Foreign Ownership and Board Seats Limits in Philippine Corporations

The SEC confirms that, for corporations not considered “public utilities” or engaged in advertising, such as Cebu Park Tower One Condominium Corporation (CPTOCC), the number of seats available for alien members on the Board of Directors (BOD) is determined by their allowable participation or share in the capital (i.e., 40%), pursuant to Section 2-A of the Anti-Dummy Law, rather than the corporation’s lower actual foreign ownership (e.g., 12.5% as in this case of CPTOCC).

SEC-OGC Opinion No. 25-10 concerns the participation of foreigners in a corporation’s BOD, specifically in the context of a condominium corporation like CPTOCC. The inquiry, made by a unit owner, asks for confirmation whether foreigners can hold two out of five BOD seats regardless of the current, lower percentage of foreign ownership in the entity, based on the maximum allowable foreign ownership (40%). The SEC provides the above-mentioned response to clarify whether “actual” or “allowable” participation determines the number of seats. 

The SEC cites Section 2-A of the Anti-Dummy Law which provides that foreign nationals may be elected to the board only in proportion to the allowable foreign ownership of the corporation. This limit is generally based on the maximum foreign equity permitted by law, not the entity’s actual foreign ownership. It also cites Department of Justice (DOJ) Opinion No. 40, Series of 2023 which distinguishes the limited cases where foreign directors must be restricted to their actual capital participation. This stricter rule applies only to (1) public utilities under Republic Act No. 11659 and (2) entities in the advertising industry. All other corporations engaged in partially nationalized activities continue to follow the rule based on allowable foreign participation, even when actual foreign ownership is lower.

The document concludes with a standard caveat that the opinion is case-specific and not a binding standing rule for all future cases.