Presentation and Analysis of Data

1. Certificate of Time Deposit

Certificate of Time Deposits (CD) are savings certificate issued by the bank entitling the bearer to receive interest which bear a maturity date, a specified fixed interest rate and can be issued in any denomination. These are generally issued by commercial banks ranging from one month to five years. Being a form of a promissory note and a time instrument, CD restricts holders from withdrawing funds on demand. In cases where it is withdrawn before maturity, penalties and interest on such instrument will be imposed according to the rules and regulations of the issuing party.

Certificate of Deposits can be negotiable and non-negotiable. Negotiable Certificate of Deposit is an instrument which bears all the essential requisites stated in Section 1 of Negotiable Instrument Law; otherwise it will be classified as non-negotiable.

To assess the negotiability of Certificate of Deposits, the researchers conducted a study through interview to Maramag Community Multipurpose Cooperative (MACO MPC).

Maramag Community Multipurpose Cooperative (MACO MPC). Business Classification: Cooperative Term: Existing for 23 years Domicile: Valencia City, Bukidnon

Terms of Issuance of Certificate of Time Deposits MACO-MPC, issues Certificate of Time Deposits for its duly registered members only, which should be at least eighteen (18) to sixtyfive (65) years old. Issuance should be made at a reasonable business hours which are from 8:00-12:00 in the morning and 1:00 to 5:00 in the afternoon.

Parties Involved The parties involved in this instrument are the depositor which should be a duly registered member of MACO-MTC which deposits money for an interest and the cooperative itself which keeps the money for safekeeping or for lending the same to other members. The depositor should be the one to file for the Certificate of Deposit, authorizing an agent is not allowed.

Material Particulars on the Face of the Instrument According to the Marketing Officer and OIC of MACO-MTC Satellite, everything written on the face of the Certificate of Time Deposit are all essential for this instrument to be valid and enforceable. All the particulars and details of the instrument was prepared, made and reviewed by their lawyer, including all the rules and regulations stated therein in accordance with the Cooperative Code of the Philippines and Cooperative Development Authority (CDA). As shown in Figure 1, some of essential parts shown in the instrument are the following: a. Maturity Date b. Date of issue c. Name of the Depositor d. Sum certain of money e. Term of the CD f. Interest Rate g. Authorized Signature

Conditions of the Instrument 1. This certificate is automatically cancelled and unenforceable in the event Check/No./S received for deposit become/s uncollectible for any reason or whatsoever.

2. This certificate is not transferable except upon the books of the office of the Cooperative where the deposit took place. 3. This deposit shall automatically be rolled over for the same term and corresponding interest rate not unless withdrawable or termination has been communicated at least one week prior to the maturity. 4. If withdrawn before maturity date, interest rate will be in accordance with the rules and regulations of the cooperative.

Rules as to Withdrawal of Certificate of Time Deposit. The instrument cannot be withdrawn before maturity by the depositor, if he does, penalties and interest of 2.5% of the amount deposited shall be collected from him.

Analysis of the Instrument Upon analyzing this instrument and its purposes, the researchers found out that the Certificate of Time Deposit issued by MACO-MTC is an instrument with limited negotiability. The OIC said that the instrument cannot be passed on to other parties because of its high risks to probable losses and non-payment.

In addition, the instrument is restricted and limited only to its duly registered members and not to other persons who are not members of this cooperative. Thus, it is a limited negotiable instrument. 2. Negotiable Certificate of Deposit To find negotiable certificate of deposit we used online searching as one of the methods of this study. Negotiable certificate of deposit, usually abbreviated to NCD, is a fixed deposit receipt issued by a bank that is negotiable in the secondary market for financial assets. The issuing bank undertakes to pay the amount of the deposit plus the interest on maturity date (in the case of short term NCDs), or interest six-monthly in arrears and the deposit amount on maturity (in the case of long NCDs). An NCD certificate contains the following information as shown in the figure below:

Figure 2- Negotiable Certificate of Deposit

Name of issuing bank Issue date Maturity date Amount of the deposit Rate of interest per cent per annum Maturity value (amount of the deposit plus interest) in the case of short NCDs

Interest dates (in the case of long NCDs)

As the name of the instrument implies, NCDs are deposits for fixed periods that are negotiable. Thus, NCD is issued in exchange for a deposit, which is an evidence of a deposit. The fact that it is negotiable makes it an attractive instrument for investors because investors are not locked into the deposit. As noted, NCDs may be issued for periods of up to three years (unless the Registrar of Banks has authorized a deviation from the Regulations). When issued for periods of less than one year, interest is usually payable at the end of the period. When issued for longer than one year, interest may be payable either at the end of the period or six-monthly in arrears, but usually the latter. NCDs are also issued at variable rates, usually with reference to some benchmark rate.

Analysis of the Instrument

NCDs are usually issued in bearer form (ie not payable to any particular person), and only occasionally in the name of the depositor. In this case the endorsement of the investor is required for transfer. Making it payable to the bearer satisfies the Subsection d of Section 1 that a negotiable instrument should be payable to bearer or order and thus it contains the all the essential requisites for an instrument to be negotiable.

3. Promissory Notes

Promissory

Note

(PN)

is

an unconditional

written

promise executed by the maker (usually the borrower) in favor of the bearer [the person holding the (PN)] or in favor of any person holding it as ordered or endorsed by the person named in the PN as payee. If the PN is drawn in favor of the makers own order, then the maker has to indorse the PN before it can be transferred to another. The promise is to pay a sum certain in money on demand or at a fixed or determinable future time.

To further understand the negotiability of a Promissory Note, the researchers conducted a study through interview with the Maramag

Community

Multipurpose

Cooperative

(MACO

MPC),

that

issues

promissory notes to the maker in availing there loan services.

Terms of the Promissory Notes The Promissory Notes of MACO-MTC are issued if the amount to be borrowed is at least Five Hundred Pesos (P 500.00) and at maximum, to Five Hundred Thousand Pesos (P 500,000.00). The PN, after it has been filled up by the maker must be notarized by a lawyer. Notarization of the instrument is the responsibility of the cooperative for it to be valid and enforceable; otherwise, the instrument is deemed to be invalid.

Parties Involved in the Instrument There are at minimum of four (4) parties in this instrument according to their rules and regulations and as shown on the face of the instrument; the maker, the co-maker, the witness and the

cooperative/payee. In the absence of authorization in any one of them the instrument would be voidable, unless the instrument would be subsequently completed.

The maker and the co-maker are jointly and severally liable upon the instrument. The co-maker is a guarantor and not just a surety of the instrument, and he/she should be a duly-registered member of the cooperative. The witness of the instrument must present his competent evidence of identity before becoming as such, for example is, his TIN, drivers license, postal I.D, GSIS number, etc. MACO-MTC does not allow joint liabilities even if spouses. The words, I/We, jointly and severally liable are not to be understood as there are two or more makers, rather these shows the liability of one maker and a co-maker. Material Particulars on the face of the Note Everything appearing on the face of the instrument is essential for the validity of the instrument (Figure 3) , such as: a. Date of the Note b. Date of Maturity c. Borrower/makers Name d. Amount of Note e. The words, I/We,jointly and severally f. The words, promise to pay to the order of MACO-MTC g. Sum Certain which should be in Philippine currency h. Mode of payment (at the option of the maker) i. Interest rate per month which is 1.5%

In cases when there were blank spaces necessary to be filled up on the instrument, the maker should be the one to complete the instrument and not an agent or another person to avoid fraud and forgery.

Additional Clauses when the Instrument is in Default These are the following clauses appearing on the face of the instrument when the maker/co-maker fails to pay the instrument on maturity date: a. Additional surcharges of 2% shall be charged there and on every defaulted amortization when the instrument is payable,

daily/weekly/semi-monthly/monthly. b. Charged 2.0% per month exacted from the unpaid balance if payable in whole amount. c. The whole unpaid balance of the agreement shall be due and demandable if the instrument is to be paid by installments. d. To empower and authorize MACO MPC to cancel this agreement and take possession of the goods or cash realized from the use of amount received e. If this instrument is in the hands of an attorney for collection, the maker/co-maker agree to pay Attorneys fee equivalent to 25% of the total outstanding obligation/indebtedness apart from the cost of suit and other incidental expenses incurred therein.

f. In event of litigation they are further liable for any damages for breach of contract. These additional clauses or conditions do not invalidate the instrument since the full commercial sense of the instrument has already ceased.

Rules when the instrument is payable by Installments. When the note is payable in monthly installment basis, installment should be paid a month from the date of issuance. For example when the note is issued on August 1, 2013, it should be paid on September 1, 2013 on installment basis and so on. Maturity Date of the Instrument The maturity date should be on specific date which is the date when the note falls due and there would be fifteen (15) days grace period from the date of maturity for the maker to pay the note with an additional surcharge. Treatment of Past Due Accounts Past due accounts are accounts not paid after maturity and 15 days grace period. Thus any of the additional clauses on the face of the instrument stated above can be implemented to enforced payment of the loan. If the maker has no other money to pay for his debt, the cooperative allows payment in kind like rice, cow, pig, etc. at the option of the maker together with his consent and approval.

Rule on Presentment of the Note for Payment. Presentment for payment should be made on the date of maturity of the note. However, if the maturity date falls on a holiday it should be made before the due date of the instrument as much as possible, rather than paying it after its maturity. This is so, since its for the benefit of the maker for him to increase the value of his credit rating to the cooperative.

Analysis of MACO MTC Promissory Notes After a thorough observation of the note, the researchers found out that the note has limited negotiability, it is restrictive negotiable instrument. Since the maker is primarily liable only to the original payee, which is the cooperative. It cannot be negotiated to other parties nor negotiated by indorsement to the outside parties, especially to other cooperative since it is restricted to the cooperative to have buy-out transactions, it is in accordance with the CDA. Thus this promissory note is a restrictive negotiable instrument making it non-negotiable.

4. Coupon Bonds

Coupon Bonds ( Figure 5) are unregistered, negotiable bonds on which interest and principal are payable to the holder, regardless of whom it was originally issued to. The coupons are attached to the bond, and each coupon represents a single interest payment. The holder submits coupon , usually semi-annually, to the issuer or paying agent to receive payment.

Figure 4- Coupon Bond These coupons that were attached beside the main instrument can be detached from it and can be negotiated further from one person to another. A coupon payment on a bond then represents periodic interest

payment that the bondholder receives during the time between when the bond is issued and when it matures. Coupons are normally described in terms of the coupon rate, which is calculated by adding the total amount of coupons paid per year and dividing by the bond's face value. The coupon rate is the yield the bond that has been paid on its issue date. However, this yield can change as the value of the bond changes and thus giving the bond's yield to maturity. So that bonds having higher coupon rates are more desirable for investors than those having lower coupon rates.

Negotiability and Presentment Coupon Bonds are issued in the form of bearer instruments which made it freely negotiable from one person to another. Physical possession of the certificate was proof of ownership. Several coupons, one for each scheduled interest payment over the life of the bond, were printed on the certificate. At the date the coupon was due, the owner would detach the coupon and present it for payment (an act called "clipping the coupon"). Between a bond's issue date and its maturity date (also called its redemption date), the bond's price is determined by taking into account several factors, including: The face value; The maturity date;

The coupon rate and frequency of coupon payments; The creditworthiness of the issuer; and The yield on comparable investment options.

5. Draft A draft is an unconditional written order by one person (the drawer) directing another person (the drawee) to pay a certain sum of money on demand or at a definite time to a named third person (the payee) or to bearer. The draft is one of the two basic types of commercial paper; the other is the note. As indicated by its definition, the draft is a three-party transaction as shown in Figure 5.

Parties to a Draft (Refer to Figure 5 below) 1. Drawer- Guarani Medoza & Co. The drawer is one who directs a person or an entity, usually a bank, to pay a sum of money stated in an instrument. The drawer prepares a document (a form, usually)the draftordering the drawee to remit a stated sum of money to the payee.

2. Drawee- Morgan Guaranty Trust Company The drawee is the person or entity that a draft is directed to and that is ordered to pay the amount stated on it. The most common drawee is a bank. 3. Payee- Guarani Mendoza and Co. A payee is a party where the payment should be remitted to The drawer, drawee, and payee need not be different people; the same person may have different capacities in a single transaction. For example as shown in Figure 5, the drawer which is Guarani Mendoza and Co. was also the payee as indicated in the words, pay to the order of ourselves. Sg. Guarani Mendoza and Co. A drawee who signs the draft becomes an acceptor: the drawee pledges to honor the draft as written. To accept as shown in Figure 5, the drawee need only sign her name on the draft, usually vertically on the face, but anywhere will do. Words such as accepted or good are unnecessary. However, a drawee who indicates that she might refuse to pay will not be held to have accepted. In addition, this draft is a time draft because it is payable after sight.

Figure 5- Time Draft