The Philippine business landscape has dramatically changed, thanks to the increasing number of foreign investors in the country. Even local businesses are now open to the idea of doing business with foreign corporations. It is to be expected that in years to come, there will be an impressive growth of foreign participants in boosting the Philippine economy. So what are implementing rules governing foreign corporations? 

Sec. 129. Law applicable. - Any 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 such only as 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. (73a)

Sec. 130. Amendments to articles of incorporation or by-laws of foreign corporations. - Whenever the articles of incorporation or by-laws of a foreign corporation authorized to transact business in the Philippines are amended, such foreign corporation shall, within sixty (60) days after the amendment becomes effective, file with the Securities and Exchange Commission, and in the proper cases with the appropriate government agency, a duly authenticated copy of the articles of incorporation or by-laws, as amended, indicating clearly in capital letters or by underscoring the change or changes made, duly certified by the authorized official or officials of the country or state of incorporation. The filing thereof shall not of itself enlarge or alter the purpose or purposes for which such corporation is authorized to transact business in the Philippines. (n)

Sec. 131. Amended license. - A foreign corporation authorized to transact business in the Philippines shall obtain an amended license in the event it changes its corporate name, or desires to pursue in the Philippines other or additional purposes, by submitting an application therefor to the Securities and Exchange Commission, favorably endorsed by the appropriate government agency in the proper cases. (n)

Sec. 132. Merger or consolidation involving a foreign corporation licensed in the Philippines. - One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporation or corporations if such is permitted under Philippine laws and by the law of its incorporation: Provided, That the requirements on merger or consolidation as provided in this Code are followed.

Whenever a foreign corporation authorized to transact business in the Philippines shall be a party to a merger or consolidation in its home country or state as permitted by the law of its incorporation, such foreign corporation shall, within sixty (60) days after such merger or consolidation becomes effective, file with the Securities and Exchange Commission, and in proper cases with the appropriate government agency, a copy of the articles of merger or consolidation duly authenticated by the proper official or officials of the country or state under the laws of which merger or consolidation was effected: Provided, however, That if the absorbed corporation is the foreign corporation doing business in the Philippines, the latter shall at the same time file a petition for withdrawal of its license in accordance with this Title. (n)

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. (69a)

Sec. 134. Revocation of license. - Without prejudice to other grounds provided by special laws, the license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the Securities and Exchange Commission upon any of the following grounds:

1. Failure to file its annual report or pay any fees as required by this Code;

2. Failure to appoint and maintain a resident agent in the Philippines as required by this Title;

3. Failure, after change of its resident agent or of his address, to submit to the Securities and Exchange Commission a statement of such change as required by this Title;

4. Failure to submit to the Securities and Exchange Commission an authenticated copy of any amendment to its articles of incorporation or by-laws or of any articles of merger or consolidation within the time prescribed by this Title;

5. A misrepresentation of any material matter in any application, report, affidavit or other document submitted by such corporation pursuant to this Title;

6. Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions;

7. Transacting business in the Philippines outside of the purpose or purposes for which such corporation is authorized under its license;

8. Transacting business in the Philippines as agent of or acting for and in behalf of any foreign corporation or entity not duly licensed to do business in the Philippines; or

9. Any other ground as would render it unfit to transact business in the Philippines. (n)

A couple of friends recently told me how their very clever Philippine attorney got around the Philippine rule that non-Philippine citizens can not own real estate in the Philippines by forming a Philippine corporation. The corporation buys the property, then they use a variety of documents to avoid the 40/60 rule that limits non-citizens equity ownership to 40 percent. This all sounds very nice, but, my question to them, did their attorney discuss the Philippine Anti-Dummy Law with you?

Their question to me, what is the Anti-Dummy Law? My answer, good question. The Anti-Dummy Law is a law created to penalize those who violate foreign equity restrictions and evade nationalization laws of the Philippines. The Anti-Dummy Law prohibits dummy, or using what I call a proxy arrangement to accomplish a transaction not allowed under Philippine law. 

To get around the Philippine land ownership rules for example, non-citizens may arrange for a Filipino citizen to purchase land and register the land title to the Filipino citizen’s name, but with the agreement that the whole right to the land belongs to the foreigner. In this case, the Filipino citizen is the “proxy,” thus the “dummy arrangement.” Another common approach, is to create a corporation. The problem with using a corporation to avoid the land restrictions rules, is the 40-60 ratio that applies (40% foreign ownership, 60% Filipino ownership). Therefore a variety of side agreements are used to keep control of the corporation in the hands of the foreigner.

Again, The Anti-Dummy Law prohibits an arrangement usually done by a foreigner to evade nationality restrictions. If you’re caught violating the Anti-Dummy Law, you can receive a jail sentence for up to 5-15 years or receive a hefty fine. Non-Citizens and Filipino citizens who engaged in the dummy arrangement will both be held liable. 

This is only a limited overview of the broad reaching Anti- Dummy Law. If you are setting up a business or acquiring real property in the Philippines, you need to be aware of how the anti-dummy rules may be applied to the way the transaction is being structured. If you don’t want your dream business or property investment in the Philippines to turn into a legal nightmare. 

Now, my friends have assured me after talking to their attorney, there is nothing to worry about. The anti- dummy rules are not being enforced. However, the law is on the books for a reason. Therefore, this does not mean that the law will be enforced in the future. Should this happen, and you run afoul of the Anti- Dummy Law, it is you, not your attorney or friends that told you that it is okay to violate Philippine law, who is on the legal hook.

Purchasing a condominium is one of the wise investments that a person may consider, but there are still some lingering questions on the value of condo units after 50 years. Things can get unpredictable when it comes to purchasing a property. A place that is considered to be a real estate hotspot at present may be of no value in the coming years. This is why some people who want to invest their money in a condominium are a little bit hesitant because of the risks involved.

Truth be told, structures and buildings are not damage-proof. Once they are exposed to harsh elements such as heavy rains and strong winds, they will become more prone to damage. When it comes to determining the value of a condominium, the location is an important factor to consider.  Even locations deemed as the central business district is not immune to urban decay. If the location shows some inevitable signs of aging, there can be a time when the building you are residing will be demolished and this is a harsh reality every condo owner needs to face and this is where most of potential buyers’ concerns are coming from. Your mind might be clouded with doubts and fears due to preconceived notions about buying a condo unit, but before you get completely discouraged, here are some answers to common questions about owning a condo unit.

Are there limitations on the ownership in a condo project?

Unlike landed properties, homeowners have limited entitlement when it comes to a condominium project. Homeowners only possess the specific dwellings, and the land where the building stands is not part of the homeowner’s entitlement. In addition, they do not hold exclusive ownership to the common areas of a condominium. Condominium corporation is composed of shareholders, who happen to be the individual unit owners. The equation for condominium corporation is that one unit is equal to one share.

Is there a law that tackles condominium corporation?

The Republic Act No. 4726 or the Condominium Act is a law that provides details of the condominium ownership. Although the Act does not necessarily talk about foreign buyers, it can serve as a buying guide for foreigners who want to buy into a corporation. Since foreigners are prohibited to own land in the Philippines, their only option is a condo project. However, foreign ownership must not exceed 40 percent.

Does the decision of shareholders need to be in unison?

Since a condominium corporation is profit-oriented, issues within a condominium must be decided through the shareholders’ votes. Whether issues are as mundane as having the common areas repainted, the shareholders have to decide in unison.

Does a condominium building have a lifespan?

The law does not specifically indicate that a condo building becomes obsolete after 50 years. However, Section 8c implies: “That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project”

It is up to the shareholders to decide if the building will be demolished. There are two options that shareholders to the condominium corporation can consider: 1. Sell the land; 2. Make a deal with the original developer.

While buying a condominium is not discouraged, a buyer must keep in mind that ownership of a condominium is limited compared to a landed property. The decision to buy a condominium will depend on the buyer’s preferences and the benefits they can obtain from a condominium such as convenience.

People belonging to the working class often consider investing in a piece of real estate such as a condominium unit because of its flexible payment schemes that make everyone’s dream of owning a real estate property a reality. As you flip through the pages of the developer’s brochures or magazines, you are left in awe as the units epitomize the kind of modern life you want to live.

The price range of these condo units vary from location to location and while these infrastructures make a great investment, there are condo unit owners who had their own share of not-so-pleasant experiences of buying a condo unit.

What can be worse than condos that do not have parking slots? Some owners have to buy a separate lot that can accommodate their vehicle and this means shelling out vast amounts of money. Developers often overlook this one essential space that makes living in a condo more comfortable and hassle-free. Condo unit owners are not only ranting about the lack of parking slots but lost deposits as well.

Buying a condominium unit can be very tedious as you need to go through all kinds of problems and dealing with the agent is no exception. Finding out about lost deposits can burst one’s bubbles. This is why, buyers make it a point to follow up on the agent or track their purchase. These are just a few issues associated with buying a condo unit let alone living in it.

Republic Act No. 4726 Or The Condominium Act Is One Of The Laws Related To Condominium Ownership:

“Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.”

Entrepreneurs who want to legally do business in the Philippines should start with exploring some viable options. A businessman just cannot jump into a business without familiarizing its technicalities. There are some things you need to take into consideration before you can operate your business. 

You need to start with knowing the types of business ownership under the Philippine law: 

1. Corporation 

This type of business structure has five owners or more and they are referred to as shareholders. There are two types of corporation: stock corporation and non-stock corporation. With stock corporation, the capital is divided into shares and distributed to the investors. In turn, investors receive allotments and dividends, which will be based on the numbers of shares they have within the corporation. 

A non-stock corporation is intended for public purposes and issuing shares of stock is already out of the picture. This corporation’s purpose is usually cultural, educational and charitable. 

2. Partnership 

There are two or more individuals involved in this type of business structure. This is why they are called partners according to the Civil Code of the Philippines. The partnership can either be a general partnership or a limited partnership. Partners in a general partnership only have a limited liability for the financial obligations while a limited partnership requires one person to have unlimited liability while the rest have liabilities based on their capital contribution amount. 

3. Sole Proprietorship

As the name implies, this business structure is fully controlled and owned by an individual, which will also enjoy the profits and handle the liabilities of the business. For a sole proprietorship to be in effect, the owner must apply for a business name. It is also the proprietor’s obligation to register with the Department of Trade and Industry (DTI). 

Important Things To Consider For The Business To Run Smoothly: 

Your business cannot be considered legal without registering it with the Bureau of Internal Revenue. Make sure you register your business to the Revenue District Office (RDO) where your business is located. You will also need to secure a Certificate of Registration (COR) and Authority to Print (ATP) for your official receipts to be printed. You should also keep in mind that only printers accredited by BIR will be acknowledged. The official receipts should show that it is BIR accredited. Even books of account must bear BIR stamp. 

Aside from BIR, you should also register your business and employees with the Social Security System (SSS), Home Development Mutual Fund (Pag-ibig) and Philippine Health Insurance (Philhealth). These government entities will also require you to submit reports. It is imperative that you register newly-hired employees with these government agencies as well. 

It is a brave move for anyone to decide on starting a business and giving up a job routine they have been accustomed to for years. While being your own boss is such a dream come true, there is more to running a business than meets the eye. Before you consider taking that huge leap, arm yourself with knowledge about business principles. Otherwise, you will be doomed to fail.

No one can really predict whether a business is viable or not because it solely depends on how you manage it. If you do not have any business background, you may feel as though a business is a total alien landscape. Everything seems foreign to you and it is like going to a battle unarmed. While establishing a path may seem very challenging, learning the business principles will lead you to the road of success.

Create A Feasibility Study

The most common mistake that people make is investing their hard earned money into a business they are not even familiar with. This is the kind of risk that is the hardest to take because if things don’t go as planned, you have to start from scratch and this means spending vast amounts of money. In a feasibility study, you will cover the following areas: products and services, target market, suppliers, competitions, pricing and marketing techniques. With all these in mind, you are slowly putting things in their proper perspectives. The main purpose of creating a feasibility study is for you to determine the nature of business that suits your skills. You can also learn more about your target audience or potential customers’ needs and wants with feasibility study. If you already have a competition before you start your own business, you have an idea how you can stay ahead of the game.

Formulate A Business Plan

Once you have identified viable products and services, the next step is to create a business plan. If you do not have a strong background in business management, find someone who can help you with drafting the plan. The business plan should include essential information on the nature of your business. Aside from the summary of the product, readers must also obtain details of your product. A business proposal must also be kept in mind and each section must outline the strategies you have developed for your business. Don’t forget to include your competition and budget in your business plan as well. Your projections must be realistic and it should the cost of the product, projected sales and even the financial requirements.

Analyze The Availability Of Cash Flow

A steady cash flow is going to be necessary if you want your business to be smooth-sailing. However, when cash flow becomes unavailable, there are still other financial institutions that will provide you assistance in fulfilling your business needs. You just have to see to it you have a sound financial projection or your objective of making a profit will be defeated. Prepare a financial report so you can keep track of your finances. Hire accounting or bookkeeping professionals for this task so you can keep your budget in check. Major business losses are usually due to financial mismanagement and if you want to increase sales and make your business more profitable, you should always keep a record of your financial activity.

Seek All The Help You Can Get

Some entrepreneurial hopefuls end up bursting their tiny bubble due to the lack of business knowledge. You may have the funding and a viable product to set up a business but do you really have what it takes to increase your chances for success? Investing your money in a business is a game of survival and those who manage to keep up with the competition win. Get expert advice so you will know how you can make your business more profitable.

Secure All The Necessary Permits

As an entrepreneur, it is your obligation to follow business rules which include securing a business permit. There are several steps involved in getting a business permit and you are not allowed to operate your business if these have not been secured. For this process, prepare all the essential documents such as notarized documents, certificate of deposit, clearance, receipts and other requirements you need for your business permit.