Investing in the Philippines
There are different modes of doing business in the Philippines. Acts of “Doing Business” is defined by the Foreign Investments Act (FIA) as:
a) Soliciting orders;
b) Service Contracts;
c) Opening offices, whether called liaison offices or branches;
d) Appointing representatives or distributors domiciled in the Philippines who in any calendar year stay in the country for a period of one hundred eighty (180) days or more;
e) Participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines, and
f) Any other act or acts that imply a continuity of commercial dealing or arrangements, and contemplate to that extent the acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain, or the purpose and object of the business organization;
g) Having a nominee or officer to represent its interest in such corporation; and
h) Appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.
Note the different requirements, characteristics and features. They may be considered as advantages or disadvantages depending on your goals and growth vision. The various modes of doing business as a foreign entity are as follows: domestic subsidiary; representative offices; regional headquarters; or regional operating headquarters. Other forms of investment may be done through a joint venture; purchase of shares in an existing domestic corporation; merger or consolidation; technology transfer arrangements; or through a management contract with a domestic corporation.
Other modes of investing would be:
A. Joint Venture
A foreign corporation can enter into a joint venture with a domestic corporation by forming a domestic corporation. A joint venture is a cooperative arrangement akin to a partnership.
B. Purchase of Shares in an Existing Domestic Corporation
Buying shares of stocks is convenient. The investing corporation takes advantage of the existence of a business and goodwill of the domestic corporation.
C. Merger or Consolidation
A merger occurs when one or more existing corporations are absorbed by another corporation which survives and continues the combined business.
A consolidation occurs when two or more existing corporations consolidate or join their business to form a single, consolidated corporation.
D. Technology Transfer Agreements
This mode may be done by a transfer of systematic knowledge, service contracts, management contracts, or assignment or licensing of intellectual property rights.
E. Management Contract
A foreign corporation can enter into a management contract with a domestic corporation for a period of five (5) years for every term.