Rules to Implement the Requirements of the Constitution and Other Laws That the Controlling Interests in Enterprises Engaged in the Exploitation of Natural Resources shall be Owned by Filipino Citizens

February 28, 1967 RULES TO IMPLEMENT THE REQUIREMENTS OF THE CONS TITU TION AND OTHER LAWS THAT THE CONTROLLING INTERESTS IN ENTERPRISES ENGAGED IN THE EXPLOITATION OF NATURAL RESOURCES SHALL BE OWNED BY FILIPINO CITIZENS To effectively carry out the requirement of the Constitution and other applicable laws that at least 60 per cent of the capital stock of corporations or capital in case of partnership engaged in the exploitation of natural resources shall be owned by Filipino citizens, the Commission, pursuant to the powers vested in it under existing laws, particularly Republic Act No. 1143, hereby promulgates the following rules: 1. To keep at All Times Percentage of Interests per Nationality. All stock corporations and partnerships engaged in any said business such as, mining, agriculture, fishing or exploitation of lumber concessions, and which are required to have at least 60 per cent of the capital stock or capital in case of partnership, owned by Filipino citizens, must keep at all times a complete record of the following: For Corporations. (a) total number of shares subscribed (including those purchased or required by other means); (b) total number of shares owned by Filipino citizens, by Americans, and by other aliens; and (c) percentage of ownership corresponding to each nationality. For Partnerships. (a) total amount of capital contributed; (b) total contributed by Filipinos, by Americans, and by other aliens; and (c) percentage of ownership corresponding to each nationality. The foregoing data shall be posted and summarized daily so as to get an up-to-date and correct percentage of interests respectively belonging to Filipinos, Americans and other aliens. 2. Percentage Adjustment in Case of Sale or Transfer of Interest. Any transfer, sale, or assignment of stock by a Filipino citizen to an American or other alien, shall be subtracted from the total holdings of the Filipinos and added to the total holding of the Americans or other aliens, and vice-versa, but any transfer, sale or assignment of stock from a Filipino to another Filipino, from American to another American, or from an alien to another alien will not affect the total holdings of each group and shall not require a subtraction from, or addition to, their respective holdings. The same rules shall apply in the case of sale, transfer or assignment of interests in a partnership. 3. Buyer of Stock to Submit Signature Card Indicating Citizenship. For the purpose of recording the citizenship of a subscriber or buyer of stock, he shall be required to submit a written statement signed by him, on a card provided by the corporation for the purpose, indicating his name, citizenship, number of shares owned, and address and bearing true specimens or samples of his signature. No stock certificate shall be issued to him until after such card indicating his citizenship shall have been received and noted by the corporation. Should a broker intervene in the transaction, the corporation shall address this requirement to him, who, in turn, shall see to it that the subscriber or buyer of stock complies therewith. If the shares are to be registered in the name of the broker, the nationality of the customer and not that of the broker shall be the one reported to the person in charge of the stock and transfer book of the issuer corporation, and the same shall be stamped or annotated in the corresponding stock certificates. A stockholder whose nationality has been lawfully charged shall report such fact of more than one customer, each customer being entitled to a stock certificate for his share. 4. Street Certificates Shall Not Represent Shares of Many Customers. No certificate issued in the name of a broker shall represent shares of more than one customer, each customer being entitled to a stock certificate for his share. 5. Warning to Avoid Reduction of Required Filipino Ownership. If the respective percentages of Filipino and alien interests in the corporation are about to be reached, and there is danger that a sale of its shares of stock might reduce the percentage of Filipino interest in the corporation to less than 60 per cent, such corporation shall give appropriate and timely notices to the brokers, the stock exchanges wherein its securities are traded and the Securities and Exchange Commission to avoid such diminution of Filipino ownership in the corporation. The notice shall state the exact number of shares that may be sold without impairing the requiring limit. CAIHTE 6. Requirements for New Entities. New corporations or partnerships shall provide in their organization papers that no transfer of stock or interest which will reduce the ownership of Filipino citizens to less than 60 per cent of the capital stock or capital in case of partnership, shall be allowed or permitted to be recorded in the proper books, and this restriction, in the case of a corporation, shall also be indicated in all its stock certificates. In case of corporations being formed by foreigners who are allowed under existing laws to engage in any of the said lines of business, satisfactory proof must be shown to the Commission that the States of their domicile grant Filipino citizens reciprocal rights to engage in the same business in said States. 7. Determination of Citizenship in Case of Corporation or Partnership. (a) Shares belonging to corporations or partnerships at least 60 per cent of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60 per cent, only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least 60 per cent of the capital stock or capital, respectively of which belongs to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shares will be recorded as belonging to aliens. (b) If the corporation owning the shares of stock is a non-stock, non-profit organization, its citizenship shall be that of the 60 per cent of its entire membership and if such percentage is not reached, all the shares belonging to it shall be proportionately allotted to each group of nationals, as each group of members having the same citizenship shall bear to the total number of members composing the corporation. Thus, if 100,000 shares of stock belong to a non-stock corporation which is composed of ten members, 2 of whom are Filipinos, 3 Americans and 5 Chinese, 2/10 or 20,000 of said shares shall be considered as Filipino, 3/10 or 30,000 shares as Americans, and 5/10 or 50,000 shares as Chinese. In case of a corporation sole, its nationality shall be the nationality of the 60 per cent of the membership of the church or religious society of which he is the head. (c) It shall be the duty of the person in charge of the stock and transfer book of the corporation, or of the manager of the partnership, or of the secretary of the non-stock corporation, as the case may be, which owns the stock, to give the number of shares allotted to each group of nationals and cause the same to be stated in the card advertised to in paragraph No. 3 of these rules. Should there be any change in the percentage of ownership of Filipinos, Americans or other aliens in the corporation or partnership owning the stock, such fact shall likewise be reported by the person in charge of the stock and transfer book to the issuer corporation within ten (10) days after the change took place. 8. Submission of Quarterly Reports. It shall be the duty of the person in charge of the stock and transfer book of the corporation to submit to the Securities and Exchange Commission, within fifteen (15) days after the end of each quarter, a report signed under oath by him, showing the total number of shares subscribed, total number of shares and percentage belonging to Filipinos, those owned by Americans and those held by other aliens as at the end of each quarter, starting June 30, 1967. In case of partnership, the manager of the firm shall submit the required report which must show the total capital contributions of all the partners, the total amounts contributed by, and the corresponding percentage belonging to, each of said nationalities. 9. Fixing Responsibility for Compliance with Rules. Unless otherwise prescribed in any of the foregoing paragraphs, the duties and functions required to be performed under these rules shall be the responsibility of, and shall be discharged by, the members of the board of directors, the officers, personnel and transfer agents of the issuer corporation directly or indirectly entrusted with the proper recording, and safe keeping of, of its stock and transfer book; and in the case of partnership, by the managers and all the partners. 10. Examination to Determine Compliance. Securities Agents and Examiners of the Commission shall from time to time examine the stock and transfer books and other pertinent records of said corporations to determine whether the foregoing requirements are being complied with. 11. Penalties. Any statement of a material fact required under these rules, which is false, misleading or incorrect, and given with a view to evading, violating or infringing the mandate of the Constitution and applicable laws that at least 60 per cent of the capital stock of corporations or capital in case of partnerships, engaged in the exploitation of natural resources shall be owned by Filipino citizens shall render the offender liable to such penalties as are now or may hereafter be provided by law aside from subjecting him to a fine in such amount as the Commission may impose him upon Republic Act No. 1143. Any other violation of these rules will render the guilty party liable to the penalties which the Commission may impose under said Republic Act No. 1143. 12. Fees. No certificate of percentage of ownership of stock or interest in the corporation or partnership shall be issued by the Securities and Exchange Commission to a person, corporation or firm unless a service fee of P5.00 shall have been first charged and paid therefor; provided, however, that if the certificate is requested by a government official or government entity performing a duty, no such fee shall be collected. DETACa 13. Effectivity. These rules shall take effect fifteen (15) days after publication in the Official Gazette. Manila, Philippines, February 28, 1967. (SGD.) MARIANO G. PINEDA Securities and Exchange Commissioner APPROVED: March 31, 1967 (SGD.) MARCELO S. BALATBAT Secretary of Commerce & Industry Published in the Official Gazette, Vol. 63, No. 18, pp. 3852-3854 on May 1, 1967.