The landscape for foreign investment in the Philippines has undergone significant liberalization in recent years, primarily governed by the Revised Corporation Code (RCC) and the Foreign Investments Act (FIA). When a domestic corporation—one incorporated under Philippine laws—includes foreign stockholders, specific regulatory requirements and equity restrictions come into play.

1. Determining the Nature of the Business

Before filing, the corporation must be classified based on its intended market, as this dictates the required minimum capital and allowable foreign equity.

Domestic Market Enterprise: An enterprise that produces goods for the domestic market or provides services to the local market. If foreign equity exceeds 40%, it is generally considered a "Foreign-Owned Domestic Corporation."
Export Enterprise: An enterprise wherein at least 60% of its output or sales are for export. These are generally allowed 100% foreign ownership, subject to specific sector exclusions.

2. Foreign Equity Restrictions (The Negative List)

Foreign ownership is not unlimited. The Regular Foreign Investment Negative List (FINL) outlines areas where foreign equity is prohibited or limited:

List A: Areas reserved for Philippine nationals by the Constitution and specific laws (e.g., Mass Media - 0%; Advertising - 30%; Natural Resources - 40%).
List B: Areas limited for reasons of security, defense, risk to health and morals, and protection of small-and-medium-sized domestic enterprises.

3. Minimum Capitalization Requirements

Capital requirements vary significantly based on the percentage of foreign ownership:

Filipino-Owned (60% or more Filipino equity): Generally no minimum paid-up capital, unless required by specific laws (e.g., banking, insurance).
Foreign-Owned Domestic Market Enterprise (More than 40% foreign equity): Must have a minimum paid-in capital of US$200,000.
Reduced Capital (US$100,000): This applies if the enterprise involves advanced technology (as certified by the DOST) or employs at least 50 direct Filipino employees.
Export Enterprises: Generally no minimum capital requirement beyond the standard incorporation fees, regardless of foreign equity percentage, provided they meet the export threshold.

4. Governance and Shareholding Structure

The RCC introduced flexible governance structures, but foreign participation remains subject to "The Anti-Dummy Law":

Incorporators: Can be any person, partnership, association, or corporation. For individuals, they must be of legal age. There is no longer a residency requirement for the majority of incorporators.
Board of Directors: Directors must own at least one share of stock. While they do not need to be Filipino citizens, the number of foreign directors must be proportional to the foreign shareholding in the corporation.
Corporate Officers:
President: Need not be a citizen or resident.
Treasurer: Must be a resident of the Philippines.
Corporate Secretary: Must be a citizen and resident of the Philippines.

5. Documentary Requirements

To register with the Securities and Exchange Commission (SEC), the following documents are essential:

Articles of Incorporation (AI) and Bylaws (BL): These define the purpose, principal office, and internal regulations.
Treasurer’s Affidavit: Although the RCC removed the general 25% subscription/25% paid-up requirement at the point of incorporation (unless required by special law), the SEC still requires a sworn statement regarding the capital received.
Bank Certificate of Deposit: Specifically for foreign-owned domestic corporations to prove the inward remittance of the US$200,000 or US$100,000 capital.
SEC Form F-100: The application for registration of a domestic corporation where foreign equity exceeds 40%.
Tax Identification Number (TIN): All foreign stockholders and directors must obtain a Philippine TIN.

6. Post-Incorporation Compliance

Once the Certificate of Incorporation is issued, the entity must fulfill additional regulatory obligations:

Bureau of Internal Revenue (BIR): Registration for a Corporate TIN, payment of Annual Registration Fee, and approval of Books of Accounts.
Local Government Units (LGU): Obtaining a Business Permit (Mayor's Permit) from the city or municipality where the office is located.
Mandatory Agencies: Registration with the Social Security System (SSS), PhilHealth, and Pag-IBIG for employee contributions.
Bangko Sentral ng Pilipinas (BSP): If the foreign investment is to be repatriated in the future (capital or profits), the investment should be registered with the BSP to obtain a Bangko Sentral Registration Document (BSRD).

7. The Grandfather Rule

In cases where a corporation has corporate stockholders, the SEC applies the Control Test to determine nationality. If the 60-40 Filipino-foreign ownership is in doubt or "circumvented," the Grandfather Rule may be applied, where the nationality of the stockholders of the investing corporation is mapped out to determine the actual percentage of Filipino and foreign ownership.