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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.
AT A GLANCE:
“No foreign corporation transacting business in the Philippines without a license, or its successor or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before the Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.” (Section 150 of the Revised Corporation Code)
What is a foreign corporation?
Under the Revised Corporation Code (RCC), a foreign corporation is one 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 after obtaining a license for that purpose in accordance with this Code and certificate of authority from the appropriate government agency. (Section 140, RCC)
A foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except those which provide for the creation, formation, organization or dissolution of corporations or those which fix the relations, liabilities, responsibilities, or duties of stockholders, members or officers of corporations to each other or to the corporation. (Section 146, RCC)
When can a foreign national sue?
Generally, a “foreign corporation” has no legal existence within the state in which it is foreign. This proceeds from the principle that juridical existence of a corporation is confined within the territory of the state under whose laws it was incorporated and organized, and it has no legal status beyond such territory. Such foreign corporation may be excluded by any other state from doing business within its limits, or conditions may be imposed on the exercise of such privileges.
Before a foreign corporation can transact business in this country, it must first obtain a license to transact business in the Philippines, and a certificate from the appropriate government agency. If it transacts business in the Philippines without such a license, it shall not be permitted to maintain or intervene in any action, suit, or proceeding in any court or administrative agency of the Philippines, but it may be sued on any valid cause of action recognized under Philippine laws.
Under Section 150 of the Revised Corporation Code:
“No foreign corporation transacting business in the Philippines without a license, or its successor or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before the Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.”
By filing an action before the Philippine courts, a foreign corporation puts itself under their jurisdiction. The case of Communications Materials and Design, Inc. v. Court of Appeals (G.R. No. 102223, August 22, 1996) explains the purpose of requiring foreign corporations to secure a license before they sue in, to wit:
“The purpose of the law in requiring that foreign corporations doing business in the Philippines be licensed to do so and that they appoint an agent for service of process is to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object is not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking steps necessary to render it amenable to suit in the local courts. The implication of the law is that it was never the purpose of the legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations.”
Read also: What are the requisites for the issuance of a license to do business for a foreign corporation?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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