equity capital of less than the equivalent of US $ 100,000 (RA 7042 as amended by RA 8179)
16.4 Laws applicable to foreign corporations licensed
to transact business in the Philippines (Section 129)
Sec. 129. Law applicable
Any foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except such only as provide for the creation, formation, organization or dissolution of corporations
or those which fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation. (73a)
UP Class Notes
1. This is limited to Filipino citizens save in cases prescribed by law 2. Full foreign participation is allowed for retail trade enterprises: (a) with paid-up capital of US $ 2,500,000 or more provided that investments for establishing a store is not less than US $ 830,000; or (b) specializing in high end or luxury products, provided that the paid- up capital per store is not less than US $ 250,000 (Sec. 5 of RA 8762) 3. Domestic investments are also prohibited (Art. II Sec. 8 Constitution; Conventions & Treaties to w/c the Philippines is signatory
4. Full foreign participation is allowed through financial or technical assistance agreement w/ the President (Art. XII Sec. 2 Constitution) 5. Full foreign participation is allowed provided that within the 30 year period from start of operation, the foreign investor shall divest a minimum of 60% of their equity to Filipino citizens (Sec. 5 PD 194; NFA Council Resolution No. 193 s. 1998)
6. No foreign national may be allowed to own stock financing companies or investment houses unless the country of which he is a national accords the same reciprocal rights to Filipinos (Sec. 6 of RA 5980 as amended by RA 8556; PD 129 as amended by RA 8366)
16.5 Consequences of doing business in the
Philippines without a license (Section 133)
Sec. 133. Doing business without a license
No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. (69a)
Suability of Foreign Corporations: (CLV’s CLR at 947)
Doing business in the Philippines
with a license
May sue and can be sued in the Philippines
Doing business in the Philippines
without license
Cannot sue, but may be sued in the Philippines
Not doing business in the Philippines, on isolated transactions
May sue
May be sued (Facilities Mgt v. dela Osa, 1979)
Jack’s Lecture
If a foreign corporation is being sued, the summons must be served on the resident agent. The corporation is also required to file with the SEC a power of attorney or resolution which says that if it has no resident agent it agrees that the summons be served with the SEC which will forward the summons and the complaint to the foreign corporation. If no resident agent and any officer who will be in the Philippines may be served with summons.
Section 133 says that if the foreign corporation will be doing business without a license it cannot sue or intervene in any action in court or administrative agency.
The SC had said that if a foreign corporation is doing business here without a license, a contract it entered into is valid, it is not rendered void so the court said the legislature made a judgment call that imposing penal sanctions and denying access to the courts are sufficient penalties for doing business without a license. The legislature did not provide that the contract it entered into is void. Although the foreign corporation did not have license to do business when it entered into in that contract, it could sue if later on it acquired a license to do business.
If a foreign corporation is not doing business it can sue because it is not required to get a license but it can not be sued because it has no presence here it will violate due process.
In the farm machinery case, the court made an obiter dictum that a foreign corporation not doing business can be sued, the reasoning of Justice Makasiar, if the foreign corporation not doing business can sue, then it should also be allowed to be sued is wrong because that will violate due process because it has no presence here. Our courts cannot acquire jurisdiction over it. The remedy is to make the action an action quasi in rem you attach its property serve it summons.
If the corporation is doing business whether or not it is licensed it can be sued, the law says that if it is doing business but it has no license it cannot sue.
If a foreign corporation is suing it must alleged either that it is not doing business or it is doing business but it is licensed because a plaintiff must indicate in the complaint that it has the legal capacity to sue. In the case of a foreign corporation it must show it is either not doing business or it doing business and it is licensed.
However, in the Merrill Lynch case, the court said that if a foreign corporation is doing business without a license, it the other party was aware of it, it can not claim that the plaintiff cannot sue, he will be in estoppel having benefited from the contract. Except in two cases, the SC has followed this most of the subsequent cases.
Other than in cases of isolated transactions, may a foreign corporation not doing business in the Philippines sue?
Yes
To protect its reputation, corporate name and goodwill (Sec 3 of RA 8293)
For infringement of trademark or trade-name, unfair competition or false description of products and infringement of patent. (Section 160 RA 8293) (Handbook of Conflict of Laws at 148)
16.6 Merger or consolidation involving licensed
foreign corporation (Section 132)
Sec. 132. Merger or consolidation involving a foreign corporation licensed in the Philippines
One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporation or corporations if such is 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 of its incorporation, such foreign corporation shall, within sixty (60) days after such merger or consolidation becomes effective, file with the Securities and Exchange 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 the laws of which 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 it license in accordance with this Title. (n)
16.7 Revocation of license and issuance of certificate
of revocation (Section 134 and 135)
Sec. 134. Revocation of license
Without prejudice to other grounds provided by special laws, the license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the Securities and Exchange Commission upon any of the following grounds:
1. Failure to file its annual report or pay any fees as required by this Code;
2. Failure to appoint and maintain a resident agent in the Philippines as required by this Title;
3. Failure, after change of its resident agent or of his address, to submit to the Securities and Exchange Commission a statement of such change as required by this Title;
4. Failure to submit to the Securities and Exchange Commission an authenticated copy of any amendment to its articles of incorporation or by-laws or of any articles of merger or consolidation within the time prescribed by this Title;
5. A misrepresentation of any material matter in any application, report, affidavit or other document submitted by such corporation pursuant to this Title;
6. 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;
7. Transacting business in the Philippines outside of the purpose or purposes for which such corporation is authorized under its license;
8. Transacting business in the Philippines as agent of or acting for and in behalf of any foreign corporation or entity not duly licensed to do business in the Philippines; or
9. Any other ground as would render it unfit to transact business in the Philippines. (n)
Sec. 135. Issuance of certificate of revocation
Upon the revocation of any such license to transact business in the Philippines, the Securities and Exchange Commission shall issue a corresponding certificate of revocation, furnishing a copy thereof to the appropriate government agency in the proper cases.
The Securities and Exchange Commission shall also mail to the corporation at its registered office in the Philippines a notice of such revocation accompanied by a copy of the certificate of revocation. (n)
16.8 Withdrawal of foreign corporation (Section 136)
Sec. 136. Withdrawal of foreign corporationsSubject to existing laws and regulations, a foreign corporation licensed to transact business in the Philippines may be allowed to withdraw from the Philippines by filing a petition for withdrawal of license. No certificate of withdrawal shall be issued by the Securities and Exchange Commission unless all the following requirements are met;
1. All claims which have accrued in the Philippines have been paid, compromised or settled;
2. All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions have been paid; and
3. The petition for withdrawal of license has been published once a week for three (3) consecutive weeks in a newspaper of general circulation in the Philippines.