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BA 162 Law on Partnerships and Private Corporations

CORPORATIONS

TITLE XV: FOREIGN CORPORATIONS

SEC. 123 DEFINITION AND RIGHTS OF FOREIGN CORPORATIONS

General rule Foreign corporations shall not be permitted to transact or do business in the Philippines until they
have secured:
(1) license from the SEC
(2) certificate of authority from appropriate government agency

Foreign corporations - corporation created by or under the laws of another State or country AND whose laws allow
Filipino citizens and corporations to do business in its own state / country
- formed, organized and existing under any laws other than that of the Philippines

Exception During WARTIME, control test and NOT the incorporation test shall determine the nationality of
a corporation (domestic corporation controlled by enemy aliens shall be deemed a foreign
corporation)

Limitations Any foreign corporation can have no legal existence beyond the bounds of the State by which it is
created. (exists only by force of law and where law ceases to operate, corporation cannot exist)

NOTE: Corporations are NOT PREVENTED from acting in another State or country

REQUISITES: Express/implied consent of country

Objectives of regulation (1) Place foreign corporations in equality with domestic corporations
(2) Foreign corporations are subject to inspection
(3) Protect residents of State in doing business with foreign corporations

SEC. 124 APPLICATION TO EXISTING FOREIGN CORPORATION

Foreign corporations authorized at the Foreign corporations authorized before

effectivity of the Code the effectivity of the Code
Pursuant to terms and conditions of its
Pursuant to the Corporation Code license, subject to the provisions of the Code
and laws

Limitation Corporations who have not satisfied the requirement of reciprocity (allowing Filipinos to do business
in a foreign country), given a period of not more than two years from the effectivity of the Code to
comply

SEC. 125 APPLICATION FOR A LICENSE

Requirements (1) Submit to the SEC a copy of its articles of incorporation and by laws
(2) Certified in accordance with law
(3) Translated to an official language of the Philippines (if necessary)

Articles of incorporation (1) Date/term of incorporation

(2) Address of the corporation in the country of incorporation
(3) Name and address of its resident agent
(4) Place where the corporation intends to operate
(5) Specific purpose/purposes of the corporation
(6) Names and addresses of the present directors
(7) Statement of authorized capital stock
(8) Statement of outstanding capital stock
(9) Statement of amount actually paid-in
(10) Other necessary information necessary for the SEC
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Attachments (1) Duly executed certificate UNDER OATH by authorized officials attesting that laws of the country
of the applicant allow Filipino citizens to do business therein, and is in good standing (translated if
not in English under oath of translator)

(2) Certificate of authority from appropriate government agency

(3) Statement under oath of the president/other officials showing that the applicant is:
- solvent
- in sound financial condition
- setting forth assets and liabilities of corporation as of date not exceeding year
immediately prior to the filing of the application

(4) Written power of attorney designating a resident agent to be held against summons

Special corporations Foreign banks, financial, insurance corporations shall comply with provisions of existing laws

Previous authority No application for license shall be accepted by SEC without previous authority from government
agency

SEC. 126 CONDITIONS SUBSEQUENT TO ISSUANCE OF LICENSE

General rule Upon the foreign corporation may commence to transact its business and continue doing so as
long as it retains the authority to act as a corporation under the laws of its incorporated state

Exception: license is sooner: surrendered, revoked, suspended or annulled

Conditions (1) Foreign company shall transact business only for the purpose which it is authorized

(2) Within 60 days, deposit to the SEC securities with at least Php 100,000 in actual market value
EXCEPTION: foreign banks or insurance corporations

(3) Within 6 months after each fiscal year, deposit additional securities equivalent to the actual
market value to 2% of the amount of income exceeding Php 5 million
EXCEPTION: actual market value of sercurities has decreased by 10% of such value

(4) Comply with the provisions of existent laws, rules and regulations; otherwise, it would be
revoked

SEC. 127 128 RESIDENT AGENT

Definition Individual / domestic corporation designated in a written power of attorney by a corporation

authorized to do business in the Philippines on whom any summons/legal processes/proceedings
may be served against such corporation

Requirements For individuals: (1) must be of good moral character

(2) financially sound in standing
(3) residing in the Philippines

For domestic corporations: (1) lawfully transacting in the Philippines

Duty of resident agent To receive in behalf of a foreign corporation notices, summons and other legal processes

Acts of doing business (1) Soliciting orders, purchases, and service contracts
(2) Opening offices
(3) Appointing representatives or distributors who are domiciled /stayed in the Philippines
(4) Participating in the management/supervision/control of any domestic business firm
(5) Any other acts that imply continuity of commercial dealings

Acts not included (1) Mere investment of shareholder by a foreigner entity in domestic corporation
(2) Exercise of rights as such investor
(3) Hanving a nominee director / officer to represent the interests
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(4) Appointing represenataives domiciled in the Philippines which transacts business in own name
and account

SEC. 129 LAW APPLICABLE

General rule A foreign corporation licensed to business in the Philippines is subject to the law of the Philippines

Exception Laws of state of creation will apply to matters of:

(1) organization (formation, creation, dissolution)
(2) internal affairs of the corporation (liabilities, responsibilities, duties of stockholders)

EXCEPTION: unless they offend any public policy of the Philippines

AMENDMENTS TO ARTICLES OF INCORPORATION OF BY-LAWS OF FOREIGN

SEC. 130
CORPORATIONS

General rule Foreign corporation authorized shall file with the SEC and appropriate agency a duly authenticated
copy of the articles/by-laws as amended

TIME FRAME: within 60 days after amendment became effective

CHANGES: underscored/indicated in capital letters

Restriction Changes in purpose of the corporation needs to be filed by way of an amended license

SEC. 131 AMENDED LICENSE

General rule A foreign corporation needs to obtain an amended license in case of:

(1) Change of name of the corporation

(2) Desire to purse other / additional purposes

MERGER / CONSOLIDATION INVOLVING A FOREIGN CORPORATION LICENSED IN THE

SEC. 132
PHILIPPINES

General rule With a domestic corporation

ALLOWABLE provided: (1) foreign corporation is permitted under Philippine laws
(2) law of incorporation in home country permits
(3) requirements on mergers / consolidations are followed

With another corporation (licensed foreign corporation merges with another foreign company)
ALLOWABLE provided: (1) 60 days after merger, file copy of articles of merger with SEC
authenticated by officials of the home country
(2) (if absorbed company is foreign corporation doing business in
PH) file a petition for withdrawal of license

Provision Unlicensed foreign corporations can STILL maintain action for:

(1) isolated business transaction in the Philippines
(2) protecting trade name/ trademark
(3) non-business transaction in the Philippines
(4) non-exemption from suit in the Philippines

Validity of contracts When contracts entered into by foreign corporations in the Philippines without obtaining required
license are void, voidable, unenforceable is not determined by Corporation Code

SEC. 134 REVOCATION OF LICENSE

Grounds (1) Failure to file annual report / pay any fees

(2) Failure to appoint/maintain resident agent in the Philippines
(3) Failure to submit to SEC:
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- statement of change of resident agent or his address
- authenticated copy of any amendment to its articles of incorporation / merger
(4) Misrepresentation of any material matter in any file submitted
(5) Failure to pay any and all taxes, impost, assessments
(6) Transacting outside the purpose authorized
(7) Transacting as an agent of or acting in behalf of any foreign corporation not licensed
(8) Any other ground render unfit to transact business

SEC. 135 ISSUANCE OF CERTIFICATE OF REVOCATION

General rule SEC shall issue a corresponding certificate of revocation, furnishing a copy to the appropriate
government agency

SEC shall mail to the corporation a notice of revocation and a copy of the certificate of revocation

Effects (1) Revocation of license cannot affect validity of contracts prior revocation nor its right to
maintain action to enforce them

(2) Foreign corporation can no longer transact business and maintain any suit in any action

SEC. 136 WITHDRAWAL OF FOREIGN CORPORATION

General rule A foreign corporation shall be allowed to withdraw from the Philippines by filing a petition for
withdrawal of license.

Provisions: (1) All claims, which occurred in the Philippines, have been settled
(2) All taxes, assessments and penalties have bene paid
(3) Petition for withdrawal has been published once a week for three consecutive weeks in a
newspaper of general circulation in the Philippines

TITLE XVI: MISCELLANEOUS PROVISIONS

SEC. 137 OUTSTANDING CAPITAL STOCK DEFINED

Outstanding capital stock All shares of stock ISSUED TO SUBSCRIBERS/SHAREHOLDERS which are fully paid,
unpaid, or partially paid, as long a there is a binding subscription subscription agreement
between the subscriber or shareholder and the corporation

NOTE: A share of stock must be held by persons OTHER THAN THE CORPORATION

SEC. 138 DESIGNATION OF GOVERNING BOARDS

General rule Non-stock or special corporations may designate governing boards by any other name than as
board of trustees (educational = board of regents)

SEC. 139 INCORPORATION AND OTHER FEES

General rule The SEC is authorized to collect and receive fees as authorized by law or rules and regulations
promulgated by the Commission

SEC. 140 STOCK OWNERSHIP IN CERTAIN CORPORATIONS

General rule Congress may set the maximum limits for stockholdings in corporations declared by it to be
vested with public interest upon recommendation with NEDA (consanguinity/affinity/prevent illegal
monopolies/combination to restraint trade)

SEC. 141 ANNUAL REPORT OF CORPORATIONS

General rule Every corporation is required to submit to the SEC within such period including a financial
statement of its assets liabilities and other requirements (different from financial report to be given
by board at stockholders meetings)
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SEC. 142 CONFIDENTIAL NATURE OF EXAMINATION RESULTS

General rule All interrogatories made by SEC and reexaminations made by the Commission on operations,
books and records of the company is strictly confidential

Exception (1) Law may require the same to be made public

(2) Results/answers shall be necessary to be presented as evidence

Visitorial powers Power of the State thru proper governmental agency to examine business affairs, administration
and condition of corporations

AGENCIES: Securities and Exchange Commission - enforcement of Corporation Code

Bureau of Internal Revenue
Insurance Commission
Deputy Governor for Supervision
National Telecommunications Comm
Department of Labor and Employment
- liabilities of corporations for taxes
- survey of insurance companies
- banking institutions
- radio/TV broadcasting/utilities
- compliance to the Labor Code

SEC. 143 RULE-MAKING POWER OF THE SECURITIES AND EXCHANGE COMMISSION

General rule The SEC is empowered to promulgate rules and regulations necessary to perform the duties
imposed upon it under the code PARTICULARLY in PREVENTING FRAUD AND ABUSES on
part of controlling stockholders

SEC. 144 VIOLATION OF THE CODE

General rule IN ADDITION TO SPECIFIC PENALTIES, the general penalty for violations is:

(1) Violation committed by director/trustee/officer/stockholder

- fine OR imprisonment (depends on court discretion)
(2) Violation committed by the corporation
- Corporation shall be DISSOLVED after appropriate proceedings before SEC

SEC. 145 AMENDMENT OR REPEAL

General rule No right/remedy in favor/against any corporation, stockholder, officer, member, director shall be
removed/impaired either by:
- subsequent dissolution of said corporation
- subsequent amendment/repeal of this Code

SEC. 146 REPEALING CLAUSE

General rule All laws/parts inconsistent with any provision of this Code shall be deemed repealed

(Old laws are supplanted by the new Corporation Code)

SEC. 147 SEPARABILITY OF PROVISIONS

General rule Should any part of this Code be declared invalid or unconstitutional, other provisions shall remain
in force

SEC. 148 APPLICABILITY TO EXISTING CORPORATIONS

General rule All corporations existing during the date of effectivity of this Code (May 1, 1980) shall be deemed
authorized, licensed and registered under the provisions of the Code

PROVIDED: any such corporation concerned with new requirements shall be given more than
2 years from the effectivity of this Code to comply

SEC. 149 EFFECTIVITY

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General rule This Code shall take effect immediately upon its approval (prior publication of laws is a
requirement <15 days following the completion in the Official Gazette> )