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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:
A stock corporation is a Philippine National under the Foreign Investments Act when:
- It is a corporation organized under Philippine laws of which 60% of the capital stock outstanding and entitled to vote is owned and held by Filipino citizens; and
- It is a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which 100% of the capital stocks entitled to vote belong to Filipinos. (Section 3, par. (a), R.A. No. 7042 or the Foreign Investments Act, as amended by R.A. No. 8179)
Republic Act No. 7042 or the Foreign Investments Act of 1991, as amended by Republic Act No. 8179, is explicit in defining who are covered by the term “Philippine National” with respect to a corporation.
When is a corporation deemed a Philippine National?
The law says:
“The term “Philippine National” shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines or a corporation organized abroad and registered as doing business in the Philippine under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national.” (Section 3, par. (a), R.A. No. 7042 or the Foreign Investments Act, as amended by R.A. No. 8179)
The foregoing provision of the Foreign Investments Act regarding which corporations are deemed as “Philippine National” only applies to stock corporations. With respect to non-stock corporations, these shall be governed by Republic Act No. 112323 or the Revised Corporation Code.
The law says:
“For purposes of this Code, 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, Republic Act No. 111232, or the Revised Corporation Code)
Related article: WHEN CAN A STOCK CORPORATION BE DEEMED AS A CORPORATION VESTED WITH PUBLIC INTEREST?
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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