M&A Due Diligence in the Philippines (2026): EO No. 113, FINL‑13 & Practical Playbook for Foreign Acquirers

M&A due diligence philippines has entered a new phase in 2026 following the issuance of Executive Order No. 113, which introduced the 13th Foreign Investment Negative List (FINL‑13) and recalibrated sectoral ownership ceilings, licensing expectations and compliance obligations for inbound acquirers. For corporate buyers, private equity sponsors and in‑house deal teams, the practical consequence is immediate: ownership limits must be screened against the revised negative list, licence transferability must be confirmed with the relevant regulator, and anti‑dummy exposure must be assessed before signing. This article sets out an executable playbook, covering ownership mapping, anti‑dummy risk, sector licences, contractual protections and post‑closing compliance, grounded in the primary regulatory framework.

The aim is to move beyond policy summaries and give acquirers a transaction‑ready framework they can apply from the first screening call to the 180‑day post‑closing review.

Introduction, why FINL‑13 matters for M&A

Executive Order No. 113 updates the Foreign Investment Negative List, the schedule the Philippines uses to identify economic activities where foreign equity participation is restricted or conditioned under the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended). Because the negative list defines both the activities a foreign acquirer may hold and the ceilings that apply to each, any change to it has direct transactional consequences. A target that was comfortably acquirable under the prior list may now sit closer to a ceiling; conversely, sectors that have been liberalised may open structuring options that were previously unavailable.

The deal‑level issues flow immediately from this. Buyers must determine whether the target’s registered and actual business activities fall within a restricted entry, whether the proposed foreign equity percentage respects the applicable ceiling, and whether sectoral licences will survive the change of control or require fresh regulator consent. In practice, the diligence burden under FINL‑13 tends to fall most heavily in regulated sectors, aviation, energy, telecommunications, financial services and retail, where the interaction between ownership limits and licensing conditions is most acute. A disciplined, source‑anchored approach to m&a due diligence philippines is now the baseline for transaction readiness.

Quick take, the transactional checklist for deal teams

The following executive checklist is structured by deal phase. Each item carries a risk indicator so that deal teams can triage effort: High (deal‑critical, resolve before signing where possible), Medium (resolve before closing), and Low (monitor and address post‑closing).

Pre‑signing

• Ownership ceiling screen (High). Map the target’s actual and registered activities against FINL‑13 entries and confirm the maximum permitted foreign equity.
• Licence and permit inventory (High). Build a complete register of sectoral licences, franchises and permits, flagging each as transferable, conditionally transferable or requiring reapplication.
• Anti‑dummy indicators (High). Identify nominee shareholders, undisclosed beneficial owners, unusual voting arrangements and non‑arm’s‑length capital flows.
• Material contracts review (Medium). Check change‑of‑control clauses in key supply, lease, financing and customer agreements.
• Corporate records and cap table (Medium). Reconcile the share register, stock and transfer book, and beneficial ownership disclosures.

Pre‑closing

• Regulator consents (High). Secure or progress sector approvals (for example, from the DOE/ERC, NTC, CAAP, SEC or BSP as applicable) that are conditions precedent.
• Capital repatriation planning (Medium). Confirm foreign investment registration pathways to preserve future repatriation and dividend remittance rights.
• Escrow and holdback sizing (Medium). Size regulatory risk holdbacks against identified anti‑dummy or licensing exposures.
• Competition clearance (Medium). Assess whether notification thresholds under the Philippine Competition Act are triggered and factor clearance timelines into the deal calendar.

Closing

• Documentary completeness (Medium). Verify executed transfer deeds, board and stockholder approvals, and updated corporate records.
• Conditions precedent satisfaction (High). Confirm all regulatory conditions precedent are satisfied or properly waived.

Post‑closing

• Statutory filings (High). Lodge SEC filings reflecting the change in ownership and any change in foreign equity.
• Foreign investment registration (High). Complete BSP registration for capital account transactions where remittance rights are desired.
• Licence notifications and renewals (Medium). Notify sector regulators and calendar renewal deadlines.
• Remediation execution (High where triggered). Implement any agreed cure of anti‑dummy or ownership issues on the contracted timeline.

This checklist is the backbone of a defensible m&a due diligence philippines process. Each line should be mapped to a document request, a responsible owner and a verification source before the transaction proceeds.

Mapping EO No. 113 (FINL‑13) to common M&A issues

The single most important diligence task is mapping the target’s business to the correct FINL‑13 entry. The negative list is activity‑based, not entity‑based, so a company that conducts several lines of business may sit across more than one entry, each with its own ceiling. Where a target engages in a restricted activity alongside unrestricted ones, the structure may need to isolate the restricted activity or accept the lowest applicable ceiling across the group.

How FINL‑13 changed ownership ceilings

Executive Order No. 113 revises the schedule of activities reserved wholly or partially for Philippine nationals. For acquirers, the key is to compare the ceiling applicable to each relevant activity against the equity percentage the buyer intends to hold. Where the intended stake exceeds the ceiling, the transaction must either be restructured, for example, through a joint venture with a qualified local partner, a reduced equity position with control secured by contract, or an asset deal that leaves the restricted licence with a compliant vehicle, or abandoned for that activity.

The table below illustrates how pre‑ and post‑FINL‑13 ceilings should be read in a transaction context. The positions shown are illustrative; the verbatim entries in Executive Order No. 113, as published in the Official Gazette, must be used for any live deal, and several ownership limits are set by the Constitution and sector‑specific statutes that the negative list reflects rather than creates.

Sectors with new or tightened limits

Where FINL‑13 tightens a ceiling or introduces a new condition, legacy structures that were compliant under the earlier list may no longer be. Diligence should specifically test whether the target was relying on a position that EO No. 113 has narrowed, because a non‑compliant structure acquired without remediation transfers the exposure, including potential anti‑dummy liability, to the new foreign owner. Conversely, liberalised sectors reward early movers: where a ceiling has been relaxed, the acquirer may consolidate control through direct equity rather than relying on contractual workarounds.

Practical impact on share versus asset purchases

The choice between a share purchase and an asset purchase is frequently driven by FINL‑13 and licensing considerations rather than tax alone. A share purchase inherits the target’s entire licensing and compliance history, including any latent anti‑dummy exposure. An asset purchase can, in principle, allow the buyer to acquire only the assets it wants and to seat restricted licences in a compliant vehicle, but many sectoral licences do not transfer with assets and must be reapplied for or expressly consented to by the regulator. Accurate m&a due diligence philippines therefore treats structure selection as a regulatory decision first and a commercial one second.

Anti‑dummy law, exposure assessment and remediation

The Anti‑Dummy Law (Commonwealth Act No. 108, as amended) is the enforcement backbone behind the foreign ownership limits in the negative list. It exists to prevent foreign investors from circumventing nationality restrictions through nominee arrangements, and it is the single largest latent risk in a Philippine acquisition because exposure can be criminal as well as civil.

What the anti‑dummy law targets

In broad terms, the Anti‑Dummy Law prohibits arrangements that allow foreign nationals to exercise rights, enjoy privileges or control activities reserved to Philippine nationals through the use of local persons as fronts or dummies. Enforcement can carry criminal sanctions against the parties involved and administrative consequences for the business, including the loss of the very rights the arrangement sought to secure. Judicial interpretation of these provisions, available through the Supreme Court’s decisions and eLibrary, reinforces that the law looks to the substance of control, not merely the registered share percentages.

Typical red flags in acquired targets

Diligence should actively search for the following indicia, each of which warrants deeper investigation:

• Nominee shareholders. Local shareholders holding equity on behalf of, or financed by, a foreign party.
• Undisclosed beneficial ownership. Gaps between the registered share register and the economic reality of who funds and benefits from the shares.
• Disproportionate voting or veto arrangements. Contractual rights that give a minority foreign holder effective control over reserved activities.
• Non‑arm’s‑length capital flows. Loans, guarantees or funding by the foreign party to the nominal local owner, especially where repayment is not genuine.
• Side agreements. Undisclosed voting trusts, call options or management arrangements that reallocate control.

Remediation options

Where exposure is identified, buyers should work through a remediation ladder before deciding whether to proceed, reprice or walk away:

• Disclosure and cure. Require the seller to unwind nominee arrangements and restore compliant ownership before closing.
• Restructuring. Reconfigure the holding structure so that foreign equity and control sit within the permitted ceiling, including moving restricted activities into a separately compliant vehicle.
• Consent and regularisation. Where a sectoral regulator’s consent or a change in the business’s registration can lawfully resolve the issue, pursue it as a condition precedent.
• Negotiated allocation. Where historic exposure cannot be fully cured, allocate the risk contractually through specific indemnities and holdbacks sized to the potential penalties.

Sample warranty and escrow wording

Transaction documents should contain a dedicated anti‑dummy representation and a holdback mechanism. Illustrative short‑form language, to be adapted by local counsel for the specific deal, might read:

“The Seller represents and warrants that the Company’s ownership, control and operation of each of its business activities comply in all material respects with the applicable foreign equity limitations under the Foreign Investment Negative List and with the Anti‑Dummy Law, and that no nominee, trust, option, voting or financing arrangement exists that permits any foreign person to exercise rights reserved to Philippine nationals beyond the permitted threshold.”

“An amount equal to the Regulatory Holdback shall be retained in escrow and released only upon the later of (i) expiry of the anti‑dummy survival period and (ii) satisfactory evidence that any identified non‑compliance has been fully remediated, with the Buyer entitled to draw against the escrow for fines, penalties, losses and remediation costs arising from any breach of the anti‑dummy representation.”

Anti‑dummy analysis is the most consequential strand of m&a due diligence philippines, because unremediated exposure does not stay with the seller, it follows the business into the buyer’s hands.

Sector licences and regulator approvals, transferability in m&a due diligence philippines

Licences and permits are often the real gating items in a Philippine deal. Many are tied to the identity, ownership or control of the holder, so a change of control can trigger a consent requirement, a notification obligation or, in some cases, a need to reapply. The diligence objective for each licence is to answer three questions: Does the licence survive the transaction? If not, what consent or reapplication is required? And what is the realistic timeline and set of conditions attached?

Aviation (CAAP)

Aviation assets and operations are among the most tightly controlled. Air operator certificates and aircraft registry matters are regulated by the Civil Aviation Authority of the Philippines, and a change of control in an operator typically engages regulator scrutiny. Buyers should confirm whether the operating certificate can be maintained through the change of control or whether a fresh approval process is required, and should factor aircraft registration and nationality requirements into both structuring and timing.

Energy (DOE / ERC)

Generation, distribution and related energy permits are overseen by the Department of Energy and the Energy Regulatory Commission. These licences frequently cannot be transferred freely; regulator consent to a change of control is commonly required, and conditions may attach to protect supply obligations and tariff arrangements. Where FINL‑13 has liberalised energy ownership, the ownership ceiling may no longer be the binding constraint, the licensing consent timeline becomes the critical path.

Telecommunications (NTC)

Telecommunications operators hold licences and frequency assignments regulated by the National Telecommunications Commission. Spectrum and frequency rights are not freely transferable and generally require regulator approval; a change of control over a licensed operator will therefore usually need NTC engagement. Diligence should map every licence and assignment the target relies on and confirm the specific consent pathway for each.

Financial services (SEC / BSP / Insurance Commission)

Acquisitions of regulated financial institutions engage the Securities and Exchange Commission, the Bangko Sentral ng Pilipinas and, for insurers, the Insurance Commission. Changes in significant ownership or control typically require prior approval, and fit‑and‑proper or capitalisation conditions may apply. These approvals are almost always structured as conditions precedent because closing without them can render the transaction ineffective or expose the business to enforcement.

Retail and real property‑linked activities

Retail and activities touching land or real property interests are sensitive because foreign ownership of land is constrained under the Constitution and retail trade is conditioned on capitalisation and activity thresholds under the Retail Trade Liberalization Act. In share deals, the acquirer should examine foreign ownership embedded in leases, real property holdings and any downstream subsidiaries, since a compliant parent can still carry non‑compliant exposure at a lower tier.

Licence transfer checklist and timing

• Classify each licence. Transferable with notice, transferable with consent, or requiring reapplication.
• Identify the trigger. Change of ownership, change of control, or change in registered activity.
• Map the documents. Board approvals, updated corporate records, financial and fit‑and‑proper materials, and regulator forms.
• Estimate the timeline. Build the longest critical‑path approval into the signing‑to‑closing calendar.
• Decide the mechanism. Condition precedent where consent is essential; post‑closing notification where only notice is required.

Pre‑closing approvals versus post‑closing notifications

The governing principle is that any approval whose absence could void the transaction, expose the business to enforcement or strip a core licence should be a condition precedent. Approvals and notifications that are procedural, where the regulator’s role is to record rather than to authorise, can usually be handled as post‑closing covenants. Getting this allocation right is central to m&a due diligence philippines, because mis‑classifying a core consent as a post‑closing item is one of the most common and most damaging errors in regulated‑sector deals.

Contracting and deal packaging, reps, covenants, indemnities, escrow and conditionality

Diligence findings only protect the buyer if they are translated into the transaction documents. The contracting phase is where regulatory risk is allocated, priced and made enforceable.

Drafting priorities

The representation package should include specific warranties on compliance with the foreign ownership limitations under FINL‑13, on compliance with the Anti‑Dummy Law, and on the absence of nominee, trust, option or financing arrangements that mask beneficial ownership. Warranties on the validity and transferability of each material licence should be tied directly to the licence inventory produced in diligence, so that the buyer’s recourse maps precisely to the regulatory risks identified.

Recommended covenants

• Pre‑closing conduct. The seller operates the business in compliance with applicable ownership and licensing law and does not alter the cap table or licence position without consent.
• Regulatory consents. The seller uses best efforts to obtain all required regulator approvals, cooperates with filings, and provides information the regulator requests.
• Cure covenant. The seller undertakes to remediate identified non‑compliance before closing, or to a defined standard within an agreed window.

Conditionality and indemnity triggers

The conditionality matrix should distinguish clearly between what must be satisfied before closing and what is managed afterwards. The sample below illustrates the approach:

Indemnities should be specific where exposure is identified, for example, a dedicated indemnity for fines, penalties and remediation costs arising from anti‑dummy or ownership non‑compliance, and should be supported by an escrow or holdback sized to the realistic quantum of that exposure, with a survival period long enough to cover the relevant enforcement horizon.

Post‑closing compliance and reporting, the 90 to 180‑day roadmap

The transaction does not end at completion. A disciplined post‑closing programme protects the value acquired and closes out the regulatory obligations triggered by the change of control.

Immediate filings

Within the first phase after closing, the acquirer should lodge the required Securities and Exchange Commission filings reflecting the change in ownership and any change in foreign equity, update the corporate records and stock and transfer book, and attend to tax registration consequences of the transfer with the Bureau of Internal Revenue. Where the buyer intends to preserve the right to remit dividends and repatriate capital, registration of the foreign investment with the Bangko Sentral ng Pilipinas for the relevant capital account transaction should be completed in accordance with current BSP rules, because the ability to register can be time‑sensitive.

Licence renewals and regulator notifications

Any sector notifications that were allocated as post‑closing items must be filed within their deadlines, and the acquirer should calendar every licence renewal date identified in diligence. In regulated sectors, a missed renewal can be as damaging as a failed consent, so renewal tracking should be built into the integration plan from day one.

Monitoring and remediation

Where diligence identified anti‑dummy or ownership exposure that was addressed through a post‑closing covenant rather than a pre‑closing cure, the remediation plan should be executed on its agreed timeline, with evidence retained to support release of any escrow. The buyer should also implement ongoing monitoring so that the structure remains compliant as the business evolves, since later changes in activity can move the company across a FINL‑13 ceiling. Treating post‑closing compliance as a continuation of m&a due diligence philippines, rather than a separate afterthought, is what keeps the acquired value intact.

Case studies and practical examples

Aviation lessor acquisition with licence transfer. In an anonymised aviation transaction, the buyer’s diligence revealed that the target’s operating certificate would not survive the proposed change of control without regulator engagement. The parties restructured the deal timeline to make the aviation consent a condition precedent, sequenced the regulator filings early, and held back a portion of consideration pending confirmation that the operating authority would continue. The lesson: in aviation, the licence consent, not the share price, usually dictates the deal calendar.

Retail acquisition with an ownership ceiling issue. In an anonymised retail deal, diligence found that the target’s structure sat above the applicable foreign equity threshold for one of its activities, with a local shareholder whose funding trail suggested a nominee arrangement. Rather than abandon the deal, the parties agreed a pre‑closing cure, unwinding the nominee arrangement and reconfiguring the equity to a compliant position, backed by an anti‑dummy indemnity and an escrow for any residual historic exposure. The lesson: identified ownership and anti‑dummy issues are frequently curable, but only if they are found early and allocated clearly in the documents.

Conclusion and recommended next steps

Executive Order No. 113 and FINL‑13 have reset the groundwork for m&a due diligence philippines, and acquirers who treat the negative list as a live transactional input rather than a background policy document will move faster and price risk more accurately. The top five priorities are clear: map the target’s activities to the correct FINL‑13 entries and ceilings; assess anti‑dummy exposure as a deal‑critical, inheritable risk; confirm the transferability of every sectoral licence and classify each consent as a condition precedent or post‑closing item; translate diligence findings into specific representations, indemnities and escrows; and execute a disciplined post‑closing compliance programme across the first 90 to 180 days.

Buyers planning a transaction should begin with an early diligence review against the current negative list and the relevant regulator guidance, and should engage experienced local counsel to validate ownership positions, licence pathways and remediation strategy before committing to structure. For deal teams seeking specialist support, the foreign investment lawyers, Philippines directory is a useful starting point.

Sources

1. Official Gazette of the Republic of the Philippines
2. Securities and Exchange Commission (Philippines)
3. Bangko Sentral ng Pilipinas (BSP)
4. Department of Trade and Industry (DTI)
5. Board of Investments (BOI)
6. Civil Aviation Authority of the Philippines (CAAP)
7. Department of Energy (DOE)
8. Energy Regulatory Commission (ERC)
9. National Telecommunications Commission (NTC)
10. Supreme Court of the Philippines, E‑Library
11. Philippine Competition Commission (PCC)
12. Bureau of Internal Revenue (BIR)