A Philippine Legal Article

In Philippine law, land ownership is not simply a matter of contract or company registration. It is a constitutional issue. The Philippines follows a strict nationalization policy over lands of the public domain and, in practice, over private land ownership as well. Because of that policy, foreigners generally cannot own land in the Philippines in the same way Filipino citizens can. One of the few legally recognized corporate pathways for landholding is through a Philippine corporation that is at least 60% Filipino-owned and 40% foreign-owned, provided that the corporation is genuinely Filipino in the constitutionally required sense and is not a mere device to evade nationality rules.

This is what people usually mean when they talk about a “60/40 Filipino corporation for land ownership.” But the concept is widely misunderstood. Many assume that once the articles of incorporation say 60% Filipino and 40% foreign, the corporation can freely own land. That is incomplete and often dangerously simplistic. In Philippine law, the issue is not only the mathematical ratio of shares, but also the true beneficial ownership, voting control, nationality of capital, corporate governance, anti-dummy restrictions, regulatory compliance, and the specific use of the land.

This article explains the legal framework, the constitutional basis, the corporate setup, the meaning of the 60/40 rule, the restrictions that apply, the steps normally involved in organizing such a corporation, and the major legal risks of doing it incorrectly.

I. The constitutional rule on land ownership

The starting point is the 1987 Constitution.

As a general rule, private lands may be transferred or conveyed only to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. Under the Constitution, those qualified include:

Filipino citizens; and
corporations or associations at least 60% of whose capital is owned by Filipino citizens.

This is the constitutional basis for the 60/40 structure.

The rule is not a special privilege for mixed corporations. It is a limitation on foreign participation. A corporation may acquire land only if it falls within the constitutional definition of a qualified Philippine national landholding entity.

That means a corporation with less than 60% Filipino capital cannot lawfully own Philippine land. A corporation with at least 60% Filipino capital may, in principle, acquire private land, but only if the arrangement is real, compliant, and not a sham.

II. Why the 60/40 corporation exists

The 60/40 model exists because Philippine law allows foreign investment in many business activities, but also reserves or partially reserves certain areas to Filipino citizens or Filipino-controlled entities. Landholding by corporations is one of the areas where Filipino ownership thresholds matter.

A 60/40 corporation is therefore often used where:

a Filipino and a foreign spouse or business partner want to operate a lawful business in the Philippines,
a mixed-ownership company needs land for an office, warehouse, factory, resort, farm-related business within legal limits, or development project,
investors want a Philippine corporation that can legally own land while still allowing up to 40% foreign equity,
or the business is in a sector where foreign ownership is allowed up to 40% and land acquisition is legally necessary.

The crucial point is that the corporation is not supposed to be a shortcut for foreign land ownership. It is supposed to be a constitutionally compliant Philippine corporation with genuine Filipino majority ownership.

III. A 60/40 corporation is not a nominee workaround

This is the most important warning.

Philippine law does not allow a foreigner to use Filipino “dummies” or nominal stockholders merely to create the appearance of 60% Filipino ownership while the foreigner is the true owner or controller of the land. That may violate the Constitution, the Anti-Dummy Law, and other regulatory and criminal provisions depending on the facts.

A lawful 60/40 corporation requires that the Filipino ownership be real, substantial, and legally effective, not fictitious.

This means:

the Filipino shareholders must truly own their shares,
they must not be mere placeholders,
they must not hold shares for the benefit of the foreigner under secret trust arrangements intended to defeat the Constitution,
voting rights and control must not be structured in a way that unlawfully strips Filipinos of their constitutionally required ownership position,
and the corporation must not be a disguised foreign landholding vehicle.

The law looks beyond paper percentages when nationality restrictions are involved.

IV. What “60% Filipino-owned” really means

On the surface, the rule sounds easy: 60% Filipino, 40% foreign. But in Philippine jurisprudence and regulatory practice, this is more complex than a simple headline ratio.

The issue involves the nationality of the corporation’s capital, especially where there are different classes of shares, voting shares, common shares, preferred shares, or layered ownership structures.

The broad legal principle is that where the Constitution requires a corporation to be at least 60% Filipino-owned in order to hold land, the Filipino ownership must be meaningful in the class or classes of shares relevant to the constitutional requirement, not merely cosmetic in total book value.

In practical terms, one must be careful about:

voting shares,
outstanding capital stock,
beneficial ownership,
control over the board,
rights to dividends and liquidation proceeds,
and arrangements that give foreign investors de facto control inconsistent with Filipino ownership requirements.

A corporation is not automatically safe merely because its capitalization table appears to show 60/40 on paper.

V. The “control test” and related nationality issues

Philippine nationality rules for corporations have often been analyzed through the control test, under which a corporation is generally treated as Filipino if at least 60% of its outstanding capital stock entitled to vote is owned by Filipinos. But in regulated or constitutionally restricted areas, especially landholding and natural resources, regulators and courts have also looked more closely at the beneficial ownership and actual control over capital.

This is why nationality compliance must be examined carefully where:

there are multiple share classes,
preferred shares are used to distort economics,
foreigners have extensive veto rights,
management agreements strip Filipinos of real control,
or corporate layering hides the true ownership.

For landholding corporations, the safer legal approach is not aggressive engineering, but straightforward compliance: real Filipino majority ownership, clean governance, and no structures that simulate foreign ownership beyond legal limits.

VI. Can a 60/40 corporation own land?

Yes, in principle, a corporation at least 60% Filipino-owned may acquire and hold private land in the Philippines, because it is a corporation qualified to hold land under the Constitution.

But that answer must always be qualified by five major realities:

1. The corporation must be genuinely Filipino in the constitutionally required sense

Paper compliance alone is not enough.

2. The corporation must be validly organized under Philippine law

It must be a properly registered domestic corporation.

3. The business purpose must be lawful and consistent with the corporation’s powers

The corporation must have a valid purpose and legal authority to acquire the land.

4. The land acquisition must itself be lawful

Title, zoning, land classification, and transfer rules still apply.

5. The corporation must remain compliant after acquisition

A corporation that later falls below nationality requirements may create major legal issues.

So the answer is yes, but only as a real, properly structured Philippine corporation within the constitutional framework.

VII. Land ownership versus land use

Another common misunderstanding is the difference between owning land and using land.

Even where foreigners cannot own land directly, they may lawfully participate in businesses that use land through other mechanisms, such as:

long-term leases within legal limits,
condominium ownership subject to condominium law restrictions,
corporate participation in a qualified Philippine entity,
or project structures that do not involve direct land ownership.

The 60/40 corporation specifically concerns corporate land ownership, not merely business use of land.

That distinction matters because some people form 60/40 corporations when a lawful lease or other structure would have been more appropriate and less legally sensitive.

VIII. The first step: determine whether a corporation is actually necessary

Before forming a 60/40 landholding corporation, the parties should first determine whether the intended objective truly requires:

direct ownership of land by the corporation,
operation of a regulated business,
development rights,
financing,
leasing,
or another kind of legal arrangement.

This matters because landholding adds constitutional sensitivity, corporate governance issues, and title risk. Sometimes the real goal is simply:

residence,
a warehouse site,
office occupancy,
or long-term business use.

In some cases, those goals may be achieved lawfully through structures other than corporate land ownership.

But where actual corporate land ownership is the chosen and lawful path, the corporation must be set up correctly from the beginning.

IX. Basic legal characteristics of the corporation to be formed

A 60/40 landholding vehicle is generally a domestic stock corporation organized under the Revised Corporation Code of the Philippines. It must be registered with the Securities and Exchange Commission (SEC) and comply with all nationality, capital, corporate governance, and reporting requirements.

At the organizational level, the corporation will need:

a corporate name cleared and approved by the SEC,
incorporators meeting legal requirements,
directors meeting legal nationality and ownership requirements,
articles of incorporation,
bylaws,
a defined primary purpose and secondary purposes,
subscribed and paid-in capital consistent with law and business type,
and supporting documents for foreign investors if foreign equity is involved.

If the corporation is to acquire land, its corporate purpose should be drafted carefully and lawfully. A company whose purpose and capitalization do not fit the intended landholding use invites regulatory and tax problems.

X. Ownership structure: the 60/40 ratio

The core structure is that at least 60% of the capital must be owned by Filipino citizens, while foreign ownership may not exceed 40%.

This usually means:

Filipinos subscribe to and own at least 60% of the corporation’s capital,
foreigners subscribe to and own not more than 40%,
and the supporting corporate records, stock and transfer book, subscriptions, and financial evidence reflect actual compliance.

But corporate nationality analysis should not stop at raw percentage alone. The structure should also be checked for:

who owns the voting shares,
who receives the real economic benefit,
who has control over disposal of shares,
whether any side agreements undermine Filipino ownership,
and whether the board structure reflects compliance with nationality limits.

The more aggressive the side arrangements, the greater the risk that regulators or courts treat the structure as unlawful.

XI. Board composition and corporate control

As a general rule, the board of directors of a stock corporation must be elected from among the holders of shares. In nationality-restricted sectors and activities, board composition often matters because control cannot be structured in a way that defeats constitutional policy.

In practice, for a 60/40 landholding corporation:

Filipino shareholders must genuinely hold majority ownership,
board membership should align with legal share ownership and nationality rules,
and the control structure should not hand practical dominion entirely to foreign interests through side letters, irrevocable proxies, or concealed beneficial arrangements.

Although foreign directors may lawfully sit on the board if foreign equity is lawfully present, the overall governance of the corporation must remain consistent with the constitutional nationality structure.

XII. Corporate purpose clause

The primary purpose clause in the articles of incorporation is crucial.

If the corporation intends to acquire land, its purpose clause should be broad enough to support the planned activity, but not so vague or overreaching that it creates regulatory issues. The purpose might involve lawful activities such as:

real estate development where otherwise allowed,
property holding incidental to a lawful business,
hospitality or resort operations where properly licensed,
manufacturing or warehousing requiring site ownership,
office and commercial premises ownership for business use,
or another legally allowed purpose.

The corporation should not acquire land outside the scope of its corporate purposes, and it should not assume that a generic purpose clause automatically authorizes any kind of land-based business. Sector-specific restrictions may still apply.

XIII. Minimum capital and foreign investment considerations

The required capital depends on the nature of the business and the extent of foreign ownership.

A corporation with foreign equity may also need to consider:

the Foreign Investments Act,
the Foreign Investment Negative List or its current policy framework,
minimum capital rules applicable to enterprises with foreign participation,
and whether the business is domestic market enterprise or export enterprise.

This matters because a 60/40 corporation may be valid for landholding, but the actual business it conducts may still be subject to separate foreign equity restrictions or capitalization requirements.

For example, a corporation may satisfy landholding nationality rules but still violate separate rules if it operates in a partially or fully nationalized industry beyond allowed foreign ownership.

Land ownership compliance alone is not enough. The business itself must also be lawful.

XIV. The importance of tracing Filipino ownership

For nationality-restricted corporations, the identity of Filipino owners must often be verified carefully. Where a shareholder is another corporation, partnership, trust-like structure, or entity, one may need to examine the ownership chain to determine whether the claimed Filipino share is truly Filipino in substance.

This matters because the 60% Filipino ownership requirement can be undermined if the supposed Filipino corporate shareholder is itself not genuinely Filipino-owned.

Therefore, before land acquisition, a serious legal review should ask:

Who are the ultimate Filipino beneficial owners?
Are they natural persons who are Filipino citizens?
Are there dual-citizenship or nationality documentation issues?
Are the funds for their shares really theirs?
Is there any hidden financing or side agreement giving foreigners the beneficial interest?

If the Filipino component is not real, the corporate landholding structure is vulnerable.

XV. Funding the corporation

Funding is one of the most legally sensitive areas.

A common unlawful pattern is where the foreign party provides all or nearly all of the money, while Filipino shareholders appear on paper as majority owners without true capital at risk or beneficial entitlement. That can signal a dummy arrangement.

A lawful 60/40 structure should ensure that:

share subscriptions are genuine,
consideration for shares is valid,
corporate records reflect actual payment,
capital contributions are properly documented,
and the funding structure does not secretly transfer Filipino-owned shares’ economic benefits back to the foreign investor in violation of nationality restrictions.

Foreign investors may of course lawfully invest up to their allowed share, and the corporation may also obtain debt financing subject to law. But financing must not be used to simulate foreign ownership of the Filipino portion.

XVI. Incorporation process in the Philippines

A lawful 60/40 corporation for land ownership is ordinarily set up through the usual domestic incorporation process, with heightened attention to foreign equity compliance.

The process generally includes:

1. Choosing the corporate name

The name must be distinguishable and acceptable to the SEC.

2. Determining shareholders and nationality composition

At least 60% Filipino ownership must be established.

3. Fixing the capital structure

The corporation decides authorized capital stock, share classes, subscriptions, and paid-in capital, subject to law.

4. Drafting the Articles of Incorporation

This includes the corporate name, purpose, principal office, term, directors or trustees, capital structure, and subscriber details.

5. Drafting bylaws

These govern internal administration, meetings, directors, officers, and procedures.

6. Preparing foreign investment documents if foreign participation exists

Foreign shareholders may need to provide additional identification and compliance documents, depending on SEC and related requirements.

7. Filing with the SEC

The corporation is created upon SEC approval and issuance of the certificate of incorporation.

8. Post-incorporation registrations

These may include BIR registration, local permits, books of account, stock and transfer book, and industry-specific licenses.

Only after the corporation is validly organized and compliant should land acquisition be seriously pursued.

XVII. Post-incorporation compliance before buying land

Before the corporation acquires land, it should ensure that:

its corporate documents are complete and consistent,
its stock and transfer book reflects actual ownership,
capital has been properly subscribed and paid,
foreign investments are properly recorded where required,
board resolutions authorize the transaction,
tax registrations are in order,
and there is no nationality defect in the structure.

Land acquisition by a newly formed corporation without clean records often creates future title and litigation problems.

XVIII. Due diligence on the land itself

Even a perfectly structured 60/40 corporation can still make a bad or unlawful land acquisition if the land itself has problems.

Legal due diligence should include:

title verification,
confirmation that the seller has authority to sell,
checking for liens, encumbrances, annotations, and adverse claims,
tax declaration and real property tax review,
zoning classification,
land use restrictions,
access issues,
environmental concerns,
agrarian reform coverage,
ancestral domain or indigenous peoples’ issues where applicable,
and whether the property is private land legally transferable to a qualified corporation.

The corporation’s qualification to own land does not cure defects in the property.

XIX. Board and stockholder approvals for land acquisition

A corporation acquires land through corporate action. Depending on the significance of the transaction and the corporate charter, land acquisition generally requires:

a board resolution approving the purchase,
authority for the signatory or signatories,
compliance with internal bylaws and approval rules,
and, in major cases, stockholder approval where required by law or governance documents.

This matters because a land title acquired without proper corporate authority can become the subject of internal corporate dispute.

XX. The Anti-Dummy Law and why it matters

No discussion of a 60/40 landholding corporation is complete without the Anti-Dummy Law.

This law exists to prevent the circumvention of nationality restrictions by placing nominal Filipino owners or officers in positions that merely conceal foreign control. Violations can have serious civil, criminal, regulatory, and transactional consequences.

A landholding corporation is especially vulnerable if:

Filipino shareholders are merely nominal,
foreigners exercise powers reserved by law to Filipinos,
secret agreements transfer beneficial ownership,
management arrangements effectively strip Filipinos of real corporate power,
or land is being held for the foreigner’s true account rather than for the corporation as a legitimate Philippine entity.

The Anti-Dummy Law is not an abstract risk. It is one of the main legal reasons why sham 60/40 structures can collapse.

XXI. Common unlawful or risky practices

Several recurring practices place a 60/40 corporation in danger:

1. Filipino shareholders are mere name-lenders

This is one of the clearest risks.

2. The foreigner funds the “Filipino” shares under secret arrangements

If the Filipino shareholding is not real, the structure is vulnerable.

3. Irrevocable proxies or side agreements transfer all effective control to the foreigner

This may undermine nationality compliance.

4. Dummy directors or officers are used

Paper governance without real authority is dangerous.

5. The foreign investor has private agreements guaranteeing ownership of land beyond legal limits

This can be treated as circumvention.

6. The corporation’s business purpose is inconsistent with foreign equity rules

Even if landholding is technically possible, the business activity may not be.

7. Corporate records are sloppy or inconsistent

Nationality compliance cases often turn on the documents.

A lawful 60/40 corporation must avoid not only obvious illegality, but also arrangements that create the appearance of disguised foreign control.

XXII. Marriage does not eliminate the rules

One of the most common reasons people explore a 60/40 corporation is marriage between a Filipino citizen and a foreign national. But marriage does not automatically allow the foreign spouse to own Philippine land directly.

A mixed-nationality married couple may use a corporation only if the corporate structure itself is constitutionally compliant. The Filipino spouse cannot simply “front” for the foreign spouse under an arrangement that secretly gives the foreign spouse the real ownership of the land.

Marriage may make a lawful mixed-ownership business relationship natural and practical, but it does not waive the constitutional nationality rules.

XXIII. What happens if the corporation later drops below 60% Filipino ownership?

This is a serious problem.

If the corporation ceases to be at least 60% Filipino-owned, it may no longer be qualified to hold land. That creates major legal risk for:

continued ownership,
future transfers,
regulatory compliance,
financing,
and title stability.

A corporation holding land must monitor its capitalization continuously. Share transfers, inheritance, share issuances, redemptions, or restructurings can accidentally push the corporation below the threshold.

Nationality compliance is not a one-time event at incorporation. It must be maintained.

XXIV. Can the foreign shareholder own 40% and still protect the investment?

Yes, a foreign investor may lawfully protect a legitimate 40% investment through proper corporate mechanisms, but those protections must not destroy the constitutional Filipino majority.

Lawful protections may include:

rights under the articles, bylaws, and shareholders’ agreement that are consistent with law,
access to information,
dividend rights,
board representation consistent with ownership,
contractual protections on lawful business matters,
and ordinary investor protections that do not convert the structure into disguised foreign control.

The line is crossed when protections become mechanisms for effective foreign ownership or domination inconsistent with nationality restrictions.

XXV. Shareholders’ agreements: useful but dangerous if drafted badly

A shareholders’ agreement is common in 60/40 corporations. It can regulate:

capital calls,
transfer restrictions,
governance procedures,
dispute resolution,
buy-sell rights,
succession planning,
dividend policy,
and business strategy.

But in a landholding corporation, the shareholders’ agreement must be drafted very carefully. It should not:

negate real Filipino majority ownership,
transfer beneficial ownership of Filipino shares,
create voting control for the foreigner beyond lawful bounds,
or effectively convert the company into a foreign landholding shell.

A shareholders’ agreement can support stability, but it cannot legally override the Constitution.

XXVI. Tax and transactional consequences

Setting up a 60/40 corporation for land ownership also has tax implications. These may include:

documentary stamp taxes,
taxes on share subscriptions or transfers in some contexts,
local business taxes,
real property taxes,
capital gains or creditable withholding taxes on land transfer depending on the seller and nature of the asset,
VAT issues in some transactions,
and ongoing corporate income tax compliance.

Landholding through a corporation is never purely a constitutional or SEC matter. It also creates tax planning and compliance consequences from acquisition to operation to exit.

XXVII. Land use, zoning, and sector-specific restrictions still apply

Even if the corporation can lawfully own land, that does not mean it can use the land for any business it wants.

The corporation must still comply with:

zoning laws,
building permits,
environmental rules,
agrarian reform limitations,
local government requirements,
tourism, industrial, or commercial licensing rules,
and sector-specific ownership or operational restrictions.

For example, holding land for a factory, subdivision, resort, school, media-related enterprise, mining activity, or utility-linked project may trigger very different regulatory rules.

A qualified landholding corporation is not exempt from all other regulation.

XXVIII. Buying land first and fixing the corporation later is risky

Some parties are tempted to rush the land purchase and “clean up” nationality compliance afterward. That is a serious mistake.

The legality of land acquisition depends on the corporation’s qualification at the time of acquisition. A defective corporation cannot safely assume that later corrections will erase all problems. A title obtained through a constitutionally defective structure may remain vulnerable.

The correct order is:

organize the corporation properly,
verify nationality compliance,
ensure internal authority and records are complete, and only then
proceed with land acquisition.

XXIX. Practical step-by-step framework

A lawful and careful approach to setting up a 60/40 Filipino corporation for land ownership usually follows this sequence:

1. Clarify the real business objective

Determine why land ownership is needed and whether ownership, rather than lease or another structure, is truly necessary.

2. Confirm that the intended business activity may legally have up to 40% foreign equity

Landholding compliance is not the only rule that matters.

3. Identify genuine Filipino majority owners

They must be real investors, not nominees.

4. Design a clean capitalization structure

Avoid manipulative share classes or side agreements that distort nationality compliance.

5. Prepare proper organizational documents

Articles, bylaws, subscription documents, and governance terms must all align.

6. Register the corporation with the SEC

Complete incorporation and any foreign investment documentation required.

7. Complete post-registration tax and local compliance

Obtain the legal operating foundation of the corporation.

8. Conduct full nationality and governance review before land purchase

Do not rely on assumptions.

9. Perform property due diligence

Check title, land status, zoning, taxes, and legal transferability.

10. Approve and document the land acquisition properly

Use board resolutions, corporate authority, and correct transfer documentation.

11. Maintain compliance after acquisition

Monitor capitalization, share transfers, reporting, taxes, and land-related obligations.

This is the lawful roadmap. Anything built around dummies, hidden trust ownership, or post hoc correction is structurally unsound.

XXX. Bottom line

A 60/40 Filipino corporation for land ownership in the Philippines is legally possible because the Constitution allows corporations at least 60% owned by Filipino citizens to acquire and hold land. But that rule is not a loophole for foreign land ownership. It is a strict constitutional exception that works only when the corporation is genuinely Filipino in the required legal sense.

The most important legal truths are these:

at least 60% of the corporation’s capital must be truly Filipino-owned;
the corporation must be properly organized under Philippine law;
the nationality structure must be real, not simulated;
dummy arrangements, nominee ownership, and concealed foreign control are dangerous and potentially unlawful;
land acquisition must be supported by proper corporate authority, due diligence, and continuing compliance;
and the corporation must remain above the nationality threshold even after it acquires the land.

In Philippine law, the issue is never just “Can we make the numbers look 60/40?” The real question is whether the corporation is a genuine constitutional Filipino corporation with lawful corporate existence, lawful business purpose, lawful governance, and lawful ownership of the land it acquires. Only then does the 60/40 structure stand on solid legal ground.