1. What is Foreign Corporation?

those formed, organized or existing under any law other than those of the Philippines
whose law allow Filipino citizens or corporations to do business in their country.
2. What is the Nationality of a Foreign Corporation?
-Applying the Control test as per DOJ Opinion No. 18 dated January 19, 1989, states that The
nationality of a foreign corporation depends on the nationality of the majority of the
incorporators
3. Department of Justice Opinion No. 18, January 19, 1989
What is INCORPORATION TEST?
- General rule: The incorporation test is applied in determining whether a corporation is
domestic or foreign. If it is incorporated in another state, it is a foreign corporation, while if it is
registered under Philippine laws, it is deemed a Filipino or domestic corporation irrespective of
the nationality of its stockholders.

- The control test as the primary test

As a rule, the control test applies. The primacy of the control test over the grandfather rule can be
traced to DOJ Opinion No. 19, s. 1989 (the 1989 DOJ Ruling), which states:

. . . the Grandfather Rule, which was evolved and applied by the SEC in several cases, will not
apply in cases where the 60-40 Filipino-alien equity ownership in a particular natural resource
corporation is not in doubt. (underscoring supplied)

In other words, according to the Department of Justice, the control test generally applies, with the
grandfather rule applicable only when the 60-40 Filipino-alien equity ownership is in doubt.

On the basis of the 1989 DOJ Ruling, the SEC issued several opinions doing away with the
grandfather rule. For example, in a May 30, 1990 opinion, the SEC stated:
. . . the Commission En Banc, on the basis of the Opinion of the Department of Justice No. 18., S.
1989 dated January 19, 9189 voted and decided to do away with the strict application/computation
of the so called grandfather rule. . . and instead applied the so-called control test method for
determining corporate nationality. (underscoring supplied)(see also SEC Opinion dated August 6,
1991; SEC Opinion dated October 14, 1991)

4. Security of Exchange Commission December 7, 1993

- WHETHER OR NOT RESPONDENT COURT OF APPEALS (Former Eighth Division) GRAVELY
ERRED WHEN:
1.
IT NULLIFIED AND SET ASIDE THE DECISION DATED JUNE 04, 1993 AND ORDER DATED
DECEMBER 07, 1993 OF THE SECURITIES AND EXCHANGE COMMISSION EN BANC, AND WHEN
IT DISMISSED THE COMPLAINT OF PETITIONER AGAINST RESPONDENT VALLEY GOLF ALL FOR
LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE;
2.
IT FAILED TO AFFIRM THE DECISION OF THE SECURITIES AND EXCHANGE COMMISSION
EN BANC DATED JUNE 04, 1993 DESPITE PREPONDERANT EVIDENCE SHOWING THAT
PETITIONER IS THE LAWFUL OWNER OF MEMBERSHIP CERTIFICATE NO. 1219 FOR ONE SHARE
OF RESPONDENT VALLEY GOLF.
The petition is granted.
The basic issue we must first hurdle is which body has jurisdiction over the controversy, the
regular courts or the SEC.
P.D. No. 902-A conferred upon the SEC the following pertinent powers:
SECTION 3. The Commission shall have absolute jurisdiction, supervision and control over all
corporations, partnerships or associations, who are the grantees of primary franchises and/or a
license or permit issued by the government to operate in the Philippines, and in the exercise of
its authority, it shall have the power to enlist the aid and support of and to deputize any and all
enforcement agencies of the government, civil or military as well as any private institution,
corporation, firm, association or person.

. . . The better policy in determining which body has jurisdiction over a case would be to consider not
only the status or relationship of the parties but also the nature of the question that is the subject of
their controversy.
Applying the foregoing principles in the case at bar, to ascertain which tribunal has jurisdiction we
have to determine therefore whether or not petitioner is a stockholder of VGCCI and whether or not the
nature of the controversy between petitioner and private respondent corporation is intra-corporate.

5. What is the meaning of Securities?

DEFINITION of 'Security' A financial instrument that represents: an ownership position in a
publicly-traded corporation (stock), a creditor relationship with governmental body or a
corporation (bond), or rights to ownership as represented by an option.

6. What are the objectives and purpose of Securities Act?

-

RA 8799 also known as the Securities Regulation Code, is given the authority to regulate
the conduct of activities relating to securities, such as shares of stock.

The Commission shall have the powers and functions provided by the Securities Regulation Code,
Presidential Decree No. 902-A, as amended, the Corporation Code, the Investment Houses Law, the
Financing Company Act, and other existing laws.
Under Section 5 of the Securities Regulation Code, Rep. Act. 8799, the Commission shall have, among
others, the following powers and functions:
(a) Have jurisdiction and supervision over all corporations, partnerships or associations who are
the grantees of primary franchises and/or a license or permit issued by the Government;
(b) Formulate policies and recommendations on issues concerning the securities market, advise
Congress and other government agencies on all aspects of the securities market and propose
legislation and amendments thereto;
(c) Approve, reject, suspend, revoke or require amendments to registration statements, and
registration and licensing applications;
(d) Regulate, investigate or supervise the activities of persons to ensure compliance;
(e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and
other SROs;
(f) Impose sanctions for the violation of laws and the rules, regulations and orders issued
pursuant thereto;
(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and
provide guidance on and supervise compliance with such rules, regulations and orders;
(h) Enlist the aid and support of and/or deputize any and all enforcement agencies of the
Government, civil or military as well as any private institution, corporation, firm, association or
person in the implementation of its powers and functions under this Code;
(i) Issue cease and desist orders to prevent fraud or injury to the investing public;
(j) Punish for contempt of the Commission, both direct and indirect, in accordance with the
pertinent provisions of and penalties prescribed by the Rules of Court;
(k) Compel the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision;
(l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the
Commission and in appropriate cases, order the examination, search and seizure of all documents,
papers, files and records, tax returns, and books of accounts of any entity or person under

investigation as may be necessary for the proper disposition of the cases before it, subject to the
provisions of existing laws;
(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration
of corporations, partnerships or associations, upon any of the grounds provided by law; and
(n) Exercise such other powers as may be provided by law as well as those which may be implied
from, or which are necessary or incidental to the carrying out of, the express powers granted the
Commission to achieve the objectives and purposes of these laws.
Under Section 5.2 of the Securities Regulation Code, the Commissions jurisdiction over all cases
enumerated under Section 5 of PD 902-A has been transferred to the Courts of general jurisdiction or
the appropriate Regional Trial Court. The Commission shall retain jurisdiction over pending cases
involving intra-corporate disputes submitted for final resolution which should be resolved within one
(1) year from the enactment of the Code. The Commission shall retain jurisdiction over pending
suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
Considering that only Sections 2, 4, and 8 of PD 902-A, as amended, have been expressly repealed by
the Securities Regulation Code, the Commission retains the powers enumerated in Section 6 of said
Decree, unless these are inconsistent with any provision of the Code.

Concentrate on the Articles of Incorporation of Non-stock.

Prepare a form or draft of non-stock and stock corporation
7. What are the requirements for the non-stock corporations?

Requirements:
a. They must be natural persons;
b. At least five (5) but not more than fifteen (15);
c. They must be of legal age;
d. Majority must be residents of the Philippines; and
8. Look for the requirements and guidelines.
Study the articles for non-stock and stock corporation
Bring forms for your guidelines
Do not expect that you will draft an articles of incorporation?