Appointment of a foreign national as president of a mining corporation
Credit to Author: KELVIN LESTER LEE | Date: Tue, 04 Jun 2019 16:24:34 +0000
If a corporation is a domestic stock corporation duly registered with the Securities and Exchange Commission (SEC) and primarily engaged in the business of quarrying, mining, cutting strip, finishing, setting, purchasing on wholesale basis and dealing in non-metallic ore, among others, can such corporation having two foreign nationals as stockholders and one of them sits as a board director, appoint such board director as president?
The business activity of a mining corporation is a partly nationalized activity. The 1987 Philippine Constitution has specific citizenship requirements when a mining corporation is involved. Article XII, Section 2 of the 1987 Philippine Constitution provides that: “All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.”
The above-quoted constitutional provision is likewise found in Executive Order No. 65, Series of 2018, otherwise known as the Eleventh Regular Foreign Investment Negative List, which states that foreign ownership is limited up to 40 percent in “exploration, development and utilization of natural resources.” Mining, which involves the exploration, development and utilization of natural resources, is a partly nationalized activity. In a previous legal opinion rendered by SEC, the latter was explicit in stating that on the citizenship requirement of corporate officers, Section 2-A of Commonwealth Act No. 108, as amended, bans foreigners from being elected or appointed to management positions such as president, vice-president, treasurer, secretary, etc. in business activities where there is a constitutional or statutory provision imposing a specific nationality requirement as a requisite for the exercise or enjoyment of a right, franchise or privilege.
This reiterates a previous opinion of the Department of Justice on the same matter which states that: “A reading of Section 2-A readily reveals the legislative intent to complement our nationalization laws by closing any avenue whereby aliens may defeat their purpose [King vs. Hernaez, 4 SCRA 792, (1962)]. It penalizes the employment of aliens in any position pertaining to management, operation, administration and control, “whether as an officer, employee, or laborer therein”, which means that the employment of a person who is not a Filipino citizen even in a minor or clerical or non-control position is prohibited. In arriving at this conclusion, I am guided by the underlying intent behind the nationalization of employment provided for in the Anti-Dummy Law, which is to eradicate the shackles of foreign economic control and domination in the country.” [King vs. Hernaez, supra, at p. 804; Universal Corn Products, Inc. vs. Rice and Corn Board, 20 SCRA1048 (1967).]”
Hence, a domestic corporation engaged in a partly nationalized activity such as a mining company cannot have a foreign national sit as its president.
Kelvin Lester K. Lee is a Commissioner of the Securities and Exchange Commission (SEC). He is the co-chairperson of the SEC Committee on Memorandum Circulars To Operationalize Revised Corporation Code Provisions. The views and opinions stated herein are his own. You may email your comments and questions to oclee@sec.gov.ph
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