Wednesday, April 12, 2017

Can a foreigner be the chairman of the board of a corporation?

For as long as the corporation is not engaged in any nationalized or partly nationalized activity, a foreigner may serve as president or chairman of the board of a corporation.

However, if the purpose of the corporation as stated in its Article of Incorporation does not exclude ownership of land and the corporation eventually owns a land, then a foreigner cannot be chairman of its board. That is because by owning a land, the corporation has engaged in a partly nationalized activity.

Article XII, Section 7 of the Constituion provides that: "Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporation or associations qualified to acquire or hold lands of the public domain."

It also goes without saying that in a 60:40 corporation where 60% of shares is owned by Filipinos and 40% is owned by foreigners, a foreigner cannot be chairman of the board or president of the corporation.

According to the Securities and Exchange Commission in an Opinion, foreigners can be elected as directors in proportion to their participation or share in the capital of corporations engaged in activities that are reserved to Filipino pursuant to PD 715 which amends CA 108, but are prohibited from being elected in management positions such as the President.

"On the citizenship requirement of corporate officers: Sec. 2-A of Commonwealth Act (CA) No. 108, as amended, bans foreigners from being elected or appointed to management positions as president, vice-president, treasurer, secretary, etc. in business activities where there is a constitutional or statutory provision imposing a specific nationality requirement as a requisite for the exercise or enjoyment of a right, franchise or privilege."

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