Atty. Francisco De Guzman

February 8, 2001 ATTY. FRANCISCO DE GUZMAN F.S. and Associated Law Offices 130 Timog Avenue, Quezon City Dear Atty. De Guzman, This has reference to your letter dated November 27, 2000 requesting our opinion on the following queries: "1. May a company whose primary purpose is "to establish, operate and maintain restaurants, coffee shops, refreshment parlors, cocktail lounges and cater foods" have foreign equity? 2. If the answer to No. 1 is affirmative, is there any limit fixed by law as to the extent of foreign equity in such company? 3. Can such company be owned 100% by foreigners?" Under R.A. 8762 (act liberalizing the retail trade business), restaurant business is considered a retail business. However, an exception is allowed under Rule 1, Sec. 2, paragraph (c), which excludes sales arising from restaurant operations by a hotel owner or innkeeper irrespective of the amount of capital, provided, that the restaurant is incidental to the hotel business. Pursuant to the abovementioned law, "partnerships, associations, corporations, partially or wholly-owned by foreigners, formed and organized under the laws of the Philippines . . . may engage or invest in the retail trade business, subject to the following categories: cCAaHD "Sec. 5. Foreign Equity Participation xxx xxx xxx Category B Enterprises with a minimum paid-up capital of the equivalent in the Philippine Pesos of Two Million Five Hundred US Dollars (US$2,500,000.00) but less than Seven Million Five Hundred Thousand US Dollars (US$7,500,000.00) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than sixty percent (60%) of total equity. Category C Enterprises with a paid-up capital of the equivalent in the Philippine Pesos of Seven Million Five Hundred Thousand US Dollars (US$7,500,000.00) or more may be wholly owned by foreigners. Provided, however, that in no case shall the investments for establishing a store in categories B and C be less than equivalent in Philippine Pesos of Eight Hundred Thirty Thousand US dollars (US$830,000.00)" Your queries are therefore answered in the affirmative subject to the categories abovecited. It is however advised that you refer to R.A. 8762 for matters concerning the retail trade business. Please be guided accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner November 27, 2000 The Securities and Exchange Commission EDSA, Greenhills, San Juan, Metro Manila Dear Sir/Madam : May we request for an opinion/ruling from your office as to the following questions/issues: 1. May a company whose primary purpose is "to establish, operate and maintain restaurants, coffee shops, refreshment parlors, cocktail lounges and cater foods" have foreign equity? 2. If the answer to No. 1 is affirmative, is there any limit fixed by law as to the extent of foreign equity in such company? 3. Can such company be owned 100% by foreigners? We hope that we can receive your reply as soon as possible. SIHCDA Very truly yours, (SGD.) ATTY. FRANCISCO S. DE GUZMAN