Opinion No. 09-01-A RE : Citizenship Requirement to participate in Private Recruitment

.. , , I '): I Republic of the Philippines Department of Trade and Industry o Securities and Exchange Commission SEC Bldg. EDSA, Greenhills, Mandaluyong City 08 December 2009 SEC-OGCOpinian NO'.09-01-A Citizenship Requirement to' participate in Private Recruitment DONATO ZARATE &. RODRIGUEZ 7/F Electra Hause 115 EstebanStree~ Legaspi Village, 1219 Makati City I I Attentian: Mr. Demasthenes B. Danata Gentlemen: I I This refers tf yaur 20 January 2009 letter requesting, an behalf af yaur client Dahle Manning Ag ncies Ltd. ("DMAL"), a review and/ar c1arificatian an the SEC- OGCOpinian NO'.0 -01, series af 2009 C'Opinian," far brevity) issued by this Office. I In particular; yau wauld like to' be clarified an the qualificatian af a trustee af a retirement trust td to acquire, awn and, hald 75% af the vating capital stack af a recruitment agen['. TO'recapitul~te, the fallawing are the pertinent facts: I 1. DMALI isa nan-resident fareign carparatian, arganized and existing under Ithe laws af the Isle af Man, a Crawn Dependency under the resparlsibility and natianality af the United Kingdam. It is nat engaged in any Ibusinessin the Philippines. . 2. DMAL I is cantemplating an investing in the 25% af the vating capital stack ~f a seaman manning agency, in jaint venture with a Philippine truste~ af funds far the retirement benefits af FilipinO'emplayees, where the tr4stee will hald 75% af the vating capital stack reserved far FilipinO' citizen~. DMAL is alsO' cantemplating an investing in 100% af the prefer~ed nan-vating capital stack af the manning agency. I 3. On 121January2009, this Office rendered an apinian stating that: I I I I http:./Iwww.sec.gov.phl • +(632) 726 09 31 to 39

• 0 I a. The pJopriety of the trustee investing the funds of the employee retire~~nt fund in 75% of the voting capital stock of a manning or recruit ent. agency would depend on the provisions of the trust agree ent entered into by the trustor, or the employer company, and the tru tee. b. The 7 Yo nationality requirement for recruitment agencies applies only to the I oting capital stock and therefore foreign nationals are qualified to ow and hold one hundred percent (100%) of the preferred non- voting apital stock of recruitment agencies. You would Ii e now to be clarified on the first part of the opinion with regard to the qualification bf a trustee of a retirement trust fund to acquire, own and hold 75% of the voting dapital stock of a recruitment agency. In particular, you would like to seek confirmatidn that a retirement fund trustee, which is a Philippine national and at least 60% ~f the fund will accrue to the benefit of the Philippine nationals, meets the citizensfiP requirement under Article 27 of the Labor Code of the Philippines,l whiclJ eads as follows: "ART. 2~. Citizenship Requirement. - Only Filipino citizens or corporations, partnerships or entities at least seventy-five percent (75%) of! the authorized and voting capital stock of which is owned and 1 controlled by Filipino citizens shall be permitted to participate in the recruitme,/t and placement of workers, locally or overseas," (Emphasis supplied) I i ~ In the omni~us Rules Implementing the Labor Code, it is stated that: I "RULEV I I Private E1ployment Agencies SECTION11. Qualificationsof applicants. - All applicants for license to operate p~ivateemploymentagencieseither for localor overseasrecruitment and Placerent shallpossessthe following qualifications: (a) Citizen~hiPrequirementas providedfor in RuleIV of these Rules;xxx" ! On the other hand, Rule IV provides: "RULEIV xxx 2

• Filipino cit ens shall be permitted to participate in the recruitment and placement f workers, locally or overseas." (Underscoring supplied) It is likewise stated in the Seventh Foreign Negative List (ANL) that foreign equity in private re ruitment, whether for local or overseas employment is limited only to twenty five ercent (25%) of the voting stock of the agency.2 From the for going provisions of the applicable laws and rules, only Filipino citizens or corporatipns, partnerships or entities at least seventy-five percent (75%) of the authorized 1nd voting capital stock of which is owned and controlled by Filipino citizens sha I be permitted to. participate in the recruitment and placement, whether for local or overseas employment. I . To determin whether an entity is considered a "Philippine national" for purposes of makin investments in the Philippines, section 3 (a) of R.A. No. 7042, also known as the" oreign Investments Act of 1991" shall govern, thus: "Sec. 3. Defini ions xxx a) The term ,"Philippine national" shall mean a citizen of the Philippines or a domestic ~artnershiP or association wholly owned by citizens of the Philippinesr or a corporation organized under the law$ of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to1vote is owned and held by citizens of the Philippines; or a trustee of funds ~ r ension or other em 10 ee retirement or se aration benefits where theltrustee is a Philippine national and at least sixty percent (60%) of the fund Will accrue to the benefit of the Philippine nationals: Provided, That wher~ . a porporation and its ~o~-Filipino stoc~holders own .stocks in a Secuntles land Exchange CommiSSion (SEC) reglsteredenterpnse, at least sixty perc~nt (60%) of the capital stocks outstanding and entitled to vote of both corpqrations must be owned and held by citizens of the Philippines and at least si*t percent (60%) of the members of the Board of Directors of both corporatio~s must be citizens of the Philippines, in order that the corporations shall be c9nsidered a Philippine national;" (Underscoring supplied) In order for I a trustee of funds to be considered a Philippine national, two requirements must Ibe satisfied, namely: (1) the trustee is a Philippine national and (2) at least sixty percent (60%) of the fund will accrue to the benefit of the Philippine nationalsj I In the case pf the proposed transaction to be entered into by the Philippine trustee of funds forr the retirement benefits of Filipino employees, where the trustee will hold 75% of ~e voting capital stock reserved for Filipino citizens, this Office opines that the sai trustee meets the citizenship requirement for it to participate in private recruitment Stated otherwise, where a trustee is a Philippine national and at least seventy-five Rercent (75%) of the fund will accrue to Philippine nationals, the said trust fund ma~ own voting shares in a private recruitment agency. I ) I 2 ' I Executive Order No. 581'4(2006). 3 I

• I It shall be u derstood that the foregoing opinion is rendered based solely on the facts and circu stances disclosed and relevant solely to the particular issues raised therein and hall not be used in the nature of a standing rule binding upon the Commission in ther cases whether of similar or dissimilar circumstances. If, upon investigation, it will be disclosed that the facts relied upon are different, this opinion shall be ren~ered null and void. Please be gUibed accordingly. Very truly yours, eK- VERNETTE G. UMAU-PACO General Counsel e:\opiniOlls\dohle.doc 3S.E.CMemorandum Cir ular No. 15 dated 16 December 2003. 4.