1. Legal Basis and Governing Law

The Revised Corporation Code of the Philippines (RCC) (Republic Act No. 11232) governs the legal framework for foreign corporations in the Philippines. Specifically, Section 140 of the RCC addresses the application process, licensing, and operation of foreign corporations within the country.
Rule 14, Section 15 of the Rules of Court deals with the guidelines on how foreign corporations may be served with summons, which impacts their suability.

2. Personality to Sue

Under Philippine law, a foreign corporation must acquire a license to do business in the Philippines to gain the personality to sue in Philippine courts.
Section 140 of the RCC mandates that foreign corporations without such a license cannot "maintain or intervene in any action, suit, or proceeding in any court or administrative agency of the Philippines."
This means that a foreign corporation that fails to secure a license cannot initiate legal proceedings, as it lacks the requisite personality to sue. However, it can still be sued.
However, the RCC and Philippine jurisprudence clarify that mere isolated or sporadic transactions do not constitute “doing business.” If the activities fall under “isolated transactions,” the foreign corporation may not need a license to sue. Such cases are exceptions where foreign corporations, even without a license, may pursue legal remedies if it involves only occasional transactions.

3. Suability of Foreign Corporations

A foreign corporation, regardless of whether it holds a license to do business, can be sued in the Philippines.
The principles of due process and fair play require that when a foreign corporation actively engages in business activities or has any presence in the Philippines, it subjects itself to local jurisdiction and can thus be impleaded in suits before Philippine courts.
For foreign corporations with no physical presence but who transact electronically or conduct business with Philippine entities, the “effects doctrine” or “doing business” test may apply to establish jurisdiction. Courts look at the nature, extent, and regularity of the corporation's transactions in the Philippines.

4. Determining “Doing Business” and the Licensing Requirement

The RCC defines “doing business” to include transactions such as:
- Appointing a representative or distributor that acts on the corporation's behalf in the Philippines.
- Engaging in continuous commercial dealings or contracts within Philippine territory.
- Other activities that amount to continuous business operations.
Mere acts of exportation, appointing independent agents, or conducting isolated commercial transactions do not constitute "doing business."
DOJ Opinion No. 2010-003 and other administrative issuances further detail examples of business activities that require or do not require a license, depending on the continuity, duration, and scope of the operations.
Foreign corporations without the required license that engage in activities qualifying as "doing business" risk penalties and are stripped of the capacity to maintain suits.

5. Exceptions to the Licensing Requirement for Foreign Corporations to Sue

The Philippine Supreme Court has consistently recognized exceptions to the licensing requirement, allowing foreign corporations to initiate suits if the transaction falls under “isolated transactions.” Examples include:
- Cases where only a single or occasional transaction occurs that does not suggest continuity.
- Enforcement of contractual rights over isolated transactions that arose in the Philippines.
Foreign corporations engaged in isolated business activities or which have passive ownership (e.g., ownership of a Filipino corporation without day-to-day operational involvement) may be allowed to sue to enforce specific rights under contracts or to protect their legal interests.

6. Procedural Requirements for Suability and Service of Summons

For a foreign corporation to be sued in the Philippines, personal or substituted service of summons is required.
Summons may be served through the corporation’s resident agent, who is designated at the time of obtaining the license to do business. If no resident agent is appointed, service may be effected upon the Securities and Exchange Commission (SEC) or, in some cases, through the Department of Foreign Affairs (DFA).
Foreign corporations engaged in electronic or online business transactions with residents or entities within the Philippines may be subject to the jurisdiction of Philippine courts under certain conditions, provided that service of summons can be effected in compliance with procedural due process.

7. Jurisprudence on Foreign Corporations’ Suability

In Top-Weld Manufacturing, Inc. v. ECED, S.A. (G.R. No. 58201), the Supreme Court ruled that foreign corporations conducting business in the Philippines without a license may be impleaded in court but lack standing to counter-sue or file a cross-claim if unlicensed.
In Universal Shipping Lines v. IAC (G.R. No. L-62681), the Supreme Court clarified that foreign corporations without licenses could be sued but are barred from initiating litigation unless they engage in isolated transactions that justify their legal standing.

8. Tax Implications of Licensing and Doing Business

A foreign corporation that is licensed and conducts business in the Philippines becomes subject to Philippine income taxes under the National Internal Revenue Code (NIRC) for income generated within the country.
Foreign corporations that fail to obtain a license but conduct business activities may be liable for tax on income derived from such operations, potentially facing penalties from the Bureau of Internal Revenue (BIR) for non-compliance.
Double taxation agreements (DTAs) between the Philippines and other jurisdictions may mitigate tax liabilities for licensed foreign corporations.

9. Administrative Considerations and Penalties for Non-Compliance

Foreign corporations that transact without a license and are found to be “doing business” are subject to penalties, administrative sanctions, or possible deportation of responsible foreign nationals involved in unauthorized transactions.
The SEC reserves the right to revoke or suspend the licenses of foreign corporations for breaches of the RCC or other applicable laws and may impose administrative fines for unlicensed transactions that meet the “doing business” criteria.

Summary

Foreign corporations in the Philippines must acquire a license if they engage in continuous or repeated business activities. They are suable within the jurisdiction if they conduct business in any capacity, licensed or not, and they are barred from filing suit unless they comply with licensing requirements. However, isolated transactions may provide a narrow exception. The Philippine judiciary and SEC maintain strict oversight to ensure compliance with these standards, ensuring fair litigation practices and reinforcing the country’s regulatory framework for foreign corporate entities.