Anti-Dummy Law Compliance in the Philippines A 2025 Comprehensive Legal Guide

1. Why it matters

The Anti-Dummy Law (Commonwealth Act No. 108, “ADL”) criminalises any attempt by foreigners—or their Filipino “dummies”—to evade nationality caps written into the Constitution and into sector-specific statutes. Violations can lead to 5-15 years’ imprisonment, hefty fines, forfeiture of the business, and deportation of alien offenders. (Supra Source)

2. Constitutional & policy foundations

1987 Constitution. Article XII §11 reserves the operation of a public utility to corporations that are at least 60 % Filipino-owned; similar 60-40 limits appear for natural resources (§2), educational institutions (Art. XIV §4[2]), mass media (Art. XVI §11) and advertising (Art. XVI §11). (Lawphil)
Nationalisation philosophy. The policy goal is to keep “critical areas of the economy” under Filipino control while still allowing foreign capital where the public interest so requires.

3. Statutory framework & key amendments

Instrument	Key points	Compliance impact
Commonwealth Act 108 (1936)	Defines dummy arrangements; sets criminal penalties; bars foreigners from “intervening, directly or indirectly, in the management” of a partly-nationalised enterprise.	Core offence provisions.
Republic Act 134 (1947)	Raised fines; clarified forfeiture.	Higher monetary risk.
Presidential Decree 715 (1975)	• Section 2-A inserted – foreigners may sit on the board only in proportion to their equity. • Allowed foreign technical personnel for limited periods with DOJ approval.	Board-composition rules; AEP/DOJ authority procedures. (eLibrary, Digest PH)
Revised Corporation Code, RA 11232 (2019)	Requires corporations to keep records of beneficial owners and bars structures that breach the ADL. (Lawphil)
SEC Memorandum Circulars 15-2019, 10-2022 & 18-2024	Mandate beneficial-ownership (BO) disclosure in the GIS; impose non-financial penalties for non-filing; integrate BO data-sharing with other agencies. (Grant Thornton Philippines)

4. Sectors still covered after recent liberalisation

Despite the 2022–2023 reform wave, the ADL still applies wherever foreign equity is capped—most notably:

Public utilities (electricity distribution, water and sewerage, petroleum pipelines) – 60 % Filipino capital after RA 11659 narrowed the definition of “public utility”. (Lawphil, Cruz Marcelo)
Exploitation of natural resources (mining, forestry, fishing).
Mass media & advertising – 100 % Filipino.
Land ownership – foreigners limited to long-term lease or 40 % condominium interest.
Activities in List A of the 12ᵗʰ Foreign Investment Negative List (FINL), EO 175 s. 2022. (Forvis Mazars, eLibrary)

Tip: If your line of business is not on the FINL and is not a public utility under the amended Public Service Act, the ADL no longer bites—but a BO filing is still required.

5. What counts as a “dummy”

Prohibited scheme	Typical red flag
Nominal shareholding – a Filipino holds legal title but has side agreements to return dividends or voting power to the foreigner.	Deeds of assignment, voting-trust agreements, or side letters contradicting SEC filings.
Board or officer control beyond the foreigner’s equity proportion.	A 40 % foreign shareholder appoints the president.
Management contracts that give foreigners decisive influence.	Technical assistance contract with veto rights over budgets.
Back-to-back loans or share options allowing foreigners to capture 100 % of the upside.	Loan repayable only from dividends on the Filipino’s shares.
Dummy employees signing for or on behalf of foreign owners.	Filipino signatory who immediately endorses decisions prepared abroad.

6. Permitted foreign participation & carve-outs

Board seats in proportion to foreign equity (PD 715).
Technical or managerial personnel may be hired for up to five years (renewable to ten) upon Department of Justice Authority to Employ Aliens (AEA); DOLE issues the Alien Employment Permit (AEP) only after DOJ clearance. DOJ Department Circular 009-2025 streamlined this process. (BusinessWorld Online)
100 % foreign ownership now allowed in:
- Telecoms, rail, seaports, and airports (non-public-utility public services) under RA 11659, subject to national-security review. (ASEAN Briefing)
- Export-oriented manufacturers (≥70 % export sales).
- Renewable-energy projects after DOE Opinion 2022-11 removed nationality restrictions. (Chambers)

7. Beneficial-ownership & reporting obligations

Filing	Deadline	Core content
General Information Sheet (GIS)	30 days after annual stockholders’ meeting	Full BO diagram: natural persons with ≥25 % ownership or control, including indirect layers.
BO Declaration (SEC MC 15/10)	Together with GIS	Passport/ID, nationality, residential address, nature of control.
Notice of Alien Director/Officer (SEC Form 23-A)	Within 5 days of election	Proportionate compliance check.

Failure triggers up to ₱400 k administrative fines plus ADL prosecution.

8. Landmark jurisprudence

Gamboa v. Finance (2012, 2014 follow-ups): “Capital” for the 60-40 test means voting stock, not the entire authorised capital—thwarting the use of non-voting preferred shares to water down Filipino control. (Lawphil)
Narra Nickel v. Redmont (2015): Supreme Court applied the grandfather rule when layers of companies obscure nationality. Even if the top-tier meets the 60 % rule, courts may pierce through. (Lawphil)
Megawide/GMR Cebu Airport (2022): trial court dismissed ADL charges after finding no proof of foreign control, underscoring the evidentiary burden on prosecutors. (BusinessMirror)
Rappler cases (2019-present): Ongoing ADL indictments illustrate that even depository receipts (PDRs) can be viewed as control devices. (Wikipedia)

9. Penalties & enforcement trends

Offence	Criminal penalty	Ancillary sanction
Acting as or employing a dummy	5-15 yrs prison + fine ≥ value of the right but ≥ ₱5 000	Forfeiture of franchise or property; deportation of aliens. (Studocu)
False BO filing (SEC MC 10-2022)	Up to ₱2 M admin fine + possible ADL charge	Suspension/revocation of licence.
Unauthorised foreign technical staff	Closure order + DOJ prosecution	Blacklisting from PEZA, BOI incentives.

The DOJ and NBI have formed financial-crimes panels dedicated to ADL probes, and the SEC now data-shares BO files with PS-DBM and AMLC for procurement and AML screening. (BusinessWorld Online, Department of Justice)

10. Practical compliance roadmap (2025 edition)

Map the business activity. Check the 12ᵗʰ FINL and RA 11659 IRR to confirm the exact foreign-equity ceiling.
Structure share classes up-front. Ensure that Filipino nationals will hold ≥60 % of each voting class if the ceiling is 60-40. Draft shareholder agreements to reflect this—and do not override them with side letters.
Compose the board & officers.
- Majority of directors must be Filipino.
- President/CEO, treasurer and compliance officer must be Filipino if the company is in a nationalised activity (SEC OGC Opinions 16-02 & 16-29). (bccslaw.com)
Secure DOJ AEA + DOLE AEP before onboarding any foreign technical personnel. Keep copies of visas, contracts and turnover-training plans.
File accurate BO information with supporting ID and organisational chart. Update within 30 days of any change.
Run annual nationality audits. Re-compute Filipino dilution after every capital raise, share buy-back or PDR issue in light of Gamboa/Narra.
Embed ADL representations & warranties in JV agreements, loan covenants and due-diligence checklists.
Train directors and compliance teams—most ADL breaches are inadvertent.

11. Common pitfalls to avoid

Using back-to-back loans to fund the Filipino shareholder—courts treat the lender as beneficial owner.
Appointing a foreigner as president of a partly nationalised company.
Silent side agreements on dividend diversion or voting pools.
Neglecting indirect share transfers (e.g., an offshore parent sells to another foreign entity).
Treating PDRs as “safe”— they may still be scrutinised for control attributes.

12. Outlook

With RA 11659 narrowing the “public utility” concept and RA 11647 liberalising retail and renewables, the universe of activities subject to the ADL is shrinking, but enforcement is tightening through BO transparency, AML-driven data sharing, and high-profile prosecutions. Expect:

Wider use of the grandfather rule in SEC investigations.
Stricter scrutiny of nominee arrangements by banks and procurement agencies.
Possible congressional bills (HB 5718/SB 2406) to raise fines to ₱10 million and empower the SEC to issue cease-and-desist orders motu proprio.

Keeping a robust compliance system is therefore cheaper than defending an ADL indictment.

13. Quick-reference checklist

✅ FINL/sector review ✅ Board ratio ✅ DOJ AEA/AEP (if any) ✅ Beneficial-ownership register ✅ Annual nationality audit ✅ ADL clauses in contracts

14. Conclusion

The Anti-Dummy Law remains the Philippines’ primary defence against covert foreign control of strategically sensitive enterprises. While recent liberalisation measures have opened many doors, compliance still hinges on genuine Filipino ownership and control, transparent beneficial-ownership reporting, and rigorous internal monitoring. A proactive, documentation-heavy approach—rather than reactive litigation—best protects both local partners and foreign investors from the ADL’s severe sanctions.

This guide synthesises legislation, SEC circulars, and Supreme Court jurisprudence current to 15 May 2025. Always confirm any material change—such as a new FINL or SEC issuance—before relying on this summary.