Date Posted: August 6, 2025

A Comprehensive Legal Guide to Mergers and Acquisitions in the Philippines

Mergers and acquisitions (M&A) are transformative corporate transactions that play a vital role in shaping the Philippine business landscape. They are powerful tools for expansion, consolidation, and restructuring. Navigating M&A in the Philippines requires a comprehensive understanding of a multi-layered legal framework, which includes corporate law, competition law, securities regulations, and specialized industry rules. This article provides a detailed legal overview of M&A in the Philippines.

I. The Core Legal Framework

The legal foundation for M&A in the Philippines is primarily rooted in three key pieces of legislation:

1. The Revised Corporation Code (Republic Act No. 11232): This law, enacted in 2019, is the central pillar of Philippine corporate law. It governs the mechanics of statutory mergers and consolidations, outlining the necessary procedures, approvals, and effects of such transactions.
2. The Philippine Competition Act (Republic Act No. 10667): The PCA is the country’s national competition policy law. It establishes a merger control regime, requiring certain M&A transactions that exceed specific financial thresholds to be notified to and approved by the Philippine Competition Commission (PCC) to prevent anti-competitive effects.
3. The Securities Regulation Code (Republic Act No. 8799): The SRC governs M&A involving publicly listed companies or those with a large number of shareholders. It mandates disclosure requirements and, in some cases, a tender offer process to protect public investors.

II. Types of M&A Transactions

M&A transactions in the Philippines can be structured in several ways, each with distinct legal implications:

• Statutory Merger: This is a combination of two or more corporations into a single surviving corporation. The Revised Corporation Code governs this process, which requires the approval of the board of directors and a vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock of each constituent corporation. Upon SEC approval, the surviving entity inherits all the assets, rights, and liabilities of the absorbed corporation.
• Consolidation: Similar to a merger, this involves two or more corporations combining to form an entirely new corporation. All assets and liabilities of the consolidating entities are transferred to the new corporation, and the original corporations cease to exist. The process and requirements are similar to those for a statutory merger.
• Asset Acquisition: In this transaction, a buyer acquires specific assets and/or assumes certain liabilities of a target company. This does not involve the dissolution of the target company as an entity. The transaction is governed by a sale and purchase agreement and may require a shareholder vote if it involves the sale of all or substantially all of the corporation’s assets.
• Stock Acquisition: This is the most common form of acquisition. It involves a buyer purchasing a controlling interest (a majority of the shares) in a target company. The target company continues to exist as a separate legal entity, but its ownership and control are transferred to the buyer.

III. The Merger and Consolidation Process

The Revised Corporation Code outlines a detailed process for statutory mergers and consolidations, which typically involves the following steps:

1. Plan of Merger or Consolidation: The boards of directors of all corporations involved must approve a plan outlining the terms and conditions of the transaction. This plan must include the names of the merging/consolidating corporations, the terms for transferring assets and liabilities, and the manner of converting shares of stock.
2. Stockholder Approval: The plan must be submitted to the stockholders for approval at a meeting duly called for the purpose. A vote of at least two-thirds of the outstanding capital stock of each corporation is required.
3. SEC Approval: The corporations must file the plan with the Securities and Exchange Commission (SEC) for approval. The SEC reviews the plan to ensure compliance with legal requirements.
4. Certificate of Merger/Consolidation: If the plan is in order, the SEC will issue a Certificate of Merger or Consolidation, which gives legal effect to the transaction. The surviving or new corporation succeeds to all the rights, properties, privileges, and liabilities of the constituent corporations.

Dissenting shareholders in a merger or consolidation have the right to demand payment for their shares at their fair value, a legal protection known as appraisal rights.

IV. Philippine Competition Act and Merger Control

The Philippine Competition Act (PCA) has a significant impact on M&A, particularly for large-scale transactions. The law prohibits M&A that may “substantially prevent, restrict, or lessen competition.”

• Compulsory Notification: The PCA, through the Philippine Competition Commission (PCC), establishes a mandatory notification regime. M&A transactions that meet specific financial thresholds must be notified to the PCC for review and approval before they can be consummated. These thresholds are adjusted periodically by the PCC to reflect economic conditions. As of March 1, 2025, the thresholds for mandatory notification are a Size of Person (SoP) of ₱8.5 billion and a Size of Transaction (SoT) of ₱3.5 billion.
• Review Process: Once a transaction is notified, the PCC reviews it to determine its potential impact on competition. The review process involves a two-phase assessment. If the PCC finds that the transaction will not harm competition, it issues a clearance. If the transaction is found to be anti-competitive, the PCC can prohibit it, or approve it subject to specific conditions or modifications.
• Penalties for Non-Compliance: Failure to notify a notifiable transaction or consummating it before receiving PCC clearance renders the transaction void and subjects the parties to administrative fines of up to 5% of the transaction value.

V. Special Considerations for M&A in the Philippines

• Securities Regulation Code (SRC): Tender Offer Rule: For M&A involving public companies, the SRC imposes a “Tender Offer Rule.” This rule requires a person or group of persons acting in concert to make a tender offer to all stockholders if they intend to acquire a certain percentage of the voting shares of a public company. The threshold is typically an acquisition that results in the acquirer owning more than 35% of the outstanding voting shares or, if the acquirer already holds between 35% and 50%, an acquisition of an additional 2% within a 12-month period.
• Foreign Investment Limitations: The Foreign Investments Act (FIA) and the Foreign Investment Negative List (FINL) impose restrictions on foreign ownership in certain sectors. These restrictions must be carefully considered, as they can limit a foreign entity’s ability to acquire a controlling stake in a Philippine corporation. For example, some sectors, like public utilities, have constitutional limitations on foreign ownership.
• Due Diligence: Due diligence is a crucial phase in any M&A transaction. It involves a thorough investigation of the target company’s financial, legal, operational, and regulatory aspects to identify potential risks and liabilities.
• Tax Implications: M&A transactions have significant tax consequences. The National Internal Revenue Code (NIRC) and other tax laws govern matters such as capital gains tax, documentary stamp tax, and value-added tax. Professional tax advice is essential for structuring a transaction in a tax-efficient manner.
• Sector-Specific Regulations: Certain industries are subject to special laws and regulatory oversight. M&A involving banks, insurance companies, public utilities, and other regulated entities may require additional approvals from their respective government agencies, such as the Bangko Sentral ng Pilipinas (BSP) for banks or the Insurance Commission for insurance companies.

VI. Conclusion

Mergers and acquisitions in the Philippines are complex legal endeavors that require careful planning and meticulous execution. The Revised Corporation Code provides the fundamental corporate law framework, while the Philippine Competition Act and the Securities Regulation Code introduce crucial regulatory hurdles for large and public transactions, respectively. Navigating this landscape successfully requires expert legal counsel to ensure compliance, mitigate risks, and achieve the strategic objectives of the transaction.