Part 4: Alternatives to Organizing and Registering a Stock Corporation

In the previous post, we talked about the steps to register you corporation with the SEC. Lastly, we will discuss alternatives to organizing your stock corporation.

Instead of organizing and registering and corporation, foreign corporations wishing to have a presence in the Philippines may also register a branch office, representative office, RHQ or ROHQ with the SEC upon submission of the documentary requirements and compliance with the minimum amount that must be remitted into the Philippines.

Unlike a Philippine corporation, these alternatives are mere extensions of the foreign corporation or multinational corporation and do not exist separately therefrom.

The 4 alternatives are explained below:

1. A “branch office” is an office of a foreign corporation which carries out the business activities of the head office and derives income from the Philippines.

2. A “representative office” is an office of a foreign corporation which deals directly with the clients of the head office but does not derive income from the Philippines.

The representative office is fully subsidized by its head office, performing activities such as information dissemination and promotion of the foreign corporation’s products as well as quality control of products (Section 1(c), Rule I, Foreign Investments Act of 1991)

3. A Regional or Area Headquarters (RHQ) is an office whose purpose is to act as an administrative branch of a multinational corporation engaged in international trade.

The RHQ principally serves as a supervision, communications and coordination center for its subsidiaries, branches or affiliates in the Asia-Pacific Region and other foreign markets. The RHQ is not allowed to earn or derive income in the Philippines. (Section 3, Republic Act No. 8756, otherwise known as An Act Providing For The Terms, Conditions And Licensing Requirements Of Regional Or Area Headquarters, Regional Operating Headquarters, And Regional Warehouses Of Multinational Companies, Amending For The Purpose Certain Provisions Of Executive Order No. 226, Otherwise Known As The Omnibus Investments Code Of 1987)

4. A Regional Operating Headquarters (ROHQ) is an office of a multinational corporation that is allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and in other foreign markets.

The ROHQ is prohibited from offering qualifying services to entities other than its affiliates, branches or subsidiaries. The ROHQ is also prohibited from directly and indirectly soliciting or marketing goods and services whether on behalf of the multinational corporation, its branches, affiliates, subsidiaries or any other corporation.(Section 4)

The ROHQ may engage in any of the following qualifying services: – General administration and planning; – Business planning and coordination; – Sourcing/procurement of raw materials and components; – Corporate finance advisory services; – Marketing control and sales promotion; – Training and personnel management; – Logistics services; – Research and development services, and product development; – Technical support and maintenance; – Data processing and communication; and – Business development.