Quisumbing Torres and Evangelista

October 11, 1995 Quisumbing Torres and Evangelista 11th Flr.,Pacific Star Bldg., Makati Ave.,cor. Sen. Gil J. Puyat Makati, Metro Manila S i r : This refers to your letter dated October 10, 1995, requesting a ruling that CSR LIMITED will not be deemed doing business in the Philippines if it will engage in the activity described therein. As stated, CSR LIMITED is a corporation duly organized and existing under the laws of Australia primarily engaged in the manufacture and sale of construction materials. It is also engaged in the business of milling and refining of sugar, aluminum and timber production. CSR has neither directly sold any of its products within the Philippines nor derived income from the Philippines. CSR has not engaged in business in the Philippines. COCA-COLA INTERNATIONAL (CCI),which owns 30% of the equity of COCA-COLA BOTTLERS PHILIPPINES, INC. ("CCBPI"),has requested CSR to perform consultancy services for CCBPI. CCI, with its related companies in Australia, is a major customer of CSR Limited. The consultancy service/technology transfer is aimed at improving the sugar handling, refining and utilization in 5 CCBPI plants and sugar mills of CCBPI sugar supplies. The proposed consultancy will consist of the following stages: Stage 1 plant visits to conduct technical assessment of the sugar handling and processing methods of CCBPI and its local sugar suppliers; preparation of preliminary technical audit report and recommendations with cost estimates of carrying out the recommendations. Stage 2 preparation of detailed technical audit report and recommendations for the improvement of the plant, equipment and systems. Stage 3 supervision of the implementation of the improvement program. CSR estimates that the plant visits will be accomplished in 20 days. Thereafter, the preliminary audit report will be prepared in Australia. Stage 1 is expected to be completed in 40 days. Stage 2 will require not more than 50 days. Of these 50 days, not more than 10 days will be performed in the Philippines. Stage 3 will require not more than 80 days. CCBPI will not pay CSR for performing Stage 1. However, if CCBPI opts to engage CSR to do Stage 2, CCBPI will reimburse CSR for expenses incurred in performing Stage 1. CCBPI will pay CSR a consultancy fee if CCBPI will engage CSR to perform Stages 2 and 3. It is your contention that CSR Limited will not be deemed doing business in the Philippines as the proposed activity is merely an isolated transaction for the following reasons: 1. The proposed activity in the Philippines is not part of the main body of activities that CSR performs in its principal place of business. CSR Limited is not engaged in the business of providing consultancy services. In rare instances, it provides consultancy in sugar processing and handling to its customers, upon the request of the Customer. CSR does not solicit consultancy contracts. It does not charge a consultancy fee to its customers. 2. CSR Limited has not previously conducted business in the Philippines and has no plans to conduct future business in the Philippines .Aside from the proposed consultancy service to CCBPI, CSR has no plans to enter into any other commercial contracts in the Philippines . The weight of authority maintains that where the corporation enters into a single agreement, or engages in isolated business act or transaction within a particular state, with no intention to repeat the same or make such state a basis for the conduct of any part of its corporate business, such corporation c annot be said to be doing business or transacting business within the state, within the meaning of the usual statutory provisions regulating the transaction of business by foreign corporation (17 Fletcher, Cyclopedia Corporations, Sec. 8469). Thus, under Philippine jurisdiction, the term " doing business " is defined under Sec. 3 (d) of RA No. 7042, otherwise known as the Foreign Investments Act of 1991, as follows: "The phrase " doing business " shall include soliciting orders, service contracts, opening offices, whether called "liaison" officers or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty (180) days or more, participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the commercial gain or of the purpose and object of the business organization; Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account." (Emphasis supplied). It can be gleaned from the above-cited provision that for a business activity or dealing to be considered doing business, there should be an element of continuity of conduct in that respect . In the present case, said element is not present. It would appear therefore that the above-contemplated activity does not fall within the coverage of the term "doing business" which requires licensing under the Corporation Code and Foreign Investments Act. Thus, taking into consideration the several pronouncements of this Commission, that foreign corporations whose activity in the Philippines is only limited to an isolated business transaction with no intention to repeat the same, are not considered doing business, we hereby confirm your view that the aforesaid proposed activity will not be deemed doing business in the Philippines, and hence, CSR is exempted from obtaining a license to do business in the Philippines. cdlex Please be advised accordingly. (SGD.) FE ELOISA C. GLORIA Associate Commissioner