WHAT CONSTITUTES DOING BUSINESS IN THE PHILIPPINES
The Corporation Code requires foreign corporations that are “doing business” in the Philippines to obtain the appropriate license for this purpose from the SEC (SEC License). To obtain an SEC License, a foreign entity may register the appropriate corporate vehicle in the Philippines. In the alternative, it may incorporate a Philippine corporation and engage in business through such corporation.
The FIA and its implementing rules and regulations of the Foreign Investments Act (FIA IRR) provide a non-exclusive enumeration of specific activities that constitutes doing business in the Philippines, as follows:
The above enumeration is not exclusive. According to the Philippine Supreme Court (Supreme Court), the true test for doing business is whether the foreign corporation is continuing the body of the business or enterprise for which it was organized and whether there exists a continuity of commercial dealings and arrangements which include acts that are normally incident to, and in the progressive prosecution of, the purpose and object of its organization.
Also, under Philippine jurisprudence, an essential condition to be considered as doing business in the Philippines is the actual performance of specific commercial acts within the Philippine territory because the Philippines does not have jurisdiction over commercial acts performed in foreign territories.
A foreign entity that is found to be “doing business” in the Philippines without an SEC License:
is denied standing to bring suit before Philippine courts for the enforcement of its rights, but may be sued before Philippine courts for any valid cause of action;
Based on jurisprudence, the lack of standing to sue may be cured by subsequently obtaining an SEC License.
may be subject to a fine and/or imprisonment for not less than 30 days but not more than five years, in the discretion of the court. In case of foreign corporations, the penalties are imposed on the directors and officers responsible for the violation.