March 3, 2004

SEC OPINION NO. 14-04

Re : Definition of "Philippine National" under the Foreign

Investments Act

Tan & Concepcion Law Firm

Suites 2103-2106, 21st Floor, Medical
Plaza, Ortigas Building, San Miguel
Avenue, Ortigas Center 1661,
Pasig City, Philippines

Gentlemen :

This refers to your letter dated January 27, 2004 inquiring on whether or not a
domestic corporation which is 100% owned by a Foreign Holding Company with a
60% Filipino equity may be considered as a Philippine National under the Foreign
Investments Act.

The Commission answers in the negative. Under Section 123 of the

Corporation Code, it is provided that "a foreign corporation is one formed, organized
or existing under any laws other than those of the Philippines and whose laws allow
Filipino citizens and corporations to do business in its own country or state."

Under Philippine jurisdiction, the primary test is always the Place of

Incorporation Test since we adhere to the doctrine that a corporation is a creature of
the State whose laws it has been created. A corporation organized under the laws of a
foreign country, irrespective of the nationality of the persons who control it is
necessarily a foreign corporation. The control test and the principal place of business
test (siege social), are merely adjunct tests, when the place of incorporation test
indicates that the subject corporation is organized under Philippine laws. (Villanueva,
Philippine Corporate Law, p. 58)

If at all, the only exception to the place of incorporation test provided under
the Foreign Investments Act is "a corporation organized abroad and registered as
doing business in the Philippines under the Corporation Code of which one hundred
Copyright 1994-2010 CD Technologies Asia, Inc. Securities and Exchange Commission 2009 1
percent (100%) of the capital stock outstanding and entitled to vote is wholly owned
by Filipinos." However, such conditions are unavailing in the particular case
presented.

Very truly yours,

(SGD.) VERNETTE G. UMALI-PACO

General Counsel

Copyright 1994-2010 CD Technologies Asia, Inc. Securities and Exchange Commission 2009 2