Opinion No. 24-19 Re: Wholly or Partly Nationalized Activity; Anti-Dummy Law

Securities and Exchange Commission

BAGONG PILIPINAS

OFFICE OF THE GENERAL COUNSEL

02 July 2024

SEC OGC Opinion No. 24-19 Re: Wholly or Partly Nationalized Activity: Anti-Dummy Law

4th and 6th Floors, Citibank Center, 8741 Paseo de Roxas Makati City, 1226 Philippines generalsrmo-law.com SIGUION REYNA MONTECILLO & ONGSIAKO

Attention: Atty. Antonio C. Pido Atty. Edgardo Roman Manuel C. Balois

Gentlemen:

("AGS") is a corporation engaged in a wholly or partially nationalized business activity. This is in response to your lettersi requesting an opinion on whether ABM Global Solutions, Inc.

August 2000. Based on its ownership structure, AGS is a wholly-owned subsidiary of ePLDT, Inc., which in turn, is a wholly-owned subsidiary of PLDT, Inc. You stated in your letter that AGS is a corporation duly registered with the Commission since 8

Per the Amended Articles of Incorporation attached to your letter, AGS's primary purpose is:

relating to finance, manufacturing, logistics, construction and engineering while also offering training and education services, and IT Business Application as a channel, ancillary services incidental to the business. "to engage in the business of consulting which includes but is not limited to providing application support services in relation to sourcing. procurement, spend reseller, implementation and support partner while also offering training and education services in relation to such function, to provide electronic catalogue purchasing facilities over the internet to buyers and suppliers for maintenance. repair, operations of products and services and standard office supplies and equipment; to provide online bidding services for negotiating typically large value and volume transactions over the internet and to provide such facilitating and management, contract management, implementation of IT based business solutions

consulting services to its clients are not covered by any nationality requirement. its primary purpose and business of providing Information Technology (IT) solutions, training, and You believe that the stockholdings of AGS do not need to be wholly or partially Filipino-owned since

Hence, your query.

following: 1) IT Consulting and Implementation, 2) Enterprise Resource Planning Software, 3) Human purpose of the corporation must be examined. As can be gleaned from the above-quoted purpose clause, AGS is engaged in the business of providing IT solutions, training, and consulting services to its clients. Specifically, the IT products and consulting services that AGS provides to its customers consist of the To determine whether AGS is engaged in a wholly or partially nationalized activity, the primary

1 Letters dated 4 March 2019 and 10 July 2019

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Capital Management Software, 4) Customer Relationship Management Software; and 5) Spend Management Software.2

risk to health and morals and protection of small and medium scale enterprises (List B)5. businesses, and enterprise in which foreign ownership is limited by mandate of the Constitution and specified laws (List A), and those in which foreign ownership is limited for reasons of security, defense. The 12th Regular Foreign Investment Negative List3 (12th FINL) provides a specific list of activities,

Based on the enumeration under List A, the business of AGM is not among those listed. The next question is whether it is included in List B.

enterprises: Sections 5 and 6 of List B limit foreign ownership up to forty percent (40%) in the following

"5. Micro and small domestic market enterprises with paid in equity capital of less than the equivalent of US$200,000 (RA No. 7042, as amended by RA No. 11647).

as determined by the Department of Science and Technology (DOST); or (ii) are endorsed as startup or startup enablers by the lead host agencies, namely the Department of Trade and Industry, Department of Information and Communication equity capital of less than the equivalent of US$100,000 (RA No. 7042, as 6. Micro and small domestic market enterprises: (i) that involve advance technology Technology or DOST, pursuant to RA No. 11337, otherwise known as the "Innovative Startup Act"; or (ii) with a majority of their direct employees as Filipinos, but in no case shall the number of Filipino employees be less than fifteen (15), with paid in amended by RA No.11647).

Services to the domestic market entirely or not exporting sixty (60) percent or more of its output.c A Domestic Market Enterprise (DME) is an enterprise that produces goods for sale, or renders

enterprise is at least US$200,000.00. However, this minimum paid-in capital is reduced to US$100,000.00 or employs at least 15 Filipino employees.7 Otherwise, if the minimum paid-in capital is not complied if the DME involves advanced technology, is endorsed as startup pursuant to the "Innovative Startup Act", with, the corporation becomes partly-nationalized and now becomes covered by the Anti-Dummy Law. Accordingly,a foreign entity may own more than 40% of a DME only if the paid-in capital of the

or does not export 60% or more of its output Based from the above, we lack information on whether AGS serves the domestic market entirely.

is less than the equivalent of US$200,0003, its foreign participation is limited to 40% and is now covered may be 100% foreign-owned, provided it does not own land. However, if AGS's minimum paid-in capital by the Anti-Dummy Law. Assuming that AGS is a DME,if its minimum paid-in capital is equivalent to at least US$200,0008, it

(Php 99,921,041.00) as of 2018 which exceeds the US$200,000 threshold under the 12th FINL. Hence, should AGS be classified as a DME, the above restriction on foreign ownership would not apply to it. capital of AGS is Ninety Nine Million Nine Hundred Twenty One Thousand and Forty One Pesos A perusal of the 2018 General Information Sheet (GIS) you submitted shows that the paid-up

6 Implementing Rules and Regulations of Republic Act No. 11647. The SEC Headquarters, 7907 Makati Avenue 3 Executive Order No. 175, 12th Foreign Negative List, dated 27 June 2022. 4 Ibid, List A. or US$100,000 if : (i) it involves advance technology as determined by the Department of Science and Technology (DOST); or (ii) are endorsed as startup or startup enablers by the lead host agencies, namely the Department of Trade and Industry, Department of Information and Communication Technology or DOST, pursuant to RA No. 11337, otherwise known as the "Innovative Startup Act"; or (ii) with a majority of their direct employees as Filipinos, but in no case shall the number of Filipino employees be less than fifteen (15). www.sec.gov.ph | imessagemo@sec.gov.ph 2 As stated in your Letter dated 10 July 2019. 5 Ibid, List B +63 253227696 9 Ihid Sunra note Salcedo Village, Bel-air,Makati City INVESTORS IN PECPLE We invest in people TUVRheintand CERTIFIED A ISO 001:2015 I1 Syntageme B 0E0 A

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circumstances and documents disclosed/submitted, and should be considered relevant solely to the particular issue raised therein. It shall not be used in the nature of a standing rule binding upon the Commission in other cases or upon the courts whether of similar or dissimilar circumstances.io If upon investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered null and void. It shall be understood that the foregoing opinion is rendered solely on the basis of the facts,

Please be guided accordingly

Respectfully yours

YROMUALD.C.PADILLA Generat cbunsey

10 Paragraph 7, SEC Memorandum Circular No. 15, Series of 2003 The SEC Headquarters,7907 Makati Avenue www.sec.gov.ph | imessagemo@sec.gov.ph +63 25322 7696 Salcedo Village, Belair, Makati City INVESTORS IN PEOPLE We invest in people TUVRheinlano ISO 9001:2015 stom 6538