Atty. Federico G. Noel

September 28, 2001 SEC OPINION Attys. Federico G. Noel Myla Rae M. Santos Shangri-la Plaza Corporation EDSA corner Shaw Boulevard, Mandaluyong City Dear Attys. Noel and Santos, This refers to your letter dated February 6, 2001 requesting opinion on the following queries posed therein: (1) May the provisions of the Anti-Dummy Law, providing in essence that aliens can only be directors in proportion to their allowable participation or share in the capital of a nationalized or partially nationalized industry, be viewed to be inapplicable to Shangrila Plaza Corporation (SLPC)? (2) Where the anti-dummy law is deemed inapplicable, may SLPC then be allowed to: (a) elect aliens to sit as members of the board of directors by a number which is more than the representation proportionate to the foreign equity in SLPC? (b) Elect aliens to compose a majority of the members of the board of directors? (c) Elect aliens to compose all of the members of the board of directors? Based on the corporate data sheet of SLPC, SLPC's ownership is 78.7% Filipino and 21.3% Foreign .Its present paid-up capital is P1,927,000,000.00. Its primary purpose is: "To invest in, purchase, or otherwise acquire and own, hold, lease, operate, and/or provide management counsel for, the Shangri-la Plaza Building located at the corner of Shaw Boulevard and Epifanio de los Santos Avenue in Mandaluyong, Metro Manila, or any other enterprise or venture engaged in the same or similar business (i.e. shopping centers and other retail areas, foodcourts, entertainment or other leisure complexes),and for this purpose, to establish, organize, equip, own, operate, manage, control or otherwise maintain in said Shangri-la Plaza Building or in such other enterprise or venture such amusement, entertainment and/or recreational facilities or establishments, as may be appropriate, including but not limited to motion picture theaters, cinemas, museums, exhibitions, fairs and shows, for participation of the public or otherwise for the purpose of attracting the public into the Shangri-la Plaza Building or such other enterprise or venture, and to charge admission fees, rates, rentals and other forms or payment for doing so". As per your letter dated August 21, 2001, you confirmed that the land on which the Shangrila Plaza building currently stands is not owned by Shangrila Plaza Corporation but by Edsa Properties Holdings Inc.,a Filipino corporation. Thus, the business activity of the subject corporation pertains primarily to the operation and management of buildings, as may be gleaned from the aforequoted purpose clause, and does not include ownership or acquisition of land in the Philippines. At present, SLPC has 7 members in its board of directors and only 2 are aliens. Pursuant to the Anti-Dummy Law, in firms engaged in wholly or partly nationalized activities ,aliens are banned from being appointed to management positions such as president, vice-president, treasurer, auditor, etc. of said companies although they can be elected directors in proportion to their allowable participation or share in the capital of such activities . (SEC Opinion dtd. July 27, 1990, Phil. Association of Service Exporters, Inc.) Hence, anent your first query, the answer is in the affirmative considering that the business purpose of subject corporation is not a nationalized or partly-nationalized activity. It can be deduced from the law that the restrictions therein apply only to nationalized or partly nationalized business activities. Accordingly, your second query and its subquestions are also answered in the affirmative provided that majority of the directors are residents of the Philippines as required by the Corporation Code. The business activity of Shangrila Plaza Corporation is neither a nationalized nor partly nationalized activity, and its paid-in equity capital is more than the equivalent of US$200,000. Thus, the limitation under the anti-dummy law will not apply. Accordingly, the corporation may elect as many aliens as members of its board of directors. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner