2019 CORP.

LAW OUTLINE 3
Prof. M.I.P. Romero

V. CLASSES OF CORPORATIONS UNDER THE CORP. CODE

1. Sec. 3, 86, 87--- stock and non-stock corporation

Section 3. Classes of Corporations. - Corporations formed or organized under this Code may be stock or nonstock corporations. Stock
corporations are those which have capital stock divided into shares and are authorized to distribute to the holders of such shares, dividends,
or allotments of the surplus profits on the basis of the shares held. All other corporations are nonstock corporations.
Section 86. Definition. - For purposes of this Code and subject to its provisions on dissolution, a nonstock corporation is one where no part
of its income is distributable as dividends to its members, trustees, or officers: Provided, That any profit which a nonstock corporation may
obtain incidental to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose of purposes for which the
corporation was organized, subject to the provisions of this Title.
The provisions governing the stock corporations, when pertinent, shall be applicable to nonstock corporations except as may be covered by
specific provisions of this Title.
Section 87. Purposes. - Nonstock corporations may be formed or organized for charitable, religious, educational, professional, cultural,
fraternal, literary, scientific, social, civic service, or similar purposes. like trade industry, agricultural and like chambers, or any combination
thereof, subject to the special provisions of this Title governing particular classes of nonstock corporations.

Coll. of Int. Rev. v. Club Filipino 5 SCRA 321 (1962)

2. Other classes of corporations under the Corporation Code:

One Person Corp. – Sec. 116

Section 116. One Person Corporation. - A One Person Corporation is a corporation with a single stockholder: Provided, That only a natural
person, trust, or an estate may form a One Person Corporation.
Banks and quasi-banks, preneed, trust, insurance, public and publicly-listed companies, and non-chartered government-owned and -
controlled corporations may not incorporate as ONe Person Corporations: Provided, further, That a natural person who is licensed to exercise
a profession may not organize as a One Person Corporation for the purpose of exercising such profession except as otherwise provided
under special laws.
Close corporation – Sec. 95
Section 95. Definition and Applicability of Title. - A close corporation, within the meaning of this Code, is one whose articles of incorporation
provides that: (a) all the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than a
specified number of persons, not exceeding twenty (20); (b) all the issued stock of all classes shall be subject to one (1) or more specified
restrictions on transfer permitted by this Title; and (c) the corporation shall not list in any stock exchange or make any public offering of its
stocks of any class. Nothwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of
its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the meaning of this Code.
Any corporation may be incorporated as a close corporation, except mining or oil companies, stock exchanges, banks, insurance companies,
public utilities, educational institutions and corporations declared to be vested with public interest in accordance with the provisions of this
Code.
The provisions of this Title shall primarily govern close corporations: Provided, That other Titles shall primarily govern close corporations:
Provided, That other Titles in this Code shall apply suppletorily, except as otherwise provided under this Title.
Special corporations – Educational, Religious (Title XIII)
TITLE XIII
SPECIAL CORPORATIONS
CHAPTER I
EDUCATIONAL CORPORATIONS
Section 105. Incorporation. - Education corporations shall be governed by special laws and by the general provisions of this Code.
Section 106. Board of Trustees. - Trustees of educational institutions organized as nonstock corporations shall not be less than five (5) nor
more than fifteen (15): Provided, That the number of trustees shall be in multiples of five (5).
Unless otherwise provided in the articles of incorporation or bylaws, the board of trustees of incorporated schools, colleges, or other
institutions of learning shall, as soon as organized, so classify themeselves that the term of office of one-fifth (1/5) of their number shall expire
every year. Trustees thereafter elected to fill vacancies, occurring before the expiration of a particular term shall hold office only for the
unexpired period. Trustees elected thereafter to fill vacancies caused by expiration of term shall hold office for five (5) years. A majority of
the trustees shall constitute a quorum for the transaction of business. The powers and authority of trustees shall be defined in the bylaws.
For institutions organized as stock corporations, the number and term of directors shall be governed by the provisions on stock corporations.
CHAPTER II
RELIGIOUS CORPORATIONS
Section 107. Classes of Religious Corporations. - Religious corporations may be incorporated by one (1) or more persons. Such corporations
may be classified into corporations sole and religious societies.
Religious corporations shall be governed by this Chapter and by the general provisions on nonstock corporations insofar as applicable.
Section 108. Corporation Sole. - For the purpose of administering and managing, as trustee, the affairs, property and temporalities of any
religious denomination, sect or church, a corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi, or other
presiding elder of such religious denomination, sect or church.
Section 109. Articles of Incorporation. - In order to become a corporation sole, the chief archbishop, bishop, priest, minister, rabbi, or
presiding elder of any religious denomination, sect or church must file with the Commission articles of incorporation setting forth the following:
(a) That the applicant chief archbishop, bishop, priest. Minister, rabbi, or presiding elder represents the religious denomination,
set or church which desires to become a corporation sole;
(b) That the rules, regulations and discipline of the religious denomination, sect or church are consistent with becoming a
corporation sole and do not forbid it;
(c) That such chief archbishop, bishop, priest, minister, rabbi or presiding elder is charged with the administration of the
temporalities and the management of the affairs, estate and properties of the religious denomination, sect or church within the
territorial jurisdiction, so described succinctly in the articles of incorporation;

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 (d) The manner by which vacancy occurring in the office of chief archbishop, bishop, priest, rabbi or presiding elder is required to
be filled, according to the rules, regulations or discipline of the religious denomination, sect or church; and
(e) The place where the principals office of the corporation sole is to be established and located, which place must be within the
territory of the Philippines.
The articles of incorporation may include any other provisions not contrary to law for the regulation of the affairs of the corporation.
Section 110. Submission of the Articles of Incorporation. - The articles of the incorporation must be verified, bu affidavit or affirmation of the
chief archbishop, bishop, priest, minister, rabbi, presiding elder, as the case may be, and accompanied by a copy of the commission,
certificate of election or letter of appointment of such chief archbishop, bishop, priest, minister, rabbi or presiding elder, as the case may be,
and accompanied by a copy of the commission, certificate of election or letter of appointment of such chief archbishop, bishop, priest,
minister, rabbi, or presiding elder, duly certified to be correct by any notary public.
From and after filing with the Commission of the said articles of incorporation, verified by affidavit or affirmation, and accompanied by the
documents mentioned in the preceding paragraph, such chief archbishop, bishop, priest, minister, rabbi, or presiding elder shall become a
corporation sole and all temporalities, estate and properties of the religious denomination, sect or church theretofore administered or manage
as such chief archbishop, bishop, priest, minister, rabbi, or presiding elder shall be personally held in trust as a corporation sole, for the use,
purpose, exclusive benefit and on behalf of the religious denomination, sect or church, including hospitals, schools, colleges, orphan asylums
parsonages, and cemeteries thereof.
Section 111. Acquisition and Alienation of Property. - A corporation sole may purchase and hold real estate and personal property for each
church, charitable, benevolent, or educational purposes, and may received bequests or gifts for such purposes. Such corporation may sell
or mortgage real property held by it by obtaining an order for that purpose from the Regional Trial Court of the province where the property
is situated upon proof that the notice of the application for leave to sell or mortgage has been made through publication or as directed by the
Court, and that it is in the interest of the corporation that leave to sell or mortgage be granted. The application for leave to sell or mortgage
must be made by petition, duly verified, by the chief archbishop, bishop, priest, minister, rabbi, or presiding elder acting as corporation sole,
and may be opposed by any member of the religious denomination, sect or church represented by the corporation sole: Provided, That in
cases where the rules, regulations, and discipline of the religious denomination, set or church, religious society, or colder concerned
represented by such corporation sole regulate the method of acquiring, holding, selling, and mortgaging real estate and personal property,
such rules, regulations and discipline shall govern, and the intervention of the courts shall not be necessary.
Section 112. Filling of Vacancies. - The successor in the office of any chief archbishop, bishop, priest, minister, rabbi, or presiding elder in
a corporation sole shall become the corporation sole on their accession to office and shall be permitted to transact business as such upon
filing a copy of their commission, certificate of election, or letters of appointment, duly certified by any notary public with the Commission.
During any vacancy in the office of chief archbishop, bishop, priest, minister, rabbi, or presiding elder of any donomination, sect or church
incorporated as a corporate sole, the person or persons authorized by the rules, regulations or discipline of the religious denomination, sect
or church represented by the corporation sole to administer the temporalities and manage the affairs, estate, and properties of the corporation
sole shall exercise all the powers and authority of the corporation sole during such vacancy.
Section 113. Dissolution. - A corporation sole may be dissolve and its affairs settled voluntarily by submitting to the Commission a verified
declaration of dissolution, setting forth:
(a) The name of the corporation;
(b) The reason of dissolution and winding up;
(c) The authorization for the dissolution of the corporation by the particular religious denomination, sect or church; and
(d) The names and addresses of the persons who are to supervise the winding up of the affairs of the corporation.
Upon approval of such declaration of dissolution by the Commission, the corporation shall cease to carry on its operations except for the
purpose of winding up its affairs.
Section 114. Religious Societies. - Unless forbidden by the competent authority, the Constitution, pertinent, rules, regulations, or discipline
of the religious denomination, sect or church of which it is part, any religious society, religious order, diocese, or synod, or district organization
of any religious denomination, sect or church, may, upon written consent and/or by an affirmative vote at a meeting called for the purpose of
at least two-thirds (2/3) of its membership, incorporate for the administration of its temporalities or for the management of its affairs, properties,
and estate by filing the management of its affairs, properties, and estate by filing with the Commission, articles of incorporation verified by
the affidavit of the presiding elder, secretary, or clerk or other member of such religious society or religious denomination, sect or church,
setting forth the following:
(a) That the religious society or religious order, or diocese, synod, or district organization is a religious organization of religious
denomination, sect or church;
(b) That at least two-thirds (2/3) of its membership has given written consent or has voted to incorporate, at a duly convened
meeting of the body;
(c) That the incorporation of the religious society or religious order, or diocese, synod, or district organization is not forbidden by
competent, authority or by the Constitution, rules, regulations or discipline of the religious denomination, sect or church of which
it forms part;
(d) That the religious society or religious order, or diocese, synod, or district organization desires to incorporate for the
administration of its affairs, properties and estate;
(e) The place within the Philippines where the principal office of the corporation is to be established and located; and
(f) The names, nationalities, and residence addresses of the trustees, not less than five (5) no more than fifteen (15), elected by
the religious society or religious order, or the diocese, synod or district organization to serve for the first year or such other period
as may be prescribed by the laws of the religious society or religious order, or of the diocese, synod, or district organization.
Foreign corporations --- Sec. 140
Section 140. Definition of Righs of Foreign Corporations. - For purposes of this 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 certificate of authority from the appropriate government agency.
Others: subsidiary (wholly-owned v. majority owned), affiliate, parent/holding company, joint venture corporation, open vs. close, lay vs. religious,
eleemosynary vs. civil corp., etc.

GOVERNED primarily by specific titles, then suppletorily by the other applicable provisions of the Corp. Code

VI. CREATION OF CORPORATION

A. Promotion (relate to Sec. 3.10. of Securities Regulation Code)

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 McArthur v. Times Printing Co. 31 Am. St. Rep. 653
Cagayan Fishing v. Sandiko 65 Phil 223 (1937)
Caram v. CA June 30, 1987

B. Incorporation

1) Steps in incorporation

2) Sections 5, 10 –14
Section 5. Corporators and Incorporators, Stockholders and Members. - Corporators are those who compose a corporation, whether as
stockholders or shareholders in a stock corporation or as a members in a nonstock corporations. Incorporators are those stockholders or
members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.
Section 10. Number and Qualifications of Incorporators. - Any person, partnership, association or corporation, singly or jointly with others
but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes: Provided, That natural persons
who are licensed to practice a profession, and partnerships or associations organized for the purpose of practicing a profession, shall not be
allowed to organize as a corporation unless otherwise provided under special laws. Incorporators who are natural persons must be of legal
age.
Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock.
A corporation with a single stockholder is considered a One Person Corporation as described in Title XIII, Chapter III of this Code.
Section 11. Corporate Term. - A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
Corporations with certificates of incorporation issued prior to the effectivity of this Code and which continue to exist shall have perpetual
existence, unless the corporation, upon a vote of its stockholders representing a majority of its articles of incorporation: Provided, That any
change in the corporate right of dissenting stockholders in accordance with the provisions of this Code.
A corporate term for a specific period may be extended or shortened by amending the articles of incorporation: Provided, That no extension
may be made earlier than three (3) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier
extension as may be determined by the Commission: Provided, further, That such extension of the corporate term shall take effect only on
the day following the original or subsequent expiry date(s).
A corporation whose term has expired may apply for revival of its corporate existence, together with all the rights and privileges under its
certificate of incorporation and subject to all of its duties, debts and liabilities existing prior to its revival. Upon approval by the Commission,
the corporation shall be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual existence,
unless its application for revival provides otherwise.
No application for revival of certificate of incorporation of banks, banking and quasi-banking institutions, preneed, insurance and trust
companies, non-stock savings and loan associations (NSSLAs), pawnshops, corporations engaged in money service business, and other
financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate
government agency.
Section 12. Minimum Capital Stock Not Required of Stock Corporations. - Stock corporations shall not be required to have minimum capital
stock, except as otherwise specially provided by special law.
Section 13. Contents of the Articles of Incorporation. - All corporations shall file with the Commission articles of incorporation in any of the
official languages, duly signed and acknowledged or authenticated, in such form and manner as may be allowed by the Commission,
containing substantially the following matters, except as otherwise prescribed by this Code or by special law:
(a) The name of corporation;
(b) The specific purpose or purposes for which the corporation is being formed. Where a corporation has more than one stated
purpose, the articles of incorporation hsall indicate the primary purpose and the secondary purpose or purposes: Provided, That
a nonstock corporation may not include a purpose which would change or contradict its nature as such;
(c) The place where the principal office of the corporation is to be located, which must be within the Philippines;
(d) The term for which the corporation is to exist, if the corporation has not elected perpetual existence;
(e) The names, nationalities, and residence addresses of the incorporators;
(f) The number of directors, which shall not be more than fifteen (15) or the number of trustees which may be more than fifteen
(15);
(g) The names, nationalities, and residence addresses of persons who shall act as directors or trustees until the first regular
directors or trustees are duly elected and qualified in accordance with this Code;
(h) If it be a stock corporation, the amount of its authorized capital stock, number of shares into which it is divided, the par value
of each, names, nationalities, and subscribers, amount subscribed and paid by each on the subscription, and a statement that
some or all of the shares are without par value, if applicable;
(i) If it be a nonstock corporation, the amount of its capital, the names, nationalities, and residence addresses of the contributors,
and amount contributed by each; and
(j) Such other matters consistent with law and which the incorporators may deem necessary and convenient.
An arbitration agreement may be provided in the articles of incorporation pursuant to Section 181 of this Code.1âwphi1
The Articles of incorporation and applications for amendments thereto may be filed with the Commission in the form of an electronic
document, in accordance with the Commission's rule and regulations on electronic filing.
Section 14. Form of Articles of Incorporation. - Unless otherwise prescribed by special law, the articles of incorporation of all domestic
corporations shall comply substantially with the following form:
Articles of Incorporation
of
_____________________
(Name of Corporation)
The undersigned incorporators, all of legal age, have voluntarily agreed to form a (stock) (nonstock) corporation under the laws
of the Republic of the Philippines and certify the following:
First: That the name of said corporation shall be "_________________", Inc. Corporation or OPC";
Second: That the purpose or purposes for which such corporation is incorporated are: (If there is more than one purpose,
indicate primary and secondary purposes);
Third: That the principal office of the corporation is located in the City/Municipality of _______________, Province of
______________________, Philippines;

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 Fourth: That the corporation shall have perpetual existence or a term of ___________ years from the date of issuance of the
certificate of incorporation;
Fifth: That the names, nationalities, and residence addresses of the incorporators of the corporation are as follows:
Name Nationality Residence

________________________ ________________________ ________________________

________________________ ________________________ ________________________

________________________ ________________________ ________________________

________________________ ________________________ ________________________

________________________ ________________________ ________________________

Sixth: That the number if directors or trustees of the corporation shall be ___________________; and the names, nationalities,
and residence addresses of the first directors or trustees of the corporation are as follows:
1âwphi1
Name Nationality Residence

________________________ ________________________ ________________________

________________________ ________________________ ________________________

________________________ ________________________ ________________________

________________________ ________________________ ________________________

________________________ ________________________ ________________________

Seventh: That the authorized capital stock of the corporation is ____________________ PESOS (₱______), dividend into ____
shares with the par value of ___________________ PESOS (₱_____________) per share. (In case all the shares are without
par value): That the capital stock of the corporation is __________________ shares without par value.
(In case some shares have par value and some are without par value): That the capital stock of said corporation consists of
________________________________ shares, of which _______________________ shares have a par value of
___________________________PESOS (₱_______) each, and of which ____________________ shares are without par
value.
Eight: That the number of shares of the authorized capital stock-stated has been subscribed as follows:
No. of Shares
Name of Subscriber Nationality Amount Subscribed Amount Paid
Subscribed

(Modify No. 8 if shares are with no-par value. In case the corporation is nonstock, Nos. 7 and 8 of the above articles may be
modified accordingly, and it is sufficient if the articles may be modified accordingly, and it is sufficient if the articles state the amount
of capital or money contributed or donated by specified persons, stating the names, nationalities, and residence addresses of the
contributors or donors and the respective amount given by each.)
Ninth: That _______________________ has been elected by the subscribers as Treasurer of the Corporation to act as such until
after the successor is duly elected and qualified in accordance with the bylaws, that as Treasurer, authority has been given to
receive in the name and for the benefit of the corporation, all subscriptions, contributions or donations paid or given by the
subscribers or members, who certifies the information set forth in the seventh and eighth clauses above, and that the paid-up
portion of the subscription in cash and/or property for the benefit and credit of the corporation has been duly received.
Tenth: That the incorporators undertake to change the name of the corporation immediately upon receipt of notice from the
Commission that another corporation, partnership or person has acquired a prior right to the use of such name, that the name has
been declared not distinguishable from a corporation, or that it is contrary to law, public morals, good customs or public policy.
Eleventh: (Corporations which will engage in any business or activity reserved for Filipino citizens shall provide the following):
"No transfer of stock or interest which shall reduce the ownership of Filipino citizens to less than the required percentage of
capital stock as provided by existing laws shall be allowed or permitted to be recorder in the proper books of the corporation, and
this restriction shall be indicated in all stock certificates issued by the corporation."
IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation, this ______ day of _____, 20___ in the
City/Municipality of _________________, Province of ________________, Republic of the Philippines.
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
(Names and signatures of the incorporators)
____________________________
(Name and signature of Treasurer)

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 * SEC Memo Circ. No. 16, series of 2019 (Guidelines on Number and Qualifications of Incorporators under the RCCP)

* SEC Memo Circ. No. 6, series of 2016 (Omnibus Guidelines on Principal Office Address; Address of Each Incorporator, Director,
Trustee, Member)

* SEC Memo Circ. No. 7, series of 2019 (Guidelines on Establishment of a One Person Corporation)

3) Name of corporation – Sec 17, 18, 14 par Tenth

Section 17. Corporation Name. - No corporate name shall be allowed by the Commission if it is not distinguishable from that already reserved or
registered for the use if another corporation, or if such name is already protected by law, rules and regulations.

A name is not distinguishable even if it contains one or more of the following:

(a) The word "corporation", "company", incorporated", "limited", "limited liability", or an abbreviation ofone if such words; and

(b) Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different tenses, spacing, or number of the same word or
phrase.

The Commission upon determination that the corporate name is: (1) not distinguishable from a name already reserved or registered for the use of
another corporation; (2) already protected by law; or (3) contrary to law, rules and regulations, may summarily order the corporation to immediately
cease and desist from using such name and require the corporation to register a new one. The Commission shall also cause the removal of all visible
signages, marks, advertisements, labels prints and other effects bearing such coroporate name. Upon the approval of the new corporate name, the
Commission shall issue a certificate of incorporation under the amended name.

If the corporation fails to comply with the Commission's order, the Commission may hold the corporation and its responsible directors or officers in
contempt and/or hold them administratively, civilly and/or criminally liable under this Code and other applicable laws and/or revoke the registration of
the corporation.

Section 18. Registration, Incorporation and Commencement of Corporation Existence. - A person or group of persons desiring to incorporate shall
submit the intended corporate name to the Commission for verification. If the Commission finds that the name is distinguishable from a name already
reserved or registered for the use of another corporation, not protected by law and is not contrary to law, rules and regulation, the name shall be
reserved in favor of the incorporators. The incorporators shall then submit their articles of incorporation and bylaws to the Commission.

If the Commission finds that the submitted document s and information are fully compliant with the requirements of this Code, other relevant laws,
rules and regulations, the Commission shall issue the certificate of incorporation.

A private corporation organized under this Code commences its corporate existence and juridical personality from the date the Commission issues the
certificate of incorporation under its official seal thereupon the incorporators, stockholders/members and their successors shall constitute a body
corporate under the name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or the
corporation is sooner dissolved in accordance with law.

* SEC Memo Circ. No. 13, series of 2019 (Amended Guidelines and Procedures on Use of Corporate & Partnership Names)

Republic Planters Bank v. CA GR 93073 Dec. 21,1992

GSIS Family Bank v. BPI Family Bank Sept. 23, 2015
Indian Chamber of Commerce Phils., Inc. v Filipino-Indian Chamber of Commerce in the Philippines, Inc. G.R. 184008 (Aug. 3, 2016)
Carebest Int’l v. SEC G.R. 215510 (Mar. 16, 2015)
and CA-GR SP No. 104364 ( Sept. 13, 2013)

4) Residence of corporation -
Young Auto Supply Co. v. CA (1993) 223 SCRA 670

5) Citizenship/ Nationality requirements ---

--- pertinent provisions of the 1987 Constitution

--- meaning of CAPITAL under Sec. 11, Art. 12 of the Constitution
Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except
to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum
of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a
longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject
to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation
or association must be citizens of the Philippines.
Gamboa v. Teves, et al June 28, 2011 and Oct. 9, 2012
SEC Memo Circ. No. 8, s2013 (Guidelines in Fil-Foreign ownership)
Roy v. Herbosa Nov. 22, 2016 and April 18, 2017

-- Foreign Investments Act (FIA) of 1991, as amended (general)

Republic Act No. 7042 June 13, 1991

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 AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS
IN THE PHILIPPINES, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
Section 1. Title. - This Act shall be known as the, "Foreign Investments Act of 1991".
Section 2. Declaration of Policy. - It is the policy of the State to attract, promote and welcome productive investments from foreign individuals,
partnerships, corporations, and governments, including their political subdivisions, in activities which significantly contribute to national industrialization
and socioeconomic development to the extent that foreign investment is allowed in such activity by the Constitution and relevant laws. Foreign
investments shall be encouraged in enterprises that significantly expand livelihood and employment opportunities for Filipinos; enhance economic
value of farm products; promote the welfare of Filipino consumers; expand the scope, quality and volume of exports and their access to foreign markets;
and/or transfer relevant technologies in agriculture, industry and support services. Foreign investments shall be welcome as a supplement to Filipino
capital and technology in those enterprises serving mainly the domestic market.
As a general rule, there are no restrictions on extent of foreign ownership of export enterprises. In domestic market enterprises, foreigners can invest
as much as one hundred percent (100%) equity except in areas included in the negative list. Foreign owned firms catering mainly to the domestic
market shall be encouraged to undertake measures that will gradually increase Filipino participation in their businesses by taking in Filipino partners,
electing Filipinos to the board of directors, implementing transfer of technology to Filipinos, generating more employment for the economy and
enhancing skills of Filipino workers.
Section 3. Definitions. - As used in this Act:
a) The term "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by citizens of
the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement
or separation benefits, where the trustee is a Philippine national and at least sixty (60%) of the fund will accrue to the benefit of the Philippine
nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stocks outstanding and entitled to vote of both corporations must be owned
and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of both corporations must
be citizens of the Philippines, in order that the corporations shall be considered a Philippine national;
b) The term "investment" shall mean equity participation in any enterprise organized or existing under the laws of the Philippines;
c) The term "foreign investment" shall mean as equity investment made by a non-Philippine national in the form of foreign exchange and/or
other assets actually transferred to the Philippines and duly registered with the Central Bank which shall assess and appraise the value of
such assets other than foreign exchange;
d) The praise "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods
totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing
business: shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to
do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such
corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its
own account;
e) The term "export enterprise" shall mean an enterprise which produces goods for sale, or renders services to the domestic market entirely
or if exporting a portion of its output fails to consistently export at least sixty percent (60%) thereof; and
g) The term "Foreign Investments Negative List" or "Negative List" shall mean a list of areas of economic activity whose foreign ownership
is limited to a maximum of forty ownership is limited to a maximum of forty percent (40%) of the equity capital of the enterprise engaged
therein.
Section 4. Scope. - This Act shall not apply to banking and other financial institutions which are governed and regulated by the General Banking Act
and other laws under the supervision of the Central Bank.
Section 5. Registration of Investments of Non-Philippine Nationals. - Without need of prior approval, a non-Philippine national, as that term is
defined in Section 3 a), and not otherwise disqualified by law may upon registration with the Securities and Exchange Commission (SEC), or with the
Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry in the case of single proprietorships, do
business as defined in Section 3 (d) of this Act or invest in a domestic enterprise up to one hundred percent (100%) of its capital, unless participation
of non-Philippine nationals in the enterprise is prohibited or limited to a smaller percentage by existing law and/or limited to a smaller percentage by
existing law and/or under the provisions of this Act. The SEC or BTRCP, as the case may be, shall not impose any limitations on the extent of foreign
ownership in an enterprise additional to those provided in this Act: Provided, however, That any enterprise seeking to avail of incentives under the
Omnibus Investment Code of 1987 must apply for registration with the Board of Investments (BOI), which shall process such application for registration
in accordance with the criteria for evaluation prescribed in said Code: Provided, finally, That a non-Philippine national intending to engage in the same
line of business as an existing joint venture in his application for registration with SEC. During the transitory period as provided in Section 15 hereof,
SEC shall disallow registration of the applying non-Philippine national if the existing joint venture enterprise, particularly the Filipino partners therein,
can reasonably prove they are capable to make the investment needed for they are competing applicant. Upon effectivity of this Act, SEC shall effect
registration of any enterprise applying under this Act within fifteen (15) days upon submission of completed requirements.
Section 6. Foreign Investments in Export Enterprises. - Foreign investment in export enterprises whose products and services do not fall within
Lists A and B of the Foreign Investment Negative List provided under Section 8 hereof is allowed up to one hundred percent (100%) ownership.
Export enterprises which are non-Philippine nationals shall register with BOI and submit the reports that may be required to ensure continuing
compliance of the export enterprise with its export requirement. BOI shall advise SEC or BTRCP, as the case may be, of any export enterprise that
fails to meet the export ratio requirement. The SEC or BTRCP shall thereupon order the non-complying export enterprise to reduce its sales to the
domestic market to not more than forty percent (40%) of its total production; failure to comply with such SEC or BTRCP order, without justifiable reason,
shall subject the enterprise to cancellation of SEC or BTRCP registration, and/or the penalties provided in Section 14 hereof.
Section 7. Foreign Investments in Domestic Market Enterprises. - Non-Philippine nationals may own up to one hundred percent (100%) of domestic
market enterprises unless foreign ownership therein is prohibited or limited by existing law or the Foreign Investment Negative List under Section 8
hereof.
A domestic market enterprise may change its status to export enterprise if over a three (3) year period it consistently exports in each year thereof sixty
per cent (60%) or more of its output.
Section 8. List of Investment Areas Reserved to Philippine Nationals (Foreign Investment Negative List). - The Foreign Investment Negative
List shall have three (3) component lists: A, B, and C:
a) List A shall enumerate the areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws.
b) List B shall contain the areas of activities and enterprises pursuant to law:

6
 1) Which are defense-related activities, requiring prior clearance and authorization from Department of National Defense (DND) to
engage in such activity, such as the manufacture, repair, storage and/or distribution of firearms, ammunition, lethal weapons,
military ordnance, explosives, pyrotechnics and similar materials; unless such manufacturing or repair activity is specifically
authorized, with a substantial export component, to a non-Philippine national by the Secretary of National Defense; or
2) Which have implications on public health and morals, such as the manufacture and distribution of dangerous drugs; all forms of
gambling; nightclubs, bars, beerhouses, dance halls; sauna and steambath houses and massage clinics.
Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of five hundred thousand
US dollars (US$500,000) are reserved to Philippine nationals, unless they involve advanced technology as determined by the
Department of Science and Technology. Export enterprises which utilize raw materials from depleting natural resources, with paid-
in equity capital of less than the equivalent of five hundred thousand US dollars (US$500,000) are likewise reserved to Philippine
nationals.
Amendments to List B may be made upon recommendation of the Secretary of National Defense, or the Secretary of Health, or the Secretary
of Education, Culture and Sports, indorsed by the NEDA, or upon recommendation motu propio of NEDA, approved by the President, and
promulgated by Presidential Proclamation.
c) List C shall contain the areas of investment in which existing enterprises already serve adequately the needs of the economy and the
consumer and do not require further foreign investments, as determined by NEDA applying the criteria provided in Section 9 of this Act,
approved by the President and promulgated in a Presidential Proclamation.
The Transitory Foreign Investment Negative List established in Sec. 15 hereof shall be replaced at the end of the transitory period by the
first Regular Negative List to the formulated and recommended by the NEDA, following the process and criteria provided in Section 8 and 9
of this Act. The first Regular Negative List shall be published not later than sixty (60) days before the end of the transitory period provided in
said section, and shall become immediately effective at the end of the transitory period. Subsequent Foreign Investment Negative Lists shall
become effective fifteen (15) days after publication in two (2) newspapers of general circulation in the Philippines: Provided, however, That
each Foreign Investment Negative List shall be prospective in operation and shall in no way affect foreign investments existing on the date
of its publication.
Amendments to List B and C after promulgation and publication of the first Regular Foreign Investment Negative List at the end of the
transitory period shall not be made more often than once every two (2) years.
Section 9. Determination of Areas of Investment for Inclusion in List C of the Foreign Investment Negative List. - Upon petition by a Philippine
national engage therein, an area of investment may be recommended by NEDA for inclusion in List C of the Foreign Investment Negative List upon
determining that it complies with all the following criteria:
a) The industry is controlled by firms owned at least sixty percent (60%) by Filipinos;
b) Industry capacity is ample to meet domestic demand;
c) Sufficient competition exists within the industry;
d) Industry products comply with Philippine standards of health and safety or, in the absence of such, with international standards, and are
reasonably competitive in quality with similar products in the same price range imported into the country;
e) Quantitative restrictions are not applied on imports of directly competing products;
f) The leading firms of the industry substantially comply with environmental standards; and
g) The prices of industry products are reasonable.
The petition shall be subjected to a public hearing at which affected parties will have the opportunity to show whether the petitioner industry adequately
serves the economy and the consumer, in general, and meets the above stated criteria in particular. NEDA may delegate evaluation of the petition and
conduct of the public hearing to any government agency having cognizance of the petitioner industry. The delegated agency shall make its evaluation
report and recommendations to NEDA which retains the right and sole responsibility to determine whether to recommend to the President to promulgate
the area of investment in List C of the Negative List. An industry or area of investment included in List C of the Negative List by Presidential Proclamation
shall remain in the said List C for two (2) years, without prejudice to re-inclusion upon new petition, and due process.
Section 10. Strategic Industries. - Within eighteen (18) months after the effectivity of this Act, the NEDA Board shall formulate and publish a list of
industries strategic to the development of the economy. The list shall specify, as a matter of policy and not as a legal requirement, the desired equity
participation by Government and/or private Filipino investors in each strategic industry. Said list of strategic industries, as well as the corresponding
desired equity participation of government and/or private Filipino investors, may be amended by NEDA to reflect changes in economic needs and
policy directions of Government. The amended list of strategic industries shall be published concurrently with publication of the Foreign Investment
Negative List.
The term "strategic industries" shall mean industries that are characterized by all of the following:
a) Crucial to the accelerated industrialization of the country,
b) Require massive capital investments to achieve economies of scale for efficient operations;
c) Require highly specialized or advanced technology which necessitates technology transfer and proven production techniques in
operations;
d) Characterized by strong backward and forward linkages with most industries existing in the country, and
e) Generate substantial foreign exchange savings through import substitution and collateral foreign exchange earnings through export of
part of the output that will result with the establishment, expansion or development of the industry.
Section 11. Compliance with Environmental Standards. - All industrial enterprises regardless of nationality of ownership shall comply with existing
rules and regulations to protect and conserve the environment and meet applicable environmental standards.
Section 12. Consistent Government Action. - No agency, instrumentality or political subdivision of the Government shall take any action on conflict
with or which will nullify the provisions of this Act, or any certificate or authority granted hereunder.
Section 13. Implementing Rules and Regulations. - NEDA, in consultation with BOI, SEC and other government agencies concerned, shall issue
the rules and regulations to implement this Act within one hundred and twenty (120) days after its effectivity. A copy of such rules and regulations shall
be furnished the Congress of the Republic of the Philippines.
Section 14. Administrative Sanctions. - A person who violates any provision of this Act or of the terms and conditions of registration or of the rules
and regulations issued pursuant thereto, or aids or abets in any manner any violation shall be subject to a fine not exceeding One hundred thousand
pesos (P100,000).
If the offense is committed by a juridical entity, it shall be subject to a fine in an amount not exceeding ½ of 1% of total paid-in capital but not more than
Five million pesos (P5,000,000). The president and/or officials responsible therefor shall also be subject to a fine not exceeding Two hundred thousand
pesos (P200,000).
In addition to the foregoing, any person, firm or juridical entity involved shall be subject to forfeiture of all benefits granted under this Act.
SEC shall have the power to impose administrative sanctions as provided herein for any violation of this Act or its implementing rules and regulations.
Section 15. Transitory Provisions. - Prior to effectivity of the implementing rules and regulations of this Act, the provisions of Book II of Executive
Order 226 and its implementing rules and regulations shall remain in force.

7
During the initial transitory period of thirty-six (36) months after issuance of the Rules and Regulations to implement this Act, the Transitory Foreign
Investment Negative List shall consist of the following:
A. List A:
1. All areas of investment in which foreign ownership is limited by mandate of Constitution and specific laws.
B. List B:
1. Manufacture, repair, storage and/or distribution of firearms, ammunitions, lethal weapons, military ordinance, explosives,
pyrotechnics and similar materials required by law to be licensed by and under the continuing regulation of the Department of
National Defense; unless such manufacturing or repair activity is specifically authorized with a substantial export component, to a
non-Philippine national by the Secretary of National Defense;
2. Manufacture and distribution of dangerous drugs; all forms of gambling; nightclubs, bars, beerhouses, dance halls; sauna and
steam bathhouses, massage clinic and other like activities regulated by law because of risks they may pose to public health and
morals;
3. Small and medium-size domestic market enterprises with paid-in equity capital or less than the equivalent of US$500,000, unless
they involve advanced technology as determined by the Department of Science and Technology, and
4. Export enterprises which utilize raw materials from depleting natural resources, and with paid-in equity capital of less than the
equivalent US$500,000.
C. List C:
1. Import and wholesale activities not integrated with production or manufacture of goods;
2. Services requiring a license or specific authorization, and subject to continuing regulations by national government agencies
other than BOI and SEC which at the time of effectivity of this Act are restricted to Philippine nationals by existing administrative
regulations and practice of the regulatory agencies concerned: Provided, That after effectivity of this Act, no other services shall
be additionally subjected to such restrictions on nationality of ownership by the corresponding regulatory agencies, and such
restrictions once removed shall not be reimposed; and
3. Enterprises owned in the majority by a foreign licensor and/or its affiliates for the assembly, processing or manufacture of goods
for the domestic market which are being produced by a Philippine national as of the date of effectivity of this Act under a technology,
know-how and/or brand name license from such licensor during the term of the license agreement: Provided, That, the license is
duly registered with the Central Bank and/or the Technology Transfer Board and is operatively in force as of the date of effectivity
of this Act.
NEDA shall make the enumeration as appropriate of the areas of the investment covered in this Transitory Foreign Investment Negative List and
publish the Negative List in full at the same time as, or prior to, the publication of the rules and regulations to implement this Act.
The areas of investment contained in List C above shall be reserved to Philippine nationals only during the transitory period. The inclusion of any of
them in the regular Negative List will require determination by NEDA after due public hearings that such inclusion is warranted under the criteria set
forth in Section 8 and 9 hereof.
Section 16. Repealing Clause. - Articles forty-four (44) to fifty-six (56) of Book II of Executive Order No. 226 are hereby repealed.
All other laws or parts of laws inconsistent with the provisions of this Act are hereby repealed or modified accordingly.
Section 17. Separability. - If any part or section of this Act is declared unconstitutional for any reason whatsoever, such declaration shall not in any
way affect the other parts or sections of this Act.
Section 18. Effectivity. - This Act shall take effect fifteen (15) days after approval and publication in two (2) newspaper of general circulation in the
Philippines.
--- other laws imposing maximum foreign equity
--- “Philippine national” under the FIA
--- Phil. corporation under the Corp. Code
--- Foreign corporation under the Corp. Code (Sec. 140)
Section 140. Definition of Righs of Foreign Corporations. - For purposes of this 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 certificate of authority from the appropriate government agency.

--- Control Test v. Grandfather Rule

Narra Nickel Mining v. Redmont April 21, 2014 and Jan. 28, 2015
(see dissent of J. Leonen)

--- Nationality of corporation sole

Roman Catholic Apostolic Admin. of Davao (102 Phil.596)

6) Formal Organization and Commencement of business – Sec. 21

Section 21. Effects of Non-Use of Corporate Charter and Continous Inoperation. - If a corporation does not formally organize and commence
its business within five (5) year from the date of its incorporation, its certificate of incorporation shall be deemed revoked as of the day
following the end of the five (5)-year period.
However, if a corporation has commence its business but subsequently becomes inoperative for a period of at least five (5) consecutive
years, the Commission may, after due notice and hearing, place the corporation under delinquent status.
A delinquent corporation shall have a period of two (2) years to resume operations and comply with all requirements that the Commission
shall prescribed. Upon the compliance by the corporation, the Commission shall issue an order lifting the delinquent status. Failure to comply
with the requirements and resume operations within the period given by the Commission shall cause the revocation of the corporation's
certificate of incorporation.
The Commission shall give reasonable notice to, and coordinate with the appropriate regulatory agency prior to the suspension or revocation
of the certificate of incorporation of companies under their special regulatory jurisdiction.