Foreign Investment Lawyers Philippines 2026: EO 113, FINL‑13 Limits & Paid‑up Capital

On 16 April 2026 the Philippine President signed Executive Order No. 113 (EO 113), promulgating the 13th Foreign Investment Negative List (FINL‑13) and recalibrating foreign ownership limits across several strategically important sectors. For general counsel, in‑house teams and strategic investors assessing Philippine market entry, the updated list reshapes equity ceilings in public utilities, transport, retail, telecoms and energy, and imposes revised paid‑up capital thresholds that directly affect deal structuring and company registration timelines. Foreign investment lawyers advising on inbound transactions must now audit existing ownership arrangements against the new FINL‑13 parameters and, where gaps exist, move quickly to restructure shareholdings, update articles of incorporation and secure the required sectoral licences before regulators begin enforcement reviews.

Key takeaways:

• EO 113 took effect upon publication on 16 April 2026 and supersedes the 12th FINL (EO 175, s. 2022), meaning every pending and pipeline deal must now be assessed against the new list.
• Foreign equity caps have been refined, not uniformly raised, across utilities, airlines, shipping, retail and renewable energy, with several sub‑sectors seeing tighter conditions tied to paid‑up capital or licensing prerequisites.
• Paid‑up capital thresholds have been consolidated under the Retail Trade Liberalization Act (as amended) and the Foreign Investments Act, requiring foreign retailers and certain service enterprises to meet minimum capitalisation before SEC registration can proceed.

FINL‑13 at a Glance, What Changed and What to Do Now

Executive Order No. 113 & FINL‑13: Quick Summary and Legal Status

Executive Order No. 113, published through the Official Gazette on 16 April 2026, exercises the President’s authority under the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended by RA 11647) to issue and periodically update the Foreign Investment Negative List. The FINL is a consolidated schedule that enumerates all economic activities in which foreign ownership is restricted or prohibited, either by the 1987 Constitution (“List A”) or by specific legislation (“List B”). The 13th edition, FINL‑13, replaces the 12th FINL promulgated by EO 175 in 2022 and carries immediate legal effect: any investment application filed from the date of publication must conform to the new list.

How the FINL Interacts with Constitutionally Protected Nationalised Sectors

The Philippine Constitution reserves certain activities exclusively to Filipino citizens or to corporations at least 60 % Filipino‑owned. These constitutional ceilings, notably the 40 % foreign equity cap for public utilities, educational institutions, mass media and natural resource exploitation, cannot be raised by executive order alone and therefore appear in FINL‑13 List A as hard caps. EO 113 does not purport to amend these constitutional provisions; it instead clarifies the sub‑classifications within each nationalised sector (for example, distinguishing between “public utility” concessionaires and non‑utility infrastructure service providers following the amendments introduced by the Public Service Act, as amended by RA 11659).

Foreign investment lawyers should note that the practical effect of RA 11659, which narrowed the statutory definition of “public utility”, is reflected in FINL‑13’s updated treatment of certain telecommunications, transport and energy activities that no longer fall within the constitutional reservation.

What Counts as a “Foreign Investor” Under FINL and SEC Rules

For FINL purposes, a “foreign national” includes any individual who is not a Philippine citizen and any corporation organised under foreign law or in which more than 40 % of the outstanding capital stock is owned by non‑Filipino nationals. The Securities and Exchange Commission (SEC) applies a “grandfather rule” and, where applicable, a “control test” to determine the actual nationality of layered corporate structures. Investors using holding companies, nominee arrangements or multi‑tier vehicles must ensure that the ultimate beneficial ownership complies with both the FINL equity ceiling and the SEC’s beneficial ownership reporting requirements. Non‑compliance can result in administrative penalties, denial of registration and, in egregious cases, criminal prosecution under the Anti‑Dummy Law (Commonwealth Act No. 108, as amended).

What FINL‑13 Changes by Sector: Foreign Ownership Limits Explained

FINL‑13 retains the two‑list architecture. List A covers activities reserved by the Constitution or by specific laws where no foreign participation, or only limited foreign equity, is permitted. List B covers activities that are defence‑related, risk‑related, or reserved for Filipino SMEs. Below is a sector‑by‑sector analysis of the changes and retained restrictions most relevant to inbound investment structuring in 2026.

Public Utilities: Water, Power and Electricity Concessions

Under Article XII, Section 11 of the 1987 Constitution, the operation of a “public utility” is reserved to Filipino citizens or corporations at least 60 % Filipino‑owned. FINL‑13 List A retains this 40 % foreign equity ceiling for enterprises classified as public utilities. However, RA 11659, the 2022 amendment to the Public Service Act, redefined “public utility” to cover only electricity distribution, electricity transmission and water distribution and sewerage. Activities previously classified as public utilities, such as telecommunications, airlines and shipping, now fall under the broader category of “public services” and are subject to different (often more liberal) foreign ownership limits unless another constitutional or statutory reservation applies.

The practical implication is significant: foreign investment lawyers must determine whether a specific infrastructure concession is classified as a “public utility” under the amended statute or as a “public service” freed from the constitutional 40 % cap. The ERC continues to exercise regulatory oversight over electricity tariffs and licensing, while water utilities fall under the MWSS or the LWUA depending on service territory.

Transport: Airlines, Shipping and Railways

Despite the narrowing of the “public utility” definition, certain transport sub‑sectors remain subject to foreign ownership limits imposed by standalone legislation. Domestic airlines are capped at 40 % foreign equity under the Civil Aviation Authority Act (RA 9497), and FINL‑13 List A reflects this ceiling. Domestic shipping is likewise limited to 40 % foreign ownership under relevant maritime legislation and cabotage rules. Railway transport, particularly mass urban rail systems, may be structured through concession or public‑private partnership arrangements under the BOT Law (RA 6957, as amended), where the concessionaire entity itself must comply with the applicable ownership threshold.

Industry observers expect that these transport sub‑sectors will attract heightened deal flow in 2026 as infrastructure spending accelerates, making it essential for foreign investment lawyers to model compliant JV structures early in the transaction cycle.

Telecoms and Broadcasting

Mass media remains constitutionally reserved to Filipino citizens (100 % Filipino ownership required). Telecommunications, however, benefited from RA 11659’s reclassification: telecoms entities are no longer “public utilities” but “public services,” and foreign ownership of up to 100 % is now theoretically permissible unless other statutory caps apply. FINL‑13 preserves the 40 % foreign equity limit specifically for entities holding a legislative franchise for telecommunications, as required by the terms of existing franchise grants. New market entrants without a franchise may face different regulatory treatment from the NTC. Foreign investors should confirm the franchise status of any target acquisition and assess whether the 40 % cap or the more liberal “public service” regime applies.

Retail and E‑Commerce

The Retail Trade Liberalization Act (RA 8762, as amended by RA 11595) allows 100 % foreign ownership of retail enterprises, provided the foreign retailer meets minimum paid‑up capital thresholds (discussed in the next section). FINL‑13 List B reflects a minimum paid‑up capital of PHP 25 million for foreign retail enterprises with investment below USD 2.5 million, and removes the paid‑up capital requirement entirely for foreign retailers investing USD 2.5 million or more. E‑commerce operations that involve direct retail sales to Philippine consumers are treated as retail trade activities and must comply with these thresholds.

Energy and Mining

The 1987 Constitution reserves the exploration, development and utilisation of natural resources to Filipino citizens or to corporations at least 60 % Filipino‑owned, and FINL‑13 List A retains this restriction for mining and conventional energy extraction. Renewable energy, however, occupies a unique position: under the Renewable Energy Act (RA 9513) and its implementing rules, foreign investors may hold up to 100 % equity in renewable energy projects during the exploration and development phases through a Department of Energy (DOE) service contract. FINL‑13 confirms this carve‑out. Early indications suggest that the DOE will continue to issue RE service contracts to majority‑ or wholly‑foreign‑owned entities, making the Philippines one of the more accessible markets in Southeast Asia for foreign renewable energy capital.

Paid‑Up Capital Requirements and Registration Checklist

The paid‑up capital requirement is the single most common compliance stumbling block for foreign investors entering the Philippines. Under the Foreign Investments Act (RA 7042, as amended by RA 11647), domestic market enterprises with foreign equity exceeding 40 % must generally have a minimum paid‑up capital of USD 200,000, unless the enterprise qualifies for the reduced threshold of USD 100,000 by employing at least 15 direct employees or utilising advanced technology as certified by the Department of Science and Technology (DOST). Enterprises that export 60 % or more of their output are classified as “export enterprises” and face no minimum capitalisation requirement.

For retail, the Retail Trade Liberalization Act (as amended by RA 11595) sets its own paid‑up capital regime: foreign retailers investing less than USD 2.5 million are required to maintain minimum paid‑up capital of PHP 25 million, while those investing USD 2.5 million or more are exempt from any additional paid‑up capital floor. The likely practical effect of FINL‑13’s consolidation of these thresholds is greater regulatory clarity, but foreign investment lawyers should verify the applicable threshold for each specific activity at the time of SEC filing.

Step‑by‑Step Registration Checklist

Failure to deposit the full paid‑up capital prior to SEC filing, or misstatement of the capital structure in the treasurer’s affidavit, can result in rejection of the application and, in cases of fraud, personal liability for the incorporators.

Inbound Investment Structuring Where Foreign Equity Is Capped

Where a constitutional or statutory cap limits foreign equity to 40 %, foreign investment lawyers must design transaction structures that respect the ceiling while still delivering adequate economic returns, operational control safeguards and exit liquidity to the foreign investor. The following structuring options are commonly deployed in Philippine inbound investment deals.

Joint Ventures and Shareholders’ Agreements, Essential Clauses

The standard approach is a joint venture (JV) with a Filipino partner, structured as a Philippine corporation with the foreign investor holding up to the maximum permitted equity (typically 40 %) and the Filipino partner holding the balance. The shareholders’ agreement (SHA) becomes the critical governance document. Essential provisions include:

• Board composition and voting thresholds. Ensure the foreign investor has representation proportionate to its economic contribution, with veto rights over material decisions (capital calls, asset disposals, related‑party transactions).
• Deadlock resolution. Tiered mechanisms, escalation to senior management, followed by mediation, then buy‑sell (Russian roulette or Texas shoot‑out), to avoid paralysis.
• Pre‑emptive rights and transfer restrictions. Right of first refusal on share transfers to prevent dilution or introduction of undesirable co‑investors.
• Escrow for capital contributions. Where paid‑up capital is contributed in tranches, escrow arrangements protect both parties against default.
• Tag‑along and drag‑along rights. Enable coordinated exits and protect minority investors from being stranded.

A critical compliance point: the SHA must not grant the foreign investor de facto control exceeding its equity percentage in a manner that would violate the Anti‑Dummy Law. Provisions that allow the foreign investor to direct the management and operations of a nationalised enterprise can be challenged by regulators, even if the share register technically shows 60/40 Filipino‑majority ownership.

Project Finance Structuring When Equity Is Capped

For infrastructure and energy projects, a special purpose vehicle (SPV) is established as the project company. The SPV’s equity is split to comply with the FINL cap, while the foreign investor maximises its economic participation through a combination of shareholder loans, subordinated debt instruments and management or technical services agreements. Key structuring considerations include:

• Concession contracts. If the SPV holds a government concession (e.g., under the BOT Law), the concession agreement itself may impose nationality requirements that mirror or exceed FINL thresholds.
• Security packages. Lenders may require pledges over the Filipino partner’s shares, creating tension with the nationality requirement, ensure that any enforcement of share pledges cannot result in foreign ownership exceeding the FINL cap.
• Ring‑fencing. Separate the regulated (nationality‑restricted) entity from unregulated service subsidiaries that can be wholly foreign‑owned, to isolate risk and maximise foreign control over non‑restricted revenue streams.

Do / Don’t Table for Foreign Investment Structuring

Licensing and Regulatory Timelines: Agency Checklist for Foreign Investment Lawyers

FINL‑13 compliance is only one layer of the regulatory stack. Sectoral licensing Philippines requirements mean that foreign investors must also secure approvals from the specialised agencies that regulate their target industry. The following table summarises the key agencies, their triggers for notification or approval, and typical statutory timelines that foreign investment lawyers should build into transaction schedules.

Missing a filing window or sequencing agency applications incorrectly is one of the most common, and most avoidable, sources of delay in Philippine inbound transactions. Best practice is to map every approval onto a single Gantt chart at the letter‑of‑intent stage and assign clear responsibility for each filing.

Practical Next Steps for General Counsel: Compliance Checklist and Sample Clauses

In‑house counsel and foreign investment lawyers acting for inbound investors should undertake the following steps immediately following the promulgation of FINL‑13:

• Gap analysis. Compare the current shareholding structure of every Philippine entity in your group against the updated FINL‑13 equity ceilings. Identify any entity that has migrated from one regulatory classification to another (e.g., from “public utility” to “public service” following RA 11659).
• Re‑audit shareholder register. Apply the SEC grandfather rule and control test to any layered or intermediate holding structures to confirm that actual foreign ownership does not exceed the applicable cap.
• Update articles of incorporation. If the FINL reclassification changes the permissible equity ceiling (upward or downward), amend the articles of incorporation accordingly and file with the SEC.
• File beneficial ownership declarations. The SEC requires annual beneficial ownership reporting. Use the FINL‑13 transition as an opportunity to ensure current filings are accurate and complete.
• Notify sectoral regulators. Where a change in classification triggers a new licensing requirement, or removes an existing one, notify the relevant agency proactively rather than waiting for an enforcement query.
• Update financing documents. Review loan agreements, pledge arrangements and security documents for any nationality‑related covenants or default triggers that may be affected by the FINL update.

Sample Clause Templates

Note: The following clause language is provided as illustrative template text only. It is not legal advice and must be reviewed and adapted by qualified Philippine counsel before inclusion in any binding agreement.

Restricted Transfer Clause (SHA):

“No Shareholder shall transfer, assign, pledge or otherwise encumber any Shares to any person if, as a result of such transfer, the aggregate foreign ownership of the Company would exceed [40]% of the total outstanding capital stock, calculated in accordance with the Foreign Investments Act (RA 7042, as amended) and the applicable Foreign Investment Negative List in effect at the time of such transfer.”

Escrow for Paid‑Up Capital Release:

“The Treasurer‑in‑Trust shall deposit the full amount of the required paid‑up capital into the Escrow Account within [5] business days of the execution of this Agreement. The Escrow Agent shall release the funds to the Company’s operating account only upon presentation of the SEC Certificate of Registration and a written joint instruction signed by all Incorporators.”

Security Holder Nationality Covenant:

“The Secured Party covenants and agrees that, upon enforcement of any pledge or security interest over the Pledged Shares, it shall not acquire or cause to be acquired any beneficial ownership interest in the Company that would result in foreign ownership exceeding the applicable Foreign Investment Negative List ceiling. Any enforcement action that would breach this covenant shall be void and of no effect.”

Conclusion: Act Now on FINL‑13 Compliance

The promulgation of EO 113 and FINL‑13 represents the most consequential recalibration of Philippine foreign ownership limits since the 2022 Public Service Act amendments. For general counsel, strategic investors and foreign investment lawyers, three steps are immediately actionable: first, conduct a gap analysis of every Philippine entity against the updated FINL‑13 ceilings; second, verify and update paid‑up capital filings and beneficial ownership declarations with the SEC; and third, engage sectoral regulators proactively where reclassification triggers new licensing or de‑licensing requirements. Timely compliance protects both the investment and the investor. For specialist guidance on <a href="https://globallawexperts