CEIVED @
pare; OO NAR 2015 *

TIME:

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Second Regular session

BILL NO. 5544

Introduced by Representative GIORGIDI B, AGGABAO.

EXPLANATORY NOTE

This bill seeks to remove the foreign equity restrictions in adjustment companies,
lending companies, financing companies and investment houses. This would result in making
the Foreign Investment Negative List (FINL) less negative

With the government aiming to attract, promote and welcome more foreign direct
investments into the country, removing or reducing the limitations on foreign investments or
participation in certain activities/areas listed in the FINL, as provided in specific laws,
becomes imperative, This is also in keeping with the major reforms in the financial sector and
the government's thrust of bringing in more capital into the country that would support our
economy and provide more jobs for our people

Approval of this bill is earnestly sought



Republic of the Philippines
HOUSE OF REPRESENTATI
Quezon City

IXTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. 5544

Introduced by Representative Giorgidi B. Aggabao

AN ACT REMOVING/AMENDING INVESTMENT RESTRICTIONS IN SPECIFIC
LAWS GOVERNING ADJUSTMENT COMPANIES, LENDING COMPANIES,
FINANCING COMPANIES AND INVESTMENT HOUSES CITED IN THE
FOREIGN INVESTMENT NEGATIVE LIST, EXCEPT THOSE IN THE
CONSTITUTION

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled:

SECTION 1, Title.- This Act shall be known as Foreign Investment Liberalization Act of
2015.

SEC. 2, Declaration of Policy.- It is the policy of the state to attract, promote and welcome
productive investments from foreign individuals, partnerships, corporations, and
governments, including their political subdivisions, in activities which significantly
contribute to industrialization and socio-economic development,

It is also a policy of the State to improve investment liberalization and facilitation in the
country to comply with our ASEAN Economic Community commitments,

siments to

Given the country’s development objectives/thrusts and the need to increase inv
achieve these, removing or reducing the limitations on foreign investments or participation in
certain activities/areas listed in the Foreign Investment Negative List as provided for in
specific laws, becomes necessary

SEC. 3. Definition of Terms.- As used in this Act

a) Foreign Investment 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
outstanding capital stock in the case of a corporation or capital in the case of
partnership;


b) Investment shall mean equity participation in any enterprise organized or existing
under the laws of the Philippines. It includes both original and additional
investments, whether made directly as in stock subscription, or indirectly through
the transfer of equity from one investor to another in stock purchase. Ownership
of bonds (including income bonds), debentures, notes or other evidences of
indebtedness does not qualify as investments.

‘The purchase of stock options or stock warrants is not an investment until the
holder thereof exercises his option and actually acquires stock from the
corporation;

©) Foreign Investment shall mean an equity investment made by a non-Philippine
national; Provided, however, that for purposes of determining foreign ownership,
peso investments made by a non-Philippine national shall be considered:
Provided, further, that only foreign investments in the form of foreign exchange
and/or other assets actually transferred to the Philippines and duly registered with
the Bangko Sentral ng Pilipinas and profits derived therefrom can be
repatriated; and Provided , finally, That, for purposes of Section 8 of Republic Act
No. 7042, as amended by Republic Act No. 8179, and Rule VIII, Section 6 of its
Implementing Rules and Regulation, Existing Foreign Investment shall mean an
equity investment made by a non-Philippine national duly registered with the
Securities and Exchange Commission (SEC) or the Bureau of Trade Regulation
and Consumer Protection in the form of foreign exchange and/or other assets
transferred to the Philippines

d) Philippine national shall mean a citizen of the Philippines or a domestic
partnership or association wholly owned by citizens of the Philippines, or
corporation organized under the laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and entitled to vote is owned and
held by citizens of the Philippines; or a corporation organized abroad and
registered as doing business in the Philippines under the Corporation Code of
which 100% of the capital stock outstanding, and entitled to vote is wholly owned
by Filipinos; or a trustee of funds for pension of other employee retirement or
separation benefits, where the trustee is a Philippine national and at least sixty
percent (60%) of the fund will accrue to the benefits of Philippine nationals:
Provided, that where a corporation and its non-Filipino stockholders own stocks in
SEC registered enterprise, at least sixty percent (60%) of the capital stock
outstanding and entitled to vote of each of both corporations must be owned and
held by citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of each of both corporations must be citizens
of the Philippines, in order that the corporation must be citizens of the Philippines,
in order that the corporation shall be considered Philippine national. The control
test shall be applied for this purpose.



Compliance with the required Filipino ownership of a corporation shall be
determined on the basis of outstanding capital stock whether fully paid or not, but
only such stocks which are generally entitled to vote are considered

For stocks to be deemed owned and held by Filipino citizens or Philippine
nationals, mere legal title is not enough to meet the required Filipino equity, Full
beneficial ownership of the stocks, coupled with appropriate voting rights is
essential, Thus, stocks, the voting rights of which have been assigned or
transferred to aliens cannot be considered held by Filipino citizens or Philippine
nationals

Individuals or juridical entities not meeting the aforementioned qualifications are
considered as non-Philippine nationals.

SEC, 4, Lifting of Nationality Requirements.- All. statutory laws and implementing rules
and regulations that impose nationality requirements or foreign investment limitations on
adjustment companies, lending companies, financing companies and investment houses are
hereby repealed, except as otherwise provided in this Act, and subject to the provisions of the
Constitution,

SEC,5.Adjustment companies.- Section 332 of Presidential Decree 612, otherwise known as
The Insurance Code” as amended by Republic Act No, 10607 is hereby amended to read as
follows:

“Section 332. No person, partnership, association, or corporation shall act as an
adjuster, as hereinafter defined, unless authorized so to act by virtue of a license issued or
renewed by the Commissioner pursuant to the provisions of this Code

Section 6. Lending companies. -Section 6 of Republic Act No, 9474, otherwise known as
the “Lending Company Regulation Act of 2007”, is hereby amended to read as follows:

“Section 6. Citizenship Requirements

A lending company may be owned up to 100% foreign nationals; Provided,
however, that where the loan is secured by land, a lending company, more that 40% of
whose capital is owned by foreign nationals, shall not bid or take part in any sale of
such land as a consequence of such mortgage.

No foreign national may be allowed to own stocks unless the country of which he is a
national accords reciprocal rights to Filipinos.”

SEC. 7. Financing companies.- Section 6 of Republic Act No. 8556, otherwise known as the
“Financing Company Act of 1998”is hereby amended to read as follows

“Section 6. Form of organization and capital requirements, Financing companies shall
be organized in the form of stock corporations, may be owned up to 100% by foreign
nationals, and shall have a paid-up capital of not less than Ten million pesos
(Php 10,000,000.00) in case the financing company is located in Metro Manila and


other first class cities, Five Million Pesos ($,000,000.00) in other classes of cities and
Two Million Five Hundred Thousand (2,500,000,00) in municipalities: Provided,
however, that no foreign national may be allowed to own stock in any financing
company unless the country of which he is a national accords the same reciprocal
rights to Filipinos in the ownership of financing companies or their counterpart
entities in such country: and Provided, further, that financing companies duly existing
and in operation before the effectivity of this Act shall comply with the minimum
capital requirement within one (1) year from the date of the said effectivity; and
Provided finally, that where land is concerned, the financing company with the
Constitutional provision on foreign ownership of land.”

SEC, 8, Investment Houses.- Section 5 of Presidential Decree 129, as amended by Republic
Act 8366 , otherwise known as the “Investment Houses Law” , is hereby amended to read as
follows:

Sec.5, Citizenship requirements.- An Investment House may be owned up to 100% by
foreign nationals. In approving foreign equity applications in Investment Houses, the
Securities and Exchange Commission shall approve such applications only if the same
or similar rights are enjoyed by Philippine nationals in the applicant’s country

Foreign nationals may become members of the board of directors to the extent of the
foreign participation in the equity of said enterprise.”

SEC. 9. Repealing Clause.- All statutory laws, orders, issuances, rules and regulation and/or
parts thereof which are inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.

SEC. 10. Effectivity,- This Act shall take effect fifteen (15) days after publication in the
Official Gazette or in a newspaper of general circulation.

Approved,