PHILIPPINES Law and Practice Contributed by: Raoul Angangco, Sylvette Y. Tankiang, Kristin Charisse C. Siao and Ma. Carla Mapalo, Villaraza & Angangco
“Joint venture” refers to a business arrangement where two or more entities or group(s) of entities contribute capital, services, assets, or a combi - nation of these towards undertaking an invest - ment activity or a specific project where each entity will have the right to direct and govern the policies of the joint venture with the intention to share in both profits and risks. An acquisition of shares may be considered as a joint venture if joint control is to exist between or among the new joint venture partners after the acquisition. Other definitive agreements that grant parties the option to acquire the shares of stock, or other conversion agreements that allow other entities to gain or obtain control over an entity, may potentially be covered by the notification requirement. The following transactions are exempt from the rules on compulsory notification: • internal restructurings within a group of com - panies wherein the acquired and acquiring entities have the same UPE; • consolidation of ownership wherein the merger or acquisition involves several enti - ties controlled by the same natural person and there is no change in control over the acquired entity post-transaction; • land acquisition not for the purpose of obtain - ing control; and • joint ventures formed by winning bidder(s) in solicited public-private partnership projects under the Build Operate Transfer Law, upon application by the procuring government agency. 2.4 Definition of “Control” “Control” refers to the ability to substantially influence or direct the actions or decisions of an entity, whether by contract, by agency or
otherwise. Control is presumed to exist when the parent owns, directly or indirectly, through subsidiaries, more than half of the voting power of an entity, except in exceptional circumstances where it can clearly be demonstrated that such ownership does not constitute control. Control may also exist even when an entity owns 50% or less of the voting power of another enti - ty, namely when: • there is power over more than half of the voting rights by virtue of an agreement with investors; • there is power to direct or govern the financial and operating policies of the entity under a statute or agreement; • there is power to appoint or remove the majority of the members of the board of directors or equivalent governing body; • there is power to cast the majority votes at meetings of the board of directors or equiva - lent governing body; • ownership exists over or the right to use all or a significant part of the assets of the entity; or • rights or contracts exist that confer decisive influence on the decisions of the entity. With respect to joint ventures, the granting of veto powers may also be deemed to vest control if the veto rights relate to strategic decisions in the business policy or activities of the corpora - tion, such as the appointment of corporate offic - ers or key management personnel, determina - tion of the budget, adoption of and amendments to the business plan and other similar aspects of business management. The existence of any such right, depending upon the content of the veto right and the importance of this right in the context of the specific business of the corpora - tion, may be sufficient to constitute control.
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