Foreign Equity Restrictions and Anti-Dummy Law

Just recently, the Securities and Exchange Commission (SEC) revoked Rappler’s business registration due to violation of the Foreign Equity Restrictions and Anti-Dummy Law. Have you ever wondered what are in these rulings? Here’s a quick glimpse.

The Extent of Foreign Equity in the Philippines

Under the law, the general rule for foreign equity in the Philippines is 40%. However, due to the liberalization of the foreign investment law, foreign investors may now capitalize in domestic or export enterprises to as much as 100% of the capital of these enterprises, provided that:

a. these enterprises are not on the Negative List;

b. the country or state of the foreign investor also allows Filipinos and their corporations to do business therein; and

c. if the foreign investor is investing in a domestic enterprise, the domestic enterprise must have a paid-in capital equivalent to USD 200,000.

Anti-Dummy Law

The Anti-Dummy Law, otherwise known as Commonwealth Act No. 108, is a law created to penalize those who violate foreign equity restrictions and evade nationalization laws. Under the law, foreign participation is prohibited in the management of a corporation, franchise, property or business that is 60% owned by Filipinos.

The Anti-Dummy Law also prohibits “dummy arrangement”, an arrangement usually done by a foreigner to evade nationality restrictions. An example of this is the ownership of land, which is strictly prohibited to foreigners.

For a full text of the said rulings, please click here

For queries and concerns, please feel free to contact us.

– Paul, Your Partner in Decision-Making

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