Ambassador S.K. Uppal

August 27, 2001 SEC OPINION Ambassador S.K. Uppal Office of the Ambassador of India 2190 Paraiso Street Dasmarias Village, Makati, Metro Manila Dear Ambassador Uppal, This is in reply to your letter dated June 21, 2001 posing the following queries: "(a) Can a foreign individual or company set up a company without local participation i.e., holding 100% equity in the Philippine operation? What is the procedure and cost of registering such a company? (b) Can the company obtain a manpower recruitment license and what are the rules and terms? (c) Can the profit of this company be repatriated 100% in hard currency? (d) Would it be better to have a local manager as an employee or as a working partner?" As to the first query, the Fourth Regular Investment Negative List provides for the foreign equity restrictions depending on the classification of the business. There are business activities which can be undertaken by a 100% foreign-owned company depending on its classification under the negative list. Attached herewith is a copy of the list for your information and reference. As to the procedure for registration, we are attaching herewith a copy of the checklist of requirements for registration and FIA application forms for your guidance. The requirements listed therein must be filed with the Commission for its approval. The cost of registration consists of the following: 1. filing fee 1/5 of 1% of the authorized capital stock but not less than P1,000.00 2. research fee 1 % of the filing fee 3. name reservation fee P40.00 per thirty (30) days reservation. On the second query, the answer is in the negative. Under the 4th Regular Foreign Investment Negative List, foreign equity for this kind of business is limited only up to 25% . We suggest that you look for a Filipino partner for this kind of business. As to the requirements, you may communicate with the Philippine Overseas Employment Administration. Anent the third question, the Bangko Sentral ng Pilipinas is the government agency concerned as far as the regulation on the repatriation of profits is concerned. We understand that there is no restriction but it would be better to clarify this with the said agency. Lastly, for foreign corporations, the appointment of a resident agent is required, his function being, to receive in behalf of the corporation summons and other legal processes in connection with actions or other legal proceedings against said corporation. Your question as to whether a local manager should be an employee or a working partner is already a business judgment which the stockholders/owners themselves should decide. You may however consider the option of making your local manager your working partner. The success/progress of the business endeavor of the foreign company would necessarily depend on the performance of the local manager. Thus, it is deemed that the individual who will be managing the company should be directly connected with the company and interested in its development. Working as a partner, the local manager would be in a better position to protect the interest of the company and be encouraged to work harder not only for his advancement but more so for the benefit of the corporation. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner