Quasha Ancheta Pena & Nolasco

July 12, 1996 Quasha Ancheta Pena & Nolasco c/o Atty. Geraldine A. Gumtang Don Pablo Building, 114 Amorsolo St.,Makati City M a d a m : This refers to your letter query dated June 17, 1996 requesting clarification on whether or not the SEC policy, allowing only a proportionate foreign representation in the Board of Directors on the basis of their actual equity participation in the capital stock of the corporation, also applies to corporations which are not engaged in partially nationalized activity. As stated, your client wishes to incorporate a company. One of the prospective majority shareholders is a Filipino Corporation which intends to nominate a foreigner as director holding only a nominal share to represent it in the Board. The proposed corporation will have a paid-in equity of US$500,000.00. You were informed that the present policy of the Commission is to apply the requirement, regardless of whether or not the corporation is engaged in a partially nationalized activity. However, it is your view that the required proportionate foreign representation in the Board of Directors does not apply in the present case inasmuch as the requirement under Section 2-A of Commonwealth Act No. 108, as amended by PD 715, otherwise known as the Anti-Dummy Law, specifically refers only to "partially-nationalized activities ." In this connection, please be advised that the Commission, in its meeting of July 11, 1996, resolved to reverse its previous policy, and now limits the required proportionate foreign representation in the Board of Directors to only "partially nationalized " corporations taking into consideration that Section 2-A of Commonwealth Act No. 108, as amended by PD 715, otherwise known as the Anti-Dummy Law, explicitly refers only to partially nationalized activities. Consequently, your view regarding this matter is upheld. Accordingly, the situation mentioned in your query may now be allowed. Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Acting Chairman