Opinion No. 19-57 Re:Wholly or Partly Nationalized Activity; Anti-Dummy Law

Republic of the Philippines

Department of Finance Securities and Exchange Commission

OFFice oF the general counSeL

26 November 2019

SEC-0GC Opinion No. 19-57 Wholly or Partly Nationalized Activity; Anti-Dummy Law

ATTY. GENER C. SANSAET

Ambicare Pharmaceuticals, Inc. #9 Amsterdam Extension, Merville Park Subd. LEGAL COUNSEL

Paranaque City, Metro Manila

Dear Atty. Sansaet:

whether Ambicare Pharmaceuticals, Inc. ("Ambicare") is an enterprise engaged in a wholly or partially nationalized activity under existing laws. This refers to your letter dated 02 0ctober 2019 requesting the Commission's opinion on

and wholesaling (except retailing) of branded generic pharmaceutical, nutraceutical and importation and trading of pharmaceutical, cosmetic and food products having a paid-up capital of 14,000,000.00. You further disclosed that Ambicare is engaged in the distribution, marketing cosmetic products. In your letter, you stated that Ambicare is a corporation primarily engaged in the

Warehousing/Storage; (5) Sales and Marketing: (6) Distribution and Logistics; and (7) Channels (Customers) -- Distributors, Chain Drugstores, Hospitals, Wholesalers, Independent Drugstores, (ProductSourcing); (2)PurchasingandImportation;(3)QualityControl;(4) and Private and Government Institutions. You also described Ambicare's business model as follows: (1) Business Development

Hence, the instant query.

the primary purpose of the corporation must be examined. The primary purpose of Ambicare as indicated in its Amended Articles of Incorporation, as found in our records1, is as follows: To determine whether Ambicare is engaged in a wholly or partly nationalized activity,

1 Ambicare's Amended Articles of Incorporation dated 04 October 2018.

"That the primary purpose of this corporation is to engage in the business of wholesale trading of various goods and import and export activities for products such as but not limited to pharmaceutical, food, cosmetic products, consumer goods, medical device, molecular diagnostic household products and other items related thereon and in furtherance of the above purposes, the corporation shall have the authority and power to acquire, hold, lease, use or dispose in any manner real properties, including the

Corporation's purposes, all subject to the limitations established by law." (Emphasis ours) improvements thereon, for the accomplishment and attainment of any one or more of the

Pertinent to the above primary purpose, Republic Act (R.A.) No. 8762, otherwise known as the Retail Trade Liberalization Act of 2000, prohibits foreign enterprises with a paid-up capital of less than US$2,500,000.00 from engaging in the retail trade business as it is reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens.? Concomitantly, R.A. 8762, defines retail trade, to wit:

"Retail Trade" shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption x x x."3 (Emphasis supplied

Moreover, for sales transactions to be considered as "retail", the following elements must concur:

(3) The object of sale is limited to merchandise, commodities or goods for consumption."4 (2) The sale must be direct to the general public; and (1) The seller should be habitually engaged in selling:

Furthermore, the Implementing Rules and Regulations ("IRR") of R.A. 8762 enumerates sale transactions which are not considered as retail, thus:

"Section 2. Sales not Considered as Retail - the following sales are not considered as retail:

X X X

by them to render service to the general public and/or produce or manufacture of goods which are in turn sold by them; or (e) Sales to industrial and commercial users onsumers who use the products bought

(f) Sales to the government and/or its agencies and government-owned and controlled] corporations."

which are used or brought for use primarily for personal, family or household purposes. Such products sold are consumer goods. Consumer goods, as defined by the Supreme Court, are goods goods are not intended for resale or further use in the production of other products.s n a previous Opinion, we opined that one of the elements of a retail sale is that the

5 SEC-OGC Opinion No. 18-14 dated 24 August 2018. 3 Section 3 (1), R.A. 8762. 2 Section 5, R.A. 8762 4 SEC-OGC Opinion No. 19-46 dated 07 October 2019

for consumption of the general public as an end-user. Consequently, distributorship agreements which directly satisfies human wants and needs for home and daily life.: with independent corporations who will sell such products to other corporate end-users is not considered retail sale.7 In addition, the items sold must be the final and end (uses) of a product In another Opinion, the Commission clarified that R.A. 8762 covers only the sale of goods

of services (i.e. hospitals, private and government institutions, etc.). business model shows that its activities do not fall within the purview of R.A. 8762 considering Indeed, the customers of Ambicare procures the latter's products with the view of reselling them (i.e. drugstores, pharmaceutical companies, wholesalers) or using these products in the delivery that it engages in wholesale trading, thus, its sales are not to the general public as end-users An examination of the primary purpose clause of Ambicare as well as its declared

domestic market enterprises' since its paid-up capital amounting to 14,000,000.00 is more than the equivalent of US$200,000.00. Furthermore, Ambicare is not subject to the foreign equity restriction imposed on

the Anti-Dummy Law does not apply. Consequently, since Ambicare is not engaged in a wholly or partly nationalized activity.

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

Please be guided accordingly.

Pao ROMUALD C. PADILLA Officer-in-Charge

6 SEC-0GC 0pinion No. 14-12 dated 2 June 2014 9 Foreign Investment Act, Section 8. List of Investment Areas Reserved to Philippine Nationals (Foreign Investment the equivalent of two hundred thousand US dollars (US$200,000) are reserved to Philippine nationals, x x x 7 SEC-OGC Opinion 6-32 dated 2 August 2006. Negative List). 10 SEC Memorandum Circular No. 15, Series of 2003. (Emphasis ours) 8 Ibid - x x x Small and mediu eti C market enterprises with paid-in equity capital less than