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Corporate Law and Commercial Transactions 

How to acquire another company in the Philippines?

Acquisitions may be structured in one of two ways:

  1. The acquiring entity may acquire shares from the shareholders of the target company (share acquisition) In a share acquisition, the acquiring entity acquires the target company, or an interest in the target company, and, indirectly, the latter's business, assets and liabilities.

  2. Acquire assets directly from the target company (asset acquisition) In an asset acquisition, the acquiring entity generally acquires only specific assets, contracts and corresponding liabilities of the target company.

There is also the concept of a statutory merger or consolidation.

  1. In a merger, the surviving company absorbs a target company. The surviving corporation, which will be one of the constituent corporations to the merger, absorbs all of the assets and liabilities of the constituent corporations.

  2. In a consolidation, two or more companies consolidate to form a new corporation. In a consolidation, a new corporation — called the "consolidated corporation" — acquires and assumes all the assets, rights, franchises and liabilities of the constituent corporation, similar to the surviving corporation in a merger.

How to conduct due diligence before buying another company in the Philippines?

The typical scope of due diligence in the Philippines will depend on many factors, including cost, time and appetite for risk, as well as mutual trust between the principal parties. As a general rule, a typical acquisition will require a legal, financial and technical due diligence. A typical legal due diligence in the Philippines will usually cover:

              a. charter documents;

              b. corporate organization and ownership;

              c. shareholdings structures;

              d. licenses and material contracts;

              e. foreign investment and government regulations;

              f. taxation;

              g. employment matters;

              h. property;

              i. business and operational matters;

              j. contracts;

             k. intellectual property;

              l. legal proceedings,

             m. disputes and investigations; and

             n. insurance policies.


It is not common for sellers to provide due diligence reports in the Philippines as it is always more advisable to rely on third-party verification and their independent assessment. Sellers are typically expected to provide the necessary documents as part of the due diligence investigation.

How to conduct due diligence before buying another company in the Philippines?

Joint venture is an association of persons or companies jointly undertaking some commercial enterprise; generally, all contribute assets and share risks which requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and a duty, which may be altered by agreement to share both in profit and losses. [ Kilosbayan vs, Guingona, 232 SCRA 110 (1994)]. It has the following characteristics:


                a. It would have a juridical personality separate and distinct from that of each of the                                       joint venturers.

                 b. Each of the co-venturers would be liable with their private property to the creditors                                   of the joint venture beyond their contributions to the joint venture.

                 c. Even if a co-venturer transfers his interest to another, the transferee does not                                               become a co-venturer together with the others in the joint venture unless all the other                               co-venturers consent.  This is in consonance with the principle of delectus personarum.

                 d. Generally, the co-venturers acting on behalf of the joint venturers are agents thereof                                with capacity to bind the joint venture.

                 e. Death, retirement, insolvency, civil interdiction or dissolution of any co-venturer                                         dissolves the joint venture. [Cesar L. Villanueva, Philippine Corporate Law 730-731, Rex                                 Printing Company, 1998]

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