What structuring options exist for a foreign private equity fund to acquire a controlling stake in a Philippine company without triggering land ownership issues?

What percentage of the outstanding shares of the target company are you planning to buy into? The outstanding shares of Philippine landholding company may be directly owned by foreigners up to 40%. If owning land is not a priority, the foreigner may enter into a long-term lease with the landholding company and separately set up a 100% foreign-owned operating company. Whether the operating company may be 100% foreign-owned will also depend on its business purpose. Foreign equity limits apply on a per industry basis. You may also consider setting up a holding company that will own shares in the landholding company. Note, however, that ownership of Philippine landholding companies are generally subject to the control test, and in case of doubt, may be further subjected to the grandfather rule. The grandfather rule is applied by reviewing not only the direct shareholding, but also the indirect shareholding and/or subsequent tiers of ownership in the company engaged in a nationalized/partly-nationalized industry to determine compliance with the foreign equity limits. The structure of the deal, approvals required, and timelines to consider will depend on the industry of the target company and size of the deal.

The most common and compliant approach for a foreign investor interested in using land is a Local Affiliate with a 60% Filipino/40% Foreign Equity Structure, coupled with robust management and shareholder agreements. The agreements should give the foreign investor management and veto rights on critical operational and financial matters, ensuring control over the business without violating the land ownership limit.

The required approvals depend on the structure, the amount of foreign investment, and the target's industry.

Agency/Approval	Applicability	Timeline Estimate	Notes
Securities and Exchange Commission (SEC) Registration	Required for all new corporate entities or M&A involving shares/assets.	3-6 Weeks (for initial incorporation/amendment)	Filing of Articles of Incorporation/Amendment, General Information Sheet (GIS). Must check the Foreign Investment Negative List (FINL) compliance.
Bangko Sentral ng Pilipinas (BSP) Registration	Optional, but highly recommended.	1-4 Weeks (after initial investment)	Required only if you intend to purchase foreign currency (FX) from local banks for capital repatriation and dividend remittance. This registration legalizes the inward remittance.
Philippine Competition Commission (PCC) Clearance	Required if the value of the transaction exceeds the current thresholds for size of party and size of transaction (this is currently subject to frequent revision).	30-90 Days (depending on the review track)	Mandatory pre-notification for large mergers and acquisitions. Failure to comply can result in substantial fines.
Local Government Units (LGU) / Business Permits	Required for the operational viability of the local affiliate.	2-4 Weeks	Mayor's Permit, Barangay Clearance, etc. for the target's physical location.

If the proposed local affiliate is a domestic market enterprise with foreign equity exceeding 40%, the Foreign Investments Act (FIA) requires a minimum paid-in capital of US$200,000. This minimum can be reduced to US$100,000 if the enterprise either:

1. 
   

   Involves advanced technology (certified by DOST); or

   
   


2. 
   

   Employs at least fifteen (15) Filipino employees.

   
   

This reply is for informational purposes only and does not constitute formal legal advice. A comprehensive legal strategy would require a deep dive into the target's specific assets, the value of the transaction, and the exact business activity.