Attys. Antonio R. Velicaria and Hildelita N. Pagkatipunan

December 5, 1990 Attys. Antonio R. Velicaria and Hildelita N. Pagkatipunan 4th Floor, Adamson Centre 121 Alfaro St.,Salcedo Vill. Makati, Metro Manila Sir/Madam : This refers to your letter dated November 21, 1990 requesting opinion regarding foreign equity participation in corporations engaged in the business of manning agency, the alien equity ownership of which under Article 27 of the Labor Code,is limited only to 25% of the authorized and voting capital stock of the corporation. As stated, a foreign corporation which is wholly-owned by Filipino citizens, desires to organize or become a stockholder in a domestic corporation engage in a manning agency business. Seventy five percent (75%) of the capital stock of said manning agency will be subscribed by the 100% Filipino-owned foreign corporation and the twenty-five percent (25%) to be owned by foreign nationals. Your queries are: Can a manning agency with the foregoing stock ownership be allowed to be organized in the Philippines and registered with the Securities and Exchange Commission? In the case of an existing manning agency, can a 100% Filipino-owned foreign corporation become a stockholder of 75% of the capital stock of said manning agency? Please be advised that the recent ruling of the Commission relative to the determination of citizenship of corporations with alien equity which states that "shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality",does not apply to corporations formed or organized outside the Philippines. The aforesaid ruling is intended to apply only to corporations incorporated under Philippine law. Section 123 of the Corporation Code is explicit that a corporation incorporated outside the Philippines is considered a "foreign corporation". The Code provides: "SECTION 123. Definition and rights of foreign Corporations . For purposes of this Code, a foreign corporation is one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its country or state ...." (Emphasis supplied) Thus, for corporations incorporated outside the Philippines, the incorporation concept of corporate nationality is adopted. Under the incorporation test of corporate nationality, the nationality of a corporation is that of the state of incorporation regardless of the nationality of the stockholders. In view of the foregoing, investments of a 100% Filipino-owned foreign corporation in a domestic corporation is treated as that of a foreign national. Accordingly, your queries are answered in the negative. cdll (SGD.) RODOLFO L. SAMARISTA Associate Commissioner