Atty. Cynthia D. Nuval-Ambrosio

June 30, 1995 Atty. Cynthia D. Nuval-Ambrosio Villaraza & Cruz Law Offices 58th Flr.,LTA Bldg.,118 Perea St., Legaspi Village, 1229 City of Makati M a d a m : This refers to your letter of April 27, 1995 requesting clarification whether or not the business undertaking mentioned therein constitutes " doing business " in the Philippines. As stated, your client, a foreign corporation, intends to organize a joint venture corporation ("JVCo") in the Philippines together with Philippine partners. The JVCo will principally undertake business activities in the Philippines which are being undertaken by your client in its home country. Some of the current employees of your client will be employed by the JVCo as key officers and/or consultants of the JVCo. Your client, like its Philippine partners, will nominate their respective representatives to the Board of Directors of the JVCo in proportion to their respective shareholdings. As shareholder of the joint venture corporation your client will receive dividends from the JVCo from time to time as the business operations of the JVCo permit. Your queries are: 1. Will your client be deemed " doing business " in the Philippines pursuant to the Foreign Investments Act (Republic Act No. 7042) and its Implementing Rules, and therefore, be required to obtain a license to do business in the Philippines? 2. If in the affirmative, will your client's activities require it to open a branch office in the Philippines, or will a representative office in the Philippines suffice for purposes of complying with the requirement to obtain a license to do business in the Philippines? Republic Act No. 7042 otherwise, known as the Foreign Investments Act, defines "doing business" as follows: SECTION 3. Definitions . As used in this Act: xxx xxx xxx. d.) The phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty (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 of the purpose and object of the business organization: provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation ;nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. (Emphasis supplied) llcd It is clear from the above provision that mere investment in the form of stock ownership in a domestic corporation does not fall within the coverage of the term "doing business" which requires licensing under the Corporation Code and Foreign Investments Act. However, while the foreign company under the above situation need not be licensed, either as a branch or representative office, the corporation to be formed out of the joint venture shall be subject to the requirements under the Foreign Investments Act in the event the foreign equity participation thereof exceeds 40% of the outstanding capital stock. Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner