Carag, Caballes, Jamora,

September 21, 1990 Carag, Caballes, Jamora, Rodriguez & Somera Law Offices 2nd Floor, The Plaza Royale 120 Alfaro St., Salcedo Vill. Makati, Metro Manila Gentlemen : This refers to your letter dated August 20, 1990 requesting confirmation of your view that the proposed corporation in which your client intends to invest is a Filipino corporation. cdll As stated, your client, Indo Phil Textile Mills, Inc. (Indo Phil) is a domestic corporation whose outstanding capital stock is owned by foreign stockholders to the extent of 56% and the rest, or 44% thereof, owned by Filipinos. Indo Phil intends to invest in the shares of stock of a proposed corporation which will engage in the manufacturing business by subscribing to 70% of its capital stock upon incorporation, and the rest or 30% to be subscribed by Filipinos. It is your view that the proposed corporation, after the said proposed subscriptions to its capital stock, would be a Filipino Corporation in that 60.8% of its capital stock will be deemed owned by Filipinos using the following computation: Subscription of Indo Phil. considered as owned by Filipinos: 70 x 44% = 30.8% 100 add: Percentage of individual Filipino stockholdings in the proposed corporation = 30.0% Filipino equity in the proposed corporation = 60.8% ===== In determining the nationality of corporations with foreign equity, the Commission has adopted the following rule based on the Department of Justice opinion No. 18, s. 1989 dated January 19, 1989: "Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine nationality . Thus, if 100,000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital, respectively, of which belong to Filipino citizens, all of the said shares shall be recorded as owned by Filipinos. But if less than 60% or, say, only 50% of the capital stock or capital of the corporation or partnership, respectively belongs to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shares shall be recorded as belonging to aliens." (Emphasis supplied) In the light of the foregoing, your view on the matter is hereby confirmed. However, while the proposed corporation may be considered a Filipino corporation, it is not qualified to engage in any business reserved by the Constitution or other special laws solely to Filipino citizens, or to invest in or enter into a joint venture agreement with corporations or partnerships, the capital or ownership of which, under the Constitution or other special laws, are limited to Filipino citizens only. LexLib Please be advised accordingly. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner