SPECIAL TYPES OF CORPORATION

CORPORATE MANAGEMENT JURISPRUDENCE

FOREIGN CORPORATIONS
 FOREIGN CORPORATION

• A foreign corporation is one formed, organized or

existing under laws other than the Philippines’ and
whose laws allow Filipino citizens and corporations to
do business in its own country or State. (Sec 140,
RCC)

• A foreign corporation is one which owes its existence

to the laws of another state, and generally, has no
legal existence within the State in which it is foreign.
(Avon Insurance PLC v. Court of Appeals, 278 SCRA
312 [1997])
 FOREIGN CORPORATION

1. Organized in another country.

• Regardless of the ownership (e.g. a corporation
organized under foreign laws even if wholly
owned by Filipinos)

2. The laws of the corporation’s home state allows

for Filipino citizens and corporations to do
business thereat (policy of reciprocity).
• The presence or absence of reciprocity affects
its capacity to do business in the Philippines.
 LICENSE TO DO BUSINESS IN THE
PHILIPPINES

• 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.
(Sec 140, RCC)
• For foreign corporations doing business in the
Philippines before the effectivity of the RCC under a
license issued to it, shall continue to have such
authority under the terms and conditions of its
license. (Sec 141, RCC)
 LICENSE TO DO BUSINESS IN THE
PHILIPPINES

• A foreign corporation must first obtain a license and a

certificate from the appropriate government agency
before it can transact business in the Philippines.
• The purpose of the law is to subject the foreign
corporation doing business in the Philippines to the
jurisdiction of our courts.
• Once a foreign corporation has obtained a license to
do business, then it is deemed domesticated, and
should be subject to no harsher rules that is required
of domestic corporations.
 LICENSE TO DO BUSINESS IN THE
PHILIPPINES

• A foreign corporation applying for a license to transact

business in the Philippines shall submit to the SEC a
copy of its articles of incorporation and bylaws,
certified in accordance with law, and their translation
to an official language of the Philippines. (Sec 142, RCC)
• If the SEC is satisfied that the applicant has complied
with all the requirements of applicable laws, rules and
regulations, the Commission shall issue a license to
transact business in the Philippines to the applicant for
the purpose or purposes specified in such license. (Sec
143, RCC)
 WHAT DOES “DOING BUSINESS” MEANS

• According to the Supreme Court, one of the

indications of “doing business” in the Philippines is
the actual performance of specific commercial
contracts within the territory of the Philippines.

• To constitute “doing business” in the Philippines, the

foreign corporation must actually transact business in
the Philippines.
 WHAT DOES “DOING BUSINESS” MEANS

• It must perform specific business transactions within

the Philippine territory on a continuing business on
its own name and on its own account.
• It implies a continuity of commercial dealings and
arrangements and the performance of acts or works
or the exercise of some of the functions normally
incident to the purpose or object of a foreign
corporation’s organization.
• Single or isolated acts, contracts, or transactions of
foreign corporations are not regarded as a carrying on
of business. (Isolated Transactions)
 ISOLATED TRANSACTIONS
EXAMPLES

• Recovery on the collision of two vessels at the Manila Harbor.

(Dampfschieffs Rhederei Union v. La Campañia Transatlantica, 8
Phil. 766 [1907])
• Loss of goods bound for Hongkong but erroneously discharged in
Manila. (The Swedish East Asia Co., Ltd. v. Manila Port Service, 25
SCRA 633 [1968])
• Recovery of damages sustained by cargo shipped to the
Philippines. (Bulakhidas v. Navarro, 142 SCRA [1986])
• Appointment of local lawyer by foreign movie companies who
have registered intellectual property rights over their movies in
the Philippines, to protect such rights for piracy (Columbia
Pictures Inc. v. Court of Appeals, 261 SCRA 144 [1996])
 “DOING BUSINESS” IN THE PHILIPPINES
AS DEFINED IN THE FOREIGN INVESTMENT ACT OF 1991

• 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;
 “DOING BUSINESS” IN THE PHILIPPINES
AS PRESENTED IN THE DTI IMPLEMENTING RULES

• The publication of a general advertisement

through any print or broadcast media;
• Maintaining a stock of goods in the Philippines
solely for the purpose of having the same processed
by another entity in the Philippines;
• Consignment by a foreign entity of equipment with
a local company to be used in the processing of
products for export;
 “DOING BUSINESS” IN THE PHILIPPINES
AS PRESENTED IN THE DTI IMPLEMENTING RULES

• Collecting information in the Philippines; and

• 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.
 EXAMPLES

• A foreign corporation which had been collecting

premiums on outstanding policies is doing business in
the Philippines. (Manufacturing Life Ins. v. Meer, 89
Phil. 351 [1951])
• Air Carriers – Off-line air carriers having general sales
agents in the Philippines are engaged in business in
the Philippines and that their income from sales of
passage here (i.e., uplifts of passengers and cargo
occur to or from the Philippines) is income from
within the Philippines. (South African Airways v.
Commissioner of Internal Revenue, 612 SCRA 665
[2010])
 DOING BUSINESS WITHOUT A LICENSE

• Foreign corporations transacting business in the

Philippines without a license, or its successors or
assigns, shall not be permitted to maintain or
intervene in any action, suit or proceeding in any court
or administrative agency of the Philippines
• Such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine
laws.
• EXCEPTION: It can sue before Philippine courts on an
isolated transaction or on a cause of action entirely
independent of any business transaction.
 THE RESIDENT AGENT
SEC. 144 & 145, RCC

• A resident agent may be either an individual residing in

the Philippines or a domestic corporation lawfully
transacting business in the Philippines. Both should be
of sound financial standing. (Sec 144, RCC)
• He must be a resident of the Philippines.
• He must be authorized through a written power of
attorney to receive summons and other legal processes
in all actions or other legal proceedings that may
served against such corporation. (Sec 145, RCC)
 LAWS APPLICABLE TO FOREIGN CORP
SEC. 146, RCC

• A 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 those which 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.
 AMENDMENT TO ITS AOI
SEC. 147, RCC

• Whenever the articles of incorporation or by-laws of

a foreign corporation authorized to transact business
in the Philippines are amended, such foreign
corporation shall, within sixty (60) days after the
amendment becomes effective, file with the SEC, and
in the proper cases with the appropriate government
agency, a duly authenticated copy of the articles of
incorporation or by-laws, as amended, indicating
clearly in capital letters or by underscoring the change
or changes made, duly certified by the authorized
official or officials of the country or state of
incorporation.
 AMENDED LICENSE
SEC. 148, RCC

• A foreign corporation authorized to transact

business in the Philippines shall obtain an amended
license in the event it changes its corporate name,
or desires to pursue other or additional purposes in
the Philippines, by submitting an application with
the SEC, favorably endorsed by the appropriate
government agency.
 MERGER & CONSOLIDATION
SEC. 149, RCC

• 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.
• The foreign corporation is required to file with the SEC & the
appropriate gov’t agency, within 60 days after the effectivity of
the merger or consolidation, 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
 GROUNDS FOR REVOCATION OF LICENSE
SEC. 134 & 135, BP BLG. 68

• Failure to file its annual report or pay any fees as required

• Failure to appoint and maintain a resident agent
• Failure, after change of its resident agent or of his address, to submit to the
SEC, a statement of such change
• Failure to submit to the SEC an authenticated copy of any amendment to its
articles of incorporation or by- laws or of any articles of merger or
consolidation
• A misrepresentation of any material matter in any application, report, affidavit
or other document submitted by such corporation
• Failure to pay any and all taxes, imposts, assessments or penalties
• Transacting business in the Philippines outside of its purpose or purposes
• 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.
 WITHDRAWAL
SEC. 136, BP BLG. 68

Subject 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.