ENTERING THE PHILIPPINE MARKET

Under the Implementing Rules and Regulations of Republic Act No. 7042 or the Foreign
Investment Act Of 1991, “doing business” in the Philippines shall include soliciting orders,
service contracts, opening offices, whether liaison offices or branches; appointing
representatives or distributors, operating under full control of the foreign corporation,
domiciled in the Philippines or who in any calendar year stay in the country for a period or
periods totaling 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.

For the purpose of carrying out the business activities of the Company and deriving income
from the Philippines under conditions prescribed by Philippine laws and regulations, there are
two (2) basic modes of entry that foreign corporations may adopt: (1) Branch Office and (2)
Domestic Subsidiary.

a. Branch Office in the Philippines

Foreign corporations intending to set up a branch office in the Philippines are only allowed
to commence their business operations after obtaining a “license to do business” from the
Securities and Exchange Commission (SEC). The following documentary requirements must be
provided:

 SEC Application Form No. F-103 – Application of a Foreign Corporation to Establish a

Branch Office in the Philippines (to be provided by the SEC);
 Name verification slip (secured from the SEC Name Verification Unit);
 Certified copy of the Board of Resolution of the parent company authorizing the
establishment of the branch office;
 Designation of a Resident Agent to receive summons and legal proceedings (a
Philippine resident or a Philippine corporation) - in the absence of such agent or upon
cessation of its operations in the Philippines, any summons or legal proceedings may be
served to the SEC as if the same is made upon the corporation at its head office;
 Latest audited financial statements of the parent company certified by an independent
certified public accountant (CPA) and authenticated by the Philippine
consulate/embassy;
 Certified copies of the Articles of Incorporation of the parent company;
 Certificate of Inward Remittance and Certificate of Bank Deposit of US$200,000.00;
 Acceptance of appointment by the Resident Agent (if agent is not the signatory of the
application form)
  Within sixty (60) days after obtaining the license to operate, the branch office is required
to deposit marketable securities worth at least P100,000 with the SEC which may be
withdrawn upon cessation of the Philippine branch’s operations.

A foreign corporation applying to put up a branch office may intend to operate either as a
domestic market enterprise (“DME”) or an export market enterprise (“EME”).

An export market enterprise is (i) a manufacturer, processor or service enterprise that

exports 60% or more of its output, or (b) a trader that purchases products domestically and
exports 60% or more of such purchases. On the other hand, a domestic market enterprise is (i)
an enterprise that produces goods for sale, or renders service or otherwise engages in any
business in the Philippines, or (ii) an enterprise that exports less than 60% of its output.

b. Philippine Subsidiary

Setting up a domestic subsidiary involves incorporation under Philippine laws. By

incorporation, the domestic subsidiary acquires a juridical personality that is separate and
distinct from that of its parent company. The parent company shall not be liable for the
obligations of the domestic subsidiary beyond its subscription to the subsidiary’s authorized
capital stock, unless there are circumstances that warrant the piercing of the veil of corporate
fiction, such as its use for the perpetration of fraud.

For the establishment of a subsidiary in the Philippines, the SEC will require the
following from the applicant:

 A corporate name which must not be similar to existing names already registered with
the SEC.;
 Articles of Incorporation, which should be (a) accompanied by a Certificate of
Authentication signed by all incorporators in the form prescribed by the SEC, or (b)
acknowledged before a notary public; and if executed abroad must be:
(i) apostilled in accordance with the 1961 Apostille Convention; or
(ii) notarized or authenticated by a Philippine Consul in the Philippine Embassy
nearest the place of execution;
 Minimum paid up capital of US$200,000.00;
o For this purpose, the applicant must submit a Certificate of Inward remittance
issued by a Philippine bank on the remittance of at least US$200,000 net of bank
charges to your Philippine account;
 Name of the subscribers to the authorized capital stock of the corporation, number of
shares and amount subscribed by each subscriber;
 Names, nationalities, addresses and passport numbers of the incorporators. Under the
Corporation Code of the Philippines, a corporation must have not more than fifteen (15)
individual incorporators who must own at least one (1) share in the company and
majority of whom must be residents of the Philippines;
 Name of the Treasurer-in-Trust appointed by the subscribers
  By-Laws signed by all the incorporators (this may be filed even after incorporation,
signed by stockholders representing at least a majority of the outstanding capital stock
of the corporation, within a month from the issuance of the certificate of incorporation);
 Name Verification Slip (a certificate from the SEC that the proposed corporation has
reserved an available corporate name for its use);
 Treasurer’s Affidavit and Authorization to Verify Bank Accounts (with regard to
subscriptions paid-in and deposited in a bank in trust for the proposed corporation); and
 SEC Form F-100 (the Application to do Business under the Foreign Investments Act)
which contains:
o the same information as that set forth in the Articles;
o undertaking to change its corporate name.

If a foreign corporation is made an incorporator, the application for registration must be

accompanied by a copy of a document, authenticated by the Philippine Consulate or with an
apostille (as applicable), authorizing the foreign corporation to invest in the corporation being
formed and specifically naming the foreign corporation’s designated signatory.

If the SEC is satisfied that all legal requirements have been complied with, it will issue a
certificate of incorporation. It is only from that time that the corporation commences its
corporate existence and acquires juridical personality.