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Unbundeled Shares: Circumventing Corporate Nationality Rules Through Swaps, Options and Other Devices

Publication date: 28.09.2018

Financial Law Review, 2018, Issue 11 (3)/2018, pp. 13 - 45

https://doi.org/10.4467/22996834FLR.18.014.9304

Authors

Russell Stanley Q. Geronimo
University of the Philippines – College of Law
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Titles

Unbundeled Shares: Circumventing Corporate Nationality Rules Through Swaps, Options and Other Devices

Abstract

Corporate nationality clauses have a simple and seemingly innocuous language: “corporations at least X per centum of whose capital is owned by Filipino citizens”. This presupposes that “capital” is a unified bundle of economic and control rights. However, modern finance and contract law can “unbundle” economic rights from control rights through the use of options, swaps, forwards, hybrid instruments, variable interests, and a vast catalogue of contractual arrangements. Unbundled economic rights allow foreign investors to have economic interest without ownership of shares, and unbundled control rights allow foreign minority stockholders to have effective control without majority of voting rights. Does this circumvent foreign equity limitations? Do the control test, beneficial ownership doctrine and other corporate nationality rules render them illegal?

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Information

Information: Financial Law Review, 2018, Issue 11 (3)/2018, pp. 13 - 45

Article type: Original article

Authors

University of the Philippines – College of Law

Published at: 28.09.2018

Article status: Open

Licence: CC BY-NC-ND  licence icon

Percentage share of authors:

Russell Stanley Q. Geronimo (Author) - 100%

Article corrections:

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Publication languages:

English