Grandfather Rule Flashcards
(1 cards)
What is the grandfather rule?
The grandfather rule is the method by which the percentage of Filipino equity in a corporation engaged in nationalized and/or partly nationalized areas of activities, provided for under the Constitution and other applicable laws, is accurately computed, in cases where corporate shareholders with foreign shareholdings are present, by attributing the nationality of the second or even subsequent tier of ownership to determine the nationality of the corporate shareholder. Thus, to arrive at the actual Filipino ownership and control in a corporation, both the direct and indirect shareholdings in the corporation are determined. In the case of a multi-tiered corporation, the stock attribution rule must be allowed to run continuously along the chain of ownership until it finally reaches the individual stockholders.
The purpose of this rule is to trace the nationality of the stockholder of investor corporations to ascertain the nationality of the corporation where the investment is made.
