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FOREIGN CORPORATIONS

IN addition, the basis now of that foreign corporation in suing is not based on the original policy but

because of deed of assignment. When you get paid by insurance, the insurer becomes subrogated into

the shoes of the insured.

After all these things, issue on when a foreign corporation can or cannot sue, we said that insofar as

isolated transaction is concerned, we said:

The corporation may sue even without license in cases of isolated transactions Isolated transactions are to be determined on a case to case basis, taking into consideration all

the factors surrounding the transaction and the parties to the transaction

On the other hand, we said that without license, the foreign corporation has no capacity to sue and it

cannot do business here, except:

Isolated transactions Non business transactions Protection of trademark Enforcement of contracts consummated abroad

On the other hand, we also had some indicators as to when a foreign corporation is engaged in business

like:

1. Assignment of distributors and agents2. Advertising3. Maintaining an office in the Philippines4. Exercising supervision and solicits orders in local establishments in its line of business

a. The act of supervising is considered proof of managing a company and the localcompany is acting in behalf of the foreign corporation

REQUIREMENTS FOR LICENSE:

Sec. 125. Application for a license. - A foreign corporation applying for a license to transact business in

the Philippines shall submit to the Securities and Exchange Commission a copy of its articles of

incorporation and by-laws, certified in accordance with law, and their translation to an official language

of the Philippines, if necessary. The application shall be under oath and, unless already stated in its

articles of incorporation, shall specifically set forth the following:

1. The date and term of incorporation;


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2. The address, including the street number, of the principal office of the corporation in the country or

state of incorporation;

3. The name and address of its resident agent authorized to accept summons and process in all legal

proceedings and, pending the establishment of a local office, all notices affecting the corporation;

4. The place in the Philippines where the corporation intends to operate;

5. The specific purpose or purposes which the corporation intends to pursue in the transaction of its

business in the Philippines: Provided, That said purpose or purposes are those specifically stated in the

certificate of authority issued by the appropriate government agency;

6. The names and addresses of the present directors and officers of the corporation;

7. A statement of its authorized capital stock and the aggregate number of shares which the corporation

has authority to issue, itemized by classes, par value of shares, shares without par value, and series, if

any;

8. A statement of its outstanding capital stock and the aggregate number of shares which the

corporation has issued, itemized by classes, par value of shares, shares without par value, and series, if

any;

9. A statement of the amount actually paid in; and

10. Such additional information as may be necessary or appropriate in order to enable the Securities and

Exchange Commission to determine whether such corporation is entitled to a license to transact

business in the Philippines, and to determine and assess the fees payable.

Attached to the application for license shall be a duly executed certificate under oath by the authorized

official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the

country or state of the applicant allow Filipino citizens and corporations to do business therein, and that

the applicant is an existing corporation in good standing. If such certificate is in a foreign language, a

translation thereof in English under oath of the translator shall be attached thereto.

The application for a license to transact business in the Philippines shall likewise be accompanied by a

statement under oath of the president or any other person authorized by the corporation, showing to

the satisfaction of the Securities and Exchange Commission and other governmental agency in the

proper cases that the applicant is solvent and in sound financial condition, and setting forth the assets

and liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filingof the application.

Foreign banking, financial and insurance corporations shall, in addition to the above requirements,

comply with the provisions of existing laws applicable to them. In the case of all other foreign

corporations, no application for license to transact business in the Philippines shall be accepted by the


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Securities and Exchange Commission without previous authority from the appropriate government

agency, whenever required by law. (68a)

Sec. 126. Issuance of a license. - If the Securities and Exchange Commission is satisfied that the applicant

has complied with all the requirements of this Code and other special laws, rules and regulations, the

Commission shall issue a license to the applicant to transact business in the Philippines for the purposeor purposes specified in such license. Upon issuance of the license, such foreign corporation may

commence to transact business in the Philippines and continue to do so for as long as it retains its

authority to act as a corporation under the laws of the country or state of its incorporation, unless such

license is sooner surrendered, revoked, suspended or annulled in accordance with this Code or other

special laws.

Within sixty (60) days after the issuance of the license to transact business in the Philippines, the license,

except foreign banking or insurance corporation, shall deposit with the Securities and Exchange

Commission for the benefit of present and future creditors of the licensee in the Philippines, securities

satisfactory to the Securities and Exchange Commission, consisting of bonds or other evidence of

indebtedness of the Government of the Philippines, its political subdivisions and instrumentalities, or of

government-owned or controlled corporations and entities, shares of stock in "registered enterprises"

as this term is defined in Republic Act No. 5186, shares of stock in domestic corporations registered in

the stock exchange, or shares of stock in domestic insurance companies and banks, or any combination

of these kinds of securities, with an actual market value of at least one hundred thousand (P100,000.)

pesos; Provided, however, That within six (6) months after each fiscal year of the licensee, the Securities

and Exchange Commission shall require the licensee to deposit additional securities equivalent in actual

market value to two (2%) percent of the amount by which the licensee's gross income for that fiscal year

exceeds five million (P5,000,000.00) pesos. The Securities and Exchange Commission shall also require

deposit of additional securities if the actual market value of the securities on deposit has decreased byat least ten (10%) percent of their actual market value at the time they were deposited. The Securities

and Exchange Commission may at its discretion release part of the additional securities deposited with it

if the gross income of the licensee has decreased, or if the actual market value of the total securities on

deposit has increased, by more than ten (10%) percent of the actual market value of the securities at the

time they were deposited. The Securities and Exchange Commission may, from time to time, allow the

licensee to substitute other securities for those already on deposit as long as the licensee is solvent.

Such licensee shall be entitled to collect the interest or dividends on the securities deposited. In the

event the licensee ceases to do business in the Philippines, the securities deposited as aforesaid shall be

returned, upon the licensee's application therefor and upon proof to the satisfaction of the Securities

and Exchange Commission that the licensee has no liability to Philippine residents, including theGovernment of the Republic of the Philippines. (n)

HIRING OF AGENTS:

- May be a natural person who is a resident in the country or juridical person legally doingbusiness in the country but:

1. He has to be a citizen of good standing and


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2. Financial capacity to become an agent

MISCELLANEOUS PROVISIONS

Outstanding capital stockstotality of shares subscribed partially or fully under a subscription

agreement

Three basic things to remember on stocks in the AOI:

1. Authorized Capital Stock2. Subscribed Capital Stocks3. Paid Up Capital Stocks

Would this include issued stocks? Are issued stocks part of the outstanding capital stocks? All of them?

- No. we have treasury shares. Issued but no longer outstanding

Earlier, during martial law, the president issued the very important PD. PD 902-8. This revised certain

provisions of the Corporation Code. There were provisions which the president wanted to change due to

his mining business to acquire some stocks. He wanted complete control of all corps in the Philippines.

The only way was to introduce provisions inconsistent with the old Corp Code.

902-A: Basically any controversy are subjected to the SEC if it relates to corporations. If any party does

not agree with the SEC decision, it can appeal to the President (thus the complete control). Whether

intra corporate matters, election of officers, ownership of stocks, the SEC can adjudicate.

After the advent of the Martial Law, this was then revised, bringing back to the regular courts certain

controversies and issues. How do you think this was divided?

To RTC: Cases involving acts of the BOD which amount to fraud and which are inimical to public,intra-corporate disputes, and election of officers.

To the SEC: the rest.

We, however, had a problem. When they were at SEC, this was highly technical and the SEC lawyers and

judges knew their trade and they were trained purely on corporations. When these were transferred to


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regular courts, the judges were inadequately equipped with expertise to handle the cases. Only few

judges were interested to learn since there was no adequate additional compensation.

CASES:

PEA vs PANTRANCO and NLRC

MADECOR is the real estate arm of PNB. If PNB would foreclose properties, it would just sell the

property to its real estate arm.

How did the employees justify their attack against PNB and PNB Madecor and MegaPrime? What was

their contention?

PNB, thru PNB-Madecor directly benefited from the operation of PNEI and had complete controlof the funds of PNEI.

CORRECT: Since there was a merger between PNB and PNEI, then we can claim against PNB. SC:

o There was no merger. It distinguished sale of assets vs. merger In sale of assets, there is no merger of personality. If there is a merger, then the

personalities are already fused

In sale of assets, the separate personalities are maintained. In merger, thepersonalities are extinguished.

In sale of assets, the liabilities of one constituent are NOT transferred. UNLESSthey agree to do so in the Plan of Merger.

How did the SC Rule?

Although there were interests involved, there was no justification of piercing the corporate veilsince PNEI cannot be considered to be an alter ego of PNB-Madecor nor PNB.

Cite instances when a corporation may be considered to be an alter ego:

What is an alter ego?

The corporation is merely a conduit of another corporation

FACTS:o Parent corporation owns most or all of the capitalo Common directors and officerso Etc.

Mere ownership of another corporation is NOT enough to establish alter ego. What the law requires is

that the control is not only be financial and on ownership but also on operations and policies so much so


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that the mother coproation controls the policies of the alter ego corporations. The mother corporation

must DECIDE ALL acts of the alter ego.

SEAOIL PETROLEUM

CHINA BANK

PASRICHA

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Www 36 MARCH 7 2014 DISCUSSION