Re : Definition of "Philippine National" under the ForeignInvestments Act

March 3, 2004 SEC OPINION NO. 14-04 Re : Definition of "Philippine National" under the Foreign Investments Act Tan & Concepcion Law Firm Suites 2103-2106, 21st Floor, Medical Plaza, Ortigas Building, San Miguel Avenue, Ortigas Center 1661, Pasig City, Philippines Gentlemen : This refers to your letter dated January 27, 2004 inquiring on whether or not a domestic corporation which is 100% owned by a Foreign Holding Company with a 60% Filipino equity may be considered as a Philippine National under the Foreign Investments Act. The Commission answers in the negative. Under Section 123 of the Corporation Code, it is provided that "a foreign corporation is one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state." Under Philippine jurisdiction, the primary test is always the Place of Incorporation Test since we adhere to the doctrine that a corporation is a creature of the State whose laws it has been created. A corporation organized under the laws of a foreign country, irrespective of the nationality of the persons who control it is necessarily a foreign corporation. The control test and the principal place of business test (siege social),are merely adjunct tests, when the place of incorporation test indicates that the subject corporation is organized under Philippine laws. (Villanueva, Philippine Corporate Law, p. 58) If at all, the only exception to the place of incorporation test provided under the Foreign Investments Act is "a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos." However, such conditions are unavailing in the particular case presented. Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel