FOREIGN CORPORATION INVESTING IN AN UNINCORPORATED CONSORTIUM NEEDS A LICENSE TO DO BUSINESS IN THE PHILIPPINES

A Foreign Corporation that intends to invest in an unincorporated consortium in the Philippines must have a license to do transact even if it does not hold a controlling interest in the consortium and not the operator of the said consortium.

This is because an unincorporated consortium is considered as a partnership. Hence, it has to comply with the Foreign Investment Act of 1991 and laws on partnership. The answer would be otherwise, if the investment would be in a domestic corporation.

The exception in the Foreign Investment Act, which would not require acquiring license to transact business are as follows:

1.     Mere investment as a shareholder by a foreign entity in domestic corporation duly registered to do business.

2.     Having nominee director to represent its interest in such corporation.

Clearly, the exception pertains to domestic corporations and not to a partnership. Considering that the exemption from the doing business rule pertains only to investment in a corporation, investment in any other business organization, firm or entity (e.g. partnership) would not automatically constitute an exemption. In this connection, participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines is considered doing business. Consequently, following the strict interpretation rule, the only automatically exempt management, supervision or control is that of a corporation (i.e. having nominee director or office to represent its interest in such corporation) and not of any other entity, such as partnership. (SEC Opinion 14-01)

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