TITLE XV: FOREIGN CORPORATIONS
from acting in another state or country with the latter’s
SECTION 140: Definition of Rights and Foreign
Corporations- For purposes of this code, a Foreign
Corporation is one formed, organized or existing under
laws other than those of the Philippines’ and whose
laws allow Filipino citizens and corporations to do
business in its own country or state. 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.
DEFINITION OF FOREIGN CORPORATION
1) With respect to a particular State, a foreign corporation
is a corporation created by or under the laws of another
State or country. This is the traditional definition of term.
2) For licensing purposes, the corporation code under the
Section 140, defines a foreign corporation as one formed,
organized or existing under any laws other than those of
the Philippines and whose laws allow Filipino citizens and
corporation to do a business in its own country Or State.
Under the Incorporation test, a corporation organized
under the laws of the Philippines is a domestic
corporation with respect to the Philippines and a foreign
corporation with reference to any other state; if
organized under the laws of another country, it is a
domestic with reference to said country and a foreign
corporation under the Corporation Code.
3) During wartime, for reasons of national security, the
control test and not the incorporation test above shall
determine the nationality of a corporation, that is, a
domestic corporation controlled by enemy aliens shall be
deemed a foreign corporation with nationality identical
with that of its controlling stock Holders.
CORPORATION MAY OPERATE WITHIN JURISDICTION
OF ANOTHER STATE
As a rule, a foreign corporation can have no legal
existence or status beyond the bounds of the state or
sovereignty by which it is created or incorporated and
organized. It exist only in contemplation of law and by
force of the law and where that law ceases to operate,
the corporation can have no existence.
This principle, however, does not prevent a corporation
express /implies consent. This is the “consent doctrine”
which is provided in Section 142 and 143. But every
power which a corporation exercises as such in another
state depends for its validity upon the laws of the
sovereignty in which it is exercised.
The State in extending to foreign corporations the
privilege of doing business may impress such privilege
with whatever conditions and restrictions it deems fit to
impose under which the foreign corporation will be
granted the privilege. The condition, of course must be
reasonable .
OBJECTIVES OF REGULATION OF FOREIGN
CORPORATIONS
The objectives of the statutory provisions prescribing
conditions under which foreign corporations are
permitted to do a business in a state other than that of
their creation have been stated as follows:
1) To place them on an equality with domestic
corporations;
2) To subject them to inspection so that their condition
may be known; and
3) To protect the resident of the state doing business
with them by subjecting them to the courts of the
state. Provisions of revenue requiring the payment
of fees and taxes are only incidental.
LICENSE AND CERTIFICATE OF AUTHORITY REQUIRED
OF FOREIGN CORPORATIONS
Under Section 140, foreign corporations shall not be
permitted to transact or do business in the Philippines
until they have secured a license for that purpose from
the Securities and Exchange Commission ( see Sec. 140)
and a certificate of authority from appropriate
government agency.
The fact, however, that a foreign corporation may not
transact business in the Philippines unless it has
obtained a license for that purpose, nor maintain a suit
in Philippine courts for recovery of any debt, claim or
demand without such license, does not make such
corporation any less a juridical person. Indeed, an
exception to the license requirement has been
recognized where a foreign corporation sues on an
isolated transaction.
DETERMINATION OF NATIONALITY
There are two rules for determining the corporate
nationality of a corporation:
 Under the “incorporation test”, the nationality of
a corporation is that state of incorporation
regardless of the nationality of its stockholders.
 Under the “control test “ it depends on the
nationality of the controlling stockholders. The
application of either test depends on the
particular situation.

SECTION 141: Application to Existing Foreign

Corporations- Every foreign corporation which, on the
date of the effectivity of this code, is authorized to do a
business in the Philippines under a license issued to it
shall continue to have such authority under the terms
and conditions of its license, subject to the provisions of
this code and other special laws.