Atty. Antonio Quintos

June 14, 1995 Atty. Antonio Quintos 502 San Luis Terraces T.M. Kalaw St.,Ermita Manila S i r : This refers to your letter of May 24, 1995 inquiring whether a foreign-owned corporation can be organized under existing laws with the following primary purpose: llcd "To import, export, distribute and trade in, educational products including but not limited to books, encyclopedias, electric and electronic learning aids, devices, games and self-improvement courses; non-educational or general interest books, non-educational electric and electronic devices and games; self-improvement courses; food supplements and vitamins; and all products deemed to improve the education, performance, health and vitality or the user." The above-quoted purpose clause is broad enough to include " retail business ". Under R.A. 1180, otherwise known as the Retail Trade Nationalization Law, a corporation whose capital are not wholly owned by citizens of the Philippines are barred from engaging in " retail business ".Since the proposed corporation is foreign-owned, its trading business should be limited only to " wholesale transactions ".Accordingly, it is suggested that the phrase, " on wholesale basis " be indicated in the purpose clause. Likewise, it makes mention of educational materials which may be interpreted to be covered by the business term " mass media ". By mandate of the Constitution, no foreign equity is allowed on corporations engaged in said business activity. Therefore, it is suggested that the following proviso be included in the purpose clause "provided that in no case shall the corporation undertake any activity that would fall within the scope of "mass media" as contemplated by the Philippine Constitution" . The inclusion of the above suggested provisions in the purpose clause would be a clear indication that the corporation does not intend to engage in retail trade nor in mass media. Further, if the foreign equity participation in the proposed corporation exceeds 40% of the entire outstanding capital stock, the corporation must comply with the minimum paid-up capital of the equivalent of five hundred thousand US dollars (US$500,000.000) required under R.A. 7042, otherwise known as the Foreign Investment Act. For as long as the above conditions are complied with, your query may be answered in the affirmative. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner