Vous êtes sur la page 1sur 11

FOREIGN CORPORATIONS:

1. WHAT IS A FOREIGN CORPORATION? (Sec. 123)


a. Formed, organized, or existing under any laws than those of the
Philippines; that is, not incorporated under the Philippine Corporation
Code.
i. This is called the Incorporation Test.

Exception: Corporations registered as doing business in


the Philippines of which 100% of the outstanding capital
stock ad entitled to vote is wholly owned by Filipinos, it
may be considered a Philippine National under FIA.

b. Whose law allows Filipino citizens and corporations to do business in its


own country or State.
Note: Requirement (b) is not an essential element to be recognized as a
foreign corporation. It is however necessary in order to secure license and
transact business in the Philippines.
2. WHAT ARE ITS RIGHTS (Sec. 123):
a. To do business in the Philippines in accordance with this Code
after complying with these requisites:
i. License to transact business in accordance with this Code

To be issued by SEC (SEC Opinion, April 22, 1985)

Requirements:
a. Submit to the SEC a copy of its Articles of
Incorporation and by-laws, certified in accordance
with law, and translated to Philippine official
language if necessary.
b. Application
following:

made

under

oath

containing

the

i. Date and term of incorporation


ii. The address in the country of incorporation
iii. Name and address of its resident agent
authorized to accept summons and other
legal processes pending the establishment of
a
local
office,
all
notices
affecting
corporation.
iv. Place in Philippines
intends to operate.

where

corporation

v. Specific purposes which it intends to pursue


in the Philippines, provided that such
purpose/s are those specifically stated in the
certificate of authority issued by the
appropriate government agency.
vi. Names and addresses of present directors
and officers of the corporation.
vii. Statement of its authorized capital stock and
the aggregate number of shares which the
corporation has authority to issue, itemized
by classes, par value of shares, shares
without par value, and series, if any.
viii. A statement of its outstanding capital stock
and the aggregate number of shares which
the corporation has issued.
ix. Amount actually paid in, and
x. Other additional information for SEC WON to
issue license.
c. Other Requirements:
i. Good standing
ii. Its
laws
allow
Filipino
citizens
corporations to do business therein,

and

iii. Solvent and sound financial condition


ii. Certificate of authority from the appropriate government agency.
3. LEGAL IMPLICATIONS OF BEING A FOREIGN CORPORATION
General Rule: A foreign corporation can have no legal existence or status
beyond the bounds of the State where it was incorporated.
Exceptions: (1) With consent of foreign state where business is conducted
(Consent Doctrine) subject to conditions and restrictions it may impose.
4. WHEN TO COMMENCE OPERATIONS (Sec. 126):
a. Upon issuance of the license issued by SEC, and may continue to do so
for as long as it retains its authority to act as a corporation under the
laws of the country or state of its incorporation, unless such license is
revoked, sooner surrendered, suspended, or annulled.
b. Except for foreign banking or Insurance Corporation, needs to deposit
with SEC securities for the benefit of its creditors in the Philippines
within 60 days.

The securities must have an actual market value of


P100,000

After every 6 months, shall add additional securities


equivalent to 2% of actual market value of any income of
the corporation which exceeds 5 Million pesos.

May also require additional securities if the actual market


value of the deposited securities has decreased at least
10% from the time of deposit.

5. OBJECTIVES OF REGULATING FOREIGN CORPORATIONS:


a. To place them on equal footing with domestic ones
b. To subject them to inspection, so their condition would be known
c. To protect the residents of the State doing business with them
6. DETERMINING NATIONALITY OF FOREIGN CORPORATIONS:
a.

Incorporation Test: The Nationality of a Corporation is that of the state of


incorporation regardless of the nationality of its stockholders.

b.

Other Tests to determine if the compliant with 60-40 percentage requirement


under the Constitution:
i. Grandfather Rule (to determine if compliant with Constitution):
the combined totals in the investing corporation and the
investee corporation must be traced in order to determine the
total percentage of Filipino ownership.

To illustrate:
X Corp. is owned by 40% of Foreing nationals and
60% owned by Y Corp., a domestic corporation.
Y Corp is 60% owned by Filipinos while 40% owned
by foreign nationals.
Calculations:
Foreign Equity in X Corp= 40% owned by foreign
nationals + 24% (40% in Y Corp. * 60% in Y Corp.)
Foreign Equity in X Corp= 64%.
Thus, if grandfather rule applied, X Corp., will not
be deemed a Philippine National because it takes
into account the direct and indirect foreign equity
of foreigners.

ii. Control Test: Shares belonging to corporations at least 60% of


the capital of which are owned by Filipinos, it shall be considered
having Philippine Nationality. Once it is established that a
corporation is at least 60% owned by Filipinos, it is no longer
necessary to conduct any further inquiry as to the ownership of
the shareholders of the investing corporation since the entire
company at least 60% Filipino-owned is already considered a
Filipino entity.
iii. So, which test applies?

SEC has done away with the stricter grandfather rule, and
has applied the control test in line with the state policy to
adopt a liberal interpretation or construction of our laws
aimed at encouraging foreign investment (SEC Opinion,
Oct. 14, 1991).

This rule is also found in FIA (Sec.7(a))

Note: Note however that, the control test has no


constitutional
or
statutory
basis,
but
is
implemented
by
mere
administrative
fiat.
Therefore, those under the Foreign Investments
Negative List adheres not to the control test, but
to the grandfather rule as it is more in line with
the Constitution.

7. REGIONAL OR AREA HEADQUARTERS:


a. Multinational Company- a foreign company or a group of foreign
companies with business establishments in two or more countries.
b. Regional or Area Headquarters- means an office whose purpose is to
act as an administrative branch of a multinational company engaged in
international trade which principally serves as a supervision,
communications and coordination center for its subsidiaries, branches
or affiliates in the Asia Pacific region and other foreign markets and
which does not derive income from the Philippines.
i. Requirements:

Certification from the Philippine/ Consulate Embassy or a


duly authenticated certification from DTI- that it is
engaged in international trade with affiliates, subsidiaries
or branch offices in the Asia-Pacific Region and other
foreign markets.

A duly authenticated certification from the principal officer


of the foreign entity to the effect that it has been
authorized by its BOD to establish its regional or area
headquarters in the Philippines, specifying that:

a. Their activities shall be limited to acting as a


supervisory, communications and coordinating
center for its subsidiaries, affiliates, and branches
in the region;
b. It will not derive any income from sources within
the Philippines,
c. It will not participate in any manner in the
management of any subsidiary or branch office it
might have in the Philippines nor shall it solicit or
market goods and services whether on behalf of its
mother company or its branches, affiliates,
subsidiaries, or any other company; and
d. The regional or area headquarters shall notify the
Board of Investments and the Commission of any
decision to close down or suspend operations of its
headquarters at least 15 days before the same is
effected.

An undertaking that the multinational company will remit


into the country such amount as may be necessary to
cover its operations in the Philippines but which amount
will not be less than $50,000 or its equivalent in other
foreign currencies annually.

8. REGIONAL OPERATING HEADQUARTERS


a. Regional Operating HQ- a foreign business entity which is allowed to
derive income in the Philippines by performing qualifying services to its
affiliates, subsidiaries or branches I the Philippines, in the Asia-Pacific
Region and in other foreign markets.
i. Requirements:

Certification from the Philippine/ Consulate Embassy or a


duly authenticated certification from DTI- that it is
engaged in international trade with affiliates, subsidiaries
or branch offices in the Asia-Pacific Region and other
foreign markets.

A duly authenticated certification from the principal officer


of the foreign entity to the effect that it has been
authorized by its BOD to establish its regional or area
headquarters in the Philippines, specifying that:
a. The regional operating HQ may engage in any
of the following qualifying services:
i. General administration and planning;
ii. Business planning and coordination;

iii. Sourcing/ procurement of raw materials


and components;
iv. Corporate
services;

finance

and

advisory

v. Marketing control and sales promotion;


vi. Training and personnel management;
vii. Logistics services;
viii. Research and development
and product development;
ix.

services,

Technical support and maintenance;

x. Data
and

processing

and

communication;

xi. Business development

It shall notify the Board of Investments, SEC, and


BSP as the case may be, of any decision to close
down or suspend operations of its HQ at least 15
days before the same is effected.

An undertaking that the multinational company will remit


into the country such amount as may be necessary to
cover its operations in the Philippines but which amount
will not be less than $200,000 or its equivalent in other
foreign currencies annually.

9. Resident Agent (Sec. 127):


a. An individual who must be of good moral character;
b. Sound financial standing;
c. Resident of the Philippines;
d. Designated in a written power of attorney, by a foreign corporation
authorized to transact business in the Philippines
e. The one whom any summons, and other legal processes may be
served in all actions or other legal proceedings against such
corporation.
Functions of a Resident Agent:
i. To receive in behalf of the foreign corporation any summons, and
other legal processes may be served in all actions or other legal
proceedings against such corporation.
ii. Acts as the agent of the foreign corporation for the said specific
purpose
Replacement:

10.

i.

SEC requires the submission of a duly authenticated copy of


the board resolution or a certification from the authorized
officer of the company formally revoking his appointment as a
resident agent of the corporation.

ii.

Accompanied by a duly authenticated written power of


attorney designating the substitute.

MEANING OF TRANSACTING BUSINESS


a. Question of fact taking into account the circumstances of each case
b. No definite meaning
c. The test: Whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was organized
or whether it has substantially retired from it and turned it over to
another.
d. Continuous business acts or transactions: it should appear that the
corporation and its officers intended to establish a continuous
business, such as the appointment of a local agent, and not one of the
temporary character.
e. However, it has a definite meaning under the Omnibus
Investments Code and FIA which may be adopted for purposes
of the Corporation Code:
i. Omnibus Investments Code (Sec.44) and FIA (Sec. 2(d)) Doing
business shall include:

Soliciting orders, purchases (sales) and service contracts

Opening offices,
branches;

Appointing representatives or distributors who are


domiciled in the Philippines or who in any calendar year
stay in the Philippines for a period or periods totaling 180
days or more;

Participating in the management, supervision or control of


any domestic business firm, entity or corporation in the
Philippines; and

Any other act or acts that imply a continuity of


commercial dealings or arrangements, and contemplate
to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to,
and in progressive prosecution of, commercial gain or for
the purpose and object of the business organization.

whether

called

liaison

offices

or

ii. See Implementing Rules and Regulation of FIA for


transactions which are not considered as doing
business.
11.

LAW APPLICABLE (Sec. 129):


a. A foreign corporation licensed to do business in the Philippines is
subject to the laws of the Philippines.
b. Exceptions: These are governed by the laws of incorporating state:
i. Creation, formation, organization or dissolution of corporations;
and
ii. The relations, liabilities, responsibilities or duties of members,
stockholders, or officers of the corporation to each other or to
the corporation.
iii. In other words, matters relating to the organization of internal
affairs of the corporation are governed by the laws of the
incorporating state unless they offend Philippine public policy.

12.
AMENDMENTS OF THE ARTICLES OF INCORPORATION AND BYLAWS (Sec. 130):
a. Effectivity: may become effective even before they are filed with SEC,
and in proper cases, with the appropriate government agency.
b. Limitation: Cannot enlarge or alter the purpose/s for which it is
authorized to transact business in the Philippines.
i. Must first obtain an amended license showing additional
purposes, otherwise its license shall be revoked by SEC, except
incidental or isolated transactions.
13.

AMENDMENT OF LICENSE (SEC. 131):


a. Required in the following instances:
i. It changes its corporate name; or
ii. It desires to pursue in the Philippines other or additional
purposes.
b. Note: A foreign corporation that fails to comply with Section 131 and
conducts business operations in the Philippines may not intervene in
any action before a court or administrative agency, but such
corporation may be sued.

14.

Merger or Consolidation (Sec. 132):


Two Types: With a Domestic Corporation or With another Foreign
Corporation

a. With a Domestic Corporation: Allowed provided the following are


met:
i. It is permitted under Philippine laws and by the law of the
incorporating state;
ii. The requirements of consolidation and merger under the
Corporation Code are followed.

If the absorbed corporation is the foreign corporation


doing business in the Philippines, the latter shall at the
same time file a petition for withdrawal of its license.

b. With another Foreign Corporation:


i. Inform SEC within 60 days after the merger or consolidation
together with a copy of the articles of merger or consolidation
duly authenticated by the proper official of the state where the
merger or consolidation was effected.
ii.

15.

If the absorbed corporation is the foreign corporation doing


business in the Philippines, the latter shall at the same time file
a petition for withdrawal of its license.

SUABILITY AND PERSONALITY TO SUE (Sec. 133):


a. Doing business in the Philippines without a license:
i. The foreign corporation doing business in the Philippines is
barred from maintaining or intervening in any action, suit, or
proceeding in any court or administrative agency of the
Philippines;
ii. BUT, they may be sued on any valid cause of action recognized
under Philippine laws under the doctrine of quasi-estoppel
by acceptance of benefits. It shall not be allowed, under any
circumstances to invoke its lack of license to impugn their
jurisdiction.

Exception: Estoppel- can no longer challenge the


personality of a corporation after having acknowledged
the same by entering into a contract with it.

iii. If a foreign corporation does not do business in the Philippines,


it cannot be sued here in the Philippines (isolated transaction
rule).

Exception:
a.

When there is an agreement that Philippine courts


will be the venue.

b. Suit by an unlicensed Foreign Corporation:

A foreign corporation without a license is not ipso facto barred from


bringing an action in Philippine courts. So long as it would not be
impossible for court processes to reach the foreign corporation.
i. To seek redress for an isolated business transaction- in order to
give redress to foreign corporations, and not to shield debtors
from their legitimate obligations.
ii. To protect its corporate reputation, name and goodwill- an
unlicensed foreign corporation which has never transacted
business in the Philippines may maintain an action to protect its
reputation, name and goodwill.
iii. To enforce its right not arising out of a business transaction
c. Suit against an Unlicensed Foreign Corporation:
If a foreign corporation not engaged in business in the Philippines is
not barred from seeking redress from courts in the Philippines, a
fortiori, that same corporation cannot claim exemption from being
sued in the Philippine courts for actionable wrongs or acts done against
a person/s in the Philippines.
d. Suits against a foreign corporation which has ceased to do
business:
Revocation of its license or its withdrawal works as a quasi-dissolution
of the foreign corporation. Consequently, its effects is as if the
corporation has expired or terminated or dissolved. It is then subject to
the rules of law governing expired domestic corporations in respect to
an action against it.
16.
VALIDITY
OF
CORPORATIONS:

CONTRACTS

OF

UNLICENSED

FOREIGN

a. There are many views, but the most reasonable among it, is that the
contract is enforceable upon compliance with the law. When there is a
violation of any of the prohibitions under Sec. 144, with no express or
implied declaration respecting the validity or enforceability of the
contracts made by qualified corporations, the contract is enforceable
upon compliance with law.
17.

REVOCATION OF LICENSE (SEC. 134):


a. The grounds are the ones enumerated under Sec. 134.
b. The grounds are without prejudice to other grounds provided by
Special laws.
c. Then, SEC is required to issue a corresponding certificate of revocation,
furnishing a copy to the appropriate government agency, and to the
corporations residence.

A. Effects of Revocation:
a. Contracts entered into/before revocation are valid
b. Contracts entered after revocation are invalid and unenforceable
without prejudice to the rights of innocent parties.
i. (Note however, that its only effect is to simply remove the
legal standing to sue of the corporation. As such, the foreign
corporation cannot seek redress from the courts to enforce
such contracts. Innocent parties can though.
c. Can no longer transact business in the Philippines, and cannot
maintain any action, although it may be sued.
18.

WITHDRAWAL OF FOREIGN CORPORATIONS (SEC. 136):

A. Requirements:
a. All claims which have accrued in the Philippines have been paid,
compromised or settled;
b. All taxes, imposts, assessments, and penalties, if any, lawfully due
to the Philippine government or any of its agencies or political
subdivisions have been paid; and
c. The petition for withdrawal of license has been published once a
week for 3 consecutive weeks in a newspaper of general circulation
in the Philippines.

Vous aimerez peut-être aussi