UPDATES IN CORPORATION LAW 2014

I-- Art. XVI, Section 11. (1) The ownership and management of mass media shall be limited to
citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and
managed by such citizens.
Ridon, et al., v. AXN Networks Phil, et. Al., G.R. 210885, August 26, 2014, En Banc
Resolution, Enriqueta E. Vidal, Clerk of Court.
Two petitions filed with SC by Cong. Ridon & Atty. Jonas Julius Caesar N. Azura under
Rule 65 of the Rules of Court.
ISSUE: whether or not SEC failed in performing its statutory duty of enforcing the
nationality requirements, prescribed in Section 11, Article XVI of the Constitution,
when it granted francises through the issuance of certificates of registration in favour
of AXN Networks Phil., Inc. and FOX Intl Channels Phil. Corp.
The petitioners received a notice from the SC that the Court en banc issued a
Resolution (12 pages) dated August 26, 2014. SC Clerk of Court Enriqueta E. Vidal
signed the notice.
The Resolution has at least three (3) salient points:
(1)
In the process of incorporation, the SEC is not acting in any judicial/quasijudicial capacity.(T)he absence of an assailed act derived from the exercise
of a quasi-judicial or judicial function removes from the Court the power to
decide these petitions by way of certiorari. (p.8)
(2)

By the nature of the reliefs prayed for, the Court is being asked to cancel the
certificates of registration issued by the SEC to AXN & FOX. This requires a
hearing under PD 902-A. But conducting a hearing is not the function of this
Court, for it is not a trier of facts. Hence, there is as yet no justiciable
controversy that is ripe ofr judicial determination.

(3)

In filing these petitions, the petitioners are in effect making a collateral

attack on the corporate existence of AXN and FOX in the guise of an action
questioning the SECs issuance of certificates of registration. This should be
done via a quo warranto proceeding.
Petitions dismissed.

Background:
Ownership of Sequestered PLDT Shares
Yuchengco v. Sandiganbayan, 479 SCRA 1 (Jan 20, 2006), En Banc, Carpio Morales, J.
The Facts
Civil Case No. 0002 was filed by the Republic of the Philippines through the Presidential
Commission on Good Government (PCGG)[1] to recover ill-gotten wealth of the late former
President, Ferdinand E. Marcos.
Among the properties identified as ill-gotten were shares of stock in the Philippine
Telecommunications Investment Corporation (PTIC): 76,779 shares in Ramon U. Cojuangcos
name; 21,525 in Imelda O. Cojuangcos name; and 111,415 in that of Prime Holdings, Inc. (PHI).
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PTIC was the biggest stockholder of Philippine Long Distance Telephone Company, Inc. (PLDT),
with over two million shares representing some 28 percent of the outstanding shares at the time
Civil Case No. 0002 was filed.
The Republic sought to recover, as part of the so-called ill-gotten wealth of the Marcoses,
the covered PLDT shares from Imelda O. Cojuangco, the Estate of Ramon U. Cojuangco, and PHI.
Alfonso T. Yuchengco and Y Realty Corporation intervened, claiming that they were the rightful
owners of PHIs 46 percent shareholding in
PTIC.
Acting on the Motion of Imelda and Ramon Cojuangco, the Sandiganbayan resolved to
sever the PLDT ownership issue from other claims in Civil Case No. 0002 and allowed a separate
trial with respect only to the issue relating to the PLDT shares.
In the course of the separate trial, interlocutory Orders of the Sandiganbayan were
questioned before the Supreme Court in the three consolidated Petitions: GR Nos. 149802 and
150320, filed by Yuchengco and Y Realty, challenged the Resolutions (1) denying their Motions to
suspend trial pending discovery proceedings and to reset trial dates;
and (2) declaring that they had waived their right to present evidence. GR No. 150367, filed by
the Republic, assailed the Order denying its Motion for Additional Time to complete the
presentation of evidence and directing it to submit its offer of evidence within 30 days.
During the pendency of these three Petitions, the Sandiganbayan continued with the
proceedings, as no restraining order had been issued by the Supreme Court. On May 6, 2002, the
Sandiganbayan promulgated a Partial Decision in Civil Case No. 0002, resolving the issue of the
PLDT shares. It dismissed the Complaint of the Republic and the Complaint-in-Intervention of
Yuchengco and Y Realty.
The Partial Decision was challenged in GR No. 153459, filed by the Republic; and GR No.
153207, by Yuchengco and Y Realty.
GR Nos. 149802, 150320, and 150367 were denied for being moot or for failing to show grave
abuse of discretion on the part of the Sandiganbayan. GR No. 153207 was likewise denied in the
absence of any reversible error by the same court.
The Issue
The sole issue that remained was, whether the Partial Decision conformed to the evidence
presented, the law, and/or settled jurisprudence.
The Courts Ruling
Under Executive Order No. 14-A,[2] the degree of proof required in this case was
preponderance of evidence. The Sandiganbayan, therefore, was not to look for proof beyond
reasonable doubt. Rather, it was to determine, based on evidence and in the light of common
human experience, which of the theories proffered by the parties was more worthy of credence.
The evidence presented by the parties showed that the preponderance clearly lay with the
Republic. In the Decision she penned, Justice Conchita Carpio Morales,[3]held that the
Sandiganbayan had grossly misappreciated the facts presented and thus committed reversible
error.
The following witnesses established the Marcoses ownership of PHI:
1. Jose Yao Campos. It was not disputed that Campos was a former crony, who, after the
February 1986 EDSA Revolution, surrendered to the government substantial assets that he had
held for the late President. He testified that, for and on behalf of Marcos, he had organized
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companies, one of which was PHI. The stockholders, none of whom had any financial interest,
executed a Deed of Trust or
Deed of Assignment in favor of an unnamed beneficiary; the original copy of the deed was then
submitted to the former President.
Notwithstanding this testimony, the Sandiganbayan concluded that Marcos had no link to PHI.
2. Rolando C. Gapud. Gapud corroborated Campos statements and further established
that PHI, of which he was one of the incorporators, was a dummy corporation of the Marcoses.
3. Francisco de Guzman. The testimony of De Guzman, a former corporate secretary of
PHI, shed light on the origins and organization of the corporation and substantially corroborated
the statements of Campos and Gapud. He confirmed that PHI had been completely organized by
the associates of Campos, who had categorically testified to having organized it for the benefit of
Marcos.
On the other hand, there was hardly any evidence to substantiate the thesis that the
company was beneficially owned by Cojuangco.
De Guzman also revealed that its office was within the premises of United Laboratories
(UNILAB), a Campos family corporation. Further clarifying the testimonies of Campos and Gapud,
De Guzman stated that no stock certificates were issued by PHI, but only deeds of assignment.
On the basis of the evidence, the Court ruled that Marcos owned PHI, and that all the
incorporators had acted under his direction. The following conclusions inevitably followed:
1.
Cojuangco was elected president, and he took over the management of PHI in 1981
with the cooperation of the Marcos nominees.
2.
As the remaining incorporators on the board divested their shares only in 1983,
Cojuangco managed the Marcos-controlled corporation for at least two years.
3.
The three remaining incorporators simultaneous divestment of shares in favor of
Cojuangcos close relatives in 1983 was with the knowledge and authorization of their principal,
Marcos.
Clearly, all these circumstances showed that Cojuangco was either one of the nominees,
as was Gapud whom he had replaced as president of PHI; or, at the very least, was a close
associate of the late President. Thus, the PCGG could and must recover for the Republic the
111,415 PTIC shares being held by PHI. They bore the character of ill-gotten wealth, whether
they were in the hands of Marcos or of
Cojuangco.
In PCGG v. Pea[[44]], this Court described the rule of Marcos as a well-entrenched
plundering regime of twenty years; and noted the magnitude of the past regimes organized
pillage and the ingenuity of the plunderers and pillagers with the assistance of the experts and
best legal minds available in the market. The evidence
presented in the case revealed one more instance of this grand scheme. As guardian of the high
standards and noble traditions of the legal profession, the Court had before it an opportunity to
undo -- even if only to a limited extent -- the damage that had been done.
============================================
WILSON P. GAMBOA vs. FINANCE SECRETARY TEVES, G.R. No. 176579, En Banc, Carpio
J.,June 28, 2011, 652 SCRA 690. [145 pages]
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I.

THE FACTS
This is a petition to nullify the sale of shares of stock of Philippine Telecommunications
Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting
through the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH),
an affiliate of First Pacific Company Limited (First Pacific), a Hong Kong-based investment
management and holding company and a shareholder of the Philippine Long Distance Telephone
Company (PLDT).
The petitioner questioned the sale on the ground that it also involved an indirect sale of 12
million shares (or about 6.3 percent of the outstanding common shares) of PLDT owned by PTIC
to First Pacific. With the this sale, First Pacifics common shareholdings in PLDT increased from
30.7 percent to 37 percent, thereby increasing the total common shareholdings of foreigners in
PLDT to about 81.47%. This, according to the petitioner, violates Section 11, Article XII of the
1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not
more than 40%.

II.

THE ISSUE
Does the term capital in Section 11, Article XII of the Constitution refer to the total
common shares only, or to the total outstanding capital stock (combined total of common and
non-voting preferred shares) of PLDT, a public utility?

III. THE RULING

[The Court partly granted the petition and held that the term capital in Section 11,
Article XII of the Constitution refers only to shares of stock entitled to vote in the election of
directors of a public utility, or in the instant case, to the total common shares of PLDT.]
Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution
mandates the Filipinization of public utilities, to wit:
Section 11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the Philippines, at least sixty
per centum of whose capital is owned by such citizens; nor shall such franchise,
certificate, or authorization be exclusive in character or for a longer period than fifty years.
Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so requires.
The State shall encourage equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public utility enterprise shall be
limited to their proportionate share in its capital, and all the executive and managing officers of
such corporation or association must be citizens of the Philippines. (Emphasis supplied)
The term capital in Section 11, Article XII of the Constitution refers only to shares of
stock entitled to vote in the election of directors, and thus in the present case only to common
shares, and not to the total outstanding capital stock comprising both common and non-voting
preferred shares [of PLDT].
xxx

xxx

xxx

Indisputably, one of the rights of a stockholder is the right to participate in the control or
management of the corporation. This is exercised through his vote in the election of directors
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because it is the board of directors that controls or manages the corporation. In the absence of
provisions in the articles of incorporation denying voting rights to preferred shares, preferred
shares have the same voting rights as common shares. However, preferred shareholders are
often excluded from any control, that is, deprived of the right to vote in the election of directors
and on other matters, on the theory that the preferred shareholders are merely investors in the
corporation for income in the same manner as bondholders. xxx.
Considering that common shares have voting rights which translate to control, as opposed
to preferred shares which usually have no voting rights, the term capital in Section 11, Article
XII of the Constitution refers only to common shares. However, if the preferred shares also have
the right to vote in the election of directors, then the term capital shall include such preferred
shares because the right to participate in the control or management of the corporation is
exercised through the right to vote in the election of directors. In short, the term capital in
Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the
election of directors.
xxx

xxx

xxx

Mere legal title is insufficient to meet the 60 percent Filipino-owned capital required in
the Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled
with 60 percent of the voting rights, is required. The legal and beneficial ownership of 60 percent
of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with
the constitutional mandate. Otherwise, the corporation is considered as non-Philippine
national[s].
As shown in PLDTs 2010 GIS, as submitted to the SEC, the par value of PLDT common
shares is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other
words, preferred shares have twice the par value of common shares but cannot elect directors
and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred
shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the preferred
shares. Worse, preferred shares constitute 77.85% of the authorized capital stock of PLDT while
common shares constitute only 22.15%. This undeniably shows that beneficial interest in PLDT is
not with the non-voting preferred shares but with the common shares, blatantly violating the
constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a
public utility.
The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest
in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial ownership
of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is
constitutionally required for the States grant of authority to operate a public utility. The
undisputed fact that the PLDT preferred shares, 99.44% owned by Filipinos, are non-voting and
earn only 1/70 of the dividends that PLDT common shares earn, grossly violates the
constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership of a
public utility.
In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60
percent of the dividends, of PLDT. This directly contravenes the express command in Section 11,
Article XII of the Constitution that [n]o franchise, certificate, or any other form of authorization
for the operation of a public utility shall be granted except to x x x corporations x x x organized
under the laws of the Philippines, at least sixty per centum of whose capital is owned by such
citizens x x x.

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares
exercises the sole right to vote in the election of directors, and thus exercise control over PLDT;
(2) Filipinos own only 35.73% of PLDTs common shares, constituting a minority of the voting
stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by
Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the dividends that common
shares earn; (5) preferred shares have twice the par value of common shares; and (6) preferred
shares constitute 77.85% of the authorized capital stock of PLDT and common shares only
22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution.
Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current
stock market value of P2,328.00 per share, while PLDT preferred shares with a par value
of P10.00 per share have a current stock market value ranging from only P10.92 to P11.06 per
share, is a glaring confirmation by the market that control and beneficial ownership of PLDT rest
with the common shares, not with the preferred shares.
xxx

xxx

xxx

WHEREFORE, we PARTLY GRANT the petition and rule that the term capital in Section
11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the
election of directors, and thus in the present case only to common shares, and not to the total
outstanding capital stock (common and non-voting preferred shares). Respondent Chairperson of
the Securities and Exchange Commission is DIRECTED to apply this definition of the term
capital in determining the extent of allowable foreign ownership in respondent Philippine Long
Distance Telephone Company, and if there is a violation of Section 11, Article XII of the
Constitution, to impose the appropriate sanctions under the law.
Heirs of Wilson P. Gamboa v. Teves, 682 SCRA 397, (Oct. 9, 2012) RESOLUTION, En Banc,
Carpio, J. [205 pages]
In short, the 60-40 ownership requirement in favour of Filipino citizens must apply separately to
each class of shares, whether common, preferred non-voting, preferred voting or any other
class of shares. 682 SCRA 445 [underscoring supplied]
SEC OGC OPINION Opinion No. 8 Series of 2013 (May 20, 2013)
Section 2. All covered corporations shall, at all times, observe the constitutional or
statutory ownership requirement. For purposes of determining compliance therewith, the
required percentage of Filipino ownership shall be applied to BOTH (a) the total number of
outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number
of outstanding shares of stock, whether or not entitled to vote in the election of directors.
(underscoring supplied)
Commentary of Francis Lim, former President of PSE, Phil Daily Inquirer, June 19, 2013.
1. Note that, rather than merely complying with the dispositive portion of the Gamboa
decisions which it could have chosen to do, the SEC added a second layer of safeguard to
ensure compliance with the ownership requirements.
2. In keeping with the spirit of Gamboa, the SEC is effectively saying that the ownership
restriction must also affect the non-voting preferred shares as they, even if denied the
right to vote in the election of directors, are entitled to vote on certain fundamental
corporate matters (8 instances listed in Section 6 of The Corporation Code).

3. With foreign direct investments (FDI) down by 8.5 percent in the first quarter of 2013
compared to the same period last year despite the gains made by the Aquino
administration and our countrys laughable track record in attracting FDI among its
Southeast Asian peers, the two-tiered test under SEC Memo No.8-2013 appears to have
struck a healthy balance between seemingly opposing considerations.
Highlights of RA 10574
R.A. No. 10574 [signed by the president last May 24, 2013]--- An Act Allowing The Infusion of
Foreign Equity in the Capital of Rural Banks, Amending RA 7353, Otherwise Known as The Rural
Bank Act of 1992, as amended, and For Other Purposes.
(1) allows up to 60 percent foreign ownership of rural banks;
(2) allows the same banks to accept real property mortgages and take possession of such up to
five years.
(3) permits rural banks to foreclose on property covered under the Agrarian Reform Act, up to a
five-hectare limit.
Critique/Comments: [BEN D. KRITZ, Enquirer, June 13, 2013]
a)The entire banking industry in the Philippines, measured in terms of deposit liabilities, is worth
about P5.75 trillion; of that, rural banks only account for about P127.7 billion, or roughly 2.2
percent of the entire industry, according to PDIC statistics as of December 2012. Even under the
most ideal circumstances, the impact of increased foreign investment in rural banks on the
economy as a whole or even just the banking system will be negligible at best.
b)There is uncertainty as to whether or not RA 10574 is actually legal. The law is apparently in
conflict with the 60-40 provision of the Constitution, reserving majority ownership in land rights
and Philippine businesses to Filipinos, a framework that was confirmed by the Supreme Courts
national patrimony ruling in 1997 and has not been seriously challenged since.
Subject RA 10574 to a test before the Supreme Court, while probably an unappealing prospect
for those hoping for greater economic liberalization, will help to clarify the current state of
investment restriction and bring the economic liberalization debate into much sharper focus.
c) Rural banking is a small-capital, high-risk sector anywhere, and particularly here in the
Philippines where the sectors recent history has been characterized by a number of failures,
regulatory interventions and a couple of high-profile fraud cases. Just last May 31, 2014, the
Monetary Board placed the Rural Bank of Naval (Leyte) under Philippine Deposit Insurance Corp.
(PDIC) receivership, the eighth such takeover of a rural bank so far this year. While on the face of
it the proactive stance of the nations monetary regulators in removing bad banks from the
system might look like a positive sign to investors, the fact that it happens so often is not an
encouraging assessment of the rural banking industry as a whole.

Highlights of RA 10641
On July 18, 2014, President Benigno Aquino III signed into law Republic Act 10641, allowing full
participation of foreign banks in the Philippine banking industry.
RA 10641 (An Act Allowing the Full Entry of Foreign Banks in the Philippines) amends
the 20-year old Republic Act 7721 (An Act Liberalizing the Entry and Scope of Operations of
Foreign Banks in the Philippines) to effectively liberalize further the domestic banking sector.
Among the salient features of RA 10641 are:
1. Under the old law, foreign banks are allowed to operate in the Philippines only by acquiring,
purchasing or owning up to 60% of the voting stock of an existing bank. Under the new law,
foreign banks are now allowed to:

acquire, purchase or own up to 100% of the voting stock of an existing bank;

invest in up to 100% of the voting stock of new banking subsidiary incorporated under the
laws of the Philippines; and

establish branches with full banking authority

2. Only established, reputable and financially sound foreign banks shall be allowed entry. The law
requires the foreign bank applicant to be publicly-listed in its country of origin, unless the bank is
owned and controlled by the said country or sovereign state.
3. The law still provides safety nets by requiring majority of the banking resources to be owned
by domestic banks. The law requires at least 60% of total banking resources to be in the hands
of domestic banks majority owned by Filipinos.
4. Approved foreign banks must permanently assign capital amounting to not less than the
minimum capital required for domestic banks of the same category.
5. The foreign bank branch may open up to five sub-branches, as may be approved by the
Monetary Board of the Bangko Sentral ng Pilipinas (BSP).
6. The Monetary Board is also given the power to suspend the further entry of foreign banks
under any or all of modes of entry as warranted by the countrys interest.
Senators Sergio Osmea III and Senator Cynthia Villar co-authored the bill in the Senate.
The law is said to be the response of the Philippines to the proposed ASEAN economic
integration, with the ASEAN Banking Integration Framework (ABIF) set to take effect in
2020.
Under the ABIF, qualified ASEAN banks can operate within ASEAN jurisdictions on equal terms as
domestic banks of that jurisdiction subject to certain prudential and governance standards.

Critique/Comments of Director Judith E. Sungsai of the BSP Office of Supervisory Policy

Development as reported to the Senate:
1.Need to harmonize RA10574 with the single-entry rule under RA 7721 or the Foreign Banks
Liberalization Act. So, BSP issue Circular No. 809 which bars those foreign banks that have
already availed of one mode of entry under RA7721.
2.Clarification is needed about the status of rural banks that become foreign-owned vis-a-vis
Constitutional prohibition on foreign ownership of land. Renting of land for maintaining a physical
office may not be cost effective.
II Narra Nickel Mining and Development Corp., et al. v. Redmont Consolidated Mines
Corp., GR 195580, 3rd Div., Velasco, J., April 21, 2014
ISSUE: The main issue in this case is centered on the issue of petitioners nationality, whether
Filipino or foreign. In their previous petitions, they had been adamant in insisting that they were
Filipino corporations, until they submitted their Manifestation and Submission dated October 19,
2012 where they stated the alleged change of corporate ownership to reflect their Filipino
ownership. Thus, there is a need to determine the nationality of petitioner corporations.
RULING: Concluding from the above-stated facts, it is quite safe to say that petitioners
McArthur, Tesoro and Narra are not Filipino since MBMI, a 100% Canadian corporation, owns 60%
or more of their equity interests. Such conclusion is derived from grandfathering petitioners
corporate owners, namely: MMI, SMMI and PLMDC. Going further and adding to the picture,
MBMIs Summary of Significant Accounting Policies statement- -regarding the joint venture
agreements that it entered into with the Olympic and Alpha groupsinvolves SMMI, Tesoro,
PLMDC and Narra. Noticeably, the ownership of the layered corporations boils down to MBMI,
Olympic or corporations under the Alpha group wherein MBMI has joint venture agreements
with, practically exercising majority control over the corporations mentioned. In effect, whether
looking at the capital structure or the underlying relationships between and among the
corporations, petitioners are NOT Filipino nationals and must be considered foreign since 60% or
more of their capital stocks or equity interests are owned by MBMI.
POINTS OF LAW:
1. Basically, there are two acknowledged tests in determining the nationality of a
corporation: the control test and the grandfather rule. Paragraph 7 of DOJ Opinion No.
020, Series of 2005, adopting the 1967 SEC Rules which implemented the requirement of
the Constitution and other laws pertaining to the controlling interests in enterprises
engaged in the exploitation of natural resources owned by Filipino citizens, provides:
Shares belonging to corporations or partnerships at least 60% of the capital of which is
owned by Filipino citizens shall be considered as of Philippine nationality, but if the
percentage of Filipino ownership in the corporation or partnership is less than 60%, only
the number of shares corresponding to such percentage shall be counted as of Philippine
nationality. Thus, if 100,000 shares are registered in the name of a corporation or
partnership at least 60% of the capital stock or capital, respectively, of which belong to
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Filipino citizens, all of the shares shall be recorded as owned by Filipinos. But if less than
60%, or say, 50% of the capital stock or capital of the corporation or partnership,
respectively, belongs to Filipino citizens only 50,000 shares shall be counted as owned by
Filipinos and the other 50,000 shall be recorded as belonging to aliens.
2. The first part of paragraph 7, DOJ Opinion No. 020, stating shares belonging to
corporations or partnerships at least 60% of the capital of which is owned by Filipino
citizens shall be considered as of Philippine nationality, pertains to the control test or the
liberal rule. On the other hand, the second part of the DOJ Opinion which provides, if
the percentage of the Filipino ownership in the corporation or partnership is less than 60%,
only the number of shares corresponding to such percentage shall be counted as
Philippine nationality, pertains to the stricter, more stringent grandfather rule.
3. Corporate layering is admittedly allowed by the FIA; but if it is used to circumvent the
Constitution and pertinent laws, then it becomes illegal. Further, the pronouncement of
petitioners that the grandfather rule has already been abandoned must be discredited for
lack of basis.
SEC OGC Opinion No. 13-12: How compute Filipino ownership of shares in a manning agency
which is required by the Labor Code to be 75% Filipino owned?
. . . since Serrata Investments Inc. (the investing corporation) is 60% owned by Filipinos, its
shareholdings of 74.97% in Anscor Swire Ship Management Corporation (the Company) is
considered owned by Filipinos for purposes of computing the required seventy-five percent
Filipino equity for manning agencies (Art. 27 of the Labor Code). If the 74.97% shareholdings of
Serrata in the Company is added to the .030% shareholdings of the Filipino individuals, then the
Company is 75% Filipino-owned in compliance with the law.
SEC OGC Opinion No. 14-01: Foreign corporations investing in a consortium; are they required
to obtain a license for doing business from the SEC?
. . . it is clear that the subject foreign corporation, being a member of the Operating
Committee, takes active part in the management and control of the business operation of the
partnership. Indeed, the Consortium Agreement positively stipulates that the Operating
Committee shall exercise overall supervision and control of all matters pertaining to the
operations, and has the specific power to determine all matters relating to general policies,
procedures and methods of operation of the business. Finally, the Service Agreement shows that
the Governments Petroleum Board can require the subject foreign corporation to perform any or
all obligations of the partnership under the Contract.
Accordingly, the subject foreign corporation is doing business in the Philippines as
provided in Section 3(d) of the FIA and hence, it must secure a license to do business in the
Philippines.
Principle: Mere investment in a corporation without participation in the management or board of
directors, and investing in a partnership, as a limited partner, without participating in
management is not considered doing business, and hence does not require a license.
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III -- SEC OGC Opinion No. 14-18, dated July 10, 2014. What is the term of a religious
corporation such as the Iglesia ni Cristo?
The corporate term of a religious corporation is not required to be specified in its articles
of incorporation under the old Corporation Law, the applicable law when the Church was
incorporated on 27 July 1914. While the present Corporation Code provides a term for
corporations in general, this does not apply to religious corporations. The Corporation Code has
specific provisions for religious corporations, set out in Title XIII on Special Corporations,
particularly on Sections 110 and 116, both of which do not provide for a term of existence of
religious corporations, whether classified as corporation sole or religious society. The law never
intended to limit the corporate life of religious corporations. Hence, they may be allowed to
exist perpetually.
SEC Memo Circular No. 1, Series of 2012, dated March 8, 2012. Finality of the
Revocation Orders

IVCosare v. Broadcom Asia, Inc., et al., G.R. No. 201298, Feb. 5, 2014, When is an
individual considered a corporate officer as distinguished from an ordinary employee?
There are two circumstances which must concur in order for an individual to be considered a
corporate officer, as against an ordinary employee or officer, namely: (1) the creation of the
position is under the Corporation Code, corporations charter or by-laws; and (2) the election of
the officer is by the directors or stockholders. It is only when the officer claiming to have been
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illegally dismissed is classified as such corporate officer that the issue is deemed an intracorporate dispute which falls within the jurisdiction of the trial courts.
Exceptions: (1)Gregorio Araneta University Foundation, 167 SCRA 79 (1988)
(2)Salafranca v. PhilamLife (Pamplona), 300 SCRA 469 (1998)
V Medical Plaza Makati Condominium Corp v. Cullen, 709 SCRA 110 (Nov. 11, 2013) 3rd
Div., Peralta, J. How do you determine whether or not a dispute constitutes an intra-corporate
controversy?
In determining whether a dispute constitutes an intra-coroporate controversy, the Court
uses two tests, namely, the relationship test and the nature of the controversy test.
An intra-corporate controversy is one which pertains to any of the following relationships:
(1) between the corporation, partnership or association and the public; (2) between the
corporation, partnership or association and the State insofar as its franchise, permit, or license to
operate is concerned; (3) between the corp0oration, partnership or association and its
stockholders, partners, members or officers; and (4) among the stockholders, partners or
associates themselves. Thus, under the relationship test, the existence of any of the above intracorporate relations makes the case intra-corporate.
Under the nature of the controversy test, the controversy must not only be rooted in the
existence of an intra-corporate relationship, but must as well pertain to the enforcement of the
parties correlative rights and obligations under the Corporation Code and the internal and intracorporate regulatory rules of the corporation. In other words, jurisdiction should be determined
by considering both the relationship of the parties as well as the nature of the question involved.
(709 SCRA at 120-121)

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