Philippines - Law & Practice

Philippines - Law & Practice

Contributed by SyCip Salazar Hernandez & Gatmaitan

Contributor(s)

SyCip Salazar Hernandez & Gatmaitan (SyCipLaw), founded in 1945, is the largest law firm in the Philippines. Although its work centres on business activity, the firm has offered a broad and integrated range of legal services that cover such areas as family relations, constitutional issues, and other matters of law unrelated to commerce. SyCipLaw's practice is diversified, as reflected in its seven principal departments: banking, finance and securities; corporate services; intellectual property; labour; litigation; special projects; and tax. Within this structure, some of the firm's lawyers are involved in additional fields of specialisation, such as power, immigration, shipping, and maritime law. For more information, please visit www.syciplaw.com.

The authors

Rafael A. Morales is the managing partner in SyCip Salazar Hernandez & Gatmaitan. Prior to his appointment, he was head of the firm's banking, finance & securities department. His areas of expertise include corporation and commercial law, contract law, banking and financial law (including project financing), securities, joint ventures, mergers and acquisitions, and international law. Mr. Morales was president of the Inter-Pacific Bar Association, an organisation of lawyers from more than 65 jurisdictions and with interests in the Asia-Pacific region. In addition, he is a member of the Philippine Bar Association, the Financial Executives Institute of the Philippines, the New York State Bar Association and the American Bar Association.

John Paul V. de Leon is a senior associate of SyCipLaw and a member of the firm's special projects and banking finance & securities groups. His practice areas include real estate development, infrastructure, mergers and acquisitions, finance and securities and investments (both foreign and local) in highly regulated areas such as information technology, food and drugs, health care, media, advertising, gaming and retail trade. Mr. de Leon has significant experience in real estate and advises advertising, media, technology and business process outsourcing companies. Mr. de Leon also regularly advises banks and financial institutions in connection with loans, bonds and debt securities.

Trends

Market developments

The Philippines' strong economy continues to attract foreign direct investments, with the country's credit rating upgraded to an "investment grade" by both Fitch Ratings and Standard & Poor's. While official figures from the regulators are not yet available, 1Q2013 probably saw a more buoyant M&A market than 1Q2012.

Significant M&A deals in 2012 included (i) the Philippine Long Distance and Telephone Company's acquisition of a controlling equity stake in DIGITEL; (ii) the acquisition of the equity interest in Raffles Residences & Fairmont Hotel in Makati City by Ayala Land from a subsidiary of Dubai property firm Kingdom Hotel Investments; and (iii) the acquisition of Redondo Peninsula Energy, Inc by Meralco PowerGen Corporation.

In 1Q2013, Coca-Cola FEMSA, SAB de CV acquired a 51% share of Coca-Cola Bottlers Philippines, Inc. from the Coca-Cola Company. The much-awaited merger of the Allied Banking Corporation and the Philippine National Bank also became effective in 1Q2013.

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Key industries

Banking, real estate, and the food and beverage sectors continue to attract significant M&A activity. The Bangko Sentral ng Pilipinas ("BSP") has encouraged mergers and consolidations between domestic banks.

Overview of the regulatory field

Acquiring a company

Acquisitions of companies in the Philippines are made primarily through (i) share purchase; (ii) asset purchase; or (iii) merger and consolidation.

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Regulatory bodies

The Securities and Exchange Commission ("SEC") is the primary regulator for M&A activities of corporations, partnerships and associations. For banks and other financial institutions, the two other regulators are the BSP and the Philippine Deposit Insurance Corporation. The Philippine Stock Exchange also exercises regulatory powers over the M&A activities of listed companies.

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Foreign investment

There are some restrictions placed on foreign investments. While, as a general rule, foreign ownership in a Philippine corporation may extend to cover 100% of its capital stock, certain areas of investment are subject to foreign-ownership limitations under both the Philippine Constitution and general law. Pursuant to the Foreign Investments Act of 1991, these limitations are contained in a "negative list" that is periodically issued by the President of the Philippines. The Ninth Foreign Investment Negative List was promulgated, through Executive Order No. 98, on October 29, 2012.

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Anti-trust regulations

At present, there is no general antitrust or anti-monopoly law in the Philippines. However, there are pending bills on the subject in the Congress of the Philippines.

The Philippine Constitution adopts a general policy against monopolies and combinations in restraint of trade. In general, the Constitution mandates the regulation and prohibition of monopolies when the public interest so requires.

Monopolies and other combinations in restraint of trade are declared unlawful and penalised under the Revised Penal Code. Specifically, it penalises:

(i) any person who seeks restraint of trade or commerce or who wishes to prevent free competition in the market by artificial means, whether it is through contract or agreement or the engagement in a conspiracy or combination in the form of a trust or otherwise;

(ii) any person who will monopolise any merchandise or object of trade or commerce, or will