Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
‘Third Regular Session
6825
HOUSE BILL NO.

Introduced by Honorable Anthony G. del Rosario

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

EXPLANATORY NOTE

‘The ASEAN Economic Community (AEC) Blueprint, formulated in 2007, set out
to ‘transform ASEAN into a single market and production base, a highly competitive
economic region, a region of equitable economic development and a region fully
integrated into the global economy.”! This implies the free flow of goods, services, labor
and investments among the members. The Philippines, as one of the founding
members of the ASEAN, is committed to this goal not only as an obligation to our
neighbors. More regional integration is envisioned to promote economic development
by giving the country the opportunity to participate in regional and global production
networks.

However, Article XII Section 10 of the Constitution may be a hindrance to our
country’s compliance to the AEC Blueprint. By default at least 60% equity of
corporations is reserved to Filipino citizens, corporations or associations except for
certain areas of investment where Congress may prescribe a higher percentage. This
restriction is the basis of the Foreign Investments Act of 1991 (Republic Act No. 7042,
as amended by Republic Act No. 8179) which in turn, is the basis for the Foreign
Investment Negative List (FINL). However, some items in the FINL may be removed if
an enabling law allowing for a higher percentage of foreign ownership is passed.

‘This bill seeks to take advantage of the exception (as stipulated above) by
removing restrictions or allowing 100% foreign investment or participation in certain

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entities namely, adjustment companies, investment houses, lending companies and
financing companies. Thus, the following laws will be amend

1. Presidential Decree 612, otherwise known as “The Insurance Code”;

2. Republic Act No. 9474, otherwise known as “The Lending Company
Regulation Act of 2007"; and

3. Republic Act No. 8556, otherwise known as the “Financing Company Act of
1998”

Assuming the Philippine Constitution would not be amended in the foreseeable
future, this bill will enable the country to comply with a many of our commitments to
the AEC and to participate in the economic benefits of ASEAN integration.

In view of the foregoing, the immediate passage of this bill is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Third Regular Session
6325

HOUSE BILLNO.

Introduced by Honorable Anthony G. Del Rosario

AN ACT
REMOVING/AMENDING INVESTMENT RESTRICTIONS IN SPECIFIC LAWS
GOVERNING ADJUSTMENT COMPANIES, INVESTMENT HOUSES, LENDING
COMPANIES, AND FINANCING COMPANIES 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 the “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 the policy of the State to improve investment liberalization and
facilitation in the country to comply with our ASEAN Economic Community
commitments.

Given the country’s development objectives/thrusts and the need to increase
investments to 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 refer a list of areas of economic
activity whose foreign ownership is limited to a maximum of sixty percent


b)

d

(60%) of the outstanding capital stock in the case of a corporation or
apital in the case of a partnership;

Investment shall refer to 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 refer to an equity investment made by a non-
Philippine national; Provided, however, that for purposes of determining
foreign ownership, peso investments made by non-Philippine nationals
shall be considered; Provided further, That access and use of foreign
exchange from banks and their subsidiary /affiliate forex corporation for
repatriation of divestment proceeds and income from such foreign
investments shall be subject to applicable BSP rules and regulations.

Philippine national shall refer to a citizen of the Philippines or a
domestic partnership or association wholly owned by citizens of the
Philippines; or a 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 or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least sixty
percent (60%) of the funds 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 Philippine 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 Philippine citizens or 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 investment houses, adjustment companies,
lending companies and financing companies 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 herein earlier defined, unless authorized so to act by
virtue of a license issued or renewed by the Commissioner pursuant to the
provisions of this Code”.

No foreign national may be allowed to act as an adjuster unless the
country of which he is a national accords reciprocal rights to Filipinos.

SEC. 6. Investment Houses. Section 2 of Republic Act No. 8366,
amending certain sections of Presidential Decree No. 129, otherwise known as
“The Investment House Law, is hereby amended to read as follows”

“Section 2. Citizenship Requirements. At least sixty percent (60% of the
voting stock of any Investment House shall be owned by citizens of the
Philippines. In determining the percentage of foreign-owned voting stocks in
Investment Houses, the basis for the computation shall be the citizenship of
each stockholder, and if the stockholder is a corporation, the citizenship of the
individual stockholders holding voting shares in that corporation. 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. 7. 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 60% by foreign nationals, Provided, however, that where the loan is
secured by land, a lending company, more than 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. However, they shall be allowed to take part in
the sale of foreclosed land only if title to said land shall not be transferred to
such lending companies.”

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

SEC. 8. 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 60% by foreign nationals, and shall have a paid-up capital of not less
than Ten Million Pesos (Php10,000,000.00) in case the financing company is
located in Metro Manila and other first class cities, Five Million Pesos
(Php5,000,000.00) in other classes of cities and Two Million Five Hundred
Thousand Pesos (Php2,500,000.00) 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 shall comply with the Constitutional provision on foreign ownership of
land.”

SEC. 9, Repealing Clause. All statutory laws, orders, issuances, rules
and regulations 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,