Opinion No. 16-10 Re: Retail Trade of Pest Control Chemicals, Machines, Equipment and Accessories

SEC Building, EDSA, Greenhills, Mandaluyong City Securities and Exchange Commission Republic of the Philippines Office of the General Counsel Department of Finance

16 May 2016

Chemicals, Machines, Equipment and Accessories SEC-OGC Opinion No. 16-10 RE: Retail Trade of Pest Control

Jipang Building, Roxas Boulevard corner Perla Street, Pasay City JIPANG GROUP OF COMPANIES

Chief Finance and Compliance Officer Attention: Atty. Rico J. De Guzman

opinion on whether the corporation which you are proposing to incorporate should comply with any foreign ownership requirements. This refers to your letter dated 31 July 2015 requesting the Commission to render an

the Philippines with a proposed corporate name of Philippine Sakudory, Inc. (Sakudory), where foreign investors are interested in investing in. Sakudory, as provided in the attached draft leasing, service maintenance and other related activities, of any item or merchandise, relative to into 16,000 shares at 100 pesos per share, per the proposed Articles of Incorporation of Articles of Incorporation, will be engaging in the business of importation, distribution, trading pest control chemicals and machines, equipment and accessories, for local distribution. You also stated that the proposed authorized capital stock to be applied will be 16,000,000 pesos divided Sakudory. Likewise, the draft Articles of Incorporation reflects that the paid-up capital is One Million Pesos (P1,000,000.00). As disclosed in your letter, you intend to form, incorporate and register a corporation in

prescribed by law. The draft Purpose of Sakudory provides: to determine whether the proposed corporation should follow any foreign equity limitations as To answer your query, it is necessary to look into your proposed Articles of Incorporation

service maintenance and other related activities, of any item or merchandise, relative to whole or retail basis; and pest control chemicals and machines, equipment and accessories, for local distribution, in 1 To engage in the business of importation, distribution, trading, leasing.

2) To cooperate with other organizations of similar aims.

Re: Retail Trade of Pest Control Chemicals, Machines, Equipment and Accessories SEC-OGC Opinion No. 16-10 Page 2 of 3

chemicals, machines, equipment and accessories) will be for local distribution, in whole or retail basis. Notably, the proposed purpose of Sakudory states that, the items (i.e. pest control

the foreign ownership limitations under the Retail Trade Liberalization Act of 2000 (RTLA). Thus, we answer your query in the affirmative, that is, Sakudory should be governed by

considered as "retail", the following elements should concur: general merchandise, commodities or goods for consumption.2 For sale transactions to be "Retail Trade" shall mean any act, occupation or calling of habitually selling direct to the

1. The seller should be habitually engaged in selling; 3. The object of the sale is limited to merchandise, commodities or goods for 2. The sale must be direct to the general public; and consumption.

In connection therewith, Section 5, paragraph 2, of the RTLA% provides:

Securities and Exchange Commission and the Department of Trade and Industry, xxx engage or invest in the retail trade business, subject to the following categories: formed and organized under the laws of Philippines may, upon registration with the "Section 5. Foreign Equity Participation. - Foreign-owned xxx corporations,

Pesos of less than Two million five hundred thousand US dollars (US$2,500,000) shall be reserved exclusively for Filipino citizens and corporation wholly owned by Filipino citizens. Category A -- Enterprises with paid-up capital of the equivalent in Philippine

total equity. Philippine Pesos of Two million five hundred thousand US dollars (US$2,500,000) but less than Seven million five hundred thousand US dollars (US$7,500,000) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than sixty percent (60%) of Category B -- Enterprises with a minimum paid-up capital of the equivalent in

(P16,000,000.00). On the other hand, its proposed paid-up capital is One Million Pesos (P1,000,000.00), which is less than the Peso equivalent of Two Million Five Hundred Thousand US Dollars (US$2,500,000.00). As such, it falls under Category A above-described. The proposed authorized capital stock of Sakudory is Sixteen Million Pesos

' R.A. 8762, An Act Liberalizing the Retail Trade Business, Repealing for the Purpose Republic Act No. 1180, as Amended and for Other Purposes. 2 Id. Section 3, Paragraph 1. 3 SEC-OGC Opinion No. 16-03, 15 February 2016 addressed to Platon, Martinez, Flores, San Pedro & Leano Law Offices citing SEC Opinion dated 11 July 1995 addressed to Mr. Moises Villanueva. 4 Id. Note 1.

Re: Retail Trade of Pest Control Chemicals, Machines, Equipment and Accessories SEC-OGC Opinion No. 16-10 Page 3 of 3

(US$2,500,000.00), in order to be qualified to engage in the retail business. s paid-up capital to the Peso equivalent of Two Million Five Hundred Thousand US Dollars Thus, if Sakudory, as mentioned, has foreign stockholders, it has to increase its proposed

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

CAMLOOSACORREA

General Counsel

jamnibg

5 SEC-OGC Opinion No. 06-07, 31 January 2006 addressed to Atty. Daisy L. Parker.