The Anti-Dummy Law in the Philippines, Explained (2026)

If you have been told to “just put a Filipino name on the shares,” stop. That is precisely the arrangement the Anti-Dummy Law — Commonwealth Act No. 108 — was written to punish, and the people who suggest it rarely carry the criminal risk you would. The good news: in 2026, most foreign founders do not need a nominee at all.

What the Anti-Dummy Law actually prohibits

The Anti-Dummy Law makes it a crime to use a dummy — a Filipino who holds equity, a directorship, or a franchise on paper while a foreigner secretly owns, controls, or benefits from it — to evade a nationality restriction. The target is the deception, not the foreigner’s presence in business.

It bites in two distinct ways:

1. Evasion of equity limits. Where a law caps foreign ownership (say, at 40%), you cannot hand the remaining 60% to a Filipino who is a shareholder in name only. If the Filipino does not really pay for, control, or profit from those shares, they are a dummy and the structure is unlawful.
2. Foreign participation in management. For partly-nationalised activities, the law also limits foreigners from intervening in management, operation, or control beyond their permitted proportion — even if the equity split itself looks compliant. You cannot use a side agreement, proxy, or voting trust to run a company you are not allowed to run.

Both the foreigner and the Filipino dummy are liable. So are directors and officers who permit it, and the lawyers or accountants who knowingly paper it.

How it connects to foreign-equity limits and the FINL

The Anti-Dummy Law has no independent list of restricted sectors. It enforces limits set elsewhere — the Constitution, the Foreign Investments Act, and sector-specific laws — which are consolidated for reference in the Foreign Investment Negative List (FINL). The current list is the 13th Regular FINL, issued as Executive Order 113, effective 2 May 2026.

This is the part most founders miss: the Anti-Dummy Law only matters where a restriction exists. If your activity is not on the FINL, there is no equity cap to evade, and a nominee structure solves a problem you do not have. See the 2026 FINL explained to check your specific activity.

The real limits of nominee shareholders and directors

A genuine Filipino partner — one who actually invests their own money, bears risk, votes their shares, and shares in profit — is perfectly legal and often valuable. The line is substance. The arrangement becomes a dummy scheme when any of these appear:

• The Filipino’s shares are funded by the foreigner (a loan-back or “buy-back” promise).
• A side deed assigns the foreigner the voting rights, dividends, or an option to seize the shares.
• The Filipino has no real authority and merely signs where told.

The same logic applies to a nominee director. A Filipino on the board to satisfy a residency or majority requirement must genuinely exercise the duties of a director. A figurehead who rubber-stamps a foreigner’s decisions is evidence of an Anti-Dummy violation, not a shield against one. Treat a nominee as a governance role with real fiduciary duty — never as a costume for foreign control.

Penalties — and who carries them

Convictions under Commonwealth Act No. 108 carry imprisonment and fines, imposed on the foreigner and the Filipino dummy alike. Corporate officers and complicit professionals face the same exposure. Beyond the criminal sanction, the corporation can forfeit the rights, franchises, or licences it obtained through the scheme — meaning the business you built can be unwound. Because liability is personal and criminal, you cannot contract or insure your way out of it, and a Filipino “partner” who later turns hostile holds genuine leverage over you.

How to structure legitimately instead

For the large majority of activities, the clean path is straightforward:

• Confirm your activity is off the FINL, then incorporate a domestic corporation with 100% foreign ownership. No nominee, no equity cap, no Anti-Dummy exposure.
• Meet the real capital requirement. Fully foreign-owned domestic enterprises generally carry a higher paid-up capital threshold (commonly USD 200,000, reduced for export or qualifying enterprises). Funding it properly is cheaper than a criminal defence.
• If you genuinely export 60% or more, you may qualify as an export enterprise with lower capital and full foreign ownership.
• If your activity truly is restricted, take a real Filipino partner with real money and real rights — or choose a different structure such as a branch or representative office. Do not fake the 60%.
• Appoint a compliant resident agent where the law requires one. This is a legitimate, named role for service of process — entirely different from a dummy, and a normal cost of doing business as a foreign-owned entity.

The instinct to reach for a nominee almost always comes from outdated advice predating the recent liberalisation of the Foreign Investments Act, the Public Service Act, and the Retail Trade Act. Under the 2026 rules, the legal route is usually the simpler and cheaper one — and it is the only one that lets you sleep, keep your licence, and actually control the company you paid to build.