The Department of Environment and Natural Resources (DENR) issued DENR Memorandum Order No. 2013-01 (the Memorandum Order), which increased the minimum capital requirements for mining applicants. Under the Memorandum Order, the minimum authorized capital stock and paid-up capital of mining applicants were increased as follows: Authorized Capital: From PhP10 million; To PhP100 million. Paid-Up Capital: From PhP2.5 million; To PhP6.25 million. The Memorandum Order applies to applicants for an exploration permit (EP), a Mineral Agreement (MA), and a Financial or Technical Assistance Agreement (FTAA). With respect to an FTAA applicant, the applicant must have a minimum paid up capital of PhP500 million upon the grant of the FTAA by the President and prior to the registration of the FTAA with the Mines and Geosciences Bureau (MGB). Under the Corporation Code, at least 25% of the authorized capital stock must be subscribed at the time of incorporation and at least 25% of the total subscription must be paid upon subscription (see section 13). In case of an increase in authorized capital stock, at least 25% of the increased capital stock must be subscribed and at least 25% of the amount subscribed must be paid (see section 38). To comply with the new capitalization requirements, a mining company may have an authorized capital stock of PhP100 million, with PhP25 million subscribed, and PhP6.25 million paid up. While the DENR sets the minimum paid-up capital to PhP6.25 million, the Foreign Investments Act of 1991 provides that domestic market enterprises with paid-in equity capital of less than US$200,000 are reserved for Philippine nationals. Thus, mining companies that do not qualify as Philippine nationals (such as companies where foreign-owned equity exceeds 40%) must have a minimum paid-in equity capital of US$200,000 (or its peso equivalent), notwithstanding the lower paid-up capital provided in the Memorandum Order. Read the rest of the Client Alert by downloading the PDF from the SyCipLaw website. |