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The Philippine legal system is characterised as a civil law jurisdiction, and its sources of law are derived from the 1987 Philippine Constitution, statutes, administrative and local issuances, and case law.

The 1987 Philippine Constitution establishes a presidential system with three co-equal and independent branches: the legislative, the executive and the judicial.

The executive branch is headed by the President who is elected by direct popular vote. It is responsible for implementing and enforcing laws and managing the bureaucracy through various departments and agencies.

The legislative branch is divided into the Senate and the House of Representatives. They are authorised to make laws, alter and repeal them.

The judicial branch is composed of a Supreme Court and lower courts. It holds the power to settle controversies involving rights that are legally demandable and enforceable.

The 1987 Constitution also recognises local autonomy, allowing local government units (LGUs) to manage their own affairs within the framework of national unity. Each LGU has elected officials and its own jurisdiction, and is authorised to enact local ordinances, collect local taxes and promote local development. These LGUs enjoy local autonomy but remain under the supervision of the national government.

Overview of the Laws and Regulations Applicable to a Business Operating in the Philippines

In general, the Philippine Civil Code governs obligations and contracts, which includes the framework for sources of obligation and the elements of a valid contract.

The primary law governing corporations in the Philippines is Republic Act No 11232, otherwise known as the Revised Corporation Code (RCC), which became effective on 23 February 2019. The RCC defines a corporation as “an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorised by law or incident to its existence”.

Under the RCC, corporations are classified as either stock corporations or non-stock corporations. Stock corporations must have capital stock divided into shares and must be authorised to distribute to its shareholders dividends out of its surplus profits.

Corporations created under the RCC are distinct from those created under special law, which are generally owned or controlled by the government, and are primarily governed by such special law, supplemented by the Revised Corporation Code as far as applicable.

In addition to the RCC, Republic Act No 7042 or the Foreign Investments Act of 1991 (FIA), as amended by Republic Act No 8179 and further amended by Republic Act No 11647, provides for the nationality restrictions on business activities and capital requirements for certain sectors when such activities and sectors include FDI.

The Philippine Securities and Exchange Commission (SEC) is the national government regulatory agency charged with supervision over the corporate sector, the capital market participants, and the securities and investment instruments market, and the protection of the investing public. In this regard, the SEC enforces the provisions of the RCC.

As a general rule, foreign individuals, corporations or other entities are allowed to engage in business in the Philippines. However, the extent of equity held by foreigners in some business activities is restricted or limited under the 1987 Philippine Constitution and special laws. The FIA governs the participation of foreign entities in economic and commercial activities in the Philippines.

The Regular Foreign Investment Negative List promulgated from time to time enumerates the business activities that are subject to foreign equity restrictions and limitations.

The most recent Twelfth Negative List was issued on 27 June 2022. It contains two lists:

• list A, which enumerates areas of investment where foreign ownership is limited pursuant to the Constitution and/or by specific laws; and
• list B, which lists areas of investment where foreign ownership is limited for reasons of security, defence, risk to health and morals and protection of local small and medium scale enterprises.

Some activities included in List A of the Twelfth Negative List are as follows.

• No foreign equity:
1. mass media, except recording and internet business;
2. practice of professions, except in cases specifically allowed by law following the prescribed conditions stated therein;
3. retail trade enterprises with paid-up capital of less than PHP25 million;
4. co-operatives, except investments of former natural born citizens of the Philippines;
5. organisation and operation of private detective, watchmen or security guards agencies;
6. small-scale mining;
7. utilisation of marine resources in archipelagic waters, territorial sea and exclusive lakes, bays and lagoons;
8. ownership, operation and management of cockpits;
9. manufacture, repair, stockpiling and/or distribution of nuclear weapons;
10. manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines; and
11. manufacture of firecrackers and other pyrotechnic devices
• Up to 25% foreign equity:

1. private recruitment, whether for local or overseas employment; and
2. contracts for the construction of defence-related structures.
• Up to 30% foreign equity:

1. advertising.
• Up to 40% foreign equity:

1. procurement of infrastructure projects;
2. exploration, development and utilisation of natural resources;
3. ownership of private lands, except by a natural born citizen who has lost his Philippine citizenship and who has the legal capacity to enter into a contract under Philippine laws;
4. operation of public utilities;
5. educational institutions other than those established by religious groups and mission boards, for foreign diplomatic personnel and their dependents, and other foreign temporary residents or for short-term high-level skills development that does not form part of the formal education system;
6. culture, production, milling, processing, trading except retailing, of rice and corn, and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof, subject to a period of divestment;
7. contracts for the supply of materials, goods and commodities to government-owned or -controlled corporations (GOCC), companies, agencies or municipal corporations;
8. operation of deep sea commercial fishing vessels;
9. ownership of condominium units; and
10. private radio communications network.

The maximum amount of equity held by a foreigner in a corporation will, therefore, depend on the type of activity that the entity will engage in.

If the corporation is engaged in a partially nationalised business activity, foreigners may become members of the board of directors only in proportion to their allowable participation or share in the capital of such entities. Further, foreigners cannot intervene in the management, operation, administration or control of corporations that are engaged in nationalised or partially nationalised business activities, whether as officers, employees or labourers thereof. However, the Secretary of Justice may authorise their employment as foreign technical personnel.

Domestic market enterprises produce goods or provide services exclusively for the domestic market. If they export a portion of their products, they do not consistently export at least 60% of their output. Domestic market enterprises can be 100% foreign owned if the following conditions are met:

• they do not engage in any activity listed on the Negative List;
• the foreign investor’s home country allows Philippine nationals to do business there, as required by law; and
• they have a minimum paid-in equity capital of at least USD200,000 (unless a lower paid-in capital of USD100,000 is acceptable, as discussed below).

If a domestic market enterprise does not meet the minimum paid-in capital requirement, foreign ownership is limited to 40%. Foreign investments in export enterprises are permitted up to 100% equity participation, provided the enterprise does not engage in any activity listed on the Negative List.

In recent years, the Philippines has liberalised nationality restrictions, allowing up to 100% foreign equity in most domestic enterprises, except where restricted by the 1987 Constitution or the Foreign Investment Negative List.

Amendment to the FIA

Under Republic Act No 11647, which amended the FIA, the list of enterprises reserved to Philippine nationals was amended. Except as otherwise provided under Republic Act No 8762, otherwise known as the Retail Trade Liberalization Act of 2000 (RTLA), and other relevant laws, micro and small domestic market enterprises with paid-in equity capital less than the equivalent of USD200,000 are reserved to Philippine nationals. However, Republic Act No 11647 provides that in the following instances, a minimum paid-in capital of USD100,000 shall be allowed to non-Philippine nationals:

• they involve advanced technology as determined by the Department of Science and Technology;
• they are endorsed as start-ups or start-up enablers by the lead host agencies pursuant to Republic Act No 11337, otherwise known as the Innovative Startup Act; or
• a majority of their direct employees are Filipinos, but in no case shall the number of Filipino employees be less than 15.

Registered foreign enterprises employing foreign nationals and enjoying fiscal incentives shall implement an understudy or skills development programme to ensure the transfer of technology or skills to Filipinos.

Amendment to the RTLA

Republic Act No 11595 amended the RTLA by lowering the required paid-up capital for foreign retail businesses. Previously, there was a high minimum paid-up capital requirement of USD2.5 million for foreign retailers and restrictive prequalification requirements. Under Republic Act No 11595, the minimum paid-up capital for foreign retailers was reduced from USD2.5 million to PHP25 million or approximately USD425,000. For foreign retailers engaged in retail trade through more than one physical store, the minimum investment per store must be at least PHP10 million.

Republic Act No 11595 also removed the pre-qualification requirement for the Board of Investments (BOI). However, foreign retailers are required to maintain the required minimum paid up capital.

Amendment to the Public Service Act

Republic Act No 11659 amended Commonwealth Act No 146 and permits 100% foreign ownership of public services in the Philippines that are not categorised as public utilities.

Under Section 4 of Republic Act No 11659, “public utility” refers to a public service that operates, manages or controls for public use any of the following:

• distribution of electricity;
• transmission of electricity;
• petroleum and petroleum products pipeline transmission systems;
• water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems;
• seaports; and
• public utility vehicles.

Section 4 of Republic Act No 11659 further provides that no other person shall be deemed a public utility unless otherwise subsequently provided by law. Thus, the definition introduced by Republic Act No 11659 limits the coverage of public utility to specific sectors that will remain subject to the 40% foreign equity ownership limit provided for by the 1987 Constitution.

Considering this amendment, Republic Act No 11659 allows for 100% foreign ownership in public services that are not categorised as public utilities. This includes sectors such as telecommunications, transportation, tollways and airports.

Amendment to Tax Incentives

Republic Act No 12066, also known as the CREATE MORE Act, was passed to further enhance the Philippines’ investment climate by making the tax incentive system more competitive, predictable and investor-friendly while still safeguarding government revenues. The law responds to concerns from investors about the complexity and rigidity of the existing tax regulations.

Republic Act No 12066 allows for longer and more flexible incentive periods for business enterprises (RBEs) which are registered with Investment Promotion Agencies, especially those engaged in high-value, strategic or export-oriented activities. This provision helps investors achieve long-term planning stability and encourages large-scale and capital-intensive investments.

The law refines the 5% Special Corporate Income Tax on Gross Income Earned, making it more attractive and clearer in application. This tax option remains in lieu of all national and local taxes, reducing the overall tax burden and simplifying compliance for qualified RBEs.

Republic Act No 12066 expands and clarifies VAT zero-rating and VAT exemption provisions, particularly for export enterprises and domestic market enterprises with export activities. These measures aim to lower production costs and enhance competitiveness in global markets.

The law likewise promotes a more balanced incentive structure that benefits both domestic and foreign investors, encourages reinvestment, and supports technology transfer, job creation and regional development.

The CREATE MORE Act fosters investment by making tax incentives more competitive, predictable and responsive to investor needs. By refining corporate tax incentives and improving administrative clarity, the law aims to attract more investments, generate employment and support sustainable economic growth in the Philippines.

To engage in business activities in the Philippines, foreign investors may either establish: (i) a representative office/liaison office; (ii) regional or area headquarters; (iii) regional operating headquarters; (iv) branch office; or (v) domestic subsidiary.

Representative Office

A representative office acts merely as a liaison office between its head office and the latter’s Philippine-based clients or customers. Its permitted activities are restricted to tasks such as information sharing, product promotion, quality control and similar functions.

The representative office is prohibited from concluding sales agreements on behalf of its head office or generating income in the Philippines. All expenses incurred by the representative office are covered by its head office.

Regional or Area Headquarters (RHQ)

An RHQ is meant to act as an administrative branch in the Philippines of a multinational company engaged in international trade. It principally serves as a supervision, communications and co-ordination centre for its subsidiaries, branches or affiliates in the Asia-Pacific region and other foreign markets.

It is not allowed to earn or derive income in the Philippines. 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. However, 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 business operations of its parent company in the Philippines and generate income from the country, it may establish a branch office, which is treated as an extension 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 Philippines 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 acceptable foreign currency must be remitted to the Philippines 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 determined by the Philippine Department of Science and Technology, or directly employs at least 50 employees, as certified by the Department of Labor and Employment.

A branch office is required to deposit with the SEC acceptable securities (certain government debt instruments 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 registration with the SEC. This entity has a juridical personality separate and distinct from that of its shareholders. 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 perpetual 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.

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 Commission (PCC) for its approval.

Parties to a merger or acquisition that satisfy the thresholds set by the PCC are required to notify the PCC before the execution of the definitive agreements relating to the transaction. From 1 March 2025, if a party to an M&A transaction is greater than PHP8.5 billion in value and if the transaction size is greater than PHP3.5 billion, such M&A must be notified to the PCC before it can proceed.

In addition, the public offering of securities in the Philippines is governed by the SRC, which provides that no security can be sold or offered for sale or distribution within the Philippines without a registration statement duly filed with, and rendered effective by, the SEC.

Takeovers of public companies are also regulated by the SRC Rules on tender offers. Compliance with the disclosure rules and requirements is monitored and enforced by the SEC. A mandatory tender offer applies whatever the method by which control of a public company is obtained, either through the direct purchase of its stocks or through indirect means.

Every corporation, domestic or foreign, doing business in the Philippines, is required to comply with the following basic reporting requirements of the SEC. The following documents must be submitted.

Audited Financial Statements (AFS)

The AFS must be audited by an independent certified public accountant. If the total assets or total liabilities of the corporation are less than PHP600,000, the financial statements shall be certified under oath by the corporation’s treasurer or chief financial officer. The AFS must be stamped as “RECEIVED” by the Bureau of Internal Revenue which must be filed within 120 calendar days after the end of the fiscal year, as indicated in the financial statements.

The SEC may place the company under delinquent status in case of its failure to submit the reporting requirements three times, consecutively or intermittently, within a period of five years.

General Information Sheet (GIS)

The corporation is likewise required to submit a GIS to the SEC, to be filed annually and within 30 days from the date of the annual stockholders’ meeting. The SEC may place the company under delinquent status in case of its failure to submit the reportorial requirements three times, consecutively or intermittently, within a period of five years.

Stock and Transfer Book (STB)

A stock corporation, or a corporation which has capital stock divided into shares and is authorised to distribute to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the shares held, is required to register its STB with the SEC within 30 days from its incorporation.

The STB shall contain a record of all stocks in the names of the stockholders alphabetically arranged, the instalments paid and unpaid on all stocks for which subscription has been made, and the date of payment of any instalment, a statement of every alienation, sale or transfer of stock made, the date thereof, by and to whom made, and such other entries as the by-laws of a corporation may prescribe.

Disclosure of Beneficial Owners

SEC Memorandum Circular No 15, series of 2025 requires reporting entities to keep and preserve in its principal office adequate, timely and accurate information relating to its beneficial owner or owners to be identified in the matter provided by the SEC.

The information on beneficial ownership is adequate when the reporting entity has the complete names, specific residential addresses, dates of birth, sex, nationalities, mobile number and/or landline, email addresses, tax identification numbers, if any, civil status, politically exposed persons, date the individual became a beneficial owner and percentage of ownership, if applicable, of all its beneficial owners.

The RCC provides for the following rights of minority shareholders in a domestic corporation.

Pre-Emptive Right

All stockholders of a stock corporation shall enjoy the pre-emptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is denied by the articles of incorporation.

However, such right shall not extend to shares issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or to shares issued in good faith with the approval of the stockholders representing two-thirds of the outstanding capital stock in exchange for property needed for corporate purposes or in payment of previously contracted debt.

Cumulative Voting for Directors

In cumulative voting, a shareholder’s votes are multiplied by the number of directors to be elected and the shareholder can concentrate the total number of its votes on one candidate or group of candidates.

Right to Call Special Meetings

A stockholder may propose the holding of a special meeting and items to be included on the agenda. Whenever for any cause, there is no person authorised, or the person authorised unjustly refuses to call a meeting, the SEC, upon petition of a stockholder on a showing of good cause, may issue an order directing the petitioning stockholder to call a meeting by giving proper notice.

Further, SEC Memorandum Circular No 7, series of 2021, as applicable for publicly listed companies, allows any number of shareholders of a corporation who hold at least 10% or more of the outstanding capital stock to call a special stockholders’ meeting.

Inspection of Books and Records

Corporate records, regardless of the form in which they are stored, shall be open to inspection by any director, trustee, stockholder or member of the corporation in person or by a representative at reasonable hours on business days, and a demand in writing may be made by such director, trustee or stockholder at their expense, for copies of such records or excerpts from them.

A requesting party who is not a stockholder or member of record, or is a competitor, director, officer, controlling stockholder or otherwise represents the interests of a competitor shall have no right to inspect or demand reproduction of corporate records.

Appraisal Right

Any stockholder shall have the right to dissent and demand payment of the fair value of the shares in the following instances:

• in case an amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorising preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;
• in case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the RCC;
• in case of merger or consolidation; and
• in case of investment of corporate funds for any purpose other than the primary purpose of the corporation.

In addition, the RCC requires certain acts to be approved by at least two-thirds of the outstanding capital stock, namely:

• any amendment of the articles of incorporation;
• removal of directors;
• ratification of a contract of the corporation with a director where any of the first three conditions set forth in Section 31 of the RCC is absent, provided that there is full disclosure of the adverse interest of the director;
• ratification of a director acquiring a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation;
• shortening or extending the corporate term;
• increase or decrease of capital stock
• incurring, creating or increasing any bonded indebtedness;
• sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets;
• investment of corporate funds in another corporation or business or for any other purpose;
• issuance of stock dividends;
• certain instances involving a management contract;
• delegation of authority to the board of directors to amend the by-Laws;
• merger or consolidation; and
• voluntary dissolution where creditors are affected.

Other than disclosure through the General Information Sheet and Beneficial Ownership Declaration (described in 4.1 Corporate Governance Framework), there are generally no disclosure requirements specially applicable to FDI. Foreign investors may register their investment with the Bangko Sentral ng Pilipinas (BSP), but this is not mandatory. Such registration of foreign investments with the BSP is only required if the foreign exchange needed to service the repatriation of capital and/or remittance of dividends, profits and earnings which accrue thereon shall be sourced from the Philippine banking system.

Foreign exchange needed for capital repatriation and remittance of dividends, profits and earnings of unregistered foreign investment may be sourced outside of the banking system.

The primary regulator of securities, corporations and capital market participants is the SEC.

The Philippine Stock Exchange (PSE), a shareholder-based and revenue-earning corporation, is the only stock exchange in the Philippines. It is classified as a self-regulatory organisation (SRO), meaning that it can implement its own rules and establish penalties on erring trade participants (TPs) and publicly listed companies. In addition, the Capital Markets Integrity Corporation (CMIC), which is also licensed as an SRO, provides audit, surveillance and compliance oversight over TPs and listed companies.

As SROs, the PSE and CMIC can adopt their own rules with the prior approval of the SEC, enforce compliance by trading participants and listed companies with those rules, and impose penalties on erring TPs and listed companies. To a certain extent, PSE exercises disciplinary authority over other market participants determined by the PSE to be responsible for offer-related violations. However, the PSE and CMIC remain under the oversight of the SEC.

In a 2024 publication of the Organization for Economic Co-operation and Development (OECD), the equity market in the Philippines was described as lacking “the consistent dynamism of other Asian economies, with both the amounts of capital raised and the number of offerings failing to achieve steady growth”. Particularly, it was stated that “IPO activity has been substantially lower in the Philippines than in peer countries both in terms of the number of IPOs and capital raised. Regarding the non-financial sector, only 77 Philippine companies have entered the market since the early 2000s, collectively raising USD11 billion”. As of 2025, there are 287 listed companies on the PSE.

The 2024 publication of the OECD described the bond market as ranking second-to-last relative to its peer countries in terms of number of bonds issued, with 567 bonds since 2000. The Philippine Dealing & Exchange Corp (PDEx) is the only regulated fixed income marketplace in the Philippines where corporate bonds can be listed and traded. The PDEx operates an electronic trading platform and is designated by the SEC as an SRO.

The SRC provides for regulations on the issuance of securities in the Philippines and sets out the registration requirements for issuances of securities and the exemptions therefrom.

Under the SRC, securities offered or sold to the public are generally required to be registered with the SEC, unless the securities are exempt. This is done by filing a registration statement to be approved by the SEC. However, the SRC exempts certain transactions from registration, such as limited or private offerings, sales to qualified buyers, and other transactions that pose minimal public risk. The SEC may also exempt other transactions, if it finds that the requirement of registration under the SRC is not necessary in the public interest or for the protection of the investors, for example because of the small amount involved or the limited character of the public offering.

With regard to reporting requirements, issuers are required to file an annual report, quarterly report and current reports, as necessary, to make a full, fair and accurate disclosure to the public of every material fact or event that occurs, which would reasonably be expected to affect investors’ decisions in relation to those securities. Disclosure requirements are also required of beneficial ownership of 5% of any class of equity securities of a company satisfying the requirements of Section 17.2 of the SRC.

Further, the SRC provides the requirements relating to tender offers, including mandatory tender offers and those exempt therefrom.

FDI in the Philippines is subject to the nationality restrictions in the FIA and securities regulation under the SRC. Other than that, there is generally no requirement for an investment to be reviewed or approved by any Philippine regulatory authority.

Merger control in the Philippines is governed by the PCA, which was enacted to enhance economic efficiency, promote free and fair competition, prevent economic concentration which will unduly stifle competition, lessen, manipulate or constrict the discipline of free markets, and penalise all forms of anti-competitive agreements, abuse of dominant position and anti-competitive mergers and acquisitions.

The PCA introduces the pre-notification regime for mergers and acquisitions, which requires covered transactions to be notified to the PCC for its approval, namely those transactions that exceed both the size of transaction (SOT) and size of party (SOP) thresholds, which are adjusted annually. Starting from 1 March 2025, mergers and acquisitions that exceed the parameters of size of party of PHP8.5 billion and size of transaction of PHP3.5 billion must be notified to the PCC before proceeding.

Upon submission of the prescribed Notification Form, the PCC has 15 days to check the completeness of the submitted documents. Once confirmed, the PCC will conduct its Phase I review within 30 days from the date of confirmation (“Phase I Review”). Should the PCC determine that a more comprehensive or detailed analysis of the merger or acquisition is necessary, it shall conduct its Phase II Review for an additional 60 days. However, the total review period shall not exceed 90 days. To facilitate time-sensitive transactions, the PCC allows for an Expedited Merger Review.

If a transaction falls below the SOP and SOT thresholds, the PCC may, motu propio, review transactions if it believes that the transaction is likely to substantially prevent, restrict or lessen competition in the relevant market.

Parties to a transaction that is subject to compulsory notification must notify the PCC within 30 calendar days after the signing of definitive agreements relating to the merger but prior to any acts of consummation.

If parties to a merger and their ultimate parent entity fail to notify the PCC or breach the waiting period before consummating the merger, the merger or acquisition is considered invalid and without legal effect. Further, the parties will be fined 1% to 5% of the transaction’s value.

The PCA also prohibits anti-competitive conduct, such as anti-competitive agreements, and abuse of dominant position. In general, anti-competitive agreements are agreements that substantially prevent, restrict or lessen competition. These may be between competitors (horizontal agreements) or between and among enterprises in a production or distribution chain (vertical agreements) that prevent, distort or restrict competition in a territory. Examples include price fixing, output limitation, market sharing and bid rigging. On the other hand, abuse of dominant position occurs when an entity with a significant degree of power in a market engages in conduct that substantially prevents, restricts or lessens competition. Examples include predatory pricing, price discrimination, limiting production, markets or technical development and exploitative behaviour towards consumers, customers or competitors.

Rule 4 of the IRR of the PCA provides that the PCC, motu proprio or upon notification, shall have the power to review mergers and acquisitions having a direct, substantial and reasonably foreseeable effect on trade, industry or commerce in the Philippines, based on factors deemed relevant by the PCC.

In conducting this review, the PCC shall assess whether a proposed merger or acquisition is likely to substantially prevent, restrict, or lessen competition in the relevant market or in the market for goods and services as may be determined by the PCC; and take into account any substantiated efficiencies put forward by the parties to the proposed merger or acquisition, which are likely to arise from the transaction.

In evaluating the competitive effects of a merger or acquisition, the PCC shall endeavour to compare the competitive conditions that would likely result from the merger or acquisition with the conditions that would likely have prevailed without it.

Further, the PCC evaluates the competitive effects of a merger or acquisition, and may consider, on a case-by-case basis, the broad range of possible factual contexts and the specific competitive effects that may arise in different transactions, such as:

• the structure of the relevant markets concerned;
• the market position of the entities concerned;
• the actual or potential competition from entities within or outside of the relevant market;
• the alternatives available to suppliers and users, and their access to supplies or markets; and
• any legal or other barriers to entry.

Under the PCC’s Merger Remedies Guidelines, the parties may propose behavioural and structural remedies, and ancillary measures.

Behavioural remedies seek to address the identified substantial prevention, restriction or lessening of competition (SLC) by regulating the conduct of parties, post-transaction. This is achieved by imposing requirements or restrictions on certain conduct of the merged firm post-transaction so that it does not act in an anti-competitive manner or exercise its enhanced market power to foreclose rivals despite having the ability and incentive to do so. Behavioural remedies target and seek to minimise the adverse effects of the transaction by regulating post-merger outcomes. An example is access or non-discrimination obligations.

Proposed behavioural remedies must conform to the following: (i) their terms are readily and affordably monitored, (ii) there is a straightforward punishment mechanism with strong deterrence effect for breach, and (iii) there is more benefit to adopt a behavioural remedy than a structural remedy or a structural remedy is not feasible.

On the other hand, structural remedies affect the structure of the market, usually by creating, restoring or maintaining a firm that will compete independently. These are self-policing and do not require active monitoring; their effects on the market have a degree of permanence; and they directly address the source of competitive harm by eliminating its root cause. Divestiture is an example of a structural remedy.

Ancillary measures refer to additional steps or conditions that the parties must comply with before, during and/or after the implementation of the remedy to ensure the effectiveness of the proposed remedy.

The PCC has the power to conduct inquiries, investigate and hear and decide on cases involving any violation of the PCA. It may also exercise its powers of review to prohibit mergers and acquisitions that will substantially prevent, restrict or lessen competition in the relevant market. Further, the PCC has the power to issue adjustment or divestiture orders including orders for corporate reorganisation or divestment in the manner and under such terms and conditions as may be prescribed in the rules and regulations implementing the PCA.

In this regard, before the investment is made, and provided that the transaction is subject to mandatory notification, the PCC may block an investment by not approving it. After an investment is made and if it was required to be notified but there was failure to do so, the PCC may declare the merger/acquisition as void and without legal effect.

Final orders or decisions of the PCC are appealable to the Court of Appeals in accordance with the Rules of Court. The appeal shall be made within 15 calendar days from receipt of the PCC’s decision. The appeal shall not stay the final order or decision sought to be reviewed, unless the Court of Appeals directs otherwise.

Foreign investors who conduct business in the Philippines are required to register with the SEC or the Department of Trade and Industry (DTI), as appropriate, and secure additional registrations, permits and licences from relevant government agencies based on their specific industry.

However, other than the nationality restrictions, there is no national security review for FDI.

This is not applicable in the Philippines. See 7.1 Applicable Regulator and Process Overview.

This is not applicable in the Philippines. See 7.1 Applicable Regulator and Process Overview.

This is not applicable in the Philippines. See 7.1 Applicable Regulator and Process Overview.

Ownership of private land in the Philippines is limited to Filipino citizens and corporations whose capital is at least 60% owned by Filipino citizens. However, Republic Act No 7652 or the Investors’ Lease Act, as amended by Republic Act No 12252, allows foreign investors to enter into long-term leases of private land, subject to certain requirements, namely:

• the foreign investor must have an approved and registered investment;
• the leased area shall be used solely for the approved and registered investment upon the mutual agreement of the parties;
• the aggregate period of the lease contract shall not exceed 99 years;
• the lease contract shall be registered with the Registry of Deeds of the province or city where the leased area is located and annotated on the certificate of title of the land and/or the tax declaration, or recorded in the Primary Entry Book for Unregistered Lands, as applicable; and
• in the case of tourism projects, lease of private lands by a foreign investor shall be limited to projects with an investment of not less than USD5 million, 70% of which shall be infused in the project within three years from the signing of the lease contract. For this purpose, the 70% includes pre-development expenses, pre-operating expenses, cost of land and land improvements, buildings, leasehold improvements, working capital, and machinery and equipment, inventory, and other current and non-current assets.

The taxes imposed on a domestic corporation are:

• corporate income tax of 25% of its net taxable income;
• minimum corporate income tax (MCIT) of 2% of the gross income;
• tax on certain passive income;
• VAT of 12% of its gross receipts; and
• local taxes, fees and charges imposed by the LGU.

By way of exception, corporations with net taxable income not exceeding PHP5 million and with total assets not exceeding PHP100 million, excluding land on which the corporation’s office, plant and equipment are situated during the taxable year, shall be taxed at 20% corporate income tax.

Please also refer to the discussion on tax incentives in 2.1 Current Economic, Political and Business Climate.

Passive income, such as dividends or interest, is subject to withholding tax. Dividends distributed by Philippine companies to non-resident foreign corporations (ie, non-resident aliens not engaged in trade or business) are generally subject to a 25% final withholding tax. A reduced 15% rate applies if the home country exempts the dividend from tax or permits a 15% or greater credit for corporate taxes paid by the company paying the dividend.

In addition to the FIA, the Omnibus Investment Code of 1987 governs foreign investments in the Philippines, while the granting of incentives is administered by investment promotions agencies, such as the BOI under the DTI, and the Philippine Economic Zone Authority (PEZA).

BOI registered enterprises shall be entitled to incentives, including:

• income tax holiday;
• additional deduction from taxable income equal to 50% of labour expenses for five years from registration;
• tax and duty exemption on imported capital equipment and accompanying spare parts, under certain conditions;
• tax credit on domestic capital equipment, subject to certain conditions; and
• employment of foreign nationals in supervisory, technical or advisory positions for five years from registration, extendable for limited periods with certain exceptions.

On the other hand, PEZA-registered enterprises are entitled to incentives available to BOI-registered entities plus additional incentives of exemption from:

• taxes and duties, subject to certain conditions, on merchandise, raw materials, supplies and other articles brought into the export processing zone; and
• local taxes and licences, including real property taxes on production equipment and machinery.

Capital gains from the sale or other disposition of shares not traded on the stock exchange, whether involving domestic or foreign corporations, are uniformly taxed at a 15% final rate on the net capital gain.

Sales of shares of stock listed and traded on a local or foreign stock exchange, other than the sale by a dealer in securities, are subject to a stock transaction tax of 0.1%. The scope of the stock transaction tax now includes the disposition of (i) other securities listed and traded through a local stock exchange and (ii) shares of stock of a domestic corporation listed and traded through a foreign stock exchange.

The Philippines does not have a general anti-avoidance rule.

The Labor Code of the Philippines (the “Labor Code”) provides for the minimum labour standards and benefits of employment that employers must provide or comply with and to which employees are entitled as a matter of right.

It also protects employees’ rights to self-organisation and collective bargaining. Managerial and confidential employees, however, may not form or become members of labour unions. A labour union must be registered with the Department of Labor and Employment to enjoy the rights granted by law to labour unions.

The Labor Code provides that employees have the right to conduct a strike in accordance with law. On the other hand, the employer has the right to lock out employees in accordance with the circumstances under the Code.

Further, employees may form and join workers’ associations and other mutual aid and benefit associations for legitimate purposes, other than collective bargaining.

The following are the minimum standards of benefits:

• as a general rule, employers can only require employees to work a maximum of eight hours a day. If the employer requires the employee to work for more than eight hours, such employee is entitled to overtime pay at the rate of 25% of the basic hourly rate for an ordinary working day or 30% of the hourly rate for the day for work performed on a holiday or rest day;
• it is the duty of the employer to give its employees a rest period of not less than 24 consecutive hours after every six consecutive normal working days;
• as a general rule, the employer must give its employees a break of not less than 60 minutes to allow them to have their regular meals;
• an employee who has rendered at least one year of service shall be entitled to a yearly paid service incentive leave of at least five days;
• any pregnant female employee shall be granted a maternity leave of 105 days with full pay;
• a married male employee cohabiting with his spouse is entitled to seven days of leave with pay on the condition that his spouse has delivered a child or suffered a miscarriage;
• in addition to leave privileges under existing laws, a solo parent is entitled to not more than seven days leave with pay provided that they had rendered one year of service;
• women who are victims of violence shall be entitled to ten days of leave with pay;
• women employees who undergo surgery caused by gynaecological disorders shall be granted two months of leave with full pay;
• compliance with the minimum wage;
• if an employee works on their rest day or on a special day (which is not a holiday), the employee is entitled to premium pay of at least 30% of their regular wage;
• if an employee works on a holiday, that employee is entitled to holiday pay;
• if an employee works between the hours of ten o’clock in the evening to six o’clock in the morning, such employee is entitled to night shift differential which is equivalent to 10% of the employee’s regular wage for each hour of work performed;
• employers must pay their employees the 13th month pay, which should not be less than one-twelfth of the total basic salary earned by an employee within a calendar year;
• retiring employees must receive their retirement pay equivalent to one-half month salary for every year of service; and
• provision of lactation stations and lactation breaks for nursing employees.

In addition, the employer is required to register itself and its employees with the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth) and the Home Development Mutual Fund (Pag-IBIG).

Employees are generally compensated through cash and statutory benefits (including discretionary bonuses, stock options, retirement benefits, etc) under the Labor Code. Other kinds of compensation, or amounts above the minimum standards under the Labor Code, may be as stipulated in the employment contract (including performance/discretionary bonuses, stock options, retirement benefits, etc).

Republic Act No 7641, amended Article 301 of the Labor Code, governs company retirement plans. Upon reaching the retirement age established in the collective bargaining agreement (CBA) or applicable employee contract, an employee may be retired. Upon retirement, an employee is entitled to the retirement benefits established in the CBA or applicable employee contract, provided that the terms thereof are not less than those established in law.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee, upon reaching the age of 60 years or more, but not beyond 65 years, which is declared the compulsory retirement age, who has served at least five years in the relevant establishment, may retire and shall be entitled to retirement pay equivalent to at least half a month’s salary for every year of service, a fraction of at least six months being considered as one whole year.

Regular employees are entitled to security of tenure, which means that they cannot be terminated except for just and authorised causes as provided in the Labor Code.

In the event of an acquisition by share sale or change of control, the employee’s tenure and compensation/benefits are not affected since the employment contract is with the target company and there is no change of employer. In any other transaction which results in an authorised cause (enumerated below), the employee may be terminated and is entitled to separation pay. Notably, there is no legal obligation for a buyer in an asset sale to absorb an employee without an assumption clause.

As regards authorised causes, separation pay is dependent on the specific authorised cause. In case of termination due to the installation of labour-saving devices or redundancy, the affected worker shall be entitled to separation pay equivalent to at least one month’s pay or to at least one month pay for every year of service, whichever is higher. In case of disease, retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one month pay or at least one-half month’s pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one whole year.

If the dismissal is based on authorised causes, the employer must give the employee and the DOLE written notice 30 days prior to the effectiveness of the separation.

Intellectual property is not an important aspect of screening FDI in the Philippines.

Republic Act No 8293, otherwise known as the Intellectual Property Code (the “IP Code”), enumerates the following intellectual property rights that can be protected: (i) copyright and related rights; (ii) trade marks and service marks; (iii) geographic indications; (iv) industrial designs; (v) patents; (vi) layout designs (topographies) of integrated circuits; and (vii) protection of undisclosed information.

Rights and defences are granted to owners of the various intellectual property rights stated above. Section 122 of the IP Code provides that rights to a trade mark shall be acquired through registration. Once the word mark is registered, the owner may maintain the registration by submitting proofs of use of the mark in any colour, typeface, style and/or design. Thus, in order to avail of the remedies under the IP Code for the protection of its intellectual property in the form of its trade marks, registration is essential.

Republic Act No 10173, otherwise known as the Data Privacy Act (DPA), was enacted to ensure that personal data in information and communications systems in the government and in the private sector are secured and protected. It applies to the processing of all types of personal information and to any natural and juridical person involved in personal information processing including those personal information controllers and processors who, although not found or established in the Philippines, use equipment that is located in the Philippines, or those who maintain an office, branch or agency in the Philippines.

The DPA requires corporations to comply with the following to ensure the privacy of personal information and sensitive personal information:

• appointing a Data Privacy Officer (DPO);
• registering the data processing system;
• conducting a Privacy Impact Assessment (PIA) within the organisation;
• creating a privacy manual or programme;
• implementing of measures for privacy and data protection; and
• regular exercise of breach reporting procedures.

The DPA provides that processing of personal information is allowed, unless prohibited by law. On the other hand, processing of sensitive personal information and privileged information is prohibited, except in cases enumerated under the DPA IRR.

In case of data breach, the National Privacy Commission (NPC) and affected data subjects must be notified by the personal information controller within 72 hours upon knowledge of the incident. Notification of personal data breaches shall be required when sensitive personal information or any other information that may be used to enable identity fraud are reasonably believed to have been acquired by an unauthorised person, and the personal information controller or the NPC believes that such unauthorised acquisition is likely to give rise to a real risk of serious harm to any affected data subject.

Any natural or juridical person, or other body involved in the processing of personal data, who fails to comply with the DPA, the DPA IRR and other issuances of the NPC, shall be liable for such violation, and shall be subject to its corresponding sanction, penalty or fine, without prejudice to any civil or criminal liability.