23 Aug 2006. Source: Baker & McKenzie.
Acquisitions are the most common form of mergers and acquisitions transaction in the Philippines, says Baker & McKenzie. These acquisitions are generally done through full or partial acquisition of shares or assets of the target company. The Philippines also recognises the concept of a merger or consolidation.
The Philippines is a constitutional democracy with three co-equal branches of government, namely, the executive, the legislative and the judicial branches. The Philippines is also a civil law jurisdiction with codified bodies of law. Notable amongst these are the Corporation Code of the Philippines (Corporation Code), which deals with domestic corporations in general, and the Civil Code of the Philippines (Civil Code), which embodies general laws relating to obligations and contracts. Decisions of the Supreme Court of the Philippines also have the force and effect of law.
Acquisitions are the most common form of mergers and acquisitions transaction in the Philippines. These acquisitions are generally done through full or partial acquisition of shares or assets of the target company. The Philippines also recognizes the concept of a merger or consolidation. In a merger, the surviving company absorbs a target company. In a consolidation, two or more companies consolidate to form a new corporation. The Philippines does not have specific M&A legislation. Generally, the provisions of the Corporation Code, the Securities Regulation Code and the Civil Code will govern M&A transactions. The Foreign Investments Act generally governs foreign investments in the Philippines. There are also several pieces of special investment legislation that complement the Foreign Investments Act and demonstrate government efforts to create an investment climate conducive to foreign investment.
A new banking law liberalized the entry of foreign banks into the Philippines, enabling foreign banks to operate full branch operations; a new independent central monetary authority, the Bangko Sentral ng Pilipinas (Central Bank), has replaced the old Central Bank; 40-year old foreign exchange controls on virtually all foreign exchange transactions have been lifted; a comprehensive build-operate-transfer law has been enacted, allowing private sector participation in infrastructure projects traditionally undertaken only by the public sector; an investors lease act was issued that allows foreign investors to obtain 50-year land leases in many cases; importation has been liberalized by the removal of quantitative restrictions and a reduction in tariffs for raw materials, intermediate goods, and capital equipment; the retail industry has been liberalized allowing foreign retailers to own equity in retail enterprises under specified cases; a new amendment of the Tax Code has, in general, reduced the rates of documentary stamp tax on, among others, transfers and issuances of shares, and increased the number of transactions exempt from this tax; and special economic zones that offer attractive fiscal and non-fiscal incentives to investors have been created pursuant to the Special Economic Zone Act of 1995 in many parts of the country.