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Philippines: Promoting foreign investment

Aaron Roi B. Riturban

In line with the policy of the Philippine government to attract and promote investment from foreign nationals in activities that make important contributions to the industrialisation, socio-economic development and sustainable inclusive growth of the country, the Philippine Congress enacted Republic Act no 10881. The Act lifts the foreign investment limitations found in laws governing (1) adjustment companies, (2) lending companies, (3) financing companies, and, (4) investment houses.

Before the enactment of the Act, foreign nationals were allowed to own only up to 40% of the capital stock of adjustment companies, up to 49% of the voting capital stock of lending companies, and up to 60% of the voting stock of financing companies and investment houses. As a result of the Act, foreign nationals may now own up to 100% of adjustment companies, lending companies, financing companies, and investments houses.

However, the nationality restriction remains in respect of investment companies (or companies that are engaged primarily, or propose to engage primarily, in the business of investing, reinvesting, or trading in securities). At present, only Filipino citizens may be nominated to sit on the board of directors of an investment company. Similarly, the Act did not lift the nationality restriction in respect of land ownership. Thus, while a lending company whose foreign shareholder/s own more than 40% of its capital may bid and take part in the foreclosure of land given as collateral to secure a loan, that lending company is required to transfer its rights to a qualified Philippine national (for example, a Filipino citizen, or a Philippine corporation whose capital is at least 60%-owned by Filipino citizens) within a period of five years from the date it takes actual possession of the foreclosed land, and in no circumstances can the title to the foreclosed land be transferred or registered in the name of the lending company.

The Act was published on August 1 2016 and became effective on August 16 2016.

Aaron Roi B. Riturban

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