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This article was originally published on April 19, 2018 and has been updated to reflect recent legal developments.
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Our country endeavors to attract, promote and welcome productive investments from foreign entities, in activities which significantly contribute to national industrialization and socio-economic development to the extent that foreign investment is allowed in such activity by the Constitution and relevant laws (Sec. 2, R.A. No. 8179). With this, many foreign corporations choose to invest by engaging in business in the Philippines. In doing so, however, our laws have imposed certain conditions before foreign corporations may legally operate their enterprises in the country.
Under Section 140 of the Revised Corporation Code, a foreign corporation is one formed, organized or existing under laws other than those of the Philippines’ and whose laws allow Filipino citizens and corporations to do business in its own country or State. It shall have the right to transact business in the Philippines after obtaining a license for that purpose in accordance with this code and a certificate of authority from the appropriate government agency.
Application and issuance of license to do business
A foreign applying for a license to transact business in the Philippines shall submit to the Commission a copy of its articles of incorporation and bylaws, certified in accordance with law, and their translation to an official language of the Philippines, if necessary. The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following:
- The date and term of incorporation;
- The address, including the street number, of the principal office of the corporation in the country or State of incorporation;
- The name and address of its resident agent authorized to accept summons and process in all legal proceedings and all notices affecting the corporation, pending the establishment of a local office;
- The place in the Philippines where the corporation intends to operate;
- The specific purpose or purposes which the corporation intends to pursue in the transaction of its business in the Philippines: Provided, That said purpose or purposes are those specifically stated in the certificate of authority issued by the appropriate government agency;
- The names and addresses of the present directors and officers of the corporation;
- A statement of its authorized capital stock and the aggregate number of shares which the corporation has authority to issue, itemized by class, par value of shares, shares without par value, and series, if any;
- A statement of its outstanding capital stock and the aggregate number of shares which the corporation has issued, itemized by class, par value of shares, shares without par value, and series, if any;
- A statement of the amount actually paid in; and
- Such additional information as may be necessary or appropriate in order to enable the Commission to determine whether such corporation is entitled to a license to transact business in the Philippines, and to determine and assess the fees payable.
Attached to the application for license shall be a certificate under oath duly executed by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the country or State of the applicant allow Filipino citizens and corporations to do business therein, and that the applicant is an existing corporation in good standing. If the certificate is in a foreign language, a translation thereof in English under oath of the translator shall be attached to the application.
The application for a license to transact business in the Philippines shall likewise be accompanied by a statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Commission and when appropriate, other governmental agencies that the applicant is solvent and in sound financial condition, setting forth the assets and liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application.
Foreign banking, financial, and insurance corporations shall, in addition to the above requirements, comply with the provisions of existing laws applicable to them. In the case of all other foreign corporations, no application for license to transact business in the Philippines shall be accepted by the Commission without previous authority from the appropriate government agency, whenever required by law. (Sec. 142)
Appointment of a resident agent, and service of processes
As a condition to the issuance of the license for a foreign corporation to transact business in the Philippines, such corporation shall file with the Commission a written power of attorney designating a person who must be a resident of the Philippines, on whom summons and other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office. Such foreign corporation shall likewise execute and file with the Commission an agreement or stipulation, executed by the proper authorities of said corporation.
Whenever such service of summons or other process is made upon the Commission, the Commission shall, within ten (10) days thereafter, transmit by mail a copy of such summons or other legal process to the corporation at its home or principal office. The sending of such copy by the Commission shall be a necessary part of and shall complete such service. All expenses incurred by the Commission for such service shall be paid in advance by the party at whose instance the service is made.
It shall be the duty of the resident agent to immediately notify the Commission in writing of any change in the resident agent’s address. (Sec. 145)
Merger or consolidation with other corporations
One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporation or corporations if permitted under Philippine laws and by the law of its incorporation: Provided, That the requirements on merger or consolidation as provided in this Code are followed.
Whenever a foreign corporation authorized to transact business in the Philippines shall be a party to a merger or consolidation in its home country or State as permitted by the law authorizing its incorporation, such foreign corporation shall, within sixty (60) days after the effectivity of such merger or consolidation, file with the Commission, and in proper cases, with the appropriate government agency, a copy of the articles of merger or consolidation duly authenticated by the proper official or officials of the country or State under whose laws the merger or consolidation was effected: Provided, however, That if the absorbed corporation is the foreign corporation doing business in the Philippines, the latter shall at the same time file a petition for withdrawal of its license in accordance with this Title. (Sec. 149)
Revocation of license to do business
Without prejudice to other grounds provided under special laws, the license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the Commission upon any of the following grounds:
- Failure to file its annual report or pay any fees as required by this Code;
- Failure to appoint and maintain a resident agent in the Philippines as required by this Title;
- Failure, after change of its resident agent or address, to submit to the Commission a statement of such change as required by this Title;
- Failure to submit to the Commission an authenticated copy of any amendment to its articles of incorporation or bylaws or of any articles of merger or consolidation within the time prescribed by this Title;
- A misrepresentation of any material matter in any application, report, affidavit or other document submitted by such corporation pursuant to this Title;
- Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions;
- Transacting business in the Philippines outside of the purpose or purposes for which such corporation is authorized under its license;
- Transacting business in the Philippines as agent of or acting on behalf of any foreign corporation or entity not duly licensed to do business in the Philippines; or
- Any other ground as would render it unfit to transact business in the Philippines. (Sec. 151)
As can be seen, even though foreign business is welcome in the Philippines, foreign corporations may do such business only after being licensed to do so, and only upon observance of the legal requirements provided by Philippine laws. With this, foreign corporations are likewise encouraged to be aware of what such requirements are, in order to take advantage of their potential Philippine market and compete with the locals. After all, the Philippines is a good place to invest, and in doing so, the country’s economy will likewise benefit, making for a mutually advantageous setup for both the foreign business and the State.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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