Introduction

In the Philippines, the corporate landscape is shaped by a combination of constitutional provisions, statutory laws, and regulatory guidelines that balance economic openness with the protection of national interests. A key question for foreign investors and multinational corporations is whether a foreigner can serve as the president of a Philippine corporation. The answer is not absolute; it depends on the nature of the corporation's business activities, the level of foreign ownership permitted, and compliance with anti-dummy laws designed to prevent circumvention of nationality restrictions. This article explores the legal framework governing nationality requirements for corporate presidents, foreign ownership rules, and related implications under Philippine law.

Legal Framework

The primary laws governing corporations in the Philippines include the Revised Corporation Code of the Philippines (Republic Act No. 11232, which amended Batas Pambansa Blg. 68), the 1987 Philippine Constitution, the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended), and the Anti-Dummy Law (Commonwealth Act No. 108, as amended). These laws collectively regulate corporate formation, ownership, management, and operations.

Revised Corporation Code: This is the foundational statute for all corporations. It outlines the qualifications for directors and officers but does not impose explicit nationality restrictions on them.
1987 Constitution: Article XII imposes nationality requirements on certain economic activities, reserving them exclusively for Filipinos or corporations with at least 60% Filipino ownership (e.g., public utilities, natural resources exploitation, land ownership).
Foreign Investments Act (FIA): This liberalizes foreign investments by allowing up to 100% foreign ownership in most sectors, except those listed in the Foreign Investment Negative List (FINL), which is periodically updated by executive order.
Anti-Dummy Law: This prohibits the use of Filipino "dummies" to enable foreigners to control or manage enterprises reserved for Filipinos, with penalties including fines and imprisonment.

Additionally, the Securities and Exchange Commission (SEC) issues opinions, memoranda, and guidelines interpreting these laws, which are binding on corporations registered in the Philippines.

General Rule: No Absolute Prohibition on Foreign Presidents

Under the Revised Corporation Code, there is no blanket prohibition against a foreigner serving as corporate president. Section 22 requires that the president be a director of the corporation, and Section 24 mandates that directors own at least one share of stock (for stock corporations) and be of legal age. However, neither section specifies citizenship as a qualification.

Residency Requirement: Section 22 stipulates that the president must be a resident of the Philippines. This means a foreigner can qualify if they hold a valid resident visa (e.g., Special Resident Retiree's Visa, investor's visa under the FIA, or permanent resident status). Non-residents, even if Filipino citizens, cannot serve as president.
Stock Ownership: As a director, the president must own at least one share. For foreigners, this shareholding must comply with ownership limits in restricted sectors.
Election by Board: The president is elected by the board of directors (Section 24), which must itself comply with any applicable nationality rules.

In fully foreign-owned corporations (allowed under the FIA for non-restricted activities like manufacturing, IT services, or tourism), a foreigner can freely serve as president. For example, a 100% foreign-owned business process outsourcing (BPO) company can have a foreign national as president, provided they are a resident.

Restrictions in Nationalized or Partially Nationalized Sectors

The Constitution and FINL impose ownership caps in certain areas, indirectly affecting who can serve as president. The FINL divides restricted activities into List A (constitutionally mandated restrictions) and List B (for reasons of security, defense, health, or morals, with limits on small-scale enterprises).

Public Utilities and Infrastructure: Under Article XII, Section 11, public utilities (e.g., electricity distribution, water supply, telecommunications) must be at least 60% Filipino-owned. The board of directors must reflect this, with at least 60% Filipino directors to ensure effective control.
Natural Resources and Mining: Exploration, development, and utilization of natural resources are limited to Filipinos or corporations with 60% Filipino ownership (Article XII, Section 2). Small-scale mining is reserved exclusively for Filipinos.
Mass Media: Ownership and management are restricted to 100% Filipino citizens or entities (Article XVI, Section 11).
Educational Institutions: Private educational institutions must be at least 60% Filipino-owned, except those established by religious groups or missions (Article XIV, Section 4).
Land Ownership: Corporations cannot own land unless at least 60% Filipino-owned, though long-term leases are permitted for foreigners.

In these sectors, while the Corporation Code does not explicitly bar foreign presidents, SEC interpretations emphasize that executive positions like president must align with nationality requirements to avoid violating constitutional intent. For instance:

The president, as the chief executive officer (CEO equivalent), exercises significant management control. Allowing a foreigner to hold this position in a partially nationalized corporation could be seen as ceding effective control to foreigners, contravening the 60-40 rule.
SEC Opinion No. 16-12 (2016) and similar rulings state that in corporations subject to ownership limits, the president and other key officers (e.g., treasurer) should be Filipinos to ensure Filipino dominance in management.
However, foreigners can serve as vice presidents, secretaries, or non-executive directors, as long as the board majority and key executives are Filipino.

The Anti-Dummy Law and Its Implications

The Anti-Dummy Law is crucial in preventing evasion of nationality rules. It penalizes any arrangement where a foreigner uses a Filipino nominee or dummy to hold shares or intervene in the management of a nationalized enterprise.

Prohibited Acts: Section 2-A prohibits foreigners from intervening in the management, operation, administration, or control of restricted businesses, whether as officers, employees, or laborers, if it results in foreign control exceeding allowed limits.
Application to Presidents: If a foreigner serves as president in a corporation where foreign ownership is capped at 40%, and this role allows them to override Filipino board members, it could trigger anti-dummy violations. Penalties include imprisonment of 5-15 years and fines up to PHP 100,000.
Enforcement: The Department of Justice (DOJ) and SEC investigate complaints. Cases like People v. Quasha (1953) illustrate that dummy arrangements are void ab initio, and foreigners found in violation may face deportation.

Exceptions exist for technical positions requiring foreign expertise, but these must be approved by the DOJ and do not extend to executive roles like president.

SEC Guidelines and Registration Requirements

When incorporating, the SEC requires disclosure of directors' and officers' nationalities. For restricted sectors:

Articles of Incorporation must specify compliance with ownership rules.
Foreign directors/officers must submit proof of residency and compliance with immigration laws.
Annual General Information Sheets (GIS) must report changes in officers, including nationality.

SEC Memorandum Circular No. 8, Series of 2013, clarifies that in partially nationalized corporations, the corporate secretary and treasurer must be Filipino citizens and residents, but the president is not explicitly mentioned. However, in practice, the SEC often requires the president to be Filipino in such cases to align with control requirements.

Case Law and Judicial Interpretations

Philippine jurisprudence reinforces these rules:

Luzon Stevedoring Co. v. Anti-Dummy Board (1965): The Supreme Court held that foreigners cannot hold positions that allow control over nationalized activities.
SEC v. Various Cases: Rulings emphasize that "management control" includes the presidency, and foreigners in such roles must not dilute Filipino ownership mandates.
Exceptions in Free Trade Zones: In areas like the Philippine Economic Zone Authority (PEZA) zones, 100% foreign-owned export-oriented enterprises can have foreign presidents without restrictions, as they are exempt from certain FINL limits.

Practical Considerations for Foreign Investors

Foreigners interested in serving as corporate presidents should:

Conduct due diligence on the FINL to confirm if their business sector allows 100% foreign ownership.
Ensure residency status through the Bureau of Immigration.
Structure the board to maintain required Filipino majorities in restricted sectors.
Seek SEC legal opinions for clarity on specific setups.
Consider joint ventures or partnerships where Filipinos hold executive roles.

Violations can lead to corporate dissolution, fines, or criminal liability, underscoring the need for legal counsel.

Conclusion

In summary, a foreigner can serve as a corporate president in the Philippines for businesses allowing full foreign ownership, provided they are residents and meet basic qualifications under the Corporation Code. However, in nationalized or partially nationalized sectors, constitutional and statutory restrictions typically require the president to be a Filipino to ensure national control. The Anti-Dummy Law serves as a safeguard against circumvention, with severe penalties for non-compliance. As the Philippines continues to attract foreign investment through liberalizing reforms, understanding these rules is essential for compliant and successful corporate governance.