Director Justiniano Ascaño

June 26, 1984 Director Justiniano Ascao Board of Investments Industry & Investment Building 385 Buendia Avenue Extension Makati, Metro Manila Sir : This refers to your letter dated June 6, 1984 requesting for opinion as to whether Alpha International Manpower Services, Inc.,a domestic corporation whose primary purpose is to engage in manpower and recruitment services may undertake its secondary purpose as its main activity (exportation business). It appears that the corporation is proposing to undertake the business of exportation of live goats to the Middle East pursuant to its Supply and Service Contract entered into with the Federated Angels (Anglo-Nubian Goat Entrepreneurs Livelihood Societies, Inc.).The company is now requesting BOI approval of its proposal to accept permissible investments from its foreign stockholders on record, to increase 30% shareholdings to 50%. A perusal of the amended articles of the incorporation indicates that the primary purpose of that corporation is as follows: "To organize, establish, engage, operate and manage a manpower placement and recruiting office and furnish manpower services, which will undertake, manage and conduct the business of providing employment and service assistance, and aid to any local or foreign firm, establishment, corporation, partnership, entity, proprietorship or individuals for the recruitment and placement of professionals, technicians, entertainers, artists, office and industrial workers, personnel and officers and crews needed for local and foreign registered vessels and all kinds of skilled and unskilled personnel or workers for determination of their special qualifications and skills in the performance and execution of a desired work, duty or assignment and conduct selecting, screening, testing and arranging travel documents and render employment assistance desired or required and to be hired by any local and/or foreign firm, company, corporation, proprietorship, entity, business establishment, commercial houses, trade centers, industrial enterprises and any other legitimate business undertaking, all to the extent provided by law." and that one of the secondary purposes is: "11. To act as general merchants in Philippine quality export products and, in the furtherance of the same, to engage in and carry on a general mercantile business, and more specifically: to buy, sell, import, export ,barter, exchange and otherwise deal in different agricultural and industrial products and commodities either grown or processed locally, and to this end, to install, operate and maintain mills, machineries, manufacturing plants and factories by utilizing as raw materials all classes and descriptions of local produce, the component materials thereof and the appurtenances thereto, and to manufacture any and all supplies, materials, tools, machines, appliances or apparatus employed in or related to the manufacture of the said wares intended principally for foreign distribution; and to engage in construction of buildings and industrial plants, locally or in any part of the world as may be necessary to carry out the furtherance of the business, and to undertake contract on any construction job, and in general, to engage in such other pursuits; and to this end to acquire by purchase or lease or otherwise, lands or interest in lands, and to hold, improve, develop and manage any real estate so acquired, engage in the business of realty brokerage and/or act as commercial broker or agent for any person, firm, corporation or association, both domestic or foreign, for and in transactions involving or related to the acquisition, sale, lease, mortgage and administration of lands and other realities and the improvements thereon without engaging in the subdivision business." (as amended on October 5, 1983) Where the purpose clause of the articles of incorporation of a company embodies a variety of different and related purposes, the corporation may intend either to carry them out simultaneously or to prosecute first the primary business in which it is most interested and then embark later in anyone of the other objectives, as the need for expansion of the enterprise may warrant or the necessity for a change of business may demand ( SEC letter to Filfactors Financial Corporation dated January 2, 1973 ). Accordingly, where the corporation has for its primary purpose the operation of a manpower placement and recruiting office and the same wishes to engage in the other purposes enumerated in its articles of incorporation, it may do so, provided that the requirements of Section 42 of the Corporation Code of the Philippines are complied with. Under this Section, a corporation can engage in a business other than the primary purpose, provided that the same be approved by a majority of the board of directors and ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock at a stockholders' meeting duly called for the purpose. It was noted, however, that under the Labor Code of the Philippines, foreign ownership in a manpower and recruitment entity is limited only to 25%. The Labor Code of the Philippines, as amended, provides: "ARTICLE 27. Citizenship Requirement . Only Filipino citizens or corporation, partnerships or entities at least seventy-five percent (75%) of the authorized and voting capital stock of which is owned and controlled by Filipino citizens shall be permitted to participate in the recruitment and placement of workers, locally or overseas." (emphasis supplied) Thus, under the aforementioned proposed capitalization set-up, the corporation cannot legally engage in manpower and recruitment services. If the corporation intends to push thru with the said proposal, it should be required to amend its primary purpose from recruitment to exportation business in accordance with Section 16 of the Corporation Code. Considering that presently, the corporation has 30% foreign equity, the Commission in a letter of even date, directed the corporation to reduce its foreign equity to the minimum percentage of foreign ownership required in the Labor Code should it intend to continue engaging in manpower and recruitment business. Please be advised accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman