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BUSINESS ORGANIZATION
At a Glance
FOREIGN CORPORATION
 

Foreign investments, how made:

Foreign investments in the Philippines may be made under any of the following modes:

[1]  By establishing a domestic branch office or operation;

[2]  By establishing a Philippine representative office;

[3]  By operating through a business association in the Philippines;

[4]  By operating through a local subsidiary which may be owned entirely or partially by the foreign business entity;

[5]  By establishing joint venture arrangement with a local corporation or business organization;

[6]  By establishing an affiliate in the Philippines.cralaw

Among the types of business organizations allowed under Philippine law, a corporation is the most feasible mode of establishing business in the Philippines. The choice of a particular mode of establishing corporate presence in the Philippines will depend to a great extent on the kind of business in which a foreign investor wants to engage.  Unless falling within the restricted list where foreign ownership is limited to a certain percentage of equity, a foreign investor may establish corporate presence in the Philippines directly, i.e., by establishing a branch office or by creating a wholly-owned subsidiary.

Foreign corporation, governing law:

As far as domestic corporations are concerned, the governing law over their creation, formation, management, dissolution and liquidation is the Corporation Code of the Philippines.  This same law also governs the corporate relationships between the corporation and its shareholders, the public, and the government.

As far as foreign corporations, however, are concerned, the law governing their creation, formation, dissolution and liquidation is the law of the country where such foreign corporations were organized or established.  This is a principle of international law which is fully recognized in Philippine jurisdiction. Further, Philippine corporation laws were basically patterned after American corporation and enterprise laws.  Consequently, it is no wonder that when unique situations confront Philippine courts, resort to American laws and jurisprudence is made to resolve them.

Foreign corporation, right to sue:

Whether a foreign corporation is possessed of the right to sue in the Philippines is determined as follows:

    [1]  If the foreign corporation is transacting or doing business in the Philippines with a license, it has  the right to sue within the jurisdiction of the Philippines;

    [2]  If it is transacting or doing business without a license, it cannot sue;

    [3]  If it is not transacting or doing business in the Philippines, it can sue even if it is not possessed of any license.

Foreign corporation, right to be sued:

A foreign corporation may be sued in the Philippines:

    [1]  If it is transacting or doing business in the Philippines with a license;

    [2]  If it is transacting or doing business in the Philippines without a license;

However, if it is not transacting or doing business in the Philippines and does not have any license to so transact or do business in the Philippines, it cannot be sued in the Philippines for lack of jurisdiction.

Foreign corporation, registration requirement; procedure; documentation:

Foreign corporations intending to operate in the Philippines through the modes allowed by law, should register with the Philippine Securities and Exchange Commission [SEC].  Such registration is necessary to give legal personality thereto.  Consequently, duly-registered foreign corporations are treated as artificial beings possessed of all rights, benefits and privileges appurtenant to being a corporate citizen, such as the capacity to sue and be sued, and/or invoke the protection of Philippine laws in all their business and commercial dealings.

Procedure:

The procedure for the registration of a domestic or foreign corporation may be summed up as follows:

First step.  Determination of whether the corporation is going to engage or do business in an industry where the Philippine constitution and laws impose restrictions as to foreign equity ownership.  If the restriction or prohibition is absolute in nature, the foreign corporation will not be permitted to be set up in the Philippines. If the restriction or prohibition is not absolute, a foreign corporation may be allowed to be set up in the Philippines but just the same, it must comply with the strict foreign equity ownership limitation.  In case there is no such limitation or prohibition, absolute or otherwise, the foreign corporation may directly engage in business in the Philippines under any of the permissible modes described above.

Second step.  Confer with the proper government agency regulating or supervising the particular industry where the foreign corporation desires to engage in.  A certification from said appropriate government agency that it is not so prohibited from engaging in a business falling within that industry must be secured.  Certain industries require this certification such as the banking industry, insurance, etc.

Third step.  Proceed with the filing of the application with the Securities and Exchange Commission [SEC] which application must be accompanied by the said certification.  The SEC will then examine the documents submitted and consequently release the registration papers in due time.

Documentation:

[A]   In the case of existing foreign corporations intending to set up a branch or representative office in the Philippines, the following documentation process shall be undertaken::

[1]  Verification of the name of the corporation with the SEC [a name verification slip is issued by the SEC for this purpose] to determine whether there is similarity in the corporate name with any existing corporations registered with the SEC;

[2]  A copy of the Board Resolution of the corporation duly certified by the Corporate Secretary and/or members of the board, that the corporation is authorized to establish an office in the Philippines and naming or designating therein its authorized agent in the Philippines;

[3]  Duly audited financial statements covering the year immediately preceding the filing of the application;

[4]  Certified copies of the original Articles of Incorporation duly filed in the country of origin [or so-called home country] and translated in English;

[5]  Verified proof of inward remittance such as bank certificate or credit advice.

[B]  In the case of domestic corporations, the following documentation requirements should be complied with:

[1]  Copy of the proposed Articles of Incorporation;

[2]  Name Verification Slip [issued by the SEC];

[3]  Certificate of Deposit issued by a bank to show proof that the paid-up capital portion of the authorized capital stock is duly deposited in said bank;

[4]  Copy of the Alien Certificate of Registration, Special Investor's Resident Visa or other types of visa;

[5]  Proof of inward remittance which is required for non-resident aliens.

Foreign corporation, merger or consolidation with domestic corporation:
   

Philippine law allows one or more foreign corporations to merge or consolidate with one or more domestic corporations in the Philippines. In the event, however, that the absorbed corporation is the foreign corporation, the latter should file a petition for withdrawal of its license with the Securities and Exchange Commission [SEC].

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