media” different from that
contemplated by the Constitution.
2

RAPPLER and RHC plead with this Honorable Court to

uphold their rights by annulling the Assailed Decision, through
which the State has acted with tyranny by putting them out of
business.
1. PARTIES
1.1. The Petitioners are:
a. RAPPLER, a corporation duly organized and existing

under Philippine laws with office address at Level 3, North
Wing, Estancia Offices, Capitol Commons, Pasig City; and
b. RHC, a corporation duly organized and existing under

Philippine laws with office address at Level 3, North Wing,
Estancia Offices, Capitol Commons, Pasig City.
The Petitioners may be served with orders, resolutions, notices,

processes, pleadings and papers of this Honorable Court through the
undersigned counsel at their address indicated below.
1.2. The Respondent is a Special Panel created pursuant to

SEC Resolution No. 437, Series of 2017, which rendered the
Investigation Report upon which the Assailed Decision is based. It
may be served with orders, resolutions, notices, processes, pleadings
and papers of this Honorable Court through the Office of the General
Counsel of the SEC at the Ground Floor, Secretariat Building, PICC
Complex, Roxas Boulevard, Pasay City.2
2. NATURE AND TIMELINESS
2.1. This is a Petition for Review under Rule 43 of the Rules of

Court, which seeks to annul and set aside the Assailed Decision of
the SEC En Banc in SP Case No. 08-17-001 entitled “In Re: Rappler, Inc.
and Rappler Holdings Corporation,” in which “the findings of the
Special Panel in its Investigation Report” were approved and
adopted in toto. The dispositive portion of the Assailed Decision
states:

2 Under Section 6 of Rule 43 of the Rules of Court, “[t]he petition for review shall state the
full names of the parties to the case, without impleading the court or agencies either as
petitioners or respondents xxx”. Notwithstanding the prohibition on impleading the agency
which issued the Assailed Decision as a respondent to the Petition, the attention of this
Honorable Court must be drawn to the unusual circumstances surrounding this case. The
proceedings before the Securities and Exchange Commission (“SEC”) were commenced without
any private complainant and the supposed investigation conducted by the Special Panel was
thereafter decided by the SEC En Banc.
3

“(1) The Omidyar PDR is declared VOID pursuant

to Section 71.2 of the SRC, for being a fraudulent
transaction within the ambit of Section 26.1 of the SRC.
(2) 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.”3
A certified true copy of the Assailed Decision is attached hereto

as Annex “A” and made an integral part hereof.
2.2. RAPPLER and RHC received a copy of the Assailed

Decision on 12 January 2018.
2.3. Section 3-12 of the 2016 Rules of Procedure of the SEC

(“SEC Rules of Procedure”) provides that “[n]o motion for
reconsideration of the Decision of the Commission En Banc shall be
entertained.”4 Thus, pursuant to Section 4 of Rule 43 of the Rules of
Court, RAPPLER and RHC have fifteen (15) days from 12 January
2018, or until 27 January 2018, within which to file this Petition.5
Since 27 January 2018 is a Saturday, the Petition may be filed on 29
January 2018, the following business day.
2.4. On 25 January 2018, RAPPLER and RHC filed an Entry of

Appearance with Motion for Additional Time (to file Petition for
Review Under Rule 43) wherein they requested an additional period
of fifteen (15) days from 27 January 2018, or until 11 February 2018,
within which to file their Petition.
2.5. On account of the urgent need to ensure that the Assailed

Decision is not enforced during the pendency of this appeal,
RAPPLER and RHC endeavored to finalize and file this Petition for
Review within the original due date of 27 January 2018. Hence, this
Petition is timely filed.
3. PAYMENT OF DOCKET AND OTHER LAWFUL FEES,

AND DEPOSIT FOR COSTS

3 Assailed Decision, p. 28.
4 Rules of Procedure of the SEC (“SEC Rules”) (2016), Rule 3-12.
5 RULES OF COURT, Rule 43, Sec. 4.
4

RAPPLER and RHC paid the full amount of the docket and
other lawful fees pertinent to this Petition on 25 January 2018.6
4. THE FACTS
4. The facts are, as follows:
About RAPPLER
4.1. RAPPLER was incorporated on 25 July 2011 by Filipino

citizens.7 Only Filipino citizens or corporations wholly owned or
managed by Filipino citizens are stockholders of RAPPLER, or have
ever been stockholders of RAPPLER.8 Only RAPPLER stockholders
are entitled to vote, and have actually voted, these shares.9
4.3. Only Filipino citizens have held the positions of Director

or Officer of,10 and only Filipino citizens have managed and
controlled, RAPPLER.11 Further, editorial decisions and decisions on
content, i.e., what is published on the various platforms of RAPPLER,
are, and have always been, made only by Filipino journalists who
comprise its Editorial Team.12 No foreigner has exercised control,
whether direct or indirect, over RAPPLER.13
4.4. The Primary Purpose of RAPPLER, as stated in its

Articles of Incorporation, is as follows:
“xxx to design, develop, establish, market, sell, maintain,

support, distribute, customize, sell, re-sell and/or operate
news, information and social network services including
but not limited to content, platforms, systems and/or
applications via web, internet, mobile and other delivery
formats; communications, advertising, corporate social
responsibility, marketing, PR, events, brand affinity and

6 A copy of the Original Receipt No. 10023469 is attached hereto as Annex “B” and made
an integral part hereof.
7 See Articles of Incorporation of RAPPLER dated 5 July 2011, a copy of which is attached
hereto as Annex “C” and made an integral part hereof.
9 See Verified Explanation dated 26 August 2017 (“Verified Explanation”), p. 3, par. 1.2, a
copy of which is attached hereto as Annex “D” and made an integral part hereof.
11 Verified Explanation, p. 3, par. 1.3.
12 Ibid.
13 Id.
5

other related services and packages provided it will not

act as an internet service provider.”14
4.5. RAPPLER’s business is unique, in that:
a. It provides a service that has not been previously offered

in the market. In fact, it owns a patent for its User-Based
Response Cluster Generation System, which is a key instrument
in carrying out its business.15
b. It is a start-up company.16 It was set up as a small

business initially financed and operated by a few Filipinos who
offered a service, i.e., organized social journalism and positive
social movement through the use of the internet, not offered in
the market at that time. RAPPLER was different from
everything else in the market at that time.17 Like other start-ups,
RAPPLER worked with a technology incubator focused on
building internet and mobile brands.18 Ninety percent (90%) of
start-ups fail globally, RAPPLER is one of the few start-ups
which has not only succeeded, but has also, reached beyond
our borders.19 Recognized and singled out as Filipino,
RAPPLER has been included in numerous reports for
successful entrepreneurs and investors globally.20
c. RAPPLER is a technology company that uses the internet

and other digital systems to report and disseminate news and
provide the public with a forum for social interaction, i.e.,
discussion and sharing of information and moods.21
d. Among others, RAPPLER also uses its technology to help

the government and its citizens during times of national
disaster.22
For example, RAPPLER partnered with the Metro Manila
Development Authority to house its website and do a 360

14 See Articles of Incorporation of RAPPLER.
16 Ibid., p. 4, par. 1.5(b).
17 Id.
18 Id.
19 Verified Explanation, p. 4, par. 1.5(b.
20 Id. See “Philippines’ Rappler fuses online journalism with counter-terrorism tactics, social
network theory,” Terrence Lee, available at <https://www.techinasia.com/how-rappler-is-
applying-counter-terrorism-tactics-into-an-online-news-startup>, last accessed on 23 August 2017
at 9:31 a.m.; “In the Philippines, Rappler is trying to figure out the role of emotion in the news,”
Adrienne Lafrance, available at <http://www.niemanlab.org/2012/08/in-the-philippines-
rappler-is-trying-to-figure-out-the-role-of-emotion-in-the-news/>, last accessed on 23 August
2017 at 9:44 a.m.
22 Ibid., p. 4, par. 1.5 (d).
6

degree emergency drill by live streaming videos and live-

tweeting/live posting video clips and posts across multi-
platform and multi-media, i.e., RAPPLER, Facebook, YouTube
and Twitter.23
In September 2013, RAPPLER set up Agos, an information

and communications platform that combines top down
government action with bottom up citizen involvement to help
communities adapt to climate change and be ready for
disasters.24 At the heart of Agos is the Alert Map, a pioneering
tech platform that crowd sources critical information during a
disaster through SMS, Social Media and direct web reporting.25
In January 2017, x.rappler.com became the official platform

used by student publications participating in the online
publishing demo competition in the Department of Education’s
National Schools Press Conference.26
e. RAPPLER fosters a culture that develops fiercely

independent journalists, whose goal is to foster understanding
of issues by presenting facts as well as numerous, and
sometimes conflicting, views and analysis.27 It adheres to the
highest global standards of journalism free of vested interests.28
The goal is to help give citizens accurate information and
analysis to strengthen Philippine democracy.29 It aims to build
communities of action that are capable of deciding what to do
for themselves, and thus, help give every Filipino a stake in our
nation’s future.30
f. RAPPLER’s goal is to strengthen civic engagement and

enhance the commitment of every citizen to participate and
impact their world.31 RAPPLER’s platform allows the free
exchange of ideas and emotions with minimal moderation. 32
4.6. RAPPLER is not engaged in the business of Print Media33

or Broadcast Media.34

23 Id., p. 5, par. 1.5(c).
24 Id.
25 Id.
26 Id.
27 Verified Explanation, p. 5, par. 1.5 (e).
28 Ibid.
29 Id., p. 5, par. 1.5(e).
30 Id.
31 Id., p. 5, par. 1.5 (f).
32 Id.
33 Id.
34 Id, p. 5, par. 15..
7

On operating the business of RAPPLER globally
4.7. From its conceptualization, RAPPLER’s goal has been to

operate its business globally.35
4.8. In 2013, RAPPLER’s stockholders and Directors

recognized the opportunity for global growth when the business
started receiving recognition from the global business community.36
4.9. RAPPLER took its first step towards growing the

business globally when it set up a News Bureau in Indonesia in
201437 and a business in 2015.38 In 2015, a business entity was also set
up in Singapore.39
4.10. To successfully catapult the business of RAPPLER

globally, it needed a boost through additional funding, and more
importantly, the recognition by key global institutional impact
investors, which would provide value, build the brand, and generate
interest in the business.40
4.11. The stockholders of RAPPLER had sufficient property,

credit or assets to provide the funding to boost the business globally
and could have provided the funding.41 Also, there were a few
prominent Filipino businessmen desiring to invest as stockholders in
RAPPLER.42
4.12. Notably, the stockholders and Directors of RAPPLER are
made up of independent investigative journalists, businessmen, and
technology specialists who all work together to come up with
decisions on important matters.43 Under this set up, the journalists in

35 Id., p. 6, par. 1.6.
36 Id., p. 6, par. 1.7; see “Philippines’ Rappler fuses online journalism with counter-terrorism
tactics, social network theory,” Terrence Lee, available at <https://www.techinasia.com/how-
rappler-is-applying-counter-terrorism-tactics-into-an-online-news-startup>, last accessed on 23
August 2017 at 9:31 a.m.; “In the Philippines, Rappler is trying to figure out the role of emotion in
the news,” Adrienne Lafrance, available at <http://www.niemanlab.org/2012/08/in-the-
philippines-rappler-is-trying-to-figure-out-the-role-of-emotion-in-the-news/>, last accessed on 23
August 2017 at 9:44 a.m..
37 Verified Explanation, p. 6, par. 1.8; See “Rappler.com”, Vera Files, available at
<https://philippines.mom-rsf.org/en/media/detail /outlet/rapplercom/>, last accessed on 28
January 2018 at 2:53 pm.
38 A copy of the Certificate of Registration of Other Company form of Rappler Indonesia is
attached hereto as Annex “F” and made an integral part hereof.
39 Ibid., see also Rappler International Holdings Corporation Pt. Ltd’s Memorandum and
Articles of Incorporation dated 5 May 2015 a copy of which is attached hereto as Annex “G” and
made an integral part hereof.
41 Ibid., p. 6, par. 1.10.
42 Id.
43 Id., p. 6, par. 1.11.
8

the group have both commercial and editorial powers.44 Thus, if the
businessmen stockholders put in more capital by purchasing
additional shares, they will have the power to override the
commercial or editorial powers given to the journalist stockholders.45
As the journalist stockholders were keen on maintaining their
independence, they did not want to raise funds by issuing shares of
stock in RAPPLER to their businessmen stockholders.46 The
businessmen and technology specialist stockholders did not also
want other businessmen to be shareholders of RAPPLER because
their interest would be diluted.47 For these reasons, the stockholders
of RAPPLER collectively took interest only in investors which would
not become RAPPLER stockholders but would invest in, and provide
value to, the business.48
4.13. RAPPLER sought advice on how to properly and legally49

structure its business and investment package. In due course,
RAPPLER was made aware that SkyCable and Globe Telecom, Inc.,
and even mass media companies such as ABS-CBN Corporation
(“ABS-CBN”) and GMA Network, Inc. (“GMA 7”), secure funding
from their parent holding companies, which sold PDRs to
foreigners.50 Two of these PDRs, were approved by the SEC and are
currently listed and publicly traded in the Philippine Stock Exchange
(“PSE”).51
4.14. With the idea of raising funds through PDRs, RAPPLER

started looking for relevant impact investors, which would neither
own nor control RAPPLER, and indeed would not hold equity or
voting interests in RAPPLER, but would provide funding and add
value to the business.52
About Rappler Holdings Corporation
4.15. RHC was incorporated on 14 December 2014 by Filipino

citizens.53 RHC was envisioned as a holding company to consolidate
the business of RAPPLER and other related entities.54

44 Id.
45 Id.
46 Id.
47 Id.
48 Id.
50 Ibid., p. 7, par. 1.13.
51 Id.
52 Id., p. 7, par. 1.14.
53 Id., p.7, par. 1.15; See also Articles of Incorporation of RHC.
54 Id., p. 7, par. 1.17.
9

4.16. Since its incorporation, only Filipino citizens or

corporations wholly owned or managed by Filipino citizens have
been stockholders of RHC.55 Only RHC stockholders are entitled to
vote, and have actually voted their shares.56 Further, only Filipino
citizens have held the positions of Director or Officer of RHC.57
The relevant impact investors
A. North Base Media, Ltd.
4.17. North Base Media, Ltd. is not a foreign media entity.58 It

is “[a]n investment firm focused on media, journalistic enterprise and
digitally-driven opportunities in growth markets.”59 According to
Bloomberg, “North Base Media, Ltd. operates as a venture capital
firm. The Company invests in media and technology sectors.”60
4.18. On 29 May 2015, RHC issued a PDR Instrument to North

Base Media, Ltd.’s investment arm, NBM Rappler, L.P., (the “NBM
PDR”),61 through which NBM Rappler, L.P. (“NBM”) was issued
264,601 PDRs on 29 May 201762 and 11,764,117 PDRs on 29 July
2017.63
B. Omidyar Network
4.19. Omidyar Network is not a foreign media entity.64 It is a

philanthropic venture capital firm founded by Pierre Omidyar, the
founder of eBay.65 Omidyar Network is known to make investments
in companies even if the monetary returns are minimal as long as the
business has the potential to give value to the greater community.66

55 Id., p. 7, par. 1.16.
56 Id.
57 Id.
58 The consularized Affidavit of Stuart Karle is attached hereto as Annex “H” and made an
integral part hereof.
59 See North Base Media Website, available at <http://northbasemedia.com/>, last
accessed on 21 August 2017 at 1:12 a.m.
60 See North Base Media Company Profile, available at
<https://www.bloomberg.com/profiles/companies/1218216D:MK-north-base-media-ltd>, last
accessed on 28 January 2018 at 1:07 p.m.
61 See SEC Show Cause Order dated 02 August 2017, p. 3, par. 8, a certified true copy of
which is attached hereto as Annex “I” and made an integral part hereof.
62 Ibid.
63 Id.
65 Ibid.; see also Feature on Pierre Omidyar, available at
< https://www.omidyar.com/people/pierre-omidyar>, last accessed on 28 January 2018 at 9:22
p.m.
66 See “Omidyar Network’s Investing Framework is Good for Low-Return, High-
Impact Social Enterprises,” Anne Field, available at
<https://www.forbes.com/sites/annefield/2016/11/25/omidyar-networks-investing-
10

4.20. On 20 October 2015, RHC issued the OMIDYAR PDR to

Omidyar Network Fund, L.L.C. (“OMIDYAR”),67 through which
instrument OMIDYAR received 7,217,257 PDRs from RHC.68
4.21. Significantly, before OMIDYAR purchased its PDRs, RHC

already secured NBM’s investment.69
4.22. While there was no pressing financial need for funds at

that time, RHC wanted to secure an investment from OMIDYAR,
because like NBM, it was a desirable investor for the value, prestige
and networking it could bring to the business.70 Also an investment
from OMIDYAR meant that the business has been vetted as one that
impacts a large part of the population and empowers people to
improve their lives.71 Taking in OMIDYAR as a PDR investor was
consistent with the global growth strategy.
4.23. As OMIDYAR acquired fewer PDRs than NBM, it was

concerned that it may not have equal rights as NBM or future PDR
Holders.72 Clause 12.2.2 of the OMIDYAR PDR was inserted as a
mechanism to help ensure that the rights of a minority investor
would be protected vis-à-vis other PDR Holders.
4.24. Clause 12.2.2, which was included in the OMIDYAR PDR

with the assistance of counsel, was never intended to vest in
OMIDYAR ownership or control of RAPPLER. Unlike some
nationalized companies, the Articles of Incorporation and By-Laws of
which contain negative covenants to protect certain stakeholders,
Clause 12.2.2 of the OMIDYAR PDR is not even found in the Articles
of Incorporation or By-Laws of RAPPLER or RHC.
5. STATEMENT OF THE CASE
5.1. On 28 February 2017, RAPPLER and RHC appeared in

response to a Notice of Conference called by the SEC Company
Registration and Monitoring Department and furnished it a copy of
the OMIDYAR PDR.73

framework-is-good-for-low-return-high-impact-social-enterprises/2/#20a874792834>, last
accessed on 28 January 2018 at 9:58 p.m.
67 SEC Show Cause Order dated 02 August 2017, p. 3, par. 8.
68 Ibid.
70 Ibid., p. 16, par. 1.39.
71 Ibid., p. 16, par. 1.39.
72 Ibid., p. 16, par. 1.41.
11

5.2. In the four (4) succeeding months thereafter, no

department from the SEC communicated with RAPPLER and RHC
about the matter concerning the PDRs.
5.3. On 24 July 2017, President Rodrigo Duterte delivered his

State of the Nation Address (“SONA”) wherein he concluded, albeit
erroneously, that RAPPLER was a newspaper that is really owned by
Americans, thus:
“Try to go out, sumama tayo – kayo sa akin. And try to

see how hard it is for them to survive. Now ito ang…
Gusto mo ganito ang pangyayari, tutal sobra-sobra
naman ‘yang pera ninyo, 'adre, sa totoo lang. Mayor ako
eh, I can look at your corporate earnings, your sister
company, I can pierce the corporate identity, kayo rin
pala. And even diyan sa mga newspaper. When you are
not supposed to… You know, ‘pag newspaper ka you are
supposed to be 100 percent Filipino. And yet when you
start to pierce their identity, it is pala fully owned by
Americans. Ganun ang nangyari eh. It’s just a matter of
piercing the…
So wala masyado ako… ABS, Rappler kayo ba ‘yan?

Have you tried to pierce your identity and it will lead
you to America? Do you know that? And yet the
Constitution requires you to be 100 percent – media –
Filipino. Rappler, try to pierce the identity and you will
end up American ownership.”74
5.4. Within a week after President Duterte’s SONA, the

Special Panel personally served RAPPLER and RHC copies of its 1
August 2017 Show Cause Order (“Show Cause Order”) on 2 August
2017.
5.5. Notably, while it appears that the Special Panel was

created prior to President Duterte’s SONA on 8 July 2017, this panel
did not take any action until after the SONA on 24 July 2017.
5.6. Worse, RAPPLER and RHC were not apprised of SEC

Resolution 437 series of 2017, which supposedly gave the Special
Panel its power to conduct an investigation into this matter. The
resolution is not publicly available.75

74 Emphasis supplied.
75 RAPPLER and RHC had to subsequently request a copy of this resolution from the SEC.
12

5.7. RAPPLER and RHC were not informed that a procedure

different than that found in the 2016 SEC Rules of Procedure (the
“SEC Rules”) would be applied to them.
5.8. On 17 August 2017, RAPPLER and RHC filed a letter-

request for extension of time to comply with the Show Cause Order.76
Through an Order77 dated 23 August 2017, RAPPLER and RHC were
given until 29 August 2017 to file their sworn statement/explanation.
5.9. On 29 August 2017, RAPPLER and RHC dutifully filed

with the Special Panel their Verified Explanation.
5.10. On 28 September 2017, the Special Panel personally

served RAPPLER and RHC the 27 September 2017 Order for the
Production of Documents.78
5.11. On 12 October 2017, RAPPLER and RHC again dutifully

complied with the Special Panel’s directive and filed their Verified
Compliance.79
5.12. On 22 December 2017, RAPPLER and RHC also filed with

the Special Panel a Verified Supplemental Compliance,80 through
which they submitted the 11 December 2017 Waiver of OMIDYAR.
5.13. Through the Waiver, OMIDYAR demonstrated that it had

no intention to control RAPPLER by waiving its rights under Clause
12.2.2 of the OMIDYAR PDR.
5.14. No order was issued by the Special Panel or the SEC En
Banc submitting this case for resolution. Further, RAPPLER and RHC
were not told about whether additional documents would be
required of them or whether the Special Panel would set the case for
hearing.
5.15. RAPPLER and RHC expected the Special Panel to render

a decision in this case, or initiate a Formal Charge, since it was
docketed as a case of the Special Panel as SP Case No. 08-17-001 and

76 A certified true copy of the letter-request for extension of time dated 17 August 2017 is
attached hereto as Annex “J” and made an integral part hereof.
77 A certified true copy of the Order of the SEC dated 23 August 2017 is attached hereto as
Annex “K” and made an integral part hereof.
78 A certified true copy of the Order for the Production of Documents dated 27 September
2017 is attached hereto as Annex “L” and made an integral part hereof.
79 A certified true copy of the Verified Compliance of RAPPLER and RHC dated 12 October
2017 is attached hereto as Annex “M” and made an integral part hereof.
80 A certified true copy of the Verified Supplemental Compliance dated 22 December 2017
is attached hereto as Annex “N” and made an integral part hereof.
13

that they would be furnished a copy of the decision of the Special

Panel.
5.16. For this reason, RAPPLER and RHC were surprised to

receive a copy of Assailed Decision from no less than the SEC En
Banc, which “…approve[d] and adopt[ed] the finding of the Special
Panel in its Investigation Report in toto.” Significantly, RAPPLER and
RHC were never furnished with a copy of the Investigation Report of
the Special Panel.
6. ARGUMENTS AND DISCUSSION
IN HASTILY ISSUING THE ASSAILED DECISION

TO PUT RAPPLER AND RHC OUT OF BUSINESS
AND VOID THE OMIDYAR PDR, THE SEC EN BANC
DEPRIVED THEM OF THEIR CONSTITUTIONAL
RIGHT TO DUE PROCESS. IN APPLYING A
PROCEDURE DIFFERENT FROM THAT FOUND IN
THE SEC RULES, THE SEC EN BANC DEPRIVED
RAPPLER AND RHC OF EQUAL PROTECTION OF
THE LAWS. AS SUCH, THE ASSAILED DECISION IS
VOID.
“Where the denial of the fundamental right of due process is

apparent, a decision rendered in disregard of that right is void for
lack of jurisdiction.”81
The right to due process is enshrined in Section 1 of Article III

of the Constitution (the “Bill of Rights”), which provides that “[n]o
person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied equal protection of the
laws.”82
In the landmark case of Ang Tibay v. the Court of Industrial
Relations, et al.,83 the Supreme Court set forth the requirements for
procedural due process before administrative agencies such as the
SEC, thus:
“…The fact, however, that the Court of Industrial

Relations may be said to be free from the rigidity of

81 De Pedro v. Romasan Development Corporation, G.R. No. 194751, 26 November 2014,
743 SCRA 52.
82 CONST. (1987), Art. III, Sec. 1.
83 G.R. No. L-46496, 27 February 1940, 69 Phil. 635.
14

certain procedural requirements does not mean that it

can, in justifiable cases before it, entirely ignore or
disregard the fundamental and essential requirements of
due process in trials and investigations of an
administrative character. There are primary rights which
must be respected even in proceedings of this character:
(1) The first of these rights is the right to a hearing, which

includes the right of the party interested or affected to
present his own case and submit evidence in support
thereof…‘the liberty and property of the citizen shall be
protected by the rudimentary requirements of fair play’.
(2) Not only must the party be given an opportunity to

present his case and to adduce evidence tending to
establish the rights which he asserts but the tribunal
must consider the evidence presented…‘the right to
adduce evidence, without the corresponding duty on the
part of the board to consider it, is vain. Such right is
conspicuously futile if the person or persons to whom the
evidence is presented can thrust it aside without notice or
consideration.’
(3) ‘While the duty to deliberate does not impose the

obligation to decide right, it does imply a necessity
which cannot be disregarded, namely, that of having
something to support it is a nullity, a place when
directly attached.’ This principle emanates from the more
fundamental is contrary to the vesting of unlimited
power anywhere. Law is both a grant and a limitation
upon power.
(4) Not only must there be some evidence to support a

finding or conclusion…, but the evidence must be
‘substantial.’… It means such relevant evidence as a
reasonable mind accept as adequate to support a
conclusion… The statute provides that ‘the rules of
evidence prevailing in courts of law and equity shall not
be controlling.’ The obvious purpose of this and similar
provisions is to free administrative boards from the
compulsion of technical rules so that the mere admission
of matter which would be deemed incompetent inn
judicial proceedings would not invalidate the
administrative order… But this assurance of a desirable
flexibility in administrative procedure does not go far as
to justify orders without a basis in evidence having
15

rational probative force. Mere uncorroborated hearsay or

rumor does not constitute substantial evidence…’
(5) The decision must be rendered on the evidence

presented at the hearing, or at least contained in the
record and disclosed to the parties affected… It should
not, however, detract from their duty actively to see that
the law is enforced, and for that purpose, to use the
authorized legal methods of securing evidence and
informing itself of facts material and relevant to the
controversy. Boards of inquiry may be appointed for the
purpose of investigating and determining the facts in any
given case, but their report and decision are only
advisory. (Section 9, Commonwealth Act No. 103.) The
Court of Industrial Relations may refer any industrial or
agricultural dispute or any matter under its consideration
or advisement to a local board of inquiry, a provincial
fiscal. a justice of the peace or any public official in any
part of the Philippines for investigation, report and
recommendation, and may delegate to such board or
public official such powers and functions as the said
Court of Industrial Relations may deem necessary, but
such delegation shall not affect the exercise of the Court
itself of any of its powers…
(6) The Court of Industrial Relations or any of its

judges, therefore, must act on its or his own
independent consideration of the law and facts of the
controversy, and not simply accept the views of a
subordinate in arriving at a decision. It may be that the
volume of work is such that it is literally Relations
personally to decide all controversies coming before
them. In the United States the difficulty is solved with the
enactment of statutory authority authorizing examiners
or other subordinates to render final decision, with the
right to appeal to board or commission, but in our case
there is no such statutory authority.
(7) The Court of Industrial Relations should, in all

controversial questions, render its decision in such a
manner that the parties to the proceeding can know the
various issues involved, and the reasons for the decision
rendered. The performance of this duty is inseparable
from the authority conferred upon it.”84

84 Ibid. Emphasis supplied.
16

The right to due process applies to juridical persons like

RAPPLER and RHC as exemplified in the case of White Light
Corporation v. City of Manila85 where the Supreme Court ruled, as
follows:
“The due process guaranty [under Section 1, Article III

of the Constitution] serves as a protection against
arbitrary regulation or seizure. Even corporations and
partnerships are protected by the guaranty insofar as
their property is concerned.”86
Gauged by the afore-mentioned requirements, it is clear that

the SEC En Banc violated the right of RAPPLER and RHC to
procedural due process. Consequently, the Assailed Decision is void.
First. The issues involved in this case are highly controversial.

Prior to the case being filed, RAPPLER was under fire for publishing
news articles (through its online platforms) critical of the
government.87
Since this case was initiated by the government supposedly by

the Office of the Solicitor General,88 and again, by President Rodrigo
Duterte through his SONA delivered on 24 July 2017, the SEC En
Banc was, duty bound to “render its decision in such a manner that
the parties to the proceeding can know the various issues involved,
and the reasons for the decision rendered.”89
Unfortunately, the SEC En Banc utterly failed in this respect.
The SEC Rules provide for the manner by which administrative

actions before it are conducted. A different procedure, which was
not made known to RAPPLER and RHC, was applied in their case.
Worse, the SEC En Banc did not explain why RAPPLER and RHC
should be treated differently.

85 G.R. No. 122846, 20 January 2009, 576 SCRA 416.
87 See “Rappler and DFA traitors’ leak of Trump – Duterte calls damages PH’s image
irreparably,” available at <http://www.manilatimes.net/rappler-dfa-traitors-leak-trump-
duterte-call-damagesphs-image-irreparably/329338>, last accessed on 22 January 2018 at 2:25
a.m.
89 Ang Tibay v. the Court of Industrial Relations, et al., G.R. No. L-46496, 27 February 1940,
69 Phil. 635.
17

The relevant procedure before the SEC, under which a

corporation may be sanctioned, is as follows:
a. The Operating Department conducts an investigation

upon a complaint from a government instrumentality.90
b. The Operating Department may, after the investigation,

initiate an administrative action to impose sanctions or
penalties.91 The Operating Department may also present its
complete findings to the SEC En Banc, which may refer the
matter to the Enforcement and Investor Protection Department
for the filing of a criminal complaint with the Department of
Justice.92
c. If the Operating Department decides to initiate an

administrative action, it shall issue a Formal Charge,93 which
shall “contain a specification of charge/s, a brief statement of
material or relevant facts, accompanied by certified true copies
of the documentary evidence, if any, sworn statements covering
the testimonies of witnesses, and a directive to file a Verified
Answer.”
d. After the Verified Answer is filed, the Operating

Department shall render its Decision.94
e. A party may file a Motion for Reconsideration of an

adverse Decision of the Operating Department,95 and
thereafter, appeal to the SEC En Banc.96

90 SEC Rules, Rule II, Sec. 2-1.
91 Ibid., Sec. 2-7.
92 Ibid., Sec. 2-8.
93 Ibid., Sec. 3-1.
94 Ibid., Sec. 3-5.
95 Ibid., Part V, Rule II.
96 Id.
18

The diagram below outlines the standard procedure for an

administrative action under the SEC Rules.
As shown by the diagram below, a different and abbreviated

procedure was applied in this case.
19

To be clear, on 2 August 2017, on RAPPLER and RHC were

served with the Show Cause Order, which stated that the Special
Panel was created under SEC Resolution 437 series of 2017, which is
not publicly available. RAPPLER and RHC were not made aware of
whether the Special Panel was conducting an investigation or an
administrative proceeding.
When RAPPLER and RHC subsequently secured a copy of SEC

Resolution 437 series of 2017, 97 they learned that the power of the
Special Panel was limited to “conducting a formal, in-depth
examination” of RAPPLER and RHC. The Special Panel’s scope of
authority was limited to examination. Further, the SEC Rules of
Procedure defines an investigation as “an inquiry or proceeding by
the Operating Department that has authority over the subject matter
to determine if there are sufficient grounds to warrant the
commencement of an administrative sanction.”98 Thus, when the
Special Panel was mandated by the SEC En Banc to conduct an
examination, it was mandate to only determine if there exists
sufficient basis to initiate administrative charges against RAPPLER
and/or RHC. The Special Panel did not have the power, authority or
jurisdiction to adjudge RAPPLER and/or RHC administratively
liable and to impose administrative sanctions.
Significantly, while ostensibly the Special Panel was conducting

an investigation, a reading of the Show Cause Order served upon
RAPPLER and RHC reveals that the Special Panel had already made
a finding that RAPPLER and RHC were liable under the various laws
cited in that order, thus:
“…directed to show cause and submit a sworn

statement/explanation within fifteen (15) days from
receipt, as to why you should not be held liable for
violation of the Foreign Equity Restrictions enshrined in
Article XVI, Section 11(1) of the Constitution (in relation
to Article II, Section 19 thereof) and enforceable through
Section 2 of Presidential Decree 1018, Limiting the
Ownership and Management of Mass Media to Citizens
of the Philippines (in relation to the sanctions under
Section 6(i) of Presidential Decree 902-A, as amended,
and Section 5.1(f) of the Securities Regulation Code),
Section 1 of Commonwealth Act 108, aka The Anti-

97 RAPPLER and RHC were only able to secure a copy of SEC Resolution 437 series of 2017
after they received the Assailed Decision and after a request was made with the SEC Office of the
Commission Secretary. The duplicate originals of the Letter Requests both dated 15 January 2018
is attached hereto as Annex “O” and made an integral part hereof.
98 SEC Rules, Sec. 1-3(k).
20

Dummy Act (in relation to the sanctions under Section

6(i) of Presidential Decree 902-A, as amended, and
Section 5.1(f) of the Securities Regulation Code), and
Section 7 in relation to Section 14 of Republic Act 7042,
The Foreign Investments Act of 1991, as amended.”
RAPPLER and RHC, being respondents in this case, were

already found to have violated the law and the Special Panel shifted
the burden of proof on them to explain why they are not liable. This
is in contravention of the established rule the burden of proof is on
the complainant.
In the case of Adajar v. Develos,99 the Supreme Court stated

that it is the burden of the complainant, and not the respondents, to
prove that they violated the law, thus:
“Settled is the rule that in administrative proceedings,

the burden of proof that the respondent committed the
act complained of rests on the complainant. He must be
able to show this by substantial evidence, or such
relevant evidence as a reasonable mind may accept as
adequate to support a conclusion. Otherwise, the
complaint must be dismissed.”100
Worse, the Special Panel recommended the imposition of

revocation on RAPPLER and RHC directly to the Commission En
Banc. No Formal Charge was filed against RAPPLER and RHC as
required by the SEC Rules.
There was also no formal administrative action filed against

RAPPLER and RHC before the SEC. Without an administrative
action, surely, no administrative sanction, including the suspension
or revocation of the corporation’s franchise, could have been imposed
by the SEC En Banc.101
Without the benefit of an administrative proceeding (which

necessarily includes Notice of the Formal Charge and hearing), the
Special Panel found that RAPPLER and RHC violated the foreign
equity restrictions applicable to mass media outfits. What is worse is
that the SEC En Banc accepted the direct recourse to it, instead of
directing the Special Panel to observe the SEC Rules. The SEC En

99 A.M. No. P.-05-2056, 18 November 2005, 475 SCRA 361.
101 See B.P. No. 68 (1980), Sec. 121; see also Pres. Dec. No. 902-A (1976), Sec. 6 (i); Rep. Act
No. 8799 (2000), Sec. 54.1(a)(v).
21

Banc also adopted the findings of the Special Panel in its Investigation
Report in toto.
For these reasons, RAPPLER and RHC were deprived of the

following procedural rights under the SEC Rules of Procedure:
a. The right to the issuance of a Formal Charge, which

should specify the charges and attach the evidence upon which
it is based;
b. The right to respond to a Formal Charge;
c. The right to be heard on the Formal Charge and to

present evidence in its defense;
d. The right to be informed of the basis of the decision of the

Special Panel and to move for reconsideration thereof; and
e. The right to appeal the decision of the Special Panel to the

SEC En Banc.
Second. Since no administrative charge was instituted against

RAPPLER and RHC, they were not provided with sufficient notice of
the Formal Charge against them (because none was issued) and the
opportunity to be heard.
Third. The Assailed Decision was not one “rendered on the

evidence presented at the hearing, or at least contained in the record
and disclosed to the parties affected” because the supposed
Investigation Report of the Special Panel, which the SEC En Banc
adopted in toto, was never presented to RAPPLER and RHC.
Fourth. The SEC En Banc did not “act on its own

independent consideration of the law and facts of the controversy,
and simply accepted the views of a subordinate in arriving at a
decision” because the Assailed Decision very clearly states that
“…the En Banc hereby approves and adopts the findings of the
Special Panel [a subordinate] in its Investigation Report in toto.”102 A
reading of the Assailed Decision fails to provide insight as to what
the Special Panel’s findings were versus the SEC En Banc’s own
appreciation of the facts and the law.

22

Fifth. As will be discussed in detail below, the SEC En

Banc did not “consider the evidence presented”. Thus, the Assailed
Decision did not have anything to support itself.
There was no finding whatsoever that OMIDYAR actually

exercised control over RAPPLER, which finding was the basis for the
revocation of the certificates of incorporation of both RAPPLER and
RHC and the annulment of the OMIDYAR PDR.
Under the circumstances, this Honorable Court should render

the Assailed Decision void as it was rendered in violation of the right
to due process and equal protection of laws of RAPPLER and RHC.
II
CLAUSE 12.2.2 OF THE OMIDYAR PDR DOES NOT

CONFER UPON OMIDYAR CONTROL, MUCH LESS
OWNERSHIP AND MANAGEMENT, OVER RAPPLER.
AS SUCH, THE SEC EN BANC HAS NO BASIS TO
DECLARE VOID THE OMIDYAR PDR AND REVOKE
THE CERTIFICATES OF INCORPORATION OF
RAPPLER AND RHC.
What is prohibited by Section 11 (1) of Article XVI of the

Constitution is foreign ownership and management of a mass media,
thus:
“The 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.”
The SEC En Banc admits that OMIDYAR is not a stockholder,

and has never participated in the management, RAPPLER and RHC.
This is undisputed. In fact, the SEC En Banc was careful to say that
the violation occurred when RAPPLER “sold control to foreigners”;103
“intentionally granted more than 0% control (influence over
corporate policy) to Omidyar”104 or “granted control” to foreigners.105
As factual basis for its Assailed Decision, the SEC En Banc stated
that

103 Ibid.
104 Id., p. 28.
105 Id., pp. 15, 19, 20, 22, 23 and 25.
23

“…Here, only the [OMIDYAR] PDR contains a repugnant

provision. Therefore, the issue is limited to the unique
terms found only in the [OMIDYAR] PDRs.
The [OMIDYAR] PDRs contain a provision wherein

the ‘company’ is required to seek approval on the
[OMIDYAR] PDR Holders on corporate matters, viz:
12.2 The Issuer undertakes to cause the

Company from the date hereof and while the
ON PDRs are outstanding:
xxx
12.2.2 not to, without prior good faith discussion
with [OMIDYAR] PDR Holders and without the
approval of PDR Holders holding at least 2/3 of
all issued and outstanding PDRs, alter, modify
or otherwise change the Company Articles of
Incorporation or By-Laws or take any other
action where such alteration, modification,
change or action will prejudice the rights in
relation to the [OMIDYAR] PDRs…”106
Since the SEC En Banc could not possibly deny that RAPPLER
and RHC “have all-Filipino shareholders, directors and officers”107 it
reasoned, as follows:
“Respondent’s true error lies in equating ‘control’ with

ownership of stock or management in the board. Upon this
premise, they devised a scheme where no foreigner would
own stock or sit in the board. The scheme employed by
respondents – making the ownership and management
appear ‘Filipino’ on paper while granting control (i.e.
influence over corporate policy) to Foreign Investors via
the terms of an equity derivative – is not a harmless
circumvention.”108
On this basis, the SEC declared the OMIDYAR PDR void, and
worse, revoked the certificate of incorporation not only of RHC, the
issuer of this PDR, but also, of RAPPLER, which is not a party to this
PDR.109

106 Assailed Decision, p. 12. Emphasis supplied.
107 Ibid., p. 25.
108 Id., p. 23. Emphasis supplied.
109 Id., p. 29.
24

The SEC’s interpretation of Clause 12.2.2 of the OMIDYAR PDR

is wrong. This clause does not, in any way, grant OMIDYAR control
or influence over any corporate act of RAPPLER.
First. The following provisions of the Civil Code contain the

mandate written into every contract110 requiring each of the
contracting parties not to prejudice each other’s rights:
a. Article 1159 of the Civil Code: “Obligations arising from

contracts have the force of law between the contracting parties
and should be complied with in good faith”.
b. Article 1315 of the Civil Code: “Contracts are perfected

by mere consent, and from that moment the parties are bound
not only to the fulfilment of what has been expressly stipulated
but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law.”
c. Article 19 of the Civil Code: “Every person must, in the

exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and
good faith.”
d. Article 20 of the Civil Code: “Every person who,

contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for the same.”
e. Article 21 of the Civil Code: “Any person who wilfully

causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the
latter for the damage.”
Clause 12.2.2 of the OMIDYAR PDR merely reiterates this

mandate. In fact, Clause 12.2.2 is superfluous. This disputed clause
states that “where such alteration, modification, change or action [on
the Articles of Incorporation or By-Laws of RAPPLER] will prejudice
the rights in relation to the ON PDRs”,111 RHC must enter into
“prior good faith discussions with ON PDR Holders” and secure
“approval of PDR Holders” before the prejudicial action referred to
here is taken again OMIDYAR. As Clause 12.2.2 of the OMIDYAR
PDR merely obligates RHC to comply with its obligation to
OMIDYAR under the law, it is not illegal.

110 National Steel Corporation v. Regional Trial Court of Lanao del Norte, G.R. No. 127004,
11 March 1999, 304 SCRA 595.
25

Second. A reading of Clause 12.2.2 of the OMDIYAR PDR

shows that any action by OMIDYAR only takes place after RHC has
made a decision to alter, modify, change, or take any action, with
respect to the Articles of Incorporation or By-Laws of RAPPLER and
only “where such alteration, modification, change or action will
prejudice the rights in relation to the ON PDRs”. OMIDYAR is not,
therefore, involved in the decision making with respect to the
Articles of Incorporation or By-Laws of RAPPLER, and cannot have
been granted control of RAPPLER or influence over it.
To be clear, this Clause does not give OMIDYAR the power to

decide when and how the Articles of Incorporation or By-Laws of
RAPPLER, or any other corporate matter, are to be made. Therefore,
OMIDYAR has no control over the actions of RHC, and also
RAPPLER. The operative actions of OMIDYAR, which takes place
only after RHC decides to take action on the Articles of Incorporation
or By-Laws of RAPPLER, is to enter into good faith discussion with
RHC and to reject or approve an act prejudicial to it.
Obviously, the consent of OMIDYAR is needed for any

“alteration, modification, change or action” of RAPPLER’s Articles or
By-Laws when such adversely affect the underlying security of PDRs
issued to OMIDYAR. For example, an event that would certainly
affect the rights of OMIDYAR would be the shortening of the
corporate term of RAPPLER, which would result in extinguishing the
Underlying Shares of the PDRs. Any PDR Holder, OMIDYAR
included, has the legal and contractual right to be protected from
such acts that affect its investment, since RHC is obligated under the
law not to prejudice OMIDYAR’s rights under the OMIDYAR PDR.
Third. Clause 12.2.2 of the OMIDYAR PDR is actually no more

than a dispute mechanism provision that spells out the procedure to
be followed by the parties in the event that RHC decides to alter,
modify, change or take action on the Articles of Incorporation or By-
Laws of RAPPLER that “will prejudice the rights [of OMIDYAR] in
relation to the OMIDYAR PDRs”.
When understood in this context, it is clear that the parties

sought to avoid dispute. The parties acknowledged that the right to
alter, modify, change or take action on the Articles of Incorporation
or By-Laws of RAPPLER rests in RHC, and OMIDYAR has no control
over this. Under the law, should RHC alter, modify, change or take
action on the Articles of Incorporation or By-Laws of RAPPLER,
which “will prejudice the rights in relation to the OMIDYAR PDRs”,
OMIDYAR’s recourse is to file an action for breach of contract. To
avoid this, the parties agreed on how to address such an even
26

without having to go to court. Hence, the “prior good faith

discussion”.
Fourth. At most, Clause 12.2.2 of the OMIDYAR PDR is in

the nature of a negative covenant put into place to protect the interest
of OMIDYAR, an investor. This is why OMIDYAR’s approval is
confined only to acts that may prejudice its rights under the
OMIDYAR PDR.
Negative covenants (including covenants restricting the

investee or borrower from amending its constitutive documents) are
not prohibited in financial agreements between foreign investors and
Philippine counter parties (even Philippine counter parties which are
subject to a nationality restriction). The following examples of similar
negative covenants have long been accepted in this jurisdiction and
are being used in standard contracts:
a. Both mortgage and pledge are accessory contracts

constituted to secure the fulfilment of the obligation under the
principal contract.112 Considering that the purpose of the
mortgage and pledge is to secure the fulfilment of the
obligation under the principal contracts, the mortgagee and
pledgee may impose provisions that may restrict the use
and/or disposition over the thing mortgaged or pledged,
provided these are not contrary to law, laws, morals, good
customs, public order, or public policy.113
Negative covenants are standard provisions under loan

agreements, mortgages, and pledge agreements to further
protect the financial interests of the lender, mortgagee, and
pledgee.114 Negative covenants are provisions which require a
party to refrain from doing something or the borrower’s
promise to the lender not to encumber or transfer the real estate
as long as the loan remains unpaid. In the case of Security Bank
& Trust v. Cuenca,115 the Loan Agreement executed by the
parties contained both positive and negative covenants. In
Philnico Industrial Corp. v. Privatization and Management
Office,116 the Pledge Agreement executed by the parties
contained a negative covenant.

112 Manila Surety & Fidelity Co. vs. Velayo, G.R. No. L-21069, 26 October 1967, 21 SCRA 515.
113 CIVIL CODE, Art. 1306.
114 Ibid.
115 G.R. No. 138544, 3 October 2000, 341 SCRA 781.
116 G.R. No. 19942, 27 August 2014, 14 SCRA 913.
27

A more specific type of a negative covenant is a negative

pledge clause. It is a clause requiring a borrower, who borrows
funds without giving security, to refrain from giving future
lenders any security without the consent of the first lender.117 In
bond indenture, it is a provision stating that the issuing entity
will not pledge its assets if it will result in less security to the
bondholders under the indenture agreement.118
Further, the law imposes upon the pledgor the obligation

to seek the consent and approval of the pledgee before the
thing pledged may be alienated.119 In the case of Estate of G.
Litton v. Mendoza,120 the purpose for the provision was
explained in this wise:
“To allow the assignor to dispose of or alienate the

security without notice to and consent of the
assignee will render nugatory the very purpose of a
pledge or an assignment of credit.”
b. In insurance policies, the insurer may minimize its

exposure to risk and potential liability by limiting the use or the
condition of a particular property that will be covered by
insurance.121 In case of change of the use or the condition of the
insured property without the consent of the insurer, the law
provides that the insurer may rescind the contract.122 Thus,
when the property was insured as a residential house and it
was subsequently converted into a factory without the consent
of the insurer, the court considered such change as a material
alteration, warranting the right of the insurer to rescind the
contract.123
Fifth. Significantly, contrary to its public statements, the SEC

En Banc has approved other long-standing PDRs that even absolutely
obligate the issuers to cause the company whose shares underlie the
transaction “not to alter, modify or otherwise change [the] Articles of
Incorporation or by Laws or take any other action so as to materially
prejudice the rights in relation to the PDRs.”

117 BLACK’S LAW DICTIONARY, 9th Edition.
118 Ibid.
120 G.R. No. L-49120, 30 June 1988, 163 SCRA 246.
121 Rep. Act No. 10607 (2012), Sec. 170.
122 Ibid.
123 Malayan Insurance Company Inc. v. PAP Co. Ltd., G.R. No. 200784, 7 August 2013, 703
SCRA 314.
28

To aid this Honorable Court, the provisions of the PDRs are

juxtaposed in the table below, thus:
ABS-CBN HOLDINGS GMA HOLDINGS

RHC-OMIDYAR
CORPORATION124 INCORPORATED125
1. Undertakings in 11. Undertakings in 12. Undertakings

relation to the PDRs relation to the PDRs xxx
xxx xxx 12.2 The Issuer
(b) The Issuer has agreed (b) The PDR Issuer has undertakes to cause the
to cause the Company: agreed to cause the Company from the date
Company: hereof and while the ON
xxx PDRs are outstanding:
(ii) Not to alter, modify xxx xxx
or otherwise change its (ii) Not to alter, modify or 12.2.2 not to, without
Articles of Incorporation otherwise change its prior good faith
or By -Laws or take any Articles of Incorporation discussions with ON
other action so as to or PDR Holders and
materially prejudice the By-Laws or take any without the approvable
Rights in relation to the other action so as to of PDR Holders holding
PDRs; materially prejudice the at least two-thirds (2/3s)
rights in of all issued and
relation to the PDRs; outstanding PDRs, alter,
modify or otherwise
change the Company’s
Articles of Incorporation
or By-laws or take any
other action here such
alteration, modification,
change or action will
prejudice the rights in
relation to the ON
PDRs; and
If the SEC approved the clauses found in other PDRs obligating

the issuer of the PDR to cause the company, the shares of which
underlie the transaction, “not to alter, modify or otherwise change its
Articles of Incorporation or By-Laws or take any other action so as to
materially prejudice the Rights in relation to the PDRs”, then, there
should be no reason for the SEC En Banc to find fault in Clause 12.2.2
of the OMIDYAR PDR, which does not even absolutely prohibit the
amendment of the Articles of Incorporation and By-Laws of
RAPPLER.

124 See About ABS-CBN Holdings Corporation, available at < http://www.abs-
cbnpdr.com/>, last accessed on 29 January 2018 at 8:44 a.m.
125 See GMA7 Prospectus, available at <http://aphrodite.gmanetwork.com/pdfs/GMA-
Final-Prospectus.pdf>, last accessed on 28 January 2018 at 9:00 a.m.
29

Sixth. Clause 12.2.2 of the OMIDYAR PDR does not grant

OMIDYAR veto power for corporate acts of RAPPLER.
The refusal of a shareholder to give a vote for a corporate act

may potentially result in RAPPLER being unable to perform that act
for lack of corporate approval. In this case, should OMIDYAR
withhold its approval of an amend, alteration or modification of the
Articles of Incorporation or By-Laws of RAPPLER which “will
prejudice [OMIDYAR’s] rights in relation to the [OMIDYAR PDR],”
RHC may nevertheless proceed with the proposed action. Only,
RHC would expose itself to possible liability for breach of the
OMIDYAR PDR.
Assuming, without admitting, that Clause 12.2.2 of the

OMIDYAR PDRs grants veto power to OMIDYAR, this veto power is
not synonymous with control. In the case of Roque v. COMELEC,126
the Supreme Court categorically stated that “veto power…does not
translate to ceding control”. In the words of Chief Justice Renato
Puno in his concurring opinion:
“[t]he veto power granted to Smartmatic in the Joint

Venture Agreement on certain technical and financial
aspects may be viewed as legitimate minority protection
devices. Without these protective provisions, Smartmatic
would be helplessly exposed to the risk of being outvoted
on significant corporate activities and decisions including
decisions on technical matters falling within its field of
expertise.”
Seventh. The OMIDYAR PDR expressly states that the right to

vote the RAPPLER shares will be retained and exercised by RHC,127 a
company solely owned and managed by Filipinos. This, more than
anything, clearly shows that OMIDYAR was not given the right to
control, and cannot possibly control, RAPPLER.
Significantly, in Roy v. Herbosa, et al.,128 the Supreme Court En

Banc equated control of a nationalized company with the power to
elect its board of directors because a shareholder exercises control
over the corporation through the election of a director who is part of
the board that controls the corporation, thus:
"Indisputably, one of the rights of a stockholder is the

right to participate in the control or management of the

126 G.R. No. 188456, 10 September 2009, 599 SCRA 69.
127 OMIDYAR PDR, Clause 4.1,
128 G.R. No. 207246, 22 November 2016, 810 SCRA 1.
30

corporation. This is exercised through his vote in the

election of directors because it is the board of directors
that controls or manages the corporation. In the absence
of provision in the articles of incorporation denying
voting rights to preferred shares, preferred shares have
the same voting rights as common shares. However,
preferred shareholders are often excluded from any
control, that is, deprived of the right to vote in the
election of directors and on other matters, on the theory
that the preferred shareholders are merely investors for
income in the same manner as bondholders."
Admittedly, the OMIDYAR PDR does not give OMIDYAR any

right to vote the RAPPLER shares, much less the right to elect
RAPPLER’s directors. By no stretch of imagination then can it be
concluded that the OMIDYAR PDR gave even an iota of control to
OMIDYAR.
Eight. SEC En Banc uses Rule 3.1.8 of the 2015 Implementing

Rules and Regulations of the Securities Regulation Code (“SRC
IRR”), which defines “control” as “the power to determine the
financial and operating policies of an entity in order to benefit from
its activities”, as its basis for determining whether OMIDYAR
exercised “control” over RAPPLER. The SEC En Banc reasons that
this definition of “control” is “intentionally broad and does not
equate ‘control’ with either ownership of shares of stock or with
management as director or officer.”129
The SEC En Banc is mistaken.
By its own terms, Rule 3.1.8 of the SRC IRR confirms that
“control” may only be exercised by the Board of Directors of a
corporation. Further, “control” is exercised only, and rightly so,
when a member of the Board of Directors votes. In this regard,
Section 3.1.8 of the SRC IRR provides, as follows:
“3.1.8. Control is the power to determine the financial and

operating policies of an entity in order to benefit from its
activities. It is presumed to exist when the parent entity
owns, directly or through subsidiaries and/or associates,
more than fifty percent (50%) of the voting power of an
entity. It also exists when the parent entity owns fifty
percent (50%) or less of the voting power of an entity, but
has any of the following powers:

31

3.1.8.1. Over more than fifty percent (50%) of the voting

rights by virtue of an agreement with other investors;
3.1.8.2. To govern the financial and operating policies of

the entity under a statute or agreement;
3.1.8.3. To appoint or remove the majority of the members

of the board of directors or equivalent governing body; or
3.1.8.4. To cast the majority of votes at meetings of the

board of directors or equivalent governing body.”
This is consistent with Section 23 of the Corporation Code,

which clearly provides that all corporate power, including those that
involve the financial and operating policies, rests in the Board of
Directors, viz.:
“[u]nless otherwise provided in this code, the corporate

powers of all corporations formed under this code shall
be exercised all business conducted, and all property of
such corporations controlled and held by the board of
directors or trustee to be elected from among the holders
of stocks . . . Every director must own at least one (1)
share of the capital stock of the Corporation of which he
is a director, which share shall stand in his name on the
books of the corporation.”
Clearly, therefore, Clause 12.2.2 of the OMIDYAR PDR does not

grant control over RAPPLER to OMIDYAR because it does not make
it a stockholder of RAPPLER or give it the right to vote the
Underlying Shares.
Significantly, OMIDYAR will receive from RHC a PDR

Certificate, not shares of stock in RAPPLER.130 Clause 4.1 of the
OMIDYAR PDR also expressly states that the Underlying Shares,
which are common shares in RAPPLER, shall be owned and
registered in the name of RHC, not OMIDYAR. Further, “[n]either
the Escrow Agent nor [OMIDYAR] shall have voting rights with
respect to the Underlying Shares…[RHC], as owner of the
Underlying Shares, will retain and exercise such voting rights
relating to the Underlying Shares.”131 OMIDYAR will not receive

130 OMIDYAR PDR, Clause 2.1.
131 OMIDYAR PDR, Clause 4.3.
32

from RAPPLER any dividends accruing to the Underlying Shares or

dividends from RHC.132
Clearly, Clause 12.2.2 of the OMIDYAR PDRs is valid and does

not, in anyway, grant OMIDYAR control over RAPPLER.
III
THERE IS NO FINDING, AND THERE CAN BE NO

FINDING, BY THE SEC EN BANC THAT OMIDYAR
ACTUALLY EXERCISED CONTROL OVER RAPPLER.
THUS, RAPPLER AND RHC CANNOT BE PUNISHED,
IN ANY WAY FOR A VIOLATION THAT NEVER
OCCURED.
Article 1158 of the Civil Code is the foundation for the principle
that, if an act punishable by law has not been performed, then, the
corresponding penalty under the law cannot be applied to one
accused of violating it. Thus:
“Obligations derived from law are not presumed. Only

those expressly determined in this Code or in special laws
are demandable, and shall be regulated by the precepts of
the law which establishes them; and as to what has not
been foreseen, by provisions of this Book.”
Arturo Tolentino, the undisputed authority in Philippine Civil

Law, explains this provision by stating that “[t]he law cannot exist as
a source of obligations, unless the acts to which its principles may
be applied exist.”133
RAPPLER and RHC cannot be sanctioned or held liable for

violation of Section 11(1) of Article XVI of the Constitution, as the act
complained of, which is control by OMIDYAR of RAPPLER never
occurred. From the time RHC issued the [OMIDYAR] PDR,
RAPPLER has not amended its Articles of Incorporation or By-Laws.
The SEC En Banc cannot deny this because any amendment would
necessarily have to be approved by it.134 Further and more
importantly, before the Assailed Decision was rendered and before
there was an opportunity, if even possible, for OMIDYAR to exercise
control over RAPPLER, OMIDYAR executed the 11 December 2017
Waiver, through which OMIDYAR affirms that “has never exercised

132 OMIDYAR PDR, Clause 9.
133 IV TOLENTINO, ARTURO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE
PHILIPPINES 63 (1991 ed.). Emphasis supplied.
134 B.P. 68 (1980), Sec. 16.
33

its rights under Section 12.2.2” and “agrees to waive its rights under
Section 12.2.2 of the PDR Instrument.”135 This Waiver was submitted
to the Special Panel on 22 December 2017 through a Verified
Supplemental Compliance.
The SEC En Banc did not consider the Waiver in rendering its
Assailed Decision for the reason that what was attached to the
Supplemental Verified Compliance was only a “photocopy of the
purported Waiver of Paragraph 12.2.2 of the ON PDR”, it was “not
subscribed before a Notary or a Philippine Consulate” and was
executed as recently as 11 December 2017, more than four (4) months
since the start of the Formal Investigation.”136 The SEC En Banc even
went so far as saying that “…even if given due course, the waiver
would not negate the fact that Paragraph 12.2.2 thereof was
intentionally placed in the ON PDR by respondents, with consent of
Omidyar”.137
The fact that only a photocopy of the Waiver was submitted

should not have been made an issue by the SEC En Banc for the
following reasons: (a) the SEC En Banc did not take issue with other
documents submitted by RAPPLER and RHC which were only
photocopies;138 (b) the original of the Waiver is available, exists and
could have been produced by RAPPLER and RHC at any time if it
was requested by the SEC En Banc or the Special Panel to do so; and
(c) the Waiver was submitted though an original Verified
Supplemental Compliance dated 21 December 2017 wherein
RAPPLER and RHC certified, under oath, that the allegations therein
are true. Also, the Waiver submitted was a print out of the scanned
original document, which under the Rules of Electronic Evidence is
considered the functional equivalent of an original document.139
Further, the law does not require that the Waiver by OMIDYAR
be notarized or consularized. In fact, the OMIDYAR PDR, which
contains the right being waived, is in a private, not public document.
Under Article 1358 of the Civil Code, a Waiver need only be
notarized if the right to be waived is also found in a notarized
document.140 In any event, RAPPLER and RHC hereby submit, for
this Honorable Court’s consideration, the original Waiver signed on
11 December 2017 and consularized thereafter.

135 A copy of the Waiver dated 11 December 2017 is attached hereto as Annex “P” and made
an integral part hereof.
136 Assailed Decision, pp. 6 and 15.
137 Ibid, p. 15.
138 Id., p. 6.
139 A.M. No. 01-7-01-SC (2001), Rule 4, Sec. 2.
34

As OMIDYAR never exercised any control over RAPPLER,

RAPPLER and RHC cannot be punished for violation of Section 11 (1)
of Article XVI of the Constitution. The Assailed Decision revoking
their certificates of incorporation and voiding the OMIDYAR PDR
should, therefore, be annulled and set aside.
IV
RAPPLER IS NOT ENGAGED IN THE BUSINESS OF

MASS MEDIA, WHICH IS SUBJECT TO
NATIONALITY RESTRICTIONS UNDER SECTION 11
(1) OF ARTICLE XVI OF THE CONSTITUTION.
RAPPLER AND RHC CANNOT, THEREFORE, BE
MADE LIABLE FOR VIOLATION THIS PROVISION
AS IMPLEMENTED BY PD 1018.
The SEC En Banc revoked the certificates of incorporation of

RAPPLER and RHC because: “Rappler, Inc. being the mass media
entity … sold control to foreigners, and Rappler Holdings
Corporation being its alter ego, existing for no other purpose than to
effect a defective scheme to circumvent the Constitution.”141
RAPPLER is not engaged in the business of “Mass Media” as

contemplated by Section 11 (1) of Article XVI of the Constitution. As
such, neither RAPPLER nor RHC is obligated to comply with this
provision or be held liable under it.
First. A reading of the deliberations of the 1986 Constitutional

Commission on Section 11 (1) of Article XVI of the Constitution
shows that “Mass Media” pertains only to Print and Broadcast
media, thus:
“MR. FOZ. No, in this provision we would like to

divide mass media into print and broadcast.
MR. MONSOD. Only two – print and broadcast?
MR. FOZ. Yes, broadcast would include TV and

radio as one form.
xxx

35

MR. COLAYCO. Thank you, Mr. Presiding Officer.

I would like to address a question to Commissioner Foz
on the second paragraph of Section 11. I understood the
Commissioner said by one form, does, he mean the
classification of the various media? So we classify TV and
radio into one, is that right?
MR. FOZ. Yes, Mr. Presiding Officer.
MR. COLAYCO. Newspapers and, I suppose,

magazines into another one.
MR. FOZ. Yes, Mr. Presiding Officer.
xxx
MR. COLAYCO…
We define that there are only two forms. It is clear

that we cannot own the two forms. In other words, TV
and newspaper. But my question is, if we are going to
follow the words strictly, a person can own more than
one of the same form.”142
Consequently, the statement of the SEC En Banc in the Assailed

Decision that “Mass Media” was not defined “to adapt to changing
times [and to give] wide discretion [to] legislature and administrative
agencies”143 is baseless and contrary to the Constitutional
deliberations.
Second. Section 1 of Presidential Decree No. 1018 (“PD

1018”) defines “Mass Media”, which is consistent with the definition
given by the framers of the 1987 Constitution when they deliberated
on Section 11 (1) of Article XVI thereof, as follows:
“print medium of communication, which includes all

newspapers, periodicals, magazines, journals and
publications and all advertising therein, and billboards,
neon signs and the like, and the broadcast medium of
communication, which includes radio and television
broadcasting in all their aspects and all other
cinematographic or radio promotions and advertising”.

142 Record of the 1996 Constitutional Commission Proceedings and Debates, Volume Five,
pp. 110 to 111. Emphasis supplied.
36

PD 1018 was originally enacted to enforce Section 7 of Article

XV of the 1973 Constitution, which provides, that “[t]he ownership
and management of mass media shall be limited to citizens of the
Philippines or corporation or associations wholly owned and
managed by such citizens.”144 Section 7 of Article XV of the 1973
Constitution was deliberately reproduced in the 1987 Constitution
and is now Section 11 (1) of Article XVI thereof.145
The SEC En Banc acknowledges that Section 11 (1) of Article

XVI of the Constitution is enforceable through PD 1018. In fact, no
other law exists specifically to implement this provision.
The other laws cited in the Assailed Decision, i.e.,

Commonwealth Act No. 108 and Republic Act No. 7042, do not
specifically implement Section 11 (1) of Article XVI of the
Constitution or provide a definition of “Mass Media”.
The SEC En Banc is duty bound to apply only the definition of

“Mass Media” as contemplated by Section 11 (1) of Article XVI of the
Constitution, and defined by its implementing law, PD 1018.
As discussed in the case of Lokin Jr. v. COMELEC,146 the power

of administrative agencies is confined to implementing the law or
putting it into effect. Corollary to this is that administrative
regulations cannot extend the law and amend a legislative enactment.
Indeed, administrative acts shall be valid only when they are not
contrary to the laws or the Constitution.147
Third. As RAPPLER and RHC were asked by the Special Panel

to show cause why they should not be held liable for a violation of
Section 11 (1) of Article XVI of the Constitution,148 the SEC En Banc
should have only considered the definition given to “Mass Media”
under this provision and PD 1018, which is the only law specifically
enforcing it. Applying other laws such as the Tobacco Act without
giving RAPPLER and RHC the opportunity to be heard on these laws
violates their constitutional right to due process.
RAPPLER and RHC are not being sanctioned for violation of

the Tobacco Regulation Act of 2003. Thus, no part of this law, its
definition of “Mass Media”, should have been applied as basis in

144 CONST. (1973), Art. XV, Sec. 7.
145 Record of the 1996 Constitutional Commission Proceedings and Debates, Volume Five, p.
94. Emphasis supplied.
146 G.R. Nos. 179431-32, 22 June 2010, 621 SCRA 385.
37

determining whether RAPPLER is engaged in “Mass Media” for

purposes of applying the sanction under PD 1018. The opinions
issued by government agencies on the term “Mass Media” are also
inapplicable because the law implementing Section 11 (1) of Article
XVI of the Constitution, PD 1018, already defines this term.
Fourth. In the Assailed Decision, the SEC En Banc cited

documents wherein RAPPLER supposedly claimed it was “Mass
Media” when a reading of those documents reveals otherwise.149 The
SEC En Banc also said that “Rappler’s scheme reveals that it believed
itself to be Mass Media and thus prohibited from directly issuing
shares to raise capital”.150
What will determine whether RAPPLER’s business falls within

the definition of “Mass Media” is the law and not any statement
made by RAPPLER.
In the case of Centeno v. Villalon-Pornillos,151 the Supreme

Court ruled, as follows:
“Where a statute, by its terms, is expressly limited

to certain matters, it may not, by interpretation or
construction, be extended to others. The rule proceeds
from the premise that the legislature would not have
made specified enumerations in a statute had the
intention been not to restrict its meaning and to confine
its terms to those expressly mentioned.”152
Nevertheless, a reading of the documents quoted by the SEC En

Banc as support for its finding that “Rappler, Inc. consistently
claimed to be Mass Media”153 shows that RAPPLER made no such
claim, and the citation quoted, belies this finding.
a. In support of its finding that “Rappler, Inc. claimed to be

a Mass Media entity before the Commission”,154 the SEC En
Banc (adopting the findings of the Special Panel in toto) cited
and quoted portions of the RAPPLER Articles of Incorporation
dated 25 July 2011, its Amended Articles of Incorporation dated
16 April 2014 and 2012 to 2017 General Information Sheets.155

149 Ibid., pp. 15 and 16 to 19.
150 Id., p. 15.
151 G.R. No. 113092, 1 September 1994, 236 SCRA 197
152 Emphasis and underscoring supplied.
153 Assailed Decision, pp. 16 to 19.

154 Ibid, p. 16.
155 Id., pp. 16 and 17.
38

Nowhere in these documents may the term “Mass

Media” be found. The Primary Purpose of RAPPLER as found
in its Articles of Incorporation dated 25 July 2011, provides, as
follows:
“SECOND: That the primary purpose for which the

said Corporation is formed is to design, develop,
establish, market, sell, maintain, support, distribute,
customize, sell, resell and/or operate news,
information and social network services including
but not limited to contents, platforms, systems
and/or applications via web, internal, mobile and
other delivery formats; communications,
advertising, corporate social responsibility,
marketing, PR, events, brand affinity and other
related services and packages, provided it will not
act as internet provider services.”
The same Primary Purpose appears in the Amended

Articles of Incorporation of RAPPLER dated 14 July 2015.
Further, under the field of Primary Purpose appearing in the
annual General Information Sheet filed by RAPPLER for the
years 2012 to 2017, it states “[t]o operate news, information and
social network services.”
b. With respect to its finding that “Rappler, Inc. claimed to
be a Mass Media entity before the Courts,”156 the SEC En Banc
(adopting the findings of the Special Panel in toto) cited the case
of Rappler v. Andres Bautista.157 Again, in this case, RAPPLER
made no claim that it was Mass Media. In fact, RAPPLER
actually distinguished itself from traditional mass media
entities. 158
To be clear, the case of Rappler, Inc. v. Andres D.
Bautista,159 decided by the Supreme Court En Banc, clearly
shows that even the Commission on Elections did not treat
RAPPLER in the same way as companies engaged in Print
media or Broadcast media such as ABS-CBN, GMA Network,
Inc., TV5 Network, Inc., Philippine Daily Inquirer, Manila
Bulletin and the like. In the Memorandum of Agreement
between the Commission on Elections and various media
groups, RAPPLER was lumped together with Google because
they were requesting to provide online streaming of the

157 Ibid.
158 Rappler v. Andres Bautista, G.R. No. 222702, 5 April 2016, 788 SCRA 442.
159 G.R. No. 222702, 5 April 2016, 788 SCRA 442.
39

elections through their platforms. Further, RAPPLER’s right to

disseminate information about the elections was not based on
the law but on the Memorandum of Agreement. Clearly,
RAPPLER was neither treated nor considered, by a government
agency, as engaged in the same business as mass media
companies.
Further, on the issue of whether RAPPLER could stream

the election debates online, the Supreme Court granted this
request without making a determination as to whether
RAPPLER was “Mass Media” as defined by Section 11 (1) of the
Constitution.
c. On the finding that “Rappler, Inc. claimed to be a Mass

Media entity to the public,”160 SEC En Banc (adopting the
findings of the Special Panel in toto) quoted an article published
by RAPPLER entitled Omidyar Network Invests in Rappler.161
Again, a reading of the article shows that the term “mass

media” was never used and that RAPPLER again distinguished
itself from traditional mass media companies, thus:
“xxx Rappler became the Philippines’ first all-

digital news organization in January 2012,
combining technology and crowdsourcing through
the use of social media and mobile phones to merge
traditional television broadcasting with the Internet,
reinventing systems and distribution channels.
xxx
Rappler is the first and only media startup in the

Philippines
xxx
The largest independent news group in Southeast

Asia...”162
Fifth. The SEC En Banc posits that “Rappler’s scheme reveals

that it believes itself to be Mass Media and thus prohibited from
directly issuing shares to raise capital.”163 According to it, “Rappler,

161 Ibid.
163 Ibid, p. 19.
40

Inc. would not have had to create Rappler Holdings Corporation to

issue the PDRs if it was not a mass media entity.”164
RHC was not established for the sole purpose of issuing PDRs.
RHC was established as part of overseas business expansion. All
RAPPLER-related companies were intended to be part of RHC’s
holdings. This is validated by the fact that prior to establishing RHC,
RAPPLER had already established a news bureau in Indonesia, and
subsequently, RAPPLER began the process of establishing its
business in Singapore.
Also, the OMIDYAR PDR and NBM PDR each contain a clause,
which supports the position of RAPPLER and RHC that the purpose
for setting up the latter corporation was for business expansion.
Clause 12.1.5 of the OMIDYAR PDR provides “…[RHC] will only
carry on the business of holding Shares and other equity interest in
the Company and/or affiliates and subsidiaries of the Company”.
Whereas, Clause 12.1.5 of the NBM PDR provides that “…[RHC] will
only carry on the business of holding Shares and other equity
interests in Rappler and/or affiliates and subsidiaries of Rappler”.
Through these clauses, it was made clear that RHC will serve as
a holding company for RAPPLER affiliates and subsidiaries.
Sixth. Significantly, the reason why foreigners are

prohibited from engaging in Print or Broadcast in the Philippines is
because in Print and Broadcast, ideas and thoughts flow only from
the owners and management down to the masses. The crafters of the
Constitution wanted to ensure that foreigners do not become owners
or part of the management of a Print or Broadcast company, so that
they may not exert their influence on the masses, thus:
“The mass media have such a powerful socializing effect

that they could tell audiences how to think and behave.
They have a tremendous influence in shaping opinions
and attitudes and could lead to cultural alienation and
social uniformity. The growing dependence on
advertising tends to produce a commercial mentality in
which consumption becomes an end in itself. Instead of
fostering a culture based on plurality, they often
encourage homogenization of ideas. They discourage
productivity since they encourage consumerism. Where
the flow is from top to bottom, the media are likely to
promote the acceptance of approved ideas at the

164 Id.
41

expense of independent thought and critical judgment.

We have, for instance, a position paper from a group of
concerned citizens where they say that pornography
could be censorship because they prevent independent
thought; they prevent critical thinking and the entry of
positive programs into the existing channels.”165
Unlike Print and Broadcast media, the information found on

the website and other platforms of RAPPLER does not emanate from
one source and does not promote the acceptance of approved ideas.
Rather, RAPPLER provides platforms or online venues for everyone,
i.e., journalists, government, public at large (people from all over the
world) to share information about various topics. It then elicits
feelings, thoughts and ideas from those who access these platforms
through its Mood Meter and various other forms of crowdsourcing.
It is from the information elicited and shared by the community that
ideas are brought about. Further, the platforms are available and
may be accessed worldwide. Indeed, the activities of RAPPLER are
more akin to the way Facebook, Twitter, YouTube and blogs operate.
Thus, by conducting its business, RAPPLER distributes independent
thought rather than the sentiment of its owners or those who run its
business. This is what distinguishes RAPPLER from a “Mass Media”
company as defined and contemplated by Section 11 (1) of Article
VXI of the Constitution. The evil sought to be avoided by Section 11
(1) of Article XVI of the Constitution is, therefore, not present in the
case of RAPPLER.
All in all, RAPPLER is not engaged in the business of “Mass

Media” as contemplated by Section 11 (1) of Article XVI of the
Constitution and cannot be held accountable under it.
RHC WAS ESTABLISHED FOR LEGITIMATE GLOBAL

BUSINESS EXPANSION; NOT TO VEST CONTROL
OVER RAPPLER TO OMIDYAR. THE REQUIRED
CLEAR AND CONVINCING EVIDENCE TO JUSTIFY
THE PIERCING OF THE CORPORATE VEIL IS
CLEARLY ABSENT IN THIS CASE.
SEC En Banc justified piercing the veil of corporate fiction

through the following findings:

165 Record of the 1996 Constitutional Commission Proceedings and Debates, Volume Five,,
pp. 82 to 83. Emphasis and underscoring supplied.
42

a. RAPPLER and RHC have almost the same stockholders,

directors and officers, they hold the same office, and the
President-in-Common of both companies, RESSA,
negotiated with the PDR Holders.166
b. RHC was set up only for the purpose of issuing Philippine

Depositary Receipts to foreigners.167
c. “Together, Rappler, Inc. and Rappler Holdings Corporation

partook of a scheme whereby stock ownership and board
management would strictly-speaking remain with Filipinos,
while control (i.e. the ability to influence corporate policy)
would necessarily be granted to foreigners holding equity-
derivative instruments.”168
Neither RAPPLER nor RHC violated the law. Thus, the SEC En
Banc has no basis to pierce the veil of corporate fiction of these
companies for the purpose of revoking their certificate of
incorporation.
First. As explained earlier, Clause 12.2.2 of the OMIDYAR
PDR did not grant OMIDYAR control, or enable it to have control,
over RAPPLER.
Second. The fact alone that RHC has common stockholders,

directors, officers and office address as RAPPLER does not imply
fraud or warrant the piercing the veil of corporate fiction.
In the case of Laguio, et al. v. the National Labor Relations

Commission, et al.,169 the Supreme Court ruled, that
“Mere substantial identity of the incorporators of the two

corporations does not necessarily imply fraud, nor
warrant the piercing of the veil of corporate fiction. In the
absence of clear and convincing evidence that April and
Well World's corporate personalities were used to
perpetuate fraud, or circumvent the law said corporations
were rightly treated as distinct and separate from each
other.”170
Third. Contrary to the findings of the SEC En Banc that, “[i]n

December 2014, Rappler, Inc. needing a way to legalize the receipts of

166 Assailed Decision, pp. 20 to 23.
167 Ibid., pp. 21 to 22.
168 Id., p. 22.
170 Ibid.
43

foreign money, but unable to issue its stocks directly or give seats on
its board, formed Rappler Holdings Corporation, intended for the
sole purpose of issuing PDRs which derive their value from
equity,”171 RHC was not established for the sole purpose of issuing
PDRs.
In their Verified Explanation dated 26 August 2017, RAPPLER

and RHC explained that: (a) from the conceptualization of RAPPLER,
the intention was to operate the business globally, (b) in 2013
RAPPLER received recognition from the global business community,
and (c) it established a news bureau in Indonesia in 2014 and began
business expansion in Singapore in 2015.172
RAPPLER’s and RHC’s claim of global recognition in 2013 is

supported by articles and papers published at that time, which they
cited in their Verified Explanation.173 Also, the existence of the
RAPPLER news bureau in Indonesia since 2014 may be easily
verified from the internet.174 That RAPPLER began the process of
establishing its business in Singapore in 2015 is likewise easily
verifiable from the Accounting and Corate Regulatory Authority of
Singapore.
It is on account of its plan of global expansion that RAPPLER

set up RHC to be the holding company of RAPPLER and its affiliate
entities. This is further supported by the fact that the Primary
Purpose of RHC under its Articles of Incorporation is to be a holding
company.
That RHC was to be the holder of shares of RAPPLER and its

affiliate entities is also clear from Clause 12.1.5 of the OMIDYAR
PDR, which provides that “[RHC] will only carry on the business of
holding shares and other equity interests in the Company and/or
affiliates and subsidiaries of the Company.” A similar provision is
also found in Clause 12.1.5 of the NBM PDR, which provides that
“[RHC] will only carry on the business of holding shares and other
equity interests in Rappler and/or the affiliates and subsidiaries of
Rappler”.

172 Verified Explanation, p. 6.
173 See https://www.techinasia.com/how-rappler-is-applying-counter-terrorism-tactics-
into-an-online-news-startup, accessed on 23 August 2017 at 9:31 a.m.;
http://www.niemanlab.org/2012/08/in-the-philippines-rappler-is-trying-to-figure-out-the-role-
of-emotion-in-the-news/, accessed on 23 August 2017 at 9:44 a.m.;
http://www.kas.de/wf/doc/10527-1442-2-30.pdf, accessed on 23 August 2017 at 10:00 a.m.
174 https://www.rappler.com/indonesia/tentang-kami, accessed on 25 January 2018 at 1:36
a.m.
44

Had the SEC En Banc considered the business expansion of

RAPPLER, it would have come to the logical conclusion that the
transfer of RAPPLER shares to RHC and fund raising were not to
enable OMIDYAR to gain control over RAPPLER, but rather, for
funds raising for global expansion.
Third. Even assuming, without admitting, that RHC was

established for the sole purpose of issuing PDRs, the SEC En Banc
should not have taken issue with this considering that it sanctioned
the existence of other parent holding companies (of companies with
nationality equity restrictions),175 the sole purpose of which is to issue
PDRs.
The table below shows that after ABS-CBN Holdings

Corporation, GMA Holdings, Inc., Globe Telecom Holdings, Inc. and
Lopez Holdings Corporation were incorporated, they issued PDRs.
SUBSIDIARY AND DISCLOSURE ON THE

PDR ISSUER NATURE OF BUSINESS OF THE HOLD-
BUSINESS ING COMPANY
ABS-CBN ABS-CBN Corpora- Based on publicly available
Holdings Cor- tion; Mass Media records found in the website
poration of the PSE176 i.e., SEC Form
17-A (2016) accomplished,
and submitted to the SEC, by
ABS-CBN Holdings Corpo-
ration (parent company of
ABS-CBN Corporation), it
declared:
“For as long as the PDRs are

outstanding, the Company
will not engage in any activi-
ties other than in connection
with the issuance of PDRs,
the performance of obliga-
tions under the PDRs and
the acquisition and holding
of shares of ABS-CBN Cor-
poration (ABS-CBN) in re-
spect of which PDRs are is-

175 CONST.(1987), Art. XVI, Sec. 11; CONST.(1987), Art. XII, Sec. 11.
176 See ABS CBN Company Disclosures, available at
<http://edge.pse.com.ph/companyDisclosures/form.do?cmpy_id=15>, last accessed on 27
January 2018 at 3 p.m.
45


sued.”
GMA Holdings, GMA Network, Inc.; Based on publicly available
Inc. Mass Media records found in the website
of the SEC, i.e., SEC Form 17-
A (2015) accomplished, and
submitted to the SEC, by
GMA Holdings, Inc. (parent
company of GMA Network,
Inc.), it declared that it:
“…does not engage in any

other business or purpose
except in relation to the issu-
ance of the PDRs relating to
GMA7 common shares for as
long as the PDRs are out-
standing. GMA has under-
taken to perform the obliga-
tions under the PDRs and
the acquisition and holding
of the common shares under-
lying the PDRs, which in-
cludes maintaining the list-
ing with the PSE, and main-
taining its status as a Philip-
pine person for so long as
the Philippine law prohibits
ownership of common
shares by non-Philippine
persons.
The accounting and adminis-

trative functions of GMA are
undertaken by GMA7, a
company under common
control.”
Globe Telecom Globe Telecom, Inc.; In its SEC Form 17-A for the
Holdings, Inc. Telecommunications period ending on 31 Decem-
ber 2002, Globe Telecom
Holdings, Inc., made the fol-
46


lowing declaration relative
to the issuance of PDRs:177
“GTHI has not conducted

(and has undertaken not to
conduct) any business other
than in connection with the
issuance of PDRs, the per-
formance of its obligations
under the PDRs and the ac-
quisition and holding of
shares of Globe Telecom, in
respect of which PDRs are
issued. GTHI does not own
any significant assets and,
except for the shares, is not
expected to own any signifi-
cant assets after the Globe
Telecom Offering.”
Lopez Holdings Sky Cable Corpora- Based on publicly available
Corporation tion; Telecommuni- records found in the Philip-
cations pine Stock Exchange Edge
Website, Lopez Holding
ABS-CBN Corpora- Corporation declared, in its
tion; Mass Media SEC Form 17-A (2016), with
respect to its investments in
PDRs: 178
“Lopez Philippine Deposi-

tary Receipts (PDRs). As at
December 31, 2016 and 2015,
total PDRs issued by Lopez
(“Lopez PDRs”), amounted
to P=5,745 million with un-
derlying 480,933,747 ABS-
CBN common shares and
987,130,246 ABS-CBN pre-

177 See SEC Form 17-A of Globe Telecom Holdings, Inc., for the period ending 31 December
2002, available at < https://ireport.sec.gov.ph/iview/main.jsp> last accessed on 26 January 2018
at 12:14 p.m.
178 See SEC Form 17-A of Lopez Holdings Corporation, available at < http://lopez-
holdings.ph/component/docman/doc_download/1844-cr02722-lpz-2016-annual-
report?Itemid=%20>, last accessed on 26 January 2018 at 12:16 p.m.
47


ferred shares. The key fea-
tures of the Lopez PDRs fol-
low:
xxx
Upon exercise of the PDRs
and payment of the exercise
price, the ownership of the
underlying ABS-CBN shares
on each PDR shall be trans-
ferred to the Parent Compa-
ny. Pending the exercise of
the PDRs, the ownership on
the underlying ABS-CBN
shares on each PDR shall be
registered under the name of
Lopez. Thus, the Parent
Company shall have no vot-
ing rights with respect to the
underlying ABS-CBN shares
until it actually exercise the
PDRs.”
Fourth. The SEC En Banc had the opportunity to review the

NBM PDR and found nothing illegal or irregular in its terms. The
SEC En Banc also ruled that the NBM PDR was valid because,
according to it, “only the ON PDR contains a repugnant provision.
Therefore, the issue is limited to the unique terms found only in the
ON PDRs.”179
As the SEC En Banc did not find anything illegal or irregular in

the NBM PDR which was issued by RHC ahead of the OMIDYAR
PDR, and under the same general conditions, then, there is no basis
for the finding that RHC was set up for the purpose of its issuing the
OMIDYAR PDR intended to grant OMIDYAR control over
RAPPLER.
Moreover, it is illogical for RAPPLER to have given control to

OMIDYAR, and not to NBM, when the latter holds more PDRs than
the former. NBM holds 12,028,718 PDRs while OMIDYAR holds only
7,217,257 PDRs.180

180 Id., p. 3.
48

Fifth. The SEC En Banc insinuates a wrong in the filing by RHC

of SEC Form 10-1 (Notice of/Application for Confirmation of Exempt
transactions) for the OMIDYAR PDR.”181
The reason why RHC did not submit the OMIDYAR PDR for
the SEC’s review is because it is an isolated transaction exempt from
registration under Subsection 8.1 of the Securities Regulation Code
(“SRC”).182 Section 10.1 (k) of the SRC provides that registration of a
“sale of securities by an issuer to fewer than twenty (20) persons in
the Philippines during any twelve month period” is exempt from
registration. Since RHC had only issued three (3) PDRs within a
period of one (1) year, the OMIDYAR PDR being one of these, the
law does not require these PDRs to be registered.
Nevertheless, RHC notified the SEC of the existence of the

PDRs it had issued not only through SEC Form 10-1 but also through
the submission of its Consolidated Financial Statements for 2015 and
2016, which the SEC En Banc (adopting the findings of the Special
Panel in toto) took note of.183 RHC filed this form because, within a
given period of six (6) months in a twelve (12) month period it only
issued three (3) PDRs – 2 to NBM and 1 to OMIDYAR. Also, when
the Company Registration and Monitoring Department of the SEC
required it, RHC readily submitted the OMIDYAR PDR to that
department on 28 February 2017.184
Clearly, there was no intention whatsoever to conceal the

OMIDYAR PDR from the SEC.
Sixth. Assuming, without admitting, that the terms of the

OMIDYAR PDR, in particular Clause 12.2.2, are illegal, it was
certainly not the intention of RAPPLER and RHC to violate any law.
As the PDRs are more sophisticated securities, RAPPLER and RHC
sought counsel’s advice and guidance in crafting its terms and relied
upon this advice and guidance in issuing them. This shows good
faith on the part of RAPPLER and RHC.
Moreover, there is presently no specific law or case dealing

with the validity of the term PDRs. As such, Article 526 of the Civil

181 Id.
182 MORALES, RAFAEL, THE PHILIPPINE SECURITIES REGULATION CODE
(ANNOTATED) 87 (2005).
183 Id., p. 2.
49

Code provides, in part, that a “[m]istake upon a doubtful or difficult

question of law may be the basis of good faith.”185
Seventh. As previously discussed, upon the request of

RAPPLER and RHC, OMIDYAR issued the 11 December 2017 Waiver
of its rights under Clause 12.2.2 of the OMIDYAR PDR. The Waiver
was issued before OMIDYAR exercised this clause. The actions of
the parties with respect to this Waiver, indubitably show their good
faith in trying to remedy a perceived error.
Verily, there is no basis for the SEC En Banc to pierce the veil of
corporate fiction of RAPPLER and RHC and sanction both with
revocation of their certificates of incorporation.
VI
THE REVOCATION OF THE CERTIFICATES OF

INCORPORATION OF RAPPLER AND RHC IS A
PENALTY THAT IS TOO SEVERE AND GROSSLY
DISPROPORTIONATE TO THE SUPPOSED WRONG
COMMITTED. AS SUCH, IT VIOLATES
SUBSTANTIVE DUE PROCESS. GIVEN THAT: (A)
THE SUPPOSED WRONG COMMITTED BY
RAPPLER AND RHC DID NOT RESULT IN INJURY
TO THE PUBLIC, (B) IT DEPRIVES OTHER
INVESTORS OF RHC LIKE NMB AND OTHER
STOCKHOLDERS OF RAPPLER THE RIGHT TO
RETURNS ON THEIR INVESTMENT; (C) RAPPLER
PROVIDES A PUBLIC SERVICE, AND (D) RAPPLER’S
BUSINESS IS AN EXAMPLE OF HOW THE FILIPINO
INTELLECT AND TALENT MAY BE AT PAR OR
EVEN GREATER THAN THOSE IN DEVELOPED
COUNTRIES, IT IS BUT JUST TO REVERSE AND SET
ASIDE THE ASSAILED DECISION.
The revocation of a corporation’s certificate of registration is its

death sentence.
“…[T]he dissolution of a corporation implies the

termination of its existence and its utter extinction and
obliteration as an entity or body in favor of which
obligations exist or accrue or upon which liabilities may
be imposed (13 Am. Jur., Sec. 1285). It is that condition of
law and fact which ends the capacity of the body

50

corporate to act as such and necessitates a liquidation and

extinguishment of all legal relations existing in respect of
the corporate enterprise.”186
As the corporation can no longer go about its business, it will

need to put its employees out on the streets, terminate existing
contracts and lose the ability to generate income. Beyond this, the
closure of business may have an impact on society if the business
involves some form of public service or enhances the economy. The
injury brought about by the revocation of a corporation’s certificate
of registration on its stakeholders, and possibly on the public, is
irreparable.
Consequently, the Supreme Court views the involuntary

dissolution of corporations with disfavor, and has in most cases,
given erring corporations the opportunity to remedy or correct their
violations.
In the case of the Government v. Philippine Sugar Estates

Development Co.,187 the Supreme Court refused to impose the
penalty of revocation after a finding that the violation committed by
the corporation did not amount to a surrender or forfeiture of its
franchise, thus:
“When it is found and adjudged that a corporation has

offended in any matter or manner which does not by law
work as a surrender or forfeiture, or has misused a
franchise or exercised a power not conferred by law, but
not of such a character as to work a surrender or
forfeiture of its franchise, judgment shall be rendered
that it be outset from the continuance of such offense or
the exercise of such power.”188
Similarly, the case of the Government v. El Hogar Filipino,189

the Supreme Court refused to revoke El Hogar’s registration despite
several violations of its franchise. The Court explained that “[n]o
corporate enterprise of any moment can be conducted perpetually
without some trivial misdemeanour against corporate law being
committed by someone or other of its numerous employees…”

186 III LOPEZ, THE CORPORATION CODE OF THE PHILIPPINES ANNOTATED 1036
(1994).
187 38 Phil. 15(1918).
189 50 Phil. 399 (1927).
51

Further, it is the declared policy of the State to establish a

socially, free market that regulates itself, to encourage the widest
participation of ownership in enterprise, to enhance the
democratization of wealth and to promote the development of the
capital market.190 Thus, the SEC is mandated to encourage
investment and active public participation in the affairs of private
corporations and enterprise.191
In this regard, Section 17 of the Corporation Code mandates the

SEC to allow the correction of objectionable provisions in their own
articles of incorporation, thus:
“Sec. 17. Grounds when articles of incorporation or

amendment may be rejected or disapproved. - The
Securities and Exchange Commission may reject the
articles of incorporation or disapprove any amendment
thereto if the same is not in compliance with the
requirements of this Code: Provided, That the
Commission shall give the incorporators a reasonable
time within which to correct or modify the
objectionable portions of the articles or
amendment…” 192
Consistent with this pro-business mandate, the SEC has, on

many occasions, allowed erring corporations to correct or remedy a
perceived wrongful action in lieu of revoking their certificates of
incorporation.
Instead of immediately revoking the certificates of

incorporation of RHC and RAPPLER, the SEC should have merely
annulled Clause 12.2.2 of the OMIDYAR PDR. This is especially so
considering that the SEC En Banc found nothing irregular in the NBM
PDR. As the NBM PDR can exist even without a similar provision as
Clause 12.2.2 of the OMIDYAR PDR, then, it is possible for such PDR,
which has similar terms as the NBM PDR, to exist independent of its
Clause 12.2.2.
In the Matter of the Petition for Involuntary Dissolution of

Starconnection, Inc.,193 the SEC refused to impose the penalty of
revocation for the failure of the corporation’s Board of Directors to

190 Rep. Act No. 8799 (2000), Sec. 2.
191 Pres. Decree No. 902-A (1976), Whereas Clause.
192 B.P. 68 (1980), Sec. 17.
193 SEC Case No. 06-09-271, 7 January 2010.
52

call and hold director’s meetings in accordance with the Corporation

Code. The SEC ruled, as follows:
“The drastic remedy of dissolving a corporation must be

exercised with great caution and not in doubtful cases.
This holds true in case where an individual’s interest and
not of the public is involved. In any event, all remedies
must be exhausted before imposing the harsh penalty of
dissolution. Also, the corporation must be given an
opportunity to correct any misdeed or comply with the
law since a dissolution will not be decreed unless no
other adequate remedy is available.”194
Also, in the case of Marbel Institute of Technical College, Inc. v.

Lubaton,195 the SEC refused to revoke Marbel Institute of Technical
College, Inc.’s certificate of incorporation on the ground that its name
is similar to that of another college stating that “the Commission has
consistently ruled that not every casual infraction would be a valid
ground for revocation.”196 While the SEC agreed that the name is
confusingly familiar to another existing corporation, instead of
imposing revocation, it permitted the college to avail of the remedy
for a change of name.
In the case of Heirs of Gamboa v. Teves,197 public utilities that

fail to comply with the nationality requirement under Section 11,
Article XII of the Constitution and the FIA were allowed to cure
their deficiencies prior to the start of the administrative case or
investigation.198 Notably, the sanctions are prospectively applied as,
following this decision, the SEC issued SEC Memorandum Circular
No. 8 Series of 2013 entitled Guidelines on Compliance with the
Filipino-Foreign Ownership Requirements Prescribed in the
Constitution and/or Existing Laws by Corporations Engaged in
Nationalized and Partly Nationalized Activities (“Guidelines”). The
Guidelines expressed the requirement that all covered corporations
shall, at all times, observe the constitutional or statutory ownership
requirement. Failure to comply with the Guidelines shall subject the
juridical entity, any person, and the corporate officer responsible, to
sanctions provided in Section 14 of the Foreign Investment Act of
1991 (“FIA”) ranging from fines to forfeiture of all benefits granted
under the FIA. Notably, all non-compliant and existing corporations

195 SEC Case No. 05-09-0336, 18 October 2016.
196 Id., citing Ramos vs. Ramos, et al., SEC Case No. 09-05-69.
198 See Halili v. Court of Appeals, 350 Phil. 906 (1990).; United Church Board for World
Ministries v. Sebastian, G.R. No. L-34672, 30 March 1988, 159 SCRA 446.
53

were given a period of one (1) year from the effectivity of the
Guidelines to comply with the ownership requirement. This period
was extendible in proper cases.
Assuming, without admitting, that RAPPLER and RHC

violated Section 11 (1) of Article XVI of the Constitution, they should
not have been meted the harsh penalty of revocation of their
certificates of registration for the following reasons:
First. RAPPLER is a Filipino intellectual creation - a start-

up tech company. RAPPLER’s business is unique as it combines
technology and information dissemination from various sectors of
society to generate social awareness and spur positive action.
RAPPLER has gained the attention and/or recognition of the global
tech industry and relevant impact investors because it is a Filipino
company successfully operating, and making an impact on a huge
part of the population, in an emerging market and its success has
surpassed the achievements of other tech and information companies
in the West/developed markets. From its inception until today,
RAPPLER remains to be Filipino as its success and development,
now and always, has been dependent on the Filipinos who created it.
More importantly, RAPPLER and RHC did not violate, and

could not have violated, any of the laws mentioned in the Order
because both companies are owned and managed by Filipinos or
corporations wholly owned and managed by Filipinos.
As RAPPLER begins to expand its reach outside of the

Philippines, it appeals to this Honorable Court to reverse and set
aside the Assailed Decision, which is tantamount to our own
government destroying the work and achievements of Filipinos and
preventing them from soaring to greater heights.
Second. RAPPLER provides a public service of delivering

credible news to the general public. Its social media and online
facilities have also allowed it to be a source of information during
times of national disaster and calamity. RAPPLER has proven itself
to be beneficial to society, and for this alone, it should be kept alive.
Third. If not set aside, irreparable damages to their

stakeholders, and the public at large, would result from the Assailed
Decision.
RAPPLER and RHC have numerous employees who rely on

them for a steady income. The revocation of the certificate of
54

incorporation of RAPPLER, if not set aside, will force RAPPLER and

RHC to terminate its employees and put them out on the streets.
RAPPLER and RHC will not be able to comply with obligations

to their suppliers as well as other investors like NBM and creditors
who are innocent parties.
At this point, RAPPLER and RHC would once again like to

point out that the SEC En Banc did not find anything questionable
about the NBM PDR, and with respect to the OMIDYAR PDR, only
Clause 12.2.2 thereof was questionable. Given that the exercise of this
Clause was waived by OMIDYAR, the wrong supposedly committed
was corrected. There is therefore no reason to disallow RAPPLER
and RHC from continuing their businesses for the sake of, among
others, continuing delivering credible news to the public, servicing
contracts of innocent parties like NBM, and keeping its employees.
PDRs have been issued by parent holding companies of several

companies which are movers in their own industries, i.e., ABS-CBN,
GMA7, SkyCable and Globe. These PDRs, which have been approved
by the SEC and existing for years (some for almost two (2) decades),
are a valuable source of funding to finance and boost their
operations. The success of these companies has brought about
growth in their industries and boosted our economy.
Through the Assailed Decision, the SEC En Banc has put to

question the very structure under which all PDRs, including those of
GMA Holdings, Inc. and ABS-CBN Holdings, Inc., have been issued.
If the Assailed Decision is not overturned, it will set a dangerous
precedent, which would allow the SEC to easily revoke the
certificates of registration of other PDR issuers and their subsidiaries
and void their PDRs. If this happens, their industries will collapse
and our economy would be severely affected.
Fourth. Assuming, without admitting, that Clause 12.2.2 of the

OMIDYAR PDR violates Section 11 (1) of Article XVI of the
Constitution, leniency should be accorded to RAPPLER and RHC, for
the following reasons:
a. OMIDYAR never exercised its rights under Clause 12.2.2

of the OMIDYAR PDR. Further, RAPPLER and RHC acted in
good faith and have taken action to remedy the perceived
wrong by requesting OMIDYAR to waive its right under this
Clause. OMIDYAR executed a Waiver to this effect.
55

b. There are no laws or jurisprudence regulating the

issuance of PDRs, and for this reason, mistakes upon a doubtful
or difficult question of law committed by RAPPLER and RHC
with respect to the OMIDYAR PDR should be viewed as done
with good faith199 especially since they sought the advice and
guidance of counsel in preparing the OMIDYAR PDR.
c. State policy and jurisprudence support the position that

encourages corporations to continue with their business and be
given the opportunity to correct supposed wrongs they have
committed. To treat RAPPLER and RHC differently on this
matter denies them equal protection of the laws.
The Assailed Decision revoking the certificates of incorporation

of RAPPLER and RHC should, therefore, be reversed and set aside.
VII
THE ASSAILED DECISION IMPERILS THE

EXISTENCE OF CORPORATIONS WITH
CONTRACTUAL CLAUSES SIMILAR TO CLAUSE
12.2.2 OF THE OMIDYAR PDR. IT HAS A CHILLING
EFFECT ON BUSINESS AND STANDS TO HAVE
DISASTROUS CONSEQUENCES ON MINORITY
SHAREHOLDERS’ RIGHTS AND THE COUNTRY’S
EFFORTS TO ATTRACT MORE FOREIGN
IVESTMENTS.
Clause 12.2.2 of the OMIDYAR PDR is not an unusual

contractual clause as similar negative covenants maybe found in
several business agreements.
As earlier discussed the PDRs of ABS-CBN Holdings

Corporation and GMA Holdings, Inc., contain substantially similar, if
not the same, provisions as that in the OMIDYAR PDR. Moreover,
similar, and even more stringent, negative covenants as that of
Clause 12.2.2 of the OMIDYAR PDR, may be found in articles of
incorporation of companies subject to nationality restrictions earlier
approved by the SEC, joint venture agreements, shareholder
agreements and loan agreements. As a whole, these business
agreements involve billions of pesos in foreign investments in favor
of Filipino companies.

199 CIVIL CODE, Art. 526 (3).
56

By reason of the harsh and rushed Assailed Decision of the SEC

En Banc revoking the certificates of registrations of RAPPLER and
RHC simply because of the existence of Clause 12.2.2 in the
OMIDYAR PDR, all other transactions containing a similar covenant
and where the value of the investments is in the billions are in danger
of being suddenly struck down by the SEC En Banc. Worse, the SEC
En Banc demonstrated to the entire Philippine nation, foreign
investors and the entire world that it can hastily, arbitrarily and
summarily nullify an investment.
It cannot be over emphasized that the Assailed Decision, sets a

dangerous precedent that businesses may be shut down after
corporations are adjudged to have a void clause in one of their
contracts.
Indeed, the Assailed Decision is an overkill that puts the SEC in
a bind. In case disgruntled persons ask the SEC to take appropriate
actions against the corporation which entered into similar business
agreements, what will our SEC and courts of law do? For instance,
what will happen if the PDRs of ABS CBN Holdings, Inc. and GMA
Holdings, Inc., which are listed and publicly traded in the stock
market, are challenged? Indeed, if the Assailed Decision is upheld, it
will have disastrous effect on investors’ rights and our country’s
efforts to attract more investments into the country.
The SEC En Banc’s hasty revocation of the certificates of

registration of RAPPLER and RHC alarms and spooks investors from
investing their money in Filipino companies. The Assailed Decision
creates a real threat on investments - a chilling effect. It will not only
substantially bring down the foreign investment market in the
Philippines but will also create a domino negative impact on the
Philippine economy effectively slowing its progress and worse,
stifling the Philippine economy.
The irreparable damage and injury to the Filipino people and

the Philippine economy warrant this Honorable Court’s reversal of
the SEC En Banc’s Assailed Decision. The broader interest of the
country demands no less.
VIII
THE EXISTENCE OF A CLAUSE IN A CONTRACT

THAT IS SUBSEQUENTLY ADJUDGED TO BE VOID
IS NOT AMONG THE GROUNDS PROVIDED BY
LAW FOR REVOCATION OF A CERTIFICATE OF
INCORPORATION.
57

The SEC En Banc exceeded its power when it imposed the penalty
of revocation of the certificates of incorporation of RAPPLER and RHC
on the ground that Clause 12.2.2 of the OMIDYAR PDR was found to
be unconstitutional and void.
Assuming, without admitting, that Clause 12.2.2 of the

OMIDYAR PDR is void for being unconstitutional, this is not a ground
to revoke the certificates of incorporation of RAPPLER and RHC.
The SEC En Banc may only impose revocation as an administrative

sanction in the instances where it is permitted by law. This is clear
from Section 121 of the Corporation Code, which provides that “[a]
corporation may be dissolved by the Securities and Exchange
Commission upon filing of a verified complaint and after proper
notice and hearing on the grounds provided by existing laws, rules
and regulations.”200 Section 6 of Presidential Decree No. 902-A, as
amended, likewise reiterates this. That the SEC may only revoke the
certificate of registration of a corporation “on the grounds provided
by existing laws, rules and regulations” is again reiterated in Section
5.1 (m) of the SRC.
There exists no law that grants the SEC the power to revoke the
certificate of incorporation of a company for the reason that a clause
found in a contract it had entered into is void for being
unconstitutional. To argue otherwise would expose countless
corporation to possible revocation of their certificates of
incorporation if any of their contracts happen to contain a void
provision.
As the SEC En Banc is aware that it cannot revoke the

certificates of incorporation of RAPPLER and RHC on the mere
existence of Clause 12.2.2 in the OMIDYAR PDR, the SEC En Banc
declared the transaction between RHC and OMIDYAR a fraudulent
in order to claim that RAPPLER and RHC violated Section 26 of the
SRC, and therefore, allow for revocation on the ground of violation of
this law. Section 26 of the SRC provides, as follows:
“Section 26. Fraudulent Transactions. – It shall be

unlawful for any person, directly or indirectly, in
connection with the purchase or sale of any securities to:
26.1. Employ any device, scheme, or artifice to defraud;

200 Underline supplied.
58

26.2. Obtain money or property by means of any untrue

statement of a material fact of any omission to state a
material fact necessary in order to make the statements
made, in the light of the circumstances under which they
were made, not misleading; or
26.3. Engage in any act, transaction, practice or course of
business which operates or would operate as a fraud or
deceit upon any person.”201
No fraud may have been committed in this case because neither

party to the OMIDYAR PDR was duped into entering into such
transaction. The public was likewise not defrauded as it is not
affected by OMIDYAR PDR.
Article 1338 of the Civil Code states that “[t]here is fraud when
through insidious words or machinations of one of the contracting
parties, the other is induced to enter into a contract which, without
them, he would not have agreed to.” Thus, for fraud to exist, one of
the parties should be swindled by the other.
The fraud contemplated by Section 26 of the SRC is a situation

where either the seller or the buyer of a security is swindled by the
other. This is confirmed by the Supreme Court in As declared in
Supreme Court in the case of Securities and Exchange Commission
v. Interport Resources Corporation, et.al.,202 which states that
“…Section 26 of the Securities Regulations Code even widens the
coverage of punishable acts, which intend to defraud public
investors through various devices, misinformation and
omissions.”203
Parenthetically, Section 71.2 of the SRC does not declare a

contract void in toto. It is on void “as regards the rights of the person”
who caused the violation. Moreover, there is nothing in this
provision that even implies that the certificates of incorporation of
such party, much less its counter-party, should be revoked.
In this case, neither RHC, as issuer, nor OMIDYAR, as PDR

Holder, were the fraudster or victim vis-à-vis each other.
Consequently, the SEC En Banc erred in finding that they violated
Section 26 of the SRC. In follows, therefore, that the SEC En Banc had
no basis to void the OMIDYAR PDR pursuant to Section 71 of the
SRC and revoke the certificates of incorporation of RAPPLER and
RHC.

201 Rep. Act. No. 8799 (2000), Sec. 26.
203 Emphasis and underscoring supplied.
59

IX
GIVEN THE SERIOUS PROCEDURAL AND

SUBSTANTIVE IRREGULARITIES IN THE
QUESTIONED DECISION, THERE CAN BE NO
OTHER CONCLUSION BUT THAT ITS REAL
PURPOSE IS TO SILENCE RAPPLER AND MUZZLE
FREE EXPRESSION.
It is difficult to ignore the context in which the SEC En Banc

investigated RAPPLER.
First. The SEC investigation was triggered by the Solicitor

General as “counsel for the Republic of the Philippines.”204 Upon
receipt of the Solicitor General’s letter, the SEC commenced an
informal investigation of RAPPLER and RHC.205
Second. The SEC created a Special Panel to investigate

RAPPLER and RHC.206 However, RAPPLER and RHC were kept in
the dark about the creation of the Special Panel. Rappler and RHC
were not given a copy of SEC Resolution 437 creating the Special
Panel. Resolution 437, to their knowledge, was not published and is
not publicly available.
Third. President Duterte publicly accused RAPPLER of being

fully owned by Americans in his SONA.207 A mere one week after the

204 On 14 December 2016, Solicitor General Jose Calida wrote SEC Chair Teresita Herbosa
requesting an investigation of RAPPLER and RHC “for any possible contravention of the strict
requirements of the Constitution.” The letter stated that RAPPLER “has been on the receiving
end of funds from foreign investors” and stressed that as “counsel for the Republic of the
Philippines, it is our office’s sworn duty to uphold the Constitution and to defend it from any
entity which seeks to subvert its mandates.” The letter ended with the Solicitor General
expressing “hope for your kind cooperation on the matter.”204 The letter was received by the SEC
on 22 December 2016.
205 The SEC’s CRMD issued a “Notice of Conference” directing RAPPLER and RHC to
appear at a conference on February 28, 2017. It was at this conference that RAPPLER and RHC
furnished the CRMD with a copy of the OMIDYAR PDRs.
206 SEC Resolution No. 437, series of 2017, cited on page 1 of the questioned Decision. On 8
July 2017, the SEC En Banc created a Special Panel “for purposes of conducting a formal, in-depth
examination of Rappler, Inc. and its parent, Rappler Holdings Corporation, as to possible
violations of nationality restrictions on ownership and/or control of Mass Media entities, in
relation to the Anti-Dummy Law, as well as possible violations of the Corporation Code, the
Securities Regulation Code, and other laws within the Commission’s mandate.” A copy of SEC
Resolution No. 437, series of 2017 is attached hereto Annex “Q” and made an integral part hereof.
207 In his SONA, President Duterte stated:
“Eh mayor ako, I can look at your corporate earnings, your sister company, I can pierce
the corporate identity, kayo rin pala. Ang hilig ‘nyo, mga newspaper. When you are not
supposed to, ano, maging newspaper ka, you are supposed to be 100-percent Filipino. And yet
when you start to pierce their identity, it is pala fully owned by Americans. Gano’n ang nangyari.
It’s a matter of piercing the... So wala masyado akong... ABS, o Rappler, kayo ba ‘yan? Have you
tried to pierce your identity and it will lead you to America. Do you know that? And yet the
60

SONA, the Special Panel issued a Show Cause Order. The SEC’s
Special Panel acted precipitately against RAPPLER and RHC after the
President‘s SONA.208
Fourth. The Show Cause Order shifts the burden to RAPPLER

and RHC and foreshadows the SEC En Banc Decision when it
concluded that the OMIDYAR PDRs require the “…approval of the
ON PRD Holders on corporate matters…”209. In the Show Cause
Order, RAPPLER and RHC had the burden to prove that they should
not be liable for violating the Constitution. In other words, it already
contained a prejudgment that RAPPLER and RHC had in fact
violated the Constitution.
Fifth. Nonetheless, RAPPLER and RHC cooperated with the

Special Panel. In line with the Panel’s directives, RAPPLER and RHC
submitted a Verified Explanation and Verified Compliance.
RAPPLER and RHC also submitted a Verified Supplemental
Compliance which contained the 11 December 2017 Waiver issued by
OMIDYAR. Since the case was investigated by the Special Panel, and
was docketed as SP Case No. 08-17-001, RAPPLER and RHC
expected that the Special Panel would render a decision, and that
RAPPLER would be given the opportunity to seek reconsideration
and to appeal it to the SEC En Banc in the event the decision would
go against them.
The Special Panel, however, did not render a decision. Instead,

it made findings which it submitted to the SEC En Banc in an
Investigation Report without providing RAPPLER with a copy, or
giving RAPPLER the opportunity to contest the findings or seek their
reconsideration. These findings were adopted in toto by the SEC En
Banc and became the basis for the Assailed Decision in question.
Thus, RAPPLER and RHC was not informed of Special Panel’s

findings; denied the opportunity to contest the findings or seek their
reconsideration.

Constitution requires you to be 100% media, Filipino. Rappler try to pierce the identity, and you
will end up American ownership.”
Available at <https://www.rappler.com/nation/176565-sona-2017-duterte-rappler-
ownership>, last accessed on 26 January 2018 at 9:00 a.m.
208 On 1 August 2017, a week after the SONA, the Special Panel issued a Show Cause Order
directing RAPPLER and RHC “to show cause…as to why you should not be held liable for
violation of the Foreign Equity Restrictions enshrined in Article XVI, Section 11(1) of Constitution
[sic] (in relation to Article II, Section 19 thereof)….”
209 Show Cause Order, p. 2.
61

Sixth. The procedure followed by the SEC En Banc and the

Special Panel radically departed from the SEC’s very own rules and
is highly irregular.
The sham nature of the SEC investigation—the serious

irregularities, prejudgment and haste with which the SEC conducted
and resolved the case—coupled with the excessively harsh penalties
imposed, lead to only one conclusion: that the SEC’s real purpose in
going after RAPPLER and RHC is to silence them and muzzle
freedom of speech.
Prior restraint.
The revocation of RAPPLER and RHC’s certificates of

incorporation has the same effect as the padlocking and closure of a
press organization. As the Supreme Court held in Burgos v. Chief of
Staff:210
“Such closure is in the nature of previous restraint

or censorship abhorrent to the freedom of the press
guaranteed under the fundamental law, and constitutes a
virtual denial of petitioners’ freedom to express
themselves…This state of being is patently anathematic to
a democratic framework where a free, alert and even
militant press is essential for the political enlightenment
and growth of the citizenry.”
Moreover, in the case of Eastern Broadcasting Corporation

(Dyre) v. Dans,211 involving a petition filed by the Radio Station
DYRE, which was summarily closed on grounds of national security,
issued the following guidelines, among others:
“(3) All forms of media, whether print or

broadcast, are entitled to the broad protection of the
freedom of speech and expression clause. The test for
limitations on freedom of expression continues to be the
clear and present danger rule — that words are used in
such circumstances and are of such a nature as to create a
clear and present danger that they will bring about the
substantive evils that the lawmaker has a right to prevent.
xxx

210 G.R. No. L-64261, 26 December 1984, 133 SCRA 800.
211 G.R. No. L- 59329, 19 July 1985, 137 SCRA 628.
62

(6) The freedom to comment on public affairs is

essential to the vitality of a representative democracy. In
the 1918 case of United States v. Bustos (37 Phil. 731) this
Court was already stressing that.
The interest of society and the maintenance of good

government demand a full discussion of public affairs.
Complete liberty to comment on the conduct of public
men is a scalpel in the case of free speech. The sharp
incision of its probe relieves the abscesses of
officialdom. Men in public life may suffer under a
hostile and an unjust accusation; the wound can be
assuaged with the balm of a clear conscience. A public
officer must not be too thin-skinned with reference to
comment upon his official acts. Only thus can the
intelligence and dignity of the individual be exalted.”212
RAPPLER is being made to pay

the ultimate price for exercising
the freedom of the press.
The SEC En Banc’s revocation of RAPPLER and RHC’s

certificates of incorporation are akin to that of the “officious
functionary of the repressive government who tells the citizen that he
may speak only if allowed to do so, and no more and no less than
what he is permitted to say on pain of punishment should he be so
rash as to disobey.”213 RAPPLER has not hesitated to exercise its
freedom of expression despite the warnings, insults, and epithets that
have been hurled at it by the President and his ardent supporters. Its
closure is the ultimate price to pay for exercising freedoms
guaranteed by the Constitution.
It is worthy to note that notwithstanding the views of

RAPPLER in relation to the current administration and political
situation in the Philippines, it absolutely remains to be entitled to its
Constitutional right to freedom of the press. Notably, in the case of
David v. Macapagal Arroyo,214 in upholding the Constitutional right
to freedom of the press of a newspaper entity whose premises were
searched for materials for publication, the Court expressed that the
seizure of these materials clearly amount to censorship and that the

213 David v. Arroyo, G.R. No. 171396, 3 May 2006 citing Dissenting Opinion, J.
Cruz, National Press Club v. Commission on Elections, G.R. Nos. 102653, 102925 & 102983, 5
March 1992, 207 SCRA 1.
214 G.R. No. 171409, 3 May 2009, 489 SCRA 160.
63

newspaper entity was subjected to these arbitrary intrusions because

of its anti-government sentiments. The Supreme Court further opined
that:
“It is that officious functionary of the repressive

government who tells the citizen that he may speak only
if allowed to do so, and no more and no less than what he
is permitted to say on pain of punishment should he be so
rash as to disobey. Undoubtedly, the The Daily Tribune
was subjected to these arbitrary intrusions because of its
anti-government sentiments. This Court cannot tolerate
the blatant disregard of a constitutional right even if it
involves the most defiant of our citizens. Freedom to
comment on public affairs is essential to the vitality of a
representative democracy. It is the duty of the courts to
be watchful for the constitutional rights of the citizen,
and against any stealthy encroachments thereon. The
motto should always be obsta principiis”.
The Court reinforced the protection of press freedom in the case

of Newsounds Broadcasting Network Inc. v. Dy,215 which involves a
radio station whose former assistant station manager became the
political opponent and rival of the City’s current governor. The radio
station was ordered to be closed down by the City due to its alleged
failure to secure the necessary mayor’s permit. The radio station was
prevented from securing a business permit by reason of the City’s
own deliberate failure and worse, refusal, to issue a business permit
in favor of the radio station. In upholding the radio station’s press
freedom and right to broadcast, the Supreme Court expressed that:
“The partisan component of this dispute will no doubt

sway many observers towards one opinion or the other,
but not us. The comfort offered by the constitutional
shelter of free expression is neutral as to personality,
affinity, ideology and popularity. The judges tasked to
enforce constitutional order are expected to rule
accordingly from the comfort of that neutral shelter.
Still, it cannot be denied that our Constitution has a

systemic bias towards free speech. The absolutist tenor of
Section 4, Article III testifies to that fact. The individual
discomforts to particular people or enterprises
engendered by the exercise of the right, for which at
times remedies may be due, do not diminish the

215 G.R. Nos. 170270 and 179411, 2 April 2009, 583 SCRA 333. Emphasis supplied.
64

indispensable nature of free expression to the

democratic way of life.”216
Judicial intervention is necessary

to prevent a blatant exercise of
prior restraint.
As the Supreme Court held in Chavez v. Gonzales:217
“[F]reedom of the press is crucial and so

inextricably woven into the right to free speech and free
expression, that any attempt to restrict it must be met
with an examination so critical that only a danger that is
clear and present would be allowed to curtail it.
Indeed, we have not wavered in the duty to uphold

this cherished freedom…When on its face, it is clear that a
governmental act is nothing more than a naked means to
prevent the free exercise of speech, it must be nullified.”
7. RESERVATION TO FILE AN
URGENT APPLICATION FOR THE ISSUANCE OF
EX PARTE TEMPORARY RESTRAINING ORDER AND/OR
WRIT OF PRELIMINARY INJUNCTION
7.1. Without prejudice to their right to file an Urgent

Application for Issuance of Ex Parte Teporary Restraining Order
(“TRO”) and/or Writ of Preliminary Injunction in case it becomes
necessary, the RAPPLER and RHC are not applying for such relief at
this time as they are relying, in good faith, on the following official
statements from the SEC En Banc given on 15 January 2018 by Atty.
Armando Pan Jr., the Commission Secretary and Spokesperson of the
SEC who was interviewed in the ANC morning program, Market
Edge:
“Atty. Armando Pan, Jr.

Commission Secretary and Spokesperson
of the Securities and Exchange Commission
ANC Interview

217 G.R. No. 168338, 15 February 2008, 545 SCRA 441.
65

“Reporter: Let’s go back to the SEC Order closing down

Rappler. We are now joined on the line by Armando Pan,
Commission Secretary of the SEC to help shed more light
on the issue. Good to have you, Armand. Thanks so much
for joining us.
“Rappler says that its gonna be business as usual even

after the SEC’s ruling. Is this possible even after the
revocation of its Certificate of Incorporation?Pan: You
know, the Commission En Banc Decision has not
become final and executory. The respondent, RAPPLER
Corporation can still go to the Court of Appeals within
fifteen (15) days to challenge the Decision of the SEC. In
the meantime, it can go on business as usual.” 218
7.2. In his interview with CNN Philippines on 17 January 2018,

Atty. Pan reiterated that the SEC “will wait for CA’s action
on Rappler’s appeal.” CNN Philippines reported that the
pronouncement by Atty. Pan had been confirmed by SEC
Chairperson Teresita J. Herbosa to in this wise:
“SEC Chair Teresita Herbosa confirmed this in a text

message, saying it “looks like” the regulator will wait for
the CA’s final decision on the petition before making its
move.”219
7.3. RAPPLER and RHC reserve all their rights, including

their right to apply for the issuance of a TRO and/or Writ of
Preliminary Injunction to prevent the SEC En Banc or any person or
agency from implementing the Assailed Decision.
PRAYER
WHEREFORE, Petitioners RAPPLER, INC. and RAPPLER

HOLDINGS CORPORATION respectfully pray that this Petition
for Review be given due course and upon due comment and/or
hesring, this Honorable Court render judgment ANNULING and
SETTING ASIDE the 11 January 2018 Decision of the SEC En Banc in
SEC En Banc SP Case No. 08-17-001.

218 Interview with Armando Pan Jr., Spokesperson, SEC, with ANC Market Edge, Manila (15
January 2018).
219 A copy of the news report is attached hereto as Annex “R” and made an integral part
hereof.
66

Taguig City for Manila, 26 January 2018.
ANGARA ABELLO CONCEPCION REGALA & CRUZ

Counsel for Petitioners Rappler, Inc.
and Rappler Holdings Corporation
22nd Floor ACCRALAW Tower
2nd Avenue corner 30th Street
Crescent Park West, Bonifacio Global City
1635 Taguig, Metro Manila
Telephone No. (632) 830-8000
Facsimile Nos. (632) 403-7007/403-7009
By:
FRANCISCO ED. LIM

PTR No. A-3695011; 01/05/18; Taguig City
IBP No. 023185; 01/05/18; Cagayan
Roll No. 31000
MCLE Exemption No. V-000494; 06/24/15
PATRICIA TYSMANS-CLEMENTE
IBP No. 023210; 01/05/18; RSM
Roll No. 44998
MCLE Compliance No. V-0018181; 04/14/16
JO BLANCA P.B. LABAY

IBP No. 023265; 01/05/18; Makati City
Roll No. 60444
MCLE Compliance No. V-0022253; 05/31/16
JO-ANNE GENEIVE DJ. PEREZ

Roll No. 69757
MCLE Compliance No. NA; (Admitted in June 2017)
NOEL CHRISTIAN O. LUCIANO

IBP No. 023268; 01/05/18; Makati
Roll No. 70075
MCLE Compliance No. NA; (Admitted in June 2017)
67

PAULA P. PLAZA
PTR No. A-3695197 01/05/18; Taguig City
Roll No: 68508
MCLE Compliance No. NA; (Admitted in May 2017)
Verification and Certification of Non-Forum Shopping page follows..

Copy furnished:
OFFICE OF THE SOLICITOR GENERAL

134 Amorsolo St., Legaspi Village,
1229 Makati City
SPECIAL HEARING PANEL

c/o Office of the General Counsel
of the Securities and Exchange Commission
Ground Floor, Secretariat Building,
PICC Complex, Roxas Boulevard,
Pasay City 1307
SECURITIES AND EXCHANGE COMMISSION EN BANC

c/o Office of the Commission Secretary
3rd Floor, Secretariat Building,
PICC Complex, Roxas Boulevard,
Pasay City 1307
EXPLANATION FOR SERVICE BY REGISTERED MAIL
In compliance with Section 11 of Rule 13 of the Rules of Court,

counsel respectfully manifests that the foregoing PETITION FOR
REVIEW is being served by registered mail because of time
constraints, as well as the limited number of office messengers
rendering personal service not practicable. Petitioners Rappler, Inc.
and Rappler Holdings Corporation, in view of the urgency of its
application for ex parte temporary restraining order and/or writ of
preliminary injunction, had to ensure personal filing of the Petition.
PAULA P. PLAZA
68

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REPUBLIC OF THE PHILIPPINES

RAPPLER, INC. AND

- versus - C.A.-G.R. No. 154292

PETITION FOR REVIEW

Petitioners RAPPLER, INC. (“RAPPLER”) and RAPPLER

“Government is powerful. When unlimited, it becomes

RAPPLER and RHC come before this Honorable Court to seek

a. OMIDYAR never exercised control over RAPPLER. The

b. Before the Assailed Decision was rendered, OMIDYAR

c. All the stockholders, directors and officers of RAPPLER

d. Prior to issuing the OMIDYAR PDR, RHC issued a PDR

e. The SEC En Banc approved PDRs (of parent holding

g. RAPPLER is not engaged in the business of “Mass

Through the Assailed Decision, the SEC En Banc (a) punished

RAPPLER and RHC plead with this Honorable Court to

1.1. The Petitioners are:

a. RAPPLER, a corporation duly organized and existing

b. RHC, a corporation duly organized and existing under

The Petitioners may be served with orders, resolutions, notices,

1.2. The Respondent is a Special Panel created pursuant to

2. NATURE AND TIMELINESS

2.1. This is a Petition for Review under Rule 43 of the Rules of

“(1) The Omidyar PDR is declared VOID pursuant

(2) REVOCATION OF CERTIFICATE OF

A certified true copy of the Assailed Decision is attached hereto

2.2. RAPPLER and RHC received a copy of the Assailed

2.3. Section 3-12 of the 2016 Rules of Procedure of the SEC

2.4. On 25 January 2018, RAPPLER and RHC filed an Entry of

2.5. On account of the urgent need to ensure that the Assailed

3. PAYMENT OF DOCKET AND OTHER LAWFUL FEES,

4. The facts are, as follows:

4.1. RAPPLER was incorporated on 25 July 2011 by Filipino

4.3. Only Filipino citizens have held the positions of Director

4.4. The Primary Purpose of RAPPLER, as stated in its

“xxx to design, develop, establish, market, sell, maintain,

other related services and packages provided it will not

4.5. RAPPLER’s business is unique, in that:

a. It provides a service that has not been previously offered

b. It is a start-up company.16 It was set up as a small

c. RAPPLER is a technology company that uses the internet

d. Among others, RAPPLER also uses its technology to help

degree emergency drill by live streaming videos and live-

In September 2013, RAPPLER set up Agos, an information

In January 2017, x.rappler.com became the official platform

e. RAPPLER fosters a culture that develops fiercely

f. RAPPLER’s goal is to strengthen civic engagement and

4.6. RAPPLER is not engaged in the business of Print Media33

On operating the business of RAPPLER globally

4.7. From its conceptualization, RAPPLER’s goal has been to

4.8. In 2013, RAPPLER’s stockholders and Directors

4.9. RAPPLER took its first step towards growing the

4.10. To successfully catapult the business of RAPPLER

4.11. The stockholders of RAPPLER had sufficient property,

4.13. RAPPLER sought advice on how to properly and legally49

4.14. With the idea of raising funds through PDRs, RAPPLER

About Rappler Holdings Corporation

4.15. RHC was incorporated on 14 December 2014 by Filipino

4.16. Since its incorporation, only Filipino citizens or

The relevant impact investors

A. North Base Media, Ltd.

4.17. North Base Media, Ltd. is not a foreign media entity.58 It

4.18. On 29 May 2015, RHC issued a PDR Instrument to North

4.19. Omidyar Network is not a foreign media entity.64 It is a

4.20. On 20 October 2015, RHC issued the OMIDYAR PDR to