Jebsen & Jessen Phils., Inc.

May 17, 1999 Jebsen & Jessen Phils.,Inc. SGS Foundation Bldg. 1335 G. Araneta Avenue Quezon City Attention : Mr . Eduardo A . Ngo Corporate Secretary Gentlemen: This refers to your letter dated April 19, 1999 posing certain queries relative to the plan of Jebsen & Jessen (SEA) Pte.,Ltd.,a foreign company incorporated in Singapore, to provide an interest-free three year loan to its subsidiary in the Philippines, Jebsen & Jessen, Phils.,Inc. prcd To summarize, you are inquiring whether or not the above transaction is considered as "foreign investment" under the Foreign Investments Act of 1991 and whether or not a license or permit from the SEC is required to facilitate the release of said loan. A grant of foreign loan is not regarded as a form of "investment" for purposes of RA 7042, otherwise known as the Foreign Investments Act of 1991, as amended by RA 8179. " Loan " and " equity " investment represent a totally different relationship of the parties to the transaction. Equity investment involves ownership interest in the corporation which entitle the investor to a right to participate in the profits thereof. On the other hand, a loan transaction involves creditor interest which requires the repayment of the principal amount loaned without being an owner of the corporation. The investment envisioned in the Act refers only to " equity investment " which is defined under said Act as follows: "c) the term "foreign investment" shall mean an equity investment made by a non-Philippine national in the form of foreign exchange and/or other assets actually transferred to the Philippines and duly registered with the Central Bank which shall assess and appraise the value of such assets other than foreign exchange." (Emphasis supplied) Further, the Commission, in a letter addressed to Mr. Henry Villegas dated March 29, 1995 , previously opined that the mere act of signing a loan agreement by a foreign company with a resident in another state where the loan is merely incidental to and not a substantial part of the business of the former does not fall within the coverage of the term "doing business" which requires licensing under the Corporation Code and the Foreign Investments Act. A xerox copy of said letter-opinion is herewith attached for ready reference. Accordingly, if the grant of the loan referred to in your letter is solely to accommodate the Philippine subsidiary of the foreign company, the above-mentioned queries are all answered in the negative. However, the transaction may be subject to the rules and regulations of the Bangko Sentral. Further information may therefore be sought from that Office." prcd Very truly yours, (SGD.) ROSALINDA U. CASIGURAN Associate Commissioner