CORPORATION LAW Query: How to determine citizenship of shares of the corporation when they are not held directly by individuals, but in turn held by another entity? Answer: apply the GRANDFATHER RULE, to wit: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital respectively, of which belong to Filipino citizens, all of the said shares shall be recorded as owned by Filipinos. But, if let’s say, 50% of the capital stock belongs to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shares shall be recorded as belonging to aliens. However, while a corporation with 60% Filipino and 40% foreign equity ownership is considered a Philippine national for purposes of investment, it is not qualified to invest in or enter into a joint venture agreement with corporations or partnerships, the capital or ownership of which under the Constitution or other special laws are limited to Filipino citizens only. Hence, for purposes of the law, whatever the percentage of Filipino ownership in the owning corporation, the foreign ownership would always render a portion of its holding in the company as foreign equity and would disqualify the corporation to engage in retail trade.
Posted on: Thu, 24 Oct 2013 13:08:30 +0000
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