Atty. V.M. Del Rosario

July 31, 2001 SEC OPINION Atty. V.M. Del Rosario V.E. Del Rosario And Partners Rosadel Building, 1011 Metropolitan Avenue Makati City Dear Mr. Del Rosario, This has reference to your letter dated May 31, 2001 requesting our opinion on the interpretation of Section 8(b)(2) of Republic Act 7042, as amended by R.A. 8179, particularly with respect to the minimum paid-in equity capital requirement for corporations with foreign equity. You are of the opinion that the minimum paid-in equity capital of US$200,000 (US$100,000) applies only if the foreign investment exceeds the 40% limitation set by law. List B of the 4th Foreign Investment Negative List limits foreign equity up to 40% for certain business activities, among which are the questioned provisions, as follows: "List B. xxx xxx xxx 6. Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000 (RA No. 7042 as amended by RA No. 8179) 7. Domestic market enterprises which involve advanced technology or employ at least fifty (50) direct employees with minimum paid-in capital of US$100,000 (RA No. 8179) The abovecited provision, particularly no. 6 means that if the paid-in capital of a domestic enterprise is less than US$200,000, then, its foreign equity participation is limited to 40%.On the reverse, if the paid-in capital of the domestic market enterprise is US$200,000 or more, then, the foreign equity may exceed the 40% limit. Impliedly then, the minimum paid-in capital of US$200,000 is required only if the foreign equity exceeds 40%. On the no. 7 item in the abovecited list, the minimum paid-in capital of US$100,000 applies only to domestic market enterprises which involve advanced technology or employ at least fifty direct employees and with foreign equity of more than forty (40%) percent. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner