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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

Aurora Labs, Inc. is a domestic corporation. As of the Grandfather Date, December 31, 2010, Filipino ownership in Aurora Labs stood at 66%. On February 1, 2023, a foreign investor purchased 45% of Aurora Labs’ outstanding capital from Filipino stockholders, reducing Filipino ownership to 21% and increasing foreign ownership to 79%. (a) Identify the doctrine at issue and state the controlling rule of the Grandfather Rule as it applies to corporate nationality. (b) Apply the rule to Aurora Labs’ facts and determine whether Aurora Labs retains Filipino nationality after the transaction. Explain your reasoning and any conditions that could change the result. (c) If the Grandfather Date had instead been December 31, 2010 with 68% Filipino ownership, would your answer differ? Explain briefly.

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Under the Grandfather Rule, the threshold is 68% on the Grandfather Date; since Aurora had 66%, it would not qualify. It remains Filipino only if the foreign dilution does not reduce Filipino ownership below 60% within a given grace period or unless the Grandfather Date is reset. If the Grandfather Date had been 68% ownership instead, Aurora would not retain Filipino nationality because it failed to meet the higher threshold. It remains Filipino because as of the Grandfather Date Aurora Labs had at least 60% Filipino ownership, and the Grandfather Rule preserves Filipino nationality despite later foreign dilution (Gokongwei v. SEC, G.R. No. L-45911, Apr. 11, 1979).

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