Share Purchase Agreement for a Philippine Company: Legal Due Diligence & Closing Checklist

This guide is written for private M&A of Philippine corporations (unlisted or listed subsidiaries), from the perspective of buyers and sellers. It’s practical and comprehensive—but not legal advice. Philippine rules change regularly; always confirm specifics with Philippine counsel, tax advisers, and your bank.

1) Big-picture: how a Philippine SPA works

A share purchase agreement (SPA) transfers ownership of a Philippine company by selling its shares. Unlike an asset deal, licenses, contracts, employees, and permits generally remain with the company, which is why diligence, conditions, and warranties are central—the buyer inherits both assets and liabilities.

Typical workstreams & sequence

Pre-signing: NDA → preliminary diligence → term sheet/LOI (often with exclusivity) → confirm structure and regulatory path (competition, sectoral, foreign ownership, tax).
Confirmatory diligence (legal, financial, tax, commercial, technical) runs in parallel with SPA drafting.
Signing of SPA (and ancillary documents) with conditions precedent (CPs).
Regulatory clearances and other CPs satisfied; closing with funds flow, share transfer, certificates reissued, stock & transfer book updated, filings made.
Post-closing: integration, remaining filings/notifications, price adjustments, indemnity claims (if any).

When a share deal is preferable

Business relies on hard-to-transfer permits, franchises, or long-term contracts with change-of-control sensitivity.
The company is a going concern with intact workforce and systems.
Seller wants clean exit; buyer wants continuity.

2) Key Philippine legal framework (high-level)

Revised Corporation Code (RCC): corporate powers, board/shareholder approvals, share transfers, pre-emptive rights (relevant to issuances, not transfers, unless restricted in bylaws/agreements).
Securities Regulation Code (SRC): public company rules, tender offer obligations for public companies crossing certain control thresholds, insider trading, disclosure.
Philippine Competition Act (PCA): merger control; some acquisitions require Philippine Competition Commission (PCC) notification and a waiting period if size-of-party/transaction thresholds are met (thresholds adjust over time).
Foreign ownership & nationality rules: the Constitution, Foreign Investments Act, Public Service Act (as amended), the Foreign Investment Negative List (and sectoral laws) impose caps in “nationalized” or partly nationalized sectors. The Anti-Dummy Law also restricts the extent of foreign involvement in management/control where nationality caps apply.
Sector-specific regulators (may require approval/notification for control changes): e.g., Bangko Sentral ng Pilipinas (BSP) for banks/quasi-banks, Insurance Commission, Energy regulators, telecoms, gaming, economic zones (PEZA/BOI), etc.
Data Privacy Act: collection/processing/transfer of personal data; potential notifications, data-sharing agreements, and cross-border transfer safeguards.
Labor Code & related issuances: continuity of employment in a share deal, transfer restrictions on benefits, union/CBAs, contractor/subcontractor rules.
Tax Code (NIRC): capital gains/stock transaction tax, documentary stamp tax (DST), Certificate Authorizing Registration (CAR) for share transfers not traded on the exchange.
Alternative Dispute Resolution Act & New York Convention: arbitration-friendly; foreign arbitral awards are generally enforceable in the Philippines.
FRIA (insolvency): check for rehabilitation or liquidation proceedings.

3) Structuring choices & price mechanics

What is being sold: existing shares (secondary sale) vs. primary issuance (subscription) vs. a mix (recap + sale). A primary issuance may need shareholder approvals, pre-emptive rights waivers, and SEC document updates.
Foreign exchange & funding: cross-border payments typically flow through authorized agent banks with standard KYC and supporting documents. Consider whether BSP registration/notification is advisable to preserve repatriation rights (practice evolves).
Price mechanics
- Locked-box: price fixed off a historical balance sheet; leakage protections and permitted leakage schedule.
- Completion accounts: closing statements for cash/debt/working capital; post-closing true-up (experts/accountants).
- Earn-outs: metrics, measurement period, accounting policies, buyer conduct covenants to protect earn-out.
Risk allocation tools: escrow, holdback, retention, deferred payment, W&I insurance (available but still less common than in the U.S./EU).

4) Legal due diligence (what to ask for & why)

A. Corporate, capitalization & governance

Articles/Bylaws and amendments; SEC General Information Sheets (GIS) and latest beneficial ownership disclosures.
Stock & transfer book, share certificates, cap table reconciliations; options/convertibles, shareholder/joint venture agreements, ROFR/tag/drag, voting arrangements.
Board/shareholder minutes & resolutions; quorum and notice compliance; officers’ appointments and authorities; powers of attorney.

B. Regulatory, licenses & nationality

Business permits (national & LGU), PEZA/BOI registrations, sectoral licenses, franchises/concessions.
Foreign ownership compliance (caps, nominees, land ownership via corporates), Anti-Dummy Law exposure (e.g., “management” rights granted to foreigners beyond allowed bounds).
Change-of-control triggers in laws or permits; required notifications/approvals and lead times.

C. Material contracts

Customers, suppliers, distributors, agents, government contracts (check anti-corruption compliance and blacklisting risks).
Change-of-control, assignment, termination-for-convenience, exclusivity, MFN/price-adjustment, audit rights, most-favored customer clauses.
Intercompany agreements, related-party transactions, guarantees and security.

D. Employment & benefits

Headcount, key employees, employment contracts & handbooks, contractors/subcontractors, union/CBAs, labor cases.
Compensation, bonuses, 13th month, leaves, retirement plans; mandatory contributions (SSS, PhilHealth, Pag-IBIG).
Non-compete/non-solicit enforceability context: must be reasonable in time, geography, and trade; overbroad restraints risk unenforceability.

E. Data privacy & cybersecurity

Registration/notification status (if applicable), data-processing inventory, lawful basis for processing, data-sharing agreements, cross-border transfers, breach logs and NPC (National Privacy Commission) communications.

F. Intellectual property & IT

Trademarks, patents, copyrights; ownership chains (especially where work was done by contractors); open source use & license compliance; software escrow; SaaS/IT service contracts; domain names.

G. Real estate & tangible assets

Lease agreements (escalations, renewal, assignment/COC clauses); owned land/buildings titles, liens/encumbrances; easements; foreign ownership issues if the company itself holds land (check shareholder nationality compliance).

H. Environment, health & safety

DENR permits/clearances, ECCs, monitoring reports; hazardous substances and disposal; incidents, notices of violation, remediation obligations.

I. Litigation, investigations & compliance

Civil, criminal, administrative cases; ombudsman/anti-graft issues (if dealing with government); internal investigations, whistleblower reports; sanctions/export controls exposure (if relevant).

J. Financial & tax

Audited FS, management accounts, budgets; debt instruments, security interests, off-balance-sheet exposures.
Tax: registration status, returns, assessments, ongoing audits, transfer pricing positions, withholding practices, VAT, local business taxes, DST history; tax treaty relief history/applicability for foreign sellers.

K. Competition/tender offer

PCC thresholds analysis, prior notifications; SRC tender offer analysis if public/PLC or crossing control thresholds.

Red flags & deal impacts

Nationality/Anti-Dummy gaps → restructuring CPs or deal abort.
Missing change-of-control consents → CPs or price adjustments.
Large tax exposures → escrow/special indemnities.
Labor/union disputes → covenants and targeted indemnities.
Privacy/regulatory breaches → remediation plans and R&W tailoring.

5) The SPA: clause-by-clause essentials (Philippine practice)

Parties & recitals: identify sellers (all registered holders), beneficial owners (for AML/KYC), and buyer SPV.
Definitions & interpretation: align with accounting policies and diligence findings; Philippine peso vs foreign currency mechanics.
Sale & purchase; consideration: number/class of shares; price; locked-box/completion accounts; earn-out; escrow; set-off rights.
Conditions precedent (CPs) (examples)
- Regulatory: PCC clearance/waiver; sectoral approvals (BSP/IC/etc.); PEZA/BOI consents; foreign investment or FX registrations (as needed).
- Corporate: board/shareholder approvals; waivers of ROFR/tag/drag; amendments to bylaws/charters if required.
- Third-party consents: key contracts, landlords, lenders (release of security/guarantees).
- Tax: CAR readiness path for non-listed share transfers (see Tax section).
- Bring-down: R&W accuracy; no MAE; absence of injunction.
Pre-closing covenants: ordinary course, preservation of permits, no leakage (locked-box), capex and hiring limits, no dividends beyond agreed leakage, buyer access, PCC process cooperation, gun-jumping avoidance.
Closing mechanics
- Funds flow (escrow, pay-offs, release of liens).
- Deliverables (see checklist below): share certificates, stock & transfer book entries, new certificates to buyer, secretary’s certificate, board elections/ resignations, incumbency, resignations of officers where appropriate, releases, consents, legal opinions if customary.
Representations & warranties
- Seller (title, capacity, no encumbrances on shares, authority).
- Company (organization, financials, no undisclosed liabilities, permits, compliance with laws, contracts, IP, real property, labor, environment, privacy, anti-corruption, sanctions, tax, litigation).
- Buyer (authority, funds, no prohibited connections).
- Fundamental vs. business warranties; materiality qualifiers; knowledge qualifiers; disclosure schedules (crucial).
Indemnities
- Caps/baskets/de minimis, survival periods (fundamentals typically longer), exclusive remedies vs fraud carve-outs; claim procedures; tax indemnity; specific indemnities (e.g., known disputes).
Non-compete & non-solicit
- Draft to be reasonable (duration, territory, scope) to improve enforceability under Philippine jurisprudence.
Confidentiality & announcements; transitional services (if any).
Termination: drop-dead date, CP failure, breach; reverse break fee (occasionally in regulated sectors).
Governing law & dispute resolution
- Philippine law is common for domestic deals; cross-border parties sometimes choose Singapore law with SIAC arbitration (seat in Singapore) and interim relief in Philippine courts—ensure compatibility and service-of-process mechanics.
Miscellaneous: notices, assignment, costs, currency/fx, counterparts and e-signatures (notarization and apostille for certain corporate/filing documents still expected), language.

6) Regulatory approvals & filings (what to plan for)

PCC merger control: mandatory pre-closing notification if thresholds are met; formal review and a waiting period. Gun-jumping penalties apply. (Thresholds change—confirm the current ones.)
SRC tender offer (public companies): acquisitions crossing control thresholds or creeping acquisitions may trigger a mandatory tender offer.
Sectoral approvals: e.g., BSP (banks/quasi-banks/e-money), Insurance Commission, telecoms, energy, gaming, utilities, education, transport, media—confirm if a change in control requires prior approval or notification.
Nationality/Anti-Dummy: maintain compliant ownership/board/management structures where caps apply.
FX & foreign investment registration: coordinate with authorized banks on any advisable BSP registration to preserve repatriation rights; documentation often includes the SPA, remittance proofs, corporate approvals.
Data privacy: consider NPC notifications/registrations for data sharing or cross-border transfers, particularly in diligence/integration.
Post-closing SEC filings: Amended GIS (reflect new shareholders/officers/beneficial owners) within the prescribed deadline; keep the stock & transfer book meticulously updated.
Economic zone/BOI and LGU permits: update contact persons, authorized signatories, project information, and addresses.
BIR: update authorized representatives/signatories; books of accounts updates if needed; ensure CAR is issued for the share transfer (if required for your share type) before recording transfer.

7) Taxes on share sales (overview—confirm current rates)

Listed shares (PSE): typically subject to a stock transaction tax (STT) on the gross trade value collected by the broker (commonly 0.6% in recent years).
Unlisted shares of a Philippine corporation: generally subject to capital gains tax (CGT) on net gain (commonly 15% for many sellers) and documentary stamp tax (DST) on the transfer instrument.
- CGT is typically reported/paid by the seller; timelines and forms are strict.
- DST is typically paid on the Deed/SPA proportionate to par value/consideration (rules differ for no-par shares).
- The BIR Certificate Authorizing Registration (CAR) is customarily required before the corporate secretary records the share transfer and issues new certificates.
Treaty relief: foreign sellers may consider tax treaty protection; local process/requirements apply.
Transfer pricing & related-party pricing: ensure the price is at arm’s length; underpricing can have donor’s tax / other implications.

Tax rules change—align with a Philippine tax adviser on the exact rates, forms, deadlines, and CAR requirements for your transaction.

8) Employment, benefits, and data privacy in a share deal

Continuity: employment contracts and tenure generally continue unchanged; no automatic termination or rehiring (unlike asset deals).
Changes in control: check bonus, vesting, change-in-control or retention provisions.
Unions/CBAs: respect consultation/notification obligations; diligence on pending labor cases.
Data privacy: use clean rooms where appropriate; execute data-sharing agreements; maintain legal bases for processing; plan cross-border data transfers with appropriate safeguards.

9) Anti-Dummy Law (ADL) essentials

If nationality restrictions apply to the company’s business or assets (e.g., certain “nationalized” activities or landholding corporations):

Avoid arrangements that grant control/management to foreigners beyond allowed limits (e.g., excessive vetoes, de facto control, or prohibited officer roles).
Ensure board composition, quorum, and reserved matters comply.
Dummy arrangements can lead to criminal penalties and deal voiding—address during structuring and in CPs.

10) Closing checklist (practical)

A. Corporate actions & consents

Seller/s and Buyer board and shareholder approvals (resolutions).
Waivers of ROFR, tag/drag, pre-emptive rights (if applicable), and any co-sale or lock-up releases.
Third-party consents and notices (material customers/suppliers, landlords, lenders, grantors, JV partners).
Regulatory clearances: PCC decision/waiver, sector approvals (BSP/IC/etc.), PEZA/BOI notifications, privacy notifications (if any).

B. Tax documentation

Proof of CGT and DST payment (where applicable) and supporting computations.
BIR CAR for the share transfer (if required), or clear path to CAR acceptable to the corporate secretary and buyer (some deals use closing-in-escrow pending CAR).

C. Share transfer instruments

SPA (notarized as needed) and Deed of Assignment of Shares (if separate).
Original share certificates duly endorsed, or lost certificate affidavit with bond (if lost).
Stock & Transfer Book updates (log the transfer at closing).
New share certificates issued to buyer.

D. Company deliverables

Secretary’s Certificate on incumbency, resolutions, authority, and post-closing board composition.
Updated GIS/beneficial ownership drafts; Specimen signatures & bank signatory updates.
Resignations and releases of directors/officers (as agreed).
Release/discharge of intercompany balances or guarantees (as agreed).
Access/transfer of corporate seals, minute books, STB, permits, statutory registers, and digital assets (domains, social accounts, cloud consoles).

E. Financial & IT

Funds flow statement (wire instructions, escrow mechanics, pay-offs).
Lien releases and UCC/Chattel/real estate mortgage cancellations (Philippine analogs).
IT handover: admin credentials, code repositories, cloud tenancy ownership, MFA devices.

F. Post-closing undertakings

Amended GIS filing (reflect new shareholders/officers/beneficial owners) within the deadline.
PEZA/BOI and LGU updates; BIR signatories and books updates; bank KYC/signatories.
PCC post-closing undertakings (if any), continuing earn-out reporting, W&I notifications.
Integration plan: HR comms, vendor/customer notifications, brand/IP assignments or licenses, TSA implementation.

11) Sample diligence request list (short-form)

Corporate: Articles/Bylaws; SEC GIS (with BO); cap table; options/convertibles; STB copies; minutes/resolutions; shareholder agreements.
Regulatory: business permits; sector licenses; PEZA/BOI docs; nationality compliance analyses; pending renewals; reports/returns.
Contracts: top customers/suppliers; leases; loans; guarantees; franchising/distribution; government contracts; intercompany; standard T&Cs.
Employment: org chart; contracts; policies; CBAs; disputes; government remittance proof; contractor compliance.
IP/IT: IP register; assignments; OSS inventory; IT architecture; security policies; past breaches.
Privacy: privacy manual; privacy notices; DSAs; NPC correspondence; breach logs.
Environment: ECCs; permits; audits; notices of violation; remediation.
Tax/Finance: audited FS; management accounts; tax returns/assessments; transfer pricing; DST/CGT history; related-party disclosures.
Litigation/Compliance: docket of cases; internal investigations; anti-corruption policies; gifts/hospitality logs.

12) Common pitfalls (and how to avoid them)

Assuming no approvals: Many industries require prior approval for control changes; map them early.
Nationality blind spots: Look through beneficial ownership, board control, and veto rights—avoid ADL issues.
Underestimating CAR timelines: Align closing mechanics with BIR CAR issuance and DST/CGT payments.
Tender offer surprises: For public/PLC targets, test SRC Rule 19 early.
Gun-jumping: Keep clean-team protocols; avoid integrating or directing target operations pre-closing.
Overbroad non-competes: Keep reasonable scope/duration/territory to improve enforceability.
Leaky locked-box: Define leakage, exceptions, and monitoring.

13) Illustrative SPA language (snippets to tailor with counsel)

No-leakage (locked-box): “From the Locked-Box Date to Closing, no Leakage has occurred other than Permitted Leakage; the Sellers shall indemnify Buyer on a peso-for-peso basis for any Leakage.”
Specific indemnity: “Sellers shall indemnify Buyer against Losses arising from [identified tax assessment/case] up to PHP [X], survival until final resolution.”
Tax indemnity (unlisted shares): “Sellers shall be responsible for CGT and related penalties/interest, and shall cooperate to obtain the BIR CAR. DST shall be for the account of [party allocation].”
Regulatory CP: “The parties shall file any required notifications with the PCC and obtain a decision of non-opposition or clearance; Closing shall not occur prior to expiry of applicable waiting periods.”
ADL compliance: “Reserved matters and governance rights shall not contravene nationality restrictions or the Anti-Dummy Law.”

14) Timetable (typical, varies by sector/size)

Weeks 0-2: LOI, NDA, kick-off, request lists; initial regulatory mapping.
Weeks 2-6: Diligence deep-dive; SPA first draft; price mechanic alignment.
Weeks 6-8: Negotiate SPA; finalize disclosure schedules; sign.
Weeks 8-16+: Satisfy CPs (PCC/sector approvals; CAR path; consents).
Closing once CPs done (or escrowed closing if parties agree on CAR timing).

15) Quick buyer/seller checklists

Buyer

Validate regulatory path (PCC, sector, tender offer).
Lock in tax strategy (CGT/DST allocation, treaty relief, CAR plan).
Secure funding and escrow arrangements.
Nail down price mechanics and disclosure schedules.
Prepare integration (HR, IT, vendor/customer comms).

Seller

Pre-clean cap table, STB, and missing certificates.
Cure permit gaps and contract consents.
Prepare tax documents early; align on CAR process.
Limit post-closing exposure (caps, baskets, survival, W&I).
Manage employee and customer communications plan.

Final word

A Philippine SPA is straightforward when diligence is thorough, regulatory paths are mapped early, and closing mechanics (especially CAR and consents) are realistic. Use the checklists above to drive the workplan, and tailor your SPA to the sector, ownership profile, and risk findings. If you’d like, I can convert this into a fillable checklist pack (Word/Excel) or draft a deal-specific CP schedule based on your target’s industry and facts.