Published — April 19, 2018
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Related Topic: Long-term Foreign Lease Over Lands in the Philippines
Our country endeavors to attract, promote and welcome productive investments from foreign entities, in activities which significantly contribute to national industrialization and socio-economic development to the extent that foreign investment is allowed in such activity by the Constitution and relevant laws. [See: Sec. 2, R.A. No. 8179]. With this, many foreign corporatons choose to invest by engaging in business in the Philippines. In doing so, however, our laws have imposed certain conditions before foreign corporations may legally operate their enterprises in the country.
A foreign corporation is defined as one that is formed, organized or existing under laws other than those of the Philippines, and whose laws allow Filipino citizens and corporations to do business in its own country or state. It shall have the right to transact business in the Philippines only after it has obtained a license to transact business in this country, and has obtained a certificate of authority from the appropriate government agency [See: Sec. 123, Corporation Code].
Application and issuance of license to do business
A foreign corporation applying for a license to transact business in the Philippines shall submit to the Securities and Exchange Commission a copy of its articles of incorporation and by-laws, certified in accordance with law, and their translation to an official language of the Philippines, if necessary. The application shall be under oath, and aside from the matters specified in the articles of incorporation, it is required to state the name and address of its resident agent authorized to accept summons and process in all legal proceedings [See: Sec. 125].
Attached in the application shall be a certificate under oath, executed by its authorized officers attesting that the laws of the country in which it is incorporated allow Filipino citizens and corporations to do business therein, and that the applicant is an existing corporation in good standing. It shall likewise include a statement under oath attesting that the corporation is in sound financial condition, setting forth its assets and liabilities for the past one year immediately prior to the filing of the application for license [Ibid].
If the Securities and Exchange Commission (“SEC”) is satisfied that the applicant has complied with all the requirements, it shall issue a license allowing the applicant to transact business in the Philippines for the purpose or purposes specified in such license. Upon being licensed, such foreign corporation may commence to transact business in the Philippines and continue to do so for as long as it retains its authority to act as a corporation under the laws of the country of its incorporation, unless such license is sooner surrendered, revoked, suspended or annulled in accordance with our laws [See: Sec. 126].
Appointment of a resident agent, and service of processes
It is required as a condition precedent to the issuance of the license to transact business in the Philippines by any foreign corporation that such corporation should file with the SEC a written power of attorney designating a person who must be Philippine resident, on whom any summons and other legal processes may be served in all actions or other legal proceedings against such corporation. Through said power of attorney, the corporation consents that service upon such resident agent shall be held as valid as if served upon the duly authorized officers of the foreign corporation at its home office [See: Sec. 128].
In case of a change of address of the resident agent, it shall be his (or its) duty to immediately notify in writing the SEC of the new address [Ibid].
Merger or consolidation with other corporations
One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporation or corporations if such is permitted under both Philippine laws and by the law of the country of its incorporation.
Also, whenever a foreign corporation authorized to transact business in the Philippines shall be a party to a merger or consolidation in its home country as permitted by the law of its incorporation, it shall, within 60 days after such merger or consolidation becomes effective, file with the SEC a copy of the articles of merger or consolidation duly authenticated by the proper officials of the country under the laws of which merger or consolidation was effected. If the absorbed corporation is the foreign corporation doing business in the Philippines, then it shall at the same time file a petition for withdrawal of it license to do business here in the country.
Revocation of license to do business
Under the law, the license of a foreign corporation to do business in the Philippines may be revoked or suspended by the SEC in any of the following grounds:
- Failure to file its annual report or pay any fees required by the Corporation Code;
- Failure to appoint and maintain a resident agent in the Philippines;
- Failure to submit to the SEC a written statement of change of its resident agent’s address;
- Failure to submit to the SEC an authenticated copy of any amendment to its articles of incorporation or by-laws, or of any articles of merger or consolidation;
- When a misrepresentation was committed on any material matter in any application, report, affidavit or other document submitted by such corporation;
- Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully due to the Philippine Government;
- Transacting business in the Philippines outside of the purposes for which such corporation is authorized under its license;
- Transacting business in the Philippines on behalf of any foreign corporation or entity not duly licensed to do business in the Philippines; or
- Any other ground as would render it unfit to transact business in the Philippines.
As can be seen, even though foreign business is welcome in the Philippines, foreign corporations may do such business only after being licensed to do so, and only upon observance of the legal requirements provided by Philippine laws. With this, foreign corporations are likewise encouraged to be aware of what such requirements are, in order to take advantage of their potential Philippine market and compete with the locals. After all, the Philippines is a good place to invest, and in doing so, the country’s economy will likewise benefit, making for a mutually advantageous setup for both the foreign business and the State.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.