Director Residency and Citizenship Rules for Philippine Corporations

The Revised Corporation Code does not require every director of a Philippine corporation to be a Philippine resident or citizen. What the law requires is that directors be elected from among the holders of stock registered in the corporation's books, and that they hold office for a term of one (1) year. The citizenship and residency requirements in the law attach to certain corporate officers, not to the board as a whole: the treasurer must be a resident, and the secretary must be both a citizen and a resident of the Philippines. Special laws and the Constitution may impose stricter nationality rules on specific industries.

Who may serve as a director of a Philippine corporation

Under Section 22 of the Revised Corporation Code, directors are elected for a term of one (1) year from among the holders of stocks registered in the corporation's books. Each director holds office until a successor is elected and qualified. A director who ceases to own at least one (1) share of stock ceases to be a director.

The same section provides that the board of directors exercises the corporate powers, conducts all business, and controls all properties of the corporation, unless the Code provides otherwise.

For nonstock corporations, the rule is different: trustees are elected from among the members of the corporation and serve a term not exceeding three (3) years. A trustee who ceases to be a member ceases to hold office.

Citizenship and residency: what the law actually requires

The Revised Corporation Code does not impose a general citizenship or residency requirement on directors. What it does require is set out in Section 24, which governs corporate officers. Immediately after their election, the directors must formally organize and elect:

• a president, who must be a director;
• a treasurer, who must be a resident;
• a secretary, who must be a citizen and resident of the Philippines; and
• such other officers as may be provided in the bylaws.

If the corporation is vested with public interest, the board must also elect a compliance officer. The same person may hold two or more positions concurrently, except that no one may act as president and secretary, or as president and treasurer, at the same time, unless the Code otherwise allows.

This is the key distinction for foreign investors and mixed-nationality boards: a corporation may have non-resident or foreign directors, but the treasurer must be a resident and the secretary must be a Filipino citizen and resident.

Nationality requirements under special laws and the Constitution

The Revised Corporation Code itself does not bar foreigners from sitting on the board of an ordinary domestic corporation. However, corporations engaged in activities reserved for Filipino citizens are subject to nationality rules found in the Constitution and in special laws.

The Code acknowledges this in several places. Section 14 prescribes a standard restriction for corporations that will engage in any business or activity reserved for Filipino citizens: no transfer of stock or interest may reduce Filipino ownership below the percentage required by existing laws, and this restriction must be indicated in all stock certificates issued.

Section 16 likewise lists, as a ground for disapproval of articles of incorporation or an amendment, failure to comply with the required percentage of Filipino ownership of capital stock under existing laws or the Constitution. Section 7 also provides that any exclusive right to vote and be voted for in the election of directors granted to holders of founders' shares shall not be allowed if its exercise will violate the Anti-Dummy Law, the Foreign Investments Act of 1991, and other pertinent laws.

In regulated industries, the primary regulator may impose additional qualifications. Section 26 provides that the disqualifications listed in the Code are without prejudice to qualifications or other disqualifications that the Commission, the primary regulatory agency, or the Philippine Competition Commission may impose to promote good corporate governance or as a sanction in administrative proceedings.

How directors are elected and reported

Under Section 23, each stockholder or member has the right to nominate any director or trustee who possesses all of the qualifications and none of the disqualifications set out in the Code, except when the exclusive right is reserved for holders of founders' shares under Section 7.

Elections require the presence, in person or by proxy, of the owners of a majority of the outstanding capital stock, or a majority of the members entitled to vote in a nonstock corporation. Voting through remote communication or in absentia is allowed when authorized in the bylaws or by a majority of the board; in corporations vested with public interest, this mode is available even without a bylaw provision. A stockholder or member participating remotely or in absentia is deemed present for purposes of quorum.

Within thirty (30) days after the election of the directors, trustees, and officers, the secretary or another officer must submit to the Securities and Exchange Commission the names, nationalities, shareholdings, and residence addresses of those elected. This is why the nationality and residence of each director and officer must be tracked carefully — they are reportable items.

Disqualifications that apply regardless of nationality

Section 26 lists the grounds that disqualify a person from being a director, trustee, or officer of any corporation. A person is disqualified if, within five (5) years prior to election or appointment, the person was:

• convicted by final judgment of an offense punishable by imprisonment exceeding six (6) years, of violating the Revised Corporation Code, or of violating the Securities Regulation Code;
• found administratively liable for any offense involving fraudulent acts; or
• found by a foreign court or equivalent foreign regulatory authority liable for acts, violations, or misconduct similar to the above.

These disqualifications apply to Filipinos and foreigners alike and are separate from any citizenship or residency requirement.

Frequently asked questions

Can a foreigner be a director of a Philippine corporation? Yes, in general. The Revised Corporation Code does not require directors to be Philippine citizens or residents. However, corporations engaged in activities reserved for Filipino citizens are subject to nationality requirements under the Constitution and special laws, and the required percentage of Filipino ownership must be complied with.

Does a director need to be a resident of the Philippines? The Code does not impose a residency requirement on directors generally. The residency requirement applies to officers: the treasurer must be a resident, and the secretary must be a citizen and resident of the Philippines.

Who can be the corporate secretary of a Philippine corporation? Under Section 24, the corporate secretary must be a citizen and resident of the Philippines. The president must be a director, and the treasurer must be a resident.

Practical takeaways

• The Revised Corporation Code requires directors to be elected from stockholders of record for a one-year term; it does not impose a general citizenship or residency requirement on directors.
• The treasurer must be a resident, and the corporate secretary must be a citizen and resident of the Philippines.
• Corporations in activities reserved for Filipino citizens must comply with nationality requirements under the Constitution and special laws, and the required Filipino ownership percentage must be reflected in the articles of incorporation and stock certificates.
• A director who ceases to own at least one share, or a trustee who ceases to be a member, automatically ceases to hold office.
• The names, nationalities, shareholdings, and residence addresses of elected directors, trustees, and officers must be reported to the Securities and Exchange Commission within thirty (30) days after election.

Primary sources

The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.

Amendments to foreign exchange regulations covering foreign investmentsOpen in Law LibraryDownload PDF

• REPUBLIC ACT NO. 11232 - AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.