Foreigners Owning 100% of a Business in The Philippines
Some people say that a Foreigner cannot own 100% of a business in the Philippines.
Some say they can only own 60% of the business. While some say they can own all of it 100%.
Who is right and who is wrong ?
Republic Act No. 7042 – “Foreign Investments Act of 1991“
Section 2:
As a general rule, there are no restrictions on extent of foreign ownership of export enterprises. In domestic market enterprises, foreigners can invest as much as one hundred percent (100%) equity except in areas included in the negative list.
Foreign owned firms catering mainly to the domestic market shall be encouraged to undertake measures that will gradually increase Filipino participation in their businesses by taking in Filipino partners, electing Filipinos to the board of directors, implementing transfer of technology to Filipinos, generating more employment for the economy and enhancing skills of Filipino workers.
From the RA7042 law, it seems that a Foreigner can own 100% of a business, but what is this negative list, and what do they mean by gradually increase Filipino participation in their businesses?
The following states the 40% maximum ownership of some businesses
Section 3g of RA7042
The term “Foreign Investments Negative List” or “Negative List” shall mean a list of areas of economic activity whose foreign ownership is limited to a maximum of forty percent (40%) of the equity capital of the enterprise engaged therein.
This section explains which type of business MUST NOT be owned fully by a Foreigner, and includes:
Section 8b of RA7042: (Foreign Investment Negative List).
Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of five hundred thousand US dollars (US$500,000) are reserved to Philippine nationals,
Source: Republic Act No. 7042