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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:
The nationality of a corporation is determined by law and not by the corporation and/or its subsidiaries. It is the test or tests, as provided by law, that should prevail in determining the nationality of a corporation, and not its representations and/or those of its subsidiaries. (SEC-OGC Opinion No. 11-42 dated October 12, 2011)
The nationality of a corporation is determined by law and not by the corporation and/or its subsidiaries. It is the test or tests, as provided by law, that should prevail in determining the nationality of a corporation, and not its representations and/or those of its subsidiaries. (SEC-OGC Opinion No. 11-42 dated October 12, 2011)
There are three (3) tests to determine the nationality of a corporation, namely:
- Incorporation Test
- Control Test
- Grandfather Rule
- INCORPORATION TEST
Under the incorporation test, the nationality of a corporation is based on its place of incorporation.
- CONTROL TEST
Under this test, a corporation shall be considered as Filipino if 60% of its capital stock is owned by Filipinos. This test shall prevail if at first glance it can be determined that there is 60-40 Filipino to foreign equity ratio and no doubt exists that would give rise to a reasonable suspicion that the Filipino shareholders do not actually have the requisite number of control and beneficial ownership in the corporation.
- GRANDFATHER RULE
The Grandfather Rule shall apply when in the mind of the Court, there is doubt, based on the attendant facts and circumstances of the case, in the 60-40 Filipino equity ownership in the corporation, then it may apply the “grandfather rule.”
The Grandfather Rule implements the intent of the Filipinization provisions of the Constitution.
To reiterate, Sec. 2, Art. XII of the Constitution reserves the exploration, development, and utilization of natural resources to Filipino citizens and “corporations or associations at least sixty per centum of whose capital is owned by such citizens.” Similarly, Section 3(aq) of the Philippine Mining Act of 1995 considers a “corporation x x x registered in accordance with law at least sixty per cent of the capital of which is owned by citizens of the Philippines” as a person qualified to undertake a mining operation. Consistent with this objective, the Grandfather Rule was originally conceived to look into the citizenship of the individuals who ultimately own and control the shares of stock of a corporation for purposes of determining compliance with the constitutional requirement of Filipino ownership. It cannot, therefore, be denied that the framers of the Constitution have not foreclosed the Grandfather Rule as a tool in verifying the nationality of corporations for purposes of ascertaining their right to participate in nationalized or partly nationalized activities.(NARRA NICKEL MINING AND DEVELOPMENT CORP. vs. REDMONT CONSOLIDATED MINES CORP, G.R. No. 195580, January 28, 2015)
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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/ 0917-5772207/ 09778050020.
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