Mr. Jiro Sato

June 11, 1991 Mr. Jiro Sato Yakult Honsha Co., Ltd. No. 1-19, 1-Chome, Higashinbashi Minato-Ku, Tokyo, 105 Japan S i r : This refers to your latter of June 5, 1991 inquiring whether or not a domestic corporation, 40% of the outstanding capital stock of which is owned by a foreign company, Yakult Honsha Co., Ltd., can invest in another domestic company which is engaged in retail business. LexLib Anent thereto, please be advised that Republic Act 1180, otherwise known as the Retail Trade Nationalization Law, was passed to nationalize the retail trade business. Section 1 thereof provides, thus: "SECTION 1. No person who is not a citizen of the Philippines, and no association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or indirectly in the retail business: . . ." It is clear from the aforecited provision that corporations whose capital are not wholly owned by citizens of the Philippines are barred from engaging "directly or indirectly" in retail business. The use of the words "directly or indirectly" is of paramount importance for it underscores the policy of the State to exclude corporations not wholly owned by Filipinos from engaging in retail business. The use of the said words clearly indicates that investments made or to be made by a corporation with foreign equity participation and its consequent ownership of shares in a Filipino corporation engaged in retail business would be an indirect means of engaging in retail business because through such shares the stockholders participate in the profits of the latter corporation. Thus, the Commission previously ruled that "only corporations wholly owned by Filipino citizens can purchase or acquire or invest shares of a corporation engaged in retail trade. The law requires 100% Filipino ownership of corporations before it can engage directly or indirectly in retail business and so any percentage less would disqualify it." ( SEC Opinion dated July 21, 1977, addressed to Atty. Rodegelio M. Jalandoni ). cdlex In the light of the foregoing, your query is answered in the negative. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman