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Section 1. Short Title. This Decree shall be known as the Trust Receipts Law.
Section 2. Declaration of Policy. It is hereby declared to be the policy of the state
(a) to encourage and promote the use of trust receipts as an additional and
convenient aid to commerce and trade; (b) to provide for the regulation of trust
receipts transactions in order to assure the protection of the rights and
enforcement of obligations of the parties involved therein; and (c) to declare the
misuse and/or misappropriation of goods or proceeds realized from the sale of
goods, documents or instruments released under trust receipts as a criminal
offense punishable under Article Three hundred and fifteen of the Revised Penal
Code.
Section 3. Definition of terms. As used in this Decree, unless the context
otherwise requires, the term
(a) "Document" shall mean written or printed evidence of title to goods.
(b) "Entrustee" shall refer to the person having or taking possession of goods,
documents or instruments under a trust receipt transaction, and any successor in
interest of such person for the purpose or purposes specified in the trust receipt
agreement.
(c) "Entruster" shall refer to the person holding title over the goods, documents,
or instruments subject of a trust receipt transaction, and any successor in interest
of such person.
(d) "Goods" shall include chattels and personal property other than: money,
things in action, or things so affixed to land as to become a part thereof.
(e) "Instrument" means any negotiable instrument as defined in the Negotiable
Instrument Law; any certificate of stock, or bond or debenture for the payment of
money issued by a public or private corporation, or any certificate of deposit,
participation certificate or receipt, any credit or investment instrument of a sort
marketed in the ordinary course of business or finance, whereby the entrustee,
after the issuance of the trust receipt, appears by virtue of possession and the
face of the instrument to be the owner. "Instrument" shall not include a document
as defined in this Decree.
(f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or
pledge, legal or equitable.
(g) "Purchaser" means any person taking by purchase.
(h) "Security Interest" means a property interest in goods, documents or
instruments to secure performance of some obligations of the entrustee or of
some third persons to the entruster and includes title, whether or not expressed
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to be absolute, whenever such title is in substance taken or retained for security
only.
(i) "Person" means, as the case may be, an individual, trustee, receiver, or other
fiduciary, partnership, corporation, business trust or other association, and two
more persons having a joint or common interest.
(j) "Trust Receipt" shall refer to the written or printed document signed by the
entrustee in favor of the entruster containing terms and conditions substantially
complying with the provisions of this Decree. No further formality of execution or
authentication shall be necessary to the validity of a trust receipt.
(k) "Value" means any consideration sufficient to support a simple contract.
Section 4. What constitutes a trust receipt transaction. A trust receipt
transaction, within the meaning of this Decree, is any transaction by and between
a person referred to in this Decree as the entruster, and another person referred
to in this Decree as entrustee, whereby the entruster, who owns or holds
absolute title or security interests over certain specified goods, documents or
instruments, releases the same to the possession of the entrustee upon the
latter's execution and delivery to the entruster of a signed document called a
"trust receipt" wherein the entrustee binds himself to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise
dispose of the goods, documents or instruments with the obligation to turn over
to the entruster the proceeds thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt or the goods, documents or
instruments themselves if they are unsold or not otherwise disposed of, in
accordance with the terms and conditions specified in the trust receipt, or for
other purposes substantially equivalent to any of the following:
1. In the case of goods or documents, (a) to sell the goods or procure their sale;
or (b) to manufacture or process the goods with the purpose of ultimate sale:
Provided, That, in the case of goods delivered under trust receipt for the purpose
of manufacturing or processing before its ultimate sale, the entruster shall retain
its title over the goods whether in its original or processed form until the entrustee
has complied fully with his obligation under the trust receipt; or (c) to load,
unload, ship or tranship or otherwise deal with them in a manner preliminary or
necessary to their sale; or
2. In the case of instruments,
a) to sell or procure their sale or exchange; or
b) to deliver them to a principal; or
c) to effect the consummation of some transactions involving delivery to a
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depository or register; or
d) to effect their presentation, collection or renewal
The sale of goods, documents or instruments by a person in the business of
selling goods, documents or instruments for profit who, at the outset of the
transaction, has, as against the buyer, general property rights in such goods,
documents or instruments, or who sells the same to the buyer on credit, retaining
title or other interest as security for the payment of the purchase price, does not
constitute a trust receipt transaction and is outside the purview and coverage of
this Decree.
Section 5. Form of trust receipts; contents. A trust receipt need not be in any
particular form, but every such receipt must substantially contain (a) a description
of the goods, documents or instruments subject of the trust receipt; (2) the total
invoice value of the goods and the amount of the draft to be paid by the
entrustee; (3) an undertaking or a commitment of the entrustee (a) to hold in trust
for the entruster the goods, documents or instruments therein described; (b) to
dispose of them in the manner provided for in the trust receipt; and (c) to turn
over the proceeds of the sale of the goods, documents or instruments to the
entruster to the extent of the amount owing to the entruster or as appears in the
trust receipt or to return the goods, documents or instruments in the event of their
non-sale within the period specified therein.
The trust receipt may contain other terms and conditions agreed upon by the
parties in addition to those hereinabove enumerated provided that such terms
and conditions shall not be contrary to the provisions of this Decree, any existing
laws, public policy or morals, public order or good customs.
Section 6. Currency in which a trust receipt may be denominated. A trust receipt
may be denominated in the Philippine currency or any foreign currency
acceptable and eligible as part of international reserves of the Philippines, the
provisions of existing law, executive orders, rules and regulations to the contrary
notwithstanding: Provided, however, That in the case of trust receipts
denominated in foreign currency, payment shall be made in its equivalent in
Philippine currency computed at the prevailing exchange rate on the date the
proceeds of sale of the goods, documents or instruments held in trust by the
entrustee are turned over to the entruster or on such other date as may be
stipulated in the trust receipt or other agreements executed between the
entruster and the entrustee.
Section 7. Rights of the entruster. The entruster shall be entitled to the proceeds
from the sale of the goods, documents or instruments released under a trust
receipt to the entrustee to the extent of the amount owing to the entruster or as
appears in the trust receipt, or to the return of the goods, documents or
instruments in case of non-sale, and to the enforcement of all other rights
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conferred on him in the trust receipt provided such are not contrary to the
provisions of this Decree.
The entruster may cancel the trust and take possession of the goods, documents
or instruments subject of the trust or of the proceeds realized therefrom at any
time upon default or failure of the entrustee to comply with any of the terms and
conditions of the trust receipt or any other agreement between the entruster and
the entrustee, and the entruster in possession of the goods, documents or
instruments may, on or after default, give notice to the entrustee of the intention
to sell, and may, not less than five days after serving or sending of such notice,
sell the goods, documents or instruments at public or private sale, and the
entruster may, at a public sale, become a purchaser. The proceeds of any such
sale, whether public or private, shall be applied (a) to the payment of the
expenses thereof; (b) to the payment of the expenses of re-taking, keeping and
storing the goods, documents or instruments; (c) to the satisfaction of the
entrustee's indebtedness to the entruster. The entrustee shall receive any
surplus but shall be liable to the entruster for any deficiency. Notice of sale shall
be deemed sufficiently given if in writing, and either personally served on the
entrustee or sent by post-paid ordinary mail to the entrustee's last known
business address.
Section 8. Entruster not responsible on sale by entrustee. The entruster holding
a security interest shall not, merely by virtue of such interest or having given the
entrustee liberty of sale or other disposition of the goods, documents or
instruments under the terms of the trust receipt transaction be responsible as
principal or as vendor under any sale or contract to sell made by the entrustee.
Section 9. Obligations of the entrustee. The entrustee shall (1) hold the goods,
documents or instruments in trust for the entruster and shall dispose of them
strictly in accordance with the terms and conditions of the trust receipt; (2)
receive the proceeds in trust for the entruster and turn over the same to the
entruster to the extent of the amount owing to the entruster or as appears on the
trust receipt; (3) insure the goods for their total value against loss from fire, theft,
pilferage or other casualties; (4) keep said goods or proceeds thereof whether in
money or whatever form, separate and capable of identification as property of the
entruster; (5) return the goods, documents or instruments in the event of non-
sale or upon demand of the entruster; and (6) observe all other terms and
conditions of the trust receipt not contrary to the provisions of this Decree.
Section 10. Liability of entrustee for loss. The risk of loss shall be borne by the
entrustee. Loss of goods, documents or instruments which are the subject of a
trust receipt, pending their disposition, irrespective of whether or not it was due to
the fault or negligence of the entrustee, shall not extinguish his obligation to the
entruster for the value thereof.
Section 11. Rights of purchaser for value and in good faith. Any purchaser of
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goods from an entrustee with right to sell, or of documents or instruments
through their customary form of transfer, who buys the goods, documents, or
instruments for value and in good faith from the entrustee, acquires said goods,
documents or instruments free from the entruster's security interest.
Section 12. Validity of entruster's security interest as against creditors. The
entruster's security interest in goods, documents, or instruments pursuant to the
written terms of a trust receipt shall be valid as against all creditors of the
entrustee for the duration of the trust receipt agreement.
Section 13. Penalty clause. The failure of an entrustee to turn over the proceeds
of the sale of the goods, documents or instruments covered by a trust receipt to
the extent of the amount owing to the entruster or as appears in the trust receipt
or to return said goods, documents or instruments if they were not sold or
disposed of in accordance with the terms of the trust receipt shall constitute the
crime of estafa, punishable under the provisions of Article Three hundred and
fifteen, paragraph one (b) of Act Numbered Three thousand eight hundred and
fifteen, as amended, otherwise known as the Revised Penal Code. If the violation
or offense is committed by a corporation, partnership, association or other
juridical entities, the penalty provided for in this Decree shall be imposed upon
the directors, officers, employees or other officials or persons therein responsible
for the offense, without prejudice to the civil liabilities arising from the criminal
offense.
Section 14. Cases not covered by this Decree. Cases not provided for in this
Decree shall be governed by the applicable provisions of existing laws.
Section 15. Separability clause. If any provision or section of this Decree or the
application thereof to any person or circumstance is held invalid, the other
provisions or sections hereof and the application of such provisions or sections to
other persons or circumstances shall not be affected thereby.
Section 16. Repealing clause. All Acts inconsistent with this Decree are hereby
repealed.
Section 17. This Decree shall take effect immediately.
Done in the City of Manila, this 29th day of January, in the year of Our Lord,
nineteen hundred and seventy-three.







'
THE NEW CENTRAL BANK ACT
CHAPTER I ESTABLISHMENT AND ORGANIZATION OF THE BANGKO
SENTRAL NG PILIPINAS
ARTICLE I CREATION, RESPONSIBILITIES AND CORPORATE POWERS OF
THE BANGKO SENTRAL
Section 1. Declaration of Policy. - The State shall maintain a central
monetary authority that shall function and operate as an independent and
accountable body corporate in the discharge of its mandated responsibilities
concerning money, banking and credit. In line with this policy, and considering its
unique functions and responsibilities, the central monetary authority established
under this Act, while being a government-owned corporation, shall enjoy fiscal
and administrative autonomy.
Section 2. Creation of the Bangko Sentral. - There is hereby established
an independent central monetary authority, which shall be a body corporate
known as the Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko
Sentral.
The capital of the Bangko Sentral shall be Fifty billion pesos
(P50,000,000,000), to be fully subscribed by the Government of the Republic,
hereafter referred to as the Government, Ten billion pesos (P10,000,000,000) of
which shall be fully paid for by the Government upon the effectivity of this Act and
the balance to be paid for within a period of two (2) years from the effectivity of
this Act in such manner and form as the Government, through the Secretary of
Finance and the Secretary of Budget and Management, may thereafter
determine.
Section 3. Responsibility and Primary Objective. - The Bangko Sentral
shall provide policy directions in the areas of money, banking, and credit. It shall
have supervision over the operations of banks and exercise such regulatory
powers as provided in this Act and other pertinent laws over the operations of
finance companies and non-bank financial institutions performing quasi-banking
functions, hereafter referred to as quasi-banks, and institutions performing similar
functions.
The primary objective of the Bangko Sentral is to maintain price stability
conducive to a balanced and sustainable growth of the economy. It shall also
promote and maintain monetary stability and the convertibility of the peso.
Section 4. Place of Business. - The Bangko Sentral shall have its
principal place of business in Metro Manila, but may maintain branches, agencies
and correspondents in such other places as the proper conduct of its business
may require.
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Section 5. Corporate Powers. - The Bangko Sentral is hereby authorized
to adopt, alter, and use a corporate seal which shall be judicially noticed; to enter
into contracts; to lease or own real and personal property, and to sell or
otherwise dispose of the same; to sue and be sued; and otherwise to do and
perform any and all things that may be necessary or proper to carry out the
purposes of this Act.
The Bangko Sentral may acquire and hold such assets and incur such
liabilities in connection with its operations authorized by the provisions of this Act,
or as are essential to the proper conduct of such operations.
The Bangko Sentral may compromise, condone or release, in whole or in
part, any claim of or settled liability to the Bangko Sentral, regardless of the
amount involved, under such terms and conditions as may be prescribed by the
Monetary Board to protect the interests of the Bangko Sentral.
ARTICLE II THE MONETARY BOARD
Section 6. Composition of the Monetary Board. - The powers and
functions of the Bangko Sentral shall be exercised by the Bangko Sentral
Monetary Board, hereafter referred to as the Monetary Board, composed of
seven (7) members appointed by the President of the Philippines for a term of six
(6) years.
The seven (7) members are:
(a) the Governor of the Bangko Sentral, who shall be the Chairman of the
Monetary Board. The Governor of the Bangko Sentral shall be head of a
department and his appointment shall be subject to confirmation by the
Commission on Appointments. Whenever the Governor is unable to attend a
meeting of the Board, he shall designate a Deputy Governor to act as his
alternate: Provided, That in such event, the Monetary Board shall designate one
of its members as acting Chairman;
(b) a member of the Cabinet to be designated by the President of the Philippines.
Whenever the designated Cabinet Member is unable to attend a meeting of the
Board, he shall designate an Undersecretary in his Department to attend as his
alternate; and
(c) five (5) members who shall come from the private sector, all of whom shall
serve full-time: Provided, however, That of the members first appointed under the
provisions of this subsection, three (3) shall have a term of six (6) years, and the
other two (2), three (3) years.
No member of the Monetary Board may be reappointed more than once.
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Section 7. Vacancies. - Any vacancy in the Monetary Board created by
the death, resignation, or removal of any member shall be filled by the
appointment of a new member to complete the unexpired period of the term of
the member concerned.
Section 8. Qualifications. - The members of the Monetary Board must be
natural-born citizens of the Philippines, at least thirty-five (35) years of age, with
the exception of the Governor who should at least be forty (40) years of age, of
good moral character, of unquestionable integrity, of known probity and
patriotism, and with recognized competence in social and economic disciplines.
Section 9. Disqualifications. - In addition to the disqualifications imposed
by Republic Act No. 6713, a member of the Monetary Board is disqualified from
being a director, officer, employee, consultant, lawyer, agent or stockholder of
any bank, quasi-bank or any other institution which is subject to supervision or
examination by the Bangko Sentral, in which case such member shall resign
from, and divest himself of any and all interests in such institution before
assumption of office as member of the Monetary Board.
The members of the Monetary Board coming from the private sector shall
not hold any other public office or public employment during their tenure.
No person shall be a member of the Monetary Board if he has been
connected directly with any multilateral banking or financial institution or has a
substantial interest in any private bank in the Philippines, within one (1) year prior
to his appointment; likewise, no member of the Monetary Board shall be
employed in any such institution within two (2) years after the expiration of his
term except when he serves as an official representative of the Philippine
Government to such institution.
Section 10. Removal. - The President may remove any member of the
Monetary Board for any of the following reasons:
(a) If the member is subsequently disqualified under the provisions of Section 8
of this Act; or
(b) If he is physically or mentally incapacitated that he cannot properly discharge
his duties and responsibilities and such incapacity has lasted for more than six
(6) months; or
(c) If the member is guilty of acts or operations which are of fraudulent or illegal
character or which are manifestly opposed to the aims and interests of the
Bangko Sentral; or
(d) If the member no longer possesses the qualifications specified in Section 8 of
this Act.
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Section 11. Meetings. - The Monetary Board shall meet at least once a
week. The Board may be called to a meeting by the Governor of the Bangko
Sentral or by two (2) other members of the Board.
The presence of four (4) members shall constitute a quorum: Provided,
That in all cases the Governor or his duly designated alternate shall be among
the four (4).
Unless otherwise provided in this Act, all decisions of the Monetary Board
shall require the concurrence of at least four (4) members.
The Bangko Sentral shall maintain and preserve a complete record of the
proceedings and deliberations of the Monetary Board, including the tapes and
transcripts of the stenographic notes, either in their original form or in microfilm.
Section 12. Attendance of the Deputy Governors. - The Deputy
Governors may attend the meetings of the Monetary Board with the right to be
heard.
Section 13. Salary. - The salary of the Governor and the members of the
Monetary Board from the private sector shall be fixed by the President of the
Philippines at a sum commensurate to the importance and responsibility attached
to the position.
Section 14. Withdrawal of Persons Having a Personal Interest. - In
addition to the requirements of Republic Act No. 6713, any member of the
Monetary Board with personal or pecuniary interest in any matter in the agenda
of the Monetary Board shall disclose his interest to the Board and shall retire
from the meeting when the matter is taken up. The decision taken on the matter
shall be made public. The minutes shall reflect the disclosure made and the
retirement of the member concerned from the meeting.
Section 15. Exercise of Authority. - In the exercise of its authority, the
Monetary Board shall:
(a) issue rules and regulations it considers necessary for the effective discharge
of the responsibilities and exercise of the powers vested upon the Monetary
Board and the Bangko Sentral. The rules and regulations issued shall be
reported to the President and the Congress within fifteen (15) days from the date
of their issuance;
(b) direct the management, operations, and administration of the Bangko Sentral,
reorganize its personnel, and issue such rules and regulations as it may deem
necessary or convenient for this purpose. The legal units of the Bangko Sentral
shall be under the exclusive supervision and control of the Monetary Board;
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(c) establish a human resource management system which shall govern the
selection, hiring, appointment, transfer, promotion, or dismissal of all personnel.
Such system shall aim to establish professionalism and excellence at all levels of
the Bangko Sentral in accordance with sound principles of management.
A compensation structure, based on job evaluation studies and wage
surveys and subject to the Board's approval, shall be instituted as an integral
component of the Bangko Sentral's human resource development program:
Provided, That the Monetary Board shall make its own system conform as
closely as possible with the principles provided for under Republic Act No. 6758:
Provided, however, That compensation and wage structure of employees whose
positions fall under salary grade 19 and below shall be in accordance with the
rates prescribed under Republic Act No. 6758.
On the recommendation of the Governor, appoint, fix the remunerations
and other emoluments, and remove personnel of the Bangko Sentral, subject to
pertinent civil service laws: Provided, That the Monetary Board shall have
exclusive and final authority to promote, transfer, assign, or reassign personnel
of the Bangko Sentral and these personnel actions are deemed made in the
interest of the service and not disciplinary: Provided, further, That the Monetary
Board may delegate such authority to the Governor under such guidelines as it
may determine.
(d) adopt an annual budget for and authorize such expenditures by the Bangko
Sentral as are in the interest of the effective administration and operations of the
Bangko Sentral in accordance with applicable laws and regulations; and
(e) indemnify its members and other officials of the Bangko Sentral, including
personnel of the departments performing supervision and examination functions
against all costs and expenses reasonably incurred by such persons in
connection with any civil or criminal action, suit or proceedings to which he may
be, or is, made a party by reason of the performance of his functions or duties,
unless he is finally adjudged in such action or proceeding to be liable for
negligence or misconduct.
In the event of a settlement or compromise, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the Bangko Sentral is advised by external counsel that the person to be
indemnified did not commit any negligence or misconduct.
The costs and expenses incurred in defending the aforementioned action,
suit or proceeding may be paid by the Bangko Sentral in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by or
on behalf of the member, officer, or employee to repay the amount advanced
should it ultimately be determined by the Monetary Board that he is not entitled to
be indemnified as provided in this subsection.
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Section 16. Responsibility. - Members of the Monetary Board, officials,
examiners, and employees of the Bangko Sentral who willfully violate this Act or
who are guilty of negligence, abuses or acts of malfeasance or misfeasance or
fail to exercise extraordinary diligence in the performance of his duties shall be
held liable for any loss or injury suffered by the Bangko Sentral or other banking
institutions as a result of such violation, negligence, abuse, malfeasance,
misfeasance or failure to exercise extraordinary diligence.
Similar responsibility shall apply to members, officers, and employees of
the Bangko Sentral for: (1) the disclosure of any information of a confidential
nature, or any information on the discussions or resolutions of the Monetary
Board, or about the confidential operations of the Bangko Sentral, unless the
disclosure is in connection with the performance of official functions with the
Bangko Sentral, or is with prior authorization of the Monetary Board or the
Governor; or (2) the use of such information for personal gain or to the detriment
of the Government, the Bangko Sentral or third parties: Provided, however, That
any data or information required to be submitted to the President and/or the
Congress, or to be published under the provisions of this Act shall not be
considered confidential.
ARTICLE III THE GOVERNOR AND DEPUTY GOVERNORS OF THE
BANGKO SENTRAL
Section 17. Powers and Duties of the Governor. - The Governor shall be
the chief executive officer of the Bangko Sentral. His powers and duties shall be
to:
(a) prepare the agenda for the meetings of the Monetary Board and to submit for
the consideration of the Board the policies and measures which he believes to be
necessary to carry out the purposes and provisions of this Act;
(b) execute and administer the policies and measures approved by the Monetary
Board;
(c) direct and supervise the operations and internal administration of the Bangko
Sentral. The Governor may delegate certain of his administrative responsibilities
to other officers or may assign specific tasks or responsibilities to any full-time
member of the Monetary Board without additional remuneration or allowance
whenever he may deem fit or subject to such rules and regulations as the
Monetary Board may prescribe;
(d) appoint and fix the remunerations and other emoluments of personnel below
the rank of a department head in accordance with the position and compensation
plans approved by the Monetary Board, as well as to impose disciplinary
measures upon personnel of the Bangko Sentral, subject to the provisions of
Section 15(c) of this Act: Provided, That removal of personnel shall be with the
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approval of the Monetary Board;
(e) render opinions, decisions, or rulings, which shall be final and executory until
reversed or modified by the Monetary Board, on matters regarding application or
enforcement of laws pertaining to institutions supervised by the Bangko Sentral
and laws pertaining to quasi-banks, as well as regulations, policies or instructions
issued by the Monetary Board, and the implementation thereof; and
(f) exercise such other powers as may be vested in him by the Monetary Board.
Section 18. Representation of the Monetary Board and the Bangko
Sentral. - The Governor of the Bangko Sentral shall be the principal
representative of the Monetary Board and of the Bangko Sentral and, in such
capacity and in accordance with the instructions of the Monetary Board, he shall
be empowered to:
(a) represent the Monetary Board and the Bangko Sentral in all dealings with
other offices, agencies and instrumentalities of the Government and all other
persons or entities, public or private, whether domestic, foreign or international;
(b) sign contracts entered into by the Bangko Sentral, notes and securities issued
by the Bangko Sentral, all reports, balance sheets, profit and loss statements,
correspondence and other documents of the Bangko Sentral.
The signature of the Governor may be in facsimile whenever appropriate;
(c) represent the Bangko Sentral, either personally or through counsel, including
private counsel, as may be authorized by the Monetary Board, in any legal
proceedings, action or specialized legal studies; and
(d) delegate his power to represent the Bangko Sentral, as provided in
subsections (a), (b) and (c) of this section, to other officers upon his own
responsibility: Provided, however, That in order to preserve the integrity and the
prestige of his office, the Governor of the Bangko Sentral may choose not to
participate in preliminary discussions with any multilateral banking or financial
institution on any negotiations for the Government within or outside the
Philippines. During the negotiations, he may instead be represented by a
permanent negotiator.
Section 19. Authority of the Governor in Emergencies. - In case of
emergencies where time is sufficient to call a meeting of the Monetary Board, the
Governor of the Bangko Sentral, with the concurrence of two (2) other members
of the Monetary Board, may decide any matter or take any action within the
authority of the Board.
The Governor shall submit a report to the President and Congress within
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seventy-two (72) hours after the action has been taken.
At the soonest possible time, the Governor shall call a meeting of the
Monetary Board to submit his action for ratification.
Section 20. Outside Interests of the Governor and the Full-time Members
of the Board. - The Governor of the Bangko Sentral and the full-time members of
the Board shall limit their professional activities to those pertaining directly to
their positions with the Bangko Sentral. Accordingly, they may not accept any
other employment, whether public or private, remunerated or ad honorem, with
the exception of positions in eleemosynary, civic, cultural or religious
organizations or whenever, by designation of the President, the Governor or the
full-time member is tasked to represent the interest of the Government or other
government agencies in matters connected with or affecting the economy or the
financial system of the country.
Section 21. Deputy Governors. - The Governor of the Bangko Sentral,
with the approval of the Monetary Board, shall appoint not more than three (3)
Deputy Governors who shall perform duties as may be assigned to them by the
Governor and the Board.
In the absence of the Governor, a Deputy Governor designated by the
Governor shall act as chief executive of the Bangko Sentral and shall exercise
the powers and perform the duties of the Governor. Whenever the Government is
unable to attend meetings of government boards or councils in which he is an ex
officio member pursuant to provisions of special laws, a Deputy Governor as may
be designated by the Governor shall be vested with authority to participate and
exercise the right to vote in such meetings.
ARTICLE IV OPERATIONS OF THE BANGKO SENTRAL
Section 22. Research and Statistics. - The Bangko Sentral shall prepare
data and conduct economic research for the guidance of the Monetary Board in
the formulation and implementation of its policies. Such data shall include,
among others, forecasts of the balance of payments of the Philippines, statistics
on the monthly movement of the monetary aggregates and of prices and other
statistical series and economic studies useful for the formulation and analysis of
monetary, banking, credit and exchange policies.
Section 23. Authority to Obtain Data and Information. - The Bangko
Sentral shall have the authority to request from government offices and
instrumentalities, or government-owned or controlled corporations, any data
which it may require for the proper discharge of its functions and responsibilities.
The Bangko Sentral through the Governor or in his absence, a duly authorized
representative shall have the power to issue a subpoena for the production of the
books and records for the aforesaid purpose. Those who refuse the subpoena
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without justifiable cause, or who refuse to supply the bank with data requested or
required, shall be subject to punishment for contempt in accordance with the
provisions of the Rules of Court.
Data on individual firms, other than banks, gathered by the Department of
Economic Research and other departments or units of the Bangko Sentral shall
not be made available to any person or entity outside of the Bangko Sentral
whether public or private except under order of the court or under such
conditions as may be prescribed by the Monetary Board: Provided, however,
That the collective data on firms may be released to interested persons or
entities: Provided, finally, That in the case of data on banks, the provisions of
Section 27 of this Act shall apply.
Section 24. Training of Technical Personnel. - The Bangko Sentral shall
promote and sponsor the training of technical personnel in the field of money and
banking. Toward this end, the Bangko Sentral is hereby authorized to defray the
costs of study, at home or abroad, of qualified employees of the Bangko Sentral,
of promising university graduates or of any other qualified persons who shall be
determined by proper competitive examinations. The Monetary Board shall
prescribe rules and regulations to govern the training program of the Bangko
Sentral.
Section 25. Supervision and Examination. - The Bangko Sentral shall
have supervision over, and conduct periodic or special examinations of, banking
institutions and quasi-banks, including their subsidiaries and affiliates engaged in
allied activities.
For purposes of this section, a subsidiary means a corporation more than
fifty percent (50%) of the voting stock of which is owned by a bank or quasi-bank
and an affiliate means a corporation the voting stock of which, to the extent of
fifty percent (50%) or less, is owned by a bank or quasi-bank or which is related
or linked to such institution or intermediary through common stockholders or such
other factors as may be determined by the Monetary Board.
The department heads and the examiners of the supervising and/or
examining departments are hereby authorized to administer oaths to any
director, officer, or employee of any institution under their respective supervision
or subject to their examination and to compel the presentation of all books,
documents, papers or records necessary in their judgment to ascertain the facts
relative to the true condition of any institution as well as the books and records of
persons and entities relative to or in connection with the operations, activities or
transactions of the institution under examination, subject to the provision of
existing laws protecting or safeguarding the secrecy or confidentiality of bank
deposits as well as investments of private persons, natural or juridical, in debt
instruments issued by the Government.
"&
No restraining order or injunction shall be issued by the court enjoining
the Bangko Sentral from examining any institution subject to supervision or
examination by the Bangko Sentral, unless there is convincing proof that the
action of the Bangko Sentral is plainly arbitrary and made in bad faith and the
petitioner or plaintiff files with the clerk or judge of the court in which the action is
pending a bond executed in favor of the Bangko Sentral, in an amount to be fixed
by the court. The provisions of Rule 58 of the New Rules of Court insofar as they
are applicable and not inconsistent with the provisions of this section shall govern
the issuance and dissolution of the restraining order or injunction contemplated in
this section.
Section 26. Bank Deposits and Investments. - Any director, officer or
stockholder who, together with his related interest, contracts a loan or any form
of financial accommodation from: (1) his bank; or (2) from a bank (a) which is a
subsidiary of a bank holding company of which both his bank and the lending
bank are subsidiaries or (b) in which a controlling proportion of the shares is
owned by the same interest that owns a controlling proportion of the shares of his
bank, in excess of five percent (5%) of the capital and surplus of the bank, or in
the maximum amount permitted by law, whichever is lower, shall be required by
the lending bank to waive the secrecy of his deposits of whatever nature in all
banks in the Philippines. Any information obtained from an examination of his
deposits shall be held strictly confidential and may be used by the examiners
only in connection with their supervisory and examination responsibility or by the
Bangko Sentral in an appropriate legal action it has initiated involving the deposit
account.
Section 27. Prohibitions. - In addition to the prohibitions found in
Republic Act Nos. 3019 and 6713, personnel of the Bangko Sentral are hereby
prohibited from:
(a) being an officer, director, lawyer or agent, employee, consultant or
stockholder, directly or indirectly, of any institution subject to supervision or
examination by the Bangko Sentral, except non-stock savings and loan
associations and provident funds organized exclusively for employees of the
Bangko Sentral, and except as otherwise provided in this Act;
(b) directly or indirectly requesting or receiving any gift, present or pecuniary or
material benefit for himself or another, from any institution subject to supervision
or examination by the Bangko Sentral;
(c) revealing in any manner, except under orders of the court, the Congress or
any government office or agency authorized by law, or under such conditions as
may be prescribed by the Monetary Board, information relating to the condition or
business of any institution. This prohibition shall not be held to apply to the giving
of information to the Monetary Board or the Governor of the Bangko Sentral, or to
any person authorized by either of them, in writing, to receive such information;
"'
and
(d) borrowing from any institution subject to supervision or examination by the
Bangko Sentral shall be prohibited unless said borrowings are adequately
secured, fully disclosed to the Monetary Board, and shall be subject to such
further rules and regulations as the Monetary Board may prescribe: Provided,
however, That personnel of the supervising and examining departments are
prohibited from borrowing from a bank under their supervision or examination.
Section 28. Examination and Fees. - The supervising and examining
department head, personally or by deputy, shall examine the books of every
banking institution once in every twelve (12) months, and at such other times as
the Monetary Board by an affirmative vote of five (5) members, may deem
expedient and to make a report on the same to the Monetary Board: Provided,
That there shall be an interval of at least twelve (12) months between annual
examinations.
The bank concerned shall afford to the head of the appropriate
supervising and examining departments and to his authorized deputies full
opportunity to examine its books, cash and available assets and general
condition at any time during banking hours when requested to do so by the
Bangko Sentral: Provided, however, That none of the reports and other papers
relative to such examinations shall be open to inspection by the public except
insofar as such publicity is incidental to the proceedings hereinafter authorized or
is necessary for the prosecution of violations in connection with the business of
such institutions.
Banking and quasi-banking institutions which are subject to examination
by the Bangko Sentral shall pay to the Bangko Sentral, within the first thirty (30)
days of each year, an annual fee in an amount equal to a percentage as may be
prescribed by the Monetary Board of its average total assets during the
preceding year as shown on its end-of-month balance sheets, after deducting
cash on hand and amounts due from banks, including the Bangko Sentral and
banks abroad.
Section 29. Appointment of Conservator. - Whenever, on the basis of a
report submitted by the appropriate supervising or examining department, the
Monetary Board finds that a bank or a quasi-bank is in a state of continuing
inability or unwillingness to maintain a condition of liquidity deemed adequate to
protect the interest of depositors and creditors, the Monetary Board may appoint
a conservator with such powers as the Monetary Board shall deem necessary to
take charge of the assets, liabilities, and the management thereof, reorganize the
management, collect all monies and debts due said institution, and exercise all
powers necessary to restore its viability. The conservator shall report and be
responsible to the Monetary Board and shall have the power to overrule or
revoke the actions of the previous management and board of directors of the
"(
bank or quasi-bank.
The conservator should be competent and knowledgeable in bank
operations and management. The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be fixed by the Monetary
Board in an amount not to exceed two-thirds (2/3) of the salary of the president of
the institution in one (1) year, payable in twelve (12) equal monthly payments:
Provided, That, if at any time within one-year period, the conservatorship is
terminated on the ground that the institution can operate on its own, the
conservator shall receive the balance of the remuneration which he would have
received up to the end of the year; but if the conservatorship is terminated on
other grounds, the conservator shall not be entitled to such remaining balance.
The Monetary Board may appoint a conservator connected with the Bangko
Sentral, in which case he shall not be entitled to receive any remuneration or
emolument from the Bangko Sentral during the conservatorship. The expenses
attendant to the conservatorship shall be borne by the bank or quasi-bank
concerned.
The Monetary Board shall terminate the conservatorship when it is
satisfied that the institution can continue to operate on its own and the
conservatorship is no longer necessary. The conservatorship shall likewise be
terminated should the Monetary Board, on the basis of the report of the
conservator or of its own findings, determine that the continuance in business of
the institution would involve probable loss to its depositors or creditors, in which
case the provisions of Section 30 shall apply.
Section 30. Proceedings in Receivership and Liquidation. - Whenever,
upon report of the head of the supervising or examining department, the
Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of
business: Provided, That this shall not include inability to pay caused by
extraordinary demands induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to
meet its liabilities; or
(c) cannot continue in business without involving probable losses to its depositors
or creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has
become final, involving acts or transactions which amount to fraud or a
dissipation of the assets of the institution; in which cases, the Monetary Board
may summarily and without need for prior hearing forbid the institution from doing
business in the Philippines and designate the Philippine Deposit Insurance
")
Corporation as receiver of the banking institution.
For a quasi-bank, any person of recognized competence in banking or
finance may be designed as receiver.
The receiver shall immediately gather and take charge of all the assets
and liabilities of the institution, administer the same for the benefit of its creditors,
and exercise the general powers of a receiver under the Revised Rules of Court
but shall not, with the exception of administrative expenditures, pay or commit
any act that will involve the transfer or disposition of any asset of the institution:
Provided, That the receiver may deposit or place the funds of the institution in
non-speculative investments. The receiver shall determine as soon as possible,
but not later than ninety (90) days from take over, whether the institution may be
rehabilitated or otherwise placed in such a condition so that it may be permitted
to resume business with safety to its depositors and creditors and the general
public: Provided, That any determination for the resumption of business of the
institution shall be subject to prior approval of the Monetary Board.
If the receiver determines that the institution cannot be rehabilitated or
permitted to resume business in accordance with the next preceding paragraph,
the Monetary Board shall notify in writing the board of directors of its findings and
direct the receiver to proceed with the liquidation of the institution. The receiver
shall:
(1) file ex parte with the proper regional trial court, and without requirement of
prior notice or any other action, a petition for assistance in the liquidation of the
institution pursuant to a liquidation plan adopted by the Philippine Deposit
Insurance Corporation for general application to all closed banks. In case of
quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon
acquiring jurisdiction, the court shall, upon motion by the receiver after due
notice, adjudicate disputed claims against the institution, assist the enforcement
of individual liabilities of the stockholders, directors and officers, and decide on
other issues as may be material to implement the liquidation plan adopted. The
receiver shall pay the cost of the proceedings from the assets of the institution.
(2) convert the assets of the institutions to money, dispose of the same to
creditors and other parties, for the purpose of paying the debts of such institution
in accordance with the rules on concurrence and preference of credit under the
Civil Code of the Philippines and he may, in the name of the institution, and with
the assistance of counsel as he may retain, institute such actions as may be
necessary to collect and recover accounts and assets of, or defend any action
against, the institution. The assets of an institution under receivership or
liquidation shall be deemed in custodia legis in the hands of the receiver and
shall, from the moment the institution was placed under such receivership or
liquidation, be exempt from any order of garnishment, levy, attachment, or
execution.
"*
The actions of the Monetary Board taken under this section or under
Section 29 of this Act shall be final and executory, and may not be restrained or
set aside by the court except on petition for certiorari on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of discretion
as to amount to lack or excess of jurisdiction. The petition for certiorari may only
be filed by the stockholders of record representing the majority of the capital
stock within ten (10) days from receipt by the board of directors of the institution
of the order directing receivership, liquidation or conservatorship.
The designation of a conservator under Section 29 of this Act or the
appointment of a receiver under this section shall be vested exclusively with the
Monetary Board. Furthermore, the designation of a conservator is not a
precondition to the designation of a receiver.
Section 31. Distribution of Assets. - In case of liquidation of a bank or
quasi-bank, after payment of the cost of proceedings, including reasonable
expenses and fees of the receiver to be allowed by the court, the receiver shall
pay the debts of such institution, under order of the court, in accordance with the
rules on concurrence and preference of credit as provided in the Civil Code.
Section 32. Disposition of Revenues and Earnings. - All revenues and
earnings realized by the receiver in winding up the affairs and administering the
assets of any bank or quasi-bank within the purview of this Act shall be used to
pay the costs, fees and expenses mentioned in the preceding section, salaries of
such personnel whose employment is rendered necessary in the discharge of the
liquidation together with other additional expenses caused thereby. The balance
of revenues and earnings, after the payment of all said expenses, shall form part
of the assets available for payment to creditors.
Section 33. Disposition of Banking Franchise. - The Bangko Sentral may,
if public interest so requires, award to an institution, upon such terms and
conditions as the Monetary Board may approve, the banking franchise of a bank
under liquidation to operate in the area where said bank or its branches were
previously operating: Provided, That whatever proceeds may be realized from
such award shall be subject to the appropriate exclusive disposition of the
Monetary Board.
Section 34. Refusal to Make Reports or Permit Examination. - Any
officer, owner, agent, manager, director or officer-in-charge of any institution
subject to the supervision or examination by the Bangko Sentral within the
purview of this Act who, being required in writing by the Monetary Board or by the
head of the supervising and examining department willfully refuses to file the
required report or permit any lawful examination into the affairs of such institution
shall be punished by a fine of not less than Fifty thousand pesos (P50,000) nor
more than One hundred thousand pesos (P100,000) or by imprisonment of not
less than one (1) year nor more than five (5) years, or both, in the discretion of
#+
the court.
Section 35. False Statement. - The willful making of a false or misleading
statement on a material fact to the Monetary Board or to the examiners of the
Bangko Sentral shall be punished by a fine of not less than One hundred
thousand pesos (P100,000) nor more than Two hundred thousand pesos
(P200,000), or by imprisonment of not more than (5) years, or both, at the
discretion of the court.
Section 36. Proceedings Upon Violation of This Act and Other Banking
Laws, Rules, Regulations, Orders or Instructions. - Whenever a bank or quasi-
bank, or whenever any person or entity willfully violates this Act or other pertinent
banking laws being enforced or implemented by the Bangko Sentral or any order,
instruction, rule or regulation issued by the Monetary Board, the person or
persons responsible for such violation shall unless otherwise provided in this Act
be punished by a fine of not less than Fifty thousand pesos (P50,000) nor more
than Two hundred thousand pesos (P200,000) or by imprisonment of not less
than two (2) years nor more than ten (10) years, or both, at the discretion of the
court.
Whenever a bank or quasi-bank persists in carrying on its business in an
unlawful or unsafe manner, the Board may, without prejudice to the penalties
provided in the preceding paragraph of this section and the administrative
sanctions provided in Section 37 of this Act, take action under Section 30 of this
Act.
Section 37. Administrative Sanctions on Banks and Quasi-banks. -
Without prejudice to the criminal sanctions against the culpable persons provided
in Sections 34, 35, and 36 of this Act, the Monetary Board may, at its discretion,
impose upon any bank or quasi-bank, their directors and/or officers, for any willful
violation of its charter or by-laws, willful delay in the submission of reports or
publications thereof as required by law, rules and regulations; any refusal to
permit examination into the affairs of the institution; any willful making of a false
or misleading statement to the Board or the appropriate supervising and
examining department or its examiners; any willful failure or refusal to comply
with, or violation of, any banking law or any order, instruction or regulation issued
by the Monetary Board, or any order, instruction or ruling by the Governor; or any
commission of irregularities, and/or conducting business in an unsafe or unsound
manner as may be determined by the Monetary Board, the following
administrative sanctions, whenever applicable:
(a) fines in amounts as may be determined by the Monetary Board to be
appropriate, but in no case to exceed Thirty thousand pesos (P30,000) a day for
each violation, taking into consideration the attendant circumstances, such as the
nature and gravity of the violation or irregularity and the size of the bank or quasi-
bank;
#"
(b) suspension of rediscounting privileges or access to Bangko Sentral credit
facilities;
(c) suspension of lending or foreign exchange operations or authority to accept
new deposits or make new investments;
(d) suspension of interbank clearing privileges; and/or
(e) revocation of quasi-banking license.
Resignation or termination from office shall not exempt such director or
officer from administrative or criminal sanctions.
The Monetary Board may, whenever warranted by circumstances,
preventively suspend any director or officer of a bank or quasi-bank pending an
investigation: Provided, That should the case be not finally decided by the
Bangko Sentral within a period of one hundred twenty (120) days after the date
of suspension, said director or officer shall be reinstated in his position: Provided,
further, That when the delay in the disposition of the case is due to the fault,
negligence or petition of the director or officer, the period of delay shall not be
counted in computing the period of suspension herein provided.
The above administrative sanctions need not be applied in the order of
their severity.
Whether or not there is an administrative proceeding, if the institution
and/or the directors and/or officers concerned continue with or otherwise persist
in the commission of the indicated practice or violation, the Monetary Board may
issue an order requiring the institution and/or the directors and/or officers
concerned to cease and desist from the indicated practice or violation, and may
further order that immediate action be taken to correct the conditions resulting
from such practice or violation. The cease and desist order shall be immediately
effective upon service on the respondents.
The respondents shall be afforded an opportunity to defend their action in
a hearing before the Monetary Board or any committee chaired by any Monetary
Board member created for the purpose, upon request made by the respondents
within five (5) days from their receipt of the order. If no such hearing is requested
within said period, the order shall be final. If a hearing is conducted, all issues
shall be determined on the basis of records, after which the Monetary Board may
either reconsider or make final its order.
The Governor is hereby authorized, at his discretion, to impose upon
banking institutions, for any failure to comply with the requirements of law,
Monetary Board regulations and policies, and/or instructions issued by the
Monetary Board or by the Governor, fines not in excess of Ten thousand pesos
##
(P10,000) a day for each violation, the imposition of which shall be final and
executory until reversed, modified or lifted by the Monetary Board on appeal.
Section 38. Operating Departments of the Bangko Sentral. - The
Monetary Board shall, in accordance with its authority under this Act, determine
and provide for such operating departments and other offices, including a public
information office, of the Bangko Sentral as it deems convenient for the proper
and efficient conduct of the operations and the accomplishment of the objectives
of the Bangko Sentral. The functions and duties of such operating departments
and other offices shall be determined by the Monetary Board.
ARTICLE V REPORTS AND PUBLICATIONS
Section 39. Reports and Publications. - The Bangko Sentral shall publish
a general balance sheet showing the volume and composition of its assets and
liabilities as of the last working day of the month within sixty (60) days after the
end of each month except for the month of December, which shall be submitted
within ninety (90) days after the end hereof.
The Monetary Board shall publish and submit the following reports to the
President and to the Congress:
(a) not later than ninety (90) days after the end of each quarter, an analysis of
economic and financial developments, including the condition of net international
reserves and monetary aggregates;
(b) within ninety (90) days after the end of the year, the preceding year's budget
and profit and loss statement of the Bangko Sentral showing in reasonable detail
the result of its operations;
(c) one hundred twenty (120) days after the end of each semester, a review of
the state of the financial system; and
(d) as soon as practicable, abnormal movements in monetary aggregates and
the general price level, and, not later than seventy-two (72) hours after they are
taken, remedial measures in response to such abnormal movements.
Section 40. Annual Report. - Before the end of March of each year, the
Bangko Sentral shall publish and submit to the President and the Congress an
annual report on the condition of the Bangko Sentral including a review of the
policies and measures adopted by the Monetary Board during the past year and
an analysis of the economic and financial circumstances which gave rise to said
policies and measures.
The annual report shall also include a statement of the financial condition
of the Bangko Sentral and a statistical appendix which shall present, as a
#$
minimum, the following data:
(a) the monthly movement of monetary aggregates and their components;
(b) the monthly movement of purchases and sales of foreign exchange and of the
international reserves of the Bangko Sentral;
(c) the balance of payments of the Philippines;
(d) monthly indices of consumer prices and of import and export prices;
(e) the monthly movement, in summary form, of exports and imports, by volume
and value;
(f) the monthly movement of the accounts of the Bangko Sentral and of other
banks;
(g) the principal data on government receipts and expenditures and on the status
of the public debt, both domestic and foreign; and
(h) the texts of the major legal and administrative measures adopted by the
Government and the Monetary Board during the year which relate to the
functions or operations of the Bangko Sentral or of the financial system.
The Bangko Sentral shall publish another version of the annual report in
terms understandable to the layman.
Failure to comply with the reportorial requirements pursuant to this article
without justifiable reason as may be determined by the Monetary Board shall
cause the withholding of the salary of the personnel concerned until the
requirements are complied with.
Section 41. Signatures on Statements. - The balance sheets and other
financial statements of the Bangko Sentral shall be signed by the officers
responsible for their preparation, by the Governor, and by the auditor of the
Bangko Sentral.
ARTICLE VI PROFITS, LOSSES, AND SPECIAL ACCOUNTS
Section 42. Fiscal Year. - The fiscal year of the Bangko Sentral shall
begin on January first and end on December thirty-first of each year.
Section 43. Computation of Profits and Losses. - Within the first thirty
(30) days following the end of each year, the Bangko Sentral shall determine its
net profits or losses. In the calculation of net profits, the Bangko Sentral shall
make adequate allowance or establish adequate reserves for bad and doubtful
#%
accounts.
Section 44. Distribution of Net Profits. - Within the first sixty (60) days
following the end of each fiscal year, the Monetary Board shall determine and
carry out the distribution of the net profits, in accordance with the following rule:
Fifty percent (50%) of the net profits shall be carried to surplus and the
remaining fifty percent (50%) shall revert back to the National Treasury, except
as otherwise provided in the transitory provisions of this Act.
Section 45. Revaluation Profits and Losses. - Profits or losses arising
from any revaluation of the Bangko Sentral's net assets or liabilities in gold or
foreign currencies with respect to the Philippine peso shall not be included in the
computation of the annual profits and losses of the Bangko Sentral. Any profits or
losses arising in this manner shall be offset by any amounts which, as a
consequence of such revaluations, are owed by the Philippines to any
international or regional intergovernmental financial institution of which the
Philippines is a member or are owed by these institutions to the Philippines. Any
remaining profit or loss shall be carried in a special frozen account which shall be
named "Revaluation of International Reserve" and the net balance of which shall
appear either among the liabilities or among the assets of the Bangko Sentral,
depending on whether the revaluations have produced net profits or net losses.
The Revaluation of International Reserve account shall be neither
credited nor debited for any purposes other than those specifically authorized in
this section.
Section 46. Suspense Accounts. - Sections 43 and 43-A of Republic Act
No. 265, as amended, creating the Monetary Adjustment Account (MAA) and the
Exchange Stabilization Adjustment Account (ESAA), respectively, are hereby
repealed. Amounts outstanding as of the effective date of this Act based on these
accounts shall continue to be for the account of the Central Bank and shall be
governed by the transitory provisions of this Act.
The Revaluation of International Reserve (RIR) account as of the
effective date of this Act of the Central Bank shall continue to be for the account
of the same entity and shall be governed by the provisions of Section 44 of
Republic Act No. 265, as amended, until otherwise provided for in accordance
with the transitory provisions of this Act.
ARTICLE VII THE AUDITOR
Section 47. Appointment and Personnel. - The Chairman of the
Commission on Audit shall act as the ex officio auditor of the Bangko Sentral
and, as such, he is empowered and authorized to appoint a representative who
shall be the auditor of the Bangko Sentral and, in accordance with law, fix his
#&
salary, and to appoint and fix salaries and number of personnel to assist said
representative in his work. The salaries and other emoluments shall be paid by
the Commission. The auditor of the Bangko Sentral and personnel under him
may be removed only by the Chairman of the Commission.
The representative of the Chairman of the Commission must be a
certified public accountant with at least ten (10) years experience as such. No
relative of any member of the Monetary Board or the Chairman of the
Commission within the sixth degree of consanguinity or affinity shall be appointed
such representative.
CHAPTER II THE BANGKO SENTRAL AND THE MEANS OF PAYMENT
ARTICLE I THE UNIT OF MONETARY VALUE
Section 48. The Peso. - The unit of monetary value in the Philippines is
the "peso," which is represented by the sign "P."
The peso is divided into one hundred (100) equal parts called "centavos,"
which are represented by the sign "c."
ARTICLE II ISSUE OF MEANS OF PAYMENT
A. CURRENCY
Section 49. Definition of Currency. - The word "currency" is hereby
defined, for purposes of this Act, as meaning all Philippine notes and coins
issued or circulating in accordance with the provisions of this Act.
Section 50. Exclusive Issue Power. - The Bangko Sentral shall have the
sole power and authority to issue currency, within the territory of the Philippines.
No other person or entity, public or private, may put into circulation notes, coins
or any other object or document which, in the opinion of the Monetary Board,
might circulate as currency, nor reproduce or imitate the facsimiles of Bangko
Sentral notes without prior authority from the Bangko Sentral.
The Monetary Board may issue such regulations as it may deem
advisable in order to prevent the circulation of foreign currency or of currency
substitutes as well as to prevent the reproduction of facsimiles of Bangko Sentral
notes.
The Bangko Sentral shall have the authority to investigate, make arrests,
conduct searches and seizures in accordance with law, for the purpose of
maintaining the integrity of the currency.
Violation of this provision or any regulation issued by the Bangko Sentral
#'
pursuant thereto shall constitute an offense punishable by imprisonment of not
less than five (5) years but not more than ten (10) years. In case the Revised
Penal Code provides for a greater penalty, then that penalty shall be imposed.
Section 51. Liability for Notes and Coins. - Notes and coins issued by the
Bangko Sentral shall be liabilities of the Bangko Sentral and may be issued only
against, and in amounts not exceeding, the assets of the Bangko Sentral. Said
notes and coins shall be a first and paramount lien on all assets of the Bangko
Sentral.
The Bangko Sentral's holdings of its own notes and coins shall not be
considered as part of its currency issue and, accordingly, shall not form part of
the assets or liabilities of the Bangko Sentral.
Section 52. Legal Tender Power. - All notes and coins issued by the
Bangko Sentral shall be fully guaranteed by the Government of the Republic of
the Philippines and shall be legal tender in the Philippines for all debts, both
public and private: Provided, however, That, unless otherwise fixed by the
Monetary Board, coins shall be legal tender in amounts not exceeding Fifty
pesos (P50.00) for denominations of Twenty-five centavos and above, and in
amounts not exceeding Twenty pesos (P20.00) for denominations of Ten
centavos or less.
Section 53. Characteristics of the Currency. - The Monetary Board, with
the approval of the President of the Philippines, shall prescribe the
denominations, dimensions, designs, inscriptions and other characteristics of
notes issued by the Bangko Sentral: Provided, however, That said notes shall
state that they are liabilities of the Bangko Sentral and are fully guaranteed by
the Government of the Republic of the Philippines. Said notes shall bear the
signatures, in facsimile, of the President of the Philippines and of the Governor of
the Bangko Sentral.
Similarly, the Monetary Board, with the approval of the President of the
Philippines, shall prescribe the weight, fineness, designs, denominations and
other characteristics of the coins issued by the Bangko Sentral. In the minting of
coins, the Monetary Board shall give full consideration to the availability of
suitable metals and to their relative prices and cost of minting.
Section 54. Printing of Notes and Mining of Coins. - The Monetary Board
shall prescribe the amounts of notes and coins to be printed and minted,
respectively, and the conditions to which the printing of notes and the minting of
coins shall be subject. The Monetary Board shall have the authority to contract
institutions, mints or firms for such operations.
All expenses incurred in the printing of notes and the minting of coins
shall be for the account of the Bangko Sentral.
#(
Section 55. Interconvertibility of Currency. - The Bangko Sentral shall
exchange, on demand and without charge, Philippine currency of any
denomination for Philippine notes and coins of any other denomination
requested. If for any reason the Bangko Sentral is temporarily unable to provide
notes or coins of the denominations requested, it shall meet its obligations by
delivering notes and coins of the denominations which most nearly approximate
those requested.
Section 56. Replacement of Currency Unfit for Circulation. - The Bangko
Sentral shall withdraw from circulation and shall demonetize all notes and coins
which for any reason whatsoever are unfit for circulation and shall replace them
by adequate notes and coins: Provided, however, That the Bangko Sentral shall
not replace notes and coins the identification of which is impossible, coins which
show signs of filing, clipping or perforation, and notes which have lost more than
two-fifths (2/5) of their surface or all of the signatures inscribed thereon. Notes
and coins in such mutilated conditions shall be withdrawn from circulation and
demonetized without compensation to the bearer.
Section 57. Retirement of Old Notes and Coins. - The Bangko Sentral
may call in for replacement notes of any series or denomination which are more
than five (5) years old and coins which are more than (10) years old.
Notes and coins called in for replacement in accordance with this
provision shall remain legal tender for a period of one (1) year from the date of
call. After this period, they shall cease to be legal tender but during the following
year, or for such longer period as the Monetary Board may determine, they may
be exchanged at par and without charge in the Bangko Sentral and by agents
duly authorized by the Bangko Sentral for this purpose. After the expiration of this
latter period, the notes and coins which have not been exchanged shall cease to
be a liability of the Bangko Sentral and shall be demonetized. The Bangko
Sentral shall also demonetize all notes and coins which have been called in and
replaced.
B. DEMAND DEPOSITS
Section 58. Definition. - For purposes of this Act, the term "demand
deposits" means all those liabilities of the Bangko Sentral and of other banks
which are denominated in Philippine currency and are subject to payment in legal
tender upon demand by the presentation of checks.
Section 59. Issue of Demand Deposits. - Only banks duly authorized to
do so may accept funds or create liabilities payable in pesos upon demand by
the presentation of checks, and such operations shall be subject to the control of
the Monetary Board in accordance with the powers granted it with respect thereto
under this Act.
#)
Section 60. Legal Character. - Checks representing demand deposits do
not have legal tender power and their acceptance in the payment of debts, both
public and private, is at the option of the creditor: Provided, however, That a
check which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash in an amount equal to the amount
credited to his account.
CHAPTER III GUIDING PRINCIPLES OF MONETARY ADMINISTRATION
BY THE BANGKO SENTRAL
ARTICLE I DOMESTIC MONETARY STABILIZATION
Section 61. Guiding Principle. - The Monetary Board shall endeavor to
control any expansion or contraction in monetary aggregates which is prejudicial
to the attainment or maintenance of price stability.
Section 62. Power to Define Terms. - For purposes of this article and of
this Act, the Monetary Board shall formulate definitions of monetary aggregates,
credit and prices and shall make public such definitions and any changes thereof.
Section 63. Action When Abnormal Movements Occur in the Monetary
Aggregates, Credit, or Price Level. - Whenever abnormal movements in the
monetary aggregates, in credit, or in prices endanger the stability of the
Philippine economy or important sectors thereof, the Monetary Board shall:
(a) take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral under the provisions of
this Act; and
(b) submit to the President of the Philippines and the Congress, and make public,
a detailed report which shall include, as a minimum, a description and analysis
of:
(1) the causes of the rise or fall of the monetary aggregates, of credit or of prices;
(2) the extent to which the changes in the monetary aggregates, in credit, or in
prices have been reflected in changes in the level of domestic output,
employment, wages and economic activity in general, and the nature and
significance of any such changes; and
(3) the measures which the Monetary Board has taken and the other monetary,
fiscal or administrative measures which it recommends to be adopted.
Whenever the monetary aggregates, or the level of credit, increases or
decreases by more than fifteen percent (15%), or the cost of living index
increases by more than ten percent (10%), in relation to the level existing at the
#*
end of the corresponding month of the preceding year, or even though any of
these quantitative guidelines have not been reached when in its judgment the
circumstances so warrant, the Monetary Board shall submit the reports
mentioned in this section, and shall state therein whether, in the opinion of the
Board, said changes in the monetary aggregates, credit or cost of living
represent a threat to the stability of the Philippine economy or of important
sectors thereof.
The Monetary Board shall continue to submit periodic reports to the
President of the Philippines and to Congress until it considers that the monetary,
credit or price disturbances have disappeared or have been adequately
controlled.
ARTICLE II INTERNATIONAL MONETARY STABILIZATION
Section 64. International Monetary Stabilization. - The Bangko Sentral
shall exercise its powers under this Act to preserve the international value of the
peso and to maintain its convertibility into other freely convertible currencies
primarily for, although not necessarily limited to, current payments for foreign
trade and invisibles.
Section 65. International Reserves. - In order to maintain the
international stability and convertibility of the Philippine peso, the Bangko Sentral
shall maintain international reserves adequate to meet any foreseeable net
demands on the Bangko Sentral for foreign currencies.
In judging the adequacy of the international reserves, the Monetary Board
shall be guided by the prospective receipts and payments of foreign exchange by
the Philippines. The Board shall give special attention to the volume and maturity
of the Bangko Sentral's own liabilities in foreign currencies, to the volume and
maturity of the foreign exchange assets and liabilities of other banks operating in
the Philippines and, insofar as they are known or can be estimated, the volume
and maturity of the foreign exchange assets and liabilities of all other persons
and entities in the Philippines.
Section 66. Composition of the International Reserves. - The
international reserves of the Bangko Sentral may include but shall not be limited
to the following assets:
(a) gold; and
(b) assets in foreign currencies in the form of: documents and instruments
customarily employed for the international transfer of funds; demand and time
deposits in central banks, treasuries and commercial banks abroad; foreign
government securities; and foreign notes and coins.
$+
The Monetary Board shall endeavor to hold the foreign exchange
resources of the Bangko Sentral in freely convertible currencies; moreover, the
Board shall give particular consideration to the prospects of continued strength
and convertibility of the currencies in which the reserve is maintained, as well as
to the anticipated demands for such currencies. The Monetary Board shall issue
regulations determining the other qualifications which foreign exchange assets
must meet in order to be included in the international reserves of the Bangko
Sentral.
The Bangko Sentral shall be free to convert any of the assets in its
international reserves into other assets as described in subsections (a) and (b) of
this section.
Section 67. Action When the International Stability of the Peso Is
Threatened. - Whenever the international reserve of the Bangko Sentral falls to a
level which the Monetary Board considers inadequate to meet prospective net
demands on the Bangko Sentral for foreign currencies, or whenever the
international reserve appears to be in imminent danger of falling to such a level,
or whenever the international reserve is falling as a result of payments or
remittances abroad which, in the opinion of the Monetary Board, are contrary to
the national welfare, the Monetary Board shall:
(a) take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral under the provisions of
this Act; and
(b) submit to the President of the Philippines and to Congress a detailed report
which shall include, as a minimum, a description and analysis of:
(1) the nature and causes of the existing or imminent decline;
(2) the remedial measures already taken or to be taken by the Monetary Board;
(3) the monetary, fiscal or administrative measures further proposed; and
(4) the character and extent of the cooperation required from other government
agencies for the successful execution of the policies of the Monetary Board.
If the resultant actions fail to check the deterioration of the reserve
position of the Bangko Sentral, or if the deterioration cannot be checked except
by chronic restrictions on exchange and trade transactions or by sacrifice of the
domestic objectives of a balanced and sustainable growth of the economy, the
Monetary Board shall propose to the President, with appropriate notice of the
Congress, such additional action as it deems necessary to restore equilibrium in
the international balance of payments of the Philippines.
$"
The Monetary Board shall submit periodic reports to the President and to
Congress until the threat to the international monetary stability of the Philippines
has disappeared.
CHAPTER IV INSTRUMENTS OF BANGKO SENTRAL ACTION
ARTICLE I GENERAL CRITERION
Section 68. Means of Action. - In order to achieve the primary objective
of price stability, the Monetary Board shall rely on its moral influence and the
powers granted to it under this Act for the management of monetary aggregates.
ARTICLE II OPERATIONS IN GOLD AND FOREIGN EXCHANGE
Section 69. Purchases and Sales of Gold. - The Bangko Sentral may buy
and sell gold in any form, subject to such regulations as the Monetary Board may
issue.
The purchases and sales of gold authorized by this section shall be made
in the national currency at the prevailing international market price as determined
by the Monetary Board.
Section 70. Purchases and Sales of Foreign Exchange. - The Bangko
Sentral may buy and sell foreign notes and coins, and documents and
instruments of types customarily employed for the international transfer of funds.
The Bangko Sentral may engage in future exchange operations.
The Bangko Sentral may engage in foreign exchange transactions with
the following entities or persons only:
(a) banking institutions operating in the Philippines;
(b) the Government, its political subdivisions and instrumentalities;
(c) foreign or international financial institutions;
(d) foreign governments and their instrumentalities; and
(e) other entities or persons which the Monetary Board is hereby empowered to
authorize as foreign exchange dealers, subject to such rules and regulations as
the Monetary Board shall prescribe.
In order to maintain the convertibility of the peso, the Bangko Sentral
may, at the request of any banking institution operating in the Philippines, buy
any quantity of foreign exchange offered, and sell any quantity of foreign
exchange demanded, by such institution, provided that the foreign currencies so
$#
offered or demanded are freely convertible into gold or United States dollars.
This requirement shall not apply to demands for foreign notes and coins.
The Bangko Sentral shall effect its exchange transactions between
foreign currencies and the Philippine peso at the rates determined in accordance
with the provisions of Section 74 of this Act.
Section 71. Foreign Asset Position of the Bangko Sentral. - The Bangko
Sentral shall endeavor to maintain at all times a net positive foreign asset
position so that its gross foreign exchange assets will always exceed its gross
foreign liabilities. In the event that the equivalent amount in pesos of the foreign
exchange liabilities of the Bangko Sentral exceed twice the equivalent amount in
pesos of the foreign exchange assets of the bank, the Bangko Sentral shall,
within sixty (60) days from the date the limit is exceeded, submit a report to the
Congress stating the origin of these liabilities, and the manner in which they will
be paid.
Section 72. Emergency Restrictions on Exchange Operations. - In order
to achieve the primary objective of the Bangko Sentral as set forth in Section 3 of
this Act, or protect the international reserves of the Bangko Sentral in the
imminence of, or during an exchange crisis, or in time of national emergency and
to give the Monetary Board and the Government time in which to take
constructive measures to forestall, combat, or overcome such a crisis or
emergency, the Monetary Board, with the concurrence of at least five (5) of its
members and with the approval of the President of the Philippines, may
temporarily suspend or restrict sales of exchange by the Bangko Sentral, and
may subject all transactions in gold and foreign exchange to license by the
Bangko Sentral, and may require that any foreign exchange thereafter obtained
by any person residing or entity operating in the Philippines be delivered to the
Bangko Sentral or to any bank or agent designated by the Bangko Sentral for the
purpose, at the effective exchange rate or rates: Provided, however, That foreign
currency deposits made under Republic Act No. 6426 shall be exempt from these
requirements.
Section 73. Acquisition of Inconvertible Currencies. - The Bangko Sentral
shall avoid the acquisition and holding of currencies which are not freely
convertible, and may acquire such currencies in an amount exceeding the
minimum balance necessary to cover current demands for said currencies only
when, and to the extent that, such acquisition is considered by the Monetary
Board to be in the national interest. The Monetary Board shall determine the
procedures which shall apply to the acquisition and disposition by the Bangko
Sentral of foreign exchange which is not freely utilizable in the international
market.
Section 74. Exchange Rates. - The Monetary Board shall determine the
exchange rate policy of the country.
$$
The Monetary Board shall determine the rates at which the Bangko
Sentral shall buy and sell spot exchange, and shall establish deviation limits from
the effective exchange rate or rates as it may deem proper. The Bangko Sentral
shall not collect any additional commissions or charges of any sort, other than
actual telegraphic or cable costs incurred by it.
The Monetary Board shall similarly determine the rates for other types of
foreign exchange transactions by the Bangko Sentral, including purchases and
sales of foreign notes and coins, but the margins between the effective exchange
rates and the rates thus established may not exceed the corresponding margins
for spot exchange transactions by more than the additional costs or expenses
involved in each type of transactions.
Section 75. Operations with Foreign Entities. - The Monetary Board may
authorize the Bangko Sentral to grant loans to and receive loans from foreign
banks and other foreign or international entities, both public and private, and may
engage in such other operations with these entities as are in the national interest
and are appropriate to its character as a central bank. The Bangko Sentral may
also act as agent or correspondent for such entities.
Upon authority of the Monetary Board, the Bangko Sentral may pledge
any gold or other assets which it possesses as security against loans which it
receives from foreign or international entities.
ARTICLE III REGULATION OF FOREIGN EXCHANGE OPERATIONS OF THE
BANKS
Section 76. Foreign Exchange Holdings of the Banks. - In order that the
Bangko Sentral may at all times have foreign exchange resources sufficient to
enable it to maintain the international stability and convertibility of the peso, or in
order to promote the domestic investment of bank resources, the Monetary
Board may require the banks to sell to the Bangko Sentral or to other banks all or
part of their surplus holdings of foreign exchange. Such transfers may be
required for all foreign currencies or for only certain of such currencies, according
to the decision of the Monetary Board. The transfers shall be made at the rates
established under the provisions of Section 74 of this Act.
The Monetary Board may, whenever warranted, determine the net assets
and net liabilities of banks and shall, in making such a determination, take into
account the bank's networth, outstanding liabilities, actual and contingent, or
such other financial or performance ratios as may be appropriate under the
circumstances. Any such determination of net assets and net liabilities shall be
applied in all banks uniformly and without discrimination.
Section 77. Requirement of Balanced Currency Position. - The Monetary
Board may require the banks to maintain a balanced position between their
$%
assets and liabilities in Philippine pesos or in any other currency or currencies in
which they operate. The banks shall be granted a reasonable period of time in
which to adjust their currency positions to any such requirement.
The powers granted under this section shall be exercised only when
special circumstances make such action necessary, in the opinion of the
Monetary Board, and shall be applied to all banks alike and without
discrimination.
Section 78. Regulation of Non-spot Exchange Transactions. - In order to
restrain the banks from taking speculative positions with respect to future
fluctuations in foreign exchange rates, the Monetary Board may issue such
regulations governing bank purchases and sales of non-spot exchange as it may
consider necessary for said purpose.
Section 79. Other Exchange Profits and Losses. - The banks shall bear
the risks of non-compliance with the terms of the foreign exchange documents
and instruments which they buy and sell, and shall also bear any other typically
commercial or banking risks, including exchange risks not assumed by the
Bangko Sentral under the provisions of the preceding section.
Section 80. Information on Exchange Operations. - The banks shall
report to the Bangko Sentral the volume and composition of their purchases and
sales of gold and foreign exchange each day, and must furnish such additional
information as the Bangko Sentral may request with reference to the movements
in their accounts in foreign currencies.
The Monetary Board may also require other persons and entities to report
to it currently all transactions or operations in gold, in any shape or form, and in
foreign exchange whether entered into or undertaken by them directly or through
agents, or to submit such data as may be required on operations or activities
giving rise to or in connection with or relating to a gold or foreign exchange
transaction. The Monetary Board shall prescribe the forms on which such
declarations must be made. The accuracy of the declarations may be verified by
the Bangko Sentral by whatever inspection it may deem necessary.
ARTICLE IV LOANS TO BANKING AND OTHER FINANCIAL INSTITUTIONS
A. CREDIT POLICY
Section 81. Guiding Principles. - The rediscounts, discounts, loans and
advances which the Bangko Sentral is authorized to extend to banking
institutions under the provisions of the present article of this Act shall be used to
influence the volume of credit consistent with the objective of price stability.
B. NORMAL CREDIT OPERATIONS
$&
Section 82. Authorized Types of Operations. - Subject to the principle
stated in the preceding section of this Act, the Bangko Sentral may normally and
regularly carry on the following credit operations with banking institutions
operating in the Philippines:
(a) Commercial credits. - The Bangko Sentral may rediscount, discount, buy and
sell bills, acceptances, promissory notes and other credit instruments with
maturities of not more than one hundred eighty (180) days from the date of their
rediscount, discount or acquisition by the Bangko Sentral and resulting from
transactions related to:
(1) the importation, exportation, purchase or sale of readily saleable goods and
products, or their transportation within the Philippines; or
(2) the storing of non-perishable goods and products which are duly insured and
deposited, under conditions assuring their preservation, in authorized bonded
warehouses or in other places approved by the Monetary Board.
(b) Production credits. - The Bangko Sentral may rediscount, discount, buy and
sell bills, acceptances, promissory notes and other credit instruments having
maturities of not more than three hundred sixty (360) days from the date of their
rediscount, discount or acquisition by the Bangko Sentral and resulting from
transactions related to the production or processing of agricultural, animal,
mineral, or industrial products. Documents or instruments acquired in accordance
with this subsection shall be secured by a pledge of the respective crops or
products: Provided, however, That the crops or products need not be pledged to
secure the documents if the original loan granted by the Bangko Sentral is
secured by a lien or mortgage on real estate property seventy percent (70%) of
the appraised value of which equals or exceeds the amount of the loan granted.
(c) Other credits. - Special credit instruments not otherwise rediscountable under
the immediately preceding subsections (a) and (b) may be eligible for
rediscounting in accordance with rules and regulations which the Bangko Sentral
shall prescribe. Whenever necessary, the Bangko Sentral shall provide funds
from non-inflationary sources: Provided, however, That the Monetary Board shall
prescribe additional safeguards for disbursing these funds.
(d) Advances. - The Bangko Sentral may grant advances against the following
kinds of collaterals for fixed periods which, with the exception of advances
against collateral named in clause (4) of the present subsection, shall not exceed
one hundred eighty (180) days:
(1) gold coins or bullion;
(2) securities representing obligations of the Bangko Sentral or of other domestic
institutions of recognized solvency;
$'
(3) the credit instruments to which reference is made in subsection (a) of this
section;
(4) the credit instruments to which reference is made in subsection (b) of this
section, for periods which shall not exceed three hundred sixty (360) days;
(5) utilized portions of advances in current amount covered by regular overdraft
agreements related to operations included under subsections (a) and (b) of this
section, and certified as to amount and liquidity by the institution soliciting the
advance;
(6) negotiable treasury bills, certificates of indebtedness, notes and other
negotiable obligations of the Government maturing within three (3) years from the
date of the advance; and
(7) negotiable bonds issued by the Government of the Philippines, by Philippine
provincial, city or municipal governments, or by any Philippine Government
instrumentality, and having maturities of not more than ten (10) years from the
date of advance.
The rediscounts, discounts, loans and advances made in accordance with the
provisions of this section may not be renewed or extended unless extraordinary
circumstances fully justify such renewal or extension.
Advances made against the collateral named in clauses (6) and (7) of
subsection (d) of this section may not exceed eighty percent (80%) of the current
market value of the collateral.
C. SPECIAL CREDIT OPERATION
Section 83. Loans for Liquidity Purposes. - The Bangko Sentral may
extend loans and advances to banking institutions for a period of not more than
seven (7) days without any collateral for the purpose of providing liquidity to the
banking system in times of need.
D. EMERGENCY CREDIT OPERATION
Section 84. Emergency Loans and Advances. - In periods of national
and/or local emergency or of imminent financial panic which directly threaten
monetary and banking stability, the Monetary Board may, by a vote of at least
five (5) of its members, authorize the Bangko Sentral to grant extraordinary loans
or advances to banking institutions secured by assets as defined hereunder:
Provided, That while such loans or advances are outstanding, the debtor
institution shall not, except upon prior authorization by the Monetary Board,
expand the total volume of its loans or investments.
$(
The Monetary Board may, at its discretion, likewise authorize the Bangko
Sentral to grant emergency loans or advances to banking institutions, even
during normal periods, for the purpose of assisting a bank in a precarious
financial condition or under serious financial pressures brought by unforeseen
events, or events which, though foreseeable, could not be prevented by the bank
concerned: Provided, however, That the Monetary Board has ascertained that
the bank is not insolvent and has the assets defined hereunder to secure the
advances: Provided, further, That a concurrent vote of at least five (5) members
of the Monetary Board is obtained.
The amount of any emergency loan or advance shall not exceed the sum
of fifty percent (50%) of total deposits and deposit substitutes of the banking
institution and shall be disbursed in two (2) or more tranches. The amount of the
first tranche shall be limited to twenty-five percent (25%) of the total deposit and
deposit substitutes of the institution and shall be secured by government
securities to the extent of their applicable loan values and other unencumbered
first class collaterals which the Monetary Board may approve: Provided, That if
as determined by the Monetary Board, the circumstances surrounding the
emergency warrant a loan or advance greater than the amount provided
hereinabove, the amount of the first tranche may exceed twenty-five percent
(25%) of the bank's total deposit and deposit substitutes if the same is
adequately secured by applicable loan values of government securities and
unencumbered first class collaterals approved by the Monetary Board, and the
principal stockholders of the institution furnish an acceptable undertaking to
indemnify and hold harmless from suit a conservator whose appointment the
Monetary Board may find necessary at any time.
Prior to the release of the first tranche, the banking institution shall submit
to the Bangko Sentral a resolution of its board of directors authorizing the
Bangko Sentral to evaluate other assets of the banking institution certified by its
external auditor to be good and available for collateral purposes should the
release of the subsequent tranche be thereafter applied for.
The Monetary Board may, by a vote of at least five (5) of its members,
authorize the release of a subsequent tranche on condition that the principal
stockholders of the institution:
(a) furnish an acceptable undertaking to indemnify and hold harmless from suit a
conservator whose appointment the Monetary Board may find necessary at any
time; and
(b) provide acceptable security which, in the judgment of the Monetary Board,
would be adequate to supplement, where necessary, the assets tendered by the
banking institution to collateralize the subsequent tranche.
In connection with the exercise of these powers, the prohibitions in
$)
Section 128 of this Act shall not apply insofar as it refers to acceptance as
collateral of shares and their acquisition as a result of foreclosure proceedings,
including the exercise of voting rights pertaining to said shares: Provided,
however, That should the Bangko Sentral acquire any of the shares it has
accepted as collateral as a result of foreclosure proceedings, the Bangko Sentral
shall dispose of said shares by public bidding within one (1) year from the date of
consolidation of title by the Bangko Sentral.
Whenever a financial institution incurs an overdraft in its account with the
Bangko Sentral, the same shall be eliminated within the period prescribed in
Section 102 of this Act.
E. CREDIT TERMS
Section 85. Interest and Rediscount. - The Bangko Sentral shall collect
interest and other appropriate charges on all loans and advances it extends, the
closure, receivership or liquidations of the debtor-institution notwithstanding. This
provision shall apply prospectively.
The Monetary Board shall fix the interest and rediscount rates to be
charged by the Bangko Sentral on its credit operations in accordance with the
character and term of the operation, but after due consideration has been given
to the credit needs of the market, the composition of the Bangko Sentral's
portfolio, and the general requirements of the national monetary policy. Interest
and rediscount rates shall be applied to all banks of the same category uniformly
and without discrimination.
Section 86. Endorsement. - The documents rediscounted, discounted,
bought or accepted as collateral by the Bangko Sentral in the course of the credit
operations authorized in this article shall bear the endorsement of the institution
from which they are received.
Section 87. Repayment of Credits. - Documents rediscounted,
discounted or accepted as collateral by the Bangko Sentral must be withdrawn
by the borrowing institution on the dates of their maturities, or upon liquidation of
the obligations which they represent or to which they relate whenever said
obligations have been liquidated prior to their dates of maturity.
Banks shall have the right at any time to withdraw any documents which
they have presented to the Bangko Sentral as collateral, upon payment in full of
the corresponding debt to the Bangko Sentral, including interest charges.
Section 88. Other requirements. - The Monetary Board may prescribe,
within the general powers granted to it under this Act, additional conditions which
borrowing institutions must satisfy in order to have access to the credit of the
Bangko Sentral. These conditions may refer to the rates of interest charged by
$*
the banks, to the purposes for which their loans in general are destined, and to
any other clearly definable aspect of the credit policy of the bank.
Section 89. Provisional Advances to the National Government. - The
Bangko Sentral may make direct provisional advances with or without interest to
the National Government to finance expenditures authorized in its annual
appropriation: Provided, That said advances shall be repaid before the end of
three (3) months extendible by another three (3) months as the Monetary Board
may allow following the date the National Government received such provisional
advances and shall not, in their aggregate, exceed twenty percent (20%) of the
average annual income of the borrower for the last three (3) preceding fiscal
years.
ARTICLE V OPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE
BANGKO SENTRAL
Section 90. Principles of Open Market Operations. - The open market
purchases and sales of securities by the Bangko Sentral shall be made
exclusively in accordance with its primary objective of achieving price stability.
Section 91. Purchases and Sales of Government Securities. - In order to
achieve the objectives of the national monetary policy, the Bangko Sentral may,
in accordance with the principle stated in Section 90 of this Act and with such
rules and regulations as may be prescribed by the Monetary Board, buy and sell
in the open market for its own account:
(a) evidences of indebtedness issued directly by the Government of the
Philippines or by its political subdivisions; and
(b) evidences of indebtedness issued by government instrumentalities and fully
guaranteed by the Government.
The evidences of indebtedness acquired under the provisions of this
section must be freely negotiable and regularly serviced and must be available to
the general public through banking institutions and local government treasuries in
denominations of a thousand pesos or more.
Section 92. Issue and Negotiation of Bangko Sentral Obligations. - In
order to provide the Bangko Sentral with effective instruments for open market
operations, the Bangko Sentral may, subject to such rules and regulations as the
Monetary Board may prescribe and in accordance with the principles stated in
Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral: Provided, That issuance of such certificates
of indebtedness shall be made only in cases of extraordinary movement in price
levels. Said evidences of indebtedness may be issued directly against the
international reserve of the Bangko Sentral or against the securities which it has
%+
acquired under the provisions of Section 91 of this Act, or may be issued without
relation to specific types of assets of the Bangko Sentral.
The Monetary Board shall determine the interest rates, maturities and
other characteristics of said obligations of the Bangko Sentral, and may, if it
deems it advisable, denominate the obligations in gold or foreign currencies.
Subject to the principles stated in Section 90 of this Act, the evidences of
indebtedness of the Bangko Sentral to which this section refers may be acquired
by the Bangko Sentral before their maturity, either through purchases in the open
market or through redemptions at par and by lot if the Bangko Sentral has
reserved the right to make such redemptions. The evidences of indebtedness
acquired or redeemed by the Bangko Sentral shall not be included among its
assets, and shall be immediately retired and cancelled.
ARTICLE VI COMPOSITION OF BANGKO SENTRAL'S PORTFOLIO
Section 93. Review of the Bangko Sentral's Portfolio. - At least once
every month the Monetary Board shall review the portfolio of the Bangko Sentral
in relation to its future credit policy.
In reviewing the Bangko Sentral's portfolio, the Monetary Board shall
especially consider whether a sufficiently large part of the portfolio consists of
assets with early maturities, in order that a contraction in Bangko Sentral credit
may be effected promptly whenever the national monetary policy so requires.
ARTICLE VII BANK RESERVES
Section 94. Reserve Requirements. - In order to control the volume of
money created by the credit operations of the banking system, all banks
operating in the Philippines shall be required to maintain reserves against their
deposit liabilities: Provided, That the Monetary Board may, at its discretion, also
require all banks and/or quasi-banks to maintain reserves against funds held in
trust and liabilities for deposit substitutes as defined in this Act. The required
reserves of each bank shall be proportional to the volume of its deposit liabilities
and shall ordinarily take the form of a deposit in the Bangko Sentral. Reserve
requirements shall be applied to all banks of the same category uniformly and
without discrimination.
Reserves against deposit substitutes, if imposed, shall be determined in
the same manner as provided for reserve requirements against regular bank
deposits, with respect to the imposition, increase, and computation of reserves.
The Monetary Board may exempt from reserve requirements deposits
and deposit substitutes with remaining maturities of two (2) years or more, as
well as interbank borrowings.
%"
Since the requirement to maintain bank reserves is imposed primarily to
control the volume of money, the Bangko Sentral shall not pay interest on the
reserves maintained with it unless the Monetary Board decides otherwise as
warranted by circumstances.
Section 95. Definition of Deposit Substitutes. - The term "deposit
substitutes" is defined as an alternative form of obtaining funds from the public,
other than deposits, through the issuance, endorsement, or acceptance of debt
instruments for the borrower's own account, for the purpose of relending or
purchasing of receivables and other obligations. These instruments may include,
but need not be limited to, bankers acceptances, promissory notes,
participations, certificates of assignment and similar instruments with recourse,
and repurchase agreements. The Monetary Board shall determine what specific
instruments shall be considered as deposit substitutes for the purposes of
Section 94 of this Act: Provided, however, That deposit substitutes of
commercial, industrial and other non-financial companies for the limited purpose
of financing their own needs or the needs of their agents or dealers shall not be
covered by the provisions of Section 94 of this Act.
Section 96. Required Reserves Against Peso Deposits. - The Monetary
Board may fix and, when it deems necessary, alter the minimum reserve ratios to
peso deposits, as well as to deposit substitutes, which each bank and/or quasi-
bank may maintain, and such ratio shall be applied uniformly to all banks of the
same category as well as to quasi-banks.
Section 97. Required Reserves Against Foreign Currency Deposits. -
The Monetary Board is similarly authorized to prescribe and modify the minimum
reserve ratios applicable to deposits denominated in foreign currencies.
Section 98. Reserves Against Unused Balances of Overdraft Lines. - In
order to facilitate Bangko Sentral control over the volume of bank credit, the
Monetary Board may establish minimum reserve requirements for unused
balances of overdraft lines.
The powers of the Monetary Board to prescribe and modify reserve
requirements against unused balances of overdraft lines shall be the same as its
powers with respect to reserve requirements against demand deposits.
Section 99. Increase in Reserve Requirements. - Whenever in the
opinion of the Monetary Board it becomes necessary to increase reserve
requirements against existing liabilities, the increase shall be made in a gradual
manner and shall not exceed four percentage points in any thirty-day period.
Banks and other affected financial institutions shall be notified reasonably in
advance of the date on which such increase is to become effective.
Section 100. Computation on Reserves. - The reserve position of each
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bank or quasi-bank shall be calculated daily on the basis of the amount, at the
close of business for the day, of the institution's reserves and the amount of its
liability accounts against which reserves are required to be maintained: Provided,
That with reference to holidays or non-banking days, the reserve position as
calculated at the close of the business day immediately preceding such holidays
and non-banking days shall apply on such days.
For the purpose of computing the reserve position of each bank or quasi-
bank, its principal office in the Philippines and all its branches and agencies
located therein shall be considered as a single unit.
Section 101. Reserve Deficiencies. - Whenever the reserve position of
any bank or quasi-bank, computed in the manner specified in the preceding
section of this Act, is below the required minimum, the bank or quasi-bank shall
pay the Bangko Sentral one-tenth of one percent (1/10 of 1%) per day on the
amount of the deficiency or the prevailing ninety-one-day treasury bill rate plus
three percentage points, whichever is higher: Provided, however, That banks and
quasi-banks shall ordinarily be permitted to offset any reserve deficiency
occurring on one or more days of the week with any excess reserves which they
may hold on other days of the same week and shall be required to pay the
penalty only on the average daily deficiency during the week. In cases of abuse,
the Monetary Board may deny any bank or quasi-bank the privilege of offsetting
reserve deficiencies in the aforesaid manner.
If a bank or quasi-bank chronically has a reserve deficiency, the Monetary
Board may limit or prohibit the making of new loans or investments by the
institution and may require that part or all of the net profits of the institution be
assigned to surplus.
The Monetary Board may modify or set aside the reserve deficiency
penalties provided in this section, for part or the entire period of a strike or
lockout affecting a bank or a quasi-bank as defined in the Labor Code, or of a
national emergency affecting operations of banks or quasi-banks. The Monetary
Board may also modify or set aside reserved deficiency penalties for
rehabilitation program of a bank.
Section 102. Interbank Settlement. - The Bangko Sentral shall establish
facilities for interbank clearing under such rules and regulations as the Monetary
Board may prescribe: Provided, That the Bangko Sentral may charge
administrative and other fees for the maintenance of such facilities.
The deposit reserves maintained by the banks in the Bangko Sentral in
accordance with the provisions of Section 94 of this Act shall serve as basis for
the clearing of checks and the settlement of interbank balances, subject to such
rules and regulations as the Monetary Board may issue with respect to such
operations: Provided, That any bank which incurs on overdrawing in its deposit
%$
account with the Bangko Sentral shall fully cover said overdraft, including interest
thereon at a rate equivalent to one-tenth of one percent (1/10 of 1%) per day or
the prevailing ninety-one-day treasury bill rate plus three percentage points,
whichever is higher, not later than the next clearing day: Provided, further, That
settlement of clearing balances shall not be effected for any account which
continues to be overdrawn for five (5) consecutive banking days until such time
as the overdrawing is fully covered or otherwise converted into an emergency
loan or advance pursuant to the provisions of Section 84 of this Act: Provided,
finally, That the appropriate clearing office shall be officially notified of banks with
overdrawn balances. Banks with existing overdrafts with the Bangko Sentral as
of the effectivity of this Act shall, within such period as may be prescribed by the
Monetary Board, either convert the overdraft into an emergency loan or advance
with a plan of payment, or settle such overdrafts, and that, upon failure to so
comply herewith, the Bangko Sentral shall take such action against the bank as
may be warranted under this Act.
Section 103. Exemption from Attachment and Other Purposes. -
Deposits maintained by banks with the Bangko Sentral as part of their reserve
requirements shall be exempt from attachment, garnishments, or any other order
or process of any court, government agency or any other administrative body
issued to satisfy the claim of a party other than the Government, or its political
subdivisions or instrumentalities.
ARTICLE VIII SELECTIVE REGULATION OF BANK OPERATIONS
Section 104. Guiding Principle. - The Monetary Board shall use the
powers granted to it under this Act to ensure that the supply, availability and cost
of money are in accord with the needs of the Philippine economy and that bank
credit is not granted for speculative purposes prejudicial to the national interests.
Regulations on bank operations shall be applied to all banks of the same
category uniformly and without discrimination.
Section 105. Margin Requirements Against Letters of Credit. - The
Monetary Board may at any time prescribe minimum cash margins for the
opening of letters of credit, and may relate the size of the required margin to the
nature of the transaction to be financed.
Section 106. Required Security Against Bank Loans. - In order to
promote liquidity and solvency of the banking system, the Monetary Board may
issue such regulations as it may deem necessary with respect to the maximum
permissible maturities of the loans and investments which the banks may make,
and the kind and amount of security to be required against the various types of
credit operations of the banks.
Section 107. Portfolio Ceilings. - Whenever the Monetary Board
considers it advisable to prevent or check an expansion of bank credit, the Board
%%
may place an upper limit on the amount of loans and investments which the
banks may hold, or may place a limit on the rate of increase of such assets within
specified periods of time. The Monetary Board may apply such limits to the loans
and investments of each bank or to specific categories thereof.
In no case shall the Monetary Board establish limits which are below the
value of the loans or investments of the banks on the date on which they are
notified of such restrictions. The restrictions shall be applied to all banks
uniformly and without discrimination.
Section 108. Minimum Capital Ratios. - The Monetary Board may
prescribe minimum ratios which the capital and surplus of the banks must bear to
the volume of their assets, or to specific categories thereof, and may alter said
ratios whenever it deems necessary.
ARTICLE IX COORDINATION OF CREDIT POLICIES BY GOVERNMENT
INSTITUTIONS
Section 109. Coordination of Credit Policies. - Government-owned
corporations which perform banking or credit functions shall coordinate their
general credit policies with those of the Monetary Board.
Toward this end, the Monetary Board may, whenever it deems it
expedient, make suggestions or recommendations to such corporations for the
more effective coordination of their policies with those of the Bangko Sentral.
CHAPTER V FUNCTIONS AS BANKER AND FINANCIAL ADVISOR OF
THE GOVERNMENT
ARTICLE I
FUNCTIONS AS BANKER OF THE GOVERNMENT
Section 110. Designation of Bangko Sentral as Banker of the
Government. - The Bangko Sentral shall act as a banker of the Government, its
political subdivisions and instrumentalities.
Section 111. Representation with the International Monetary Fund. - The
Bangko Sentral shall represent the Government in all dealings, negotiations and
transactions with the International Monetary Fund and shall carry such accounts
as may result from Philippine membership in, or operations with, said Fund.
Section 112. Representation with Other Financial Institutions. - The
Bangko Sentral may be authorized by the Government to represent it in dealings,
negotiations or transactions with the International Bank for Reconstruction and
Development and with other foreign or international financial institutions or
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agencies. The President may, however, designate any of his other financial
advisors to jointly represent the Government in such dealings, negotiations or
transactions.
Section 113. Official Deposits. - The Bangko Sentral shall be the official
depository of the Government, its political subdivisions and instrumentalities as
well as of government-owned or controlled corporations and, as a general policy,
their cash balances should be deposited with the Bangko Sentral, with only
minimum working balances to be held by government-owned banks and such
other banks incorporated in the Philippines as the Monetary Board may
designate, subject to such rules and regulations as the Board may prescribe:
Provided, That such banks may hold deposits of the political subdivisions and
instrumentalities of the Government beyond their minimum working balances
whenever such subdivisions or instrumentalities have outstanding loans with said
banks.
The Bangko Sentral may pay interest on deposits of the Government or
of its political subdivisions and instrumentalities, as well as on deposits of banks
with the Bangko Sentral.
Section 114. Fiscal Operations. - The Bangko Sentral shall open a
general cash account for the Treasurer of the Philippines, in which the liquid
funds of the Government shall be deposited.
Transfers of funds from this account to other accounts shall be made only
upon order of the Treasurer of the Philippines.
Section 115. Other Banks as Agents of the Bangko Sentral. - In the
performance of its functions as fiscal agent, the Bangko Sentral may engage the
services of other government-owned and controlled banks and of other domestic
banks for operations in localities at home or abroad in which the Bangko Sentral
does not have offices or agencies adequately equipped to perform said
operations: Provided, however, That for fiscal operations in foreign countries, the
Bangko Sentral may engage the services of foreign banking and financial
institutions.
Section 116. Remuneration for Services. - The Bangko Sentral may
charge equitable rates, commissions or fees for services which it renders to the
Government, its political subdivisions and instrumentalities.
ARTICLE II THE MARKETING AND STABILIZATION OF SECURITIES FOR
THE ACCOUNT OF THE GOVERNMENT
A. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES
Section 117. Issue of Government Obligations. - The issue of securities
%'
representing obligations of the Government, its political subdivisions or
instrumentalities, may be made through the Bangko Sentral, which may act as
agent of, and for the account of, the Government or its respective subdivisions or
instrumentality, as the case may be: Provided, however, That the Bangko Sentral
shall not guarantee the placement of said securities, and shall not subscribe to
their issue except to replace its maturing holdings of securities with the same
type as the maturing securities.
Section 118. Methods of Placing Government Securities. - The Bangko
Sentral may place the securities to which the preceding section refers through
direct sale to financial institutions and the public.
The Bangko Sentral shall not be a member of any stock exchange or
syndicate, but may intervene therein for the sole purpose of regulating their
operations in the placing of government securities.
The Government, or its political subdivisions or instrumentalities, shall
reimburse the Bangko Sentral for the expenses incurred in the placing of the
aforesaid securities.
Section 119. Servicing and Redemption of the Public Debt. - The
servicing and redemption of the public debt shall also be effected through the
Bangko Sentral.
B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT
SECURITIES MARKET
Section 120. The Securities Stabilization Fund. - There shall be
established a "Securities Stabilization Fund" which shall be administered by the
Bangko Sentral for the account of the Government.
The operations of the Securities Stabilization Fund shall consist of
purchases and sales, in the open market, of bonds and other evidences of
indebtedness issued or fully guaranteed by the Government. The purpose of
these operations shall be to increase the liquidity and stabilize the value of said
securities in order thereby to promote investment in government obligations.
The Monetary Board shall use the resources of the Fund to prevent, or
moderate, sharp fluctuations in the quotations of said government obligations,
but shall not endeavor to alter movements of the market resulting from basic
changes in the pattern or level of interest rates.
The Monetary Board shall issue such regulations as may be necessary to
implement the provisions of this section.
Section 121. Resources of the Securities Stabilization Fund. - Subject to
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Section 132 of this Act, the resources of the Securities Stabilization Fund shall
come from the balance of the fund as held by the Central Bank under Republic
Act No. 265 as of the effective date of this Act.
Section 122. Profits and Losses of the Fund. - The Securities
Stabilization Fund shall retain net profits which it may make on its operations,
regardless of whether said profits arise from capital gains or from interest
earnings. The Fund shall correspondingly bear any net losses which it may incur.
ARTICLE III FUNCTIONS AS FINANCIAL ADVISOR OF THE GOVERNMENT
Section 123. Financial Advice on Official Credit Operations. - Before
undertaking any credit operation abroad, the Government, through the Secretary
of Finance, shall request the opinion, in writing, of the Monetary Board on the
monetary implications of the contemplated action. Such opinions must similarly
be requested by all political subdivisions and instrumentalities of the Government
before any credit operation abroad is undertaken by them.
The opinion of the Monetary Board shall be based on the gold and foreign
exchange resources and obligations of the nation and on the effects of the
proposed operation on the balance of payments and on monetary aggregates.
Whenever the Government, or any of its political subdivisions or
instrumentalities, contemplates borrowing within the Philippines, the prior opinion
of the Monetary Board shall likewise be requested in order that the Board may
render an opinion on the probable effects of the proposed operation on monetary
aggregates, the price level, and the balance of payments.
Section 124. Representation on the National Economic and
Development Authority. - In order to assure effective coordination between the
economic, financial and fiscal policies of the Government and the monetary,
credit and exchange policies of the Bangko Sentral, the Deputy Governor
designated by the Governor of the Bangko Sentral shall be an ex officio member
of the National Economic and Development Authority Board.
CHAPTER VI PRIVILEGES AND PROHIBITIONS
ARTICLE I PRIVILEGES
Section 125. Tax Exemptions. - The Bangko Sentral shall be exempt for
a period of five (5) years from the approval of this Act from all national, provincial,
municipal and city taxes, fees, charges and assessments.
The exemption authorized in the preceding paragraph of this section shall
apply to all property of the Bangko Sentral, to the resources, receipts,
expenditures, profits and income of the Bangko Sentral, as well as to all
%)
contracts, deeds, documents and transactions related to the conduct of the
business of the Bangko Sentral: Provided, however, That said exemptions shall
apply only to such taxes, fees, charges and assessments for which the Bangko
Sentral itself would otherwise be liable, and shall not apply to taxes, fees,
charges, or assessments payable by persons or other entities doing business
with the Bangko Sentral: Provided, further, That foreign loans and other
obligations of the Bangko Sentral shall be exempt, both as to principal and
interest, from any and all taxes if the payment of such taxes has been assumed
by the Bangko Sentral.
Section 126. Exemption from Customs Duties. - The provision of any
general or special law to the contrary notwithstanding, the importation and
exportation by the Bangko Sentral of notes and coins, and of gold and other
metals to be used for purposes authorized under this Act, and the importation of
all equipment needed for bank note production, minting of coins, metal refining
and other security printing operations shall be fully exempt from all customs
duties and consular fees and from all other taxes, assessments and charges
related to such importation or exportation.
Section 127. Applicability of the Civil Service Law. - Appointments in the
Bangko Sentral, except as to those which are policy-determining, primarily
confidential or highly technical in nature, shall be made only according to the Civil
Service Law and regulations: Provided, That no qualification requirements for
positions in the Bangko Sentral shall be imposed other than those set by the
Monetary Board: Provided, further, That, the Monetary Board or Governor, in
accordance with Sections 15(c) and 17(d) of this Act, respectively, may without
need of obtaining prior approval from any other government agency, appoint
personnel in the Bangko Sentral whose services are deemed necessary in order
not to unduly disrupt the operations of the Bangko Sentral.
Officers and employees of the Bangko Sentral, including all members of
the Monetary Board, shall not engage directly or indirectly in partisan activities or
take part in any election except to vote.
ARTICLE II PROHIBITIONS
Section 128. Prohibitions. - The Bangko Sentral shall not acquire shares
of any kind or accept them as collateral, and shall not participate in the
ownership or management of any enterprise, either directly or indirectly.
The Bangko Sentral shall not engage in development banking or
financing: Provided, however, That outstanding loans obtained or extended for
development financing shall not be affected by the prohibition of this section.
CHAPTER VII TRANSITORY PROVISIONS
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Section 129. Phase-out of Fiscal Agency Functions. - Unless
circumstances warrant otherwise and approved by the Congress Oversight
Committee, the Bangko Sentral shall, within a period of three (3) years but in no
case longer than five (5) years from the approval of this Act, phase out all fiscal
agency functions provided for in Sections 117, 118, 119, and 120 as well as in
other pertinent provisions of this Act and transfer the same to the Department of
Finance.
Section 130. Phase-out of Regulatory Powers Over the Operations of
Finance Corporations and Other Institutions Performing Similar Functions. - The
Bangko Sentral shall, within a period of five (5) years from the effectivity of this
Act, phase out its regulatory powers over finance companies without quasi-
banking functions and other institutions performing similar functions as provided
in existing laws, the same to be assumed by the Securities and Exchange
Commission.
Section 131. Implementing Details. - The Bangko Sentral shall be made
operational by the performance of the following acts:
(a) the President shall constitute the Monetary Board by appointing the members
thereof within sixty (60) days from the effectivity of this Act; and
(b) the transfer of such assets and liabilities from the Central Bank to the Bangko
Sentral as provided in Section 132 shall be completed within ninety (90) days
from the constitution of the Monetary Board.
All incumbent personnel in the Central Bank as of the date of the
approval of this Act shall continue to exercise their duties and functions as
personnel of the Bangko Sentral subject to the provisions of Section 133:
Provided, That such personnel in the Central Bank as may be necessary for the
purpose of implementing Section 132 may be assigned by the Bangko Sentral
Monetary Board to the Central Bank.
Section 132. Transfer of Assets and Liabilities. - Upon the effectivity of
this Act, three (3) members of the Monetary Board, which may include the
Governor, in representation of the Bangko Sentral, the Secretary of Finance and
the Secretary of Budget and Management in representation of the National
Government, and the Chairmen of the Committees on Banks of the Senate and
the House of Representatives shall determine the assets and liabilities of the
Central Bank which may be transferred to or assumed by the Bangko Sentral.
The Committee shall complete its work within ninety (90) days from the
constitution of the Monetary Board submitting a comprehensive report with all its
findings and justification.
The following guidelines shall be strictly observed in the determination of
which assets and liabilities shall be transferred to the Bangko Sentral:
&+
(a) the Monetary Board and the Secretary of Finance shall have primary
responsibility for working out creative monetary and financial solutions to retire
the Central Bank liabilities and losses at the least cost to the Government;
(b) the Bangko Sentral shall remit seventy-five percent (75%) of its net profits to
a special deposit account (sinking fund) until such time as the net liabilities of the
Central Bank shall have been liquidated through generally accepted finance
mechanisms such as, but not limited to, write-offs, set-offs, condonation,
collections, reappraisal, revaluation and bond issuance by the National
Government, or to the National Government as dividends;
(c) the assets and liabilities to be transferred shall be limited to an amount that
will enable the Bangko Sentral to perform its responsibilities adequately and
operate on a viable basis: Provided, That the assets shall exceed the liabilities as
certified by the Commission on Audit (COA), by an initial amount of Ten billion
pesos (P10,000,000,000);
(d) liabilities to be assumed by the Bangko Sentral shall include liability for notes
and coins in circulation as of the effective date of this Act; and
(e) any asset or liability of the Central Bank not transferred to the Bangko Sentral
shall be retained and administered, disposed of and liquidated by the Central
Bank itself which shall continue to exist as the CB Board of Liquidators only for
the purposes provided in this paragraph but not later than twenty-five (25) years
or until such time that liabilities have been liquidated: Provided, That the Bangko
Sentral may financially assist the Central Bank of Liquidators in the liquidation of
CB liabilities: Provided, finally, That upon disposition of said retained assets and
liquidation of said retained liabilities, the Central Bank shall be deemed
abolished.
All actions taken by the Bangko Sentral Monetary Board under this
section shall be reported to Congress and the President within thirty (30) days.
Section 133. Mandate to Organize. - The Bangko Sentral shall be
organized by the Monetary Board without being subject to the provisions of
Republic Act No. 7430, by adopting if it so desires, an entirely new staffing
pattern on organizational structure to suit the operations of the Bangko Sentral
under this Act. No preferential or priority right shall be given to or enjoyed by any
personnel for appointment to any position in the new staffing pattern, nor shall
any personnel be considered as having prior or vested rights with respect to
retention in the Bangko Sentral or in any position which may be created in the
new staffing pattern, even if he should be the incumbent of a similar position prior
to organization. The formulation of the program of organization shall be
completed within six (6) months after the effectivity of this Act, and shall be fully
implemented within a period of six (6) months thereafter. Personnel who may not
be retained are deemed separated from the service.
&"
Section 134. Separation Benefits. - Pursuant to Section 15 of this Act,
the Monetary Board is authorized to provide separation incentives, and all those
who shall retire or be separated from the service on account of reorganization
under the preceding section shall be entitled to such incentives, which shall be in
addition to all gratuities and benefits to which they may be entitled under existing
laws.
Section 135. Repealing Clause. - Except as may be provided for in
Section 46 and 132 of this Act, Republic Act No. 265, as amended, the
provisions of any other law, special charters, rule or regulation issued pursuant to
said Republic Act No. 265, as amended, or parts thereof, which may be
inconsistent with the provisions of this Act are hereby repealed. Presidential
Decree No. 1792 is likewise repealed.
Section 136. Transfer of Powers. - All powers, duties and functions
vested by law in the Central Bank of the Philippines not inconsistent with the
provisions of this Act shall be deemed transferred to the Bangko Sentral ng
Pilipinas. All references to the Central Bank of the Philippines in any law or
special charters shall be deemed to refer to the Bangko Sentral.
Section 137. Separability Clause. - If any provision or section of this Act
or the application thereof to any person or circumstance is held invalid, the other
provisions or sections of this Act, and the application of such provision or section
to other persons or circumstances, shall not be affected thereby.
Section 138. Effectivity Clause. - This Act shall take effect fifteen (15)
days following its publication in the Official Gazette or in two (2) national
newspapers of general circulation.

















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REPUBLIC ACT NO. 8791 May 23, 2000
AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND
OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND FOR
OTHER PURPOSES
CHAPTER I TITLE AND CLASSIFICATION OF BANKS
Section 1. Title. The short title of this Act shall be "The General Banking Law of
2000." (1a)
Section 2. Declaration Of Policy. - The State recognizes the vital role of banks
providing an environment conducive to the sustained development of the national
economy and the fiduciary nature of banking that requires high standards of
integrity and performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of a developing economy.
(n)
Section 3. Definition and Classification of Banks. -
3.1. "Banks" shall refer to entities engaged in the lending of funds obtained in the
form of deposits. (2a)
3.2. Banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings
and loan associations, and (iii) Private development banks, as defined in the
Republic Act No. 7906 (hereafter the "Thrift Banks Act");
(d) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks
Act");
(e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the
"Cooperative Code");
(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the
"Charter of Al Amanah Islamic Investment Bank of the Philippines"; and
(g) Other classifications of banks as determined by the Monetary Board of the
Bangko Sentral ng Pilipinas. (6-Aa)
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CHAPTER II AUTHORITY OF THE BANGKO SENTRAL
Section 4. Supervisory Powers. The operations and activities of banks shall be
subject to supervision of the Bangko Sentral. "Supervision" shall include the
following:
4.1. The issuance of rules of, conduct or the establishment standards of
operation for uniform application to all institutions or functions covered, taking
into consideration the distinctive character of the operations of institutions and
the substantive similarities of specific functions to which such rules, modes or
standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and
regulations if the circumstances so warrant as determined by the Monetary
Board;
4.3 Overseeing to ascertain that laws and regulations are complied with;
4.4 Regular investigation which shall not be oftener than once a year from the
last date of examination to determine whether an institution is conducting its
business on a safe or sound basis: Provided, That the deficiencies/irregularities
found by or discovered by an audit shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D); or
4.6 Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations of and
exercise regulatory powers over quasi-banks, trust entities and other financial
institutions which under special laws are subject to Bangko Sentral supervision.
(2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the
borrowing of funds through the issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes as defined in Section 95 of
Republic Act No. 7653 (hereafter the "New Central Bank Act") for purposes of re-
lending or purchasing of receivables and other obligations. (2-Da)
Section 5. Policy Direction; Ratios, Ceilings and Limitations. - The Bangko
Sentral shall provide policy direction in the areas of money, banking and credit.
(n)
For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations,
or other forms of regulation on the different types of accounts and practices of
banks and quasi-banks which shall, to the extent feasible, conform to
internationally accepted standards, including of the Bank for International
&%
Settlements (BIS). The Monetary Board may exempt particular categories of
transactions from such ratios, ceilings. and limitations, but not limited to
exceptional cases or to enable a bank or quasi-bank under rehabilitation or
during a merger or consolidation to continue in business, with safety to its
creditors, depositors and the general public. (2-Ca)
Section 6. Authority to Engage in Banking and Quasi-Banking Functions. - No
person or entity shall engage in banking operations or quasi-banking functions
without authority from the Bangko Sentral: .Provided, however, That an entity
authorized by the Bangko Sentral to perform universal or commercial banking
functions shall likewise have the authority to engage in quasi-banking functions.
The determination of whether a person or entity is performing banking or quasi-
banking functions without Bangko Sentral authority shall be decided by the
Monetary Board. To resolve such issue, the Monetary Board may; through the
appropriate supervising and examining department of the Bangko Sentral,
examine, inspect or investigate the books and records of such person or entity.
Upon issuance of this authority, such person or entity may commence to engage
in banking operations or quasi-banking function and shall continue to do so
unless such authority is sooner surrendered, revoked, suspended or annulled by
the Bangko Sentral in accordance with this Act or other special laws.
The department head and the examiners of the appropriate supervising and
examining department are hereby authorized to administer oaths to any such
person, employee, officer, or director of any such entity and to compel the
presentation or production of such books, documents, papers or records that are
reasonably necessary to ascertain the facts relative to the true functions and
operations of such person or entity. Failure or refusal to comply with the required
presentation or production of such books, documents, papers or records within a
reasonable time shall subject the persons responsible therefore to the penal
sanctions provided under the New Central Bank Act.
Persons or entities found to be performing banking or quasi-banking functions
without authority from the Bangko Sentral shall be subject to appropriate
sanctions under the New Central Bank Act and other applicable laws. (4a)
Section 7. Examination by the Bangko Sentral. - The Bangko Sentral shall, when
examining a bank, have the authority to examine an enterprise which is wholly or
majority-owned or controlled by the bank. (2-Ba)
CHAPTER III ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF
BANKS. QUASI-BANKS AND TRUST ENTITIES
Section 8. Organization. - The Monetary Board may authorize the organization
of a bank or quasi-bank subject to the following conditions:
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8.1 That the entity is a stock corporation (7);
8.2 That its funds are obtained from the public, which shall mean twenty (20) or
more persons (2-Da); and
8.3 That the minimum capital requirements prescribed by the Monetary Board for
each category of banks are satisfied. (n)
No new commercial bank shall be established within three (3) years from the
effectivity of this Act. In the exercise of the authority granted herein, the Monetary
Board shall take into consideration their capability in terms of their financial
resources and technical expertise and integrity. The bank licensing process shall
incorporate an assessment of the bank's ownership structure, directors and
senior management, its operating plan and internal controls as well as its
projected financial condition and capital base.
Section 9. Issuance of Stocks. - The Monetary Board may prescribe rules and
regulations on the types of stock a bank may issue, including the terms thereof
and rights appurtenant thereto to determine compliance with laws and
regulations governing capital and equity structure of banks; Provided, That banks
shall issue par value stocks only.
Section 10. Treasury Stocks. - No bank shall purchase or acquire shares of its
own capital stock or accept its own shares as a security for a loan, except when
authorized by the Monetary Board: Provided, That in every case the stock so
purchased or acquired shall, within six (6) months from the time of its purchase
or acquisition, be sold or disposed of at a public or private sale. (24a)
Section 11. Foreign Stockholdings. - Foreign individuals and non-bank
corporations may own or control up to forty percent (40%) of the voting stock of a
domestic bank. This rule shall apply to Filipinos and domestic non-bank
corporations. (12a; 12-Aa) The percentage of foreign-owned voting stocks in a
bank shall be determined by the citizenship of the individual stockholders in that
bank. The citizenship of the corporation which is a stockholder in a bank shall
follow the citizenship of the controlling stockholders of the corporation,
irrespective of the place of incorporation. (n)
Section 12. Stockholdings of Family Groups of Related Interests. -
Stockholdings of individuals related to each other within the fourth degree of
consanguinity or affinity, legitimate or common-law, shall be considered family
groups or related interests and must be fully disclosed in all transactions by such
corporations or related groups of persons with the bank. (12-Ba)
Section 13. Corporate Stockholdings. - Two or more corporations owned or
controlled by the same family group or same group of persons shall be
considered related interests and must be fully disclosed in all transactions by
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such corporations or related group of persons with the bank. (12-Ba)
Section 14. Certificate of Authority to Register. - The Securities and Exchange
Commission shall no register the articles of incorporation of any bank, or any
amendment thereto, unless accompanied by a certificate of authority issued by
the Monetary Board, under it seal. Such certificate shall not be issued unless the
Monetary Board is satisfied from the evidence submitted to it:
14.1 That all requirements of existing laws and regulations to engage in the
business for which the applicant is proposed to be incorporated have been
complied with;
14.2 That the public interest and economic conditions, both general and local,
justify the authorization; and
14.3 That the amount of capital, the financing, organization, direction and
administration, as well as the integrity and responsibility of the organizers and
administrators reasonably assure the safety of deposits and the public interest.
(9)
The Securities and Exchange Commission shall not register the by-laws of any
bank, or any amendment thereto, unless accompanied by a certificate of
authority from the Bangko Sentral. (10)
Section 15. Board of Directors. - The provisions of the Corporation Code to the
contrary notwithstanding, there shall be at least five (5), and a maximum of
fifteen (15) members of the board or directors of a bank, two (2) of whom shall be
independent directors. An "independent director" shall mean a person other than
an officer or employee of the bank, its subsidiaries or affiliates or related
interests. (n) Non-Filipino citizens may become members of the board of
directors of a bank to the extent of the foreign participation in the equity of said
bank. (Sec. 7, RA 7721) The meetings of the board of directors may be
conducted through modern technologies such as, but not limited to,
teleconferencing and video-conferencing. (n)
Section 16. Fit and Proper Rule. - To maintain the quality of bank management
and afford better protection to depositors and the public in general the Monetary
Board shall prescribe, pass upon and review the qualifications and
disqualifications of individuals elected or appointed bank directors or officers and
disqualify those found unfit. After due notice to the board of directors of the bank,
the Monetary Board may disqualify, suspend or remove any bank director or
officer who commits or omits an act which render him unfit for the position. In
determining whether an individual is fit and proper to hold the position of a
director or officer of a bank, regard shall be given to his integrity, experience,
education, training, and competence. (9-Aa)
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Section 17. Directors of Merged or Consolidated Banks. - In the case of a bank
merger or consolidation, the number of directors shall not exceed twenty-one
(21). (l3a)
Section 18. Compensation and Other Benefits of Directors and Officers. To
protect the finds of depositors and creditors the Monetary Board may regulate the
payment by the bark to its directors and officers of compensation, allowance,
fees, bonuses, stock options, profit sharing and fringe benefits only in exceptional
cases and when the circumstances warrant, such as but not limited to the
following:
18.1. When a bank is under comptrollership or conservatorship; or
18.2. When a bank is found by the Monetary Board to be conducting business in
an unsafe or unsound manner; or
18.3. When a bank is found by the Monetary Board to be in an unsatisfactory
financial condition. (n)
Section 19. Prohibition on Public Officials. - Except as otherwise provided in the
Rural Banks Act, no appointive or elective public official whether full-time or part-
time shall at the same time serve as officer of any private bank, save in cases
where such service is incident to financial assistance provided by the
government or a government owned or controlled corporation to the bank or
unless otherwise provided under existing laws. (13)
Section 20. Bank Branches. - Universal or commercial banks may open
branches or other offices within or outside the Philippines upon prior approval of
the Bangko Sentral. Branching by all other banks shall be governed by pertinent
laws.
A bank may, subject to prior approval of the Monetary Board, use any or all of its
branches as outlets for the presentation and/or sale of the financial products of
its allied undertaking or of its investment house units. A bank authorized to
establish branches or other offices shall be responsible for all business
conducted in such branches and offices to the same extent and in the same
manner as though such business had all been conducted in the head office. A
bank and its branches and offices shall be treated as one unit. (6-B; 27)
Section 21. Banking Days and Hours. - Unless otherwise authorized by the
Bangko Sentral in the interest of the banking public, all banks including their
branches and offices shall transact business on all working days for at least six
(6) hours a day. In addition, banks or any of their branches or offices may open
for business on Saturdays, Sundays or holidays for at least three (3) hours a day:
Provided, That banks which opt to open on days other than working days shall
report to the Bangko Sentral the additional days during which they or their
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branches or offices shall transact business. For purposes of this Section, working
days shall mean Mondays to Fridays, except if such days are holidays. (6-Ca)
Section 22. Strikes and Lockouts. - The banking industry is hereby declared as
indispensable to the national interest and, notwithstanding the provisions of any
law to the contrary, any strike or lockout involving banks, if unsettled after seven
(7) calendar days shall be reported by the Bangko Sentral to the secretary of
Labor who may assume jurisdiction over the dispute or decide it or certify the
sane to the National Labor Relations Commission for compulsory arbitration.
However, the President of the Philippines may at any time intervene and assume
jurisdiction over such labor dispute in order to settle or terminate the same. (6-E)
CHAPTER IV DEPOSITS. LOANS AND OTHER OPERATIONS
Article I Operations Of Universal Banks
Section 23. Powers of a Universal Bank - A universal bank shall have the
authority to exercise, in addition to the powers authorized for a commercial bank
in Section 29, the powers of an investment house as provided in existing laws
and the power to invest in non-allied enterprises as provided in this Act. (21-B)
Section 24. Equity Investments of a Universal Bank. - A universal bank may,
subject to the conditions stated in the succeeding paragraph, invest in the
equities of allied and non-allied enterprises as may be determined by the
Monetary Board. Allied enterprises may either be financial or non-financial.
Except as the Monetary Board may otherwise prescribe:
24.1. The total investment in equities of allied and non-allied enterprises shall not
exceed fifty percent (50%) of the net worth of the bank; and
24.2. The equity investment in any one enterprise, whether allied or non-allied,
shall not exceed twenty-five percent (25%) of the net worth of the bank.
As used in this Act, "net worth" shall mean the total of the unimpaired paid-in
capital including paid-in surplus, retained earnings and undivided profit, net of
valuation reserves and other adjustments as may be required by the Bangko
Sentral.
The acquisition of such equity or equities is subject to the prior approval of the
Monetary Board which shall promulgate appropriate guidelines to govern such
investments. (21-Ba)
Section 25. Equity Investments of a Universal Bank in Financial Allied
Enterprises. - A universal bank can own up to one hundred percent (100%) of the
equity in a thrift bank, a rural bank or a financial allied enterprise. A publicly-listed
universal or commercial bank may own up to one hundred percent (100%) of the
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voting stock of only one other universal or commercial bank. (21-B; 21-Ca)
Section 26. Equity Investments of a Universal Bank in Non-Financial Allied
Enterprises. - A universal bank may own up to one hundred percent (100%) of
the equity in a non-financial allied enterprise. (21-Ba)
Section 27. Equity Investments of a Universal Bank in Non-Allied Enterprises. -
The equity investment of a universal bank, or of its wholly or majority-owned
subsidiaries, in a single non-allied enterprise shall not exceed thirty-five percent
(35%) of the total equity in that enterprise nor shall it exceed thirty-five percent
(35%) of the voting stock in that enterprise. (21-B)
Section 28. Equity Investments in Quasi-Banks. - To promote competitive
conditions in financial markets, the Monetary Board may further limit to forty
percent (40%) equity investments of universal banks in quasi-banks. This rule
shall also apply in the case of commercial banks. (12-E) Article II. Operations Of
Commercial Banks
Section 29. Powers of a Commercial Bank. - A commercial bank shall have, in
addition to the general powers incident to corporations, all such powers as may
be necessary to carry on the business of commercial banking such as accepting
drafts and issuing letters of credit; discounting and negotiating promissory notes,
drafts, bills of exchange, and other evidences of debt; accepting or creating
demand deposits; receiving other types of deposits and deposit substitutes;
buying and selling foreign exchange and gold or silver bullion; acquiring
marketable bonds and other debt securities; and extending credit, subject to such
rules as the Monetary Board may promulgate. These rules may include the
determination of bonds and other debt securities eligible for investment, the
maturities and aggregate amount of such investment.
Section 30. Equity Investments of a Commercial Bank. - A commercial bank
may, subject to the conditions stated in the succeeding paragraphs, invest only in
the equities of allied enterprises as may be determined by the Monetary Board.
Allied enterprises may either be financial or non-financial. Except as the
Monetary Board may otherwise prescribe:
30.1. The total investment in equities of allied enterprises shall not exceed thirty-
five percent (35%) of the net worth of the bark; and
30.2. The equity investment in any one enterprise shall not exceed twenty-five
percent (25%) of tile net worth of the bank. The acquisition of such equity or
equities is subject to the prior approval of the Monetary Board which shall
promulgate appropriate guidelines to govern such investment.(2lA-a; 21-Ca)
Section 31. Equity Investments of a Commercial Bank in Financial Allied
Enterprises. - A commercial bank may own up to one hundred percent (100%) of
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the equity of a thrift bank or a rural bank. Where the equity investment of a
commercial bank is in other financial allied enterprises, including another
commercial bank, such investment shall remain a minority holding in that
enterprise. (21-Aa; 21-Ca)
Section 32. Equity Investments of a Commercial Bank in Non-Financial Allied
Enterprises. A commercial bank may own up to one hundred percent (100%) of
the equity in a non-financial allied enterprise. (21-Aa) Article III. Provisions
Applicable To All Banks, Quasi-Banks, And Trust Entities
Section 33. Acceptance of Demand Deposits. - A bank other than a universal or
commercial bank cannot accept or create demand deposits except upon prior
approval of, and subject to such conditions and rules as may be prescribed by
the Monetary Board. (72-Aa)
Section 34. Risk-Based Capital. - The Monetary Board shall prescribe the
minimum ratio which the net worth of a bank must bear to its total risk assets
which may include contingent accounts. For purposes of this Section, the
Monetary Board may require such ratio be determined on the basis of the net
worth and risk assets of a bank and its subsidiaries, financial or otherwise, as
well as prescribe the composition and the manner of determining the net worth
and total risk assets of banks and their subsidiaries: Provided, That in the
exercise of this authority, the Monetary Board shall, to the extent feasible
conform to internationally accepted standards, including those of the Bank for
International Settlements(BIS), relating to risk-based capital requirements:
Provided further, That it may alter or suspend compliance with such ratio
whenever necessary for a maximum period of one (1) year: Provided, finally,
That such ratio shall be applied uniformly to banks of the same category. In case
a bank does not comply with the prescribed minimum ratio, the Monetary Board
may limit or prohibit the distribution of net profits by such bank and may require
that part or all of the net profits be used to increase the capital accounts of the
bank until the minimum requirement has been met The Monetary Board may,
furthermore, restrict or prohibit the acquisition of major assets and the making of
new investments by the bank, with the exception of purchases of readily
marketable evidences of indebtedness of the Republic of the Philippines and of
the Bangko Sentral and any other evidences of indebtedness or obligations the
servicing and repayment of which are fully guaranteed by the Republic of the
Philippines, until the minimum required capital ratio has been restored. In case of
a bank merger or consolidation, or when a bank is under rehabilitation under a
program approved by the Bangko Sentral, Monetary Board may temporarily
relieve the surviving bank, consolidated bank, or constituent bank or corporations
under rehabilitation from full compliance with the required capital ratio under such
conditions as it may prescribe. Before the effectivity of rules which the Monetary
Board is authorized to prescribe under this provision, Section 22 of the General
Banking Act, as amended, Section 9 of the Thrift Banks Act, and all pertinent
rules issued pursuant thereto, shall continue to be in force. (22a)
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Section 35. Limit on Loans, Credit Accommodations and Guarantees
35.1 Except as the Monetary Board may otherwise prescribe for reasons of
national interest, the total amount of loans, credit accommodations and
guarantees as may be defined by the Monetary Board that may be extended by a
bank to any person, partnership, association, corporation or other entity shall at
no time exceed twenty percent (20%) of the net worth of such bank. The basis for
determining compliance with single borrower limit is the total credit commitment
of the bank to the borrower.
35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans,
credit accommodations and guarantees prescribed in the preceding paragraph
may be increased by an additional ten percent (10%) of the net worth of such
bank provided the additional liabilities of any borrower are adequately secured by
trust receipts, shipping documents, warehouse receipts or other similar
documents transferring or securing title covering readily marketable, non-
perishable goods which must be fully covered by insurance.
35.3 The above prescribed ceilings shall include (a) the direct liability of the
maker or acceptor of paper discounted with or sold to such bank and the liability
of a general endorser, drawer or guarantor who obtains a loan or other credit
accommodation from or discounts paper with or sells papers to such bank; (b) in
the case of an individual who owns or controls a majority interest in a
corporation, partnership, association or any other entity, the liabilities of said
entities to such bank; (c) in the case of a corporation, all liabilities to such bank of
all subsidiaries in which such corporation owns or controls a majority interest;
and (d) in the case of a partnership, association or other entity, the liabilities of
the members thereof to such bank.
35.4. Even if a parent corporation, partnership, association, entity or an individual
who owns or controls a majority interest in such entities has no liability to the
bank, the Monetary Board may prescribe the combination of the liabilities of
subsidiary corporations or members of the partnership, association, entity or
such individual under certain circumstances, including but not limited to any of
the following situations: (a) the parent corporation, partnership, association, entity
or individual guarantees the repayment of the liabilities; (b) the liabilities were
incurred for the accommodation of the parent corporation or another subsidiary
or of the partnership or association or entity or such individual; or (c) the
subsidiaries though separate entities operate merely as departments or divisions
of a single entity.
35.5. For purposes of this Section, loans, other credit accommodations and
guarantees shall exclude: (a) loans and other credit accommodations secured by
obligations of the Bangko Sentral or of the Philippine Government: (b) loans and
other credit accommodations fully guaranteed by the government as to the
payment of principal and interest; (c) loans and other credit accommodations
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covered by assignment of deposits maintained in the lending bank and held in
the Philippines; (d) loans, credit accommodations and acceptances under letters
of credit to the extent covered by margin deposits; and (e) other loans or credit
accommodations which the Monetary Board may from time to time, specify as
non-risk items.
35.6. Loans and other credit accommodations, deposits maintained with, and
usual guarantees by a bank to any other bank or non-bank entity, whether locally
or abroad, shall be subject to the limits as herein prescribed.
35.7. Certain types of contingent accounts of borrowers may be included among
those subject to these prescribed limits as may be determined by the Monetary
Board.(23a)
Section 36. Restriction on Bank Exposure to Directors, Officers, Stockholders
and Their Related Interests. - No director or officer of any bank shall, directly or
indirectly, for himself or as the representative or agent of others, borrow from
such bank nor shall he become a guarantor, endorser or surety for loans from
such bank to others, or in any manner be an obligor or incur any contractual
liability to the bank except with the written approval of the majority of all the
directors of the bank, excluding the director concerned: Provided, That such
written approval shall not be required for loans, other credit accommodations and
advances granted to officers under a fringe benefit plan approved by the Bangko
Sentral. The required approval shall be entered upon the records of the bank and
a copy of such entry shall be transmitted forthwith to the appropriate supervising
and examining department of the Bangko Sentral. Dealings of a bank with any of
its directors, officers or stockholders and their related interests shall be upon
terms not less favorable to the bank than those offered to others. After due notice
to the board of directors of the bank, the office of any bank director or officer who
violates the provisions of this Section may be declared vacant and the director or
officer shall be subject to the penal provisions of the New Central Bank Act. The
Monetary Board may regulate the amount of loans, credit accommodations and
guarantees that may be extended, directly or indirectly, by a bank to its directors,
officers, stockholders and their related interests, as well as investments of such
bank in enterprises owned or controlled by said directors, officers, stockholders
and their related interests. However, the outstanding loans, credit
accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be limited to
an amount equivalent to their respective unencumbered deposits and book value
of their paid-in capital contribution in the bank: Provided, however, That loans,
credit accommodations and guarantees secured by assets considered as non-
risk by the Monetary Board shall be excluded from such limit: Provided, further,
That loans, credit accommodations and advances to officers in the form of fringe
benefits granted in accordance with rules as may be prescribed by the Monetary
Board shall not be subject to the individual limit. The Monetary Board shall define
the term "related interests." The limit on loans, credit accommodations and
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guarantees prescribed herein shall not apply to loans, credit accommodations
and guarantees extended by a cooperative bank to its cooperative shareholders.
(83a)
Section 37. Loans and Other Credit Accommodations Against Real Estate. -
Except as the Monetary Board may otherwise prescribe, loans and other credit
accommodations against real estate shall not exceed seventy-five percent (75%)
of the appraised value of the respective real estate security, plus sixty percent
(60%) of the appraised value of the insured improvements, and such loans may
be made to the owner of the real estate or to his assignees. (78a)
Section 38. Loans And Other Credit Accommodations on Security of Chattels
and Intangible Properties. - Except as the Monetary Board may otherwise
prescribe, loans and other credit accommodations on security of chattels and
intangible properties such as, but not limited to, patents, trademarks, trade
names, and copyrights shall not exceed seventy-five percent (75%) of the
appraised value of the security, an such loans and other credit accommodation
may be made to the title-holder of the chattels and intangible properties or his
assignees. (78a)
Section 39. Grant and Purpose of Loans and Other Credit Accommodations. - A
bank shall grant loans and other credit accommodations only in amounts and for
the periods of time essential for the effective completion of the operations to be
financed. Such grant of loans and other credit accommodations shall be
consistent with safe and sound banking practices. (75a) The purpose of all loans
and other credit accommodations shall be stated in the application and in the
contract between the bank and the borrower. If the bank finds that the proceeds
of the loan or other credit accommodation have been employed, without its
approval, for purposes other than those agreed upon with the bank, it shall have
the right to terminate the loan or other credit accommodation and demand
immediate repayment of the obligation. (77)
Section 40. Requirement for Grant Of Loans or 0ther Credit Accommodations. -
Before granting a loan or other credit accommodation, a bank must ascertain that
the debtor is capable of fulfilling his commitments to the bank. Toward this end, a
bank may demand from its credit applicants a statement of their assets and
liabilities and of their income and expenditures and such information as may be
prescribed by law or by rules and regulations of the Monetary Board to enable
the bank to properly evaluate the credit application which includes the
corresponding financial statements submitted for taxation purposes to the Bureau
of Internal Revenue. Should such statements prove to be false or incorrect in any
material detail, the bank may terminate any loan or other credit accommodation
granted on the basis of said statements and shall have the right to demand
immediate repayment or liquidation of the obligation. In formulating rules and
regulations under this Section, the Monetary Board shall recognize the peculiar
characteristics of micro financing, such as cash flow-based lending to the basic
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sectors that are not covered by traditional collateral. (76a)
Section 41. Unsecured Loans or Other Credit Accommodations. - The Monetary
Board is hereby authorized to issue such regulations as it may deem necessary
with respect to unsecured loans or other credit accommodations that may be
granted by banks. (n)
Section 42. Other Security Requirements for Bank Credits. - The Monetary
Board may, by regulation, prescribe further security requirements to which the
various types of bank credits shall be subject, and, in accordance with the
authority granted to it in Section 106 of the New Central Bank Act, the Board may
by regulation, reduce the maximum ratios established in Sections 36 and 37 of
this Act, or, in special cases, increase the maximum ratios established therein.
(78)
Section 43. Authority to Prescribe Terms and Conditions of Loans and Other
Credit Accommodations. - The Monetary Board, may, similarly in accordance
with the authority granted to it in Section 106 of the New Central Bank Act, and
taking into account the requirements of the economy for the effective utilization of
long-term funds, prescribe the maturities, as well as related terms and conditions
for various types of bank loans and other credit accommodations. Any change by
the Board in the maximum maturities, as well as related terms and conditions for
various types of bank loans and other credit accommodations. Any change by
the Board in the maximum maturities shall apply only to loans and other credit
accommodations made after the date of such action. The Monetary Board shall
regulate the interest imposed on micro finance borrowers by lending investors
and similar lenders such as, but not limited to, the unconscionable rates of
interest collected on salary loans and similar credit accommodations. (78a)
Section 44. Amortization on Loans and Other Credit Accommodations. - The
amortization schedule of bank loans and other credit accommodations shall be
adapted to the nature of the operations to be financed. In case of loans and other
credit accommodations with maturities of more than five (5) years, provisions
must be made for periodic amortization payments, but such payments must be
made at least annually: Provided, however, That when the borrowed funds are to
be used for purposes which do not initially produce revenues adequate for
regular amortization payments therefrom, the bank may permit the initial
amortization payment to be deferred until such time as said revenues are
sufficient for such purpose, but in no case shall the initial amortization date be
later than five (5) years from the date on which the loan or other credit
accommodation is granted. (79a) In case of loans and other credit
accommodations to micro finance sectors, the schedule of loan amortization shall
take into consideration the projected cash flow of the borrower and adopt this into
the terms and conditions formulated by banks. (n)
Section 45. Prepayment of Loans and Other Credit Accommodations. - A
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borrower may at any time prior to the agreed maturity date prepay, in whole or in
part, the unpaid balance of any bank loan and other credit accommodation,
subject to such reasonable terms and conditions as may be agreed upon
between the bank and its borrower. (80a)
Section 46. Development Assistance Incentives. - The Bangko Sentral shall
provide incentives to banks which, without government guarantee, extend loans
to finance educational institutions cooperatives, hospitals and other medical
services, socialized or low-cost housing, local government units and other
activities with social content. (n)
Section 47. Foreclosure of Real Estate Mortgage. - In the event of foreclosure,
whether judicially or extra-judicially, of any mortgage on real estate which is
security for any loan or other credit accommodation granted, the mortgagor or
debtor whose real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of the real estate, to
redeem the property by paying the amount due under the mortgage deed, with
interest thereon at rate specified in the mortgage, and all the costs and expenses
incurred by the bank or institution from the sale and custody of said property less
the income derived therefrom. However, the purchaser at the auction sale
concerned whether in a judicial or extra-judicial foreclosure shall have the right to
enter upon and take possession of such property immediately after the date of
the confirmation of the auction sale and administer the same in accordance with
law. Any petition in court to enjoin or restrain the conduct of foreclosure
proceedings instituted pursuant to this provision shall be given due course only
upon the filing by the petitioner of a bond in an amount fixed by the court
conditioned that he will pay all the damages which the bank may suffer by the
enjoining or the restraint of the foreclosure proceeding. Notwithstanding Act
3135, juridical persons whose property is being sold pursuant to an extrajudicial
foreclosure, shall have the right to redeem the property in accordance with this
provision until, but not after, the registration of the certificate of foreclosure sale
with the applicable Register of Deeds which in no case shall be more than three
(3) months after foreclosure, whichever is earlier. Owners of property that has
been sold in a foreclosure sale prior to the effectivity of this Act shall retain their
redemption rights until their expiration. (78a)
Section 48. Renewal or Extension of Loans and Other Credit Accommodations. -
The Monetary Board may, by regulation, prescribe the conditions and limitations
under which a bank may grant extensions or renewals of its loans and other
credit accommodations. (81)
Section 49. Provisions for Losses and Write-Offs. - All debts due to any bank on
which interest is past due and unpaid for such period as may be determined by
the Monetary Board, unless the same are welt-secured and in the process of
collection shall be considered bad debts within the meaning of this Section. The
Monetary Board may fix, by regulation or by order in a specific case, the amount
''
of reserves for bad debts or doubtful accounts or other contingencies. Writing off
of loans, other credit accommodations, advances and other assets shall be
subject to regulations issued by the Monetary Board. (84a)
Section 50. Major Investments. - For the purpose or enhancing bank
supervision, the Monetary Board shall establish criteria for reviewing major
acquisitions of investments by a bank including corporate affiliations or structures
that may expose the bank to undue risks or in any way hinder effective
supervision.
Section 51. Ceiling on Investments in Certain Assets. - Any bank may acquire
real estate as shall be necessary for its own use in the conduct of its business:
Provided, however, That the total investment in such real estate and
improvements thereof including bank equipment, shall not exceed fifty percent
(50%) of combined capital accounts: Provided, further, That the equity
investment of a bank in another corporation engaged primarily in real estate shall
be considered as part of the bank's total investment in real estate, unless
otherwise provided by the Monetary Board. (25a)
Section 52. Acquisition of Real Estate by Way of Satisfaction of Claims. -
Notwithstanding the limitations of the preceding Section, a bank may acquire,
hold or convey real property under the following circumstances:
52.1. Such as shall be mortgaged to it in good faith by way of security for debts;
52.2. Such as shall be conveyed to it in satisfaction of debts previously
contracted in the course of its dealings, or
52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or
trust deeds held by it and such as it shall purchase to secure debts due it.
Any real property acquired or held under the circumstances enumerated in the
above paragraph shall be disposed of by the bank within a period of five (5)
years or as may be prescribed by the Monetary Board: Provided, however, That
the bank may, after said period, continue to hold the property for its own use,
subject to the limitations of the preceding Section. (25a)
Section 53. Other Banking Services. - In addition to the operations specifically
authorized in this Act, a bank may perform the following services:
53.1. Receive in custody funds, documents and valuable objects;
53.2. Act as financial agent and buy and sell, by order of and for the account of
their customers, shares, evidences of indebtedness and all types of securities;
53.3. Make collections and payments for the account of others and perform such
'(
other services for their customers as are not incompatible with banking business;
53.4 Upon prior approval of the Monetary Board, act as managing agent, adviser,
consultant or administrator of investment management/advisory/consultancy
accounts; and
53.5. Rent out safety deposit boxes.
The bank shall perform the services permitted under Subsections 53.1, 53.2,53.3
and 53.4 as depositary or as an agent. Accordingly, it shall keep the funds,
securities and other effects which it receives duly separate from the bank's own
assets and liabilities: The Monetary Board may regulate the operations
authorized by this Section in order to ensure that such operations do not
endanger the interests of the depositors and other creditors of the bank. In case
a bank or quasi-bark notifies the Bangko Sentral or publicly announces a bank
holiday, or in any manner suspends the payment of its deposit liabilities
continuously for more than thirty (30) days, the Monetary Board may summarily
and without need for prior hearing close such banking institution and place it
under receivership of the Philippine Deposit Insurance Corporation. (72a)
Section 54. Prohibition to Act as Insurer. - A bank shall not directly engage in
insurance business as the insurer. (73)
Section 55. Prohibited Transactions.
55.1. No director, officer, employee, or agent of any bank shall -
(a) Make false entries in any bank report or statement or participate in any
fraudulent transaction, thereby affecting the financial interest of, or causing
damage to, the bank or any person;
(b) Without order of a court of competent jurisdiction, disclose to any
unauthorized person any information relative to the funds or properties in the
custody of the bank belonging to private individuals, corporations, or any other
entity: Provided, That with respect to bank deposits, the provisions of existing
laws shall prevail;
(c) Accept gifts, fees, or commissions or any other form of remuneration in
connection with the approval of a loan or other credit accommodation from said
bank;
(d) Overvalue or aid in overvaluing any security for the purpose of influencing in
any way the actions of the bank or any bank; or
(e) Outsource inherent banking functions.
')
55.2. No borrower of a bank shall -
(a) Fraudulently overvalue property offered as security for a loan or other credit
accommodation from the bank;
(b) Furnish false or make misrepresentation or suppression of material facts for
the purpose of obtaining, renewing, or increasing a loan or other credit
accommodation or extending the period thereof;
(c) Attempt to defraud the said bank in the event of a court action to recover a
loan or other credit accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee,
commission, or any other form of compensation in order to influence such
persons into approving a loan or other credit accommodation application.
55.3 No examiner, officer or employee of the Bangko Sentral or of any
department, bureau, office, branch or agency of the Government that is assigned
to supervise, examine, assist or render technical assistance to any bank shall
commit any of the acts enumerated in this Section or aid in the commission of the
same. (87-Aa)
The making of false reports or misrepresentation or suppression of material facts
by personnel of the Bangko Sental ng Pilipinas shall be subject to the
administrative and criminal sanctions provided under the New Central Bank Act.
55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known
as the Banks Secrecy Law, no bank shall employ casual or non regular
personnel or too lengthy probationary personnel in the conduct of its business
involving bank deposits.
Section 56. Conducting Business in an Unsafe or Unsound Manner - In
determining whether a particular act or omission, which is not otherwise
prohibited by any law, rule or regulation affecting banks, quasi-banks or trust
entities, may be deemed as conducting business in an unsafe or unsound
manner for purposes of this Section, the Monetary Board shall consider any of
the following circumstances:
56.1 The act or omission has resulted or may result in material loss or damage,
or abnormal risk or danger to the safety, stability, liquidity or solvency of the
institution;
56.2 The act or omission has resulted or may result in material loss or damage or
abnormal risk to the institution's depositors, creditors, investors, stockholders or
to the Bangko Sentral or to the public in general;
'*
56.3 The act or omission has caused any undue injury, or has given any
unwarranted benefits, advantage or preference to the bank or any party in the
discharge by the director or officer of his duties and responsibilities through
manifest partiality, evident bad faith or gross inexcusable negligence; or
56.4 The act or omission involves entering into any contract or transaction
manifestly and grossly disadvantageous to the bank, quasi-bank or trust entity,
whether or not the director or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting its business in
an unsafe or unsound manner, the Monetary Board may, without prejudice to the
administrative sanctions provided in Section 37 of the New Central Bank Act,
take action under Section 30 of the same Act and/or immediately exclude the
erring bank from clearing, the provisions of law to the contrary notwithstanding.
(n)
Section 57. Prohibition on Dividend Declaration. - No bank or quasi-bank shall
declare dividends, if at the time of declaration:
57.1 Its clearing account with the Bangko Sentral is overdrawn; or
57.2 It is deficient in the required liquidity floor for government deposits for five
(5) or more consecutive days, or
57.3 It does not comply with the liquidity standards/ratios prescribed by the
Bangko Sentral for purposes of determining funds available for dividend
declaration; or
57.4 It has committed a major violation as may be determined by the Bangko
Sentral (84a)
Section 58. Independent Auditor. - The Monetary Board may require a bank,
quasi-bank or trust entity to engage the services of an independent auditor to be
chosen by the bank, quasi-bank or trust entity concerned from a list of certified
public accountants acceptable to the Monetary Board. The term of the
engagement shall be as prescribed by the Monetary Board which may either be
on a continuing basis where the auditor shall act as resident examiner, or on the
basis of special engagements; but in any case, the independent auditor shall be
responsible to the bank's, quasi-bank's or trust entity's board of directors. A copy
of the report shall be furnished to the Monetary Board. The Monetary Board may
also direct the board of directors of a bank, quasi-bank, trusty entity and/or the
individual members thereof; to conduct, either personally or by a committee
created by the board, an annual balance sheet audit of the bank, quasi-bank or
trust entity to review the internal audit and control system of the bank, quasi-bank
or trust entity and to submit a report of such audit. (6-Da)
(+
Section 59. Authority to Regulate Electronic Transactions. - The Bangko Sentral
shall have full authority to regulate the use of electronic devices, such as
computers, and processes for recording, storing and transmitting information or
data in connection with the operations of a bank; quasi-bank or trust entity,
including the delivery of services and products to customers by such entity. (n)
Section 60. Financial Statements. - Every bank, quasi-bank or trust entity shall
submit to the appropriate supervising and examining department of the Bangko
Sentral financial statements in such form and frequency as may be prescribed by
the Bangko Sentral. Such statements, which shall be as of a specific date
designated by the Bangko Sentral, shall show thee actual financial condition of
the institution submitting the statement, and of its branches, offices, subsidiaries
and affiliates, including the results of its operations, and shall contain such
information as may be required in Bangko Sentral regulations. (n)
Section 61. Publication of Financial Statements. - Every bank, quasi-bank or
trust entity, shall publish a statement of its financial condition, including those of
its subsidiaries and affiliates, in such terms understandable to the layman and in
such frequency as may be prescribed Bangko Sentral, in English or Filipino, at
least once every quarter in a newspaper of general circulation in the city or
province where the principal office, in the case of a domestic institution or the
principal branch or office in the case of a foreign bank, is located, but if no
newspaper is published in the same province, then in a newspaper published in
Metro Manila or in the nearest city or province. The Bangko Sentral may by
regulation prescribe the newspaper where the statements prescribed herein shall
be published. The Monetary Board may allow the posting of the financial
statements of a bank, quasi-bank or trust entity in public places it may determine,
lieu of the publication required in the preceding paragraph, when warranted by
the circumstances. Additionally, banks shall make available to the public in such
form and manner as the Bangko Sentral may prescribe the complete set of its
audited financial statements as well as such other relevant information including
those on enterprises majority-owned or controlled by the bank, that will inform the
public of the true financial condition of a bank as of any given time. In periods of
national and/or local emergency or of imminent panic which directly threaten
monetary and banking stability, the Monetary Board, by a vote of at least five (5)
of its members, in special cases and upon application of the bank, quasi-bank or
trust entity, may allow such bank, quasi-bank or trust entity to defer for a stated
period of time the publication of the statement of financial condition required
herein. (n)
Section 62. Publication of Capital Stock. - A bank, quasi-bank or trust entity
incorporated under the laws of the Philippines shall not publish the amount of its
authorized or subscribed capital stock without indicating at the same time and
with equal prominence, the amount of its capital actually paid up. No branch of
any foreign bank doing business in the Philippines shall in any way announce the
amount of the capital and surplus of its head office, or of the bank in its entirety
("
without indicating at the same time and with equal prominence the amount of the
capital, if any, definitely assigned to such branch, such fact shall be stated in,
and shall form part of the publication. (82)
Section 63. Settlement of Disputes. - The provisions of any law to the contrary
notwithstanding, the Bangko Sentral shall be consulted by other government
agencies or instrumentalities in actions or proceedings initiated by or brought
before them involving controversies in banks, quasi-banks or trust entities arising
out of and involving relations between and among their directors, officers or
stockholders, as well as disputes between any or all of them and the bank, quasi-
bank or trust entity of which they are directors, officers or stockholders. (n)
Section 64. Unauthorized Advertisement or Business Representation. - No
person, association, or corporation unless duly authorized to engage in the
business of a bank, quasi-bank, trust entity, or savings and loan association as
defined in this Act, or other banking laws, shall advertise or hold itself out as
being engaged in the business of such bank, quasi-bank, trust entity, or
association, or use in connection with its business title, the word or words "bank",
"banking", "banker", "quasi-bank", "quasi-banking", "quasi-banker", "savings and
loan association", "trust corporation", "trust company" or words of similar import
or transact in any manner the business of any such bank, corporation or
association. (6)
Section 65. Service Fees. - The Bangko Sentral may charge equitable rates,
commissions or fees, as may be prescribed by the Monetary Board for
supervision, examination and other services which it renders under this Act. (n)
Section 66. Penalty for Violation of this Act. - Unless otherwise herein provided,
the violation of any of the provisions of this Act shall be subject to Sections 34,
35, 36 and 37 of the New Central Bank Act. If the offender is a director or officer
of a bank, quasi-bank or trust entity, the Monetary Board may also suspend or
remove such director or officer. If the violation is committed by a corporation,
such corporation may be dissolved by quo warranto proceedings instituted by the
Solicitor General. (87)
CHAPTER V PLACEMENT UNDER CONSERVATORSHIP
Section 67. Conservatorship. - The grounds and procedures for placing a bank
under conservatorship, as well as, the powers and duties of the conservator
appointed for the bank shall be governed by the provisions of Section 29 and the
last two paragraphs of Section 30 of the New Central Bank Act: Provided, That
this Section shall also apply to conservatorship proceedings of quasi-banks. (n)
CHAPTER VI CESSATION OF BANKING BUSINESS
Section 68. Voluntary Liquidation. - In case of voluntary liquidation of any bank
(#
organized under the laws of the Philippines, or of any branch or office in the
Philippines of a foreign bank, written notice of such liquidation shall be sent to the
Monetary Board before such liquidation shall be sent to the Monetary Board
before such liquidation is undertaken, and the Monetary Board shall have the
right to intervene and take such steps as may be necessary to protect the
interests of creditors. (86)
Section 69. Receivership and Involuntary Liquidation. - The grounds and
procedures for placing a bank under receivership or liquidation, as well as the
powers and duties of the receiver or liquidator appointed for the bank shall be
governed by the provisions of Sections 30, 31, 32, and 33 of the New Central
Bank Act: Provided, That the petitioner or plaintiff files with the clerk or judge of
the court in which the action is pending a bond, executed in favor of the Bangko
Sentral, in an amount to be fixed by the court. This Section shall also apply to the
extent possible to the receivership and liquidation proceedings of quasi-banks.
(n)
Section 70. Penalty for Transactions After a Bank Becomes Insolvent. - Any
director or officer of any bank declared insolvent or placed under receivership by
the Monetary Board who refuses to turn over the bank's records and assets to
the designated receivers, or who tampers with banks records, or who
appropriates for himself for another party or destroys or causes the
misappropriation and destruction of the bank's assets, or who receives or permits
or causes to be received in said bank any deposit, collection of loans and/or
receivables, or who pays out or permits or causes to be transferred any
securities or property of said bank shall be subject to the penal provisions of the
New Central Bank Act. (85a)
CHAPTER VII LAWS GOVERNING OTHER TYPES OF BANKS
Section 71. Other Banking Laws. - The organization, the ownership and capital
requirements, powers, supervision and general conduct of business of thrift
banks, rural banks and cooperative banks shall be governed by the provisions of
the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code,
respectively. The organization, ownership and capital requirements, powers,
supervision and general conduct of business of Islamic banks shall be governed
by special laws. The provisions of this Act, however, insofar as they are not in
conflict with the provisions of the Thrift Banks Act, the Rural Banks Act, and the
Cooperative Code shall likewise apply to thrift banks, rural banks, and
cooperative banks, respectively. However, for purposes of prescribing the
minimum ratio which the net worth of a thrift bank must bear to its total risk
assets, the provisions of Section 33 of this Act shall govern. (n)
CHAPTER VIII FOREIGN BANKS
Section 72. Transacting Business in the Philippines. - The entry of foreign banks
($
in the Philippines through the establishment of branches shall be governed by
the provisions of the Foreign Banks Liberalization Act. The conduct of offshore
banking business in the Philippines shall be governed by the provisions of the
Presidential Decree No. 1034, otherwise known as the "Offshore Banking
System Decree." (14a)
Section 73. Acquisition of Voting Stock in a Domestic Bank. - Within seven (7)
years from the effectivity of this act and subject to guidelines issued pursuant to
the Foreign Banks Liberalization Act, the Monetary Board may authorize a
foreign bank to acquire up to one hundred percent (100%) of the voting stock of
only one (1) bank organized under the laws of the Republic of the Philippines.
Within the same period, the Monetary Board may authorize any foreign bank,
which prior to the effectivity of this Act availed itself of the privilege to acquire up
to sixty percent (60%) of the voting stock of a bank under the Foreign Banks
Liberalization Act and the Thrift Banks Act, to further acquire voting shares such
bank to the extent necessary for it to own one hundred percent (100%) of the
voting stock thereof. In the exercise of the authority, the Monetary Board shall
adopt measures as may be necessary to ensure that at all times the control of
seventy percent (70%) of the resources or assets of the entire banking system is
held by banks which are at least majority-owned by Filipinos. Any right, privilege
or incentive granted to a foreign bank under this Section shall be equally enjoyed
by and extended under the same conditions to banks organized under the laws
of the Republic of the Philippines. (Secs. 2 and 3, RA 7721
Section 74. Local Branches of Foreign Banks. - In the case of a foreign bank
which has more than one (1) branch in the Philippines, all such branches shall be
treated as one (1) unit for the purpose of this Act, and all references to the
Philippine branches of foreign banks shall be held to refer to such units. (68)
Section 75. Head Office Guarantee. - In order to provide effective protection of
the interests of the depositors and other creditors of Philippine branches of a
foreign bank, the head office of such branches shall fully guarantee the prompt
payment of all liabilities of its Philippine branch. (69) Residents and citizens of
the Philippines who are creditors of a branch in the Philippines of a foreign bank
shall have preferential rights to the assets of such branch in accordance with the
existing laws. (19)
Section 76. Summons and Legal Process. - Summons and legal process served
upon the Philippine agent or head of any foreign bank designated to accept
service thereof shall give jurisdiction to the courts over such bank, and service of
notices on such agent or head shall be as binding upon the bank which he
represents as if made upon the bank itself. Should the authority of such agent or
head to accept service of summons and legal processes for the bank or notice to
it be revoked, or should such agent or head become mentally incompetent or
otherwise unable to accept service while exercising such authority, it shall be the
duty of the bank to name and designate promptly another agent or head upon
(%
whom service of summons and processes in legal proceedings against the bank
and of notices affecting the bank may be made, and to file with the Securities and
Exchange Commission a duly authenticated nomination of such agent. In the
absence of the agent or head or should there be no person authorized by the
bank upon whom service of summons, processes and all legal notices may be
made, service of summons, processes and legal notices may be made upon the
Bangko Sentral Deputy Governor In-Charge of the supervising and examining
departments and such service shall be as effective as if made upon the bank or
its duly authorized agent or head. In case of service for the bank upon the
Bangko Sentral Deputy Governor In-charge of the supervising and examining
departments, the said deputy Governor shill register and transmit by mail to the
president or the secretary of the bank at its head or principal office a copy, duly
certified by him, of the summons, process, or notice. The sending of such copy of
the summons, process, or notice shall be a necessary part of the services and
shall complete the service. The registry receipt of mailing shall be prima facie
evidence of the transmission of the summons, process or notice. All costs
necessarily incurred by the said Deputy Governor for the making and mailing and
sending of a copy of the summons, process, or notice to the president or the
secretary of the bank at its head or principal office shall be paid in advance by
the party at whose instance the service is made. (17)
Section 77. Laws Applicable. - In all matters not specifically covered by special
provisions applicable only to a foreign bank or its branches and other offices in
the Philippines any foreign bank licensed to do business in the Philippines shall
be bound by the provisions of this Act, all other laws, rules and regulations
applicable to banks organized under the laws of the Philippines of the same
class, except those that provide for the creation, formation, organization or
dissolution of corporations or for the fixing of the relations, liabilities,
responsibilities, or duties of stockholders, members, directors or officers of
corporations to each other or to the corporation. (18)
Section 78. Revocation of License of a Foreign Bank - The Monetary Board may
revoke the license to transact business in the Philippines of, any foreign bank, if it
finds that the foreign bank is insolvent or in imminent danger thereof or that its
continuance in business will involve probable loss to those transacting business
with it. After the revocation of its license, it shall be unlawful for any such foreign
banks to transact business in the Philippines unless its license is renewed or
reissued. After the revocation of such license, the Bangko Sentral shall take the
necessary action to protect the creditors of such foreign bank and the public. The
provisions of the New Central Bank Act on sanctions and penalties shall likewise
be applicable. (16)
CHAPTER IX TRUST OPERATIONS
Section 79. Authority to Engage in Trust Business. - Only a stock corporation or
a person duly authorized by the Monetary Board to engage in trust business shall
(&
act as a trustee or administer any trust or hold property in trust or on deposit for
the use, benefit, or behoof of others. For purposes of this Act, such a corporation
shall be referred to as a trust entity. (56a; 57a)
Section 80. Conduct of Trust Business. - A trust entity shall administer the funds
or property under its custody with the diligence that a prudent man would
exercise in the conduct of an enterprise of a like character and with similar aims.
No trust entity shall, for the account of the trustor or the beneficiary of the trust,
purchase or acquire property from, or sell, transfer, assign, or lend money or
property to, or purchase debt instruments of, any of the departments, directors,
officers, stockholders, or employees of the trust entity, relatives within the first
degree of consanguinity or affinity, or the related interests, of such directors,
officers and stockholders, unless the transaction is specifically authorized by the
trustor and the relationship of the trustee and the other party involved in the
transaction is fully disclosed to the trustor of beneficiary of the trust prior to the
transaction. The Monetary Board shall promulgate such rules and regulations as
may be necessary to prevent circumvention of this prohibition or the evasion of
the responsibility herein imposed on a trust entity. (56)
Section 81. Registration of Articles of Incorporation and By-Laws of a Trust
Entity. - The Securities and Exchange Commission shall not register the articles
of incorporation and by-laws or any amendment thereto, of any trust entity,
unless accompanied by a certificate of authority issued by the Bangko Sentral.
(n)
Section 82. Minimum Capitalization. - A trust entity, before it can engage in trust
or other fiduciary business, shall comply with the minimum paid-in capital
requirement which will be determined by the Monetary Board. (n)
Section 83. Powers of a Trust Entity. - A trust entity, in addition to the general
powers incident to corporations, shall have the power to:
83.1 Act as trustee on any mortgage or bond issued by any municipality,
corporation, or any body politic and to accept and execute any trust consistent
with law;
83.2 Act under the order or appointment of any court as guardian, receiver,
trustee, or depositary of the estate of any minor or other incompetent person, and
as receiver and depositary of any moneys paid into court by parties to any legal
proceedings and of property of any kind which may be brought under the
jurisdiction of the court;
83.3. Act as the executor of any will when it is named the executor thereof;
83.4 Act as administrator of the estate of any deceased person, with the will
annexed, or as administrator of the estate of any deceased person when there is
('
no will;
83.5. Accept and execute any trust for the holding, management, and
administration of any estate, real or personal, and the rents, issues and profits
thereof; and
83.6. Establish and manage common trust funds, subject to such rules and
regulations as may be prescribed by the Monetary Board.
Section 84. Deposit for the Faithful Performance of Trust Duties. - Before
transacting trust business, every trust entity shall deposit with the Bangko
Sentral, as security for the faithful performance of its trust duties, cash or
securities approved by the Monetary Board in an amount equal to or not less
than Five hundred thousand pesos (P500,000.00) or such higher amount as may
fixed by the Monetary Board: Provided, however, That the Monetary Board shall
require every trust entity to increase the amount of its cash or securities on
deposit with the Bangko Sentral in accordance with the provisions of this
paragraph. Should the capital and surplus fall below said amount, the Monetary
Board shall have the same authority as that granted to it under the provisions of
the fifth paragraph of Section 34 of this Act. A trust entity so long as it shall
continue to be solvent and comply with laws or regulations shall have the right to
collect the interest earned on such securities deposited with the Bangko Sentral
and, from time to time, with the approval of the Bangko Sentral, to exchange the
securities for others. If the trust entity fails to comply with any law or regulation,
the Bangko Sentral shall retain such interest on the securities deposited with it
for the benefit of rightful claimants. Al claims rising out of the trust business of a
trust entity shall have priority over all other claims as regards the cash or
securities deposited as above provided. The Monetary Board may not permit the
cash or securities deposited in accordance with the provisions of this Section to
be reduced below the prescribed minimum amount until the depositing entity
shall discontinue its trust business and shall satisfy the Monetary Board that it
has complied with all its obligations in connection with such business. (65a)
Section 85. Bond of Certain Persons for the Faithful Performance of Duties. -
Before an executor, administrator, guardian, trustee, receiver or depositary
appointed by the court enters upon the execution of his duties, he shall, upon
order of the court, file a bond in such sum as the court may direct. Upon the
application of any executor, administrator, guardian, trustee, receiver, depositary
or any other person in interest, the court may, after notice and hearing, order that
the subject matter of the trust or any part, thereof be deposited with a trust entity.
Upon presentation of proof to the court that the subject matter of the trust has
been deposited with a trust entity. Upon presentation of proof to the court that the
subject matter of the trust has been deposited with a trust entity, the court may
order that the bond given by such persons for the faithful performance of their
duties be reduced to such sums as it may deem proper: Provided, however, That
the reduced bond shall be sufficient to secure adequately the proper
((
administration and care of any property remaining under the control of such
persons and the proper accounting for such property. Property deposited with
any trust entity in conformity with this Section shall be held by such entity under
the orders and direction of the court. (59)
Section 86. Exemption of Trust Entity from Bond Requirement. - No bond or
other security shall be required by the court from a trust entry for the faithful
performance of its duties as court-appointed trustee, executor, administrator,
guardian, receiver, or depositary. However, the court may, upon proper
application with it showing special cause therefore, require the trust entity to post
a bond or other security for the protection of funds or property confided to such
entity. (59)
Section 87. Separation of Trust Business from General Business. - The trust
business and all funds, properties or securities received by any trust entity as
executor, administrator, guardian, trustee, receiver, or depositary shall be kept
separate and distinct from the general business including all other funds,
properties, and assets of such trust entity. The accounts of all such funds,
properties, or securities shall likewise be kept separate and distinct from the
accounts of the general business of the trust entity. (61)
Section 88. Investment Limitations of a Trust Entity. - Unless otherwise directed
by the instrument creating the trust, the lending and investment of funds and
other assets acquired by a trust entity as executor, administrator, guardian,
trustee, receiver or depositary of the estate of any minor or other incompetent
person shall be limited to loans or investments as may be prescribed by law, the
Monetary Board or any court of competent jurisdiction. (63a)
Section 89. Real Estate Acquired by a Trust Entity. - Unless otherwise
specifically directed by the trustor or the nature of the trust, real estate acquired
by a trust entity in whatever manner and for whatever purposes, shall likewise be
governed by the relevant provisions of Section 52 of this Act. (64a)
Section 90. Investment of Non-Trust Funds. - The investment of funds other than
trust funds of a trust entity which is a bank, financing company or an investment
house shall be governed by the relevant provisions of this Act and other
applicable laws. (64)
Section 91. Sanctions and Penalties. - A trust entity or any of its officers and
directors found to have willfully violated any pertinent provisions of this Act, shall
be subject to the sanctions and penalties provided tinder Section 66 of this Act as
well as Sections 36 and 37 of the New Central Bank Act.
Section 92. Exemption of Trust Assets from Claims. - No assets held by a trust
entity in its capacity as trustee shall be subject to any claims other than those of
the parties interested in the specific trusts. (65)
()
Section 93. Establishment of Branches of a Trust Entity. - The ordinary business
of a trust entity shall be transacted at the place of business specified in its
articles of incorporation. Such trust entity may, with prior approval of the
Monetary Board, establish branches in the Philippines and the said entity shall be
responsible for all business conducted in such branches to the same extent and
in the same manner as though such business had all been conducted in the head
office. For the purpose of this Act, the trust entity and its branches shall be
treated as one unit. (67)
CHAPTER X FINAL PROVISIONS
Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan
Associations. - Within a period of three (3) years from the effectivity of this Act,
the Bangko Sentral shall phase out and transfer its supervising and regulatory
powers over building and loan associations to the Home Insurance and Guaranty
Corporation which shall assume the same. Until otherwise provided bylaw1
building and loan associations shall continue to be governed by Sections 39 to
55, Chapter VI of the General Banking Act, as amended, including such rules
and regulations issued pursuant thereto. Upon assumption by the Home
Insurance and Guaranty Corporation of supervising and regulatory powers over
building and loan associations, a references in Sections 39 to 55 of the General
Banking Act, as amended, to the Bangko Sentral and the Monetary Board shall
be deemed to refer to the Home Insurance and Guaranty Corporation and its
board of directors, respectively. (n)
Section 95. Repealing Clause. - Except as may be provided for in Sections 34
and 94 of this Act, the General Banking Act, as amended, and the provisions of
any other law, special charters, rule or regulation issued pursuant to said General
Banking Act, as amended, or parts thereof, which may be inconsistent with the
provisions of this Act are hereby repealed. The provisions of paragraph 8,
Section 8, Republic Act No. 3591, as amended by republic Act No. 7400, are
likewise repealed. (90a)
Section 96. Separability Clause. - If any provision or section of this Act or the
application thereof to any person or circumstance is held invalid, the other
provisions or sections of this Act, and the application of such provision or section
to other persons or circumstances shall not be affected thereby. (n)
Section 97. Effectivity Clause - This Act shall take effect fifteen (15) days
following its publication in the Official Gazette or in two (2) national newspapers
of general circulation. (91)





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AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS
WITH ANY BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR.
Section 1. It is hereby declared to be the policy of the Government to give
encouragement to the people to deposit their money in banking institutions and
to discourage private hoarding so that the same may be properly utilized by
banks in authorized loans to assist in the economic development of the country.
Section 2.
1
All deposits of whatever nature with banks or banking institutions in
the Philippines including investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office,
except upon written permission of the depositor, or in cases of impeachment, or
upon order of a competent court in cases of bribery or dereliction of duty of public
officials, or in cases where the money deposited or invested is the subject matter
of the litigation.
Section 3. It shall be unlawful for any official or employee of a banking institution
to disclose to any person other than those mentioned in Section two hereof any
information concerning said deposits.
Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules
and Regulations which are inconsistent with the provisions of this Act are hereby
repealed.
Section 5. Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court.
Section 6. This Act shall take effect upon its approval.















)+
REPUBLIC ACT NO. 9160 September 29, 2001
AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING
PENALTIES THEREFOR AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
Section 1. Short Title. This Act shall be known as the "Anti-Money Laundering
Act of 2001."
Section 2. Declaration of Policy. It is hereby declared the policy of the State to
protect and preserve the integrity and confidentiality of bank accounts and to
ensure that the Philippines shall not be used as a money laundering site for the
proceeds of any unlawful activity. Consistent with its foreign policy, the State
shall extend cooperation in transnational investigations and prosecutions of
persons involved in money laundering activities whenever committed.
Section 3. Definitions. For purposes of this Act, the following terms are hereby
defined as follows:
(a) "Covered Institution" refers to:
(1) banks, non-banks, quasi-banks, trust entities, and all other institutions and
their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng
Pilipinas (BSP);
(2) Insurance companies and all other institutions supervised or regulated by the
Insurance Commission; and
(3) (i) securities dealers, brokers, salesmen, investment houses and other similar
entities managing securities or rendering services as investment agent, advisor,
or consultant, (ii) mutual funds, close and investment companies, common trust
funds, pre-need companies and other similar entities, (iii) foreign exchange
corporations, money changers, money payment, remittance, and transfer
companies and other similar entities, and (iv) other entities administering or
otherwise dealing in currency, commodities or financial derivatives based
thereon, valuable objects, cash substitutes and other similar monetary
instruments or property supervised or regulated by Securities and Exchange
Commission.
(b) "Covered transaction" is a single, series, or combination of transactions
involving a total amount in excess of Four million Philippine pesos
(Php4,000,000.00) or an equivalent amount in foreign currency based on the
prevailing exchange rate within five (5) consecutive banking days except those
between a covered institution and a person who, at the time of the transaction
)"
was a properly identified client and the amount is commensurate with the
business or financial capacity of the client; or those with an underlying legal or
trade obligation, purpose, origin or economic justification.
It likewise refers to a single, series or combination or pattern of unusually large
and complex transactions in excess of Four million Philippine pesos
(Php4,000,000.00) especially cash deposits and investments having no credible
purpose or origin, underlying trade obligation or contract.
(c) "Monetary Instrument" refers to:
(1) coins or currency of legal tender of the Philippines, or of any other country;
(2) drafts, checks and notes;
(3) securities or negotiable instruments, bonds, commercial papers, deposit
certificates, trust certificates, custodial receipts or deposit substitute instruments,
trading orders, transaction tickets and confirmations of sale or investments and
money marked instruments; and
(4) other similar instruments where title thereto passes to another by
endorsement, assignment or delivery.
(d) "Offender" refers to any person who commits a money laundering offense.
(e) "Person" refers to any natural or juridical person.
(f) "Proceeds" refers to an amount derived or realized from an unlawful activity.
(g) "Supervising Authority" refers to the appropriate supervisory or regulatory
agency, department or office supervising or regulating the covered institutions
enumerated in Section 3(a).
(h) "Transaction" refers to any act establishing any right or obligation or giving
rise to any contractual or legal relationship between the parties thereto. It also
includes any movement of funds by any means with a covered institution.
(l) "Unlawful activity" refers to any act or omission or series or combination
thereof involving or having relation to the following:
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as
the Revised Penal Code, as amended;
(2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as
amended, otherwise known as the Dangerous Drugs Act of 1972;
)#
(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as
amended; otherwise known as the Anti-Graft and Corrupt Practices Act;
(4) Plunder under Republic Act No. 7080, as amended;
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of
the Revised Penal Code, as amended;
(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree
No. 1602;
(7) Piracy on the high seas under the Revised Penal Code, as amended and
Presidential Decree No. 532;
(8) Qualified theft under, Article 310 of the Revised Penal Code, as amended;
(9) Swindling under Article 315 of the Revised Penal Code, as amended;
(10) Smuggling under Republic Act Nos. 455 and 1937;
(11) Violations under Republic Act No. 8792, otherwise known as the Electronic
Commerce Act of 2000;
(12) Hijacking and other violations under Republic Act No. 6235; destructive
arson and murder, as defined under the Revised Penal Code, as amended,
including those perpetrated by terrorists against non-combatant persons and
similar targets;
(13) Fraudulent practices and other violations under Republic Act No. 8799,
otherwise known as the Securities Regulation Code of 2000;
(14) Felonies or offenses of a similar nature that are punishable under the penal
laws of other countries.
Section 4. Money Laundering Offense. Money laundering is a crime whereby
the proceeds of an unlawful activity are transacted, thereby making them appear
to have originated from legitimate sources. It is committed by the following:
(a) Any person knowing that any monetary instrument or property represents,
involves, or relates to the proceeds of any unlawful activity, transacts or attempts
to transact said monetary instrument or property.
(b) Any person knowing that any monetary instrument or property involves the
proceeds of any unlawful activity, performs or fails to perform any act as a result
of which he facilitates the offense of money laundering referred to in paragraph
(a) above.
)$
(c) Any person knowing that any monetary instrument or property is required
under this Act to be disclosed and filed with the Anti-Money Laundering Council
(AMLC), fails to do so.
Section 5. Jurisdiction of Money Laundering Cases. The regional trial courts
shall have jurisdiction to try all cases on money laundering. Those committed by
public officers and private persons who are in conspiracy with such public officers
shall be under the jurisdiction of the Sandiganbayan.
Section 6. Prosecution of Money Laundering.
(a) Any person may be charged with and convicted of both the offense of money
laundering and the unlawful activity as herein defined.
(b) Any proceeding relating to the unlawful activity shall be given precedence
over the prosecution of any offense or violation under this Act without prejudice
to the freezing and other remedies provided.
Section 7. Creation of Anti-Money Laundering Council (AMLC). The Anti-
Money Laundering Council is hereby created and shall be composed of the
Governor of the Bangko Sentral ng Pilipinas as chairman, the Commissioner of
the Insurance Commission and the Chairman of the Securities and Exchange
Commission as members. The AMLC shall act unanimously in the discharge of
its functions as defined hereunder:
(1) to require and receive covered transaction reports from covered institutions;
(2) to issue orders addressed to the appropriate Supervising Authority or the
covered institution to determine the true identity of the owner of any monetary
instrument or property subject of a covered transaction report or request for
assistance from a foreign State, or believed by the Council, on the basis of
substantial evidence to be in whole or in part, whenever located, representing,
involving, or related to, directly or indirectly, in any manner or by any means, the
proceeds of an unlawful activity;
(3) to institute civil forfeiture proceedings and all other remedial proceedings
through the Office of the Solicitor General;
(4) to cause the filing of complaints with the Department of Justice or the
Ombudsman for the prosecution of money laundering offenses;
(5) to initiate investigations of covered transactions, money laundering activities
and other violations of this Act;
(6) to freeze any monetary instrument or property alleged to be proceed of any
unlawful activity;
)%
(7) to implement such measures as may be necessary and justified under this
Act to counteract money laundering;
(8) to receive and take action in respect of, any request from foreign states for
assistance in their own anti-money laundering operations provided in this Act;
(9) to develop educational programs on the pernicious effects of money
laundering, the methods and techniques used in money laundering, the viable
means of preventing money laundering and the effective ways of prosecuting and
punishing offenders; and
(10) to enlist the assistance of any branch, department, bureau, office, agency or
instrumentality of the government, including government-owned and controlled
corporations, in undertaking any and all anti-money laundering operations, which
may include the use of its personnel, facilities and resources for the more
resolute prevention, detection and investigation of money laundering offenses
and prosecution of offenders.
Section 8. Creation of a Secretariat. The AMLC is hereby authorized to
establish a secretariat to be headed by an Executive Director who shall be
appointed by the Council for a term of five (5) years. He must be a member of the
Philippine Bar, at least thirty-five (35) years of age and of good moral character,
unquestionable integrity and known probity. All members of the Secretariat must
have served for at least five (5) years either in the Insurance Commission, the
Securities and Exchange Commission or the Bangko Sentral ng Pilipinas (BSP)
and shall hold full-time permanent positions within the BSP.
Section 9. Prevention of Money Laundering; Customer Identification
Requirements and Record Keeping.
(a) Customer Identification, - Covered institutions shall establish and record the
true identity of its clients based on official documents. They shall maintain a
system of verifying the true identity of their clients and, in case of corporate
clients, require a system of verifying their legal existence and organizational
structure, as well as the authority and identification of all persons purporting to
act on their behalf.
The provisions of existing laws to the contrary notwithstanding, anonymous
accounts, accounts under fictitious names, and all other similar accounts shall be
absolutely prohibited. Peso and foreign currency non-checking numbered
accounts shall be allowed. The BSP may conduct annual testing solely limited to
the determination of the existence and true identity of the owners of such
accounts.
(b) Record Keeping All records of all transactions of covered institutions shall
be maintained and safely stored for five (5) years from the date of transactions.
)&
With respect to closed accounts, the records on customer identification, account
files and business correspondence, shall be preserved and safety stored for at
least five (5) years from the dates when they were closed.
(c) Reporting of Covered Transactions. Covered institutions shall report to
the AMLC all covered transactions within five (5) working days from occurrence
thereof, unless the Supervising Authority concerned prescribes a longer period
not exceeding ten (10) working days.
When reporting covered transactions to the AMLC, covered institutions and their
officers, employees, representatives, agents, advisors, consultants or associates
shall not be deemed to have violated Republic Act No. 1405, as amended;
Republic Act No. 6426, as amended; Republic Act No. 8791 and other similar
laws, but are prohibited from communicating, directly or indirectly, in any manner
or by any means, to any person the fact that a covered transaction report was
made, the contents thereof, or any other information in relation thereto. In case of
violation thereof, the concerned officer, employee, representative, agent, advisor,
consultant or associate of the covered institution, shall be criminally liable.
However, no administrative, criminal or civil proceedings, shall lie against any
person for having made a covered transaction report in the regular performance
of his duties and in good faith, whether or not such reporting results in any
criminal prosecution under this Act or any other Philippine law.
When reporting covered transactions to the AMLC, covered institutions and their
officers, employees, representatives, agents, advisors, consultants or associates
are prohibited from communicating, directly or indirectly, in any manner or by any
means, to any person, entity, the media, the fact that a covered transaction
report was made, the contents thereof, or any other information in relation
thereto. Neither may such reporting be published or aired in any manner or form
by the mass media, electronic mail, or other similar devices. In case of violation
thereof, the concerned officer, employee, representative, agent, advisor,
consultant or associate of the covered institution, or media shall be held
criminally liable.
Section 10. Authority to Freeze. Upon determination that probable cause
exists that any deposit or similar account is in any way related to an unlawful
activity, the AMLC may issue a freeze order, which shall be effective
immediately, on the account for a period not exceeding fifteen (15) days. Notice
to the depositor that his account has been frozen shall be issued simultaneously
with the issuance of the freeze order. The depositor shall have seventy-two (72)
hours upon receipt of the notice to explain why the freeze order should be lifted.
The AMLC has seventy-two (72) hours to dispose of the depositor's explanation.
If it falls to act within seventy-two (72) hours from receipt of the depositor's
explanation, the freeze order shall automatically be dissolved. The fifteen (15)-
day freeze order of the AMLC may be extended upon order of the court, provided
that the fifteen (15)-day period shall be tolled pending the court's decision to
)'
extend the period.
No court shall issue a temporary restraining order or writ of injunction against any
freeze order issued by the AMLC except the Court of Appeals or the Supreme
Court.
Section 11. Authority to inquire into Bank Deposits. Notwithstanding the
provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as
amended; Republic Act No. 8791, and other laws, the AMLC may inquire into or
examine any particular deposit or investment with any banking institution or non-
bank financial institution upon order of any competent court in cases of violation
of this Act when it has been established that there is probable cause that the
deposits or investments involved are in any way related to a money laundering
offense: Provided, That this provision shall not apply to deposits and investments
made prior to the effectivity of this Act.
Section 12. Forfeiture Provisions.
(a) Civil Forfeiture. When there is a covered transaction report made, and the
court has, in a petition filed for the purpose ordered seizure of any monetary
instrument or property, in whole or in part, directly or indirectly, related to said
report, the Revised Rules of Court on civil forfeiture shall apply.
(b) Claim on Forfeited Assets. Where the court has issued an order of
forfeiture of the monetary instrument or property in a criminal prosecution for any
money laundering offense defined under Section 4 of this Act, the offender or any
other person claiming an interest therein may apply, by verified petition, for a
declaration that the same legitimately belongs to him and for segregation or
exclusion of the monetary instrument or property corresponding thereto. The
verified petition shall be filed with the court which rendered the judgment of
conviction and order of forfeiture, within fifteen (15) days from the date of the
order or forfeiture, in default of which the said order shall become final and
executory. This provision shall apply in both civil and criminal forfeiture.
(c) Payment in Lieu of Forfeiture. Where the court has issued an order of
forfeiture of the monetary instrument or property subject of a money laundering
offense defined under Section 4, and said order cannot be enforced because any
particular monetary instrument or property cannot, with due diligence, be located,
or it has been substantially altered, destroyed, diminished in value or otherwise
rendered worthless by any act or omission, directly or indirectly, attributable to
the offender, or it has been concealed, removed, converted or otherwise
transferred to prevent the same from being found or to avoid forfeiture thereof, or
it is located outside the Philippines or has been placed or brought outside the
jurisdiction of the court, or it has been commingled with other monetary
instruments or property belonging to either the offender himself or a third person
or entity, thereby rendering the same difficult to identify or be segregated for
)(
purposes of forfeiture, the court may, instead of enforcing the order of forfeiture
of the monetary instrument or property or part thereof or interest therein,
accordingly order the convicted offender to pay an amount equal to the value of
said monetary instrument or property. This provision shall apply in both civil and
criminal forfeiture.
Section 13. Mutual Assistance among States.
(a) Request for Assistance from a Foreign State. Where a foreign State
makes a request for assistance in the investigation or prosecution of a money
laundering offense, the AMLC may execute the request or refuse to execute the
same and inform the foreign State of any valid reason for not executing the
request or for delaying the execution thereof. The principles of mutuality and
reciprocity shall, for this purpose, be at all times recognized.
(b) Power of the AMLC to Act on a Request for Assistance from a Foreign
State. The AMLC may execute a request for assistance from a foreign State
by: (1) tracking down, freezing, restraining and seizing assets alleged to be
proceeds of any unlawful activity under the procedures laid down in this Act; (2)
giving information needed by the foreign State within the procedures laid down in
this Act; and (3) applying for an order of forfeiture of any monetary instrument or
property in the court: Provided, That the court shall not issue such an order
unless the application is accompanied by an authenticated copy of the order of a
court in the requesting State ordering the forfeiture of said monetary instrument
or properly of a person who has been convicted of a money laundering offense in
the requesting State, and a certification of an affidavit of a competent officer of
the requesting State stating that the conviction and the order of forfeiture are final
and then no further appeal lies in respect or either.
(c) Obtaining Assistance from Foreign States. The AMLC may make a
request to any foreign State for assistance in (1) tracking down, freezing,
restraining and seizing assets alleged to be proceeds of any unlawful activity; (2)
obtaining information that it needs relating to any covered transaction, money
laundering offense or any other matter directly or indirectly, related thereto; (3) to
the extent allowed by the law of the Foreign State, applying with the proper court
therein for an order to enter any premises belonging to or in the possession or
control of, any or all of the persons named in said request, and/or search any or
all such persons named therein and/or remove any document, material or object
named in said request: Provided, That the documents accompanying the request
in support of the application have been duly authenticated in accordance with the
applicable law or regulation of the foreign State; and (4) applying for an order of
forfeiture of any monetary instrument or property in the proper court in the foreign
State: Provided, That the request is accompanied by an authenticated copy of
the order of the regional trial court ordering the forfeiture of said monetary
instrument or property of a convicted offender and an affidavit of the clerk of
court stating that the conviction and the order of forfeiture are final and that no
))
further appeal lies in respect of either.
(d) Limitations on Request for Mutual Assistance. The AMLC may refuse to
comply with any request for assistance where the action sought by the request
contravenes any provision of the Constitution or the execution of a request is
likely to prejudice the national interest of the Philippines unless there is a treaty
between the Philippines and the requesting State relating to the provision of
assistance in relation to money laundering offenses.
(e) Requirements for Requests for Mutual Assistance from Foreign State.
A request for mutual assistance from a foreign State must (1) confirm that an
investigation or prosecution is being conducted in respect of a money launderer
named therein or that he has been convicted of any money laundering offense;
(2) state the grounds on which any person is being investigated or prosecuted for
money laundering or the details of his conviction; (3) gives sufficient particulars
as to the identity of said person; (4) give particulars sufficient to identity any
covered institution believed to have any information, document, material or object
which may be of assistance to the investigation or prosecution; (5) ask from the
covered institution concerned any information, document, material or object
which may be of assistance to the investigation or prosecution; (6) specify the
manner in which and to whom said information, document, material or object
detained pursuant to said request, is to be produced; (7) give all the particulars
necessary for the issuance by the court in the requested State of the writs, orders
or processes needed by the requesting State; and (8) contain such other
information as may assist in the execution of the request.
(f) Authentication of Documents. For purposes of this Section, a document is
authenticated if the same is signed or certified by a judge, magistrate or
equivalent officer in or of, the requesting State, and authenticated by the oath or
affirmation of a witness or sealed with an official or public seal of a minister,
secretary of State, or officer in or of, the government of the requesting State, or
of the person administering the government or a department of the requesting
territory, protectorate or colony. The certificate of authentication may also be
made by a secretary of the embassy or legation, consul general, consul, vice
consul, consular agent or any officer in the foreign service of the Philippines
stationed in the foreign State in which the record is kept, and authenticated by
the seal of his office.
(g) Extradition. The Philippines shall negotiate for the inclusion of money
laundering offenses as herein defined among extraditable offenses in all future
treaties.
Section 14. Penal Provisions.
(a) Penalties for the Crime of Money Laundering. The penalty of imprisonment
ranging from seven (7) to fourteen (14) years and a fine of not less than Three
)*
million Philippine pesos (Php 3,000,000.00) but not more than twice the value of
the monetary instrument or property involved in the offense, shall be imposed
upon a person convicted under Section 4(a) of this Act.
The penalty of imprisonment from four (4) to seven (7) years and a fine of not
less than One million five hundred thousand Philippine pesos (Php 1,500,000.00)
but not more than Three million Philippine pesos (Php 3,000,000.00), shall be
imposed upon a person convicted under Section 4(b) of this Act.
The penalty of imprisonment from six (6) months to four (4) years or a fine of not
less than One hundred thousand Philippine pesos (Php 100,000.00) but not more
than Five hundred thousand Philippine pesos (Php 500,000.00), or both, shall be
imposed on a person convicted under Section 4(c) of this Act.
(b) Penalties for Failure to Keep Records. The penalty of imprisonment from
six (6) months to one (1) year or a fine of not less than One hundred thousand
Philippine pesos (Php 100,000.00) but not more than Five hundred thousand
Philippine pesos (Php 500,000.00), or both, shall be imposed on a person
convicted under Section 9(b) of this Act.
(c) Malicious Reporting. Any person who, with malice, or in bad faith, report or
files a completely unwarranted or false information relative to money laundering
transaction against any person shall be subject to a penalty of six (6) months to
four (4) years imprisonment and a fine of not less than One hundred thousand
Philippine pesos (Php 100,000.00) but not more than Five hundred thousand
Philippine pesos (Php 500,000.00), at the discretion of the court: Provided, That
the offender is not entitled to avail the benefits of the Probation Law.
If the offender is a corporation, association, partnership or any juridical person,
the penalty shall be imposed upon the responsible officers, as the case may be,
who participated in the commission of the crime or who shall have knowingly
permitted or failed to prevent its commission. If the offender is a juridical person,
the court may suspend or revoke its license. If the offender is an alien, he shall,
in addition to the penalties herein prescribed, be deported without further
proceedings after serving the penalties herein prescribed. If the offender is a
public official or employee, he shall, in addition to the penalties prescribed herein,
suffer perpetual or temporary absolute disqualification from office, as the case
may be;
Any public official or employee who is called upon to testify and refuses to do the
same or purposely fails to testify shall suffer the same penalties prescribed
herein.
(d) Breach of Confidentiality. The punishment of imprisonment ranging from
three (3) to eight (8) years and a fine of not less than Five hundred thousand
Philippine pesos (Php 500,000.00) but not more than One million Philippine
*+
pesos (Php 1,000,000.00), shall be imposed on a person convicted for a violation
under Section 9(c).
Section 15. System of Incentives and Rewards. A system of special incentives
and rewards is hereby established to be given to the appropriate government
agency and its personnel that led and initiated an investigation, prosecution and
conviction of persons involved in the offense penalized in Section 4 of this Act.
Section 16. Prohibitions Against Political Harassment. This Act shall not be
used for political prosecution or harassment or as an instrument to hamper
competition in trade and commerce.
No case for money laundering may be filed against and no assets shall be
frozen, attached or forfeited to the prejudice of a candidate for an electoral office
during an election period.
Section 17. Restitution. Restitution for any aggrieved party shall be governed
by the provisions of the New Civil Code.
Section 18. Implementing Rules and Regulations. Within thirty (30) days from
the effectivity of this Act, the Bangko Sentral ng Pilipinas, the Insurance
Commission and the Securities and Exchange Commission shall promulgate the
rules and regulations to implement effectivity the provisions of this Act. Said rules
and regulations shall be submitted to the Congressional Oversight Committee for
approval.
Covered institutions shall formulate their respective money laundering prevention
programs in accordance with this Act including, but not limited to, information
dissemination on money laundering activities and its prevention, detection and
reporting, and the training of responsible officers and personnel of covered
institutions.
Section 19. Congressional Oversight Committee. There is hereby created a
Congressional Oversight Committee composed of seven (7) members from the
Senate and seven (7) members from the House of Representatives. The
members from the Senate shall be appointed by the Senate President based on
the proportional representation of the parties or coalitions therein with at least
two (2) Senators representing the minority. The members from the House of
Representatives shall be appointed by the Speaker also based on proportional
representation of the parties or coalitions therein with at least two (2) members
representing the minority.
The Oversight Committee shall have the power to promulgate its own rules, to
oversee the implementation of this Act, and to review or revise the implementing
rules issued by the Anti-Money Laundering Council within thirty (30) days from
the promulgation of the said rules.
*"
Section 20. Appropriations Clause. The AMLC shall be provided with an initial
appropriation of Twenty-five million Philippine pesos (Php 25,000,000.00) to be
drawn from the national government. Appropriations for the succeeding years
shall be included in the General Appropriations Act.
Section 21. Separability Clause. If any provision or section of this Act or the
application thereof to any person or circumstance is held to be invalid, the other
provisions or sections of this Act, and the application of such provision or section
to other persons or circumstances, shall not be affected thereby.
Section 22. Repealing Clause. All laws, decrees, executive orders, rules and
regulations or parts thereof, including the relevant provisions of Republic Act No.
1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791,
as amended and other similar laws, as are inconsistent with this Act, are hereby
repealed, amended or modified accordingly.
Section 23. Effectivity. This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in at least two (2) national
newspapers of general circulation.
The provisions of this Act shall not apply to deposits and investments made prior
to its effectivity.
























*#
REPUBLIC ACT No. 5980
AN ACT REGULATING THE ORGANIZATION AND OPERATION OF
FINANCING COMPANIES.
Section 1. This Act shall be known as the "Financing Company Act."
Section 2. Declaration of Policy. It is hereby declared to be the policy of the
State to regulate the activities of financing companies to place their operations on
a sound, stable and efficient basis, so that they may be in a better position to
extend effective service in a fair manner to the general public and to industry,
commerce and agriculture; to curtail and prevent acts or practices prejudicial to
the public interests.
Section 3. Definition of Terms. As used in this Act, the term:
(a) "Financing companies," hereinafter called companies, are corporations, or
partnerships, except those regulated by the Central Bank of the Philippines, the
Insurance Commissioner and the Cooperatives Administration Office, which are
primarily organized for the purpose of extending credit facilities to consumers and
to industrial, commercial, or agricultural enterprises, either by discounting or
factoring commercial papers on accounts receivable, or by buying and selling
contracts, leases, chattel mortgages, or other evidences of indebtedness, or by
leasing of motor vehicles, heavy equipment and industrial machinery, business
and office machine and equipment, appliances and other movable property;
(b) "Securities and Exchange Commission" shall mean the office of the Securities
and Exchange Commission of the Philippines;
(c) "Credit" shall mean any loan, mortgage, deed of trust, advance, or discount;
any conditional sales contract, any contract to sell, or sale or contract of sale of
property or service, either for present or future delivery, under which, part or all
the price is payable subsequent to the making of such sale or contract; any
rental-purchase contract; any option, demand, lien, pledge, or other claim
against, or for the delivery of, property or money, any purchase, or other
acquisition of or any credit upon the security of, any obligation or claim arising
out of the foregoing; and any transaction or series of transactions having a
similar purpose or effect; and
(d) "Purchase discount" is the difference between the value of the receivable
purchased or credit assigned, and the net amount paid by the finance company
for such purchase or assignment, exclusive of fees, service charges, interests
and other charges incident to the extension of credit.
Section 4. Grant of Authority to the Securities and Exchange Commission. The
Securities and Exchange Commission of the Philippines is hereby empowered to
*$
enforce the provisions of this Act.
Section 5. Limitation on Purchase Discount, Fees, Service and Other Charges.
In the case of assignments of credit or the buying of installment papers,
accounts, receivables and other evidences of indebtedness by financing
companies, the purchase discount, exclusive of interest and other charges shall
be limited to fourteen (14%) per cent of the value of the credit assigned or the
value of the installment papers, accounts receivable and other evidence of
indebtedness purchased based on a period of twelve (12) months or less, and to
one and one-sixth (1 1/6%) per cent of each additional month or fraction thereof
in excess of twelve months, regardless of the terms and conditions of the
assignment or purchase.
In the case of assignment of credit or the buying of installment papers, accounts
receivable and other evidence of indebtedness pertaining to appliances,
furniture, and office equipment, the purchase discount, exclusive of interest
charges, shall be limited to eighteen (18%) per cent of the value at maturity of the
credit assigned or receivable purchased, based on a period of twelve months or
less, and to one and one-half (1 1/2%) per cent for each additional month or
fraction thereof in excess of twelve months, regardless of the terms and
conditions of the assignment or purchase.
In case of factoring of accounts receivables or other evidences of indebtedness,
the discounting rate that can be charged, exclusive of interest and other charges,
shall not exceed two per cent of the value of the credit assigned or receivable
purchased for every thirty days, regardless of the terms and conditions of the
factoring agreement.
The Securities and Exchange Commission, in consultation with the financing
companies, shall prescribe reasonable limitations on fees, service and other
charges which shall be uniform for all financing companies, taking into
consideration the nature of the transaction or service and the cost thereof to the
financing companies.
Section 6. Form of Organization. Financing companies shall be organized in the
form of stock corporations or general partnerships at least sixty per centum of the
capital of which is owned by citizens of the Philippines and shall have a paid-up
capital of not less than five hundred thousand pesos: Provided, however, That
financing companies duly existing and operating before the approval of this Act
shall comply with the requirement that sixty (60%) per centum of the capital be
owned by citizens of the Philippines within one year from the date of said
approval.
Section 7. Requirement for Registration. Aside from requiring compliance with
the provisions of the Corporation Law and the New Civil Code in case of
partnership the Securities and Exchange Commission shall not register the
*%
articles of incorporation or the articles of partnership of any financing company
unless his office is satisfied on the evidence submitted to it that:
(a) all the requirements of existing laws to engage in the business for which the
applicant is proposed to be incorporated or organized have been complied with;
(b) the organization, direction, and administration, as well as the integrity and
responsibility of the organizers and administrators reasonably assume the
protection of the interest of the general public; and
(c) all the requirements of this Act have been complied with: Provided, That
financing companies duly incorporated or registered prior to the approval of this
Act, and which are actually existing and operating as such, shall file an
information sheet with the Securities and Exchange Commission in the form to
be prescribed by the Securities and Exchange Commission within sixty (60) days
after notice from the said Commission. No person, association, partnership, or
corporation shall hold itself out as doing business as a "financing company" or
"finance and investment company" or any other title or name tending to give the
public the impression that it is engaged in the operations and activities of a
financing company, unless so authorized under this Act.
Section 8. Citizenship Requirement of the Board of Directors. In the case of a
corporation, at least two-thirds of all members of the Board of Directors of any
financing company which may be established after the approval of this Act, shall
be citizens of the Philippines. In the case of partnerships, all the managing
partners must be citizens of the Philippines. In the case of corporations and
partnerships existing before the approval of this Act compliance with this
provisions shall be required within the period of one year from the date of said
approval.
Section 9. Revocation and Suspension of Registration. The Securities and
Exchange Commission may revoke or suspend the registration of any financing
company by entering an order to this effect together with its findings in respect
thereto, if upon investigation into the affairs of said financing company or
complaint by any person, it shall appear that:
(a) it is insolvent; or
(b) it has violated any provision of this Act.
Section 10. Penalty. A fine of not less than five thousand pesos (P5,000.00) and
not more than ten thousand pesos (P10,000.00) or imprisonment for not more
than six months or both, at the discretion of the court, shall be imposed upon:
1. Persons, associations, partnerships, or corporations, including the managing
officer thereof, that shall:
*&
(a) Engage in the business of a financing company without authority from the
Securities and Exchange Commission;
(b) Hold themselves out to be a financing company, either through advertisement
in whatever form, whether in its stationary, commercial paper, or other document,
or through other representations without authority;
(c) Make use of a trade or firm name containing the words "financing company"
or "finance company" or "finance and investment company" or any other
designation that would give the public the impression that it is engaged in the
business of a financing company as defined in this Act without authority; and
(d) Violate the provisions of this Act.
2. Any officer, employee, or agent of a financing company who shall:
(a) Knowingly and willingly make any statement in any application, report, or
document required to be filed under this Act, which statement is false or
misleading with respect to any material fact; or
(b) Overvalue or aid in overvaluing any security for the purpose of influencing in
any way the action of the company on any loan, or discounting line.
3. Any officer, employee, or examiner of the Securities and Exchange
Commission directly charged with the implementation of this Act who shall
commit, connive, aid, or assist in the commission of acts enumerated under
subsections 1 and 2 of this Section.
Section 11. Separability of Clause. If any provision or section of this Act or the
application thereof to any person or circumstances is held invalid, the other
provisions or sections hereof and the application of such provisions or sections to
other persons or circumstances shall not be affected thereby.
Section 12. Repealing Clause. All Acts inconsistent with this Act are hereby
repealed.
Section 13. Effectivity. This Act shall take effect upon its approval.
Approved: August 4, 1969







*'
Section 1. The short title of this Act shall be "The Chattel Mortgage Law."

Sec. 2. All personal property shall be subject to mortgage, agreeably to the
provisions of this Act, and a mortgage executed in pursuance thereof shall be
termed chattel mortgage.

Sec. 3. Chattel mortgage defined. A chattel mortgage is a conditional sale of
personal property as security for the payment of a debt, or the performance of
some other obligation specified therein, the condition being that the sale shall be
void upon the seller paying to the purchaser a sum of money or doing some other
act named. If the condition is performed according to its terms the mortgage and
sale immediately become void, and the mortgagee is thereby divested of his title.

Sec. 4. Validity. A chattel mortgage shall not be valid against any person
except the mortgagor, his executors or administrators, unless the possession of
the property is delivered to and retained by the mortgagee or unless the
mortgage is recorded in the office of the register of deeds of the province in
which the mortgagor resides at the time of making the same, or, if he resides
without the Philippine Islands, in the province in which the property is situated:
Provided, however, That if the property is situated in a different province from
that in which the mortgagor resides, the mortgage shall be recorded in the office
of the register of deeds of both the province in which the mortgagor resides and
that in which the property is situated, and for the purposes of this Act the city of
Manila shall be deemed to be a province.

Sec. 5. Form. A chattel mortgage shall be deemed to be sufficient when made
substantially in accordance with the following form, and shall be signed by the
person or persons executing the same, in the presence of two witnesses, who
shall sign the mortgage as witnesses to the execution thereof, and each
mortgagor and mortgagee, or, in the absence of the mortgagee, his agent or
attorney, shall make and subscribe an affidavit in substance as hereinafter set
forth, which affidavit, signed by the parties to the mortgage as above stated, and
the certificate of the oath signed by the authority administering the same, shall be
appended to such mortgage and recorded therewith.












*(

FORM OF CHATTEL MORTGAGE AND AFFIDAVIT.

"This mortgage made this ____ day of ______19____ by _______________, a resident of the
municipality of ______________, Province of ____________, Philippine Islands mortgagor, to
____________, a resident of the municipality of ___________, Province of ______________,
Philippine Islands, mortgagee, witnesseth:

"That the said mortgagor hereby conveys and mortgages to the said mortgagee all of the
following-described personal property situated in the municipality of ______________, Province
of ____________ and now in the possession of said mortgagor, to wit:

(Here insert specific description of the property mortgaged.)

"This mortgage is given as security for the payment to the said ______, mortgagee, of promissory
notes for the sum of ____________ pesos, with (or without, as the case may be) interest thereon
at the rate of ___________ per centum per annum, according to the terms of __________,
certain promissory notes, dated _________, and in the words and figures following (here insert
copy of the note or notes secured).

"(If the mortgage is given for the performance of some other obligation aside from the payment of
promissory notes, describe correctly but concisely the obligation to be performed.)

"The conditions of this obligation are such that if the mortgagor, his heirs, executors, or
administrators shall well and truly perform the full obligation (or obligations) above stated
according to the terms thereof, then this obligation shall be null and void.

"Executed at the municipality of _________, in the Province of ________, this _____ day of
19_____

____________________
(Signature of mortgagor.)

"In the presence of

"_________________
"_________________
(Two witnesses sign here.)

FORM OF OATH.
"We severally swear that the foregoing mortgage is made for the purpose of securing the
obligation specified in the conditions thereof, and for no other purpose, and that the same is a just
and valid obligation, and one not entered into for the purpose of fraud."

FORM OF CERTIFICATE OF OATH.
"At ___________, in the Province of _________, personally appeared ____________, the parties
who signed the foregoing affidavit and made oath to the truth thereof before me.

"_____________________________"
(Notary public, justice of the peace, 1 or other officer, as the case may be.)





*)
Sec. 6. Corporations. When a corporation is a party to such mortgage the
affidavit required may be made and subscribed by a director, trustee, cashier,
treasurer, or manager thereof, or by a person authorized on the part of such
corporation to make or to receive such mortgage. When a partnership is a party
to the mortgage the affidavit may be made and subscribed by one member
thereof.

Sec. 7. Descriptions of property. The description of the mortgaged property
shall be such as to enable the parties to the mortgage, or any other person, after
reasonable inquiry and investigation, to identify the same.

If the property mortgaged be large cattle," as defined by section one of Act
Numbered Eleven and forty-seven, 2 and the amendments thereof, the
description of said property in the mortgage shall contain the brands, class, sex,
age, knots of radiated hair commonly known as remolinos, or cowlicks, and other
marks of ownership as described and set forth in the certificate of ownership of
said animal or animals, together with the number and place of issue of such
certificates of ownership.

If growing crops be mortgaged the mortgage may contain an agreement
stipulating that the mortgagor binds himself properly to tend, care for and protect
the crop while growing, and faithfully and without delay to harvest the same, and
that in default of the performance of such duties the mortgage may enter upon
the premises, take all the necessary measures for the protection of said crop,
and retain possession thereof and sell the same, and from the proceeds of such
sale pay all expenses incurred in caring for, harvesting, and selling the crop and
the amount of the indebtedness or obligation secured by the mortgage, and the
surplus thereof, if any shall be paid to the mortgagor or those entitled to the
same.

A chattel mortgage shall be deemed to cover only the property described therein
and not like or substituted property thereafter acquired by the mortgagor and
placed in the same depository as the property originally mortgaged, anything in
the mortgage to the contrary notwithstanding.

Sec. 8. Failure of mortgagee to discharge the mortgage. If the mortgagee,
assign, administrator, executor, or either of them, after performance of the
condition before or after the breach thereof, or after tender of the performance of
the condition, at or after the time fixed for the performance, does not within ten
days after being requested thereto by any person entitled to redeem, discharge
the mortgage in the manner provided by law, the person entitled to redeem may
recover of the person whose duty it is to discharge the same twenty pesos for his
neglect and all damages occasioned thereby in an action in any court having
jurisdiction of the subject-matter thereof.

Sec. 9-12. (inclusive) 3
**

Sec. 13. When the condition of a chattel mortgage is broken, a mortgagor or
person holding a subsequent mortgage, or a subsequent attaching creditor may
redeem the same by paying or delivering to the mortgagee the amount due on
such mortgage and the reasonable costs and expenses incurred by such breach
of condition before the sale thereof. An attaching creditor who so redeems shall
be subrogated to the rights of the mortgagee and entitled to foreclose the
mortgage in the same manner that the mortgagee could foreclose it by the terms
of this Act.

Sec. 14. Sale of property at public auction; Officer's return; Fees; Disposition of
proceeds. The mortgagee, his executor, administrator, or assign, may, after
thirty days from the time of condition broken, cause the mortgaged property, or
any part thereof, to be sold at public auction by a public officer at a public place
in the municipality where the mortgagor resides, or where the property is
situated, provided at least ten days' notice of the time, place, and purpose of
such sale has been posted at two or more public places in such municipality, and
the mortgagee, his executor, administrator, or assign, shall notify the mortgagor
or person holding under him and the persons holding subsequent mortgages of
the time and place of sale, either by notice in writing directed to him or left at his
abode, if within the municipality, or sent by mail if he does not reside in such
municipality, at least ten days previous to the sale.

The officer making the sale shall, within thirty days thereafter, make in writing a
return of his doings and file the same in the office of the register of deeds where
the mortgage is recorded, and the register of deeds shall record the same. The
fees of the officer for selling the property shall be the same as in the case of sale
on execution as provided in Act Numbered One hundred and ninety, 4 and the
amendments thereto, and the fees of the register of deeds for registering the
officer's return shall be taxed as a part of the costs of sale, which the officer shall
pay to the register of deeds. The return shall particularly describe the articles
sold, and state the amount received for each article, and shall operate as a
discharge of the lien thereon created by the mortgage. The proceeds of such
sale shall be applied to the payment, first, of the costs and expenses of keeping
and sale, and then to the payment of the demand or obligation secured by such
mortgage, and the residue shall be paid to persons holding subsequent
mortgages in their order, and the balance, after paying the mortgages, shall be
paid to the mortgagor or person holding under him on demand.

If the sale includes any "large cattle," a certificate of transfer as required by
section sixteen of Act Numbered Eleven hundred and forty-seven 5 shall be
issued by the treasurer of the municipality where the sale was held to the
purchaser thereof.

Sec. 15. 6, 6a

"++
Sec. 16. This Act shall take effect on August first, nineteen hundred and six.

Enacted, July 2, 1906.











































"+"
ACT NO. 3135

AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL
POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES

SECTION 1. When a sale is made under a special power inserted in or attached
to any real-estate mortgage hereafter made as security for the payment of money
or the fulfillment of any other obligation, the provisions of the following election
shall govern as to the manner in which the sale and redemption shall be effected,
whether or not provision for the same is made in the power.

SECTION 2. Said sale cannot be made legally outside of the province in which
the property sold is situated; and in case the place within said province in which
the sale is to be made is subject to stipulation, such sale shall be made in said
place or in the municipal building of the municipality in which the property or part
thereof is situated.

SECTION 3. Notice shall be given by posting notices of the sale for not less than
twenty days in at least three public places of the municipality or city where the
property is situated, and if such property is worth more than four hundred pesos,
such notice shall also be published once a week for at least three consecutive
weeks in a newspaper of general circulation in the municipality or city.

SECTION 4. The sale shall be made at public auction, between the hours or nine
in the morning and four in the afternoon; and shall be under the direction of the
sheriff of the province, the justice or auxiliary justice of the peace of the
municipality in which such sale has to be made, or a notary public of said
municipality, who shall be entitled to collect a fee of five pesos each day of actual
work performed, in addition to his expenses.

SECTION 5. At any sale, the creditor, trustee, or other persons authorized to act
for the creditor, may participate in the bidding and purchase under the same
conditions as any other bidder, unless the contrary has been expressly provided
in the mortgage or trust deed under which the sale is made.

SECTION 6. In all cases in which an extrajudicial sale is made under the special
power hereinbefore referred to, the debtor, his successors in interest or any
judicial creditor or judgment creditor of said debtor, or any person having a lien
on the property subsequent to the mortgage or deed of trust under which the
property is sold, may redeem the same at any time within the term of one year
from and after the date of the sale; and such redemption shall be governed by
the provisions of sections four hundred and sixty-four to four hundred and sixty-
six, inclusive, of the Code of Civil Procedure, in so far as these are not
inconsistent with the provisions of this Act.

SECTION 7. In any sale made under the provisions of this Act, the purchaser
"+#
may petition the Court of First Instance of the province or place where the
property or any part thereof is situated, to give him possession thereof during the
redemption period, furnishing bond in an amount equivalent to the use of the
property for a period of twelve months, to indemnify the debtor in case it be
shown that the sale was made without violating the mortgage or without
complying with the requirements of this Act. Such petition shall be made under
oath and filed in form of an ex parte motion in the registration or cadastral
proceedings if the property is registered, or in special proceedings in the case of
property registered under the Mortgage Law or under section one hundred and
ninety-four of the Administrative Code, or of any other real property encumbered
with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of the court shall,
upon the filing of such petition, collect the fees specified in paragraph eleven of
section one hundred and fourteen of Act Numbered Four hundred and ninety-six,
as amended by Act Numbered Twenty-eight hundred and sixty-six, and the court
shall, upon approval of the bond, order that a writ of possession issue, addressed
to the sheriff of the province in which the property is situated, who shall execute
said order immediately.

SECTION 8. The debtor may, in the proceedings in which possession was
requested, but not later than thirty days after the purchaser was given
possession, petition that the sale be set aside and the writ of possession
cancelled, specifying the damages suffered by him, because the mortgage was
not violated or the sale was not made in accordance with the provisions hereof,
and the court shall take cognizance of this petition in accordance with the
summary procedure provided for in section one hundred and twelve of Act
Numbered Four hundred and ninety-six; and if it finds the complaint of the debtor
justified, it shall dispose in his favor of all or part of the bond furnished by the
person who obtained possession. Either of the parties may appeal from the order
of the judge in accordance with section fourteen of Act Numbered Four hundred
and ninety-six; but the order of possession shall continue in effect during the
pendency of the appeal.

SECTION 9. When the property is redeemed after the purchaser has been given
possession, the redeemer shall be entitled to deduct from the price of redemption
any rentals that said purchaser may have collected in case the property or any
part thereof was rented; if the purchaser occupied the property as his own
dwelling, it being town property, or used it gainfully, it being rural property, the
redeemer may deduct from the price the interest of one per centum per month
provided for in section four hundred and sixty-five of the Code of Civil Procedure.

SECTION 10.

This Act shall take effect on its approval.

Approved: March 6, 1924
"+$

Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

a. Coverage

Governs sales made under a special power inserted in or attached to
any real-estate mortgage, which is made as security for the payment
of money or the fulfillment of any other obligation. The Act will govern
the manner in which the sale and redemption shall be effected,
whether or not provision for the same is made in the power. (Sec 1,
Act 3135)

The law covers only real estate mortgages. It is intended merely to
regulate the extrajudicial sale and redemption of the property if and
when the mortgagee is given a special power or express authority to
do so in the deed itself or in a document annexed thereto.

b. Remedies available to mortgagee upon default of the
mortgagor

The mortgagee has a choice of one (1) of two (2) remedies,
but he cannot have both. The mortgagee may (i) foreclose the
mortgage or (ii) file an ordinary action to collect the debt, i.e. specific
performance.

When the mortgagee chooses the foreclosure of the mortgage
as a remedy, he enforces his lien by the sale on foreclosure of the
mortgaged property. The proceeds of the sale will be applied to the
satisfaction of the debt. With this remedy, he has a prior lien on the
property. In case of a deficiency, the mortgagee has the right to claim
for the deficiency resulting from the price obtained in the sale of the
real property at public auction and the outstanding obligation at the
time of the foreclosure proceedings. (Soriano v. Enriquez, 24 Phil.
584; Banco de Islas Filipinas v. Concepcion Hijos, 53 Phil. 86; Banco
Nacional v. Barreto, 53 Phil. 101)

On the other hand, if the mortgagee resorts to an action to collect the
debt, he thereby waives his mortgage lien. He will have no more
priority over the mortgaged property. If the judgment in the action to
collect is favorable to him, and it becomes final and executory, he can
enforce said judgment by execution. He can even levy execution on
the same mortgaged property, but he will not have priority over the
latter and there may be other creditors who have better lien on the
"+%
properties of the mortgagor. Caltex Phils. vs. IAC, August 25, 1989

If mortgagor issues post-dated checks, resorting to a criminal action
for violation of BP 22 also precludes the remedy of foreclosure and vice
versa. Recovery of the amount due is deemed included in the action
for violation of BP 22.

TIP: If the mortgage covers the total claim, then foreclose. If not, still
foreclose for after all you can still collect the deficiency from the
principal debtor (if mortgagor is a third person), not the mortgagor
unless the latter bound himself solidarily liable with the borrower.
Make it a last resort to file a criminal action because in reality it takes
much longer to pursue BP 22.

c. Need for special power of attorney

Under Section 1 of Act No. 3135, a special power of attorney
must be inserted in or attached to any Real Estate Mortgage.

Without proof of petitioner's special authority to foreclose, the Clerk of
Court as Ex-Oficio Sheriff is precluded from acting on the application
for extrajudicial foreclosure. (Office of the Court Administrator v.
Pardo, RTJ-08-2109, April 30, 2008; Casano v. Magat, 425 Phil. 356,
360-361 (2002); Paguyo v. Gatbunton, A.M. No. P-06-2135, May 25,
2007, 523 SCRA 156, 161).

d. Authority to foreclose extrajudicially

A mortgage may be foreclosed extrajudicially where there is
inserted in the contract a clause giving the mortgagee the power upon
default of the debtor, to foreclose the mortgage by an extrajudicial
sale of the mortgaged property. The authority to sell is not
extinguished by the death of the mortgagor (or mortgagee).

e. Procedure

(1) Where to file

All applications shall be filed with the Executive Judge through the
Clerk of Court, who is also the Ex-Officio Sheriff. See Sec. 1, Circular
No. 7-2002, Guidelines for the enforcement of Supreme Court
Resolution of December 14, 1999 in A.M. no. 99-10-05-0 (re:
Procedure in extra-judicial foreclosure of mortgage), as amended by
the Resolutions dated January 30, 2001 and August 7, 2001.
"+&

(2) Where to sell

Province where the property is situated. (Sec. 2, R.A. 3135, as
amended) Sale cannot be made legally outside of the province in
which the property sold is situated.

If venue is subject to stipulation, such sale shall be made in said place
(i.e., the place so stipulated) or in the municipal building of the
municipality in which the property or part thereof is situated. (ibid.)

(3) Posting requirement

Notice of the sale is posted in at least three (3) public places of the
municipality or city (Sheriffs Office, Assessors Office and Register of
Deeds) where the property is situated for not less than twenty (20)
days and published once a week for at least three (3) consecutive
weeks in a newspaper of general circulation in the municipality or city
(Sec. 3, ibid). Posting of notice on mortgaged property not required.

Failure to advertise a mortgage foreclosure sale in compliance with
statutory requirements constitutes a jurisdictional defect invalidating
the sale. A substantial error or omission in a notice of sale will render
the notice insufficient and vitiate the sale. (PNB v. Nepomuceno, 394
SCRA 405, 2002)

(4) Publication requirement

(a) Sufficiency of newspaper publication

Notice shall also be published once a week for at least three (3)
consecutive weeks in a newspaper of general circulation. The
newspaper need not have the largest circulation so long as it is of
general circulation. To be a newspaper of general circulation, it is
enough that it is published for the dissemination of local news and
general information; that it has a bona fide subscription list of paying
subscribers; and that it is published at regular intervals. The
newspaper must not be devoted to the interests or entertainment of a
particular class, profession, trade, calling, race or religious
denomination. The newspaper need not have the largest circulation so
long as it is of general circulation (Perez vs. Perez (2005)) in the
municipality or city where the property is located. Metrobank v.
Peafiel, G.R. No. 173976 Feb. 27, 2009

"+'
(b) Need for republication in case of postponement

Republication is necessary for the validity of a postponed extrajudicial
foreclosure sale. Another publication is required in case the auction
sale is rescheduled, and the absence of such republication invalidates
the foreclosure sale. The last paragraph of the prescribed notice of sale
(under SC Circular 7-2002) allows the holding of a rescheduled auction
sale without reposting or republication of the notice. In the event the
public auction should not take place on the said date, it shall be held
on ___________,______ without further notice. However, the
rescheduled auction sale will only be valid if the rescheduled date of
auction is clearly specified in the prior notice of sale. The absence of
this information in the prior notice of sale will render the rescheduled
auction sale void for lack of reposting or republication. (DBP vs.
Emerald Resorts Hotel)

(c) Personal notice to the mortgagor when and when not needed

General Rule: Personal notice to the mortgagor is not generally
required. Exception: Unless required in the mortgage contract, the lack
of personal notice to the mortgagor is not a ground to set aside a
foreclosure sale.

Unless otherwise stipulated by the parties to the mortgage
contract, the debtor-mortgagor need not be personally served a copy
of the notice of the extra- judicial foreclosure.

SC Circular 7-2002

f. Possession by purchaser of foreclosed property

Upon failure of the debtor to redeem the property within one (1) year
after the date of the registration of the certificate of sale, winning
bidder becomes the absolute owner.

g. Remedy of debtor if foreclosure is not proper

Within thirty (30) days after the purchaser is given possession of the
property, the debtor may petition that the sale be set aside on the
ground that the mortgage was not violated or the sale was not made
in accordance with the provisions of Act 3135. (Sec. 8. This may be
done in the proceedings in which possession was requested)




"+(
h. Redemption

Right of Redemption is the right of the mortgagor to redeem
the mortgage property within a certain period (1 year) after it was sold
for the satisfaction of the mortgage debt.

Requisites for valid redemption:
1. Redemption within 1 year from registration of sale;
2. Payment of purchase price plus 1% interest per month thereon if
any, paid by purchaser; and
3. Written notice of redemption served on officer who made the
sale.

(1) Who may redeem

a. The debtor;
b. The debtor's successors-in-interest;
c. Any judicial creditor or judgment creditor of the debtor;
d. Any person having a lien on the property subsequent to the
mortgage or deed of trust under which the property is sold
(Redemption price to be paid by accommodation mortgagors).

(2) Amount of Redemption price

a. Limited to the winning bid price plus twelve percent (12%) interest
per annum.
b. Purchase price if judgment obligor. Sum paid on last redemption if
redemptioner. (Rule 39, Sec. 28, Rules of Court). The redemptioner
should make an actual tender in good faith of the full amount of the
purchase price (Hi-Yield Realty vs. CA (2002)

(3) Period for redemption

Natural persons: Within 1 year from and after the date of the sale.
Sec. 6
Juridical persons: Until but not after the registration of the certificate
of foreclosure sale with the applicable Register of Deeds, which in no
case shall be more than 3 months after foreclosure, whichever is
earlier. (Sec. 47, R.A. 8791)

(4) Effect of pendency of action for annulment of sale

The filing of court action to enforce redemption has effect of
preserving the redemptioners rights; and freezing the expiration of
"+)
one year period to redeem. (Banco Filipino v Court of Appeals)

i. Writ of possession

(1) Ministerial duty of the court

The duty of the trial court to grant a writ of possession is ministerial.
Such writ issues as a matter of course upon the filing of the proper
motion and the approval of the corresponding bond. Any question
regarding the regularity and validity of the sale is to be determined in
a subsequent proceeding. (Sec. 8). Mandamus will lie.

The judge to whom an application for writ of possession is filed need
not look into the validity of the mortgage or the manner of its
foreclosure. In the issuance of a writ of possession, no discretion is left
to the Trial Court. Any question regarding the cancellation of the writ
in respect to the validity/regularity of the foreclosure sale or the
mortgage should be determined in a subsequent proceeding (PNB v.
Sanao). Such question cannot be raised to oppose the issuance of the
writ, since the proceeding is ex parte. (Samson vs Rivera, 2004)

After the consolidation of title in the buyers name for failure of the
mortgagor to redeem, the writ of possession becomes a matter of right

(2) Enforcement against third parties

The purchaser or last redemption shall be entitled to
possession of the property upon the finality of the order of
confirmation or upon the expiration of the period of redemption, unless
a third party is actually holding the same adversely to the judgment
debtor.

(3) Pendency of action for annulment of sale

The pendency of a separate civil suit questioning the validity
of the sale of the mortgaged property cannot bar the issuance of the
writ of possession. DBP vs Spouses Gatal (2005)







"+*
[A.M. No. 99-10-05-0. August 7, 2001]
(AS FURTHER AMENDED, AUGUST 7, 2001)
PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF MORTGAGE
In line with the responsibility of an Executive Judge under Administrative
Order No. 6, dated June 30, 1975, for the management of courts within his
administrative area, included in which is the task of supervising directly the work
of the Clerk of Court, who is also the Ex-Office Sheriff, and his staff, and the
issuance of commissions to notaries public and enforcement of their duties under
the law, the following procedures are hereby prescribed in extrajudicial
foreclosure of mortgages:
1. All applications for extra-judicial foreclosure of mortgage whether
under the direction of the sheriff or a notary public, pursuant to Act
3135, as amended by Act 4118, and Act 1508, as amended, shall
be filed with the Executive Judge, through the Clerk of court who is
also the Ex-Officio Sheriff.
2. Upon receipt of an application for extra-judicial foreclosure of
mortgage, it shall be the duty of the Clerk of Court to:
a) receive and docket said application and to stamp thereon the
corresponding file number, date and time of filing;
b) collect the filing fees therefore pursuant to rule 141, Section 7(c),
as amended by A.M. No. 00-2-01-SC, and issue the corresponding
official receipt;
c) examine, in case of real estate mortgage foreclosure, whether the
applicant has complied with all the requirements before the public
auction is conducted under the direction of the sheriff or a notary
public, pursuant to Sec. 4 of Act 3135, as amended;
d) sign and issue the certificate of sale, subject to the approval of the
Executive Judge, or in his absence, the Vice-Executive Judge. No
certificate of sale shall be issued in favor of the highest bidder until
all fees provided for in the aforementioned sections and in Rule
141, Section 9(1), as amended by A.M. No. 00-2-01-SC, shall
have been paid; Provided, that in no case shall the amount
payable under Rule 141, Section 9(1), as amended, exceed
P100,000.00;
e) after the certificate of sale has been issued to the highest bidder,
keep the complete records, while awaiting any redemption within a
period of one (1) year from date of registration of the certificate of
""+
sale with the Register of Deeds concerned, after which, the
records shall be archived. Notwithstanding the foregoing
provision, juridical persons whose property is sold pursuant to an
extra-judicial foreclosure, shall have the right to redeem the
property until, but not after, the registration of the certificate of
foreclosure sale which in no case shall be more than three (3)
months after foreclosure, whichever is earlier, as provided in
Section 47 of Republic Act No. 8791 (as amended, Res. Of August
7, 2001).
Where the application concerns the extrajudicial foreclosure of mortgages
of real estates and/or chattels in different locations covering one indebtedness,
only one filing fee corresponding to such indebtedness shall be collected. The
collecting Clerk of Court shall, apart from the official receipt of the fees, issue a
certificate of payment indicating the amount of indebtedness, the filing fees
collected, the mortgages sought to be foreclosed, the real estates and/or chattels
mortgaged and their respective locations, which certificate shall serve the
purpose of having the application docketed with the Clerks of Court of the places
where the other properties are located and of allowing the extrajudicial
foreclosures to proceed thereat.
3. The notices of auction sale in extrajudicial foreclosure for
publication by the sheriff or by a notary public shall be published in
a newspaper of general circulation pursuant to Section 1,
Presidential Decree No. 1079, dated January 2, 1977, and non-
compliance therewith shall constitute a violation of Section 6
thereof.
4. The Executive Judge shall, with the assistance of the Clerk of
Court, raffle applications for extrajudicial foreclosure of mortgage
under the direction of the sheriff among all sheriffs, including those
assigned to the Office of the Clerk of Court and Sheriffs IV
assigned in the branches.
5. The name/s of the bidder/s shall be reported by the sheriff or the
notary public who conducted the sale to the Clerk of Court before
the issuance of the certificate of sale.
This Resolution amends or modifies accordingly Administrative Order No. 3
issued by then Chief Justice Enrique M. Fernando on 19 October 1984 and
Administrative Circular No. 3-98 issued by the Chief Justice Andres R. Narvasa
on 5 February 1998.






"""
REPUBLIC ACT No. 10142
AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF
FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
CHAPTER I GENERAL PROVISIONS
Section 1. Title. - This Act shall be known as the "Financial Rehabilitation and
Insolvency Act (FRIA) of 2010".
Section 2. Declaration of Policy. - It is the policy of the State to encourage
debtors, both juridical and natural persons, and their creditors to collectively and
realistically resolve and adjust competing claims and property rights. In
furtherance thereof, the State shall ensure a timely, fair, transparent, effective
and efficient rehabilitation or liquidation of debtors. The rehabilitation or
liquidation shall be made with a view to ensure or maintain certainly and
predictability in commercial affairs, preserve and maximize the value of the
assets of these debtors, recognize creditor rights and respect priority of claims,
and ensure equitable treatment of creditors who are similarly situated. When
rehabilitation is not feasible, it is in the interest of the State to facilities a speedy
and orderly liquidation of these debtor's assets and the settlement of their
obligations.
Section 3. Nature of Proceedings. - The proceedings under this Act shall be in
rem. Jurisdiction over all persons affected by the proceedings shall be
considered as acquired upon publication of the notice of the commencement of
the proceedings in any newspaper of general circulation in the Philippines in the
manner prescribed by the rules of procedure to be promulgated by the Supreme
Court.
The proceedings shall be conducted in a summary and non-adversarial manner
consistent with the declared policies of this Act and in accordance with the rules
of procedure that the Supreme Court may promulgate.
Section 4. Definition of Terms. - As used in this Act, the term:
(a) Administrative expenses shall refer to those reasonable and necessary
expenses:
(1) incurred or arising from the filing of a petition under the provisions of this Act;
(2) arising from, or in connection with, the conduct of the proceedings under this
Act, including those incurred for the rehabilitation or liquidation of the debtor;
""#
(3) incurred in the ordinary course of business of the debtor after the
commencement date;
(4) for the payment of new obligations obtained after the commencement date to
finance the rehabilitation of the debtor;
(5) incurred for the fees of the rehabilitation receiver or liquidator and of the
professionals engaged by them; and
(6) that are otherwise authorized or mandated under this Act or such other
expenses as may be allowed by the Supreme Court in its rules.
(b) Affiliate shall refer to a corporation that directly or indirectly, through one or
more intermediaries, is controlled by, or is under the common control of another
corporation.
(c) Claim shall refer to all claims or demands of whatever nature or character
against the debtor or its property, whether for money or otherwise, liquidated or
unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed,
including, but not limited to; (1) all claims of the government, whether national or
local, including taxes, tariffs and customs duties; and (2) claims against directors
and officers of the debtor arising from acts done in the discharge of their
functions falling within the scope of their authority: Provided, That, this inclusion
does not prohibit the creditors or third parties from filing cases against the
directors and officers acting in their personal capacities.
(d) Commencement date shall refer to the date on which the court issues the
Commencement Order, which shall be retroactive to the date of filing of the
petition for voluntary or involuntary proceedings.
(e) Commencement Order shall refer to the order issued by the court under
Section 16 of this Act.
(f) Control shall refer to the power of a parent corporation to direct or govern the
financial and operating policies of an enterprise so as to obtain benefits from its
activities. Control is presumed to exist when the parent owns, directly or indirectly
through subsidiaries or affiliates, more than one-half (1/2) of the voting power of
an enterprise unless, in exceptional circumstances, it can clearly be
demonstrated that such ownership does not constitute control. Control also exists
even when the parent owns one-half (1/2) or less of the voting power of an
enterprise when there is power:
(1) over more than one-half (1/2) of the voting rights by virtue of an agreement
with investors;
(2) to direct or govern the financial and operating policies of the enterprise under
""$
a statute or an agreement;
(3) to appoint or remove the majority of the members of the board of directors or
equivalent governing body; or
(4) to cast the majority votes at meetings of the board of directors or equivalent
governing body.
(g) Court shall refer to the court designated by the Supreme Court to hear and
determine, at the first instance, the cases brought under this Act.
(h) Creditor shall refer to a natural or juridical person which has a claim against
the debtor that arose on or before the commencement date.
(i) Date of liquidation shall refer to the date on which the court issues the
Liquidation Order.
(j) Days shall refer to calendar days unless otherwise specifically stated in this
Act.
(k) Debtor shall refer to, unless specifically excluded by a provision of this Act, a
sole proprietorship duly registered with the Department of Trade and Industry
(DTI), a partnership duly registered with the Securities and Exchange
Commission (SEC), a corporation duly organized and existing under Philippine
laws, or an individual debtor who has become insolvent as defined herein.
(l) Encumbered property shall refer to real or personal property of the debtor
upon which a lien attaches.
(m) General unsecured creditor shall refer to a creditor whose claim or a portion
thereof its neither secured, preferred nor subordinated under this Act.
(n) Group of debtors shall refer to and can cover only: (1) corporations that are
financially related to one another as parent corporations, subsidiaries or affiliates;
(2) partnerships that are owned more than fifty percent (50%) by the same
person; and (3) single proprietorships that are owned by the same person. When
the petition covers a group of debtors, all reference under these rules to debtor
shall include and apply to the group of debtors.
(o) Individual debtor shall refer to a natural person who is a resident and citizen
of the Philippines that has become insolvent as defined herein.
(p) Insolvent shall refer to the financial condition of a debtor that is generally
unable to pay its or his liabilities as they fall due in the ordinary course of
business or has liabilities that are greater than its or his assets.
""%
(q) Insolvent debtor's estate shall refer to the estate of the insolvent debtor, which
includes all the property and assets of the debtor as of commencement date,
plus the property and assets acquired by the rehabilitation receiver or liquidator
after that date, as well as all other property and assets in which the debtor has an
ownership interest, whether or not these property and assets are in the debtor's
possession as of commencement date: Provided, That trust assets and bailment,
and other property and assets of a third party that are in the possession of the
debtor as of commencement date, are excluded therefrom.
(r) Involuntary proceedings shall refer to proceedings initiated by creditors.
(s) Liabilities shall refer to monetary claims against the debtor, including
stockholder's advances that have been recorded in the debtor's audited financial
statements as advances for future subscriptions.
(t) Lien shall refer to a statutory or contractual claim or judicial charge on real or
personal property that legality entities a creditor to resort to said property for
payment of the claim or debt secured by such lien.
(u) Liquidation shall refer to the proceedings under Chapter V of this Act.
(v) Liquidation Order shall refer to the Order issued by the court under Section
112 of this Act.
(w) Liquidator shall refer to the natural person or juridical entity appointed as
such by the court and entrusted with such powers and duties as set forth in this
Act: Provided, That, if the liquidator is a juridical entity, it must designated a
natural person who possesses all the qualifications and none of the
disqualifications as its representative, it being understood that the juridical entity
and the representative are solidarity liable for all obligations and responsibilities
of the liquidator.
(x) Officer shall refer to a natural person holding a management position
described in or contemplated by a juridical entity's articles of incorporation,
bylaws or equivalent documents, except for the corporate secretary, the assistant
corporate secretary and the external auditor.
(y) Ordinary course of business shall refer to transactions in the pursuit of the
individual debtor's or debtor's business operations prior to rehabilitation or
insolvency proceedings and on ordinary business terms.
(z) Ownership interest shall refer to the ownership interest of third parties in
property held by the debtor, including those covered by trust receipts or
assignments of receivables.
(aa) Parent shall refer to a corporation which has control over another
""&
corporation either directly or indirectly through one or more intermediaries.
(bb) Party to the proceedings shall refer to the debtor, a creditor, the unsecured
creditors' committee, a stakeholder, a party with an ownership interest in property
held by the debtor, a secured creditor, the rehabilitation receiver, liquidator or any
other juridical or natural person who stands to be benefited or injured by the
outcome of the proceedings and whose notice of appearance is accepted by the
court.
(cc) Possessory lien shall refer to a lien on property, the possession of which has
been transferred to a creditor or a representative or agent thereof.
(dd) Proceedings shall refer to judicial proceedings commenced by the court's
acceptance of a petition filed under this Act.
(ee) Property of others shall refer to property held by the debtor in which other
persons have an ownership interest.
(ff) Publication notice shall refer to notice through publication in a newspaper of
general circulation in the Philippines on a business day for two (2) consecutive
weeks.
(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of
successful operation and solvency, if it is shown that its continuance of operation
is economically feasible and its creditors can recover by way of the present value
of payments projected in the plan, more if the debtor continues as a going
concern than if it is immediately liquidated.
(hh) Rehabilitation receiver shall refer to the person or persons, natural or
juridical, appointed as such by the court pursuant to this Act and which shall be
entrusted with such powers and duties as set forth herein.
(ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and
viability of an insolvent debtor can be restored using various means including, but
not limited to, debt forgiveness, debt rescheduling, reorganization or quasi-
reorganization, dacion en pago, debt-equity conversion and sale of the business
(or parts of it) as a going concern, or setting-up of new business entity as
prescribed in Section 62 hereof, or other similar arrangements as may be
approved by the court or creditors.
(jj) Secured claim shall refer to a claim that is secured by a lien.
(kk) Secured creditor shall refer to a creditor with a secured claim.
(ll) Secured party shall refer to a secured creditor or the agent or representative
of such secured creditor.
""'
(mm) Securities market participant shall refer to a broker dealer, underwriter,
transfer agent or other juridical persons transacting securities in the capital
market.
(nn) Stakeholder shall refer, in addition to a holder of shares of a corporation, to
a member of a nonstock corporation or association or a partner in a partnership.
(oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the
voting stock of which is owned or controlled directly or indirectly through one or
more intermediaries by another corporation, which thereby becomes its parent
corporation.
(pp) Unsecured claim shall refer to a claim that is not secured by a lien.
(qq) Unsecured creditor shall refer to a creditor with an unsecured claim.
(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.
(ss) Voting creditor shall refer to a creditor that is a member of a class of
creditors, the consent of which is necessary for the approval of a Rehabilitation
Plan under this Act.
Section 5. Exclusions. - The term debtor does not include banks, insurance
companies, pre-need companies, and national and local government agencies or
units.
For purposes of this section:
(a) Bank shall refer to any duly licensed bank or quasi-bank that is potentially or
actually subject to conservatorship, receivership or liquidation proceedings under
the New Central Bank Act (Republic Act No. 7653) or successor legislation;
(b) Insurance company shall refer to those companies that are potentially or
actually subject to insolvency proceedings under the Insurance Code
(Presidential Decree No. 1460) or successor legislation; and
(c) Pre-need company shall refer to any corporation authorized/licensed to sell or
offer to sell pre-need plans.
Provided, That government financial institutions other than banks and
government-owned or controlled corporations shall be covered by this Act,
unless their specific charter provides otherwise.
Section 6. Designation of Courts and Promulgation of Procedural Rules. - The
Supreme Court shall designate the court or courts that will hear and resolve
cases brought under this Act and shall promulgate the rules of pleading, practice
""(
and procedure to govern the proceedings brought under this Act.
Section 7. Substantive and Procedural Consolidation. - Each juridical entity shall
be considered as a separate entity under the proceedings in this Act. Under
these proceedings, the assets and liabilities of a debtor may not be commingled
or aggregated with those of another, unless the latter is a related enterprise that
is owned or controlled directly or indirectly by the same interests: Provided,
however, That the commingling or aggregation of assets and liabilities of the
debtor with those of a related enterprise may only be allowed where:
(a) there was commingling in fact of assets and liabilities of the debtor and the
related enterprise prior to the commencement of the proceedings;
(b) the debtor and the related enterprise have common creditors and it will be
more convenient to treat them together rather than separately;
(c) the related enterprise voluntarily accedes to join the debtor as party petitioner
and to commingle its assets and liabilities with the debtor's; and
(d) The consolidation of assets and liabilities of the debtor and the related
enterprise is beneficial to all concerned and promotes the objectives of
rehabilitation.
Provided, finally, That nothing in this section shall prevent the court from joining
other entities affiliated with the debtor as parties pursuant to the rules of
procedure as may be promulgated by the Supreme Court.
Section 8. Decisions of Creditors. - Decisions of creditors shall be made
according to the relevant provisions of the Corporation Code in the case of stock
or nonstock corporations or the Civil Code in the case of partnerships that are not
inconsistent with this Act.
Section 9. Creditors Representatives. - Creditors may designate representatives
to vote or otherwise act on their behalf by filing notice of such representation with
the court and serving a copy on the rehabilitation receiver or liquidator.
Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship,
Partners in a Partnership, or Directors and Officers. - Individual debtor, owner of
a sole proprietorship, partners in a partnership, or directors and officers of a
debtor shall be liable for double the value of the property sold, embezzled or
disposed of or double the amount of the transaction involved, whichever is higher
to be recovered for benefit of the debtor and the creditors, if they, having notice
of the commencement of the proceedings, or having reason to believe that
proceedings are about to be commenced, or in contemplation of the proceedings,
willfully commit the following acts:
"")
(a) Dispose or cause to be disposed of any property of the debtor other than in
the ordinary course of business or authorize or approve any transaction in fraud
of creditors or in a manner grossly disadvantageous to the debtor and/or
creditors; or
(b) Conceal or authorize or approve the concealment, from the creditors, or
embezzles or misappropriates, any property of the debtor.
The court shall determine the extent of the liability of an owner, partner, director
or officer under this section. In this connection, in case of partnerships and
corporations, the court shall consider the amount of the shareholding or
partnership or equity interest of such partner, director or officer, the degree of
control of such partner, director or officer over the debtor, and the extent of the
involvement of such partner, director or debtor in the actual management of the
operations of the debtor.
Section 11. Authorization to Exchange Debt for Equity. - Notwithstanding
applicable banking legislation to the contrary, any bank, whether universal or not,
may acquire and hold an equity interest or investment in a debtor or its
subsidiaries when conveyed to such bank in satisfaction of debts pursuant to a
Rehabilitation or Liquidation Plan approved by the court: Provided, That such
ownership shall be subject to the ownership limits applicable to universal banks
for equity investments and: Provided, further, That any equity investment or
interest acquired or held pursuant to this section shall be disposed by the bank
within a period of five (5) years or as may be prescribed by the Monetary Board.
CHAPTER II COURT-SUPERVISED REHABILITATION
(A) Initiation Proceedings.
(1) Voluntary Proceedings.
Section 12. Petition to Initiate Voluntary Proceedings by Debtor. - When
approved by the owner in case of a sole proprietorship, or by a majority of the
partners in case of a partnership, or in case of a corporation, by a majority vote of
the board of directors or trustees and authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or in case
of nonstock corporation, by the vote of at least two-thirds (2/3) of the members, in
a stockholder's or member's meeting duly called for the purpose, an insolvent
debtor may initiate voluntary proceedings under this Act by filing a petition for
rehabilitation with the court and on the grounds hereinafter specifically provided.
The petition shall be verified to establish the insolvency of the debtor and the
viability of its rehabilitation, and include, whether as an attachment or as part of
the body of the petition, as a minimum the following:
(a) Identification of the debtor, its principal activities and its addresses;
""*
(b) Statement of the fact of and the cause of the debtor's insolvency or inability to
pay its obligations as they become due;
(c) The specific relief sought pursuant to this Act;
(d) The grounds upon which the petition is based;
(e) Other information that may be required under this Act depending on the form
of relief requested;
(f) Schedule of the debtor's debts and liabilities including a list of creditors with
their addresses, amounts of claims and collaterals, or securities, if any;
(g) An inventory of all its assets including receivables and claims against third
parties;
(h) A Rehabilitation Plan;
(i) The names of at least three (3) nominees to the position of rehabilitation
receiver; and
(j) Other documents required to be filed with the petition pursuant to this Act and
the rules of procedure as may be promulgated by the Supreme Court.
A group of debtors may jointly file a petition for rehabilitation under this Act when
one or more of its members foresee the impossibility of meeting debts when they
respectively fall due, and the financial distress would likely adversely affect the
financial condition and/or operations of the other members of the group and/or
the participation of the other members of the group is essential under the terms
and conditions of the proposed Rehabilitation Plan.
(2) Involuntary Proceedings.
Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. - Any
creditor or group of creditors with a claim of, or the aggregate of whose claims is,
at least One Million Pesos (Php1,000,000.00) or at least twenty-five percent
(25%) of the subscribed capital stock or partners' contributions, whichever is
higher, may initiate involuntary proceedings against the debtor by filing a petition
for rehabilitation with the court if:
(a) there is no genuine issue of fact on law on the claim/s of the petitioner/s, and
that the due and demandable payments thereon have not been made for at least
sixty (60) days or that the debtor has failed generally to meet its liabilities as they
fall due; or
(b) a creditor, other than the petitioner/s, has initiated foreclosure proceedings
"#+
against the debtor that will prevent the debtor from paying its debts as they
become due or will render it insolvent.
Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition
for rehabilitation shall be verified to establish the substantial likelihood that the
debtor may be rehabilitated, and include:
(a) identification of the debtor its principal activities and its address;
(b) the circumstances sufficient to support a petition to initiate involuntary
rehabilitation proceedings under Section 13 of this Act;
(c) the specific relief sought under this Act;
(d) a Rehabilitation Plan;
(e) the names of at least three (3) nominees to the position of rehabilitation
receiver;
(f) other information that may be required under this Act depending on the form of
relief requested; and
(g) other documents required to be filed with the petition pursuant to this Act and
the rules of procedure as may be promulgated by the Supreme Court.
(B) Action on the Petition and Commencement of Proceedings.
Section 15. Action on the Petition. - If the court finds the petition for rehabilitation
to be sufficient in form and substance, it shall, within five (5) working days from
the filing of the petition, issue a Commencement Order. If, within the same
period, the court finds the petition deficient in form or substance, the court may,
in its discretion, give the petitioner/s a reasonable period of time within which to
amend or supplement the petition, or to submit such documents as may be
necessary or proper to put the petition in proper order. In such case, the five (5)
working days provided above for the issuance of the Commencement Order shall
be reckoned from the date of the filing of the amended or supplemental petition
or the submission of such documents.
Section 16. Commencement of Proceedings and Issuance of a Commencement
Order. - The rehabilitation proceedings shall commence upon the issuance of the
Commencement Order, which shall:
(a) identify the debtor, its principal business or activity/ies and its principal place
of business;
(b) summarize the ground/s for initiating the proceedings;
"#"
(c) state the relief sought under this Act and any requirement or procedure
particular to the relief sought;
(d) state the legal effects of the Commencement Order, including those
mentioned in Section 17 hereof;
(e) declare that the debtor is under rehabilitation;
(f) direct the publication of the Commencement Order in a newspaper of general
circulation in the Philippines once a week for at least two (2) consecutive weeks,
with the first publication to be made within seven (7) days from the time of its
issuance;
(g) If the petitioner is the debtor direct the service by personal delivery of a copy
of the petition on each creditor holding at least ten percent (10%) of the total
liabilities of the debtor as determined from the schedule attached to the petition
within five (5) days; if the petitioner/s is/are creditor/s, direct the service by
personal delivery of a copy of the petition on the debtor within five (5) days;
(h) appoint a rehabilitation receiver who may or not be from among the nominees
of the petitioner/s and who shall exercise such powers and duties defined in this
Act as well as the procedural rules that the Supreme Court will promulgate;
(i) summarize the requirements and deadlines for creditors to establish their
claims against the debtor and direct all creditors to their claims with the court at
least five (5) days before the initial hearing;
(j) direct Bureau of internal Revenue (BIR) to file and serve on the debtor its
comment on or opposition to the petition or its claim/s against the debtor under
such procedures as the Supreme Court provide;
(k) prohibit the debtor's suppliers of goods or services from withholding the
supply of goods and services in the ordinary course of business for as long as
the debtor makes payments for the services or goods supplied after the issuance
of the Commencement Order;
(l) authorize the payment of administrative expenses as they become due;
(m) set the case for initial hearing, which shall not be more than forty (40) days
from the date of filing of the petition for the purpose of determining whether there
is substantial likelihood for the debtor to be rehabilitated;
(n) make available copies of the petition and rehabilitation plan for examination
and copying by any interested party;
(o) indicate the location or locations at which documents regarding the debtor
"##
and the proceedings under Act may be reviewed and copied;
(p) state that any creditor or debtor who is not the petitioner, may submit the
name or nominate any other qualified person to the position of rehabilitation
receiver at least five (5) days before the initial hearing;
(q) include s Stay or Suspension Order which shall:
(1) suspend all actions or proceedings, in court or otherwise, for the enforcement
of claims against the debtor;
(2) suspend all actions to enforce any judgment, attachment or other provisional
remedies against the debtor;
(3) prohibit the debtor from selling, encumbering, transferring or disposing in any
manner any of its properties except in the ordinary course of business; and
(4) prohibit the debtor from making any payment of its liabilities outstanding as of
the commencement date except as may be provided herein.
Section 17. Effects of the Commencement Order. - Unless otherwise provided
for in this Act, the court's issuance of a Commencement Order shall, in addition
to the effects of a Stay or Suspension Order described in Section 16 hereof:
(a) vest the rehabilitation with all the powers and functions provided for this Act,
such as the right to review and obtain records to which the debtor's management
and directors have access, including bank accounts or whatever nature of the
debtor subject to the approval by the court of the performance bond filed by the
rehabilitation receiver;
(b) prohibit or otherwise serve as the legal basis rendering null and void the
results of any extrajudicial activity or process to seize property, sell encumbered
property, or otherwise attempt to collection or enforce a claim against the debtor
after commencement date unless otherwise allowed in this Act, subject to the
provisions of Section 50 hereof;
(c) serve as the legal basis for rendering null and void any setoff after the
commencement date of any debt owed to the debtor by any of the debtor's
creditors;
(d) serve as the legal basis for rendering null and void the perfection of any lien
against the debtor's property after the commencement date; and
(e) consolidate the resolution of all legal proceedings by and against the debtor
to the court Provided. However, That the court may allow the continuation of
cases on other courts where the debtor had initiated the suit.
"#$
Attempts to seek legal of other resource against the debtor outside these
proceedings shall be sufficient to support a finding of indirect contempt of court.
Section 18. Exceptions to the Stay or Suspension Order. - The Stay or
Suspension Order shall not apply:
(a) to cases already pending appeal in the Supreme Court as of commencement
date Provided, That any final and executory judgment arising from such appeal
shall be referred to the court for appropriate action;
(b) subject to the discretion of the court, to cases pending or filed at a specialized
court or quasi-judicial agency which, upon determination by the court is capable
of resolving the claim more quickly, fairly and efficiently than the court: Provided,
That any final and executory judgment of such court or agency shall be referred
to the court and shall be treated as a non-disputed claim;
(c) to the enforcement of claims against sureties and other persons solidarily
liable with the debtor, and third party or accommodation mortgagors as well as
issuers of letters of credit, unless the property subject of the third party or
accommodation mortgage is necessary for the rehabilitation of the debtor as
determined by the court upon recommendation by the rehabilitation receiver;
(d) to any form of action of customers or clients of a securities market participant
to recover or otherwise claim moneys and securities entrusted to the latter in the
ordinary course of the latter's business as well as any action of such securities
market participant or the appropriate regulatory agency or self-regulatory
organization to pay or settle such claims or liabilities;
(e) to the actions of a licensed broker or dealer to sell pledged securities of a
debtor pursuant to a securities pledge or margin agreement for the settlement of
securities transactions in accordance with the provisions of the Securities
Regulation Code and its implementing rules and regulations;
(f) the clearing and settlement of financial transactions through the facilities of a
clearing agency or similar entities duly authorized, registered and/or recognized
by the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP)
and the SEC as well as any form of actions of such agencies or entities to
reimburse themselves for any transactions settled for the debtor; and
(g) any criminal action against individual debtor or owner, partner, director or
officer of a debtor shall not be affected by any proceeding commend under this
Act.
Section 19. Waiver of taxes and Fees Due to the National Government and to
Local Government Units (LGUs). - Upon issuance of the Commencement Order
by the court, and until the approval of the Rehabilitation Plan or dismissal of the
"#%
petition, whichever is earlier, the imposition of all taxes and fees including
penalties, interests and charges thereof due to the national government or to
LGUs shall be considered waived, in furtherance of the objectives of
rehabilitation.
Section 20. Application of Stay or Suspension Order to Government Financial
Institutions. - The provisions of this Act concerning the effects of the
Commencement Order and the Stay or Suspension Order on the suspension of
rights to foreclose or otherwise pursue legal remedies shall apply to government
financial institutions, notwithstanding provisions in their charters or other laws to
the contrary.
Section 21. Effectivity and Duration of Commencement Order. - Unless lifted by
the court, the Commencement Order shall be for the effective for the duration of
the rehabilitation proceedings for as long as there is a substantial likelihood that
the debtor will be successfully rehabilitated. In determining whether there is
substantial likelihood for the debtor to be successfully rehabilitated, the court
shall ensure that the following minimum requirements are met:
(a) The proposed Rehabilitation Plan submitted complies with the minimum
contents prescribed by this Act;
(b) There is sufficient monitoring by the rehabilitation receiver of the debtor's
business for the protection of creditors;
(c) The debtor has met with its creditors to the extent reasonably possible in
attempts to reach consensus on the proposed Rehabilitation Plan;
(d) The rehabilitation receiver submits a report, based on preliminary evaluation,
stating that the underlying assumptions and the goals stated in the petitioner's
Rehabilitation Plan are realistic reasonable and reasonable or if not, there is, in
any case, a substantial likelihood for the debtor to be successfully rehabilitated
because, among others:
(1) there are sufficient assets with/which to rehabilitate the debtor;
(2) there is sufficient cash flow to maintain the operations of the debtor;
(3) the debtor's, partners, stockholders, directors and officers have been acting in
good faith and which due diligence;
(4) the petition is not s sham filing intended only to delay the enforcement of the
rights of the creditor's or of any group of creditors; and
(5) the debtor would likely be able to pursue a viable Rehabilitation Plan;
"#&
(e) The petition, the Rehabilitation Plan and the attachments thereto do not
contain any materially false or misleading statement;
(f) If the petitioner is the debtor, that the debtor has met with its creditor/s
representing at least three-fourths (3/4) of its total obligations to the extent
reasonably possible and made a good faith effort to reach a consensus on the
proposed Rehabilitation Plan if the petitioner/s is/are a creditor or group of
creditors, that/ the petitioner/s has/have met with the debtor and made a good
faith effort to reach a consensus on the proposed Rehabilitation Plan; and
(g) The debtor has not committed acts misrepresentation or in fraud of its
creditor/s or a group of creditors.
Section 22. Action at the Initial Hearing. - At the initial hearing, the court shall:
(a) determine the creditors who have made timely and proper filing of their notice
of claims;
(b) hear and determine any objection to the qualifications of the appointment of
the rehabilitation receiver and, if necessary appoint a new one in accordance
with this Act;
(c) direct the creditors to comment on the petition and the Rehabilitation Plan,
and to submit the same to the court and to the rehabilitation receiver within a
period of not more than twenty (20) days; and
(d) direct the rehabilitation receiver to evaluate the financial condition of the
debtor and to prepare and submit to the court within forty (40) days from initial
hearing the report provided in Section 24 hereof.
Section 23. Effect of Failure to File Notice of Claim. - A creditor whose claim is
not listed in the schedule of debts and liabilities and who fails to file a notice of
claim in accordance with the Commencement Order but subsequently files a
belated claim shall not be entitled to participate in the rehabilitation proceedings
but shall be entitled to receive distributions arising therefrom.
Section 24. Report of the Rehabilitation Receiver. - Within forty (40) days from
the initial hearing and with or without the comments of the creditors or any of
them, the rehabilitation receiver shall submit a report to the court stating his
preliminary findings and recommendations on whether:
(a) the debtor is insolvent and if so, the causes thereof and any unlawful or
irregular act or acts committed by the owner/s of a sole proprietorship partners of
a partnership or directors or officers of a corporation in contemplation of the
insolvency of the debtor or which may have contributed to the insolvency of the
debtor;
"#'
(b) the underlying assumptions, the financial goals and the procedures to
accomplish such goals as stated in the petitioner's Rehabilitation Plan are
realistic, feasible and reasonable;
(c) there is a substantial likelihood for the debtor to be successfully rehabilitated;
(d) the petition should be dismissed; and
(e) the debtor should be dissolved and/or liquidated.
Section 25. Giving Due Course to or Dismissal of Petition, or Conversion of
Proceedings. - Within ten (10) days from receipt of the report of the rehabilitation
receiver mentioned in Section 24 hereof the court may:
(a) give due course to the petition upon a finding that:
(1) the debtor is insolvent; and
(2) there is a substantial likelihood for the debtor to be successfully rehabilitated;
(b) dismiss the petition upon a finding that:
(1)debtor is not insolvent;
(2) the petition i8 a sham filing intended only to delay the enforcement of the
rights of the creditor/s or of any group of creditors;
(3)the petition, the Rehabilitation Plan and the attachments thereto contain any
materially false or misleading statements; or
(4)the debtor has committed acts of misrepresentation or in fraud of its creditor/s
or a group of creditors;
(c)convert the proceedings into one for the liquidation of the debtor upon a
finding that:
(1)the debtor is insolvent; and
(2)there is no substantial likelihood for the debtor to be successfully rehabilitated
as determined in accordance with the rules to be promulgated by the Supreme
Court.
Section 26.Petition Given Due Course. - If the petition is given due course, the
court shall direct the rehabilitation receiver to review, revise and/or recommend
action on the Rehabilitation Plan and submit the same or a new one to the court
within a period of not more than ninety (90) days.
"#(
The court may refer any dispute relating to the Rehabilitation Plan or the
rehabilitation proceedings pending before it to arbitration or other modes of
dispute resolution, as provided for under Republic Act No. 9285, Or the
Alternative Dispute Resolution Act of 2004, should it determine that such mode
will resolve the dispute more quickly, fairly and efficiently than the court.
Section 27.Dismissal of Petition. - If the petition is dismissed pursuant to
paragraph (b) of Section 25 hereof, then the court may, in its discretion, order the
petitioner to pay damages to any creditor or to the debtor, as the case may be,
who may have been injured by the filing of the petition, to the extent of any such
injury.
(C) The Rehabilitation Receiver, Management Committee and Creditors'
Committee.
Section 28.Who May Serve as a Rehabilitation Receiver. - Any qualified natural
or juridical person may serve as a rehabilitation receiver: Provided, That if the
rehabilitation receiver is a juridical entity, it must designate a natural person/s
who possess/es all the qualifications and none of the disqualifications as its
representative, it being understood that the juridical entity and the
representative/s are solidarily liable for all obligations and responsibilities of the
rehabilitation receiver.
Section 29.Qualifications of a Rehabilitation Receiver. - The rehabilitation
receiver shall have the following minimum qualifications:
(a)A citizen of the Philippines or a resident of the Philippines in the six (6) months
immediately preceding his nomination;
(b)Of good moral character and with acknowledged integrity, impartiality and
independence;
(c)Has the requisite knowledge of insolvency and other relevant commercial
laws, rules and procedures, as well as the relevant training and/or experience
that may be necessary to enable him to properly discharge the duties and
obligations of a rehabilitation receiver; and
(d)Has no conflict of interest: Provided, That such conflict of interest may be
waived, expressly or impliedly, by a party who may be prejudiced thereby.
Other qualifications and disqualifications of the rehabilitation receiver shall be set
forth in procedural rules, taking into consideration the nature of the business of
the debtor and the need to protect the interest of all stakeholders concerned.
Section 30.Initial Appointment of the Rehabilitation Receiver. - The court shall
initially appoint the rehabilitation receiver, who mayor may not be from among the
"#)
nominees of the petitioner, However, at the initial hearing of the petition, the
creditors and the debtor who are not petitioners may nominate other persons to
the position. The court may retain the rehabilitation receiver initially appointed or
appoint another who mayor may not be from among those nominated.
In case the debtor is a securities market participant, the court shall give priority to
the nominee of the appropriate securities or investor protection fund.
If a qualified natural person or entity is nominated by more than fifty percent
(50%) of the secured creditors and the general unsecured creditors, and
satisfactory evidence is submitted, the court shall appoint the creditors' nominee
as rehabilitation receiver.
Section 31.Powers, Duties and Responsibilities of the Rehabilitation Receiver. -
The rehabilitation receiver shall be deemed an officer of the court with the
principal duty of preserving and maximizing the value of the assets of the debtor
during the rehabilitation proceedings, determining the viability of the rehabilitation
of the debtor, preparing and recommending a Rehabilitation Plan to the court,
and implementing the approved Rehabilitation Plan, To this end, and without
limiting the generality of the foregoing, the rehabilitation receiver shall have the
following powers, duties and responsibilities:
(a)To verify the accuracy of the factual allegations in the petition and its annexes;
(b)To verify and correct, if necessary, the inventory of all of the assets of the
debtor, and their valuation;
(c)To verify and correct, if necessary, the schedule of debts and liabilities of the
debtor;
(d)To evaluate the validity, genuineness and true amount of all the claims against
the debtor;
(e)To take possession, custody and control, and to preserve the value of all the
property of the debtor;
(f)To sue and recover, with the approval of the court, all amounts owed to, and all
properties pertaining to the debtor;
(g)To have access to all information necessary, proper or relevant to the
operations and business of the debtor and for its rehabilitation;
(h) To sue and recover, with the. approval of the court, all property or money of
the debtor paid, transferred or disbursed in fraud of the debtor or its creditors, or
which constitute undue preference of creditor/s;
"#*
(i) To monitor the operations and the business of the debtor to ensure that no
payments or transfers of property are made other than in the ordinary course of
business;
(j) With the court's approval, to engage the services of or to employ persons or
entities to assist him in the discharge of his functions;
(k) To determine the manner by which the debtor may be best rehabilitated, to
review) revise and/or recommend action on the Rehabilitation Plan and submit
the same or a new one to the court for approval;
(1) To implement the Rehabilitation Plan as approved by the court, if 80 provided
under the Rehabilitation Plan;
(m) To assume and exercise the powers of management of the debtor, if directed
by the court pursuant to Section 36 hereof;
(n) To exercise such other powers as may, from time to time, be conferred upon
him by the court; and
To submit a status report on the rehabilitation proceedings every quarter or as
may be required by the court motu proprio. or upon motion of any creditor. or as
may be provided, in the Rehabilitation Plan.
Unless appointed by the court, pursuant to Section 36 hereof, the rehabilitation
receiver shall not take over the management and control of the debtor but may
recommend the appointment of a management committee over the debtor in the
cases provided by this Act.
Section 32.Removal of the Rehabilitation Receiver. The rehabilitation receiver
may be removed at any time by the court either motu proprio or upon motion by
any creditor/s holding more than fifty percent (50%) of the total obligations of the
debtor, on such grounds as the rules of procedure may provide which shall
include, but are not limited to, the following:
(a) Incompetence, gross negligence, failure to perform or failure to exercise the
proper degree of care in the performance of his duties and powers;
(b) Lack of a particular or specialized competency required by the specific case;
(c) Illegal acts or conduct in the performance of his duties and powers;
(d) Lack of qualification or presence of any disqualification;
(e) Conflict of interest that arises after his appointment; and
"$+
(f) Manifest lack of independence that is detrimental to the general body of the
stakeholders.
Section 33.Compensation and Terms of Service. The rehabilitation receiver and
his direct employees or independent contractors shall be entitled to
compensation for reasonable fees and expenses from the debtor according to
the terms approved by the court after notice and hearing. Prior to such hearing,
the rehabilitation receiver and his direct employees shall be entitled to
reasonable compensation based on quantum meruit. Such costs shall be
considered administrative expenses.
Section 34.Oath and Bond of the Rehabilitation Receiver. Prior to entering upon
his powers, duties and responsibilities, the rehabilitation receiver shall take an
oath and file a bond, in such amount to be fixed by the court, conditioned upon
the faithful and proper discharge of his powers, duties and responsibilities.
Section 35.Vacancy. - Incase the position of rehabilitation receiver is vacated for
any reason whatsoever. the court shall direct the debtor and the creditors to
submit the name/s of their nominee/s to the position. The court may appoint any
of the qualified nominees. or any other person qualified for the position.
Section 36.Displacement of Existing Management by the Rehabilitation Receiver
or Management Committee. Upon motion of any interested party, the court may
appoint and direct the rehabilitation receiver to assume the powers of
management of the debtor, or appoint a management committee that will
undertake the management of the debtor. upon clear and convincing evidence of
any of the following circumstances:
(a) Actual or imminent danger of dissipation, loss, wastage or destruction of the
debtors assets or other properties;
(b) Paralyzation of the business operations of the debtor; or
(c) Gross mismanagement of the debtor. or fraud or other wrongful conduct on
the part of, or gross or willful violation of this Act by. existing management of the
debtor Or the owner, partner, director, officer or representative/s in management
of the debtor.
In case the court appoints the rehabilitation receiver to assume the powers of
management of the debtor. the court may:
(1) require the rehabilitation receiver to post an additional bond;
(2) authorize him to engage the services or to employ persona or entities to
assist him in the discharge of his managerial functions; and
"$"
(3) authorize a commensurate increase in his compensation.
Section 37.Role of the Management Committee. When appointed pursuant to
the foregoing section, the management committee shall take the place of the
management and the governing body of the debtor and assume their rights and
responsibilities.
The specific powers and duties of the management committee, whose members
shall be considered as officers of the court, shall be prescribed by the procedural
rules.
Section 38.Qualifications of Members of the Management Committee. - The
qualifications and disqualifications of the members of the management
committee shall be set forth in the procedural rules, taking into consideration the
nature of the business of the debtor and the need to protect the interest of all
stakeholders concerned.
Section 39.Employment of Professionals. - Upon approval of the court, and after
notice and hearing, the rehabilitation receiver or the management committee may
employ specialized professionals and other experts to assist each in the
performance of their duties. Such professionals and other experts shall be
considered either employees or independent contractors of the rehabilitation
receiver or the management committee, as the case may be. The qualifications
and disqualifications of the professionals and experts may be set forth in
procedural rules, taking into consideration the nature of the business of the
debtor and the need to protect the interest of all stakeholders concerned.
Section 40.Conflict of Interest. - No person may be appointed as a rehabilitation
receiver, member of a_ management committee, or be employed by the
rehabilitation receiver or the management committee if he has a conflict of
interest.
An individual shall be deemed to have a conflict of interest if he is so situated as
to be materially influenced in the exercise of his judgment for or against any party
to the proceedings. Without limiting the generality of the foregoing, an individual
shall be deemed to have a conflict of interest if:
(a) he is a creditor, owner, partner or stockholder of the debtor;
(b) he is engaged in a line of business which competes with that of the debtor;
(c) he is, or was, within five (5) years from the filing of the petition, a director,
officer, owner, partner or employee of the debtor or any of the creditors, or the
auditor or accountant of the debtor;
(d) he is, or was, within two (2) years from the filing of the petition, an underwriter
"$#
of the outstanding securities of the debtor;
(e) he is related by consanguinity or affinity within the fourth civil degree to any
individual creditor, owners of a sale proprietorship-debtor, partners of a
partnership- debtor or to any stockholder, director, officer, employee or
underwriter of a corporation-debtor; or
(f) he has any other direct or indirect material interest in the debtor or any of the
creditors.
Any rehabilitation receiver, member of the management committee or persons
employed or contracted by them possessing any conflict of interest shall make
the appropriate disclosure either to the court or to the creditors in case of out-of-
court rehabilitation proceedings. Any party to the proceeding adversely affected
by the appointment of any person with a conflict of interest to any of the positions
enumerated above may however waive his right to object to such appointment
and, if the waiver is unreasonably withheld, the court may disregard the conflict
of interest, taking into account the general interest of the stakeholders.
Section 41.Immunity. - The rehabilitation receiver and all persons employed by
him, and the members of the management committee and all persons employed
by it, shall not be subject to any action. claim or demand in connection with any
act done or omitted to be done by them in good faith in connection with the
exercise of their powers and functions under this Act or other actions duly
approved by the court.1awp++il
Section 42.Creditors' Committee. - After the creditors' meeting called pursuant to
Section 63 hereof, the creditors belonging to a class may formally organize a
committee among
themselves. In addition, the creditors may, as a body, agree to form a creditors'
committee composed of a representative from each class of creditors, such as
the following:
(a) Secured creditors;
(b) Unsecured creditors;
(c) Trade creditors and suppliers; and
(d) Employees of the debtor.
In the . election of the creditors' representatives, the rehabilitation receiver or his
representative shall attend such meeting and extend the appropriate assistance
as may be defined in the procedural rules.
"$$
Section 43.Role of Creditors' Committee. - The creditors' committee when
constituted pursuant to Section 42 of this Act shall assist the rehabilitation
receiver in communicating with the creditors and shall be the primary liaison
between the rehabilitation receiver and the creditors. The creditors' committee
cannot exercise or waive any right or give any consent on behalf of any creditor
unless specifically authorized in writing by such creditor. The creditors' committee
may be authorized by the court or by the rehabilitation receiver to perform such
other tasks and functions as may be defined by the procedural rules in order to
facilitate the rehabilitation process.
(D) Determination of Claims.
Section 44.Registry of Claims. - Within twenty (20) days from his assumption
into office, the rehabilitation receiver shall establish a preliminary registry of
claims. The rehabilitation receiver shall make the registry available for public
inspection and provide
publication notice to the debtor, creditors and stakeholders on where and when
they may inspect it. All claims included in the registry of claims must be duly
supported by sufficient evidence.
Section 45.Opposition or Challenge of Claims. Within thirty (30) days from the
expiration of the period stated in the immediately preceding section, the debtor,
creditors, stakeholders and other interested parties may submit a challenge to
claim/s to the court, serving a certified copy on the rehabilitation receiver and the
creditor holding the challenged claim/so Upon the expiration of the thirty (30)-day
period, the rehabilitation receiver shall submit to the court the registry of claims
which shall include undisputed claims that have not been subject to challenge.
Section 46.Appeal. - Any decision of the rehabilitation receiver regarding a claim
may be appealed to the court.
(E) Governance.
Section 47.Management. - Unless otherwise provided herein, the management
of the juridical debtor shall remain with the existing management subject to the
applicable law/s and agreement/s, if any, on the election or appointment of
directors, managers Or managing partner. However, all disbursements,
payments or sale, disposal, assignment, transfer or encumbrance of property , or
any other act affecting title or interest in property, shall be subject to the approval
of the rehabilitation receiver and/or the court, as provided in the following
subchapter.
(F) Use, Preservation and Disposal of Assets and Treatment of Assets and
Claims after Commencement Date.
"$%
Section 48.Use or Disposition of Assets. - Except as otherwise provided herein,
no funds or property of the debtor shall he used or disposed of except in the
ordinary course of business of the debtor, or unless necessary to finance the
administrative expenses of the rehabilitation proceedings.
Section 49.Sale of Assets. - The court, upon application of the rehabilitation
receiver, may authorize the sale of unencumbered property of the debtor outside
the ordinary course of business upon a showing that the property, by its nature or
because of other circumstance, is perishable, costly to maintain, susceptible to
devaluation or otherwise injeopardy.
Section 50.Sale or Disposal of Encumbered Property of the Debtor and Assets
of Third Parties Held by Debtor. The court may authorize the sale, transfer,
conveyance or disposal of encumbered property of the debtor, or property of
others held by the debtor where there is a security interest pertaining to third
parties under a financial, credit or other similar transactions if, upon application of
the rehabilitation receiver and with the consent of the affected owners of the
property, or secured creditor/s in the case of encumbered property of the debtor
and, after notice and hearing, the court determines that:
(a) such sale, transfer, conveyance or disposal is necessary for the continued
operation of the debtor's business; and
(b) the debtor has made arrangements to provide a substitute lien or ownership
right that provides an equal level of security for the counter-party's claim or right.
Provided, That properties held by the debtor where the debtor has authority to
sell such as trust receipt or consignment arrangements may be sold or disposed
of by the .debtor, if such sale or disposal is necessary for the operation of the
debtor's business, and the debtor has made arrangements to provide a substitute
lien or ownership right that provides an equal level of security for the counter-
party's claim or right.
Sale or disposal of property under this section shall not give rise to any criminal
liability under applicable laws.
Section 51.Assets of Debtor Held by Third Parties. In the case of possessory
pledges, mechanic's liens or similar claims, third parties who have in their
possession or control property of the debtor shall not transfer, conveyor
otherwise dispose of the same to persons other than the debtor, unless upon
prior approval of the rehabilitation receiver. The rehabilitation receiver may also:
(a) demand the surrender or the transfer of the possession or control of such
property to the rehabilitation receiver or any other person, subject to payment of
the claims secured by any possessory Iien/s thereon;
"$&
(b) allow said third parties to retain possession or control, if such an arrangement
would more likely preserve or increase the value of the property in question or
the total value of the assets of the debtor; or
(c) undertake any otI1er disposition of the said property as may be beneficial for
the rehabilitation of the debtor, after notice and hearing, and approval of the
court.
Section 52.Rescission or Nullity of Sale, Payment, Transfer or Conveyance of
Assets. - The court may rescind or declare as null and void any sale, payment,
transfer or conveyance of the debtor's unencumbered property or any
encumbering thereof by the debtor or its agents or representatives after the
commencement date which are not in the ordinary course of the business of the
debtor: Provided, however, That the unencumbered property may be sold,
encumbered or otherwise disposed of upon order of the court after notice and
hearing:
(a) if such are in the interest of administering the debtor and facilitating the
preparation and implementation of a Rehabilitation Plan;
(b) in order to provide a substitute lien, mortgage or pledge of property under this
Act;
(c) for payments made to meet administrative expenses as they arise;
(d) for payments to victims of quasi delicts upon a showing that the claim is valid
and the debtor has insurance to reimburse the debtor for the payments made;
(e) for payments made to repurchase property of the debtor that is auctioned off
in a judicial or extrajudicial sale under. This Act; or
(f) for payments made to reclaim property of the debtor held pursuant to a
possessory lien.
Section 53.Assets Subject to Rapid Obsolescence, Depreciation and Diminution
of Value. - Upon the application of a secured creditor holding a lien against or
holder of an ownership interest in property held by the debtor that is subject to
potentially rapid obsolescence, depreciation or diminution in value, the court
shall, after notice and hearing, order the debtor or rehabilitation receiver to take
reasonable steps necessary to prevent the depreciation. If depreciation cannot
be avoided and such depreciation is jeopardizing the security or property interest
of the secured creditor or owner, the court shall:
(a) allow the encumbered property to be foreclosed upon by the secured creditor
according to the relevant agreement between the debtor and the secured
creditor, applicable rules of procedure and relevant legislation: Provided. That the
"$'
proceeds of the sale will be distributed in accordance with the order prescribed
under the rules of concurrence and preference of credits; or
(b) upon motion of, or with the consent of the affected secured creditor or interest
owner. order the conveyance of a lien against or ownership interest in substitute
property of the debtor to the secured creditor: Provided. That other creditors
holding liens on such property, if any, do not object thereto, or, if such property is
not available;
(c) order the conveyance to the secured creditor or holder . of an ownership
interest of a lien on the residual funds from the sale of encumbered property
during the proceedings; or
(d) allow the sale or disposition of the property: Provided. That the sale or
disposition will maximize the value of the property for the benefit of the secured
creditor and the debtor, and the proceeds of the sale will be distributed in
accordance with the order prescribed under the rules of concurrence and
preference of credits.
Section 54.Post-commencement Interest. - The rate and term of interest, if any,
on secured and unsecured claims shall be determined and provided for in the
approved Rehabilitation Plan.
Section 55.Post-commencement Loans and Obligations. - With the approval of
the court upon the recommendation of the rehabilitation receiver, the debtor, in
order to enhance its
rehabilitation. may:
(a) enter into credit arrangements; or
(b) enter into credit arrangements, secured by mortgages of its unencumbered
property or secondary mortgages of encumbered property with the approval of
senior secured parties with regard to the encumbered property; or
(c) incur other obligations as may be essential for its rehabilitation.
The payment of the foregoing obligations shall be considered administrative
expenses under this Act.
Section 56.Treatment of Employees, Claims. Compensation of employees
required to carry on the business shall be considered an administrative expense.
Claims of separation pay for months worked prior to the commencement date
shall be considered a pre- ommencement claim. Claims for salary and separation
pay for work performed after the commencement date shall be an administrative
expense.
"$(
Section 57.Treatment of Contracts. - Unless cancelled by virtue of a final
judgment of a court of competent jurisdiction issued prior to the issuance of the
Commencement Order, or at anytime thereafter by the court before which the
rehabilitation proceedings are pending, all valid and subbsisting contracts of the
debtor with creditors and other third parties as at the commencement date shall
continue in force: Provided, That within ninety (90) days following the
commencement of proceedings, the debtor, with the consent of the rehabilitation
receiver, shall notify each contractual counter-party of whether it is confirming the
particular contract. Contractual obligations of the debtor arising or performed
during this period, and afterwards for confirmed contracts, shall be considered
administrative expenses. Contracts not confirmed within the required deadline
shall be considered terminated. Claims for actual damages, if any, arising as a
result of the election to terminate a contract shall be considered a pre-
commencement claim against the debtor. Nothing contained herein shall prevent
the cancellation or termination of any contract of the debtor for any ground
provided by law.
(G) Avoidance Proceedings.
Section 58.Rescission or Nullity of Certain Pre-commencement Transactions.
Any transaction occurring prior to commencement date entered into by the debtor
or involving its funds or assets may be rescinded or declared null and void on the
ground that the same was executed with intent to defraud a creditor or creditors
or which constitute undue preference of creditors. Without limiting the generality
of the foregoing, a disputable presumption of such design shall arise if the
transaction:
(a) provides unreasonably inadequate consideration to the debtor and is
executed within ninety (90) days prior to the commencement date;
(b) involves an accelerated payment of a claim to a creditor within ninety (90)
days prior to the commencement date;
(c) provides security or additional security executed within ninety (90) days prior
to the commencement date;
(d) involves creditors, where a creditor obtained, or received the benefit of, more
than its pro rata share in the assets of the debtor, executed at a time when the
debtor was insolvent; or
(e) is intended to defeat, delay or hinder the ability of the creditors to collect
claims where the effect of the transaction is to put assets of the debtor beyond
the reach of creditors or to otherwise prejudice the interests of creditors.
Provided, however, That nothing in this section shall prevent the court from
rescinding or declaring as null and void a transaction on other grounds provided
"$)
by relevant legislation and jurisprudence: Provided, further, That the provisions of
the Civil Code on rescission shall in any case apply to these transactions.
Section 59.Actions for Rescission or Nullity. - (a) The rehabilitation receiver or,
with his conformity, any creditor may initiate and prosecute any action to rescind,
or declare null and void any transaction described in Section 58 hereof. If the
rehabilitation receiver does not consent to the filing or prosecution of such action,
(b) If leave of court is granted under subsection (a), the rehabilitation receiver
shall assign and transfer to the creditor all rights, title and interest in the chose in
action or subject matter of the proceeding, including any document in support
thereof.
(c) Any benefit derived from a proceeding taken pursuant to subsection (a), to the
extent of his claim and the costs, belongs exclusively to the creditor instituting the
proceeding, and the surplus, if any, belongs to the estate.
(d) Where, before an order is made under subsection (a), the rehabilitation
receiver (or liquidator) signifies to the court his readiness to institute the
proceeding for the benefit of the creditors, the order shall fix the time within which
he shall do so and, m that case, the benefit derived from the proceeding, if
instituted within the time limits so fixed, belongs to the estate.
(H) Treatment of Secured Creditors.
Section 60.No Diminution of Secured Creditor Rights. The issuance of the
Commencement Order and the Suspension or Stay Order, and any other
provision of this Act, shall not be
deemed in any way to diminish or impair the security or lien of a secured creditor,
or the value of his lien or security, except that his right to enforce said security or
lien may be suspended during the term of the Stay Order.
The court, upon motion or recommendation of the rehabilitation receiver, may
allow a secured creditor to enforce his security or lien, or foreclose upon property
of the debtor
securing his/its claim, if the said property is not necessary for the rehabilitation of
the debtor. The secured creditor and/or the other lien holders shall be admitted to
the rehabilitation proceedings only for the balance of his claim, if any.
Section 61.Lack of Adequate Protection. - The court, on motion or motu proprio,
may terminate, modify or set conditions for the continuance of suspension of
payment, or relieve a claim from the coverage thereof, upon showing that: (a) a
creditor does not have adequate protection over property securing its claim; or
"$*
(b) the value of a claim secured by a lien on property which is not necessary for
rehabilitation of the debtor exceeds the fair market value of the said property.
For purposes of this section, a creditor shall be deemed to lack adequate
protection if it can be shown that:
(a) the debtor fails or refuses to honor a pre-existing agreement with the creditor
to keep the property insured;
(b) the debtor fails or refuses to take commercially reasonable steps to maintain
the property; or
(c) the property has depreciated to an extent that the creditor is under secured.
Upon showing of a lack of protection, the court shall order the debtor or the
rehabilitation receiver to make arrangements to provide for the insurance or
maintenance of the property; or to make payments or otherwise provide
additional or replacement security such that the obligation is fully secured. If such
arrangements are not feasible, the court may modify the Stay Order to allow the
secured creditor lacking adequate protection to enforce its security claim against
the debtor: Provided, however, That the court may deny the creditor the
remedies in this paragraph if the property subject of the enforcement is required
for the rehabilitation of the debtor.
(i) Administration of Proceedings.
Section 62.Contents of a Rehabilitation Plan. The Rehabilitation Plan shall, as
a minimum:
(a) specify the underlying assumptions, the financial goals and the procedures
proposed to accomplish such goals;
(b) compare the amounts expected to be received by the creditors under the
Rehabilitation Plan with those that they will receive if liquidation ensues within the
next one hundred twenty (120) days;
(c) contain information sufficient to give the various classes of creditors a
reasonable basis for determining whether supporting the Plan is in their financial
interest when compared to the immediate liquidation of the debtor, including any
reduction of principal interest and penalties payable to the creditors;
(d) establish classes of voting creditors;
(e) establish subclasses of voting creditors if prior approval has been granted by
the court;
"%+
(f) indicate how the insolvent debtor will be rehabilitated including, but not limited
to, debt forgiveness, debt rescheduling, reorganization or quasi-reorganization.
dacion en pago, debt-equity conversion and sale of the business (or parts of it)
as a going concern, or setting-up of a new business entity or other similar
arrangements as may be necessary to restore the financial well-being and
visibility of the insolvent debtor;
(g) specify the treatment of each class or subclass described in subsections (d)
and (e);
(h) provide for equal treatment of all claims within the same class or subclass,
unless a particular creditor voluntarily agrees to less favorable treatment;
(i) ensure that the payments made under the plan follow the priority established
under the provisions of the Civil Code on concurrence and preference of credits
and other applicable laws;
(j) maintain the security interest of secured creditors and preserve the liquidation
value of the security unless such has been waived or modified voluntarily;
(k) disclose all payments to creditors for pre-commencement debts made during
the proceedings and the justifications thereof;
(1) describe the disputed claims and the provisioning of funds to account for
appropriate payments should the claim be ruled valid or its amount adjusted;
(m) identify the debtor's role in the implementation of the Plan;
(n) state any rehabilitation covenants of the debtor, the breach of which shall be
considered a material breach of the Plan;
(o) identify those responsible for the future management of the debtor and the
supervision and implementation of the Plan, their affiliation with the debtor and
their remuneration;
(p) address the treatment of claims arising after the confirmation of the
Rehabilitation Plan;
(q) require the debtor and its counter-parties to adhere to the terms of all
contracts that the debtor has chosen to confirm;
(r) arrange for the payment of all outstanding administrative expenses as a
condition to the Plan's approval unless such condition has been waived in writing
by the creditors concerned;
(s) arrange for the payment" of all outstanding taxes and assessments, or an
"%"
adjusted amount pursuant to a compromise settlement with the BlR Or other
applicable tax authorities;
(t) include a certified copy of a certificate of tax clearance or evidence of a
compromise settlement with the BIR;
(u) include a valid and binding r(,solution of a meeting of the debtor's
stockholders to increase the shares by the required amount in cases where the
Plan contemplates an additional issuance of shares by the debtor;
(v) state the compensation and status, if any, of the rehabilitation receiver after
the approval of the Plan; and
(w) contain provisions for conciliation and/or mediation as a prerequisite to court
assistance or intervention in the event of any disagreement in the interpretation
or implementation of the Rehabilitation Plan.
Section 63.Consultation with Debtor and Creditors. if the court gives due
course to the petition, the rehabilitation receiver shall confer with the debtor and
all the classes of creditors, and may consider their views and proposals ill the
review, revision or preparation of a new Rehabilitation Plan.
Section 64.Creditor Approval of Rehabilitation Plan. The rehabilitation receiver
shall notify the creditors and stakeholders that the Plan is ready for their
examination. Within twenty (2Q) days from the said notification, the rehabilitation
receiver shall convene the creditors, either as a whole or per class, for purposes
of voting on the approval of the Plan. The Plan shall be deemed rejected unless
approved by all classes of creditors w hose rights are adversely modified or
affected by the Plan. For purposes of this section, the Plan is deemed to have
been approved by a class of creditors if members of the said class holding more
than fifty percent (50%) of the total claims of the said class vote in favor of the
Plan. The votes of the creditors shall be based solely on the amount of their
respective claims based on the registry of claims submitted by the rehabilitation
receiver pursuant to Section 44 hereof.
Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm
the Rehabilitation Plan if all of the following circumstances are present:
(a)The Rehabilitation Plan complies with the requirements specified in this Act.
(b) The rehabilitation receiver recommends the confirmation of the Rehabilitation
Plan;
(c) The shareholders, owners or partners of the juridical debtor lose at least their
controlling interest as a result of the Rehabilitation Plan; and
"%#
(d) The Rehabilitation Plan would likely provide the objecting class of creditors
with compensation which has a net present value greater than that which they
would have received if the debtor were under liquidation.
Section 65.Submission of Rehabilitation Plan to the Court. - 1fthe Rehabilitation
Plan is approved, the rehabilitation receiver shall submit the same to the court for
confirmation. Within five (5) days from receipt of the Rehabilitation Plan, the court
shall notify the creditors that the Rehabilitation Plan has been submitted for
confirmation, that any creditor may obtain copies of the Rehabilitation Plan and
that any creditor may file an objection thereto.
Section 66.Filing of Objections to Rehabilitation Plan. A creditor may file an
objection to the Rehabilitation Plan within twenty (20) days from receipt of notice
from the court that the Rehabilitation Plan has been submitted for confirmation.
Objections to a Rehabilitation Plan shall be limited to the following:
(a) The creditors' support was induced by fraud;
(b)The documents or data relied upon in the Rehabilitation Plan are materially
false or misleading; or
(c)The Rehabilitation Plan is in fact not supported by the voting creditors.
Section 67.Hearing on the Objections. - If objections have been submitted during
the relevant period, the court shall issue an order setting the time and date for
the hearing or hearings on the objections.
If the court finds merit in the objection, it shall order the rehabilitation receiver or
other party to cure the defect, whenever feasible. If the court determines that the
debtor acted in bad faith, or that it is not feasible to cure the defect, the court
shall convert the proceedings into one for the liquidation of the debtor under
Chapter V of this Act.
Section 68.Confirmation of the Rehabilitation Plan. If no objections are filed
within the relevant period or, if objections are filed, the court finds them lacking in
merit, or determines that the basis for the objection has been cured, or
determines that the debtor has complied with an order to cure the objection, the
court shall issue an order confirming the Rehabilitation Plan.
The court may confirm the Rehabilitation Plan notwithstanding unresolved
disputes over claims if the Rehabilitation Plan has made adequate provisions for
paying such claims.
For the avoidance of doubt, the provisions of other laws to the contrary
notwithstanding, the court shall have the power to approve or implement the
Rehabilitation Plan despite the lack of approval, or objection from the owners,
"%$
partners or stockholders of the insolvent debtor: Provided, That the terms thereof
are necessary to restore the financial well-being and viability of the insolvent
debtor.
Section 69.Effect of Confirmation of the Rehabilitation Plan, - The confirmation
of the Rehabilitation Plan by the court shall result in the following:
(a) The Rehabilitation Plan and its provisions shall be binding upon the debtor
and all persons who may be affected by . it, including the creditors, whether or
not such persons have participated in the proceedings or opposed the
Rehabilitation Plan or whether or not their claims have been scheduled;
(b) The debtor shall comply with the provisions of the Rehabilitation Plan and
shall take all actions necessary to carry out the Plan;
(c) Payments shall be made to the creditors in accordance with the provisions of
the Rehabilitation Plan;
(d) Contracts and other arrangements between the debtor and its creditors shall
be interpreted as continuing to apply to the extent that they do not conflict with
the provisions of the Rehabilitation Plan;
(e) Any compromises on amounts or rescheduling of timing of payments by the
debtor shall be binding on creditors regardless of whether or not the Plan is
successfully implement; and
(f) Claims arising after approval of the Plan that are otherwise not treated by the
Plan are not subject to any Suspension Order.
The Order confirming the Plan shall comply with Rules 36 of the Rules of Court:
Provided, however, That the court may maintain jurisdiction over the case in
order to resolve claims against the debtor that remain contested and allegations
that the debtor has breached the Plan.
Section 70. Liability of General Partners of a Partnership for Unpaid Balances
Under an Approved Plan. - The approval of the Plan shall not affect the rights of
creditors to pursue actions against the general partners of a partnership to the
extent they are liable under relevant legislation for the debts thereof.
Section 71. Treatment of Amounts of Indebtedness or Obligations Forgiven or
Reduced. - Amounts of any indebtedness or obligations reduced or forgiven in
connection with a Plan's approval shall not be subject to any tax in furtherance of
the purposes of this Act.
Section 72. Period for Confirmation of the Rehabilitation Plan. - The court shall
have a maximum period of one (1) year from the date of the filing of the petition
"%%
to confirm a Rehabilitation Plan.
If no Rehabilitation Plan is confirmed within the said period, the proceedings may
upon motion or motu propio, be converted into one for the liquidation of the
debtor .
Section 73. Accounting Discharge of Rehabilitation Receiver. - Upon the
confirmation of the Rehabilitation Plan, the rehabilitation receiver shall provide a
final report and accounting to the court. Unless the Rehabilitation Plan
specifically requires and describes the role of the rehabilitation receiver after the
approval of the Rehabilitation Plan, the court shall discharge the rehabilitation
receiver of his duties.
(j) Termination of Proceedings
Section 74. Termination of Proceedings. - The rehabilitation proceedings under
Chapter II shall, upon motion by any stakeholder or the rehabilitation receiver be
terminated by order of the court either declaring a successful implementation of
the Rehabilitation Plan or a failure of rehabilitation.
There is failure of rehabilitation in the following cases:
(a) Dismissal of the petition by the court;
(b) The debtor fails to submit a Rehabilitation Plan;
(c) Under the Rehabilitation Plan submitted by the debtor, there is no substantial
likelihood that the debtor can be rehabilitated within a reasonable period;
(d) The Rehabilitation Plan or its amendment is approved by the court but in the
implementation thereof, the debtor fails to perform its obligations thereunder or
there is a failure to realize the objectives, targets or goals set forth therein,
including the timelines and conditions for the settlement of the obligations due to
the creditors and other claimants;
(e) The commission of fraud in securing the approval of the Rehabilitation Plan or
its amendment; and
(f) Other analogous circumstances as may be defined by the rules of procedure.
Upon a breach of, or upon a failure of the Rehabilitation Plan the court, upon
motion by an affected party may:
(1) Issue an order directing that the breach be cured within a specified period of
time, falling which the proceedings may be converted to a liquidation;
"%&
(2) Issue an order converting the proceedings to a liquidation;
(3) Allow the debtor or rehabilitation receiver to submit amendments to the
Rehabilitation Plan, the approval of which shall be governed by the same
requirements for the approval of a Rehabilitation Plan under this subchapter;
(4) Issue any other order to remedy the breach consistent with the present
regulation, other applicable law and the best interests of the creditors; or
(5) Enforce the applicable provisions of the Rehabilitation Plan through a writ of
execution.
Section 75. Effects of Termination. - Termination of the proceedings shall result
in the following:
(a) The discharge of the rehabilitation receiver subject to his submission of a final
accounting; and
(b) The lifting of the Stay Order and any other court order holding in abeyance
any action for the enforcement of a claim against the debtor.
Provided, however, That if the termination of proceedings is due to failure of
rehabilitation or dismissal of the petition for reasons other than technical grounds,
the proceedings shall be immediately converted to liquidation as provided in
Section 92 of this Act.
CHAPTER III PRE-NEGOTIATED REHABILITATION
Section 76. Petition by Debtor. - An insolvent debtor, by itself or jointly with any
of its creditors, may file a verified petition with the court for the approval of a pre-
negotiated Rehabilitation Plan which has been endorsed or approved by
creditors holding at least two-thirds (2/3) of the total liabilities of the debtor,
including secured creditors holding more than fifty percent (50%) of the total
secured claims of the debtor and unsecured creditors holding more than fifty
percent (50%) of the total unsecured claims of the debtor. The petition shall
include as a minimum:
(a) a schedule of the debtor's debts and liabilities;
(b) an inventory of the debtor's assets;
(c) the pre-negotiated Rehabilitation Plan, including the names of at least three
(3) qualified nominees for rehabilitation receiver; and
(d) a summary of disputed claims against the debtor and a report on the
provisioning of funds to account for appropriate payments should any such
"%'
claims be ruled valid or their amounts adjusted.
Section 77. Issuance of Order. - Within five (5) working days, and after
determination that the petition is sufficient in form and substance, the court shall
issue an Order which shall;
(a) identify the debtor, its principal business of activity/ies and its principal place
of business;
(b) declare that the debtor is under rehabilitation;
(c) summarize the ground./s for the filling of the petition;
(d) direct the publication of the Order in a newspaper of general circulation in the
Philippines once a week for at least two (2) consecutive weeks, with the first
publication to be made within seven (7) days from the time of its issuance;
(e) direct the service by personal delivery of a copy of the petition on each
creditor who is not a petitioner holding at least ten percent (10%) of the total
liabilities of the debtor, as determined in the schedule attached to the petition,
within three (3) days;
(f) state that copies of the petition and the Rehabilitation Plan are available for
examination and copying by any interested party;
(g) state that creditors and other interested parties opposing the petition or
Rehabilitation Plan may file their objections or comments thereto within a period
of not later than twenty (20) days from the second publication of the Order;
(h) appoint a rehabilitation receiver, if provided for in the Plan; and
(i) include a Suspension or Stay Order as described in this Act.
Section 78. Approval of the Plan. - Within ten (10) days from the date of the
second publication of the Order, the court shall approve the Rehabilitation Plan
unless a creditor or other interested party submits an objection to it in
accordance with the next succeeding section.
Section 79. Objection to the Petition or Rehabilitation Plan. - Any creditor or
other interested party may submit to the court a verified objection to the petition
or the Rehabilitation Plan not later than eight (8) days from the date of the
second publication of the Order mentioned in Section 77 hereof. The objections
shall be limited to the following:
(a) The allegations in the petition or the Rehabilitation Plan or the attachments
thereto are materially false or misleading;
"%(
(b) The majority of any class of creditors do not in fact support the Rehabilitation
Plan;
(c) The Rehabilitation Plan fails to accurately account for a claim against the
debtor and the claim in not categorically declared as a contested claim; or
(d) The support of the creditors, or any of them was induced by fraud.
Copies of any objection to the petition of the Rehabilitation Plan shall be served
on the debtor, the rehabilitation receiver (if applicable), the secured creditor with
the largest claim and who supports the Rehabilitation Plan, and the unsecured
creditor with the largest claim and who supports the Rehabilitation Plan.
Section 80. Hearing on the Objections. - After receipt of an objection, the court
shall set the same for hearing. The date of the hearing shall be no earlier than
twenty (20) days and no later than thirty (30) days from the date of the second
publication of the Order mentioned in Section 77 hereof. If the court finds merit in
the objection, it shall direct the debtor, when feasible to cure the detect within a
reasonable period. If the court determines that the debtor or creditors supporting
the Rehabilitation Plan acted in bad faith, or that the objection is non-curable, the
court may order the conversion of the proceedings into liquidation. A finding by
the court that the objection has no substantial merit, or that the same has been
cured shall be deemed an approval of the Rehabilitation Plan.
Section 81. Period for Approval of Rehabilitation Plan. - The court shall have a
maximum period of one hundred twenty (120) days from the date of the filing of
the petition to approve the Rehabilitation Plan. If the court fails to act within the
said period, the Rehabilitation Plan shall be deemed approved.
Section 82. Effect of Approval. - Approval of a Plan under this chapter shall have
the same legal effect as confirmation of a Plan under Chapter II of this Act.
CHAPTER IV OUT-OF-COURT OR INFORMAL RESTRUCTURING
AGREEMENTS OR REHABILITATION PLANS
Section 83. Out-of-Court or Informal Restructuring Agreements and
Rehabilitation Plans. - An out-of-curt or informal restructuring agreement or
Rehabilitation Plan that meets the minimum requirements prescribed in this
chapter is hereby recognized as consistent with the objectives of this Act.
Section 84. Minimum Requirements of Out-of-Court or Informal Restructuring
Agreements and Rehabilitation Plans. - For an out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan to qualify under this
chapter, it must meet the following minimum requirements:
(a) The debtor must agree to the out-of-court or informal restructuring/workout
"%)
agreement or Rehabilitation Plan;
(b) It must be approved by creditors representing at least sixty-seven (67%) of
the secured obligations of the debtor;
(c) It must be approved by creditors representing at least seventy-five percent
(75%) of the unsecured obligations of the debtor; and
(d) It must be approved by creditors holding at least eighty-five percent (85%) of
the total liabilities, secured and unsecured, of the debtor.
Section 85. Standstill Period. - A standstill period that may be agreed upon by
the parties pending negotiation and finalization of the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan contemplated herein shall
be effective and enforceable not only against the contracting parties but also
against the other creditors: Provided, That (a) such agreement is approved by
creditors representing more than fifty percent (50%) of the total liabilities of the
debtor; (b) notice thereof is publishing in a newspaper of general circulation in
the Philippines once a week for two (2) consecutive weeks; and (c) the standstill
period does not exceed one hundred twenty (120) days from the date of
effectivity. The notice must invite creditors to participate in the negotiation for out-
of-court rehabilitation or restructuring agreement and notify them that said
agreement will be binding on all creditors if the required majority votes prescribed
in Section 84 of this Act are met.
Section 86. Cram Down Effect. - A restructuring/workout agreement or
Rehabilitation Plan that is approved pursuant to an informal workout framework
referred to in this chapter shall have the same legal effect as confirmation of a
Plan under Section 69 hereof. The notice of the Rehabilitation Plan or
restructuring agreement or Plan shall be published once a week for at least three
(3) consecutive weeks in a newspaper of general circulation in the Philippines.
The Rehabilitation Plan or restructuring agreement shall take effect upon the
lapse of fifteen (15) days from the date of the last publication of the notice
thereof.
Section 87. Amendment or Modification. - Any amendment of an out-of-court
restructuring/workout agreement or Rehabilitation Plan must be made in
accordance with the terms of the agreement and with due notice on all creditors.
Section 88. Effect of Court Action or Other Proceedings. - Any court action or
other proceedings arising from, or relating to, the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan shall not stay its
implementation, unless the relevant party is able to secure a temporary
restraining order or injunctive relief from the Court of Appeals.
Section 89. Court Assistance. - The insolvent debtor and/or creditor may seek
"%*
court assistance for the execution or implementation of a Rehabilitation Plan
under this Chapter, under such rules of procedure as may be promulgated by the
Supreme Court.
CHAPTER V LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS
Section 90. Voluntary Liquidation. - An insolvent debtor may apply for liquidation
by filing a petition for liquidation with the court. The petition shall be verified, shall
establish the insolvency of the debtor and shall contain, whether as an
attachment or as part of the body of the petition;
(a) a schedule of the debtor's debts and liabilities including a list of creditors with
their addresses, amounts of claims and collaterals, or securities, if any;
(b) an inventory of all its assets including receivables and claims against third
parties; and
(c) the names of at least three (3) nominees to the position of liquidator.
At any time during the pendency of court-supervised or pre-negotiated
rehabilitation proceedings, the debtor may also initiate liquidation proceedings by
filing a motion in the same court where the rehabilitation proceedings are
pending to convert the rehabilitation proceedings into liquidation proceedings.
The motion shall be verified, shall contain or set forth the same matters required
in the preceding paragraph, and state that the debtor is seeking immediate
dissolution and termination of its corporate existence.
If the petition or the motion, as the case may be, is sufficient in form and
substance, the court shall issue a Liquidation Order mentioned in Section 112
hereof.
Section 91. Involuntary Liquidation. - Three (3) or more creditors the aggregate
of whose claims is at least either One million pesos (Php1,000,000,00) or at least
twenty-five percent (25%0 of the subscribed capital stock or partner's
contributions of the debtor, whichever is higher, may apply for and seek the
liquidation of an insolvent debtor by filing a petition for liquidation of the debtor
with the court. The petition shall show that:
(a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and
that the due and demandable payments thereon have not been made for at least
one hundred eighty (180) days or that the debtor has failed generally to meet its
liabilities as they fall due; and
(b) there is no substantial likelihood that the debtor may be rehabilitated.
At any time during the pendency of or after a rehabilitation court-supervised or
"&+
pre-negotiated rehabilitation proceedings, three (3) or more creditors whose
claims is at least either One million pesos (Php1,000,000.00) or at least twenty-
five percent (25%) of the subscribed capital or partner's contributions of the
debtor, whichever is higher, may also initiate liquidation proceedings by filing a
motion in the same court where the rehabilitation proceedings are pending to
convert the rehabilitation proceedings into liquidation proceedings. The motion
shall be verified, shall contain or set forth the same matters required in the
preceding paragraph, and state that the movants are seeking the immediate
liquidation of the debtor.
If the petition or motion is sufficient in form and substance, the court shall issue
an Order:
(1) directing the publication of the petition or motion in a newspaper of general
circulation once a week for two (2) consecutive weeks; and
(2) directing the debtor and all creditors who are not the petitioners to file their
comment on the petition or motion within fifteen (15) days from the date of last
publication.
If, after considering the comments filed, the court determines that the petition or
motion is meritorious, it shall issue the Liquidation Order mentioned in Section
112 hereof.
Section 92. Conversion by the Court into Liquidation Proceedings. - During the
pendency of court-supervised or pre-negotiated rehabilitation proceedings, the
court may order the conversion of rehabilitation proceedings to liquidation
proceedings pursuant to (a) Section 25(c) of this Act; or (b) Section 72 of this Act;
or (c) Section 75 of this Act; or (d) Section 90 of this Act; or at any other time
upon the recommendation of the rehabilitation receiver that the rehabilitation of
the debtor is not feasible. Thereupon, the court shall issue the Liquidation Order
mentioned in Section 112 hereof.
Section 93. Powers of the Securities and Exchange Commission (SEC). - The
provisions of this chapter shall not affect the regulatory powers of the SEC under
Section 6 of Presidential Decree No. 902-A, as amended, with respect to any
dissolution and liquidation proceeding initiated and heard before it.
CHAPTER VI INSOLVENCY OF INDIVIDUAL DEBTORS
(A) Suspension of Payments.
Section 94. Petition. - An individual debtor who, possessing sufficient property to
cover all his debts but foreseeing the impossibility of meeting them when they
respectively fall due, may file a verified petition that he be declared in the state of
suspension of payments by the court of the province or city in which he has
"&"
resides for six (6) months prior to the filing of his petition. He shall attach to his
petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory of
assess; and (c) a proposed agreement with his creditors.
Section 95. Action on the Petition. - If the court finds the petition sufficient in
form and substance, it shall, within five (5) working days from the filing of the
petition, issue an Order:
(a) calling a meeting of all the creditors named in the schedule of debts and
liabilities at such time not less than fifteen (15) days nor more than forty (40)
days from the date of such Order and designating the date, time and place of the
meeting;
(b) directing such creditors to prepare and present written evidence of their
claims before the scheduled creditors' meeting;
(c) directing the publication of the said order in a newspaper of general
circulation published in the province or city in which the petition is filed once a
week for two (2) consecutive weeks, with the first publication to be made within
seven (7) days from the time of the issuance of the Order;
(d) directing the clerk of court to cause the sending of a copy of the Order by
registered mail, postage prepaid, to all creditors named in the schedule of debts
and liabilities;
(e) forbidding the individual debtor from selling, transferring, encumbering or
disposing in any manner of his property, except those used in the ordinary
operations of commerce or of industry in which the petitioning individual debtor is
engaged so long as the proceedings relative to the suspension of payments are
pending;
(f) prohibiting the individual debtor from making any payment outside of the
necessary or legitimate expenses of his business or industry, so long as the
proceedings relative to the suspension of payments are pending; and
(g) appointing a commissioner to preside over the creditors' meeting.
Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the
court may issue an order suspending any pending execution against the
individual debtor. Provide, That properties held as security by secured creditors
shall not be the subject of such suspension order. The suspension order shall
lapse when three (3) months shall have passed without the proposed agreement
being accepted by the creditors or as soon as such agreement is denied.
No creditor shall sue or institute proceedings to collect his claim from the debtor
from the time of the filing of the petition for suspension of payments and for as
"&#
long as proceedings remain pending except:
(a) those creditors having claims for personal labor, maintenance, expense of
last illness and funeral of the wife or children of the debtor incurred in the sixty
(60) days immediately prior to the filing of the petition; and
(b) secured creditors.
Section 97. Creditors' Meeting. - The presence of creditors holding claims
amounting to at least three-fifths (3/5) of the liabilities shall be necessary for
holding a meeting. The commissioner appointed by the court shall preside over
the meeting and the clerk of court shall act as the secretary thereof, subject to
the following rules:
(a) The clerk shall record the creditors present and amount of their respective
claims;
(b) The commissioner shall examine the written evidence of the claims. If the
creditors present hold at least three-fifths (3/5) of the liabilities of the individual
debtor, the commissioner shall declare the meeting open for business;
(c) The creditors and individual debtor shall discuss the propositions in the
proposed agreement and put them to a vote;
(d) To form a majority, it is necessary:
(1) that two-thirds (2/3) of the creditors voting unite upon the same proposition;
and
(2) that the claims represented by said majority vote amount to at least three-
fifths (3/5) of the total liabilities of the debtor mentioned in the petition; and
(e) After the result of the voting has been announced, all protests made against
the majority vote shall be drawn up, and the commissioner and the individual
debtor together with all creditors taking part in the voting shall sign the affirmed
propositions.
No creditor who incurred his credit within ninety (90) days prior to the filing of the
petition shall be entitled to vote.
Section 98. Persons Who May Refrain From Voting. - Creditors who are
unaffected by the Suspension Order may refrain from attending the meeting and
from voting therein. Such persons shall not be bound by any agreement
determined upon at such meeting, but if they should join in the voting they shall
be bound in the same manner as are the other creditors.
"&$
Section 99. Rejection of the Proposed Agreement. - The proposed agreement
shall be deemed rejected if the number of creditors required for holding a
meeting do not attend thereat, or if the two (2) majorities mentioned in Section 97
hereof are not in favor thereof. In such instances, the proceeding shall be
terminated without recourse and the parties concerned shall be at liberty to
enforce the rights which may correspond to them.
Section 100. Objections. - If the proposal of the individual debtor, or any
amendment thereof made during the creditors' meeting, is approved by the
majority of creditors in accordance with Section 97 hereof, any creditor who
attended the meeting and who dissented from and protested against the vote of
the majority may file an objection with the court within ten (10) days from the date
of the last creditors' meeting. The causes for which objection may be made to the
decision made by the majority during the meeting shall be: (a) defects in the call
for the meeting, in the holding thereof and in the deliberations had thereat which
prejudice the rights of the creditors; (b) fraudulent connivance between one or
more creditors and the individual debtor to vote in favor of the proposed
agreement; or (c) fraudulent conveyance of claims for the purpose of obtaining a
majority. The court shall hear and pass upon such objection as soon as possible
and in a summary manner.
In case the decision of the majority of creditors to approve the individual debtor's
proposal or any amendment thereof made during the creditors' meeting is
annulled by the court, the court shall declare the proceedings terminated and the
creditors shall be at liberty to exercise the rights which may correspond to them.
Section 101. Effects of Approval of Proposed Agreement. - If the decision of the
majority of the creditors to approve the proposed agreement or any amendment
thereof made during the creditors' meeting is uphold by the court, or when no
opposition or objection to said decision has been presented, the court shall order
that the agreement be carried out and all parties bound thereby to comply with its
terms.
The court may also issue all orders which may be necessary or proper to enforce
the agreement on motion of any affected party. The Order confirming the
approval of the proposed agreement or any amendment thereof made during the
creditors' meeting shall be binding upon all creditors whose claims are included
in the schedule of debts and liabilities submitted by the individual debtor and who
were properly summoned, but not upon: (a) those creditors having claims for
personal labor, maintenance, expenses of last illness and funeral of the wife or
children of the debtor incurred in the sixty (60) days immediately prior to the filing
of the petition; and (b) secured creditors who failed to attend the meeting or
refrained from voting therein.
Section 102. Failure of Individual Debtor to Perform Agreement. - If the
individual debtor fails, wholly or in part, to perform the agreement decided upon
"&%
at the meeting of the creditors, all the rights which the creditors had against the
individual debtor before the agreement shall revest in them. In such case the
individual debtor may be made subject to the insolvency proceedings in the
manner established by this Act.
(B) Voluntary Liquidation.
Section 103. Application. - An individual debtor whose properties are not
sufficient to cover his liabilities, and owing debts exceeding Five hundred
thousand pesos (Php500,000.00), may apply to be discharged from his debts
and liabilities by filing a verified petition with the court of the province or city in
which he has resided for six (6) months prior to the filing of such petition. He shall
attach to his petition a schedule of debts and liabilities and an inventory of
assets. The filing of such petition shall be an act of insolvency.
Section 104. Liquidation Order. - If the court finds the petition sufficient in form
and substance it shall, within five (5) working days issue the Liquidation Order
mentioned in Section 112 hereof.
(C) In voluntary Liquidation.
Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors with
a claim of, or with claims aggregating at least Five hundred thousand pesos
(Php500, 000.00) may file a verified petition for liquidation with the court of the
province or city in which the individual debtor resides.
The following shall be considered acts of insolvency, and the petition for
liquidation shall set forth or allege at least one of such acts:
(a) That such person is about to depart or has departed from the Republic of the
Philippines, with intent to defraud his creditors;
(b) That being absent from the Republic of the Philippines, with intent to defraud
his creditors, he remains absent;
(c) That he conceals himself to avoid the service of legal process for the purpose
of hindering or delaying the liquidation or of defrauding his creditors;
(d) That he conceals, or is removing, any of his property to avoid its being
attached or taken on legal process;
(e) That he has suffered his property to remain under attachment or legal
process for three (3) days for the purpose of hindering or delaying the liquidation
or of defrauding his creditors;
(f) That he has confessed or offered to allow judgment in favor of any creditor or
"&&
claimant for the purpose of hindering or delaying the liquidation or of defrauding
any creditors or claimant;
(g) That he has willfully suffered judgment to be taken against him by default for
the purpose of hindering or delaying the liquidation or of defrauding his creditors;
(h) That he has suffered or procured his property to be taken on legal process
with intent to give a preference to one or more of his creditors and thereby hinder
or delay the liquidation or defraud any one of his creditors;
(i) That he has made any assignment, gift, sale, conveyance or transfer of his
estate, property, rights or credits with intent to hinder or delay the liquidation or
defraud his creditors;
(j) That he has, in contemplation of insolvency, made any payment, gift, grant,
sale, conveyance or transfer of his estate, property, rights or credits;
(k) That being a merchant or tradesman, he has generally defaulted in the
payment of his current obligations for a period of thirty (30) days;
(l) That for a period of thirty (30) days, he has failed, after demand, to pay any
moneys deposited with him or received by him in a fiduciary; and
(m) That an execution having been issued against him on final judgment for
money, he shall have been found to be without sufficient property subject to
execution to satisfy the judgment.
The petitioning creditor/s shall post a bond in such as the court shall direct,
conditioned that if the petition for liquidation is dismissed by the court, or
withdrawn by the petitioner, or if the debtor shall not be declared an insolvent the
petitioners will pay to the debtor all costs, expenses, damages occasioned by the
proceedings and attorney's fees.
Section 106. Order to Individual Debtor to Show Cause. - Upon the filing of such
creditors' petition, the court shall issue an Order requiring the individual debtor to
show cause, at a time and place to be fixed by the said court, why he should not
be adjudged an insolvent. Upon good cause shown, the court may issue an
Order forbidding the individual debtor from making payments of any of his debts,
and transferring any property belonging to him. However, nothing contained
herein shall affect or impair the rights of a secured creditor to enforce his lien in
accordance with its terms.
Section 107. Default. - If the individual debtor shall default or if, after trial, the
issues are found in favor of the petitioning creditors the court shall issue the
Liquidation Order mentioned in Section 112 hereof.
"&'
Section 108. Absent Individual Debtor. - In all cases where the individual debtor
resides out of the Republic of the Philippines; or has departed therefrom; or
cannot, after due diligence, be found therein; or conceals himself to avoid service
of the Order to show cause, or any other preliminary process or orders in the
matter, then the petitioning creditors, upon submitting the affidavits requisite to
procedure an Order of publication, and presenting a bond in double the amount
of the aggregate sum of their claims against the individual debtor, shall be
entitled to an Order of the court directing the sheriff of the province or city in
which the matter is pending to take into his custody a sufficient amount of
property of the individual debtor to satisfy the demands of the petitioning
creditors and the costs of the proceedings. Upon receiving such Order of the
court to take into custody of the property of the individual debtor, it shall be the
duty of the sheriff to take possession of the property and effects of the individual
debtor, not exempt from execution, to an extent sufficient to cover the amount
provided for and to prepare within three (3) days from the time of taking such
possession, a complete inventory of all the property so taken, and to return it to
the court as soon as completed. The time for taking the inventory and making
return thereof may be extended for good cause shown to the court. The sheriff
shall also prepare a schedule of the names and residences of the creditors, and
the amount due each, from the books of the debtor, or from such other papers or
data of the individual debtor available as may come to his possession, and shall
file such schedule or list of creditors and inventory with the clerk of court.
Section 109. All Property Taken to be Held for All Creditors; Appeal Bonds;
Exemptions to Sureties. - In all cases where property is taken into custody by the
sheriff, if it does not embrace all the property and effects of the debtor not
exempt from execution, any other creditor or creditors of the individual debtor,
upon giving bond to be approved by the court in double the amount of their
claims, singly or jointly, shall be entitled to similar orders and to like action, by the
sheriff; until all claims be provided for, if there be sufficient property or effects. All
property taken into custody by the sheriff by virtue of the giving of any such
bonds shall be held by him for the benefit of all creditors of the individual debtor
whose claims shall be duly proved as provided in this Act. The bonds provided
for in this section and the preceding section to procure the order for custody of
the property and effects of the individual debtor shall be conditioned that if, upon
final hearing of the petition in insolvency, the court shall find in favor of the
petitioners, such bonds and all of them shall be void; if the decision be in favor of
the individual debtor, the proceedings shall be dismissed, and the individual
debtor, his heirs, administrators, executors or assigns shall be entitled to recover
such sum of money as shall be sufficient to cover the damages sustained by him,
not to exceed the amount of the respective bonds. Such damages shall be fixed
and allowed by the court. If either the petitioners or the debtor shall appeal from
the decision of the court, upon final hearing of the petition, the appellant shall be
required to give bond to the successful party in a sum double the amount of the
value of the property in controversy, and for the costs of the proceedings.
"&(
Any person interested in the estate may take exception to the sufficiency of the
sureties on such bond or bonds. When excepted to the petitioner's sureties, upon
notice to the person excepting of not less than two (2) nor more than five (5)
days, must justify as to their sufficiency; and upon failure to justify, or of others in
their place fail to justify at the time and place appointed the judge shall issue an
Order vacating the order to take the property of the individual debtor into the
custody of the sheriff, or denying the appeal, as the case may be.
Section 110. Sale Under Execution. - If, in any case, proper affidavits and bonds
are presented to the court or a judge thereof, asking for and obtaining an Order
of publication and an Order for the custody of the property of the individual debtor
and thereafter the petitioners shall make it appear satisfactorily to the court or a
judge thereof that the interest of the parties to the proceedings will be subserved
by a sale thereof, the court may order such property to be sold in the same
manner as property is sold under execution, the proceeds to de deposited in the
court to abide by the result of the proceedings.
CHAPTER VII PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF
INDIVIDUAL AND JURIDICAL DEBTORS
Section 111. Use of Term Debtor. - For purposes of this chapter, the term debtor
shall include both individual debtor as defined in Section 4(o) and debtor as
defined in Section 4(k) of this Act.
(A) The Liquidation Order.
Section 112. Liquidation Order. - The Liquidation Order shall:
(a) declare the debtor insolvent;
(b) order the liquidation of the debtor and, in the case of a juridical debtor,
declare it as dissolved;
(c) order the sheriff to take possession and control of all the property of the
debtor, except those that may be exempt from execution;
(d) order the publication of the petition or motion in a newspaper of general
circulation once a week for two (2) consecutive weeks;
(e) direct payments of any claims and conveyance of any property due the debtor
to the liquidator;
(f) prohibit payments by the debtor and the transfer of any property by the debtor;
(g) direct all creditors to file their claims with the liquidator within the period set by
the rules of procedure;
"&)
(h) authorize the payment of administrative expenses as they become due;
(i) state that the debtor and creditors who are not petitioner/s may submit the
names of other nominees to the position of liquidator; and
(j) set the case for hearing for the election and appointment of the liquidator,
which date shall not be less than thirty (30) days nor more than forty-five (45)
days from the date of the last publication.
Section 113. Effects of the Liquidation Order. - Upon the issuance of the
Liquidation Order:
(a) the juridical debtor shall be deemed dissolved and its corporate or juridical
existence terminated;
(b) legal title to and control of all the assets of the debtor, except those that may
be exempt from execution, shall be deemed vested in the liquidator or, pending
his election or appointment, with the court;
(c) all contracts of the debtor shall be deemed terminated and/or breached,
unless the liquidator, within ninety (90) days from the date of his assumption of
office, declares otherwise and the contracting party agrees;
(d) no separate action for the collection of an unsecured claim shall be allowed.
Such actions already pending will be transferred to the Liquidator for him to
accept and settle or contest. If the liquidator contests or disputes the claim, the
court shall allow, hear and resolve such contest except when the case is already
on appeal. In such a case, the suit may proceed to judgment, and any final and
executor judgment therein for a claim against the debtor shall be filed and
allowed in court; and
(e) no foreclosure proceeding shall be allowed for a period of one hundred eighty
(180) days.
Section 114. Rights of Secured Creditors. - The Liquidation Order shall not affect
the right of a secured creditor to enforce his lien in accordance with the
applicable contract or law. A secured creditor may:
(a) waive his right under the security or lien, prove his claim in the liquidation
proceedings and share in the distribution of the assets of the debtor; or
(b) maintain his rights under the security or lien:
If the secured creditor maintains his rights under the security or lien:
(1) the value of the property may be fixed in a manner agreed upon by the
"&*
creditor and the liquidator. When the value of the property is less than the claim it
secures, the liquidator may convey the property to the secured creditor and the
latter will be admitted in the liquidation proceedings as a creditor for the balance.
If its value exceeds the claim secured, the liquidator may convey the property to
the creditor and waive the debtor's right of redemption upon receiving the excess
from the creditor;
(2) the liquidator may sell the property and satisfy the secured creditor's entire
claim from the proceeds of the sale; or
(3) the secure creditor may enforce the lien or foreclose on the property pursuant
to applicable laws.
(B) The Liquidator.
Section 115. Election of Liquidator. - Only creditors who have filed their claims
within the period set by the court, and whose claims are not barred by the statute
of limitations, will be allowed to vote in the election of the liquidator. A secured
creditor will not be allowed to vote, unless: (a) he waives his security or lien; or
(b) has the value of the property subject of his security or lien fixed by agreement
with the liquidator, and is admitted for the balance of his claim.
The creditors entitled to vote will elect the liquidator in open court. The nominee
receiving the highest number of votes cast in terms of amount of claims, ad who
is qualified pursuant to Section 118 hereof, shall be appointed as the liquidator.
Section 116. Court-Appointed Liquidator. - The court may appoint the liquidator
if:
(a) on the date set for the election of the liquidator, the creditors do not attend;
(b) the creditors who attend, fail or refuse to elect a liquidator;
(c) after being elected, the liquidator fails to qualify; or
(d) a vacancy occurs for any reason whatsoever, In any of the cases provided
herein, the court may instead set another hearing of the election of the liquidator.
Provided further, That nothing in this section shall be construed to prevent a
rehabilitation receiver, who was administering the debtor prior to the
commencement of the liquidation, from being appointed as a liquidator.
Section 117. Oath and Bond of the Liquidator. -Prior to entering upon his
powers, duties and responsibilities, the liquidator shall take an oath and file a
bond, In such amount to be fixed by the court, conditioned upon the proper and
faithful discharge of his powers, duties and responsibilities.
"'+
Section 118. Qualifications of the Liquidator. - The liquidator shall have the
qualifications enumerated in Section 29 hereof. He may be removed at any time
by the court for cause, either motu propio or upon motion of any creditor entitled
to vote for the election of the liquidator.
Section 119. Powers, Duties and Responsibilities of the Liquidator. - The
liquidator shall be deemed an officer of the court with the principal duly of
preserving and maximizing the value and recovering the assets of the debtor,
with the end of liquidating them and discharging to the extent possible all the
claims against the debtor. The powers, duties and responsibilities of the
liquidator shall include, but not limited to:
(a) to sue and recover all the assets, debts and claims, belonging or due to the
debtor;
(b) to take possession of all the property of the debtor except property exempt by
law from execution;
(c) to sell, with the approval of the court, any property of the debtor which has
come into his possession or control;
(d) to redeem all mortgages and pledges, and so satisfy any judgement which
may be an encumbrance on any property sold by him;
(e) to settle all accounts between the debtor and his creditors, subject to the
approval of the court;
(f) to recover any property or its value, fraudulently conveyed by the debtor;
(g) to recommend to the court the creation of a creditors' committee which will
assist him in the discharge of the functions and which shall have powers as the
court deems just, reasonable and necessary; and
(h) upon approval of the court, to engage such professional as may be necessary
and reasonable to assist him in the discharge of his duties.
In addition to the rights and duties of a rehabilitation receiver, the liquidator, shall
have the right and duty to take all reasonable steps to manage and dispose of
the debtor's assets with a view towards maximizing the proceedings therefrom, to
pay creditors and stockholders, and to terminate the debtor's legal existence.
Other duties of the liquidator in accordance with this section may be established
by procedural rules.
A liquidator shall be subject to removal pursuant to procedures for removing a
rehabilitation receiver.
"'"
Section 120. Compensation of the Liquidator. - The liquidator and the persons
and entities engaged or employed by him to assist in the discharge of his powers
and duties shall be entitled to such reasonable compensation as may determined
by the liquidation court, which shall not exceed the maximum amount as may be
prescribed by the Supreme Court.
Section 121. Reporting Requiremen5ts. - The liquidator shall make and keep a
record of all moneys received and all disbursements mad by him or under his
authority as liquidator. He shall render a quarterly report thereof to the court ,
which report shall be made available to all interested parties. The liquidator shall
also submit such reports as may be required by the court from time to time as
well as a final report at the end of the liquidation proceedings.
Section 122. Discharge of Liquidator. - In preparation for the final settlement of
all the claims against the debtor , the liquidator will notify all the creditors, either
by publication in a newspaper of general circulation or such other mode as the
court may direct or allow, that will apply with the court for the settlement of his
account and his discharge from liability as liquidator. The liquidator will file a final
accounting with the court, with proof of notice to all creditors. The accounting will
be set for hearing. If the court finds the same in order, the court will discharge the
liquidator.
(C) Determination of Claims
Section 123. Registry of Claims. - Within twenty (20) days from his assumption
into office the liquidator shall prepare a preliminary registry of claims of secured
and unsecured creditors. Secured creditors who have waived their security or
lien, or have fixed the value of the property subject of their security or lien by
agreement with the liquidator and is admitted as a creditor for the balance , shall
be considered as unsecured creditors. The liquidator shall make the registry
available for public inspection and provide publication notice to creditors,
individual debtors owner/s of the sole proprietorship-debtor, the partners of the
partnership-debtor and shareholders or members of the corporation-debtor, on
where and when they may inspect it. All claims must be duly proven before being
paid.
Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor and
creditor of each other one debt shall be set off against the other, and only the
balance, if any shall be allowed in the liquidation proceedings.
Section 125. - Opposition or Challenge to Claims. - Within thirty (30 ) days from
the expiration of the period for filing of applications for recognition of claims,
creditors, individual debtors, owner/s of the sole proprietorship-debtor, partners
of the partnership-debtor and shareholders or members of the corporation -
debtor and other interested parties may submit a challenge to claim or claims to
the court, serving a certified copy on the liquidator and the creditor holding the
"'#
challenged claim. Upon the expiration of the (30) day period, the rehabilitation
receiver shall submit to the court the registry of claims containing the undisputed
claims that have not been subject to challenge. Such claims shall become final
upon the filling of the register and may be subsequently set aside only on
grounds or fraud, accident, mistake or inexcusable neglect.
Section 126. Submission of Disputed to the Court. - The liquidator shall resolve
disputed claims and submit his findings thereon to the court for final approval.
The liquidator may disallow claims.
(D) Avoidance Proceedings.
Section 127. Rescission or Nullity of Certain Transactions. - Any transaction
occurring prior to the issuance of the Liquidation Order or, in case of the
conversion of the rehabilitation proceedings prior to the commencement date,
entered into by the debtor or involving its assets, may be rescinded or declared
null and void on the ground that the same was executed with intent to defraud a
creditor or creditors or which constitute undue preference of creditors. The
presumptions set forth in Section 58 hereof shall apply.
Section 128. Actions for Rescission or Nullity. - (a) The liquidator or, with his
conformity, a creditor may initiate and prosecute any action to rescind, or declare
null and void any transaction described in the immediately preceding paragraph.
If the liquidator does not consent to the filling or prosecution of such action, any
creditor may seek leave of the court to commence said action.
(b) if leave of court is granted under subsection (a) hereof, the liquidator shall
assign and transfer to the creditor all rights, title and interest in the chose in
action or subject matter of the proceeding, including any document in support
thereof.
(c) Any benefit derived from a proceeding taken pursuant to subsection (a)
hereof, to the extent of his claim and the costs, belongs exclusively to the creditor
instituting the proceeding, and the surplus, if any, belongs to the estate.
(d) Where, before an orders is made under subsection (a) hereof, the liquidator
signifies to the court his readiness to the institute the proceeding for the benefit of
the creditors, the order shall fix the time within which he shall do so and, in that
case the benefit derived from the proceedings, if instituted within the time limits
so fixed, belongs to the estate.
(E) The Liquidation Plan.
Section 129. The Liquidation Plan. - Within three (3) months from his
assumption into office, the Liquidator shall submit a Liquidation Plan to the court.
The Liquidation Plan shall, as a minimum enumerate all the assets of the debtor
"'$
and a schedule of liquidation of the assets and payment of the claims.
Section 130. Exempt Property to be Set Apart. - It shall be the duty of the court,
upon petition and after hearing, to exempt and set apart, for the use and benefit
of the said insolvent, such real and personal property as is by law exempt from
execution, and also a homestead; but no such petition shall be heard as
aforesaid until it is first proved that notice of the hearing of the application
therefor has been duly given by the clerk, by causing such notice to be posted it
at least three (3) public places in the province or city at least ten (10) days prior
to the time of such hearing, which notice shall set forth the name of the said
insolvent debtor, and the time and place appointed for the hearing of such
application, and shall briefly indicate the homestead sought to be exempted or
the property sought to be set aside; and the decree must show that such proof
was made to the satisfaction of the court, and shall be conclusive evidence of
that fact.
Section 131. Sale of Assets in Liquidation. - The liquidator may sell the
unencumbered assets of the debtor and convert the same into money. The sale
shall be made at public auction. However, a private sale may be allowed with the
approval of the court if; (a) the goods to be sold are of a perishable nature, or are
liable to quickly deteriorate in value, or are disproportionately expensive to keep
or maintain; or (b) the private sale is for the best interest of the debtor and his
creditors.
With the approval of the court, unencumbered property of the debtor may also be
conveyed to a creditor in satisfaction of his claim or part thereof.
Section 132. manner of Implementing the Liquidation Plan. - The Liquidator shall
implement the Liquidation Plan as approved by the court. Payments shall be
made to the creditors only in accordance with the provisions of the Plan.
Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and
its Implementation shall ensure that the concurrence and preference of credits as
enumerated in the Civil Code of the Philippines and other relevant laws shall be
observed, unless a preferred creditor voluntarily waives his preferred right. For
purposes of this chapter, credits for services rendered by employees or laborers
to the debtor shall enjoy first preference under Article 2244 of the Civil Code,
unless the claims constitute legal liens under Article 2241 and 2242 thereof.
Section 134. Order Removing the Debtor from the List of Registered Entitles at
the Securities and Exchange Commission. - Upon determining that the liquidation
has been completed according to this Act and applicable law, the court shall
issue an Order approving the report and ordering the SEC to remove the debtor
from the registry of legal entities.
Section 135. Termination of Proceedings. - Upon receipt of evidence showing
"'%
that the debtor has been removed from the registry of legal entities at the SEC.
The court shall issue an Order terminating the proceedings.
(F) Liquidation of a Securities Market Participant.
Section 136. Liquidation of a Securities Market Participant. - The foregoing
provisions of this chapter shall be without prejudice to the power of a regulatory
agency or self- regulatory organization to liquidate trade-related claims of clients
or customers of a securities market participant which, for purposes of investor
protection, are hereby deemed to have absolute priority over other claims of
whatever nature or kind insofar as trade-related assets are concerned.
For purposes of this section, trade -related assets include cash, securities,
trading right and other owned and used by the securities market participant in the
ordinary course of this business.
CHAPTER VIII PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR
REHABILITAION PROCEEDINGS
(A) Banks and Other Financial Institutions Under Rehabilitation
Receivership Pursuant to a State-funded or State-mandated Insurance
System.
Section 137. Provision of Assistance. - The court shall issue orders, adjudicate
claims and provide other relief necessary to assist in the liquidation of a financial
under rehabilitation receivership established by a state-funded or state-mandated
insurance system.
Section 138. Application of Relevant Legislation. - The liquidation of bank,
financial institutions, insurance companies and pre-need companies shall be
determined by relevant legislation. The provisions in this Act shall apply in a
suppletory manner.
(B) Cross-Border Insolvency Proceedings.
Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. -
Subject to the provision of Section 136 hereof and the rules of procedure that
may be adopted by the Supreme Court, the Model Law on Cross-Border
Insolvency of the United Nations Center for International Trade and Development
is hereby adopted as part of this Act.
Section 140. Initiation of Proceedings. - The court shall set a hearing in
connection with an insolvency or rehabilitation proceeding taking place in a
foreign jurisdiction, upon the submission of a petition by the representative of the
foreign entity that is the subject of the foreign proceeding.
"'&
Section 141. Provision of Relief. - The court may issue orders:
(a) suspending any action to enforce claims against the entity or otherwise seize
or foreclose on property of the foreign entity located in the Philippines;
(b) requiring the surrender property of the foreign entity to the foreign
representative; or
(c) providing other necessary relief.
Section 142. Factors in Granting Relief. - In determining whether to grant relief
under this subchapter, the court shall consider;
(a) the protection of creditors in the Philippines and the inconvenience in
pursuing their claim in a foreign proceeding;
(b) the just treatment of all creditors through resort to a unified insolvency or
rehabilitation proceedings;
(c) whether other jurisdictions have given recognition to the foreign proceeding;
(d) the extent that the foreign proceeding recognizes the rights of creditors and
other interested parties in a manner substantially in accordance with the manner
prescribed in this Act; and
(e) the extent that the foreign proceeding has recognized and shown deference
to proceedings under this Act and previous legislation.
CHAPTER IX FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED
AND CONTROLLED CORPORATIONS
Section 143. Funds for Rehabilitation of Government -owned and Controlled
Corporations. - Public funds for the rehabilitation of government-owned and
controlled corporations shall be released only pursuant to an appropriation by
Congress and shall be supported by funds actually available as certified by the
National Treasurer.
The Department of Finance, in collaboration with the Department of Budget and
Management, shall promulgate the rules for the use and release of said funds.
CHAPTER X MISCELLANEOUS PROVISIOS
Section 144. Applicability of Provisions. - The provisions in Chapter II, insofar as
they are applicable, shall likewise apply to proceedings in Chapters II and IV.
Section 145. Penalties. - An owner, partner, director, officer or other employee of
"''
the debtor who commits any one of the following acts shall, upon conviction
thereof, be punished by a fine of not more than One million pesos (Php 1,
000,000.00) and imprisonment for not less than three(3) months nor more than
five (5) years for each offense;
(a) if he shall, having notice of the commencement of the proceedings, or having
reason to believe that proceedings are about to be commented, or in
contemplation of the proceedings hide or conceal, or destroy or cause to be
destroyed or hidden any property belonging to the debtor or if he shall hide,
destroy, after mutilate or falsify, or cause to be hidden, destroyed, altered,
mutilated or falsified, any book, deed, document or writing relating thereto; if he
shall, with intent to defraud the creditors of the debtor, make any payment sale,
assignment, transfer or conveyance of any property belongings to the debtor
(b) if he shall, having knowledge belief of any person having proved a false or
fictitious claim against the debtor, fail to disclose the same to the rehabilitation
receiver of liquidator within one (1) month after coming to said knowledge or
belief; or if he shall attempt to account for any of the debtors property by fictitious
losses or expense; or
(c) if he shall knowingly violate a prohibition or knowingly fail to undertake an
obligation established by this Act.
Section 146. Application to Pending Insolvency, Suspension of Payments and
Rehabilitation Cases. - This Act shall govern all petitions filed after it has taken
effect. All further proceedings in insolvency, suspension of payments and
rehabilitation cases then pending, except to the extent that in opinion of the court
their application would not be feasible or would work injustice, in which event the
procedures set forth in prior laws and regulations shall apply.
Section 147. Application to Pending Contracts. - This Act shall apply to all
contracts of the debtor regardless of the date of perfection.
Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As
amended is hereby repealed. All other laws, orders, rules and regulations or
parts thereof inconsistent with any provision of this Act are hereby repealed or
modified accordingly.
Section 149. Separability Clause. - If any provision of this Act shall be held
invalid, the remainder of this Act not otherwise affected shall remain in full force
effect
Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days after
its complete publication in the Official Gazette or in at least two (2) national
newspaper of general circulation.
"'(
REPUBLIC ACT No. 3765
AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN
CONNECTION WITH EXTENSIONS OF CREDIT.
Section 1. This Act shall be known as the "Truth in Lending Act."
Section 2. Declaration of Policy. It is hereby declared to be the policy of the
State to protect its citizens from a lack of awareness of the true cost of credit to
the user by assuring a full disclosure of such cost with a view of preventing the
uninformed use of credit to the detriment of the national economy.
Section 3. As used in this Act, the term
(1) "Board" means the Monetary Board of the Central Bank of the Philippines.
(2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any
conditional sales contract; any contract to sell, or sale or contract of sale of
property or services, either for present or future delivery, under which part or all
of the price is payable subsequent to the making of such sale or contract; any
rental-purchase contract; any contract or arrangement for the hire, bailment, or
leasing of property; any option, demand, lien, pledge, or other claim against, or
for the delivery of, property or money; any purchase, or other acquisition of, or
any credit upon the security of, any obligation of claim arising out of any of the
foregoing; and any transaction or series of transactions having a similar purpose
or effect.
(3) "Finance charge" includes interest, fees, service charges, discounts, and
such other charges incident to the extension of credit as the Board may be
regulation prescribe.
(4) "Creditor" means any person engaged in the business of extending credit
(including any person who as a regular business practice make loans or sells or
rents property or services on a time, credit, or installment basis, either as
principal or as agent) who requires as an incident to the extension of credit, the
payment of a finance charge.
(5) "Person" means any individual, corporation, partnership, association, or other
organized group of persons, or the legal successor or representative of the
foregoing, and includes the Philippine Government or any agency thereof, or any
other government, or of any of its political subdivisions, or any agency of the
foregoing.
Section 4. Any creditor shall furnish to each person to whom credit is extended,
prior to the consummation of the transaction, a clear statement in writing setting
forth, to the extent applicable and in accordance with rules and regulations
"')
prescribed by the Board, the following information:
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such
person in connection with the transaction but which are not incident to the
extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of the
obligation.
Section 5. The Board shall prescribe such rules and regulations as may be
necessary or proper in carrying out the provisions of this Act. Any rule or
regulation prescribed hereunder may contain such classifications and
differentiations as in the judgment of the Board are necessary or proper to
effectuate the purposes of this Act or to prevent circumvention or evasion, or to
facilitate the enforcement of this Act, or any rule or regulation issued thereunder.
Section 6. (a) Any creditor who in connection with any credit transaction fails to
disclose to any person any information in violation of this Act or any regulation
issued thereunder shall be liable to such person in the amount of P100 or in an
amount equal to twice the finance charged required by such creditor in
connection with such transaction, whichever is the greater, except that such
liability shall not exceed P2,000 on any credit transaction. Action to recover such
penalty may be brought by such person within one year from the date of the
occurrence of the violation, in any court of competent jurisdiction. In any action
under this subsection in which any person is entitled to a recovery, the creditor
shall be liable for reasonable attorney's fees and court costs as determined by
the court.
(b) Except as specified in subsection (a) of this section, nothing contained in this
Act or any regulation contained in this Act or any regulation thereunder shall
affect the validity or enforceability of any contract or transactions.
(c) Any person who willfully violates any provision of this Act or any regulation
issued thereunder shall be fined by not less than P1,00 or more than P5,000 or
imprisonment for not less than 6 months, nor more than one year or both.
"'*
(d) No punishment or penalty provided by this Act shall apply to the Philippine
Government or any agency or any political subdivision thereof.
(e) A final judgment hereafter rendered in any criminal proceeding under this Act
to the effect that a defendant has willfully violated this Act shall be prima facie
evidence against such defendant in an action or proceeding brought by any other
party against such defendant under this Act as to all matters respecting which
said judgment would be an estoppel as between the parties thereto.
Section 7. This Act shall become effective upon approval.
Approved: June 22, 1963

















"(+
Section 1. Title. - This Act shall be known as the "Retail Trade Liberalization Act
of 2000."


Sec. 2. Declaration of Policy. - It is the policy of the State to promote consumer
welfare in attracting, promoting and welcoming productive investments that will
bring down prices for the Filipino consumer, create more jobs, promote tourism,
assist small manufacturers, stimulate economic growth and enable Philippine
goods and services to become globally competitive through the liberalization of
the retail trade sector.
Pursuant to this policy, the Philippine retail industry is hereby liberalized to
encourage Filipino and foreign investors to forge an efficient and competitive
retail trade sector in the interest of empowering the Filipino consumer through
lower prices, higher quality if goods, better services and wider choices.
Sec. 3. Definition. - As used in this Act:


(1) "Retail Trade" shall mean any act, occupation or calling of habitually selling
direct to the general public merchandise, commodities or goods for consumption,
but the restriction of this law shall not apply to the following:
(a) Sales by a manufacturer, processor, laborer, or worker, to the general public
the products manufactured, processed or produced by him if his capital does not
exceed One Hundred Thousand Pesos (P100,000.00);

(b) Sales by a farmer or agriculturist selling the products of his farm;
(c) Sales in restaurant operations by a hotel owner or inn-keeper irrespective of
the amount of capital: Provided, that the restaurant is incidental to the hotel
business; and
(d) Sales which are limited only to products manufactured, processed or
assembled by a manufacturer through a single outlet, irrespective of
capitalization.

(2) "High-end or luxury goods" shall refer to goods which are not necessary for
life maintenance and whose demand is generated in large part by the highest
income groups. Luxury goods shall include, but are not limited to, products such
as: jewelry, branded or designer clothing and footwear, wearing apparel, leisure
and sporting goods, electronics and other personal effects.



Sec. 4. Treatment of Natural-Born Citizen Who Has Lost His Philippine
Citizenship. - A natural-born citizen of the Philippines who has lost his Philippine
citizenship but who resides in the Philippines shall be granted the same rights as
Filipino citizens for purposes of this Act.


"("
Sec. 5. Foreign Equity Participation. - Foreign-owned partnerships, associations
and corporations formed and organized under the laws of the Philippines may,
upon registration with the Securities and Exchange Commission (SEC) and the
Department of Trade and Industry (DTI) or in case of foreign-owned single
proprietorships, with the DTI, engage or invest in the retail trade business,
subject to the following categories:
Category A - Enterprises with paid-up capital of the equivalent in Philippine
Pesos of less than Two Million Five Hundred Thousand US Dollars
(US$2,500,000.00) shall be reserved exclusively for Filipino citizens and
corporations wholly-owned by Filipino citizens.

Category B - Enterprises with a minimum paid-up capital of the equivalent in
Philippine Pesos of Two Million Five Hundred Thousand US Dollars
(US$2,500,000.00) may be wholly owned by foreigners except for the first two (2)
years after the effectivity of this Act wherein foreign participation shall be limited
to not more than (60%) of total equity.

Category C - Enterprises with a paid-up capital of the equivalent in Philippine
Pesos of Seven Million Five Hundred Thousand US Dollars (US$7,500,000.00)
or more maybe wholly owned by foreigners: Provided, however, that in no case
shall the investments for establishing a store in Categories B and C be less than
the equivalent in Philippine Pesos of Eight Hundred Thirty Thousand US Dollars
(US$830,000.00).

Category D - Enterprises specializing in high-end or luxury products with a paid
up capital of the equivalent in Philippine Pesos of Two Hundred Fifty Thousand
US Dollars (US$250,000.00) per store may be wholly-owned by foreigners.

The foreign investor shall be required to maintain in the Philippines, the full
amount of the prescribed minimum capital. Unless the foreign investor has
notified the SEC and the DTI of its intention to repatriate its capital and cease
operations in the Philippines. The actual use in Philippine operations of the
inwardly remitted minimum capital requirements shall be monitored by the SEC.


Failure retail stores shall secure a certification from the Bangko Sentral ng
Pilipinas (BSP) and the DTI, which will verify or confirm inward remittance of the
minimum required capital investment.


Sec.. 6. Foreign Investors Acquiring Shares of Stock of Local Retailers. - Foreign
Investors acquiring shares from existing retail stores whether or not publicly listed
whose net worth is in excess of the peso equivalent of Two Million Five Hundred
Thousand US Dollars (US$2,500,000.00) may purchase only up to a minimum of
sixty percent (60%) of the equity thereof within the first two (2) years from the
effectivity of this Act and thereafter, they may acquire the remaining percentage
"(#
consistent with the allowable foreign participation as herein provided.



Sec. 7. Public Offering of Shares of Stock. - All retail trade enterprises under
Categories B and C in which foreign ownership exceeds eighty percent (80%) of
equity shall offer a minimum of thirty percent (30%) of their equity to the public
through any stock exchange in the Philippines within eight (8) years from their
start of operations.


Sec. 8. Qualifications of Foreign Retailers. - No foreign retailer shall be allowed
to engage in retail trade in the Philippines unless all the following qualifications
are met:
(a) A minimum of Two Hundred Million US Dollars (US$200,000,000.00) net
worth in its parent corporation for Categories B and C, and Fifty Million US
Dollars (US$50,000,000.00) net worth in its parent corporation for Category D;

(b) Five (5) retailing branches or franchises in operation anywhere around the
world unless such retailers has at least one (1) store capitalized at a minimum of
Twenty-Five Million US Dollars (US$25,000,000.00);

(c) Five (5)-year track record in retailing; and

(d) Only nationals from, or judicial entities formed or incorporated in, countries
which allow the entry of Filipino retailers, shall be allowed to engage in retail
trade in the Philippines.

The DTI is hereby authorized to pre-qualify all foreign retailers, subject to the
provisions of this Act, before they are allowed to conduct business in the
Philippines.


The DTI shall keep a record of qualified foreign retailers who may, upon
compliance with law, establish retail stores in the Philippines. It shall ensure that
the parent retail trading company of the foreign investor complies with the
qualifications on capitalization and track record prescribed in this Sec..

The Inter-Agency Committee on Tariff and Related Matters of the National
Economic Development Authority (NEDA) Board shall formulate and regularly
update a list of foreign retailers of high-end or luxury goods and render an annual
report on the same to Congress.


Sec. 9. Promotional of Locally Manufactured Products. - For ten (10) years after
the effectivity of this Act, at least thirty percent (30%) of the aggregate cost of the
"($
stock inventory of foreign retailers falling under Categories B and C and ten
percent (10%) for Category D, shall be made in the Philippines.
Sec. 10. Prohibited Activities of Qualified Foreign Retailers. - Qualified foreign
retailers shall not be allowed to engage in certain retailing activities outside their
accredited stores through the use of mobile or rolling stores or carts, the use of
sales representatives, door-to-door selling, restaurants and sari-sari stores and
such other similar retailing activities: Provided, that a detailed list of prohibited
activities shall hereafter be formulated by the DTI. Sec. 11. Implementing
Agency; Rules and Regulations. - The monitoring and regulation of foreign sole
proprietorships, partnerships, associations or corporations allowed to engage in
retail trade shall be the responsibility of the DTI. This shall include resolution of
conflicts. The DTI, in coordination with the SEC, the NEDA and the BSP, shall
formulate and issue the implementing rules and regulations necessary to
implement this Act within ninety (90) days after its approval.
Sec. 12. Penalty Clause. - Any person who shall be found guilty of violation of
any provision of this Act shall be punished by imprisonment of not less than six
(6) years and one (1) day but not more than eight (8) years, and a fine of not less
than One Million Pesos (P1,000,000.00) but not more than Twenty Million Pesos
(P20,000,000.00).



In the case of associations, partnerships or corporations, the penalty shall be
imposed upon its partners, president, directors, managers and other officers
responsible for the violation. If the offender is not a citizen of the Philippines, he
shall be deported immediately after service of sentence. If the Filipino offender is
a public officer or employee, he shall, in addition to the penalty prescribed herein,
suffer dismissal and permanent disqualification from public office.


Sec. 13. Repealing Clause. - Republic Act No. 1180, as amended, is hereby
repealed. Republic Act No. 3018, as amended, and all other laws, executive
orders, rules and regulations or parts thereof inconsistent with this Act are
repealed or modified accordingly.

Sec. 14. Separability Clause. - If any provision of this Act shall be held
unconstitutional, the other provisions not otherwise affected thereby shall remain
in force and effect.

Sec. 15. Effectivity. - This Act shall take effect fifteen (15) days after its approval
and publication in at least two (2) newspapers of general circulation in the
Philippines.