Mr. Enrico M. Ingles

February 18, 1994 Mr. Enrico M. Ingles Seventh Flr. Suite D, Valero Tower, 122 Valero Street Salcedo Village, Makati, Metro Manila S i r : This refers to your letter of February 4, 1994 inquiring whether foreigners may occupy positions of President, Vice-President and Treasurer aside from being members of the Board in "trading" and "construction" business. The Commission, in several occasions has ruled that in firms engaged in wholly or partially nationalized business activities, aliens are banned from being appointed/elected to management positions, such as president, vice-president, treasurer, secretary, auditor, etc. of said companies pursuant to the ruling of the Department of Justice Re: Opinion No. 37, Series of 1976, although they can be elected directors in proportion to their allowable participation or share in the capital of such activities in accordance with Commonwealth Act No. 108, as amended by P.D. 715, otherwise known as the Anti-Dummy law. Retail trade business is considered a wholly nationalized business pursuant to RA 1180, as amended, otherwise known as the Retail Trade Nationalization Law. Accordingly, foreigners are barred from engaging in said line of business, and consequently, they cannot be appointed to management positions thereof, either as directors or officers. However, in "wholesale trading", foreigners are not disqualified to become officers, provided that the wholesale trading activity is integrated in the production or manufacture of goods not covered by the Foreign Investments Negative List under RA 7042, otherwise known as the Foreign Investment Act of 1991 and provided further that the corporation has a paid-up capital of not less than the equivalent of five hundred thousand US dollars (US$500,000). For " Wholesale trading " activities which are not integrated with manufacturing, foreigners are prohibited, since under the Negative List such business activity is considered a partially nationalized business wherein foreign equity is limited only to 40%. With respect to construction business ,foreigners are subject to the above prohibition if the construction activity involves any of the following: a. Contracts for the construction and repair of locally-funded public works (25% under C.A. 541 as amended by PD 1594; LOI 630) b. Contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, company, agency or municipal corporation (40% under RA 5183) c. Private domestic and overseas construction contracts (40% under RA 4566 as amended by RA 6957) d. Contracts for the construction of defense-related buildings and structures (e.g. land, air, sea and coastal defenses, arsenals. barracks, depots, hangars, landing fields, quarters, hospitals (40% under Commonwealth Act 541 ) e. Construction of public utilities (40% under RA 6957) Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman