Re : Foreigner as CEO of Domestic IT Company

April 26, 2004 SEC OPINION NO. 27-04 Re : Foreigner as CEO of Domestic IT Company Atty. Arnold M. Caga De Guzman Dionido & Associates Law Offices 3rd floor, Executive Bldg. Center, Gil Puyat Ave. cor. Makati Ave., Makati City S i r : This refers to your request for opinion whether American Data Exchange Corporation can be wholly foreign-owned and as a consequence, can elect a foreigner as its Chief Executive Officer. The Second Article of the company's Amended Articles of Incorporation reads: "SECOND: A. That the primary purpose of this corporation is to engage in Information Technology (IT) and IT enabled services like data encoding, data processing, data conversion, transcription, call center and other customer relationship management (CRM) services; business process outsourcing; systems design, integration and management; data center management; software development, content development; and a host of other services tailor fit for your evolving IT and business needs. "(As amended on March 24, 2004) Per your definition, "content development" is the process of gathering together, writing, editing, optimizing and otherwise adapting content materials specifically for publication on the web. 1 On the other hand, the term "mass media" shall mean the gathering, transmission of news, information, messages, signals, and forms of written, oral and all visual communications and shall embrace the print medium, radio, television, film, movies, wire and radio communication services, advertising in all its phases, and their business managerial. 2 It embraces means of communications which reach and influence large number of people. It is divided into two groups: Print Media and Broadcast Media. 3 "Print Media" includes all newspapers, periodicals, magazines, journals and publications and all advertising therein, and billboards, neon signs and the like. 4 The term "mass media in the Constitution, refers to any medium of communication, a newspaper, radio, motion pictures, television, designed to reach the masses and that tend to set standards, ideals and aims of the masses. 5 Further, information technology has been defined as the development, installation and implementation of computer systems and application. 6 A call center is a centralized office of a company that answers incoming telephone calls from customers (especially for taking orders or serving customers). It is a place that handles a high-volume of incoming telephone calls on behalf of a large organization. 7 In view of the foregoing definitions, it can be implied that your corporation is merely a "carrier" for transmitting messages and does not create messages/information nor transmit the messages/information to the general public 8 that influence large numbers of people. The same does not fall within the ambit of the definition of "mass media." Consequently, it is not covered by the Constitutional mandate limiting ownership and management to citizens of the Philippines. Thus, we confirm your opinion that foreign nationals may own one hundred percent (100%) equity in a domestic corporation intended to be established in the Philippines to engage in Information Technology and related business and be elected as the latter's Chief Executive Officer, provided that the corporation shall not engage in any of the activities enumerated in the Foreign Investments Negative List as nationalized or partly nationalized activities; provided further, that it complies with the required minimum inward remittance of US$200,000.00 or its peso equivalent. 9 Please be reminded however that the foregoing opinion is based solely on facts disclosed in your query and relevant solely to the particular issues raised therein and shall not be used in the nature of a standing rule binding upon the Commission in other cases whether similar or dissimilar circumstances. 2004cdtai For your information and guidance. IaTSED Very truly yours , (SGD.) VERNETTE G. UMALI-PACO General Counsel Footnotes 1. Letter dated 12 March 2004, Arnel Galo S. Esguerra, ADEC Managing Director. 2. SEC Opinion dated 15 July 1991 addressed to Myrna Cruz-Feliciano, citing P.D. 36, as amended by P.D. 191 and 197). 3. Ibid. 4. Ibid. , citing Sec. 2, P.D. 576. 5. Ibid. , citing Opinion No. 163, S. 1973, Minister of Justice. 6. http://www.bartleby.com/cgi-bin/texis/webinator/ahdsearch?search_type=enty&query=in ... 7. Encarta World English Dictionary, North American Edition, http://en2.wikipedia.org/wiki/Call+center. 8. DOJ Opinion No. 040, s. 1998 dated 19 March 1998. 9. Republic Act 7042 otherwise known as "The Foreign Investments Act of 1991".