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McArthur Mining, Inc., is composed, among others, by Madridejos Mining Corporation (Filipino) owning
5,997 out of 10,000 shares, and MBMI Resources, Inc. (Canadian) owning 3,998 out of 10,000 shares;
MBMI also owns 3,331 out of 10,000 shares of Madridejos Mining Corporation;
Tesoro and Mining and Development, Inc., is composed, among others, by Sara Marie Mining, Inc.
(Filipino) owning 5,997 out of 10,000 shares, and MBMI Resources, Inc. (Canadian) owning 3,998 out of
10,000 shares; MBMI also owns 3,331 out of 10,000 shares of Sara Marie Mining, Inc.;
Narra Nickel Mining and Development Corporation, is composed, among others, by Patricia Louise
Mining & Development Corporation (Filipino) owning 5,997 out of 10,000 shares, and MBMI Resources,
Inc. (Canadian) owning 3,998 out of 10,000 shares; MBMI also owns 3,396 out of 10,000 shares of
Patricia Louise Mining & Development Corporation;
ISSUES
(1) Is the Grandfather Rule applicable?
RULINGS
(1) YES.
The instant case presents a situation which exhibits a scheme employed by stockholders to circumvent
the law, creating a cloud of doubt in the Courts mind. To determine, therefore, the actual participation,
direct or indirect, of MBMI, the grandfather rule must be used.
The Strict Rule or the Grandfather Rule pertains to the portion in Paragraph 7 of the 1967 SEC Rules
which states, but if the percentage of Filipino ownership in the corporation or partnership is less than
60%, only the number of shares corresponding to such percentage shall be counted as of Philippine
nationality. Under the Strict Rule or Grandfather Rule Proper, the combined totals in the Investing
Corporation and the Investee Corporation must be traced (i.e., grandfathered) to determine the total
percentage of Filipino ownership.
(2) NO.
[P]etitioners McArthur, Tesoro and Narra are not Filipino since MBMI, a 100% Canadian corporation,
owns 60% or more of their equity interests. Such conclusion is derived from grandfathering petitioners
corporate owners. xxx Noticeably, the ownership of the layered corporations boils down to xxx group
wherein MBMI has joint venture agreements with, practically exercising majority control over the
corporations mentioned. In effect, whether looking at the capital structure or the underlying relationships
between and among the corporations, petitioners are NOT Filipino nationals and must be considered
foreign since 60% or more of their capital stocks or equity interests are owned by MBMI.