Can corporations own Philippine property, even if the corporate investors are foreigners?  That’s a question I have been asked here on PhilFAQS frequently.  And I have a definitive answer … ready?

Yes, No or Maybe.

A corporation, under the law is treated in some ways as a natural person and under the laws of the Philippines, corporations enjoy the rights of land ownership … subject, of course to the provisions of Philippine law.

It’s very common … I’ve been approached on this myself .. for a real estate agent or other party interested in the sale of a property to bring up the idea to a foreign investor that a corporation be formed to buy the property, and the fort=reign investor would thus enjoy the ownership of the property, somehow bypassing the strict Philippine laws against foreign ownership.

I’m not a lawyer, and I am not giving legal advice … if you are thinking about buying property, by any means, you need a lawyer.  ide3ally I would pick one admitted to practice in both the US and the Philippines … they exist.

But I do have a lot of experience in this area and I have seen a number of foreigners lose their investments and even a few wind up in Philippine prisons … not a place you want to be, trust me.

The laws state a corporation that is 60% or more owned by Filipino stockholders may take title to land exactly as a natural Filipino born person may.  And it is done, all the time.

The part you need to ask yourself, in advance, is are you sure this method is for you?  Do you really feel you actually own something in which your interest is only 40%?  It takes 51% to assuredly control a corporation.  You may feel confident in having Filipinos on the board whom you feel you can trust … but these deals frequently go sour … very sour.

Ah, but Dave, you say, I have a way around that … I’ll put up the money for the whole corporation and I’ll really be the only owner and controller … only my vote will count … I’ll just pay the others a fee to act like owners.

Does that sound a little dumb to you?  It does to me.  In fact it does to the law as well.  Sham corporations like this are known in the business as ‘Dummy Corporations" and they fall under many laws, especially Commonwealth Act 108 and Republic Act 1130, part of a potent package of Anti-Dummy laws.  You can Google all this and read for yourself, I’m not making this up.

What typically happens is our well-meaning but devious American friend brings say $100,000 USD to the Philippines, collects 9 other people, at least 6 of whom are Filipino citizens and gives each of them some papers to sign certifying that they are each contributing $10,000 USD to the corporation.  The board meets, resolves to buy the property and the new owner moves in.  Or doesn’t.

In addition to putting himself in  a very precarious financial position, the foreigner has just committed a criminal act … circumventing the law.  There are many government agencies who do nothing but investigate these issues and they have gone so far as to deport and/or jail violators.

So what if the government doesn’t find out?  Well here’s what happened to a friend of mine.  he came to a small island in the south, formed a corporation like the one I described with trusted local friends, politicians and even an attorney or two, sad to say.  The corporation invested a large portion of the corporate money in b=uying building materials to refurbish the property.

One night all the building materials disappeared and the property itself was stripped of existing wiring and pipes as well.

A special meeting of the board was called to discuss the now serious situation.  Board meetings are matters of record and documented minutes must be kept.

A board member proposed that, since there seemed no possibility of proceeding with the project that the corporation sell the now much devalued property to  a local investor … a a huge loss, and then divide up the money remaining equally among the 10 board members.

Motion carried and adopted.  I think when all was done my friend came away with about $7,000USD of his $100,000 USD investment … and he had absolutely no legal leg to stand on … to protest his fellow board member’s actions would have brought the matter into court and the flawed, illegal basis of the corporation would have been exposed … nothing to do but bite the bullet … like piling all the chips on red and the wheel comes up Black.

If you are really into roulette or craps, go ahead and invest in this way … I even know a few lawyers who might be interested in sitting on your board.

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