Doing Business In The Philippines

On 20 February 2019, President Rodrigo Roa Duterte signed into law Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines (Code).

Title XV of the Code specifically covers foreign companies and the license to do business in the Philippines. 

“When is a foreign company deemed to be doing business in the Philippines?”

A foreign company deemed to be doing business in the Philippines if:

• it participates in the management, supervision, or control of any domestic business, firm, entity, or corporation in the Philippines; and/or

• it solicited orders, entered into service contracts, and/or opened an office in the Philippines;

• it appointed a representative or a distributor that operates under full control of the foreign company and that representative or distributor is domiciled in the Philippines or stays in the Philippines for a total of at least 180 days, whether or not continuous, in a calendar year; 

• it actually performs in the Philippines specific 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 the purpose and object of the business organization.

The last item is where most of Philippine jurisprudence on “doing business” has developed.

“What is a foreign company/foreign corporation?”

There is a legal (although not encompassing) definition of doing business in the Philippines. It begins with a definition of what is a “foreign company” or, as it is referred to by the Code, a “foreign corporation”.

The Code defines a foreign corporation as one that is “formed, organized or existing under laws other than the Philippines’ and whose laws allow Filipino citizens and corporations to do business in its own country or State.”  

This definition has two components: first, the corporation must not be formed under Philippine law and, second, the corporation’s home state must allow Filipinos to do business there.  An entity that meets these two requirements is considered a “foreign corporation” under Philippine law.  In practice this definition has been extended to encompass legal entities such as partnerships, limited liability companies, and sociedad anonima even if some of these legal entities do not exist under Philippine law.

“When is a license to transact business in the Philippines needed?”

The Code then says that a foreign corporation “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.”  

Here is where we first encounter the concept of “transacting business” or “doing business” in the Philippines.  On its face, it appears that the Code requires that a foreign company must first get a license to transact business from the appropriate government agency (i.e., the Philippine Securities and Exchange Commission [SEC]) before that foreign company has the right to transact business in the Philippines.  In the succeeding article, I shall explain that this is not the case and that there are exceptions to this license requirement.