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Branch Office and Representative Office in Philippines

by Sophia

The majority of the foreign companies coming to the Philippines do not have a primary business interest here. They only come over to take advantage of new business opportunities, to introduce new products with the Philippines as the primary market, to expand presence in the ASEAN region, or for other reasons. To these foreign organizations, establishing an initial presence in the Philippines in the form of a Representative Office is more practical. A Foreign Corporation intending to equitably attract members of the public, acquire public funds, issue stocks to the public, and be sued before Philippine courts would need to secure a License to do Business in the Philippines. However, to secure a License, it shall first establish a branch in the Philippines.

Foreign companies looking towards business opportunities in the Philippines initially need proper corporate organization. One way of doing that is through establishing an affiliate company in the Philippines, which could only be done if such a foreign company has a single Filipino stockholder. Another way is through engaging the services of a Philippine corporation or a partnership, which would act as its marketing arm with the Philippines as its territory. For those organizations with primary business in the Philippines, it is not only more practical but also more profitable to establish their presence in the Philippines through a local company. Our branch office Philippines provides local support and services to enhance our presence and operations within the region.

Branch Office in Philippines

A foreign entity shall register with the SEC a branch office for the purpose of doing business in the Philippines (Corporation Code of the Philippines, Sec. 123). The branch office shall acquire a license and a certificate of authority from the SEC. The SEC is allowed to issue regulations subjecting to registration requirements a natural gas or coal business. It should not be engaged in any other business except to transact its business in the Philippines and may be sued or sued upon in the Philippines. In other words, the transactions of the branch office are necessarily the same as its head office in the country but only add a legitimate presence in the market.

Branch Offices. A foreign corporation licensed to do business in the Philippines may maintain a branch or branches, including insurance companies, public utility companies, educational institutions, and other corporations similarly situated as specifically provided in the Corporation Code of the Philippines. A branch office in the Philippines is an extension of the foreign corporation and not a separate and distinct corporation from the head office. It is merely an agency through which the foreign corporation operates and does business in the Philippines. It possesses the option to operate a place of business in the Philippines, either through a representative office, a branch office, or a wholly-owned domestic corporation. Under current regulations and the Foreign Investments Act of 1991, the amount of a local business, branch office sales of goods and services that could be entirely foreign-owned has no equity cap.

Philippine Representative Office

The RO may not bill nor collect money as it is not allowed to derive income. To facilitate its operation, the RO may open a foreign currency bank account with banks accredited by the Bangko Sentral ng Pilipinas, local or foreign owned. The following entities are of kind similar to a Philippine RO and are treated as such: general professional partnership, medical clinics, regional operating headquarters, regional headquarters, Representative office of the Asian Development Bank, and Representative office of foreign news bureaus.

Philippine Representative Office (RO) is an extension office established to represent the parent company in the Philippines. The RO does not derive income in the Philippines. Examples of activities which the RO may perform are: information dissemination, implementation of company policies, quality control of products for the Philippine market, and activities that will promote the export sales from the Philippines, or import substitution activities. ROs of foreign corporations engage in promotion and supervision of existing contracts already entered into without a need for prior approval from appropriate government agencies, except for those activities subject to licensing requirements by the Professional Regulatory Boards of the Professional Regulation Commission (PRC) or other special laws. The Philippine representative office offers a direct point of contact for clients and partners, ensuring efficient communication and service delivery.

Setting up a Representative Office in Philippines

A foreign corporation is required to appoint a resident agent who is a local individual or an authorized corporation in the Philippines. This agent is the foreign corporation’s representative for its RO operations with government offices or agencies and in legal and judicial proceedings on its behalf. If a foreign corporation to be represented is a branch of a licensed foreign bank, financing company, or insurance company, the agent must be of good standing and reputable character, and a person of recognized competence in financial, banking, or insurance matters, as the case may be. The authority of the resident agent may be confirmed in the registration of RO and shall contain the limitations of the agent’s authority, whether general or specific.

Setting up a representative office is a temporary arrangement by which foreign corporations can expand to the Philippine market. A RO is a foreign corporation’s extension office, which is normally established to act as a coordinator or information gathering center for its parent company. ROs are not allowed to engage in commercial, revenue-generating activities. A typical scenario is the ROs which are set up to administer the contracts of their expatriate employees working for their affiliates in the Philippines. Unlike a branch office, which does not have a separate juridical identity, ROs operate as a secondary office of the foreign corporation. Registration of a RO and its continued operations are subject to strict regulatory requirements.

A branch office, dependent largely on its head office and with the latter unconditionally guaranteeing an undertaking to perform on behalf of the branch, is more organized than a sole proprietorship branch or any subsidiary company. It is therefore advisable and prudent that a branch office secure head office credit resources that it can utilize for the conduct of activities, rather than solely relying on the credit resources of the head office. If the head office is not prepared to extend whatever financial and credit support may be required for the branch installed herein, then a branch office may as well not be established at all.

In conclusion, it is important to emphasize that when opting for a branch office or a representative office, the extent of business involvement that a foreign company wants in the Philippines would be the most important deciding factor. If a foreign corporation is interested in securing contracts for the head office by participating in the procurement of goods or services, then it is recommended that it establish a branch office. The Philippines representative office serves as a crucial hub for managing our business activities and client relations in the area.

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