PDRs: The innovative business tool that attacked media and chilled businesses

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'If I was the business owner and I think that if I do something that will anger the future administration, my business will be shut down, imagine the chilling effect on that,' says Francis Lim, Rappler's legal counsel. CourageON HoldTheLine

MANILA, Philippines – When former president Rodrigo Duterte launched his attacks on media, his government used Philippine Depositary Receipts as a tool to paint news companies like Rappler and ABS-CBN as tax evaders and foreign owned, creating in the process a chilling effect that crossed over to the business sector., the Philippines’ Court of Tax Appeals explained how local laws and regulations innovated to allow businesses to raise capital.

PDR was a common tool not only for media companies but other large companies as well, said Francis Lim, Rappler’s lead counsel in the PDR and tax cases, and former president of the Philippine Stock Exchange and the Management Association of the Philippines. “Cases like the one against ABS-CBN would make them a less attractive investment instrument, especially other nationalized companies like telecommunications,” he said.

What PDR gave to foreign investors was the right to buy an underlying share compliant to laws. But because media companies should be 100% Filipino owned, Rappler’s PDR holders cannot buy any underlying share. They can only benefit from the shares of the dividend of the subsidiary.

 

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