April 23, 1982

GUIDELINES FOR THE INVESTMENT REQUIREMENT OF FOREIGN CORPORATIONS UNDER SECTION 126 OF THE CORPORATION CODE OF THE PHILIPPINES

The following guidelines are hereby promulgated for the information and guidance of all foreign corporations duly licensed to do business in the Philippines pursuant to Section 126 in relation to Section 148 of the Corporation Code of the Philippines.

SECTION 1. Scope of applicability. — Presently existing foreign corporations duly licensed to do business in the Philippines as of May 1, 1980 shall deposit securities satisfactory to the Philippine Security and Exchange Commission with an actual market value of P100,000.00 by May 1, 1982. Other foreign corporations duly licensed after May 1, 1980 and such foreign corporations as may be heretofore be licensed in the future shall also deposit similar securities with an actual market value of P100,000.00 within sixty (60) days from the issuance of license to do business in the Philippines.

However, the following corporations need not comply with the investment requirement prescribed in Section 126 of the Corporation Code of the Philippines:

1. Foreign banking corporations including offshore banking units;

2. Foreign insurance corporations;

3. Foreign non-stock corporations including foreign religious corporations;

4. Foreign corporations which have established representative offices in the Philippines;

5. Regional or area headquarters of multinational companies registered under PD 218.

SECTION 2. Purpose of investment requirement. — The deposit shall not only be for the benefit of present and future creditors of the licensee foreign corporations but also to compel said foreign corporations to invest in or buy Philippine securities in order to foster the social and economic development of the country, (CF Explanatory Note of BP Blg. 68). As such, the prescribed deposit is separate and distinct from the BOI requirement under PD 1789 to bring assets in the Philippines so as to constitute the capital of such foreign corporation.

SECTION 3. Types of acceptable Securities. — The following securities are acceptable as deposit to the Securities and Exchange Commission:

A. Government Debt Instruments:

1. Bonds or any evidence of indebtedness of the Government of the Philippines, its political subdivisions and instrumentalities, such as but not limited to the following:

a) Central Bank Certificates of Indebtedness (CBCIs)

b) Cultural Center of the Philippines

c) Premyo Savings Bond

d) Treasury Savings Bond

e) Treasury Notes

2. Any evidence of indebtedness of government-owned or controlled corporations and entities, such as

a) National Power Corporation Capital Bonds

B. Equity Instruments:

1. Shares of stock in "registered enterprises" under the Omnibus Investments Code (PD 1789);

2. Shares of stock in domestic corporations registered in the stock exchange;

3. Shares of stock in domestic insurance corporations under the supervision and regulation of the Office of the Insurance Commission;

4. Shares of stock in banks licensed by the Central Bank of the Philippines;

5. Or any combination of these kinds of securities. Cash, money market placement, time deposits and bank guaranty or standby letter of credit and similar instruments other than those falling in the foregoing enumeration shall not be acceptable as deposit.

SECTION 4. Mechanics in the acceptance of deposit.

A. A written application to deposit securities mandated by law shall be filed with the Commission, signed under oath by the resident agent or a duly authorized representative of the licensee-foreign corporation.

B. A custodian fee of P1,000.00 per year shall be charged by the Commission upon filing of said application to cover payment of space in the vault of the bank, inter alia.

C. The Commission shall determine whether or not the securities deposited are acceptable, and the prices of such securities shall likewise be examined and verified if the actual market value of such securities is at least P100,000.00.

D. The securities submitted to the Commission shall be indorsed in blank.

E. The Commission shall thereby issue a Certificate of Acceptance of Deposit containing an Inventory of such securities.

F. The securities accepted by the Commission shall remain unchanged and unimpaired during the period that the foreign corporation engages/transacts business in the Philippines, subject however to the succeeding paragraphs of the instant guidelines.

SECTION 5. Substitution of securities. — Upon proper application therefor and payment of the same fee prescribed in the preceding paragraph, the Commission may allow the licensee-foreign corporation to substitute other securities for those already on deposit as long as the licensee is solvent. Upon compliance with the requirements of the preceding paragraph, the Commission shall issue a Certificate of Substitution of Securities on Deposit.

SECTION 6. Additional Securities Required. — Within six (6) months after each fiscal year of licensee-foreign corporation, the Commission shall require the deposit of additional securities under the following conditions:

A. If the licensee's gross income within the Philippines for that fiscal year exceeds five million (P5M) pesos, then an additional securities equivalent in actual market value to two (2) percent of the increase in said gross income shall be required.

B. If the actual market value of the securities on deposit has decreased by at least ten (10%) percent of their actual market value at the time they were deposited.

The Commission shall thereby issue a certificate of Release of additional Securities.

SECTION 7. Release of Additional Securities. — At its discretion, and upon proper application therefor, the Commission may release part of the additional securities deposited with it, under the following circumstances:

A. If the gross income in excess of P5M of the licensee-foreign corporation has decreased; or

B. If the actual market value of the total securities on deposit has increased by more than ten (10%) percent of the actual market value of the securities at the time they were deposited.

The Commission shall thereby issue a Certificate of Release of Additional Securities.

SECTION 8. Who shall be entitled to interest or dividends. — During the period of time that the securities are on deposit with the Securities and Exchange Commission, the licensee shall be entitled to collect the interest or dividends on the said securities.

SECTION 9. Return of Securities. — Whenever a foreign corporation decides to withdraw from business in the Philippines, the Commission may return the securities deposited by such foreign corporation, subject to the following conditions:

A. A written application must be made therefor and signed under oath by its resident agent or by a duly authorized representative, upon payment of the aforementioned fee.

B. It has ceased to do business in the Philippines by submitting a resolution of the Board of Directors of the foreign corporation to the effect that they desire to withdraw the license to do business in the Philippines and that said company has the liabilities to the Government of the Republic of the Philippines, to the Public or private corporations, Philippine residents and/or citizens.

C. Thereafter, the Commission shall issue a Certificate of Return of Deposits.

For strict compliance.

(SGD.) MANUEL G. ABELLO

Chairman