Anti-Dummy Law Philippines Update: How to Protect Foreign Investments Legally

February 19, 2026

The landscape of foreign direct investment in the Philippines has entered a new era of transparency with the latest Anti-Dummy Law Update, as regulators tighten the oversight of corporate structures to ensure that nationalized industries remain within the legal bounds of Filipino ownership. Central to this shift is the full implementation of the Securities and Exchange Commission’s (SEC) new beneficial ownership reporting system, which requires corporations to provide a granular view of the natural persons who ultimately control or profit from an entity, effectively ending the era of opaque nominee arrangements. For investors entering the archipelago in 2026, the convergence of Commonwealth Act No. 108 and modern digital registries means that legal safeguards are no longer just a matter of corporate preference, but a mandatory prerequisite for operational survival. This article examines the critical changes to the Anti-Dummy Law Philippines 2026 update, providing a comprehensive guide for multinational firms and foreign entrepreneurs to navigate the 2026 Foreign Investment Negative List (FINL) while maintaining strict compliance with the Republic’s nationalization laws.

The Legal Framework of Commonwealth Act 108 and P.D. 715 Anti-Dummy Law

The foundation of the Philippine government’s protectionist stance is rooted in decades of legislation designed to preserve specific sectors for its citizens. This policy continues to be strictly enforced through the following mechanisms:

Historical Context of Commonwealth Act No. 108: Originally enacted in 1936, the CA 108 Anti-Dummy Law was established to punish the evasion of nationalization laws. It prohibits any Filipino citizen from allowing their name or citizenship to be used to circumvent foreign equity restrictions. In 2026, this law remains the primary weapon against “dummy” corporations, where a local nominee holds shares on behalf of a foreigner who exercises actual control.
The Amendments under P.D. 715 Anti-Dummy Law: Presidential Decree 715 significantly expanded the scope of the original act by clarifying the role of foreign nationals in the management of partially nationalized businesses. It explicitly prohibits aliens from intervening in the management, operation, administration, or control of such companies, except as technical personnel with express authorization from the Secretary of Justice.
Foreign Directors in the Philippines: Under the “proportionate representation” rule, foreign investors may serve on the Anti-Dummy Law board of directors, but only in proportion to their actual share in the corporation’s capital. If an industry is 60% reserved for Filipinos, the board must reflect that same 60% Filipino majority.
Foreign Management Control: One of the most common anti-dummy law violations involves a foreign national acting as a chairman, president, or manager of a partially nationalized company. Current enforcement in 2026 involves the SEC and the Department of Justice (DOJ) cross-referencing payroll records and corporate filings to identify unauthorized foreign control.
Anti-Dummy Law Penalties: The consequences for non-compliance are severe. The Anti-Dummy Law imprisonment fine remains a significant deterrent, with prison terms ranging from five to 15 years. Furthermore, corporations found in violation face immediate dissolution and the forfeiture of the right, franchise, or privilege acquired in violation of the law.

Navigating the 2026 Beneficial Ownership Reporting and HARBOR System

In an effort to align with global anti-money laundering standards, the Philippine government has shifted its focus from legal title to “beneficial ownership,” making the following requirements essential for all registered corporations:

The Launch of HARBOR: As of January 30, 2026, the SEC has made the Hierarchical and Applicable Relations and Beneficial Ownership Registry (HARBOR) the exclusive platform for disclosure. This system integrates with the electronic Filing and Analysis System (eFAST), ensuring that a verified beneficial ownership declaration supports every General Information Sheet (GIS).
SEC Beneficial Ownership Reporting: Corporations are now required to identify the “natural person” who ultimately owns or controls at least 20% of the voting rights or capital. The new rules state that a corporation cannot be a beneficial owner; the registry must drill down through layers of corporate ownership until a human being is identified.
Categories of Control: The 2026 update classifies control into 9 categories (A-I). This includes Category H, which captures individuals who exercise control through “other means,” such as exclusive use of assets or receipt of profits, and Category I, which identifies senior management if no other person is found.
Beneficial Ownership Disclosure: Transparency now extends to the nature of the control. Whether the power is exercised through a shareholder agreement of a foreign Filipino or through informal influence, the SEC demands explicit documentation of how decisions are made within the entity.
Impact on Dummy Shareholders: The HARBOR system is specifically designed to eliminate the use of Filipino dummy nominees. By requiring disclosure of the source of funds for share purchases and the ultimate destination of dividends, the government can easily flag a nominee shareholder in the Philippines who lacks the financial capacity to own the shares they represent.

Industry Restrictions and the Foreign Investment Negative List (FINL) 2026

Foreign investors must match their corporate goals with the limitations set by the FINL, which categorizes industries based on the degree of allowable foreign participation:

Total Prohibitions (List A): Certain sectors remain entirely closed to foreign equity. These include mass media (excluding internet-based businesses), small-scale mining, the practice of professions (except where reciprocity exists), and the retail trade of enterprises with a paid-up capital of less than 25 million pesos.
The 40% Foreign Equity Restrictions: Many industries, such as the exploration and development of natural resources, the operation of public utilities, and the ownership of private lands, are capped at 40% foreign equity. In these sectors, the Filipino ownership requirement in the Philippines is strictly 60%.
FINL Philippines 2026 Special Provisions: The latest update reflects the nuances of the amended Public Service Act. While many “public services” are now open to 100% foreign ownership, “public utilities” such as electricity distribution, water pipeline systems, and petroleum pipelines remain subject to the 60/40 rule.
Recruitment Compliance: The private recruitment of employees, whether for local or overseas employment, is restricted to a maximum of 25% foreign equity. This is a critical area for investors to monitor, as unauthorized management in a recruitment agency is a frequent target for anti-dummy law enforcement.
Investment Compliance Checklist: Before establishing a presence, firms should consult the Twelfth Regular Foreign Investment Negative List to determine if their specific business activity requires a Filipino partner. Failure to correctly identify a restricted industry is the first step toward a potential violation of anti-dummy laws.

Strategic Corporate Structuring and the Necessity of Professional Guidance

Because the Philippine legal landscape is rife with bureaucratic hurdles and strict nationalization laws, establishing a compliant entity is exceptionally complicated. Relying on an experienced EOR provider in the Philippines or a legal consultant is no longer optional; it is a critical risk-mitigation strategy.

Corporate Structuring for Foreign Investors: To protect foreign investments in the Philippines, firms must employ robust legal frameworks that avoid the pitfalls of the Control Test Philippines foreign ownership. This often involves clear-cut voting rights restrictions in the Philippines and well-drafted shareholder agreements that protect minority investors without overstepping management’s limits.
How to Avoid Anti-Dummy Law: The most effective way to avoid violations is to ensure that the Filipino partners are legitimate investors with the financial means to support their equity. This avoids the appearance of a dummy corporation in the Philippines and ensures that the beneficial ownership disclosure is honest and defensible.
Employer of Record Philippines as an Entry Strategy: Many companies choose to hire employees in the Philippines without an entity by utilizing global EOR Philippines services. This allows them to employ staff in the Philippines without local entities during the initial market-entry phase, ensuring total Philippines EOR payroll and compliance. At the same time, the long-term corporate structure is finalized.
Recruitment Process in the Philippines: For firms looking to scale, it involves more than just finding talent. It requires managing recruitment agency fees in the Philippines and ensuring that the salary negotiation process for hiring there complies with local labor laws. Often, firms ask how long recruitment takes in the Philippines, which can range from 4 to 8 weeks, depending on the role’s seniority.
Onboarding Requirements Philippines: Once talent is found, the onboarding requirements in the Philippines include mandatory registration with the Social Security System (SSS), PhilHealth, and Pag-IBIG Fund, as well as tax registration with the Bureau of Internal Revenue (BIR).
The Importance of Triple i Consulting: Navigating these complexities—from the initial recruitment process in the Philippines to the final SEC HARBOR filing—requires specialized knowledge. Triple i Consulting is a trusted provider of these services, helping investors manage everything from EOR services in the Philippines to complete corporate registration. Because the Anti-Dummy Law Update involves intricate reporting and severe penalties, seeking Triple i Consulting’s help is vital to ensuring your business remains on the right side of the law when outsourcing employment to the Philippines.

Wrapping Up

The 2026 regulatory environment in the Philippines is characterized by a “trust but verify” approach to foreign investment. While the government has opened doors in sectors like renewable energy and telecommunications, it has simultaneously built a high-tech wall around nationalized industries through the HARBOR system and more aggressive reporting mandates. For any foreign national asking, “Can foreigners own a business in the Philippines?” or “Can foreigners be directors in the Philippines?”, the answer is a nuanced yes, provided they comply with the Philippines’ constitutional foreign ownership limits.

Successfully operating in this market requires a proactive approach to reporting on risks posed by dummy corporations in the Philippines and a commitment to legal safeguards for foreign investors in the Philippines. By prioritizing compliance and using reputable EOR solutions in the Philippines, investors can take advantage of the country’s booming economy without the looming threat of legal repercussions. As the government continues to refine the definition of control and ownership, staying informed of every Anti-Dummy Law Update will be the hallmark of a successful and sustainable Philippine venture.

Is Assistance Available?

Yes, Triple i Consulting can help by providing expert legal guidance and corporate structuring services to ensure your business remains fully compliant with the latest regulations. Our team of specialists is dedicated to simplifying the complex business registration and reporting processes for foreign investors in the Philippines. Contact us today to schedule an initial consultation with one of our experts: