Doing business in the Philippines

What are the Filipino cultural and business etiquette insights that global companies and their general counsels should be aware of when negotiating and conducting business transactions in the Philippines?

Personal relationships are highly valued in Filipino business culture. Respect for authority and hierarchy are also important as these play a vital role in every decision-making process. Finally, maintaining smooth interpersonal relations is a valued trait of Filipinos and is an essential key to long-lasting business relationships.

In the geopolitical landscape, what are the potential risks that global companies should be aware of, and what are the legal implications for businesses operating in the Philippines?

Global events impact the Philippines’ supply and chain distribution, as well as market access. In turn, the Philippines has forged economic partnerships with other nations and continues to leverage its strong membership in the Association of Southeast Asian Nations. For instance, the Regional Comprehensive Economic Partnership Agreement, which aims to elevate market access conditions and liberalise tariff policies, among others, is seen to offset the losses brought by these global events. In the end, businesses and investors stand to gain significant advantages from the partnerships that the Philippines has established.

How can global companies effectively manage and mitigate legal and regulatory risks associated with doing business in the Philippines?

Global companies must implement robust internal controls to ensure and monitor compliance with the industry-specific sets of laws and requirements. They should also foster collaboration with the relevant local regulators (eg the Securities and Exchange Commission, the Bangko Sentral ng Pilipinas, the Bureau of Internal Revenue, the Department of Labour and Employment, and the National Privacy Commission) and local legal experts.

Our firm, Gorriceta Africa Cauton & Saavedra (Gorriceta) presently caters to several foreign clients, who remain resilient to the risks related to their businesses in the Philippines because of our comprehensive legal services.

What environmental and sustainability regulations should companies be aware of, and how can they align their operations with these requirements?

Recently, there has been an accelerated push for ESG compliance from the Bangko Sentral ng Pilipinas (for banks) and the Securities and Exchange Commission (for publicly-listed companies). Despite the limited scope of these issuances, companies are encouraged to comply with these standards, including the prioritisation of stakeholder and community development, addressing environmental challenges, and observing sustainable business practices.

Gorriceta’s new ESG practice group aims to assist its clients to comply with, and observe these standards. We also assist our clients in developing innovative strategies to adapt to the ever-evolving Philippine legal landscape.

What measures can be taken to ensure compliance with anti-corruption laws in the Philippines, and how can companies establish robust internal controls?

Global companies need to ensure that internal safeguards against graft and corrupt practices, as well as protocols for transparent and lawful delivery of services are in place. Thus, compliance with the Anti-Graft and Corrupt Practices Act, as well as the prohibition against corporations being used for graft and corrupt practices under the Revised Corporation Code, must be given priority.

How can global general counsels build strong relationships and foster effective communication and collaboration with local legal teams and authorities in the Philippines?

Effective communication and collaboration between global general counsels and local legal teams and authorities can be achieved through the following strategies: keeping direct and open communication, empowering local legal teams to navigate legal and commercial solutions, and respecting cultural diversity, among others.

What are the emerging trends and future legal developments that may impact the business landscape in the Philippines, and how can companies proactively adapt to these changes?

The vast digital transformation in the Philippines continues to transform and impact business operations. Thus, several enactments including the Internet Transactions Act of 2023 continue to emerge to govern e-commerce. Thus, companies must conduct a comprehensive risk assessment to evaluate how their new technologies impact compliance with regulations, and concurrently identify potential vulnerabilities. Companies must establish compliance frameworks and conduct training to ensure that their manpower has an understanding of the technological and regulatory aspects.

How can global companies effectively handle cross-border transactions and joint ventures involving Filipino entities while ensuring compliance with both local and international regulations?

Global companies must collaborate with a robust and proactive legal team in the Philippines that can assist and represent them for the whole phase of the transaction. Aside from handling negotiations and communicating with all stakeholders, the local legal team must have a full understanding and appreciation of the underlying commercial intentions of the global company.

What are the considerations for exiting the Philippine market, and how can companies navigate legal and regulatory challenges associated with business divestiture?

The most prevalent exit strategy in the Philippines is through a merger and acquisition transaction, which requires the buy and sell side to undergo thorough commercial and legal due diligence. Various legal frameworks, including those related to the government’s prior approval for a change in control or ownership, competition regulations, tax exposures, and foreign equity restrictions must also be considered before concluding a merger and acquisition transaction. As timing is critical for divestment, companies should seek guidance from local legal experts to navigate legal and regulatory complexities, while maximising shareholder value and meeting investor expectations.

What resources and support are available for global companies seeking legal guidance and assistance when doing business in the Philippines?

Global companies may seek internal support from their counterpart in-house counsels in the Philippines. They can also seek external support from established and reputable local legal counsels or firms, particularly for highly specialised and complex legal matters, like mergers and acquisitions transactions, data privacy compliance, and technology, media, and telecommunications transactions, among others. This strategy will allow global companies to fully realise their business purpose while ensuring full compliance with the associated legal regulatory frameworks.