Establishing A Business Entity In the Philippines (Updated)

International Lawyers Network

I. Types of business entities -

As a general rule, foreign equity is allowed to conduct and participate in business in the Philippines, through any of the following modes:

1. By investing in a domestic stock corporation.

A domestic corporation is a corporation which is organized under Philippine law. It is an artificial being which has a personality separate and distinct from the shareholders, thus, the liability of shareholders is limited only to their capital contribution. Other than their capital contribution, the shareholders’ other assets are beyond the reach of the corporation’s creditors. Foreign capital may invest in a domestic corporation either by acquiring shares of stock in an existing domestic corporation, or by contributing capital to one that is still in the process of incorporation.

2. By operating through a local subsidiary which may be owned entirely or partially by the foreign business entity.

A local subsidiary is a domestic corporation, incorporated under Philippine law, which is wholly or majority-owned by the foreign business entity. It is considered domestic because of its local incorporation but is also seen as foreign because of its ownership and the fact that it acts in furtherance of the interests of the foreign “parent” corporation. However, as it is deemed a domestic corporation pursuant to law, it enjoys a legal personality separate and distinct not only from its shareholders, but also from the foreign “parent” corporation.

Please see full Chapter below for more information.

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