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A. Foreign Investment Act
The
Foreign Investment Act and its implementing regulations define what is
doing business. It includes:
·
Soliciting orders.
When we talk of soliciting orders we mean negotiations of the specific
terms and conditions of the contract. If you just advertise, that is
not doing business.
·
Opening offices
·
Appointing representatives or
distributors
·
Operating under full control of
the foreign corporation
·
Domiciled in the Philippines or
who in any calendar year stay in the Philippines for at least 180 days
·
Participating in the management,
supervision or control of any domestic corporate entity
·
Any other acts that involve
continuity of commercial dealings, and
·
Performance of acts or functions
incident to or in progressive prosecution of commercial gain
The
rules also state certain acts which do not constitute doing business
like:
·
Mere investment in a domestic
corporation. This repudiates the ruling in
the Granger case where Justice Cruz said that being a mere
investor is doing business. That is wrong. It could have been just a
passive investment. So that decision is being repudiated here.
·
Having a director to represent
you in a corporation because of your investment.
That is also not doing business.
·
Appointing a representative
distributor which transacts business in the distributor’s own name.
The usual distributorship agreement will
contain a provision something like this, “The relationship between the
parties is that of seller and buyer.” This means that the local
distributor has to pay for the goods he purchased irrespective of
whether he is able to resell them or not. And it is up to him to sell
them for whatever price he can get. Now if the distributor is
transacting business not in his own name, but as agent of the foreign
corporation, then the foreign corporation will be doing business. This
is what happened to BMW. They have a distributor here but if somebody
wants to buy a car, the distributor will merely forward the order to BMW
in Bavaria and he will send the payment to BMW in Bavaria and BMW in
Bavaria will ship the car to him. So the court said that BMW was
actually doing business here, because the agent was dealing with
customers in the name of BMW.
·
Publication of advertisement.
Like the advertisement in magazines which are sold here. That is not
doing business.
·
Maintaining stock of goods to
have them processed like this garment business
in the United States which send their textiles to be processed into
dresses which are then shipped back to United States or components for
electronic products which are sent here to be processed and sent back to
Silicon Valley. These are not doing business.
·
Consignment of the equipment to
be used in processing the products for export.
So that if the foreign company sends its equipment to be used by the
local processor, that is not doing business.
·
Gathering information about the
Philippines
·
Performing service auxiliary to
an isolated contract not in a continuing basis
such as installing in the Philippines machinery, servicing the same, and
training workers to operate it. An example here is a foreign company
which is selling machinery to a local factory. They send you their
engineer so he can install it, test it and then he will train the
employees on the proper use of the machinery. That is not doing
business.
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