11. Foreign Corporations (See also RA 7042, as amended by RA 8179 and 11647)

9. Foreign Corporations

• Personality to Sue and Suability
• Republic Act (R.A.) No. 7042¹, as amended by R.A. Nos. 8179² and 11647³ or the Foreign Investments Act
• “Doing Business in the Philippines”
• Registration Requirement
• Nationalized Activities and the Negative List

Foreign Corporation

A corporation formed, organized or existing under any law other than those of the Philippines, and whose laws allow Filipino citizens and corporations to do business in its own country or state. (Sec. 140)⁴

A foreign corporation is one which owes its existence to the laws of another state, and generally, has no legal existence within the state in which it is foreign (Avon Insurance PLC v. Court of Appeals, G.R. No. 97642, 29 August 1997)⁵.

A fundamental rule of international jurisdiction is that no state can by its laws, and no court which is only a creature of the state, can by its judgments and decrees, directly bind or affect property or persons beyond the limits of that state (Time, Inc. v. Reyes, G.R. No. L-28882, 31 May 1971)⁶.

Necessity of a License to Do Business

• A license subjects a foreign corporation transacting business in the Philippines to applicable registration and regulatory requirements; it is not a prerequisite for Philippine courts to acquire jurisdiction in every action against it.
• To place foreign corporations in the same footing as domestic corporations
• Protection for the public in dealing with said corporations.

Requisites for Issuance of License

A foreign corporation applying for a license to transact business in the Philippines shall submit to the SEC the following:

• A copy of its articles of incorporation and bylaws, certified in accordance with law and their translation to an official language of the Philippines, if necessary.
• The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following:
• The date and term of incorporation;
• The address, including the street number, of the principal office of the corporation in the country or State of incorporation;
• The name and address of its resident agent authorized to accept summons and process in all legal proceedings and all notices affecting the corporation, pending the establishment of a local office;
• The place in the Philippines where the corporation intends to operate;
• The specific purpose or purposes which the corporation intends to pursue in the transaction of its business in the Philippines: Provided, That said purpose or purposes are those specifically stated in the certificate of authority issued by the appropriate government agency;
• The names and addresses of the present directors and officers of the corporation;
• A statement of its authorized capital stock and the aggregate number of shares which the corporation has authority to issue, itemized by class, par value of shares, shares without par value, and series, if any;
• A statement of its outstanding capital stock and the aggregate number of shares which the corporation has issued, itemized by class, par value of shares, shares without par value, and series, if any;
• A statement of the amount actually paid in; and
• Such additional information as may be necessary or appropriate in order to enable the Commission to determine whether such corporation is entitled to a license to transact business in the Philippines, and to determine and assess the fees payable.
• The application shall be accompanied by the following:
• A certificate under oath duly executed by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the country or State of the applicant allow Filipino citizens and corporations to do business therein, and that the applicant is an existing corporation in good standing. If the certificate is in a foreign language, a translation thereof in English under oath of the translator shall be attached to the application.
• A statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Commission and when appropriate, other governmental agencies that the applicant is solvent and in sound financial condition, setting forth the assets and liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application.
• Foreign banking, financial, and insurance corporations shall, in addition to the above requirements, comply with the provisions of existing laws applicable to them.
• In the case of all other foreign corporations, no application for license to transact business in the Philippines shall be accepted by the Commission without previous authority from the appropriate government agency, whenever required by law. (Sec. 142)⁷

Personality to Sue and Suability

Section 35 of the RCC⁸ enumerates the express powers of a corporation, which includes the corporation’s ability to sue and be sued.

The power of the corporation to sue and be sued in any court is lodged with the board of directors that exercises its corporate powers. (Bitong v. Court of Appeals, G.R. No. 123553, 13 July 1998)⁹

Foreign Corporations

A corporation formed, organized or existing under any law other than those of the Philippines, and whose laws allow Filipino citizens and corporations to do business in its own country or state. (Sec. 140)¹⁰

A foreign corporation is one which owes its existence to the laws of another state, and generally, has no legal existence within the state in which it is foreign (Avon Insurance PLC v. Court of Appeals)¹¹.

A fundamental rule of international jurisdiction is that no state can by its laws, and no court which is only a creature of the state, can by its judgments and decrees, directly bind or affect property or persons beyond the limits of that state (Time, Inc. v. Reyes)¹².

Necessity of a License to Do Business:

• A license subjects a foreign corporation transacting business in the Philippines to applicable registration and regulatory requirements; it is not a prerequisite to jurisdiction in every action against it.
• To place them in the same footing as domestic corporations
• Protection for the public in dealing with said corporations.

Requisites for Issuance of License

A foreign corporation applying for a license to transact business in the Philippines shall submit to the SEC the following:

• A copy of its articles of incorporation and bylaws, certified in accordance with law and their translation to an official language of the Philippines, if necessary.
• The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following:
• The date and term of incorporation;
• The address, including the street number, of the principal office of the corporation in the country or State of incorporation;
• The name and address of its resident agent authorized to accept summons and process in all legal proceedings and all notices affecting the corporation, pending the establishment of a local office;
• The place in the Philippines where the corporation intends to operate;
• The specific purpose or purposes which the corporation intends to pursue in the transaction of its business in the Philippines: Provided, That said purpose or purposes are those specifically stated in the certificate of authority issued by the appropriate government agency;
• The names and addresses of the present directors and officers of the corporation;
• A statement of its authorized capital stock and the aggregate number of shares which the corporation has authority to issue, itemized by class, par value of shares, shares without par value, and series, if any;
• A statement of its outstanding capital stock and the aggregate number of shares which the corporation has issued, itemized by class, par value of shares, shares without par value, and series, if any;
• A statement of the amount actually paid in; and
• Such additional information as may be necessary or appropriate in order to enable the Commission to determine whether such corporation is entitled to a license to transact business in the Philippines, and to determine and assess the fees payable.
• The application shall be accompanied by the following:
• A certificate under oath duly executed by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the country or State of the applicant allow Filipino citizens and corporations to do business therein, and that the applicant is an existing corporation in good standing. If the certificate is in a foreign language, a translation thereof in English under oath of the translator shall be attached to the application
• A statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Commission and when appropriate, other governmental agencies that the applicant is solvent and in sound financial condition, setting forth the assets and liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application.
• Foreign banking, financial, and insurance corporations shall, in addition to the above requirements, comply with the provisions of existing laws applicable to them.
• In the case of all other foreign corporations, no application for license to transact business in the Philippines shall be accepted by the Commission without previous authority from the appropriate government agency, whenever required by law. (Sec. 142)¹³

Resident Agent

Who may be a Resident Agent

• Individual residing in the Philippines of good moral character and of sound financial standing
• Domestic corporation lawfully transacting business in the Philippines, with a sound financial standing and must show proof that it is in good standing as certified by the SEC (Sec. 144)¹⁴

Service of Process upon a Foreign Corporation Through A Resident Agent

Before a foreign corporation can be issued a license to transact business in the Philippines, such corporation must first file with the SEC

• A written power of attorney designating some person who must be a resident of the Philippines, on whom any summons and other legal processes may be served in all actions or other legal proceedings against such corporation;
• Consent that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office.
• An agreement or stipulation, executed by its proper authorities, that if the corporation ceases to transact business in the Philippines or is without a resident agent in the Philippines on whom summons or other legal process may be served, service may be made upon the SEC.
• Whenever such service of summons or other process is made upon the SEC under that stipulation, it must, within 10 days thereafter, transmit by mail a copy of such summons or other legal process to the corporation at its home or principal office. When SEC sends such copy, it shall constitute a necessary part of and shall complete such service
• In case of a change of address of the resident agent, it shall be his or its duty to immediately notify the SEC in writing. (Sec. 145)¹⁵

Grounds for Revocation of License

Section 151 of the Revised Corporation Code¹⁶ provides that the SEC may cancel the certificate or license of a foreign corporation on any of the following grounds:

• Failure to file its annual report or pay any fees as required by Code;
• Failure to appoint and maintain a resident agent;
• Failure to inform SEC of the change of resident agent or the latter’s change of address;
• Failure to submit a copy of amended articles of incorporation or by- laws; or articles of merger or consolidation;
• Misrepresentation of any material matter in any application, report, affidavit, or other document submitted pursuant to the provisions governing foreign corporations;
• Failure to pay any and all taxes, imposts, assessments or penalties;
• Engaged in a business not authorized by SEC;
• Acting as a dummy of a foreign corporation not licensed to do business in the Philippines; or
• Any other ground as would render it unfit to transact business in the Philippines.

Law applicable to Foreign Corporations (Sec. 146)

A foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except:

• those which provide for the creation, formation, organization or dissolution of corporations or
• those which fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation.