April 3, 1997

DAR OPINION NO. 34-97

Atty. Margaret O. Chua

2nd Floor EAA Bldg.

No. 6 Road 3, Project 6

Quezon City

Dear Atty. Chua:

This has reference to your letter dated 3 March 1997 seeking opinion on the following queries posed therein, to wit:

1)        Whether a corporation (with 40% foreign equity) can acquire by purchase agricultural lands?

2)        If in the affirmative, what is the extent of the area that can be purchased, that is, can a corporation acquire more than five (5) hectares?

You state that you were retain as counsel in a certain corporation; that said corporation is contemplating to purchase hectares of land in different provinces; and that these lands are classified as agricultural (irrigated and unirrigated) but all of which are untenanted.

Anent your first query, by express provision of the Philippine Constitution, corporations both domestic and foreign are prohibited to acquire or own by purchase public agricultural lands in the Philippines. Section 3 of Article XII of the 1987 Constitution (National Economy and Patrimony) pertinently provides that: "private corporations or associations may not hold such lands of the public domain except by lease, for a period not exceeding twenty five (25) years, renewable for not more than twenty five (25) years, and not to exceed on thousand (1,000) hectares in area."

However, it is believed that the aforecited prohibition does not apply to agricultural lands of private ownership. This means that a corporation of Filipino ownership can acquire said lands by purchase in the Philippines without transgressing any constitutional provision relative to acquisition of private agricultural lands. Specifically, this is one of the privileges enshrined in the 1987 Constitution which can be enjoyed solely by Filipino citizens, corporations or associations. By Filipino ownership, it does not mean that the corporation must be one of hundred percent (100%) Filipino capitalization; it is enough that at least sixty percent (60%) of the capital is owned by Filipino citizens.

Section 2 of R.A. No. 6657 (Comprehensive Agrarian Reform Law) expressly provides that: "owners of agricultural land have the obligation to cultivate directly or through labor administration the lands they owned and thereby make the land productive". Clearly, the law suggest that cultivation requirement need not be performed personally as the law allows labor administration in the alternative. Nonetheless, only Filipino corporations are capacitated to acquire by purchase private agricultural lands in the Philippines. Through this proscription, any intent to circumvent the acquisition of private agricultural lands through the use of a dummy can be effectively safeguarded.

Anent your second query, Filipino corporations are allowed to acquire private agricultural lands only up to a maximum area of five (5) hectares. Section 6 of R.A. 6657 (Comprehensive Agrarian Reform Law) expressly provides in part that: "no person may own or retain, directly of indirectly, any public or private agricultural land . . ., but in no case shall retention by the landowner exceed five (5) hectares". The term "person" has been interpreted in the generic sense so as to include both natural and juridical persons. Qualified Filipino stockholders can likewise own a maximum area of five (5) hectares in their individual names or personal capacity since it is a settled rule in corporation law that a corporation has a personality distinct and separate from that of its stockholders.

We hope to have clarified the matters with you.

Very truly yours,

(SGD.) ARTEMIO A. ADASA, JR.

Undersecretary for Legal Affairs, and Policy and Planning