PHILIPPINES Law and Practice Contributed by: Francis L. Fragante and Jennifer Marie G. Castro, Cruz Marcelo & Tenefrancia
subsidiaries, branches or affiliates in the Asia-Pacific region and other foreign markets. It is not allowed to earn or derive income in the Philip - pines. It is required to submit an undertaking that such amount as may be necessary to cover its operations in the Philippines, which must be at least USD50,000, will be remitted annually to the Philippines. Regional Operating Headquarters (ROHQ) An ROHQ is a branch established in the Philippines by a multinational company, which is engaged in certain qualifying services. It is allowed to derive income in the Philippines. How - ever, an ROHQ is prohibited from offering qualifying services to entities other than its affiliates, branches or subsidiaries, nor shall it be allowed to solicit or market goods and services directly and indirectly, whether on behalf of its mother company, branches, affiliates, subsidiaries or any other company. An ROHQ must initially remit into the Philippines at least USD200,000. Branch Office If a foreign corporation intends to conduct the busi - ness operations of its parent company in the Philip - pines and generate income from the country, it may establish a branch office, which is treated as an exten - sion of the parent foreign corporation and does not have a separate legal identity. Thus, any judgment or claim for liability against the branch office in the Phil - ippines will be directed against the parent company. Furthermore, a branch is considered a foreign entity. For this reason, if the business activity is subject to foreign equity restrictions, the foreign investor may not be allowed to establish a branch office. At least USD200,000 or its equivalent in other accept - able foreign currency must be remitted to the Phil - ippines as initial funding for the branch office. The amount of required minimum capital may be reduced to USD100,000 if the branch office will engage in a business that involves advanced technology, as deter - mined by the Philippine Department of Science and Technology, or directly employs at least 50 employ -
ees, as certified by the Department of Labor and Employment. A branch office is required to deposit with the SEC acceptable securities (certain government debt instru - ments and equity instruments) with an actual market value of not less than PHP500,000, for the benefit of present and future domestic creditors of the foreign corporation within 60 days after the issuance of its licence to conduct business. Domestic Corporation Subject to legal requirements, foreign investors may establish and register a domestic corporation. A foreign investor can establish a regular corporation or a local subsidiary in the Philippines through regis - tration with the SEC. This entity has a juridical per - sonality separate and distinct from that of its share - holders. A regular corporation or a local subsidiary of a foreign corporation is considered separate and distinct from its parent company. Shareholders are only liable up to the extent of their investments as represented by the shares they have subscribed to. Corporate entities are permitted to act as incorporators of corporations, with a minimum of two incorporators required. Corporations have a per - petual term unless stated otherwise in their Articles of Incorporation. Furthermore, unless stipulated by law, corporations are not obligated to meet a minimum requirement for subscribed and paid-up capital. The minimum paid-up capital of a domestic corporation with foreign equity participation exceeding 40% of its outstanding and voting capital stock that will operate as a domestic market enterprise must be equivalent to at least USD200,000. 3.2 Regulation of Domestic M&A Transactions Merger control in the Philippines is governed by Republic Act No 10667 or the Philippine Competition Act (PCA). The PCA introduces the pre-notification regime for M&A, which requires covered transactions to be notified to the Philippine Competition Commis - sion (PCC) for its approval. Parties to a merger or acquisition that satisfy the thresholds set by the PCC are required to notify the
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