Atty. Cielito A. Martinez

January 26, 1990 Atty. Cielito A. Martinez Martinez Law Office Ground Floor, Ledesma Building Corner Real & Gen. Luna Sts. Intramuros, Manila S i r : This refers to your letter dated December 26, 1989, requesting opinion on the query posed therein. LexLib You stated that Washington Export/Import Corporation is presently engaged in the manufacture and pulping of abaca, maguey, salago and other natural fibers. In 1988, it exported approximately 88% of its total production, while the remaining 12% found its way to the local market. In 1988, the corporation amended its articles of incorporation by dividing its capital stock into 70% "A" common shares which shall be exclusively issued to Filipino citizens, and 30% "B" common shares which may be owned by both Filipino and foreign nationals and/or corporations. With the foregoing facts, you are inquiring whether a foreigner who is a holder of class "B" common shares may be elected as president of subject corporation. Pursuant to the provisions of Commonwealth Act No. 108, as amended by PD 715, otherwise known as the Anti-Dummy Law, the Commission previously ruled that in firms engaged in wholly or partially nationalized activities, aliens are banned from being elected or appointed to management positions as president, vice-president, treasurer, auditor, etc. of said companies, although they can be elected directors in proportion to their allowable participation or share in the capital of such companies. (SEC Opinions dated June 14, 1982 * ; July 1, 1983; May 15, 1985; May 28, 1985) The Anti-Dummy Law provides, thus: "SECTION 2.A. Any person, corporation or association which, having in its name or under its control, a right, franchise, privilege, property or business, the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country, or to corporation or association at least sixty per centum of the capital of which is owned by such citizens, ...permits or allow any person, not possessing the qualifications required by the Constitution, or existing laws ... to intervene in the management, operations, administration or control thereof, whether as an officer, employee or laborer therein with or without remuneration except technical personnel whose employment may be specifically authorized by the Secretary of Justice ...shall be punished by imprisonment for not less than five nor more than fifteen years ...;and provided, finally, That the election of aliens as members of the Board of Directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in the capital of such entities." (emphasis supplied) Likewise, your attention is invited to the provisions of RA 1180, otherwise known as the Retail Trade Nationalization Law, which provides that corporations whose capital are not owned wholly by citizens of the Philippines are banned from engaging in "retail business". The law provides, thus: "SECTION 1. No person who is not a citizen of the Philippines, and no associations, 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 ...".(emphasis supplied) Records show that subject corporation has the following purpose clause: "To engage in the manufacture and pulping of abaca, maguey, salago and other natural fibers and to carry on a general mercantile and commercial business or importing and exporting, buying, acquiring, holding, selling or otherwise disposing of and dealing in the aforesaid natural fibers pulp and paper and in any and all equipment, supplies, goods, wares, merchandise and commodities of all kinds and products, natural or artificial, of the Philippines or other countries, which are or may become articles of commerce." (Primary Purpose) (emphasis supplied) "2. To manufacture, buy, sell, deal in, and to engage in, conduct, and carry on the business of manufacturing, buying, selling and dealing ill goods, wares, merchandise of every class and descriptions ,except food and drugs." (Secondary) (emphasis supplied) From the aforecited purpose clause, it can be construed that subject corporation may engage in retail business . Thus, if the corporation is presently engaged in said line of business, it is prohibited from accepting foreign investors, and in view of the provisions of the Anti-Dummy Law, aliens are banned from being elected to management positions, such as president. However, should the corporation opt to accept foreign investors, and desires to elect an alien president, it may amend its articles of incorporation in accordance with Section 16 of the Corporation Code by expressly stating in the purpose clause that its trading business shall be limited to wholesale basis only, in which event, foreign ownership and participation in the management thereof may be allowed. llcd Please be guided accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .