Mr. K.J. Mctavish

December 8, 1995 Mr. K.J. Mctavish Australian Federal Police Australian Embassy Manila S i r : This refers to your letter dated November 15, 1995 requesting information relative to restrictions on Chinese non-Filipino citizens conducting business in the Philippines in their own right, either as a corporation or sole proprietorship. prcd We wish to inform you that foreigners are not prohibited from engaging in business in the Philippines. As a general rule , foreign equity participation of as much as one hundred percent (100%) is allowed, except in areas reserved to Philippine nationals as mandated in the Philippine Constitution and other relevant laws of the country. While the Government recognizes the importance of foreign investments in the economic development of the country, it also recognizes the rights of Philippine nationals and the need to protect certain areas as provided for in the Constitution and other laws for reasons of security, defense, risk to health and morals, and protection of local small and medium-scale enterprises. The extent of foreign equity in these areas are limited to percentages indicated in the Foreign Investment Negative List adopted pursuant to RA 7042, otherwise known as the Foreign Investments Act of 1991. On the citizenship requirement of corporate officers . Sec. 2-A of Commonwealth Act No. 108, as amended, bans foreigners from being elected or appointed to management positions as president, vice-president, treasurer, secretary, etc. in business activities where there is a constitutional or statutory provision imposing a specific nationality requirement as a requisite for the exercise or enjoyment of a right, franchise or privilege . In the case of the corporate secretary , Sec. 25 of the Corporation Code requires that he/she shall be a citizen and residents of the Philippines, regardless of whether or not the corporation is engaged in a nationalized business . However, while in nationalized business activities foreigners are prohibited from being elected or appointed as corporate officers, they can be elected as directors in proportion to their participation or share in the capital of such business entities pursuant to PD 715 which amends CA 108. Thus, the Department of Justice had opined that " in determining the representation of alien stockholders in the board of directors of corporations engaged in partially nationalized activities, the basis should be the actual share of the alien stockholders in the capital of the corporation which share, however, should not exceed the foreign equity ceiling prescribed by law for a particular corporation or association ". (DOJ Opinion No. 161, S. 1994) Regarding residency requirements , Section 23 of the Corporation Code requires that at least majority of the members of the Board of Directors must be residents of the Philippines. Section 25 of the Corporation Code further requires that the corporate Secretary shall be a citizen and at the same time a " resident " of the Philippines. Likewise, the Commission, as a matter of policy, requires that the corporate Treasurer shall be a " resident " of the Philippines taking into consideration his function as custodian of the corporate funds. Both corporate secretary and treasurer are required to be residents of the Philippines regardless whether or not the corporation is engaged in a nationalized business activity. As a matter of policy, the SEC considers holders of ICR (Immigrant Certificate of Registration, SIRV (Special Investors Resident Visa), and any kind of Visa which is valid for at least one (1) year, as " residents " of the Philippines for purposes of complying with the residency requirement under the Corporate Code. For further information, you may communicate with the following Government Offices for appropriate assistance on the subject matters herein indicated: 1. Bangko Sentral ng Pilipinas ( on restrictions of remittances of earnings and procedure of repatriation of foreign investments .) 2. Bureau of Internal Revenue (for purposes of taxation of foreign investments) 3. Bureau of Immigration (for investment visa of foreigners) Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Acting Chairman