The Bangko Sentral ng Pilipinas (the BSP, the Philippines' central bank), through BSP Circular No. 1030, Series of 2019 (Cir. 1030), has recently introduced certain amendments to the Manual of Regulations on Foreign Exchange Transactions of the BSP, liberalizing the regulations applicable to (among others) inward investments.
Cir. 1030, dated 5 February 2019 and effective 15 days after publication, expanded the scope of the categories of inward foreign investments such that the presence of control and significant degree of influence between the investor and the investee firm is considered for certain types of investments to be categorized as direct investment or portfolio investment.
"Foreign direct investment" is now defined as a category of cross-border investment associated with a resident in one economy having control (meaning, the non-resident investor owns at least 50% of the voting power in the resident enterprise) or a significant degree of influence (meaning, the non-resident investor owns at least 10% of the voting power in the resident enterprise) on the management of an enterprise in another economy.
Meanwhile, "foreign portfolio investment" is defined as a cross-border transaction and position involving debt or equity securities other than those included in foreign direct investment. This includes debt securities issued by the National Government and other public sector entities.
More importantly, Cir. 1030 has established a grace period to register existing investments that are unregistered as of the effectivity date of Cir. 1030. Under Cir. 1030, applications for registration of existing investments that are unregistered as of the effectivity date of Cir. 1030 may be filed with the BSP within one year from such effectivity date, regardless of the date of funding, without registration fee.
Actions to consider
Foreign investors and investee companies should take note of the foregoing amendments to the registration of inward foreign investments. Likewise, foreign investors who have not to date registered (or caused the registration of their inward investments) may now consider applying for such registration with the BSP.