Opinion No. 26-11 Re: Capacity of a Corporation to Enter into Co-Working and/or Subleasing Arrangements

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QFFICE OF THE GENERAL COUNSEL

SEC-OGC Opinion No. 26-12 Re: Post-Production; Applicability of Foreign Equity Restriction on Mass Media 17 August 2026

ATTY. NORAIZA MAE KEITH M. TALBIN NMT Consulting Legal Services [email protected]

Dear Atty. Talbin:

subsidiary in the Philippines (Proposed Entity). opinion on the applicability of foreign equity restrictions to the business activities of a proposed domestic This refers to your letter dated 08 June 2026, requesting, on behalf of your potential client, an

established service provider specializing in the digitization, restoration, formatting, and technical preparation of film and audio-visual materials. It intends to establish the Proposed Entity to conduct the following business activities: As disclosed in your letter, your potential client (Corporation) is a foreign corporation that is an

a b C} Remastering of films from one format to another; video transfer, namely, providing color Film editing; film mastering services; post-production editing services in the field of music, correction and conversion of motion picture film to video film; videos and film; and Digital image correction, restoration and enhancement of film and video; DVD authoring

services.

or production of motion pictures, films, commercials, or television programs, nor transmit, broadcast, stream, publish, advertise, sell, exhibit, or otherwise disseminate or distribute any such content in the materials or content that are to be distributed outside the Philippines by the Corporation's clients or other rights holders. These clients, consisting of studios, distributors, streaming, platforms and media library- owners, shall have the sole right, authority and responsibility for such publication or distribution. Philippines. Its role will be limited to providing technical post-production and restoration services on For clarity, you mentioned that the Proposed Entity will not engage in the actual shooting, creation

Your queries are:

2. 1. Whether the Proposed Entity can be 100% foreign-owned if its business activities are limited to Whether the business activities of the Proposed Entity are considered a form of "Mass Media" or film and video post-production, remastering, and digital restoration services? "Advertising" under the 1987 Constitution and/or the Foreign Investment Negative List, which restricts or prohibits foreign equity?

www.sec.gov.ph I [email protected] (+63 2) 5322 7696 The SEC Headquarters, 7907 Makati Avenue Salcedo Village, Bel-air, Makatl City https://linktr.ee/secphilippines INVESTORS: Wo Invest in poopts PEOPLE ISO 9001

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Foreign Investment Negative List (13th FINL),2 the ownership and management of mass media shall be limited to citizens of the Philippines or to corporations, associations wholly owned and managed by such citizens. On the other hand, only Filipino citizens or corporations owning at least 70% of the capital can engage in the advertising industry.3 Under Section 11, Article XVI of the 1987 Constitution,1 and as reiterated in the Thirteenth Regular

which is the dissemination of information and ideas to the public, or a portion thereof.4Mass media masses and that tends to set the standards, ideals and aims of the masses, the distinctive feature of as defined in Article 4(a) of Republic Act (R.A.) No. 7394,5 refers to "any means or methods used to convey advertising messages to the public such as television, radio, magazines, cinema, billboards, posters, streamers, hand bills, leaflets, mails and the like.t" (Emphasis supplied) Mass media in the Constitution refers to any medium of communication designed to reach the

organization or enterprise creating, conducting, producing, implementing or giving counsel on presenting or making available to the public, through any form of mass media, fact, data or information promotional campaigns or programs through any medium for and in behalf of any advertiser. about the attributes, features, quality or availability of consumer products, services or credit." Thus, the Implementing Rules and Regulations of the same law defines an advertising agency or agent as "a service (Emphasis supplied) Advertising, as defined in Article 4(b) of R.A. No. 7394, is "the business of conceptualizing.

In previous opinions, the Commission distinguished an advertising agency from a mass media entity as follows:

to utilize or avail of the facilities of mass media, i.e., newspapers, radio, television, etc., for this purpose. Advertising agencies falling within this concept are not mass media, considering that they do not operate or control any medium of communication designed to reach or influence the masses, although the activities of such agencies, by their nature, are closely related to those of mass media. "x x x Advertising agencies do not actually disseminate the materials they prepare as they have

advertising firm which sells billboard space to advertisers, then such advertising agencies would fall controls or otherwise engages in the business of mass media, a specific example of which is an outdoor within the purview of the constitutional limitation. However, where the advertising agency actually disseminates information, or operates,

commercial messages with the end goal of promoting the goods or services. On the other hand, mass media covers any medium of communication, the primary objective of which is to disseminate information to the public. However, an advertising company is said to he engaged in mass media activities The main function of an advertising agency is the creation and/or conceptualization of the

1 Article XVI, Section 11 of the 1987 Constitution provides:

the Philippines, or to corporations, cooperatives or associations, wholly named and managed by such citizens. "SECTION 11. (1) The ownership and management of mass media shall be limited to citizens of

interest so requires. No combinations in restraint of trade or unfair competition therein shall be allowed. The Congress shall regulate or prohibit monopolies in commercial mass media when the public

the protection of consumers and the promotion of the general weifare. (2) The advertising industry is impressed with public interest, and shall be regulated by law for

of which is owned by such citizens shall be allowed to engage in the advertising industry. Only Filipino citizens or corporations or associations at least seventy per centum of the capital

limited to their proportionate share in the capital thereof, and all the executive and managing officers of Such entities must be citizens of the Philippines." The participation of foreign investors in the governing body of entities in such industry shall be

6 SEC-OGC Opinion No.21-07 dated 10 May 2021 addressed to Aquende Yebra Aniag Loon & Associates, citing SEC-OGC Opinion No. 2 Executive Order No. 113, Series of 2026, provides: 4 DOj Opinion No. 40, series of 1998; cited in SEC-0GC Opinion No.16-17 dated 11 July 2016 addressed to Mr. Darmo N. Castillo. 5 The Consumer Act of the Philippines 3 Supra, Note 1 14-06 dated 8 May 2014 addressed to Atty. Alvin 0. Geli and Atty.Regina G. Santos. "Mass media, except recording (Section 11[1], Article XVI of the Constitution; Presidential Memorandum dated 5 May 1994) and internet business [Department of Justice [DO] Opinion No. 40 [s. 1998]).

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through any medium of communication?"(Emphasis supplied) when it not only creates and conceptualizes commercial messages but also disseminates information

what medium of dissemination is to be used in the promotion of their goods or services. It merely provides post-production and restoration services. does not conceptualize and create commercial messages or advertisements nor advises advertisers as to Pursuant to the above, the Proposed Entity cannot be considered an advertising agency because it

of an entity engaging in mass media activities, per Department of Justice (DOJ) Opinions, is the As to whether the Proposed Entity is mass media, it's worth reiterating that the distinctive feature

entity, although not an indispensable element, is editorial control of the content. dissemination of information to the puhlic or a portion thereof. A common feature of a mass media

distributed in the Philippines.3 If the publication is intended for dissemination in the Philippines, the In order for the Constitutional provision to apply, the mass media material produced must be

activity. 9 Otherwise, it will not apply if the mass media materials are disseminated outside of the Philippines.10 undertaking is subject to the Constitutional limitation making mass media a completely nationalized

nor does it distribute or publish the same. Accordingly, the Proposed Entity is not engaged in mass media. Corporation's clients. The Proposed Entity neither exercises editorial control over the materials or content, and restoration services on materials or content that shall be distributed outside the Philippines by the In this case, the scope of the Proposed Entity's activities is confined to rendering post-production

examine if it is an export enterprise or a domestic market enterprise. However, even if the Proposed Entity is not a mass media entity or an advertising agency, we must

tourism) enterprise exports sixty percent (60%) or more of its output, or wherein a trader purchases the domestic market entirely or not exporting sixty (60) percent or more of its output.11 products domestically and exports sixty percent (60%) or more of such purchases. On the other hand, a domestic market enterprise shall mean an enterprise, which produces goods for sale, or render services to An export enterprise is an enterprise wherein a manufacturer, processor or service (including

Republic Act No. 1164712 expressly provides:

Section 7. Section 6 of RA. No. 7042, as amended, is hereby amerded to read as foliows:

provided under Section 8 hereof is allowed up to one hundred percent (100%) ownership. whose products and services do not fall within Lists A and B of the Fore "Section 6. Foreign Investment in Export Enterprises. - Foreign investment in export enterprise ign Investment Negative Lisi

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Section 8. Section 8 of R.A. No. 7042, as amended, is hereby further amended to read as follows:

"Section 8. List of Investment Areas Reserved to Philippine Nationals (Foreign Investment Negative List). -

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11 Implementing Rules and Regulation of Republic Act No. 11647 dated 11 July 2022. ?SEC Opinion dated 21 September 1986, addressed to Mr. Jose P. Quiambao; SEC Opinion dated 31 March 1986, addressed to Mr. Youm Young Sig, both citing DOJ Opinion No. 024, s. 1986, dated 17 February 1986. Otherwise Known as the "Foreign Investment Acts of 1991", As Amended, and For Other Purposes", 02 March 2022. 24 July 2017 addressed to Gorriceta Africa Cauton & Saavedra, citing SEC-0GC Opinion No. 16-12 dated 13 September 2012 8 D0J Opinion No. 024, s. 1986, dated 17 February 1986 cited in SEC-OGC Opinion No. 18-22 dated 28 November 2018 addressed to Kittleson and Carpo Consulting, Inc. 10 bid 12 Republic Act No. 11647, otherwise known as "An Act Promoting Foreign Investments, Amending thereby Republic Act No. 7042, 7SEC-0GC Opinion No. 18-21 dated 28 November 2018 addressed to Angelito M. Villanueva, citing SEC-OGC Opinion No. 07-17 dated addressed to Puno & Puno Law Office, citing SEC Corporate Legal Department Opinion dated 2 September 1988

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Micro and small domestic market enterprise with paid-in equity capital less than the equivalent of Two hundred thousand US dollar (US$200,000.00). are reserved to Philippine nationals: Provided, That if: (1) they involve advanced technology as determined by the Department of Science and Technology, or (2) they are endorsed as startup or startup enablers by the lead host agencies pursuant to Republic Act No. 11337, otherwise known as the Innovative Startup Act; or (3) a majority of their direct employees are Filipinos, but in no case shall the number of Filipino employees be less than fifteen (15), than a minimum paid-in capital of One hundred thousand US dollars (US$100,000.00) shall be allowed to non-Philippine nationals: (Emphasis supplied)

In relation thereto, Items Nos. 6 and 7, List B of the 13 th FINL provides:

HEALTH AND MORALS, AND PROTECTION OF SMALL-AND MEDIUM-SCALE ENTERPRISES "LIST B: FOREIGN OWNERSHIP IS REGULATED FOR REASONS OF SECURITY, DEFENSE, RISK TO

Up to forty percent (40%) foreign equity

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equivalent of US$200,000 (RA No. 7042, as amended); and 6. Micro and small domestic market enterprises with paid-in equity capital of less than the

determined by the Department of Science and Technology (DOST); endorsed as startup or startup Information and Communications Technology, and DOST (RA No. 11337 or the "Innovative Startup of Filipino employees be less than fifteen (15), with paid-in equity capital of less than the equivalent of US$100,000.00 (RA No. 7042, as amended)." (Emphasis and underscoring supplied) enablers hy the lead host agencies, namely the Department of Trade and Industry, Department of Act"); or (iii) with a majority of their direct employees are Filipinos, but in no case shall the number 7. Micro and small domestic market enterprises that: (i) involve advanced technology as

pursuant to the "Innovative Startup Act," or employs at least 15 Filipino employees. 13 capital of the enterprise is at least US$200,000.00. However, this minimum paid-in capital is reduced to US$100,000.00 if the domestic market enterprise involves advanced technology, is endorsed as startup Thus, a foreign entity may own more than 40% of a domestic market enterprise only if the paid-in

its products and services do not fall under any other provision of List A and B of the FINL. Otherwise, if it is a domestic market enterprise that has less than US$200,000.00 (or less than US$100,000.00 in the special instances mentioned above), it is subject to the 40% foreign equity restriction mentioned above. Accordingly, the Proposed Entity may be 100% foreign-owned if it is an export enterprise, provided

and documents disclosed/submitted and relevant solely to the particular issue raised therein. It shall not be used in the nature of a standing rule binding upon the Commission in other cases or upon the courts whether of similar or dissimilar circumstances.14 If, upon further inquiry or investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered void. It shall be understood that the foregoing opinion is rendered based solely on the facts, circumstances,

Please be guided accordingly.

Very truly your:

Lnuaiefmm ROMUALD C. PADILLA General Counsel

14 Section 7, SEC MC No. 15 Series of 2003, 16 December 2003. 13 List B, 13% FINL.