PHILIPPINES Law and Practice Contributed by: Rose Marie M. King-Dominguez, Melyjane G. Bertillo-Ancheta and Franco Aristotle G. Larcina, SyCip Salazar Hernandez & Gatmaitan
2. Overview of Regulatory Field 2.1 Acquiring a Company The acquisition of local businesses or companies is typically effected through: • a purchase of, or investment in, shares or other securities (eg, notes convertible or exchangeable to shares) in a Philippine company; or • the purchase of the assets or property comprising a local business. 2.2 Primary Regulators The primary Philippine regulators that are most rel - evant for local M&A activity would be: • the Securities and Exchange Commission (SEC), which generally administers laws on doing busi - ness, establishing and running corporations, public companies and foreign ownership requirements; • the Philippine Competition Commission (PCC), which implements laws requiring merger notifica - tions; and • the Bureau of Internal Revenue (BIR). M&A projects in particular businesses (eg, telecoms and banking) could require approvals from, or notices to, industry-specific agencies. 2.3 Restrictions on Foreign Investments While foreign investment in local business is generally allowed and even encouraged, certain activities are partially or wholly reserved for Philippine nationals. Foreign ownership limitations are set out in the Phil - ippine Constitution and other statutes. Examples of these limitations are: • a 40% foreign ownership limit for land ownership; • a 30% foreign ownership limit for advertising; and • a 100% Filipino ownership requirement (no foreign equity is permitted) for mass media. 2.4 Antitrust Regulations Assuming certain Philippine revenue and asset value thresholds are met, mergers and acquisitions, and joint ventures are subject to compulsory merger noti - fication under the Philippine Competition Act and its implementing rules and regulations (IRR). Where
subject to compulsory notification, the merger notices must be filed with the PCC within 30 days from the signing of the definitive agreements, and securing a merger clearance from the PCC is a suspensory con - dition; ie, the transaction cannot be consummated prior to the issuance of such clearance (unless the relevant review period lapses without the PCC having taken any action over the merger filing). However, the 30-day period to file the merger notice is currently waived, and parties to a notifiable transaction may file the merger notice any time after the signing of the definitive agreements, provided that the parties may not consummate the transaction prior to obtaining PCC approval. 2.5 Labour Law Regulations From a human resources/employment law perspec - tive, acquirers should be mindful of: • security-of-tenure rules that prohibit termination of employment except for just and lawful causes and only in accordance with specific procedures, and do not allow transfer of employees from one business entity to another without, effectively, the employee’s consent; • bottom-line costs for personnel by reason of sala - ries and mandatory benefits; and • liabilities or business stability issues affecting acquisition targets by reason of employee claims, including claims for regularisation, and labour rela - tions history, especially where a target is unionised. 2.6 National Security Review Under the Public Service Act and its IRR, the relevant government department or administrative agency may review and evaluate any investment in a public ser - vice that effectively results in the grant of direct or indirect control to a foreigner or a foreign corporation. Investments in any public service satisfying both of the following conditions shall be subject to national security review: • the proposed merger or acquisition transaction, or any investment in a public service entity, will effectively result in the granting of control, whether direct or indirect, to a foreigner or a foreign corpo - ration, or a foreign government; and
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