"Residence" vis-a-vis the Corp Code residence requirement for directors

Just in case anybody needs this...

Regarding residency requirements, Section 23 of the Corporation Code requires that at least majority of the members of the Board of Directors must be residents of the Philippines. Section 25 of the Corporation Code further requires that the corporate Secretary shall be a citizen and at the same time a "resident" of the Philippines. Likewise, the Commission, as a matter of policy, requires that the corporate Treasurer shall be a "resident" of the Philippines taking into consideration his function as custodian of the corporate funds. Both corporate secretary and treasurer are required to be residents of the Philippines regardless whether or not the corporation is engaged in a nationalized business activity. [1]

The term "resident" or "residence" as used in corporate statutes requiring one or certain number of directors to be residents of the state, "is equivalent to domicile, the pertinent elements of which are physical presence in the state and an intention to remain therein. [2] The term "resident" imports more than a temporary stay in a place for the performance of a single piece or job of work, especially where the workman at the same time has a home and permanent place of abode in another place. It is therefore difficult to define in precise language what constitutes a residence or what makes one a resident of a place. Much depends upon the circumstances then surrounding the person, upon the character of the work to be performed, upon whether he has a family or a home in another place, and largely upon his present intention. [3]

The residency requirement should not pose a big problem to foreign investors. The Commission, in order to promote foreign investments, recently adopted a liberal construction of what constitutes a "resident" of the Philippines. For as long as the foreigner who is a grantee of an investors visa or retirement visa possesses the essential elements of physical presence in the Philippines and intends to remain therein, he may be considered a resident of the Philippines for qualification purposes of an incorporator, director or officer. [4]

As a matter of policy, the SEC considers the holders of the following documents as "residents" for purposes of complying with the residency requirement under the Corporation Code: [5]

1. Immigrant Certificate of Registration (ICR)[6]

2. Special Investors Resident Visa (SIRV)[7]

3. Student Visa[8]

Other proof of residency, like alien certificate of registration and multiple-entry visa given to foreign nationals, [9] and any kind of Visa which is valid for at least one (1) year [10] may also be accepted.

Suffice it therefor to state that for as long as the aliens who are non-immigrant visa holders under Section 9, paragraphs (d) and (g), of CA 613 possess the essential elements of physical presence in the Philippines and an intention to remain therein, they may be considered as residents of the Philippines within the purview of Section 23 of the Corporation Code. [11]

As regard the President, the requirement is not mandatory provided there is a Vice-President who would act as President in his absence. The concept and nature of the functions of a President as an executive vary so widely in different companies as to be indefinable. The usual executive duty of the President is to act as general manager or chief executive officer of the corporation. He is frequently designated as the chief administrator or chief operating officer giving him the general supervision over the management of the corporation. In such a given situation, his presence in the Philippines appears to be necessary in order to effectively manage the corporation. However, it may be considered only a "sound corporate practice" and should not be imposed as a requirement taking into consideration that with the present modern and advanced communication and transportation facilities, continuous stay in the business area is not necessary in the management of the business, although the management thereof is not as effective as when one is physically present. [12]

It has to be emphasized, however, that in firms engaged in wholly or partially nationalized activities, foreigners, regardless of whether they are residents or non-residents are banned from being elected or appointed to management positions as President, Vice-President, Treasurer, Auditor, etc. of said companies pursuant to the ruling of the Department of Justice, although they can be elected directors in proportion to their allowable participation or share in the capital of such activities in accordance with the Anti-Dummy Law, as amended by Presidential Decree No. 715. [13]

---

[1] SEC Opinion, December 8, 1995, Mr. K.J. McTavish.

[2] 2 Fletcher, Cyc. Corp., 1969 Rev. Vol., sec. 307 at 97, cited in SEC Opinion, January 17, 1985, Canlubang Automotive Resources Corporation.

[3] 37 Words and Phrases, at 404, cited in SEC Opinion, January 17, 1985, Canlubang Automotive Resources Corporation.

[4] SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.

[5] SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.

[6] SEC Opinion, December 8, 1995, Mr. K.J. McTavish; SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.

[7] SEC Opinion, December 8, 1995, Mr. K.J. McTavish; SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.

[8] SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.

[9] SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.

[10] SEC Opinion, December 8, 1995, Mr. K.J. McTavish.

[11] SEC Opinion, January 17, 1985, Canlubang Automotive Resources Corporation.

[12] SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.

[13] SEC Opinion, May 27, 1991, Atty. Jose Ma. Nieto.