Law and Jurisprudence

On Foreign Corporations and the Phrase Doing Business in the Philippines

Foreign corporations which desire to do business in the Philippines are required to first obtain a license. In the event that a foreign corporation transacts business in the Philippines without the requisite license, such foreign corporation, or its successor or assigns, shall not be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines. That foreign corporation, however, may be sued or proceeded against before the Philippin courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

While the Revised Corporation Code (and its predecessor, the Corporation Code) is silent as to what constitutes “doing business”, Republic Act No. 7042, the Foreign Investments Act of 1991, as amended, expressly defines the phrase. Sec. 3(d) of RA 7042 states:

  The phrase “doing business” shall include soliciting orders, service contracts, opening offices, whether called “liaison” offices or branches; appointing representatives or distributors 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 x x x x x.

The same provision also provides that  doing business does not “include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account”.