Law
By Lala Rimando, abs-cbnNEWS.com/Newsbreak
Filipinos who violate this law commits a criminal act punishable with 5-
to 15-year imprisonment.
Recently, the Anti-Dummy Law was cited as the law violated by the
consortium of 2010 poll automation project winners Total Information
The Department of Justice Opinion No. 165, Series of 1984, laid down
the following “significant indicators” or badges of “dummy status”
That the foreign investor provides practically all the funds for the
joint investment undertaken by Filipino businessmen and their
foreign partner.
That the foreign investors undertake to provide practically all the
technological support for the joint venture.
That the foreign investors, while being minority stockholders,
manage the company and prepare all economic viability studies.
Under this rule, if Filipino citizens own 60% of the corporationʼs capital
and foreigners own the remaining 40%, then itʼs a straightforward 60-
40 venture.
SEC had said that the DoJʼs 1989 opinion has gained legislative
acceptance through the Foreign Investment Act (or Republic Act No.
7042).
The SEC explained that, based on the control test, further inquiry on
the ownership of shareholders in “investing and investee corporations
shall be dispensed with once it is clearly established that the
participating corporations are 60% owned by Filipino citizens.”
The SEC has also pointed out that the “grandfather rule will not apply
in cases where the 60-40 Filipino equity ownership ... is not in doubt.”