Foreign corporation doing business without a license; "distributorship" is an exception - G.R. No. 171995

G.R. No. 171995

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          The rule that an unlicensed foreign corporations doing business in the Philippine do not have the capacity to sue before the local courts is well-established.  Section 133 of the Corporation Code of the Philippines explicitly states:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

          The phrase “doing business” is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign Investments Act of 1991), to wit:

d) The phrase “doing business” shall include soliciting orders, service contracts, opening offices, whether called “liaison” offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase “doing business” shall not be deemed to includemere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; norappointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account; (Emphases supplied)

          This definition is supplemented by its Implementing Rules and Regulations, Rule I, Section 1(f) which elaborates on the meaning of the same phrase:

f.  “Doing business” shall include soliciting orders, service contracts, opening offices, whether liaison offices or branches; 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 country for a period totalling one hundred eighty [180] days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to and in progressive prosecution of commercial gain or of the purpose and object of the business organization.

The following acts shall not be deemed “doing business” in the Philippines:

1.  Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor;

2.  Having a nominee director or officer to represent its interest in such corporation;

3.  Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative's or distributor's own name and account;

4.  The publication of a general advertisement through any print or broadcast media;

5.  Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines;

6.  Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export;

7.  Collecting information in the Philippines; and

8.  Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. (Emphases supplied)

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