TL;DR: You can buy an existing Philippine business as a foreigner, but the same ownership caps apply, and a share purchase inherits every liability the company ever accumulated. The deal lives or dies on due diligence: corporate standing, tax filings, labor exposure, permits, and who really owes what. Shares are fast; assets are clean. Price the risk or walk.
Why foreign founders look at acquisitions
Fresh incorporation takes weeks and starts with zero customers. Buying an existing company buys speed: existing permits, staff who know the work, contracts with customers and suppliers, sometimes a PEZA registration or a location that would take a year to replicate. In restricted sectors, an acquisition can also deliver the Filipino equity partner you need, though the Anti-Dummy rules apply to acquisitions just as they apply to startups.
The trade is speed for risk. You are buying the company’s entire history, including the parts the seller hopes you will not check.
Share purchase vs asset purchase
Share purchase. You buy the seller’s shares, the company keeps its identity, and everything stays: contracts, permits, employees, bank accounts, and liabilities. This is usually the faster path and the only sensible one when the company’s value lives in its non-transferable registrations.
Asset purchase. A new or existing company buys selected assets: equipment, inventory, customer contracts, maybe trademarks. Liabilities stay with the seller to the extent the agreement says so. The cost is friction: consents from counterparties, re-issuance of licenses in the buyer’s name, and re-hiring staff (with the labor-law consequences of that transition).
Foreign buyers in a hurry tend to over-prefer share deals. If the target’s filings are messy, an asset purchase into your own newly incorporated company is frequently cheaper than discovering year-old BIR exposure after closing.
The due diligence checklist
Work through every item below and get documentary proof, not assurances:
- Corporate standing. SEC certificate, latest articles and by-laws, and the current GIS. Confirm the shares being sold actually exist, are fully paid, and that the sellers own them. Cross-check the GIS filing history for gaps.
- Tax health. BIR certificate of registration, filings and payments for the last three years, open assessments, and any open cases. Unpaid withholding tax is the classic inherited surprise.
- Labor. Employee list with salaries, tenure, and benefits; SSS, PhilHealth, and Pag-IBIG contribution compliance; DOLE inspection history; pending labor cases. Under Philippine succession rules, a share purchase keeps every employee with all accrued entitlements.
- Permits and registrations. LGU business permit and barangay clearance, industry licenses, FDA or PEZA registrations, and the exact entity and address each one names.
- Contracts. Customer and supplier agreements, especially change-of-control clauses, exclusivity terms, and anything the company has signed personally.
- Debts and contingencies. Bank loans, director loans, guaranties, pending litigation, and unpaid utilities that carry deposits.
- Location. Lease assignment terms, or proof of clean title if property is in the deal, which immediately raises the land-ownership rules.
For anything above hobby size, pay Philippine counsel and an accountant to run this with you. The checklist is not the expensive part; skipping items is.
How the transfer works
In a share purchase, the mechanics are a deed of assignment of shares, payment of the transfer taxes (capital gains tax by the seller, documentary stamp tax by the buyer, allocation written into the deed; current rates in our capital gains tax guide), delivery of the indorsed stock certificates, and updating the corporation’s records: new GIS naming you as stockholder, new officer slate, new signatories at the banks and the BIR. The company’s annual compliance calendar continues without interruption, now on your watch.
Budget time for the officer and signatory updates. Until the bank mandate changes, the seller’s people can still sign on the company’s accounts, which is exactly as dangerous as it sounds.
When buying beats building
Acquisition wins when the target holds something slow to build: a PEZA-registered operation, an industry license with a queue, a lease in a building with no vacancies, or a customer book that pays for the deal. It loses when the target’s main asset is “established” in the sense that it has been operating untidily for years. If your diligence summary has more conditions than confirmations, take the incorporation route and build it clean.
This guide is general information, not legal advice on your specific facts. Book a consultation if you are evaluating a specific target, or see our corporate services for post-acquisition compliance handover.
Frequently asked questions
Can a foreigner buy an existing business in the Philippines?
Yes, within the same foreign-ownership limits that apply to setting up. Buying the shares of an existing company means you inherit its ownership profile, so the target must already be compliant with Foreign Investment Negative List caps, or the deal has to restructure equity before closing.
Is it better to buy shares or buy the assets of a Philippine business?
Shares transfer the whole company, including its history: contracts, permits, staff, and every undisclosed liability. An asset purchase lets you cherry-pick what you take and leave the liabilities behind, but licenses and contracts often need re-issuance or consent. Most small foreign acquisitions weigh share deals for speed against asset deals for cleanliness.
What taxes apply when buying shares of a Philippine corporation?
The seller generally bears capital gains tax on the sale of unlisted shares and the buyer withholds documentary stamp tax on the transfer. The rates and who pays what should be written into the deed of sale; see our capital gains tax guide for the current rates.
Do existing permits transfer when I buy the company?
SEC registration, BIR registration, and most licenses attach to the company, so they survive a share purchase. LGU permits, FDA licenses, PEZA registrations, and bank mandates need name-of-officer or address updates, and some regulators require notification or fresh application when control changes.
Official sources
Primary references this guide is checked against.
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