transacting business” in the Philippines for foreign corporations?
A:
1. Soliciting orders, service contracts, and opening offices
2. Appointing representatives, distributors domiciled in the Philippines or who stay for a period or periods totaling 180 days or more
3. Participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines 4. Any act or acts that imply a
continuity of commercial dealings or arrangements, and contemplate to some extent the performance of acts or works or the exercise of some functions normally incident to and in progressive prosecution of, the purpose and object of its organization.
Q: What are the requisites for obtaining license to do business?
A:
1. The foreign corporation should file a verified application containing and together with the following:
a. Designated resident agent (who will receive summons and notices for the corporation;
b. a special power of attorney should also be submitted for such purpose;
2. An agreement that if it ceases to transact business or if there is no more resident agent, summons shall then be served through SEC;
3. Oath of Reciprocity. Certificate under Oath of the authorized official of the foreign corporation’s country that allows Filipino citizens and corporations to do business in said country.
4. Within 60 days from issuance of license, the corporation should deposit at least P100, 000.00 (cash, property or bond) for the benefit of creditors subject to further deposit every six months.
Q: Why do foreign corporations need license to transact business in the Philippines?
A: Foreign corporations need license to:
1. Place them under the jurisdiction of the court;
2. Place them in the same footing as domestic corporation;
3. Protect the public in dealing with the said corporation.
Q: What are the jurisprudential rules related to the consequences of not obtaining license by a foreign corporation?
A:
1. Doctrine of isolated transactions – foreign corporations, even unlicensed ones can sue or be sued on a transaction or series of transactions set apart from their common business in the sense that there is no intention to engage in a progressive pursuit of the purpose and object of business transaction (Eriks Pte. Ltd. v. CA, G.R.
No. 118843, Feb. 6, 1997)
2. In pari delicto rule – in the case of Top‐
Weld manufacturing vs. ECED S.A. (G.R. No. L‐44944, Aug. 9, 1985), the court
denied the relief prayed for by petitioner when it ruled that the very purpose of the law was circumvented and evaded when the petitioner entered into the said agreements despite the prohibition contained in the questioned law. The parties were considered as being in pari delicto because they equally violated R.A. No. 5455.
3. Doctrine of Estoppel – the party is estopped from questioning the capacity of a foreign corporation to institute an action in our courts where it had obtained benefits from its dealings with such foreign corporations and thereafter omitted a breach or sought to renege its obligations (Merrill Lynch
v. CA, G.R. No. 978160, July 24, 1992)
Q: What are considered doing business under the Foreign Investment Act?
A: Under the Foreign Investment Act, the
following are considered doing business:
1. Soliciting orders 2. Service contracts
3. Appointing representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totaling 180 days or more 4. Opening offices, whether called liason offices
or branches
5. Establishing a factory, workshop or processing plant
6. Undertaking building construction or erection projects
7. Opening a store, whether wholesale or retail without prejudice to the provisions of the Retail Trade Act
8. Maintaining or operating a warehouse for business purposes including the storage, display or delivery of its own products 9. Participating in the management,
supervision or control of any domestic business, firm, entity or corporation in the Philippines
10. Any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent, performance normally incident to , and in progressive prosecution of, commercial gain or of the purpose and object of the business organization
11. It shall not include:
a. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business and/or the exercise of such rights as such investor b. Having a nominee director or
officer to represent its interests in such corporations
c. Appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account
12. The following acts by themselves shall not be deemed doing business in the Phil:
a. The publication of a general advertisement through newspapers, brochures or other publication media or through radio or television
b. Maintaining the stock of goods in the Phil solely for the purpose of having the same processed by another entity in the Phil.
c. Collecting information in the Phil. d. Performing services auxiliary to an
existing contract or sale, which are not on a continuing basis.
Q: What are not considered doing business under the Foreign Investment Act?
A: Under the Foreign Investment Act, the
following are not considered doing business: 1. Mere investment as a shareholder by a
foreign entity in a foreign corporation duly registered to do business.
2. The exercise of rights as a stock investor and
3. Having a nominee director or officer to represent its interest in such corporation
4. Appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.
5. Publication of general advertisement through any print or broadcast media 6. Maintaining a stock of goods in the
Philippines solely for the purpose of having the same processed by another entity in the Philippines.
7. Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export and
8. Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it and similar incidental services.
(B) NECESSITY OF A LICENSE TO DO BUSINESS
Q: Why is there a necessity to require a foreign corporation to acquire a license before engaging in business in the Philippines?
A: The purpose of the law in requiring that a
foreign corporation doing business in the Philippines be licensed to do so is to subject such corporation to the jurisdiction of the courts. The object is not to prevent foreign corporation from performing single acts but to prevent it from acquiring a domicile for the purpose of business without taking steps necessary to render it amenable to suits in local courts.
(i) REQUISITES FOR ISSUANCE OF LICENSE
Q: What are the requisites for the issuance of license to a foreign corporation?
A: A foreign corporation applying for a license
shall submit to the SEC: