Legal due diligence and regulatory approvals
Buying a Philippine business can give a buyer an established customer base, staff, facilities, and an operating history. It can also bring obligations that the price and financial statements only partly reveal. The buyer needs to understand what will transfer and what it will take to operate the business after closing.
Legal due diligence should establish what the buyer will acquire, what liabilities may remain, and which approvals are needed before completion. The findings should then affect the contract, price, and closing conditions.
Review the seller’s records against how the business earns revenue. If one lease, permit, customer, or software license is essential to operations, establish who holds it and whether it will be available at closing. That answer can affect the deal structure before the parties agree on price.
Choose between a share purchase and an asset purchase
In a share acquisition, the target company continues with its existing assets, contracts, and obligations. It generally remains responsible for its existing liabilities after the shareholders change. Review the company’s history and outstanding exposures because they affect the value of the shares the buyer will acquire.[1]
In an asset acquisition, the buyer selects the assets and business components it will acquire. Each component may need its own transfer document. Prepare a schedule for conveyances, assignments, employee arrangements, and permit applications so the buyer can see which items it can use on the first day.
Asset purchase liability depends on the rules and the facts. A buyer can assume obligations by agreement or become liable if the transaction amounts to a merger, continues the seller’s business, or fraudulently evades its debts. A continuation of the seller’s business can bring liability even without fraud.[2]
Map the parties that own the equipment, employ the staff, hold the permits, and sign the key contracts. An affiliate or the founder may own something the operating company uses every day. Identify what needs a separate transfer or license even when the transaction is structured as a purchase of shares.
Check for services the business shares with the seller’s other operations, such as payroll, bookkeeping, insurance, or technology support. If those services will end at closing, arrange replacements or agree on a transition period. Set out which party will provide each service, how long it will continue, and what it will cost.
The structure also affects taxes, consent requirements, and how the buyer obtains operational control. Compare those consequences before committing to a price.
Compare structures using the same operating assumptions. A share purchase may preserve the contracting entity while triggering change of control provisions. An asset deal may require multiple assignments and new permits. Allow for tax, consent, and implementation costs in the price model for either route.
Confirm ownership and authority to sell
Review the target’s incorporation documents, stock and transfer book, share certificates, subscription payments, and agreements affecting the shares. Verify that the seller owns the shares or assets it proposes to transfer. Identify any lien, pledge, transfer restriction, or third party right that the parties must address before closing.[3]
For certificated shares, arrange delivery of the endorsed certificates and recording in the corporate books. Check for any unpaid claim of the corporation against the shares that would prevent their registration in the books. Reconcile the share counts and classes with the proposed purchase agreement and closing documents.
For an asset purchase, match material assets to the evidence of ownership. For equipment, check identifying details, invoices, and any lease or security documents. For land, reconcile the property description with a recent certified title and verify the authority of the registered owner. Plan the conveyance and recording for each asset that requires it.
Determine the corporate approvals required on both sides. In a stock corporation, a sale of all or substantially all assets generally requires majority board approval and approval by holders of at least two-thirds of the outstanding capital stock. Apply Section 39 of the Revised Corporation Code, including its statutory test, exceptions, notice requirements and appraisal rights.[4]
The statutory test uses net asset value from the latest financial statements and considers whether the disposition would leave the seller unable to continue its business or accomplish its corporate purpose. Check the exceptions and confirm the required approvals under Section 39 of the Revised Corporation Code.
Gather the relevant board or shareholder resolutions, notices, and signatory authority. Check any right of first refusal, consent requirement, or other transfer restriction in the governing documents. Tie the evidence of compliance to a specific closing deliverable so that approvals can be verified before funds are released.
A foreign buyer should confirm the permissible interest before settling the price and governance terms. Review the Thirteenth Regular Foreign Investment Negative List under Executive Order No. 113 of 2026 together with the laws governing the target’s activities. Review nationality restrictions closely for landholding companies and regulated businesses.[5]
Map direct and indirect ownership and voting rights before and after closing. Check the activity the target actually conducts, the property it holds, and the conditions attached to its licenses. The starting point for the sector review is the Thirteenth Regular Foreign Investment Negative List.
Review the business behind the corporate records
Material contracts should be checked for assignment and change of control provisions, termination rights, outstanding defaults, and unusual obligations. Verify key licenses, ownership of intellectual property, and rights to occupy the business premises.
Start with contracts that account for material revenue, supply, or access to the premises. Identify the contracting entity, term, renewal date, outstanding defaults, and exact consent or notice clause. A site lease or major customer contract that ends or becomes terminable at closing can affect the value of the business.
Review employment arrangements, unpaid benefits, disputes, tax assessments, financing, guarantees and security interests. Identify contingent obligations as well as amounts already due.
Build a separate schedule for claims and assessments. Review the underlying notices, pleadings, and decisions to verify their status and the next response deadline. Separate amounts presently payable from disputed or contingent exposures. Record the likely cost of responding and the evidence available to support the company’s position.
Reconcile payroll and benefit records with the people who actually work in the business. Check unpaid wages or contributions, pending claims, and agreements with contractors. For an asset purchase, decide who will employ the workforce after closing and review the legal steps and costs for any proposed employment changes.
For financed assets, confirm the borrower, collateral, outstanding balance, and lender’s release requirements. An asset schedule should identify which items the buyer expects to receive free of liens. Coordinate payoffs and releases with the seller and lender so that each required release can be delivered when the price is paid.
For a technology or data-dependent business, verify software rights and the legal basis for processing and transferring personal data. The diligence room itself should limit personal data to what is necessary and use appropriate safeguards.[6]
Use redacted records or summaries when they can answer the diligence question. Limit access to staff or advisers who need the underlying data, and agree how it will be returned or deleted if the deal stops. Separately assess the legal basis and contractual restrictions for processing customer or employee data after closing.
When buying a Philippine business, maintain a written request list with a record of what was produced, what remains outstanding, and who will follow up. Check the corporate filings against contracts, permits, tax correspondence, and other operating records. Record what each missing document could affect, including price, deal structure, or closing.
Check PCC notification and sector approvals
Compulsory notification to the Philippine Competition Commission (PCC) requires both the size of party and size of transaction thresholds to be exceeded. The PCC rules prescribe separate calculations for the parties’ groups and the transaction. Assemble the applicable asset and revenue records before concluding that the deal falls above or below the thresholds.[7]
Effective 1 March 2026, the thresholds are a size of party exceeding PHP 9.1 billion and a size of transaction exceeding PHP 3.8 billion. Both tests must be met, and the rules also cover qualifying joint ventures. Use the thresholds applicable when the definitive agreement is executed.[8]
Identify each ultimate parent entity and the relevant controlled entities early. The size of party calculation and the size of transaction calculation use different measures, and the latter depends on the transaction structure. Use the applicable rules and retain the supporting records for computing merger thresholds.
For notifiable transactions whose definitive agreements are signed on or after 3 October 2026, PCC Memorandum Circular No. 26-004 requires filing within 30 calendar days of signing. For earlier signed notifiable agreements where no act of consummation has occurred, the circular allows 90 calendar days from its effectivity to notify.[9]
Agree who will prepare the notification and collect financial information before the signing date. The filing periods and continued suspension of expedited merger review appear in PCC Memorandum Circular No. 26-004.
The notification deadline is separate from the standstill obligation. Build the applicable review period and any clearance conditions into the closing timetable. The PCC may also review transactions below the thresholds where competition concerns arise. Separate sector approvals may still be required.[10]
Keep the businesses operating independently while the standstill applies. Review limits on access to competitively sensitive information, particularly when the parties are competitors. Assign responsibility for responding to agency requests and set an outside date that allows for review and any required sector approvals.
Check licenses and regulatory consents for the particular buyer, target, and deal structure. Prepare a list of the agency, required filing, party responsible, and evidence of approval. Make any approval necessary to operate a closing condition and plan for a delay when signing and completion occur on different dates.
Use the findings to set the deal terms
A due diligence report should identify what must be resolved before closing, what can be addressed through price or security, and what risk the buyer is being asked to accept.
Possible protections include conditions precedent, accurate representations and warranties, specific indemnities, retention of part of the price and termination rights.
Their wording should reflect the identified risks, available evidence and the seller’s ability to meet a claim. For example, if a key lease requires landlord consent to the proposed transfer, make that consent a closing condition.
Use warranties to establish what the seller confirms about the business. Use a specific indemnity to allocate a known exposure, such as a disputed tax assessment for a period before closing. Consider the amount at risk, deadlines for claims, control of the defense, and the practical means of collecting from the seller.
If the parties agree to retain or place part of the price in escrow, specify who holds the funds, the permitted deductions, and the release date. If part of the price depends on accounts prepared after closing, agree on the accounting method, the timetable for review, and how to resolve differences.
The following examples show how a legal diligence finding can affect the agreement and the evidence the parties exchange at closing.
| Diligence finding | Possible deal term | Evidence to obtain |
| Key lease requires landlord consent | Require consent before closing | Written consent covering the proposed transaction |
| Equipment is pledged to a lender | Coordinate payoff and release with payment | Payoff confirmation and release of the relevant security |
| Disputed tax assessment for an earlier period | Agree a specific indemnity and consider a price retention | Assessment records and agreed indemnity or retention terms |
| PCC notification is required | Condition closing on meeting applicable review requirements | Evidence of clearance or expiration of the review period, as applicable |
Plan the completion steps as carefully as the signing. Documents, payments, releases of security, consents, and control of corporate records should be coordinated so that the buyer receives the agreed business and authority to operate it.
A buyer considering signing before closing should agree how the seller will operate in the interim and what changes require notice. Examples include the loss of a major customer, a new financing arrangement, or a material claim. State who may waive a contractual condition and how the parties will respond if a required approval is delayed.
When buying a Philippine business, assign each deliverable to an owner and specify when it is due. Coordinate endorsed certificates or conveyances, third party consents, evidence of payment, releases, and handover of books. Record post-closing work separately, including updates to permits and filings required for the chosen structure.
How a software business purchase can turn on a license
Consider a buyer negotiating for shares in a Philippine software company. The company signs the customer contracts, but the founder owns some of the source code personally. The company’s largest customer also has a change of control clause. Both facts can affect what the buyer can operate after closing.
The buyer can require an assignment or sufficient license from the founder, depending on what the business needs and what the parties agree to transfer. It can also require the customer’s written consent. Check any client restrictions on access to data and the software, and document the resulting rights in the closing file.
If the parties need time to resolve one of these issues, identify who is responsible and agree when the condition must be met. The buyer can then decide whether the unresolved issue should delay closing, change the purchase price, or give rise to a separate contractual protection.
Common questions about buying a Philippine business
Whether company debts continue after a share sale
The company remains the same legal entity after the change in shareholders and generally continues to owe its existing obligations. Review the company’s debt, guarantees, unpaid taxes, and disputed claims when assessing the value of the shares.
When an asset buyer may assume liabilities
An asset buyer may assume obligations under the agreement or face liability under applicable law. A transaction that continues the seller’s enterprise can bring liabilities even in the absence of fraud. Review the actual business being transferred and how it will operate after closing.
Approvals for a sale of substantially all assets
For a stock corporation, Section 39 generally calls for majority board approval and approval by holders of at least two-thirds of outstanding capital stock. Apply the net asset value and business continuity tests and check the statutory exceptions, notice requirements, and appraisal rights.
When PCC notification is compulsory
The applicable size of party and size of transaction thresholds must both be exceeded under the prescribed calculations. Check the rules in force at signing and include qualifying joint ventures in the analysis. The PCC can also review transactions below the thresholds.
When to file and when to close
For notifiable agreements signed on or after 3 October 2026, file within 30 calendar days from signing. Plan closing separately around the statutory standstill, the applicable review period, any clearance conditions, and other approvals required for the transaction.
Whether contracts and permits carry over
A share purchase keeps the same contracting entity, although a change of control can trigger notice, consent, or termination rights. An asset purchase may need assignments, new permits, or both. Check the wording of each material contract and license.
Handling an unresolved tax assessment
Confirm the period, amount, status, and evidence of the assessment. Depending on the risk, the parties can negotiate a specific indemnity, price adjustment, or retention. Set out who manages the dispute and how a claim is made.
What to collect at closing
The closing list should identify the signed transfer documents, required approvals and consents, release of security, payment evidence, and records needed to take control of the business. Assign each item and record any filings or notices due afterward.
Legal support for business acquisitions
ATL Law Firm assists buyers and sellers with legal due diligence, transaction documents, corporate approvals, and regulatory issues affecting business acquisitions. Learn more about our corporate practice.
[1] Revised Corporation Code, Republic Act No. 11232, § 2 (Feb. 20, 2019) (Phil.) (recognizing the corporation as a separate juridical entity with a right of succession).
[2] Y-I Leisure Philippines, Inc. v. Yu, G.R. No. 207161 (Sept. 8, 2015) (Phil.) (discussing the general rule on asset transfers and exceptions, including a continuation of the seller’s business).
[3] Revised Corporation Code, §§ 62–63 (transfer and recording of shares, unpaid claims and issuance of certificates).
[4] Revised Corporation Code, § 39.
[5] Executive Order No. 113, § 1 & annex, Promulgating the Thirteenth Regular Foreign Investment Negative List (Apr. 13, 2026) (Phil.); Phil. Const., art. XII, §§ 2–3, 7, 10.
[6] Data Privacy Act of 2012, Republic Act No. 10173, §§ 11–13, 20–21 (Aug. 15, 2012) (Phil.).
[7] Philippine Competition Commission (PCC), Computing Merger Thresholds.
[8] PCC, PCC Adjusts the Merger Notification Thresholds Effective March 2026 (Mar. 2, 2026); PCC Memorandum Circular No. 26-004, n. 1 (May 28, 2026) (thresholds determined as of execution of the definitive agreement).
[9] PCC Memorandum Circular No. 26-004, §§ 1–2, Resumption of the 30-Day Notification Period for Mergers and Acquisitions (May 28, 2026) (effective Oct. 3, 2026); PCC, PCC Reinstates Mandatory 30-Day Filing Timeline for Mergers and Acquisitions (Sept. 30, 2026). The circular also maintains the suspension of expedited merger review under § 3.
[10] Philippine Competition Act, Republic Act No. 10667, §§ 12(b), 16–17, 19–20 (July 21, 2015) (Phil.); PCC, PCC Adjusts the Merger Notification Thresholds Effective March 2026 (Mar. 2, 2026) (confirming the power to review transactions below the thresholds).
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