2022 11 March

Philippines: Republic Act No. 11595 Reduces the Required Paid-up Capital for Foreign Retail Enterprises to Twenty-five Million Philippine Pesos

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On 10 December 2021, President Rodrigo Duterte signed into law Republic Act No. 11595 (“RA No. 11595”) which introduced important amendments to the Retail Trade Liberalization Act of 2000 (“RTLA”), including the following salient revisions:

  • RA No. 11595 reduced the paid-up capital requirements for foreign retailers, regardless of category, from PHP 25 Million to a minimum paid-up capital of only PHP 25 Million.
  • The old categories of foreign retailers provided for in the old Section 5 of the RTLA have been removed and the new provision introduced by RA No. 11595 only provided for general conditions for all foreign retailers in the Philippines. Particularly, the general conditions, aside from the minimum paid-up capital of PHP 25 Million are as follows:
    • The foreign retailer’s country of origin must not prohibit the entry of Filipino retailers.
    • In case of foreign retailers engaged in retail trade through more than one (1) physical store, the minimum investment per store must be at least PHP 10 Million; provided, however, that this PHP 10 Million minimum investment per store requirement shall not apply to foreign investors and foreign retailers who are legitimately engaged in retail trade and were not required to comply with the minimum investment per store at the time of the effectivity of RA No. 11595.
    • For purposes of registration with the Securities and Exchange Commission (“SEC”) or the Department of Trade and Industry (“DTI”), the foreign retailer shall submit a certification from the Bangko Sentral ng Pilipinas (“BSP”) of the inward remittance of its capital investment, or in lieu thereof, such other proof certifying that its capital investment is deposited and maintained in a bank in the Philippines.
  • To be allowed to engage in retail trade in the Philippines, foreign retailers are no longer required to have at least five (5) retailing branches or franchise in operation anywhere around the world and a five (5) year track record in retailing. Further, as the categories of foreign retailers provided for in the old Section 5 of the RTLA are now removed, the minimum net worth of USD 20 Million in the parent corporations of the old Categories B and C, and USD 50 Million net worth in the parent corporation for Category D are no longer required.
  • Retail trade enterprises under the old Categories B and C in which foreign ownership exceeds eighty percent (80%) of equity is no longer required to offer a minimum of 30% of their equity to the public through any stock exchange in the Philippines within eight (8) years from their start of their operations.
  • The responsibility to monitor foreign retailers engaged in retail trade in the Philippines is now shared between the SEC and DTI. Particularly, foreign partnerships, associations and corporations engaged in retail trade in the Philippines shall be within the jurisdiction of the SEC while foreign retailers which are single proprietors shall be within the jurisdiction of DTI.
  • RA No. 11595 also mandates DTI, SEC and the National Economic and Development Authority (“NEDA”) to review the required minimum paid-up capital every three (3) years from the effectivity of RA No. 11595.
  • Foreign retailers are now encouraged to have a stock inventory of products which are made in the Philippines.
  • RA No. 11595 decreased the imposable penalty for the violation of any provisions of the RTLA. From an imposable penalty of imprisonment of a maximum period of 8 years, the new maximum imposable penalty of imprisonment is now only 6 years. Further, from a maximum imposable fine of PHP 20 Million, the new maximum imposable fine is now PHP 5 Million.

Notably, DTI, in coordination with SEC and NEDA, is mandated to formulate and issue the necessary implementing rules and regulations for the implementation of RA No. 11595 within 90 days after the approval of RA No. 11595.

RA No. 11595 was approved by President Rodrigo Duterte on 10 December 2021 and shall take effect fifteen (15) days after its publication in the Official Gazette or in at least two (2) newspapers of general circulation in the Philippines. A copy of RA No. 11595 has been uploaded to the Official Gazette website (https://www.officialgazette.gov.ph) only on 06 January 2022. The full text of RA No. 11595 may be accessed through this link.

 

The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

 

Contact

Jude Ocampo

Partner, Ocampo & Suralvo Law Offices

jocampo@ocamposuralvo.com

www.ocamposuralvo.com

 

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