Republic Act No. 7042, as amended or the Foreign Investments Act (“FIA”) prescribes the procedure for registering enterprises doing business in the Philippines.
Determining whether a foreign entity’s activity constitutes “doing business” in the Philippines is importance since:
• License Requirement. Foreign entities doing business in the Philippines are required to register and obtain a license to do business in the Philippines.
• Right to Sue. Foreign entities that are “doing business” in the Philippines without a license do not have the right to sue in Philippine courts, although they are subject to suit in such courts.
Under the FIA, the following activities constitute “doing business” in the Philippines:
• soliciting orders;
• entering into service contracts;
• opening offices, whether called liaison offices or branches;
• appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling 180 days or more;
• participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; or
• and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or of the purpose and object of the business organization.
On the other hand, the following acts shall not be deemed “doing business” in the Philippines:
• mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor;
• having a nominee director or officer to represent its interest in such corporation;
• appointing a representative or distributor domiciled in the Philippines which transacts business in the representative’s or distributor’s own name and account;
• the publication of a general advertisement through any print or broadcast media;
• maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines;
• consignment by a foreign entity of equipment with a local company to be used in the processing of products for export;
• collecting information in the Philippines; and
• performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services.
In evaluating whether a foreign entity is “doing business,” Philippine courts consider whether the activity undertaken by such entity in the Philippines involves profit-making. If so, it is likely that the foreign entity will be deemed “doing business” in the Philippines. (See Cargill Inc. v. Intra Strata Assurance Corporation, G.R. No. 168266, 15 March 2010)