Lazaro Sheryll

Diego, Jade

Case: Martha Soriano, a Baguio City-based retailer and caterer, noted the severe shortage of
hotel accommodations in the city, especially during the annual Panagbenga Flower Festival.
She invited some foreign friends, Arthur Hewitt, an American retiree, and Rose Ann Grundt, a
German hotelier, to join and invest in her new business venture - the Mayflower Hotel. Based
on the business plan prepared, the total capitalization needed for the 50-room standard hotel
is Php20 million. Martha is only capable of raising half of the total investment needed. What
advice would you give Ms. Soriano as she forms a partnership with two (2) foreign partners?

According to the rules and regulations governing the accreditation of Travel and Tour Services,
partnerships organized under Philippine laws must have at least 60% of their capital owned and
held by a Philippine national. The partnership, however, would be impossible because Martha
can only provide P10 million of the required Php20 million capital. To invest in a hotel with her
foreign friends, Martha would need at least Php12 million. To continue the partnership for May
Flower Hotel, Martha could invite another Filipino national to invest P2 million, resulting in two
Filipino nationals owning 60% of the capital. I would advise Ms. Soriano to be very clear about
the terms of the partnership agreement from the start. This includes defining each partner's
ownership percentage, roles and responsibilities, and how profits and losses will be distributed.
It is also critical to have a clear exit strategy in place in case one of the partners wishes to sell
their stake in the company. First and foremost, the terms of the partnership agreement must
be understood from the start. This includes defining each partner's ownership percentage, roles
and responsibilities, and how profits and losses will be distributed. In the case of the Mayflower
Hotel, for example, it is critical to specify how much each partner will contribute to the total
capitalization of the business. If one partner can only contribute half of the total investment, it
is critical to specify what percentage ownership they will have in the business. It is also critical
to clearly define each partner's roles and responsibilities. In the case of the Mayflower Hotel,
Martha Soriano will be in charge of day-to-day operations, while Arthur Hewitt and Rose Ann
Grundt will be in charge of capital investment. Finally, it is critical to have a clear exit strategy in
place in case one of the partners wishes to sell their stake in the company. This could include
specifying a buy-sell agreement in which the other partners have first refusal to purchase the
departing partner's shares. Finally, it is critical to be clear about the terms of the partnership
agreement from the start in order to avoid misunderstandings or conflict later on.