REPUBLIC ACT No.

10142 the rules of procedure that the Supreme Court may

promulgate.
AN ACT PROVIDING FOR THE
REHABILITATION OR LIQUIDATION OF Section 4. Definition of Terms. - As used in this Act,
FINANCIALLY DISTRESSED ENTERPRISES the term:
AND INDIVIDUALS
(a) Administrative expenses shall refer to
Be it enacted by the Senate and House of those reasonable and necessary expenses:
Representatives of the Philippine Congress
Assembled: (1) incurred or arising from the
filing of a petition under the
CHAPTER I provisions of this Act;
GENERAL PROVISIONS
(2) arising from, or in connection
Section 1. Title. - This Act shall be known as the with, the conduct of the
"Financial Rehabilitation and Insolvency Act proceedings under this Act,
(FRIA) of 2010". including those incurred for the
rehabilitation or liquidation of the
Section 2. Declaration of Policy. - It is the policy of debtor;
the State to encourage debtors, both juridical and
natural persons, and their creditors to collectively and (3) incurred in the ordinary course
realistically resolve and adjust competing claims and of business of the debtor after the
property rights. In furtherance thereof, the State shall commencement date;
ensure a timely, fair, transparent, effective and
efficient rehabilitation or liquidation of debtors. The (4) for the payment of new
rehabilitation or liquidation shall be made with a obligations obtained after the
view to ensure or maintain certainly and commencement date to finance the
predictability in commercial affairs, preserve and rehabilitation of the debtor;
maximize the value of the assets of these debtors,
recognize creditor rights and respect priority of (5) incurred for the fees of the
claims, and ensure equitable treatment of creditors rehabilitation receiver or liquidator
who are similarly situated. When rehabilitation is not and of the professionals engaged by
feasible, it is in the interest of the State to facilities a them; and
speedy and orderly liquidation of these debtor's assets
and the settlement of their obligations. (6) that are otherwise authorized or
mandated under this Act or such
Section 3. Nature of Proceedings. - The proceedings other expenses as may be allowed
under this Act shall be in rem. Jurisdiction over all by the Supreme Court in its rules.
persons affected by the proceedings shall be
considered as acquired upon publication of the notice (b) Affiliate shall refer to a corporation that
of the commencement of the proceedings in any directly or indirectly, through one or more
newspaper of general circulation in the Philippines in intermediaries, is controlled by, or is under
the manner prescribed by the rules of procedure to be the common control of another corporation.
promulgated by the Supreme Court.
(c) Claim shall refer to all claims or
The proceedings shall be conducted in a summary demands of whatever nature or character
and non-adversarial manner consistent with the against the debtor or its property, whether
declared policies of this Act and in accordance with for money or otherwise, liquidated or
unliquidated, fixed or contingent, matured or enterprise under a statute or an
unmatured, disputed or undisputed, agreement;
including, but not limited to; (1) all claims
of the government, whether national or (3) to appoint or remove the
local, including taxes, tariffs and customs majority of the members of the
duties; and (2) claims against directors and board of directors or equivalent
officers of the debtor arising from acts done governing body; or
in the discharge of their functions falling
within the scope of their authority: (4) to cast the majority votes at
Provided, That, this inclusion does not meetings of the board of directors
prohibit the creditors or third parties from or equivalent governing body.
filing cases against the directors and officers
acting in their personal capacities. (g) Court shall refer to the court designated
by the Supreme Court to hear and determine,
(d) Commencement date shall refer to the at the first instance, the cases brought under
date on which the court issues the this Act.
Commencement Order, which shall be
retroactive to the date of filing of the (h) Creditor shall refer to a natural or
petition for voluntary or involuntary juridical person which has a claim against
proceedings. the debtor that arose on or before the
commencement date.
(e) Commencement Order shall refer to the
order issued by the court under Section 16 of (i) Date of liquidation shall refer to the date
this Act. on which the court issues the Liquidation
Order.
(f) Control shall refer to the power of a
parent corporation to direct or govern the (j) Days shall refer to calendar days unless
financial and operating policies of an otherwise specifically stated in this Act.
enterprise so as to obtain benefits from its
activities. Control is presumed to exist when (k) Debtor shall refer to, unless specifically
the parent owns, directly or indirectly excluded by a provision of this Act, a sole
through subsidiaries or affiliates, more than proprietorship duly registered with the
one-half (1/2) of the voting power of an Department of Trade and Industry (DTI), a
enterprise unless, in exceptional partnership duly registered with the
circumstances, it can clearly be Securities and Exchange Commission
demonstrated that such ownership does not (SEC), a corporation duly organized and
constitute control. Control also exists even existing under Philippine laws, or an
when the parent owns one-half (1/2) or less individual debtor who has become insolvent
of the voting power of an enterprise when as defined herein.
there is power:
(l) Encumbered property shall refer to real
(1) over more than one-half (1/2) of or personal property of the debtor upon
the voting rights by virtue of an which a lien attaches.
agreement with investors;
(m) General unsecured creditor shall refer
(2) to direct or govern the financial to a creditor whose claim or a portion
and operating policies of the thereof its neither secured, preferred nor
subordinated under this Act.
(n) Group of debtors shall refer to and can debtor's audited financial statements as
cover only: (1) corporations that are advances for future subscriptions.
financially related to one another as parent
corporations, subsidiaries or affiliates; (2) (t) Lien shall refer to a statutory or
partnerships that are owned more than fifty contractual claim or judicial charge on real
percent (50%) by the same person; and (3) or personal property that legality entities a
single proprietorships that are owned by the creditor to resort to said property for
same person. When the petition covers a payment of the claim or debt secured by
group of debtors, all reference under these such lien.
rules to debtor shall include and apply to the
group of debtors. (u) Liquidation shall refer to the proceedings
under Chapter V of this Act.
(o) Individual debtor shall refer to a natural
person who is a resident and citizen of the (v) Liquidation Order shall refer to the
Philippines that has become insolvent as Order issued by the court under Section 112
defined herein. of this Act.

(p) Insolvent shall refer to the financial (w) Liquidator shall refer to the natural
condition of a debtor that is generally unable person or juridical entity appointed as such
to pay its or his liabilities as they fall due in by the court and entrusted with such powers
the ordinary course of business or has and duties as set forth in this Act: Provided,
liabilities that are greater than its or his That, if the liquidator is a juridical entity, it
assets. must designated a natural person who
possesses all the qualifications and none of
(q) Insolvent debtor's estate shall refer to the the disqualifications as its representative, it
estate of the insolvent debtor, which being understood that the juridical entity and
includes all the property and assets of the the representative are solidarity liable for all
debtor as of commencement date, plus the obligations and responsibilities of the
property and assets acquired by the liquidator.
rehabilitation receiver or liquidator after that
date, as well as all other property and assets (x) Officer shall refer to a natural person
in which the debtor has an ownership holding a management position described in
interest, whether or not these property and or contemplated by a juridical entity's
assets are in the debtor's possession as of articles of incorporation, bylaws or
commencement date: Provided, That trust equivalent documents, except for the
assets and bailment, and other property and corporate secretary, the assistant corporate
assets of a third party that are in the secretary and the external auditor.
possession of the debtor as of
commencement date, are excluded (y) Ordinary course of business shall refer
therefrom. to transactions in the pursuit of the
individual debtor's or debtor's business
(r) Involuntary proceedings shall refer to operations prior to rehabilitation or
proceedings initiated by creditors. insolvency proceedings and on ordinary
business terms.
(s) Liabilities shall refer to monetary claims
against the debtor, including stockholder's (z) Ownership interest shall refer to the
advances that have been recorded in the ownership interest of third parties in
property held by the debtor, including those
covered by trust receipts or assignments of (hh) Rehabilitation receiver shall refer to the
receivables. person or persons, natural or juridical,
appointed as such by the court pursuant to
(aa) Parent shall refer to a corporation this Act and which shall be entrusted with
which has control over another corporation such powers and duties as set forth herein.
either directly or indirectly through one or
more intermediaries. (ii) Rehabilitation Plan shall refer to a plan
by which the financial well-being and
(bb) Party to the proceedings shall refer to viability of an insolvent debtor can be
the debtor, a creditor, the unsecured restored using various means including, but
creditors' committee, a stakeholder, a party not limited to, debt forgiveness, debt
with an ownership interest in property held rescheduling, reorganization or quasi-
by the debtor, a secured creditor, the reorganization, dacion en pago, debt-equity
rehabilitation receiver, liquidator or any conversion and sale of the business (or parts
other juridical or natural person who stands of it) as a going concern, or setting-up of
to be benefited or injured by the outcome of new business entity as prescribed in Section
the proceedings and whose notice of 62 hereof, or other similar arrangements as
appearance is accepted by the court. may be approved by the court or creditors.

(cc) Possessory lien shall refer to a lien on (jj) Secured claim shall refer to a claim that
property, the possession of which has been is secured by a lien.
transferred to a creditor or a representative
or agent thereof. (kk) Secured creditor shall refer to a creditor
with a secured claim.
(dd) Proceedings shall refer to judicial
proceedings commenced by the court's (ll) Secured party shall refer to a secured
acceptance of a petition filed under this Act. creditor or the agent or representative of
such secured creditor.
(ee) Property of others shall refer to
property held by the debtor in which other (mm) Securities market participant shall
persons have an ownership interest. refer to a broker dealer, underwriter, transfer
agent or other juridical persons transacting
(ff) Publication notice shall refer to notice securities in the capital market.
through publication in a newspaper of
general circulation in the Philippines on a (nn) Stakeholder shall refer, in addition to a
business day for two (2) consecutive weeks. holder of shares of a corporation, to a
member of a nonstock corporation or
(gg) Rehabilitation shall refer to the association or a partner in a partnership.
restoration of the debtor to a condition of
successful operation and solvency, if it is (oo) Subsidiary shall refer to a corporation
shown that its continuance of operation is more than fifty percent (50%) of the voting
economically feasible and its creditors can stock of which is owned or controlled
recover by way of the present value of directly or indirectly through one or more
payments projected in the plan, more if the intermediaries by another corporation,
debtor continues as a going concern than if it which thereby becomes its parent
is immediately liquidated. corporation.
 (pp) Unsecured claim shall refer to a claim promulgate the rules of pleading, practice and
that is not secured by a lien. procedure to govern the proceedings brought under
this Act.
(qq) Unsecured creditor shall refer to a
creditor with an unsecured claim. Section 7. Substantive and Procedural
Consolidation. - Each juridical entity shall be
(rr) Voluntary proceedings shall refer to considered as a separate entity under the proceedings
proceedings initiated by the debtor. in this Act. Under these proceedings, the assets and
liabilities of a debtor may not be commingled or
(ss) Voting creditor shall refer to a creditor aggregated with those of another, unless the latter is a
that is a member of a class of creditors, the related enterprise that is owned or controlled directly
consent of which is necessary for the or indirectly by the same interests: Provided,
approval of a Rehabilitation Plan under this however, That the commingling or aggregation of
Act. assets and liabilities of the debtor with those of a
related enterprise may only be allowed where:
Section 5. Exclusions. - The term debtor does not
include banks, insurance companies, pre-need (a) there was commingling in fact of assets
companies, and national and local government and liabilities of the debtor and the related
agencies or units. enterprise prior to the commencement of the
proceedings;
For purposes of this section:
(b) the debtor and the related enterprise have
(a) Bank shall refer to any duly licensed common creditors and it will be more
bank or quasi-bank that is potentially or convenient to treat them together rather than
actually subject to conservatorship, separately;
receivership or liquidation proceedings
under the New Central Bank Act (Republic (c) the related enterprise voluntarily accedes
Act No. 7653) or successor legislation; to join the debtor as party petitioner and to
commingle its assets and liabilities with the
(b) Insurance company shall refer to those debtor's; and
companies that are potentially or actually
subject to insolvency proceedings under the (d) The consolidation of assets and liabilities
Insurance Code (Presidential Decree No. of the debtor and the related enterprise is
1460) or successor legislation; and beneficial to all concerned and promotes the
objectives of rehabilitation.
(c) Pre-need company shall refer to any
corporation authorized/licensed to sell or Provided, finally, That nothing in this section shall
offer to sell pre-need plans. prevent the court from joining other entities affiliated
with the debtor as parties pursuant to the rules of
Provided, That government financial institutions procedure as may be promulgated by the Supreme
other than banks and government-owned or Court.
controlled corporations shall be covered by this Act,
unless their specific charter provides otherwise. Section 8. Decisions of Creditors. - Decisions of
creditors shall be made according to the relevant
Section 6. Designation of Courts and Promulgation provisions of the Corporation Code in the case of
of Procedural Rules. - The Supreme Court shall stock or nonstock corporations or the Civil Code in
designate the court or courts that will hear and the case of partnerships that are not inconsistent with
resolve cases brought under this Act and shall this Act.
Section 9. Creditors Representatives. - Creditors may when conveyed to such bank in satisfaction of debts
designate representatives to vote or otherwise act on pursuant to a Rehabilitation or Liquidation Plan
their behalf by filing notice of such representation approved by the court: Provided, That such
with the court and serving a copy on the ownership shall be subject to the ownership limits
rehabilitation receiver or liquidator. applicable to universal banks for equity investments
and: Provided, further, That any equity investment or
Section 10. Liability of Individual Debtor, Owner of interest acquired or held pursuant to this section shall
a Sole Proprietorship, Partners in a Partnership, or be disposed by the bank within a period of five (5)
Directors and Officers. - Individual debtor, owner of years or as may be prescribed by the Monetary
a sole proprietorship, partners in a partnership, or Board.
directors and officers of a debtor shall be liable for
double the value of the property sold, embezzled or CHAPTER II
disposed of or double the amount of the transaction COURT-SUPERVISED REHABILITATION
involved, whichever is higher to be recovered for
benefit of the debtor and the creditors, if they, having (A) Initiation Proceedings.
notice of the commencement of the proceedings, or
having reason to believe that proceedings are about to (1) Voluntary Proceedings.
be commenced, or in contemplation of the
proceedings, willfully commit the following acts: Section 12. Petition to Initiate Voluntary
Proceedings by Debtor. - When approved by the
(a) Dispose or cause to be disposed of any owner in case of a sole proprietorship, or by a
property of the debtor other than in the majority of the partners in case of a partnership, or in
ordinary course of business or authorize or case of a corporation, by a majority vote of the board
approve any transaction in fraud of creditors of directors or trustees and authorized by the vote of
or in a manner grossly disadvantageous to the stockholders representing at least two-thirds (2/3)
the debtor and/or creditors; or of the outstanding capital stock, or in case of
nonstock corporation, by the vote of at least two-
(b) Conceal or authorize or approve the thirds (2/3) of the members, in a stockholder's or
concealment, from the creditors, or member's meeting duly called for the purpose, an
embezzles or misappropriates, any property insolvent debtor may initiate voluntary proceedings
of the debtor. under this Act by filing a petition for rehabilitation
with the court and on the grounds hereinafter
The court shall determine the extent of the liability of specifically provided. The petition shall be verified to
an owner, partner, director or officer under this establish the insolvency of the debtor and the
section. In this connection, in case of partnerships viability of its rehabilitation, and include, whether as
and corporations, the court shall consider the amount an attachment or as part of the body of the petition, as
of the shareholding or partnership or equity interest a minimum the following:
of such partner, director or officer, the degree of
control of such partner, director or officer over the (a) Identification of the debtor, its principal
debtor, and the extent of the involvement of such activities and its addresses;
partner, director or debtor in the actual management
of the operations of the debtor. (b) Statement of the fact of and the cause of
the debtor's insolvency or inability to pay its
Section 11. Authorization to Exchange Debt for obligations as they become due;
Equity. - Notwithstanding applicable banking
legislation to the contrary, any bank, whether (c) The specific relief sought pursuant to this
universal or not, may acquire and hold an equity Act;
interest or investment in a debtor or its subsidiaries
 (d) The grounds upon which the petition is (a) there is no genuine issue of fact on law
based; on the claim/s of the petitioner/s, and that
the due and demandable payments thereon
(e) Other information that may be required have not been made for at least sixty (60)
under this Act depending on the form of days or that the debtor has failed generally
relief requested; to meet its liabilities as they fall due; or

(f) Schedule of the debtor's debts and (b) a creditor, other than the petitioner/s, has
liabilities including a list of creditors with initiated foreclosure proceedings against the
their addresses, amounts of claims and debtor that will prevent the debtor from
collaterals, or securities, if any; paying its debts as they become due or will
render it insolvent.
(g) An inventory of all its assets including
receivables and claims against third parties; Section 14. Petition to Initiate Involuntary
Proceedings. - The creditor/s' petition for
(h) A Rehabilitation Plan; rehabilitation shall be verified to establish the
substantial likelihood that the debtor may be
(i) The names of at least three (3) nominees rehabilitated, and include:
to the position of rehabilitation receiver; and
(a) identification of the debtor its principal
(j) Other documents required to be filed with activities and its address;
the petition pursuant to this Act and the rules
of procedure as may be promulgated by the (b) the circumstances sufficient to support a
Supreme Court. petition to initiate involuntary rehabilitation
proceedings under Section 13 of this Act;
A group of debtors may jointly file a petition for
rehabilitation under this Act when one or more of its (c) the specific relief sought under this Act;
members foresee the impossibility of meeting debts
when they respectively fall due, and the financial (d) a Rehabilitation Plan;
distress would likely adversely affect the financial
condition and/or operations of the other members of (e) the names of at least three (3) nominees
the group and/or the participation of the other to the position of rehabilitation receiver;
members of the group is essential under the terms and
conditions of the proposed Rehabilitation Plan. (f) other information that may be required
under this Act depending on the form of
(2) Involuntary Proceedings. relief requested; and

Section 13. Circumstances Necessary to Initiate (g) other documents required to be filed with
Involuntary Proceedings. - Any creditor or group of the petition pursuant to this Act and the rules
creditors with a claim of, or the aggregate of whose of procedure as may be promulgated by the
claims is, at least One Million Pesos Supreme Court.
(Php1,000,000.00) or at least twenty-five percent
(25%) of the subscribed capital stock or partners' (B) Action on the Petition and Commencement of
contributions, whichever is higher, may initiate Proceedings.
involuntary proceedings against the debtor by filing a
petition for rehabilitation with the court if: 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 attached to the petition within five (5) days;
Commencement Order. If, within the same period, if the petitioner/s is/are creditor/s, direct the
the court finds the petition deficient in form or service by personal delivery of a copy of the
substance, the court may, in its discretion, give the petition on the debtor within five (5) days;
petitioner/s a reasonable period of time within which
to amend or supplement the petition, or to submit (h) appoint a rehabilitation receiver who
such documents as may be necessary or proper to put may or not be from among the nominees of
the petition in proper order. In such case, the five (5) the petitioner/s and who shall exercise such
working days provided above for the issuance of the powers and duties defined in this Act as well
Commencement Order shall be reckoned from the as the procedural rules that the Supreme
date of the filing of the amended or supplemental Court will promulgate;
petition or the submission of such documents.
(i) summarize the requirements and
Section 16. Commencement of Proceedings and deadlines for creditors to establish their
Issuance of a Commencement Order. - The claims against the debtor and direct all
rehabilitation proceedings shall commence upon the creditors to their claims with the court at
issuance of the Commencement Order, which shall: least five (5) days before the initial hearing;

(a) identify the debtor, its principal business (j) direct Bureau of internal Revenue (BIR)
or activity/ies and its principal place of to file and serve on the debtor its comment
business; on or opposition to the petition or its claim/s
against the debtor under such procedures as
(b) summarize the ground/s for initiating the the Supreme Court provide;
proceedings;
(k) prohibit the debtor's suppliers of goods
(c) state the relief sought under this Act and or services from withholding the supply of
any requirement or procedure particular to goods and services in the ordinary course of
the relief sought; business for as long as the debtor makes
payments for the services or goods supplied
(d) state the legal effects of the after the issuance of the Commencement
Commencement Order, including those Order;
mentioned in Section 17 hereof;
(l) authorize the payment of administrative
(e) declare that the debtor is under expenses as they become due;
rehabilitation;
(m) set the case for initial hearing, which
(f) direct the publication of the shall not be more than forty (40) days from
Commencement Order in a newspaper of the date of filing of the petition for the
general circulation in the Philippines once a purpose of determining whether there is
week for at least two (2) consecutive weeks, substantial likelihood for the debtor to be
with the first publication to be made within rehabilitated;
seven (7) days from the time of its issuance;
(n) make available copies of the petition and
(g) If the petitioner is the debtor direct the rehabilitation plan for examination and
service by personal delivery of a copy of the copying by any interested party;
petition on each creditor holding at least ten
percent (10%) of the total liabilities of the (o) indicate the location or locations at
debtor as determined from the schedule which documents regarding the debtor and
 the proceedings under Act may be reviewed performance bond filed by the rehabilitation
and copied; receiver;

(p) state that any creditor or debtor who is (b) prohibit or otherwise serve as the legal
not the petitioner, may submit the name or basis rendering null and void the results of
nominate any other qualified person to the any extrajudicial activity or process to seize
position of rehabilitation receiver at least property, sell encumbered property, or
five (5) days before the initial hearing; otherwise attempt to collection or enforce a
claim against the debtor after
(q) include s Stay or Suspension Order commencement date unless otherwise
which shall: allowed in this Act, subject to the provisions
of Section 50 hereof;
(1) suspend all actions or
proceedings, in court or otherwise, (c) serve as the legal basis for rendering null
for the enforcement of claims and void any setoff after the commencement
against the debtor; date of any debt owed to the debtor by any
of the debtor's creditors;
(2) suspend all actions to enforce
any judgment, attachment or other (d) serve as the legal basis for rendering null
provisional remedies against the and void the perfection of any lien against
debtor; the debtor's property after the
commencement date; and
(3) prohibit the debtor from selling,
encumbering, transferring or (e) consolidate the resolution of all legal
disposing in any manner any of its proceedings by and against the debtor to the
properties except in the ordinary court Provided. However, That the court
course of business; and may allow the continuation of cases on other
courts where the debtor had initiated the
(4) prohibit the debtor from making suit.
any payment of its liabilities
outstanding as of the Attempts to seek legal of other resource against the
commencement date except as may debtor outside these proceedings shall be sufficient to
be provided herein. support a finding of indirect contempt of court.

Section 17. Effects of the Commencement Order. - Section 18. Exceptions to the Stay or Suspension
Unless otherwise provided for in this Act, the court's Order. - The Stay or Suspension Order shall not
issuance of a Commencement Order shall, in addition apply:
to the effects of a Stay or Suspension Order described
in Section 16 hereof: (a) to cases already pending appeal in the
Supreme Court as of commencement date
(a) vest the rehabilitation with all the powers Provided, That any final and executory
and functions provided for this Act, such as judgment arising from such appeal shall be
the right to review and obtain records to referred to the court for appropriate action;
which the debtor's management and
directors have access, including bank (b) subject to the discretion of the court, to
accounts or whatever nature of the debtor cases pending or filed at a specialized court
subject to the approval by the court of the or quasi-judicial agency which, upon
determination by the court is capable of
resolving the claim more quickly, fairly and of a debtor shall not be affected by any
efficiently than the court: Provided, That proceeding commend under this Act.
any final and executory judgment of such
court or agency shall be referred to the court Section 19. Waiver of taxes and Fees Due to the
and shall be treated as a non-disputed claim; National Government and to Local Government
Units (LGUs). - Upon issuance of the
(c) to the enforcement of claims against Commencement Order by the court, and until the
sureties and other persons solidarily liable approval of the Rehabilitation Plan or dismissal of
with the debtor, and third party or the petition, whichever is earlier, the imposition of all
accommodation mortgagors as well as taxes and fees including penalties, interests and
issuers of letters of credit, unless the charges thereof due to the national government or to
property subject of the third party or LGUs shall be considered waived, in furtherance of
accommodation mortgage is necessary for the objectives of rehabilitation.
the rehabilitation of the debtor as determined
by the court upon recommendation by the Section 20. Application of Stay or Suspension Order
rehabilitation receiver; to Government Financial Institutions. - The
provisions of this Act concerning the effects of the
(d) to any form of action of customers or Commencement Order and the Stay or Suspension
clients of a securities market participant to Order on the suspension of rights to foreclose or
recover or otherwise claim moneys and otherwise pursue legal remedies shall apply to
securities entrusted to the latter in the government financial institutions, notwithstanding
ordinary course of the latter's business as provisions in their charters or other laws to the
well as any action of such securities market contrary.
participant or the appropriate regulatory
agency or self-regulatory organization to Section 21. Effectivity and Duration of
pay or settle such claims or liabilities; Commencement Order. - Unless lifted by the court,
the Commencement Order shall be for the effective
(e) to the actions of a licensed broker or for the duration of the rehabilitation proceedings for
dealer to sell pledged securities of a debtor as long as there is a substantial likelihood that the
pursuant to a securities pledge or margin debtor will be successfully rehabilitated. In
agreement for the settlement of securities determining whether there is substantial likelihood
transactions in accordance with the for the debtor to be successfully rehabilitated, the
provisions of the Securities Regulation Code court shall ensure that the following minimum
and its implementing rules and regulations; requirements are met:

(f) the clearing and settlement of financial (a) The proposed Rehabilitation Plan
transactions through the facilities of a submitted complies with the minimum
clearing agency or similar entities duly contents prescribed by this Act;
authorized, registered and/or recognized by
the appropriate regulatory agency like the (b) There is sufficient monitoring by the
Bangko Sentral ng Pilipinas (BSP) and the rehabilitation receiver of the debtor's
SEC as well as any form of actions of such business for the protection of creditors;
agencies or entities to reimburse themselves
for any transactions settled for the debtor; (c) The debtor has met with its creditors to
and the extent reasonably possible in attempts to
reach consensus on the proposed
(g) any criminal action against individual Rehabilitation Plan;
debtor or owner, partner, director or officer
(d) The rehabilitation receiver submits a consensus on the proposed Rehabilitation
report, based on preliminary evaluation, Plan; and
stating that the underlying assumptions and
the goals stated in the petitioner's (g) The debtor has not committed acts
Rehabilitation Plan are realistic reasonable misrepresentation or in fraud of its creditor/s
and reasonable or if not, there is, in any or a group of creditors.
case, a substantial likelihood for the debtor
to be successfully rehabilitated because, Section 22. Action at the Initial Hearing. - At the
among others: initial hearing, the court shall:

(1) there are sufficient assets (a) determine the creditors who have made
with/which to rehabilitate the timely and proper filing of their notice of
debtor; claims;

(2) there is sufficient cash flow to (b) hear and determine any objection to the
maintain the operations of the qualifications of the appointment of the
debtor; rehabilitation receiver and, if necessary
appoint a new one in accordance with this
(3) the debtor's, partners, Act;
stockholders, directors and officers
have been acting in good faith and (c) direct the creditors to comment on the
which due diligence; petition and the Rehabilitation Plan, and to
submit the same to the court and to the
(4) the petition is not s sham filing rehabilitation receiver within a period of not
intended only to delay the more than twenty (20) days; and
enforcement of the rights of the
creditor's or of any group of (d) direct the rehabilitation receiver to
creditors; and evaluate the financial condition of the debtor
and to prepare and submit to the court within
(5) the debtor would likely be able forty (40) days from initial hearing the
to pursue a viable Rehabilitation report provided in Section 24 hereof.
Plan;
Section 23. Effect of Failure to File Notice of Claim.
(e) The petition, the Rehabilitation Plan and - A creditor whose claim is not listed in the schedule
the attachments thereto do not contain any of debts and liabilities and who fails to file a notice of
materially false or misleading statement; claim in accordance with the Commencement Order
but subsequently files a belated claim shall not be
(f) If the petitioner is the debtor, that the entitled to participate in the rehabilitation
debtor has met with its creditor/s proceedings but shall be entitled to receive
representing at least three-fourths (3/4) of its distributions arising therefrom.
total obligations to the extent reasonably
possible and made a good faith effort to Section 24. Report of the Rehabilitation Receiver. -
reach a consensus on the proposed Within forty (40) days from the initial hearing and
Rehabilitation Plan if the petitioner/s is/are a with or without the comments of the creditors or any
creditor or group of creditors, that/ the of them, the rehabilitation receiver shall submit a
petitioner/s has/have met with the debtor and report to the court stating his preliminary findings
made a good faith effort to reach a and recommendations on whether:
 (a) the debtor is insolvent and if so, the (3)the petition, the Rehabilitation
causes thereof and any unlawful or irregular Plan and the attachments thereto
act or acts committed by the owner/s of a contain any materially false or
sole proprietorship partners of a partnership misleading statements; or
or directors or officers of a corporation in
contemplation of the insolvency of the (4)the debtor has committed acts of
debtor or which may have contributed to the misrepresentation or in fraud of its
insolvency of the debtor; creditor/s or a group of creditors;

(b) the underlying assumptions, the financial (c)convert the proceedings into one for the
goals and the procedures to accomplish such liquidation of the debtor upon a finding that:
goals as stated in the petitioner's
Rehabilitation Plan are realistic, feasible and (1)the debtor is insolvent; and
reasonable;
(2)there is no substantial likelihood
(c) there is a substantial likelihood for the for the debtor to be successfully
debtor to be successfully rehabilitated; rehabilitated as determined in
accordance with the rules to be
(d) the petition should be dismissed; and promulgated by the Supreme Court.

(e) the debtor should be dissolved and/or Section 26.Petition Given Due Course. - If the
liquidated. petition is given due course, the court shall direct the
rehabilitation receiver to review, revise and/or
Section 25. Giving Due Course to or Dismissal of recommend action on the Rehabilitation Plan and
Petition, or Conversion of Proceedings. - Within ten submit the same or a new one to the court within a
(10) days from receipt of the report of the period of not more than ninety (90) days.
rehabilitation receiver mentioned in Section 24
hereof the court may: The court may refer any dispute relating to the
Rehabilitation Plan or the rehabilitation proceedings
(a) give due course to the petition upon a pending before it to arbitration or other modes of
finding that: dispute resolution, as provided for under Republic
Act No. 9285, Or the Alternative Dispute Resolution
(1) the debtor is insolvent; and Act of 2004, should it determine that such mode will
resolve the dispute more quickly, fairly and
(2) there is a substantial likelihood efficiently than the court.
for the debtor to be successfully
rehabilitated; Section 27.Dismissal of Petition. - If the petition is
dismissed pursuant to paragraph (b) of Section 25
(b) dismiss the petition upon a finding that: hereof, then the court may, in its discretion, order the
petitioner to pay damages to any creditor or to the
(1)debtor is not insolvent; debtor, as the case may be, who may have been
injured by the filing of the petition, to the extent of
(2) the petition i8 a sham filing any such injury.
intended only to delay the
enforcement of the rights of the (C) The Rehabilitation Receiver, Management
creditor/s or of any group of Committee and Creditors' Committee.
creditors;
Section 28.Who May Serve as a Rehabilitation persons to the position. The court may retain the
Receiver. - Any qualified natural or juridical person rehabilitation receiver initially appointed or appoint
may serve as a rehabilitation receiver: Provided, That another who mayor may not be from among those
if the rehabilitation receiver is a juridical entity, it nominated.
must designate a natural person/s who possess/es all
the qualifications and none of the disqualification’s In case the debtor is a securities market participant,
as its representative, it being understood that the the court shall give priority to the nominee of the
juridical entity and the representative/s are solidarily appropriate securities or investor protection fund.
liable for all obligations and responsibilities of the
rehabilitation receiver. If a qualified natural person or entity is nominated by
more than fifty percent (50%) of the secured creditors
Section 29.Qualifications of a Rehabilitation and the general unsecured creditors, and satisfactory
Receiver. - The rehabilitation receiver shall have the evidence is submitted, the court shall appoint the
following minimum qualifications: creditors' nominee as rehabilitation receiver.

(a)A citizen of the Philippines or a resident Section 31.Powers, Duties and Responsibilities of
of the Philippines in the six (6) months the Rehabilitation Receiver. - The rehabilitation
immediately preceding his nomination; receiver shall be deemed an officer of the court with
the principal duty of preserving and maximizing the
(b)Of good moral character and with value of the assets of the debtor during the
acknowledged integrity, impartiality and rehabilitation proceedings, determining the viability
independence; of the rehabilitation of the debtor, preparing and
recommending a Rehabilitation Plan to the court, and
(c)Has the requisite knowledge of implementing the approved Rehabilitation Plan, To
insolvency and other relevant commercial this end, and without limiting the generality of the
laws, rules and procedures, as well as the foregoing, the rehabilitation receiver shall have the
relevant training and/or experience that may following powers, duties and responsibilities:
be necessary to enable him to properly
discharge the duties and obligations of a (a)To verify the accuracy of the factual
rehabilitation receiver; and allegations in the petition and its annexes;

(d)Has no conflict of interest: Provided, (b)To verify and correct, if necessary, the
That such conflict of interest may be inventory of all of the assets of the debtor,
waived, expressly or impliedly, by a party and their valuation;
who may be prejudiced thereby.
(c)To verify and correct, if necessary, the
Other qualifications and disqualification’s of the schedule of debts and liabilities of the
rehabilitation receiver shall be set forth in procedural debtor;
rules, taking into consideration the nature of the
business of the debtor and the need to protect the (d)To evaluate the validity, genuineness and
interest of all stakeholders concerned. true amount of all the claims against the
debtor;
Section 30.Initial Appointment of the Rehabilitation
Receiver. - The court shall initially appoint the (e)To take possession, custody and control,
rehabilitation receiver, who mayor may not be from and to preserve the value of all the property
among the nominees of the petitioner, However, at of the debtor;
the initial hearing of the petition, the creditors and the
debtor who are not petitioners may nominate other
(f)To sue and recover, with the approval of as may be provided, in the Rehabilitation
the court, all amounts owed to, and all Plan.
properties pertaining to the debtor;
Unless appointed by the court, pursuant to
(g)To have access to all information Section 36 hereof, the rehabilitation receiver
necessary, proper or relevant to the shall not take over the management and
operations and business of the debtor and for control of the debtor but may recommend
its rehabilitation; the appointment of a management
committee over the debtor in the cases
(h) To sue and recover, with the. approval of provided by this Act.
the court, all property or money of the
debtor paid, transferred or disbursed in fraud Section 32.Removal of the Rehabilitation Receiver. –
of the debtor or its creditors, or which The rehabilitation receiver may be removed at any
constitute undue preference of creditor/s; time by the court either motu proprio or upon motion
by any creditor/s holding more than fifty percent
(i) To monitor the operations and the (50%) of the total obligations of the debtor, on such
business of the debtor to ensure that no grounds as the rules of procedure may provide which
payments or transfers of property are made shall include, but are not limited to, the following:
other than in the ordinary course of
business; (a) Incompetence, gross negligence, failure
to perform or failure to exercise the proper
(j) With the court's approval, to engage the degree of care in the performance of his
services of or to employ persons or entities duties and powers;
to assist him in the discharge of his
functions; (b) Lack of a particular or specialized
competency required by the specific case;
(k) To determine the manner by which the
debtor may be best rehabilitated, to review) (c) Illegal acts or conduct in the
revise and/or recommend action on the performance of his duties and powers;
Rehabilitation Plan and submit the same or a
new one to the court for approval; (d) Lack of qualification or presence of any
disqualification;
(1) To implement the Rehabilitation Plan as
approved by the court, if 80 provided under (e) Conflict of interest that arises after his
the Rehabilitation Plan; appointment; and

(m) To assume and exercise the powers of (f) Manifest lack of independence that is
management of the debtor, if directed by the detrimental to the general body of the
court pursuant to Section 36 hereof; stakeholders.

(n) To exercise such other powers as may, Section 33.Compensation and Terms of Service. The
from time to time, be conferred upon him by rehabilitation receiver and his direct employees or
the court; and independent contractors shall be entitled to
compensation for reasonable fees and expenses from
To submit a status report on the the debtor according to the terms approved by the
rehabilitation proceedings every quarter or court after notice and hearing. Prior to such hearing,
as may be required by the court motu the rehabilitation receiver and his direct employees
proprio. or upon motion of any creditor. or shall be entitled to reasonable compensation based on
quantum meruit. Such costs shall be considered (1) require the rehabilitation receiver to post
administrative expenses. an additional bond;

Section 34.Oath and Bond of the Rehabilitation (2) authorize him to engage the services or
Receiver. Prior to entering upon his powers, duties to employ persona or entities to assist him in
and responsibilities, the rehabilitation receiver shall the discharge of his managerial functions;
take an oath and file a bond, in such amount to be and
fixed by the court, conditioned upon the faithful and
proper discharge of his powers, duties and (3) authorize a commensurate increase in his
responsibilities. compensation.

Section 35.Vacancy. - Incase the position of Section 37.Role of the Management Committee. –
rehabilitation receiver is vacated for any reason When appointed pursuant to the foregoing section,
whatsoever. the court shall direct the debtor and the the management committee shall take the place of the
creditors to submit the name/s of their nominee/s to management and the governing body of the debtor
the position. The court may appoint any of the and assume their rights and responsibilities.
qualified nominees. or any other person qualified for
the position. The specific powers and duties of the management
committee, whose members shall be considered as
Section 36.Displacement of Existing Management by officers of the court, shall be prescribed by the
the Rehabilitation Receiver or Management procedural rules.
Committee. – Upon motion of any interested party,
the court may appoint and direct the rehabilitation Section 38.Qualifications of Members of the
receiver to assume the powers of management of the Management Committee. - The qualifications and
debtor, or appoint a management committee that will disqualification’s of the members of the management
undertake the management of the debtor. upon clear committee shall be set forth in the procedural rules,
and convincing evidence of any of the following taking into consideration the nature of the business of
circumstances: the debtor and the need to protect the interest of all
stakeholders concerned.
(a) Actual or imminent danger of
dissipation, loss, wastage or destruction of Section 39.Employment of Professionals. - Upon
the debtor’s assets or other properties; approval of the court, and after notice and hearing,
the rehabilitation receiver or the management
(b) Paralyzation of the business operations committee may employ specialized professionals and
of the debtor; or other experts to assist each in the performance of
their duties. Such professionals and other experts
(c) Gross mismanagement of the debtor. or shall be considered either employees or independent
fraud or other wrongful conduct on the part contractors of the rehabilitation receiver or the
of, or gross or willful violation of this Act management committee, as the case may be. The
by. existing management of the debtor Or qualifications and disqualification’s of the
the owner, partner, director, officer or professionals and experts may be set forth in
representative/s in management of the procedural rules, taking into consideration the nature
debtor. of the business of the debtor and the need to protect
the interest of all stakeholders concerned.
In case the court appoints the rehabilitation receiver
to assume the powers of management of the debtor. Section 40.Conflict of Interest. - No person may be
the court may: appointed as a rehabilitation receiver, member of a_
management committee, or be employed by the
rehabilitation receiver or the management committee is unreasonably withheld, the court may disregard the
if he has a conflict of interest. conflict of interest, taking into account the general
interest of the stakeholders.
An individual shall be deemed to have a conflict of
interest if he is so situated as to be materially Section 41.Immunity. - The rehabilitation receiver
influenced in the exercise of his judgment for or and all persons employed by him, and the members
against any party to the proceedings. Without of the management committee and all persons
limiting the generality of the foregoing, an individual employed by it, shall not be subject to any action.
shall be deemed to have a conflict of interest if: claim or demand in connection with any act done or
omitted to be done by them in good faith in
(a) he is a creditor, owner, partner or connection with the exercise of their powers and
stockholder of the debtor; functions under this Act or other actions duly
approved by the court.1awp++il
(b) he is engaged in a line of business which
competes with that of the debtor; Section 42.Creditors' Committee. - After the
creditors' meeting called pursuant to Section 63
(c) he is, or was, within five (5) years from hereof, the creditors belonging to a class may
the filing of the petition, a director, officer, formally organize a committee among
owner, partner or employee of the debtor or
any of the creditors, or the auditor or themselves. In addition, the creditors may, as a body,
accountant of the debtor; agree to form a creditors' committee composed of a
representative from each class of creditors, such as
(d) he is, or was, within two (2) years from the following:
the filing of the petition, an underwriter of
the outstanding securities of the debtor; (a) Secured creditors;

(e) he is related by consanguinity or affinity (b) Unsecured creditors;

within the fourth civil degree to any
individual creditor, owners of a sale (c) Trade creditors and suppliers; and
proprietorship-debtor, partners of a
partnership- debtor or to any stockholder, (d) Employees of the debtor.
director, officer, employee or underwriter of
a corporation-debtor; or In the . election of the creditors' representatives, the
rehabilitation receiver or his representative shall
(f) he has any other direct or indirect attend such meeting and extend the appropriate
material interest in the debtor or any of the assistance as may be defined in the procedural rules.
creditors.
Section 43.Role of Creditors' Committee. - The
Any rehabilitation receiver, member of the creditors' committee when constituted pursuant to
management committee or persons employed or Section 42 of this Act shall assist the rehabilitation
contracted by them possessing any conflict of interest receiver in communicating with the creditors and
shall make the appropriate disclosure either to the shall be the primary liaison between the rehabilitation
court or to the creditors in case of out-of-court receiver and the creditors. The creditors' committee
rehabilitation proceedings. Any party to the cannot exercise or waive any right or give any
proceeding adversely affected by the appointment of consent on behalf of any creditor unless specifically
any person with a conflict of interest to any of the authorized in writing by such creditor. The creditors'
positions enumerated above may however waive his committee may be authorized by the court or by the
right to object to such appointment and, if the waiver rehabilitation receiver to perform such other tasks
and functions as may be defined by the procedural (F) Use, Preservation and Disposal of Assets and
rules in order to facilitate the rehabilitation process. Treatment of Assets and Claims after
Commencement Date.
(D) Determination of Claims.
Section 48.Use or Disposition of Assets. - Except as
Section 44.Registry of Claims. - Within twenty (20) otherwise provided herein, no funds or property of
days from his assumption into office, the the debtor shall he used or disposed of except in the
rehabilitation receiver shall establish a preliminary ordinary course of business of the debtor, or unless
registry of claims. The rehabilitation receiver shall necessary to finance the administrative expenses of
make the registry available for public inspection and the rehabilitation proceedings.
provide
Section 49.Sale of Assets. - The court, upon
publication notice to the debtor, creditors and application of the rehabilitation receiver, may
stakeholders on where and when they may inspect it. authorize the sale of unencumbered property of the
All claims included in the registry of claims must be debtor outside the ordinary course of business upon a
duly supported by sufficient evidence. showing that the property, by its nature or because of
other circumstance, is perishable, costly to maintain,
Section 45.Opposition or Challenge of Claims. – susceptible to devaluation or otherwise injeopardy.
Within thirty (30) days from the expiration of the
period stated in the immediately preceding section, Section 50.Sale or Disposal of Encumbered Property
the debtor, creditors, stakeholders and other of the Debtor and Assets of Third Parties Held by
interested parties may submit a challenge to claim/s Debtor. The court may authorize the sale, transfer,
to the court, serving a certified copy on the conveyance or disposal of encumbered property of
rehabilitation receiver and the creditor holding the the debtor, or property of others held by the debtor
challenged claim/so Upon the expiration of the thirty where there is a security interest pertaining to third
(30)-day period, the rehabilitation receiver shall parties under a financial, credit or other similar
submit to the court the registry of claims which shall transactions if, upon application of the rehabilitation
include undisputed claims that have not been subject receiver and with the consent of the affected owners
to challenge. of the property, or secured creditor/s in the case of
encumbered property of the debtor and, after notice
Section 46.Appeal. - Any decision of the and hearing, the court determines that:
rehabilitation receiver regarding a claim may be
appealed to the court. (a) such sale, transfer, conveyance or
disposal is necessary for the continued
(E) Governance. operation of the debtor's business; and

Section 47.Management. - Unless otherwise provided (b) the debtor has made arrangements to
herein, the management of the juridical debtor shall provide a substitute lien or ownership right
remain with the existing management subject to the that provides an equal level of security for
applicable law/s and agreement/s, if any, on the the counter-party's claim or right.
election or appointment of directors, managers Or
managing partner. However, all disbursements, Provided, That properties held by the debtor where
payments or sale, disposal, assignment, transfer or the debtor has authority to sell such as trust receipt or
encumbrance of property , or any other act affecting consignment arrangements may be sold or disposed
title or interest in property, shall be subject to the of by the .debtor, if such sale or disposal is necessary
approval of the rehabilitation receiver and/or the for the operation of the debtor's business, and the
court, as provided in the following subchapter. debtor has made arrangements to provide a substitute
lien or ownership right that provides an equal level of preparation and implementation of a
security for the counter-party's claim or right. Rehabilitation Plan;

Sale or disposal of property under this section shall (b) in order to provide a substitute lien,
not give rise to any criminal liability under applicable mortgage or pledge of property under this
laws. Act;

Section 51.Assets of Debtor Held by Third Parties. – (c) for payments made to meet
In the case of possessory pledges, mechanic's liens or administrative expenses as they arise;
similar claims, third parties who have in their
possession or control property of the debtor shall not (d) for payments to victims of quasi delicts
transfer, conveyor otherwise dispose of the same to upon a showing that the claim is valid and
persons other than the debtor, unless upon prior the debtor has insurance to reimburse the
approval of the rehabilitation receiver. The debtor for the payments made;
rehabilitation receiver may also:
(e) for payments made to repurchase
(a) demand the surrender or the transfer of property of the debtor that is auctioned off in
the possession or control of such property to a judicial or extrajudicial sale under. This
the rehabilitation receiver or any other Act; or
person, subject to payment of the claims
secured by any possessory Iien/s thereon; (f) for payments made to reclaim property of
the debtor held pursuant to a possessory lien.
(b) allow said third parties to retain
possession or control, if such an Section 53.Assets Subject to Rapid Obsolescence,
arrangement would more likely preserve or Depreciation and Diminution of Value. - Upon the
increase the value of the property in application of a secured creditor holding a lien
question or the total value of the assets of against or holder of an ownership interest in property
the debtor; or held by the debtor that is subject to potentially rapid
obsolescence, depreciation or diminution in value,
(c) undertake any otI1er disposition of the the court shall, after notice and hearing, order the
said property as may be beneficial for the debtor or rehabilitation receiver to take reasonable
rehabilitation of the debtor, after notice and steps necessary to prevent the depreciation. If
hearing, and approval of the court. depreciation cannot be avoided and such depreciation
is jeopardizing the security or property interest of the
Section 52.Rescission or Nullity of Sale, Payment, secured creditor or owner, the court shall:
Transfer or Conveyance of Assets. - The court may
rescind or declare as null and void any sale, payment, (a) allow the encumbered property to be
transfer or conveyance of the debtor's unencumbered foreclosed upon by the secured creditor
property or any encumbering thereof by the debtor or according to the relevant agreement between
its agents or representatives after the commencement the debtor and the secured creditor,
date which are not in the ordinary course of the applicable rules of procedure and relevant
business of the debtor: Provided, however, That the legislation: Provided. That the proceeds of
unencumbered property may be sold, encumbered or the sale will be distributed in accordance
otherwise disposed of upon order of the court after with the order prescribed under the rules of
notice and hearing: concurrence and preference of credits; or

(a) if such are in the interest of (b) upon motion of, or with the consent of
administering the debtor and facilitating the the affected secured creditor or interest
 owner. order the conveyance of a lien The payment of the foregoing obligations shall be
against or ownership interest in substitute considered administrative expenses under this Act.
property of the debtor to the secured
creditor: Provided. That other creditors Section 56.Treatment of Employees, Claims.
holding liens on such property, if any, do not Compensation of employees required to carry on the
object thereto, or, if such property is not business shall be considered an administrative
available; expense. Claims of separation pay for months worked
prior to the commencement date shall be considered a
(c) order the conveyance to the secured pre- ommencement claim. Claims for salary and
creditor or holder . of an ownership interest separation pay for work performed after the
of a lien on the residual funds from the sale commencement date shall be an administrative
of encumbered property during the expense.
proceedings; or
Section 57.Treatment of Contracts. - Unless
(d) allow the sale or disposition of the cancelled by virtue of a final judgment of a court of
property: Provided. That the sale or competent jurisdiction issued prior to the issuance of
disposition will maximize the value of the the Commencement Order, or at anytime thereafter
property for the benefit of the secured by the court before which the rehabilitation
creditor and the debtor, and the proceeds of proceedings are pending, all valid and subbsisting
the sale will be distributed in accordance contracts of the debtor with creditors and other third
with the order prescribed under the rules of parties as at the commencement date shall continue in
concurrence and preference of credits. force: Provided, That within ninety (90) days
following the commencement of proceedings, the
Section 54.Post-commencement Interest. - The rate debtor, with the consent of the rehabilitation receiver,
and term of interest, if any, on secured and unsecured shall notify each contractual counter-party of whether
claims shall be determined and provided for in the it is confirming the particular contract. Contractual
approved Rehabilitation Plan. obligations of the debtor arising or performed during
this period, and afterwards for confirmed contracts,
Section 55.Post-commencement Loans and shall be considered administrative expenses.
Obligations. - With the approval of the court upon Contracts not confirmed within the required deadline
the recommendation of the rehabilitation receiver, the shall be considered terminated. Claims for actual
debtor, in order to enhance its damages, if any, arising as a result of the election to
terminate a contract shall be considered a pre-
rehabilitation. may: commencement claim against the debtor. Nothing
contained herein shall prevent the cancellation or
(a) enter into credit arrangements; or termination of any contract of the debtor for any
ground provided by law.
(b) enter into credit arrangements, secured
by mortgages of its unencumbered property (G) Avoidance Proceedings.
or secondary mortgages of encumbered
property with the approval of senior secured Section 58.Rescission or Nullity of Certain Pre-
parties with regard to the encumbered commencement Transactions. Any transaction
property; or occurring prior to commencement date entered into
by the debtor or involving its funds or assets may be
(c) incur other obligations as may be rescinded or declared null and void on the ground
essential for its rehabilitation. 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 action or subject matter of the proceeding, including
of such design shall arise if the transaction: any document in support thereof.

(a) provides unreasonably inadequate (c) Any benefit derived from a proceeding taken
consideration to the debtor and is executed pursuant to subsection (a), to the extent of his claim
within ninety (90) days prior to the and the costs, belongs exclusively to the creditor
commencement date; instituting the proceeding, and the surplus, if any,
belongs to the estate.
(b) involves an accelerated payment of a
claim to a creditor within ninety (90) days (d) Where, before an order is made under subsection
prior to the commencement date; (a), the rehabilitation receiver (or liquidator) signifies
to the court his readiness to institute the proceeding
(c) provides security or additional security for the benefit of the creditors, the order shall fix the
executed within ninety (90) days prior to the time within which he shall do so and, m that case, the
commencement date; benefit derived from the proceeding, if instituted
within the time limits so fixed, belongs to the estate.
(d) involves creditors, where a creditor
obtained, or received the benefit of, more (H) Treatment of Secured Creditors.
than its pro rata share in the assets of the
debtor, executed at a time when the debtor Section 60.No Diminution of Secured Creditor
was insolvent; or Rights. The issuance of the Commencement Order
and the Suspension or Stay Order, and any other
(e) is intended to defeat, delay or hinder the provision of this Act, shall not be
ability of the creditors to collect claims
where the effect of the transaction is to put deemed in any way to diminish or impair the security
assets of the debtor beyond the reach of or lien of a secured creditor, or the value of his lien or
creditors or to otherwise prejudice the security, except that his right to enforce said security
interests of creditors. or lien may be suspended during the term of the Stay
Order.
Provided, however, That nothing in this section shall
prevent the court from rescinding or declaring as null The court, upon motion or recommendation of the
and void a transaction on other grounds provided by rehabilitation receiver, may allow a secured creditor
relevant legislation and jurisprudence: Provided, to enforce his security or lien, or foreclose upon
further, That the provisions of the Civil Code on property of the debtor
rescission shall in any case apply to these
transactions. securing his/its claim, if the said property is not
necessary for the rehabilitation of the debtor. The
Section 59.Actions for Rescission or Nullity. - (a) secured creditor and/or the other lien holders shall be
The rehabilitation receiver or, with his conformity, admitted to the rehabilitation proceedings only for the
any creditor may initiate and prosecute any action to balance of his claim, if any.
rescind, or declare null and void any transaction
described in Section 58 hereof. If the rehabilitation Section 61.Lack of Adequate Protection. - The court,
receiver does not consent to the filing or prosecution on motion or motu proprio, may terminate, modify or
of such action, set conditions for the continuance of suspension of
payment, or relieve a claim from the coverage
(b) If leave of court is granted under subsection (a), thereof, upon showing that: (a) a creditor does not
the rehabilitation receiver shall assign and transfer to have adequate protection over property securing its
the creditor all rights, title and interest in the chose in claim; or
(b) the value of a claim secured by a lien on property (c) contain information sufficient to give the
which is not necessary for rehabilitation of the debtor various classes of creditors a reasonable
exceeds the fair market value of the said property. basis for determining whether supporting the
Plan is in their financial interest when
For purposes of this section, a creditor shall be compared to the immediate liquidation of
deemed to lack adequate protection if it can be shown the debtor, including any reduction of
that: principal interest and penalties payable to
the creditors;
(a) the debtor fails or refuses to honor a pre-
existing agreement with the creditor to keep (d) establish classes of voting creditors;
the property insured;
(e) establish subclasses of voting creditors if
(b) the debtor fails or refuses to take prior approval has been granted by the court;
commercially reasonable steps to maintain
the property; or (f) indicate how the insolvent debtor will be
rehabilitated including, but not limited to,
(c) the property has depreciated to an extent debt forgiveness, debt rescheduling,
that the creditor is under secured. reorganization or quasi-reorganization.
dacion en pago, debt-equity conversion and
Upon showing of a lack of protection, the court shall sale of the business (or parts of it) as a going
order the debtor or the rehabilitation receiver to make concern, or setting-up of a new business
arrangements to provide for the insurance or entity or other similar arrangements as may
maintenance of the property; or to make payments or be necessary to restore the financial well-
otherwise provide additional or replacement security being and visibility of the insolvent debtor;
such that the obligation is fully secured. If such
arrangements are not feasible, the court may modify (g) specify the treatment of each class or
the Stay Order to allow the secured creditor lacking subclass described in subsections (d) and
adequate protection to enforce its security claim (e);
against the debtor: Provided, however, That the court
may deny the creditor the remedies in this paragraph (h) provide for equal treatment of all claims
if the property subject of the enforcement is required within the same class or subclass, unless a
for the rehabilitation of the debtor. particular creditor voluntarily agrees to less
favorable treatment;
(i) Administration of Proceedings.
(i) ensure that the payments made under the
Section 62.Contents of a Rehabilitation Plan. – The plan follow the priority established under the
Rehabilitation Plan shall, as a minimum: provisions of the Civil Code on concurrence
and preference of credits and other
(a) specify the underlying assumptions, the applicable laws;
financial goals and the procedures proposed
to accomplish such goals; (j) maintain the security interest of secured
creditors and preserve the liquidation value
(b) compare the amounts expected to be of the security unless such has been waived
received by the creditors under the or modified voluntarily;
Rehabilitation Plan with those that they will
receive if liquidation ensues within the next (k) disclose all payments to creditors for
one hundred twenty (120) days; pre-commencement debts made during the
proceedings and the justifications thereof;
(1) describe the disputed claims and the (v) state the compensation and status, if any,
provisioning of funds to account for of the rehabilitation receiver after the
appropriate payments should the claim be approval of the Plan; and
ruled valid or its amount adjusted;
(w) contain provisions for conciliation
(m) identify the debtor's role in the and/or mediation as a prerequisite to court
implementation of the Plan; assistance or intervention in the event of any
disagreement in the interpretation or
(n) state any rehabilitation covenants of the implementation of the Rehabilitation Plan.
debtor, the breach of which shall be
considered a material breach of the Plan; Section 63.Consultation with Debtor and Creditors.
– if the court gives due course to the petition, the
(o) identify those responsible for the future rehabilitation receiver shall confer with the debtor
management of the debtor and the and all the classes of creditors, and may consider
supervision and implementation of the Plan, their views and proposals ill the review, revision or
their affiliation with the debtor and their preparation of a new Rehabilitation Plan.
remuneration;
Section 64.Creditor Approval of Rehabilitation Plan.
(p) address the treatment of claims arising – The rehabilitation receiver shall notify the creditors
after the confirmation of the Rehabilitation and stakeholders that the Plan is ready for their
Plan; examination. Within twenty (2Q) days from the said
notification, the rehabilitation receiver shall convene
(q) require the debtor and its counter-parties the creditors, either as a whole or per class, for
to adhere to the terms of all contracts that purposes of voting on the approval of the Plan. The
the debtor has chosen to confirm; Plan shall be deemed rejected unless approved by all
classes of creditors w hose rights are adversely
(r) arrange for the payment of all modified or affected by the Plan. For purposes of this
outstanding administrative expenses as a section, the Plan is deemed to have been approved by
condition to the Plan's approval unless such a class of creditors if members of the said class
condition has been waived in writing by the holding more than fifty percent (50%) of the total
creditors concerned; claims of the said class vote in favor of the Plan. The
votes of the creditors shall be based solely on the
(s) arrange for the payment" of all amount of their respective claims based on the
outstanding taxes and assessments, or an registry of claims submitted by the rehabilitation
adjusted amount pursuant to a compromise receiver pursuant to Section 44 hereof.
settlement with the BlR Or other applicable
tax authorities; Notwithstanding the rejection of the Rehabilitation
Plan, the court may confirm the Rehabilitation Plan if
(t) include a certified copy of a certificate of all of the following circumstances are present:
tax clearance or evidence of a compromise
settlement with the BIR; (a)The Rehabilitation Plan complies with the
requirements specified in this Act.
(u) include a valid and binding r(,solution of
a meeting of the debtor's stockholders to (b) The rehabilitation receiver recommends
increase the shares by the required amount the confirmation of the Rehabilitation Plan;
in cases where the Plan contemplates an
additional issuance of shares by the debtor; (c) The shareholders, owners or partners of
the juridical debtor lose at least their
 controlling interest as a result of the proceedings into one for the liquidation of the debtor
Rehabilitation Plan; and under Chapter V of this Act.

(d) The Rehabilitation Plan would likely Section 68.Confirmation of the Rehabilitation Plan.
provide the objecting class of creditors with – If no objections are filed within the relevant period
compensation which has a net present value or, if objections are filed, the court finds them lacking
greater than that which they would have in merit, or determines that the basis for the objection
received if the debtor were under has been cured, or determines that the debtor has
liquidation. complied with an order to cure the objection, the
court shall issue an order confirming the
Section 65.Submission of Rehabilitation Plan to the Rehabilitation Plan.
Court. - 1fthe Rehabilitation Plan is approved, the
rehabilitation receiver shall submit the same to the The court may confirm the Rehabilitation Plan
court for confirmation. Within five (5) days from notwithstanding unresolved disputes over claims if
receipt of the Rehabilitation Plan, the court shall the Rehabilitation Plan has made adequate provisions
notify the creditors that the Rehabilitation Plan has for paying such claims.
been submitted for confirmation, that any creditor
may obtain copies of the Rehabilitation Plan and that For the avoidance of doubt, the provisions of other
any creditor may file an objection thereto. laws to the contrary notwithstanding, the court shall
have the power to approve or implement the
Section 66.Filing of Objections to Rehabilitation Rehabilitation Plan despite the lack of approval, or
Plan. – A creditor may file an objection to the objection from the owners, partners or stockholders
Rehabilitation Plan within twenty (20) days from of the insolvent debtor: Provided, That the terms
receipt of notice from the court that the thereof are necessary to restore the financial well-
Rehabilitation Plan has been submitted for being and viability of the insolvent debtor.
confirmation. Objections to a Rehabilitation Plan
shall be limited to the following: Section 69.Effect of Confirmation of the
Rehabilitation Plan, - The confirmation of the
(a) The creditors' support was induced by Rehabilitation Plan by the court shall result in the
fraud; following:

(b)The documents or data relied upon in the (a) The Rehabilitation Plan and its
Rehabilitation Plan are materially false or provisions shall be binding upon the debtor
misleading; or and all persons who may be affected by . it,
including the creditors, whether or not such
(c)The Rehabilitation Plan is in fact not persons have participated in the proceedings
supported by the voting creditors. or opposed the Rehabilitation Plan or
whether or not their claims have been
Section 67.Hearing on the Objections. - If objections scheduled;
have been submitted during the relevant period, the
court shall issue an order setting the time and date for (b) The debtor shall comply with the
the hearing or hearings on the objections. provisions of the Rehabilitation Plan and
shall take all actions necessary to carry out
If the court finds merit in the objection, it shall order the Plan;
the rehabilitation receiver or other party to cure the
defect, whenever feasible. If the court determines that (c) Payments shall be made to the creditors
the debtor acted in bad faith, or that it is not feasible in accordance with the provisions of the
to cure the defect, the court shall convert the Rehabilitation Plan;
 (d) Contracts and other arrangements Section 73. Accounting Discharge of Rehabilitation
between the debtor and its creditors shall be Receiver. - Upon the confirmation of the
interpreted as continuing to apply to the Rehabilitation Plan, the rehabilitation receiver shall
extent that they do not conflict with the provide a final report and accounting to the court.
provisions of the Rehabilitation Plan; Unless the Rehabilitation Plan specifically requires
and describes the role of the rehabilitation receiver
(e) Any compromises on amounts or after the approval of the Rehabilitation Plan, the court
rescheduling of timing of payments by the shall discharge the rehabilitation receiver of his
debtor shall be binding on creditors duties.
regardless of whether or not the Plan is
successfully implement; and (j) Termination of Proceedings

(f) Claims arising after approval of the Plan Section 74. Termination of Proceedings. - The
that are otherwise not treated by the Plan are rehabilitation proceedings under Chapter II shall,
not subject to any Suspension Order. upon motion by any stakeholder or the rehabilitation
receiver be terminated by order of the court either
The Order confirming the Plan shall comply with declaring a successful implementation of the
Rules 36 of the Rules of Court: Provided, however, Rehabilitation Plan or a failure of rehabilitation.
That the court may maintain jurisdiction over the
case in order to resolve claims against the debtor that There is failure of rehabilitation in the following
remain contested and allegations that the debtor has cases:
breached the Plan.
(a) Dismissal of the petition by the court;
Section 70. Liability of General Partners of a
Partnership for Unpaid Balances Under an (b) The debtor fails to submit a
Approved Plan. - The approval of the Plan shall not Rehabilitation Plan;
affect the rights of creditors to pursue actions against
the general partners of a partnership to the extent they (c) Under the Rehabilitation Plan submitted
are liable under relevant legislation for the debts by the debtor, there is no substantial
thereof. likelihood that the debtor can be
rehabilitated within a reasonable period;
Section 71. Treatment of Amounts of Indebtedness or
Obligations Forgiven or Reduced. - Amounts of any (d) The Rehabilitation Plan or its
indebtedness or obligations reduced or forgiven in amendment is approved by the court but in
connection with a Plan's approval shall not be subject the implementation thereof, the debtor fails
to any tax in furtherance of the purposes of this Act. to perform its obligations thereunder or there
is a failure to realize the objectives, targets
Section 72. Period for Confirmation of the or goals set forth therein, including the
Rehabilitation Plan. - The court shall have a timelines and conditions for the settlement
maximum period of one (1) year from the date of the of the obligations due to the creditors and
filing of the petition to confirm a Rehabilitation Plan. other claimants;

If no Rehabilitation Plan is confirmed within the said (e) The commission of fraud in securing the
period, the proceedings may upon motion or motu approval of the Rehabilitation Plan or its
propio, be converted into one for the liquidation of amendment; and
the debtor .
(f) Other analogous circumstances as may be
defined by the rules of procedure.
Upon a breach of, or upon a failure of the CHAPTER III
Rehabilitation Plan the court, upon motion by an PRE-NEGOTIATED REHABILITATION
affected party may:
Section 76. Petition by Debtor. - An insolvent debtor,
(1) Issue an order directing that the breach by itself or jointly with any of its creditors, may file a
be cured within a specified period of time, verified petition with the court for the approval of a
falling which the proceedings may be pre-negotiated Rehabilitation Plan which has been
converted to a liquidation; endorsed or approved by creditors holding at least
two-thirds (2/3) of the total liabilities of the debtor,
(2) Issue an order converting the including secured creditors holding more than fifty
proceedings to a liquidation; percent (50%) of the total secured claims of the
debtor and unsecured creditors holding more than
(3) Allow the debtor or rehabilitation fifty percent (50%) of the total unsecured claims of
receiver to submit amendments to the the debtor. The petition shall include as a minimum:
Rehabilitation Plan, the approval of which
shall be governed by the same requirements (a) a schedule of the debtor's debts and
for the approval of a Rehabilitation Plan liabilities;
under this subchapter;
(b) an inventory of the debtor's assets;
(4) Issue any other order to remedy the
breach consistent with the present (c) the pre-negotiated Rehabilitation Plan,
regulation, other applicable law and the best including the names of at least three (3)
interests of the creditors; or qualified nominees for rehabilitation
receiver; and
(5) Enforce the applicable provisions of the
Rehabilitation Plan through a writ of (d) a summary of disputed claims against the
execution. debtor and a report on the provisioning of
funds to account for appropriate payments
Section 75. Effects of Termination. - Termination of should any such claims be ruled valid or
the proceedings shall result in the following: their amounts adjusted.

(a) The discharge of the rehabilitation Section 77. Issuance of Order. - Within five (5)
receiver subject to his submission of a final working days, and after determination that the
accounting; and petition is sufficient in form and substance, the court
shall issue an Order which shall;
(b) The lifting of the Stay Order and any
other court order holding in abeyance any (a) identify the debtor, its principal business
action for the enforcement of a claim against of activity/ies and its principal place of
the debtor. business;

Provided, however, That if the termination of (b) declare that the debtor is under
proceedings is due to failure of rehabilitation or rehabilitation;
dismissal of the petition for reasons other than
technical grounds, the proceedings shall be (c) summarize the ground./s for the filling of
immediately converted to liquidation as provided in the petition;
Section 92 of this Act.
(d) direct the publication of the Order in a
newspaper of general circulation in the
 Philippines once a week for at least two (2) (b) The majority of any class of creditors do
consecutive weeks, with the first publication not in fact support the Rehabilitation Plan;
to be made within seven (7) days from the
time of its issuance; (c) The Rehabilitation Plan fails to
accurately account for a claim against the
(e) direct the service by personal delivery of debtor and the claim in not categorically
a copy of the petition on each creditor who declared as a contested claim; or
is not a petitioner holding at least ten percent
(10%) of the total liabilities of the debtor, as (d) The support of the creditors, or any of
determined in the schedule attached to the them was induced by fraud.
petition, within three (3) days;
Copies of any objection to the petition of the
(f) state that copies of the petition and the Rehabilitation Plan shall be served on the debtor, the
Rehabilitation Plan are available for rehabilitation receiver (if applicable), the secured
examination and copying by any interested creditor with the largest claim and who supports the
party; Rehabilitation Plan, and the unsecured creditor with
the largest claim and who supports the Rehabilitation
(g) state that creditors and other interested Plan.
parties opposing the petition or
Rehabilitation Plan may file their objections Section 80. Hearing on the Objections. - After
or comments thereto within a period of not receipt of an objection, the court shall set the same
later than twenty (20) days from the second for hearing. The date of the hearing shall be no earlier
publication of the Order; than twenty (20) days and no later than thirty (30)
days from the date of the second publication of the
(h) appoint a rehabilitation receiver, if Order mentioned in Section 77 hereof. If the court
provided for in the Plan; and finds merit in the objection, it shall direct the debtor,
when feasible to cure the detect within a reasonable
(i) include a Suspension or Stay Order as period. If the court determines that the debtor or
described in this Act. creditors supporting the Rehabilitation Plan acted in
bad faith, or that the objection is non-curable, the
Section 78. Approval of the Plan. - Within ten (10) court may order the conversion of the proceedings
days from the date of the second publication of the into liquidation. A finding by the court that the
Order, the court shall approve the Rehabilitation Plan objection has no substantial merit, or that the same
unless a creditor or other interested party submits an has been cured shall be deemed an approval of the
objection to it in accordance with the next succeeding Rehabilitation Plan.
section.
Section 81. Period for Approval of Rehabilitation
Section 79. Objection to the Petition or Plan. - The court shall have a maximum period of
Rehabilitation Plan. - Any creditor or other interested one hundred twenty (120) days from the date of the
party may submit to the court a verified objection to filing of the petition to approve the Rehabilitation
the petition or the Rehabilitation Plan not later than Plan. If the court fails to act within the said period,
eight (8) days from the date of the second publication the Rehabilitation Plan shall be deemed approved.
of the Order mentioned in Section 77 hereof. The
objections shall be limited to the following: Section 82. Effect of Approval. - Approval of a Plan
under this chapter shall have the same legal effect as
(a) The allegations in the petition or the confirmation of a Plan under Chapter II of this Act.
Rehabilitation Plan or the attachments
thereto are materially false or misleading;
 CHAPTER IV notice thereof is publishing in a newspaper of general
OUT-OF-COURT OR INFORMAL circulation in the Philippines once a week for two (2)
RESTRUCTURING AGREEMENTS OR consecutive weeks; and (c) the standstill period does
REHABILITATION PLANS not exceed one hundred twenty (120) days from the
date of effectivity. The notice must invite creditors to
Section 83. Out-of-Court or Informal Restructuring participate in the negotiation for out-of-court
Agreements and Rehabilitation Plans. - An out-of- rehabilitation or restructuring agreement and notify
curt or informal restructuring agreement or them that said agreement will be binding on all
Rehabilitation Plan that meets the minimum creditors if the required majority votes prescribed in
requirements prescribed in this chapter is hereby Section 84 of this Act are met.
recognized as consistent with the objectives of this
Act. Section 86. Cram Down Effect. - A
restructuring/workout agreement or Rehabilitation
Section 84. Minimum Requirements of Out-of-Court Plan that is approved pursuant to an informal
or Informal Restructuring Agreements and workout framework referred to in this chapter shall
Rehabilitation Plans. - For an out-of-court or have the same legal effect as confirmation of a Plan
informal restructuring/workout agreement or under Section 69 hereof. The notice of the
Rehabilitation Plan to qualify under this chapter, it Rehabilitation Plan or restructuring agreement or
must meet the following minimum requirements: Plan shall be published once a week for at least three
(3) consecutive weeks in a newspaper of general
(a) The debtor must agree to the out-of-court circulation in the Philippines. The Rehabilitation Plan
or informal restructuring/workout agreement or restructuring agreement shall take effect upon the
or Rehabilitation Plan; lapse of fifteen (15) days from the date of the last
publication of the notice thereof.
(b) It must be approved by creditors
representing at least sixty-seven (67%) of Section 87. Amendment or Modification. - Any
the secured obligations of the debtor; amendment of an out-of-court restructuring/workout
agreement or Rehabilitation Plan must be made in
(c) It must be approved by creditors accordance with the terms of the agreement and with
representing at least seventy-five percent due notice on all creditors.
(75%) of the unsecured obligations of the
debtor; and Section 88. Effect of Court Action or Other
Proceedings. - Any court action or other proceedings
(d) It must be approved by creditors holding arising from, or relating to, the out-of-court or
at least eighty-five percent (85%) of the total informal restructuring/workout agreement or
liabilities, secured and unsecured, of the Rehabilitation Plan shall not stay its implementation,
debtor. unless the relevant party is able to secure a temporary
restraining order or injunctive relief from the Court
Section 85. Standstill Period. - A standstill period of Appeals.
that may be agreed upon by the parties pending
negotiation and finalization of the out-of-court or Section 89. Court Assistance. - The insolvent debtor
informal restructuring/workout agreement or and/or creditor may seek court assistance for the
Rehabilitation Plan contemplated herein shall be execution or implementation of a Rehabilitation Plan
effective and enforceable not only against the under this Chapter, under such rules of procedure as
contracting parties but also against the other may be promulgated by the Supreme Court.
creditors: Provided, That (a) such agreement is
approved by creditors representing more than fifty
percent (50%) of the total liabilities of the debtor; (b)
 CHAPTER V (a) there is no genuine issue of fact or law
LIQUIDATION OF INSOLVENT JURIDICAL on the claims/s of the petitioner/s, and that
DEBTORS the due and demandable payments thereon
have not been made for at least one hundred
Section 90. Voluntary Liquidation. - An insolvent eighty (180) days or that the debtor has
debtor may apply for liquidation by filing a petition failed generally to meet its liabilities as they
for liquidation with the court. The petition shall be fall due; and
verified, shall establish the insolvency of the debtor
and shall contain, whether as an attachment or as part (b) there is no substantial likelihood that the
of the body of the petition; debtor may be rehabilitated.

(a) a schedule of the debtor's debts and At any time during the pendency of or after a
liabilities including a list of creditors with rehabilitation court-supervised or pre-negotiated
their addresses, amounts of claims and rehabilitation proceedings, three (3) or more creditors
collaterals, or securities, if any; whose claims is at least either One million pesos
(Php1,000,000.00) or at least twenty-five percent
(b) an inventory of all its assets including (25%) of the subscribed capital or partner's
receivables and claims against third parties; contributions of the debtor, whichever is higher, may
and also initiate liquidation proceedings by filing a
motion in the same court where the rehabilitation
(c) the names of at least three (3) nominees proceedings are pending to convert the rehabilitation
to the position of liquidator. proceedings into liquidation proceedings. The motion
shall be verified, shall contain or set forth the same
At any time during the pendency of court-supervised matters required in the preceding paragraph, and state
or pre-negotiated rehabilitation proceedings, the that the movants are seeking the immediate
debtor may also initiate liquidation proceedings by liquidation of the debtor.
filing a motion in the same court where the
rehabilitation proceedings are pending to convert the If the petition or motion is sufficient in form and
rehabilitation proceedings into liquidation substance, the court shall issue an Order:
proceedings. The motion shall be verified, shall
contain or set forth the same matters required in the (1) directing the publication of the petition
preceding paragraph, and state that the debtor is or motion in a newspaper of general
seeking immediate dissolution and termination of its circulation once a week for two (2)
corporate existence. consecutive weeks; and

If the petition or the motion, as the case may be, is (2) directing the debtor and all creditors who
sufficient in form and substance, the court shall issue are not the petitioners to file their comment
a Liquidation Order mentioned in Section 112 hereof. on the petition or motion within fifteen (15)
days from the date of last publication.
Section 91. Involuntary Liquidation. - Three (3) or
more creditors the aggregate of whose claims is at If, after considering the comments filed, the court
least either One million pesos (Php1,000,000,00) or determines that the petition or motion is meritorious,
at least twenty-five percent (25%0 of the subscribed it shall issue the Liquidation Order mentioned in
capital stock or partner's contributions of the debtor, Section 112 hereof.
whichever is higher, may apply for and seek the
liquidation of an insolvent debtor by filing a petition Section 92. Conversion by the Court into Liquidation
for liquidation of the debtor with the court. The Proceedings. - During the pendency of court-
petition shall show that: supervised or pre-negotiated rehabilitation
proceedings, the court may order the conversion of (b) directing such creditors to prepare and
rehabilitation proceedings to liquidation proceedings present written evidence of their claims
pursuant to (a) Section 25(c) of this Act; or (b) before the scheduled creditors' meeting;
Section 72 of this Act; or (c) Section 75 of this Act;
or (d) Section 90 of this Act; or at any other time (c) directing the publication of the said order
upon the recommendation of the rehabilitation in a newspaper of general circulation
receiver that the rehabilitation of the debtor is not published in the province or city in which
feasible. Thereupon, the court shall issue the the petition is filed once a week for two (2)
Liquidation Order mentioned in Section 112 hereof. consecutive weeks, with the first publication
to be made within seven (7) days from the
Section 93. Powers of the Securities and Exchange time of the issuance of the Order;
Commission (SEC). - The provisions of this chapter
shall not affect the regulatory powers of the SEC (d) directing the clerk of court to cause the
under Section 6 of Presidential Decree No. 902-A, as sending of a copy of the Order by registered
amended, with respect to any dissolution and mail, postage prepaid, to all creditors named
liquidation proceeding initiated and heard before it. in the schedule of debts and liabilities;

CHAPTER VI (e) forbidding the individual debtor from

INSOLVENCY OF INDIVIDUAL DEBTORS selling, transferring, encumbering or
disposing in any manner of his property,
(A) Suspension of Payments. except those used in the ordinary operations
of commerce or of industry in which the
Section 94. Petition. - An individual debtor who, petitioning individual debtor is engaged so
possessing sufficient property to cover all his debts long as the proceedings relative to the
but foreseeing the impossibility of meeting them suspension of payments are pending;
when they respectively fall due, may file a verified
petition that he be declared in the state of suspension (f) prohibiting the individual debtor from
of payments by the court of the province or city in making any payment outside of the
which he has resides for six (6) months prior to the necessary or legitimate expenses of his
filing of his petition. He shall attach to his petition, as business or industry, so long as the
a minimum: (a) a schedule of debts and liabilities; (b) proceedings relative to the suspension of
an inventory of assess; and (c) a proposed agreement payments are pending; and
with his creditors.
(g) appointing a commissioner to preside
Section 95. Action on the Petition. - If the court finds over the creditors' meeting.
the petition sufficient in form and substance, it shall,
within five (5) working days from the filing of the Section 96. Actions Suspended. - Upon motion filed
petition, issue an Order: by the individual debtor, the court may issue an order
suspending any pending execution against the
(a) calling a meeting of all the creditors individual debtor. Provide, That properties held as
named in the schedule of debts and security by secured creditors shall not be the subject
liabilities at such time not less than fifteen of such suspension order. The suspension order shall
(15) days nor more than forty (40) days from lapse when three (3) months shall have passed
the date of such Order and designating the without the proposed agreement being accepted by
date, time and place of the meeting; 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 (e) After the result of the voting has been
for as long as proceedings remain pending except: announced, all protests made against the
majority vote shall be drawn up, and the
(a) those creditors having claims for commissioner and the individual debtor
personal labor, maintenance, expense of last together with all creditors taking part in the
illness and funeral of the wife or children of voting shall sign the affirmed propositions.
the debtor incurred in the sixty (60) days
immediately prior to the filing of the No creditor who incurred his credit within ninety (90)
petition; and days prior to the filing of the petition shall be entitled
to vote.
(b) secured creditors.
Section 98. Persons Who May Refrain From Voting.
Section 97. Creditors' Meeting. - The presence of - Creditors who are unaffected by the Suspension
creditors holding claims amounting to at least three- Order may refrain from attending the meeting and
fifths (3/5) of the liabilities shall be necessary for from voting therein. Such persons shall not be bound
holding a meeting. The commissioner appointed by by any agreement determined upon at such meeting,
the court shall preside over the meeting and the clerk but if they should join in the voting they shall be
of court shall act as the secretary thereof, subject to bound in the same manner as are the other creditors.
the following rules:
Section 99. Rejection of the Proposed Agreement. -
(a) The clerk shall record the creditors The proposed agreement shall be deemed rejected if
present and amount of their respective the number of creditors required for holding a
claims; meeting do not attend thereat, or if the two (2)
majorities mentioned in Section 97 hereof are not in
(b) The commissioner shall examine the favor thereof. In such instances, the proceeding shall
written evidence of the claims. If the be terminated without recourse and the parties
creditors present hold at least three-fifths concerned shall be at liberty to enforce the rights
(3/5) of the liabilities of the individual which may correspond to them.
debtor, the commissioner shall declare the
meeting open for business; Section 100. Objections. - If the proposal of the
individual debtor, or any amendment thereof made
(c) The creditors and individual debtor shall during the creditors' meeting, is approved by the
discuss the propositions in the proposed majority of creditors in accordance with Section 97
agreement and put them to a vote; hereof, any creditor who attended the meeting and
who dissented from and protested against the vote of
(d) To form a majority, it is necessary: the majority may file an objection with the court
within ten (10) days from the date of the last
(1) that two-thirds (2/3) of the creditors' meeting. The causes for which objection
creditors voting unite upon the may be made to the decision made by the majority
same proposition; and during the meeting shall be: (a) defects in the call for
the meeting, in the holding thereof and in the
(2) that the claims represented by deliberations had thereat which prejudice the rights of
said majority vote amount to at the creditors; (b) fraudulent connivance between one
least three-fifths (3/5) of the total or more creditors and the individual debtor to vote in
liabilities of the debtor mentioned favor of the proposed agreement; or (c) fraudulent
in the petition; and 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 (B) Voluntary Liquidation.
manner.
Section 103. Application. - An individual debtor
In case the decision of the majority of creditors to whose properties are not sufficient to cover his
approve the individual debtor's proposal or any liabilities, and owing debts exceeding Five hundred
amendment thereof made during the creditors' thousand pesos (Php500,000.00), may apply to be
meeting is annulled by the court, the court shall discharged from his debts and liabilities by filing a
declare the proceedings terminated and the creditors verified petition with the court of the province or city
shall be at liberty to exercise the rights which may in which he has resided for six (6) months prior to the
correspond to them. filing of such petition. He shall attach to his petition a
schedule of debts and liabilities and an inventory of
Section 101. Effects of Approval of Proposed assets. The filing of such petition shall be an act of
Agreement. - If the decision of the majority of the insolvency.
creditors to approve the proposed agreement or any
amendment thereof made during the creditors' Section 104. Liquidation Order. - If the court finds
meeting is uphold by the court, or when no the petition sufficient in form and substance it shall,
opposition or objection to said decision has been within five (5) working days issue the Liquidation
presented, the court shall order that the agreement be Order mentioned in Section 112 hereof.
carried out and all parties bound thereby to comply
with its terms. (C) In voluntary Liquidation.

The court may also issue all orders which may be Section 105. Petition; Acts of Insolvency. - Any
necessary or proper to enforce the agreement on creditor or group of creditors with a claim of, or with
motion of any affected party. The Order confirming claims aggregating at least Five hundred thousand
the approval of the proposed agreement or any pesos (Php500, 000.00) may file a verified petition
amendment thereof made during the creditors' for liquidation with the court of the province or city
meeting shall be binding upon all creditors whose in which the individual debtor resides.
claims are included in the schedule of debts and
liabilities submitted by the individual debtor and who The following shall be considered acts of insolvency,
were properly summoned, but not upon: (a) those and the petition for liquidation shall set forth or
creditors having claims for personal labor, allege at least one of such acts:
maintenance, expenses of last illness and funeral of
the wife or children of the debtor incurred in the sixty (a) That such person is about to depart or
(60) days immediately prior to the filing of the has departed from the Republic of the
petition; and (b) secured creditors who failed to Philippines, with intent to defraud his
attend the meeting or refrained from voting therein. creditors;

Section 102. Failure of Individual Debtor to Perform (b) That being absent from the Republic of
Agreement. - If the individual debtor fails, wholly or the Philippines, with intent to defraud his
in part, to perform the agreement decided upon at the creditors, he remains absent;
meeting of the creditors, all the rights which the
creditors had against the individual debtor before the (c) That he conceals himself to avoid the
agreement shall revest in them. In such case the service of legal process for the purpose of
individual debtor may be made subject to the hindering or delaying the liquidation or of
insolvency proceedings in the manner established by defrauding his creditors;
this Act.
(d) That he conceals, or is removing, any of (m) That an execution having been issued
his property to avoid its being attached or against him on final judgment for money, he
taken on legal process; shall have been found to be without
sufficient property subject to execution to
(e) That he has suffered his property to satisfy the judgment.
remain under attachment or legal process for
three (3) days for the purpose of hindering The petitioning creditor/s shall post a bond in such as
or delaying the liquidation or of defrauding the court shall direct, conditioned that if the petition
his creditors; for liquidation is dismissed by the court, or
withdrawn by the petitioner, or if the debtor shall not
(f) That he has confessed or offered to allow be declared an insolvent the petitioners will pay to
judgment in favor of any creditor or the debtor all costs, expenses, damages occasioned by
claimant for the purpose of hindering or the proceedings and attorney's fees.
delaying the liquidation or of defrauding any
creditors or claimant; Section 106. Order to Individual Debtor to Show
Cause. - Upon the filing of such creditors' petition,
(g) That he has willfully suffered judgment the court shall issue an Order requiring the individual
to be taken against him by default for the debtor to show cause, at a time and place to be fixed
purpose of hindering or delaying the by the said court, why he should not be adjudged an
liquidation or of defrauding his creditors; insolvent. Upon good cause shown, the court may
issue an Order forbidding the individual debtor from
(h) That he has suffered or procured his making payments of any of his debts, and transferring
property to be taken on legal process with any property belonging to him. However, nothing
intent to give a preference to one or more of contained herein shall affect or impair the rights of a
his creditors and thereby hinder or delay the secured creditor to enforce his lien in accordance
liquidation or defraud any one of his with its terms.
creditors;
Section 107. Default. - If the individual debtor shall
(i) That he has made any assignment, gift, default or if, after trial, the issues are found in favor
sale, conveyance or transfer of his estate, of the petitioning creditors the court shall issue the
property, rights or credits with intent to Liquidation Order mentioned in Section 112 hereof.
hinder or delay the liquidation or defraud his
creditors; Section 108. Absent Individual Debtor. - In all cases
where the individual debtor resides out of the
(j) That he has, in contemplation of Republic of the Philippines; or has departed
insolvency, made any payment, gift, grant, therefrom; or cannot, after due diligence, be found
sale, conveyance or transfer of his estate, therein; or conceals himself to avoid service of the
property, rights or credits; Order to show cause, or any other preliminary
process or orders in the matter, then the petitioning
(k) That being a merchant or tradesman, he creditors, upon submitting the affidavits requisite to
has generally defaulted in the payment of his procedure an Order of publication, and presenting a
current obligations for a period of thirty (30) bond in double the amount of the aggregate sum of
days; their claims against the individual debtor, shall be
entitled to an Order of the court directing the sheriff
(l) That for a period of thirty (30) days, he of the province or city in which the matter is pending
has failed, after demand, to pay any moneys to take into his custody a sufficient amount of
deposited with him or received by him in a property of the individual debtor to satisfy the
fiduciary; and demands of the petitioning creditors and the costs of
the proceedings. Upon receiving such Order of the appeal from the decision of the court, upon final
court to take into custody of the property of the hearing of the petition, the appellant shall be required
individual debtor, it shall be the duty of the sheriff to to give bond to the successful party in a sum double
take possession of the property and effects of the the amount of the value of the property in
individual debtor, not exempt from execution, to an controversy, and for the costs of the proceedings.
extent sufficient to cover the amount provided for
and to prepare within three (3) days from the time of Any person interested in the estate may take
taking such possession, a complete inventory of all exception to the sufficiency of the sureties on such
the property so taken, and to return it to the court as bond or bonds. When excepted to the petitioner's
soon as completed. The time for taking the inventory sureties, upon notice to the person excepting of not
and making return thereof may be extended for good less than two (2) nor more than five (5) days, must
cause shown to the court. The sheriff shall also justify as to their sufficiency; and upon failure to
prepare a schedule of the names and residences of the justify, or of others in their place fail to justify at the
creditors, and the amount due each, from the books of time and place appointed the judge shall issue an
the debtor, or from such other papers or data of the Order vacating the order to take the property of the
individual debtor available as may come to his individual debtor into the custody of the sheriff, or
possession, and shall file such schedule or list of denying the appeal, as the case may be.
creditors and inventory with the clerk of court.
Section 110. Sale Under Execution. - If, in any case,
Section 109. All Property Taken to be Held for All proper affidavits and bonds are presented to the court
Creditors; Appeal Bonds; Exemptions to Sureties. - or a judge thereof, asking for and obtaining an Order
In all cases where property is taken into custody by of publication and an Order for the custody of the
the sheriff, if it does not embrace all the property and property of the individual debtor and thereafter the
effects of the debtor not exempt from execution, any petitioners shall make it appear satisfactorily to the
other creditor or creditors of the individual debtor, court or a judge thereof that the interest of the parties
upon giving bond to be approved by the court in to the proceedings will be subserved by a sale
double the amount of their claims, singly or jointly, thereof, the court may order such property to be sold
shall be entitled to similar orders and to like action, in the same manner as property is sold under
by the sheriff; until all claims be provided for, if there execution, the proceeds to de deposited in the court to
be sufficient property or effects. All property taken abide by the result of the proceedings.
into custody by the sheriff by virtue of the giving of
any such bonds shall be held by him for the benefit of CHAPTER VII
all creditors of the individual debtor whose claims PROVISIONS COMMON TO LIQUIDATION
shall be duly proved as provided in this Act. The IN INSOLVENCY OF INDIVIDUAL AND
bonds provided for in this section and the preceding JURIDICAL DEBTORS
section to procure the order for custody of the
property and effects of the individual debtor shall be Section 111. Use of Term Debtor. - For purposes of
conditioned that if, upon final hearing of the petition this chapter, the term debtor shall include both
in insolvency, the court shall find in favor of the individual debtor as defined in Section 4(o) and
petitioners, such bonds and all of them shall be void; debtor as defined in Section 4(k) of this Act.
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 (A) The Liquidation Order.
shall be sufficient to cover the damages sustained by
him, not to exceed the amount of the respective Section 112. Liquidation Order. - The Liquidation
bonds. Such damages shall be fixed and allowed by Order shall:
the court. If either the petitioners or the debtor shall
 (a) declare the debtor insolvent; (b) legal title to and control of all the assets
of the debtor, except those that may be
(b) order the liquidation of the debtor and, in exempt from execution, shall be deemed
the case of a juridical debtor, declare it as vested in the liquidator or, pending his
dissolved; election or appointment, with the court;

(c) order the sheriff to take possession and (c) all contracts of the debtor shall be
control of all the property of the debtor, deemed terminated and/or breached, unless
except those that may be exempt from the liquidator, within ninety (90) days from
execution; the date of his assumption of office, declares
otherwise and the contracting party agrees;
(d) order the publication of the petition or
motion in a newspaper of general circulation (d) no separate action for the collection of an
once a week for two (2) consecutive weeks; unsecured claim shall be allowed. Such
actions already pending will be transferred
(e) direct payments of any claims and to the Liquidator for him to accept and settle
conveyance of any property due the debtor or contest. If the liquidator contests or
to the liquidator; disputes the claim, the court shall allow,
hear and resolve such contest except when
(f) prohibit payments by the debtor and the the case is already on appeal. In such a case,
transfer of any property by the debtor; the suit may proceed to judgment, and any
final and executor judgment therein for a
(g) direct all creditors to file their claims claim against the debtor shall be filed and
with the liquidator within the period set by allowed in court; and
the rules of procedure;
(e) no foreclosure proceeding shall be
(h) authorize the payment of administrative allowed for a period of one hundred eighty
expenses as they become due; (180) days.

(i) state that the debtor and creditors who are Section 114. Rights of Secured Creditors. - The
not petitioner/s may submit the names of Liquidation Order shall not affect the right of a
other nominees to the position of liquidator; secured creditor to enforce his lien in accordance
and with the applicable contract or law. A secured
creditor may:
(j) set the case for hearing for the election
and appointment of the liquidator, which (a) waive his right under the security or lien,
date shall not be less than thirty (30) days prove his claim in the liquidation
nor more than forty-five (45) days from the proceedings and share in the distribution of
date of the last publication. the assets of the debtor; or

Section 113. Effects of the Liquidation Order. - Upon (b) maintain his rights under the security or
the issuance of the Liquidation Order: lien:

(a) the juridical debtor shall be deemed If the secured creditor maintains his rights under the
dissolved and its corporate or juridical security or lien:
existence terminated;
(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 (b) the creditors who attend, fail or refuse to
property is less than the claim it secures, the elect a liquidator;
liquidator may convey the property to the
secured creditor and the latter will be (c) after being elected, the liquidator fails to
admitted in the liquidation proceedings as a qualify; or
creditor for the balance. If its value exceeds
the claim secured, the liquidator may convey (d) a vacancy occurs for any reason
the property to the creditor and waive the whatsoever, In any of the cases provided
debtor's right of redemption upon receiving herein, the court may instead set another
the excess from the creditor; hearing of the election of the liquidator.

(2) the liquidator may sell the property and Provided further, That nothing in this section shall be
satisfy the secured creditor's entire claim construed to prevent a rehabilitation receiver, who
from the proceeds of the sale; or was administering the debtor prior to the
commencement of the liquidation, from being
(3) the secure creditor may enforce the lien appointed as a liquidator.
or foreclose on the property pursuant to
applicable laws. 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.
(B) The Liquidator.
Section 118. Qualifications of the Liquidator. - The
Section 115. Election of Liquidator. - Only creditors liquidator shall have the qualifications enumerated in
who have filed their claims within the period set by Section 29 hereof. He may be removed at any time by
the court, and whose claims are not barred by the the court for cause, either motu propio or upon
statute of limitations, will be allowed to vote in the motion of any creditor entitled to vote for the election
election of the liquidator. A secured creditor will not of the liquidator.
be allowed to vote, unless: (a) he waives his security
or lien; or (b) has the value of the property subject of Section 119. Powers, Duties and Responsibilities of
his security or lien fixed by agreement with the the Liquidator. - The liquidator shall be deemed an
liquidator, and is admitted for the balance of his officer of the court with the principal duly of
claim. preserving and maximizing the value and recovering
the assets of the debtor, with the end of liquidating
The creditors entitled to vote will elect the liquidator them and discharging to the extent possible all the
in open court. The nominee receiving the highest claims against the debtor. The powers, duties and
number of votes cast in terms of amount of claims, ad responsibilities of the liquidator shall include, but not
who is qualified pursuant to Section 118 hereof, shall limited to:
be appointed as the liquidator.
(a) to sue and recover all the assets, debts
Section 116. Court-Appointed Liquidator. - The and claims, belonging or due to the debtor;
court may appoint the liquidator if:
(b) to take possession of all the property of
(a) on the date set for the election of the the debtor except property exempt by law
liquidator, the creditors do not attend; from execution;
 (c) to sell, with the approval of the court, Section 121. Reporting Requiremen5ts. - The
any property of the debtor which has come liquidator shall make and keep a record of all moneys
into his possession or control; received and all disbursements mad by him or under
his authority as liquidator. He shall render a quarterly
(d) to redeem all mortgages and pledges, and report thereof to the court , which report shall be
so satisfy any judgement which may be an made available to all interested parties. The liquidator
encumbrance on any property sold by him; shall also submit such reports as may be required by
the court from time to time as well as a final report at
(e) to settle all accounts between the debtor the end of the liquidation proceedings.
and his creditors, subject to the approval of
the court; Section 122. Discharge of Liquidator. - In
preparation for the final settlement of all the claims
(f) to recover any property or its value, against the debtor , the liquidator will notify all the
fraudulently conveyed by the debtor; creditors, either by publication in a newspaper of
general circulation or such other mode as the court
(g) to recommend to the court the creation of may direct or allow, that will apply with the court for
a creditors' committee which will assist him the settlement of his account and his discharge from
in the discharge of the functions and which liability as liquidator. The liquidator will file a final
shall have powers as the court deems just, accounting with the court, with proof of notice to all
reasonable and necessary; and creditors. The accounting will be set for hearing. If
the court finds the same in order, the court will
(h) upon approval of the court, to engage discharge the liquidator.
such professional as may be necessary and
reasonable to assist him in the discharge of (C) Determination of Claims
his duties.
Section 123. Registry of Claims. - Within twenty (20)
In addition to the rights and duties of a rehabilitation days from his assumption into office the liquidator
receiver, the liquidator, shall have the right and duty shall prepare a preliminary registry of claims of
to take all reasonable steps to manage and dispose of secured and unsecured creditors. Secured creditors
the debtor's assets with a view towards maximizing who have waived their security or lien, or have fixed
the proceedings therefrom, to pay creditors and the value of the property subject of their security or
stockholders, and to terminate the debtor's legal lien by agreement with the liquidator and is admitted
existence. Other duties of the liquidator in as a creditor for the balance , shall be considered as
accordance with this section may be established by unsecured creditors. The liquidator shall make the
procedural rules. registry available for public inspection and provide
publication notice to creditors, individual debtors
A liquidator shall be subject to removal pursuant to owner/s of the sole proprietorship-debtor, the partners
procedures for removing a rehabilitation receiver. of the partnership-debtor and shareholders or
members of the corporation-debtor, on where and
Section 120. Compensation of the Liquidator. - The when they may inspect it. All claims must be duly
liquidator and the persons and entities engaged or proven before being paid.
employed by him to assist in the discharge of his
powers and duties shall be entitled to such reasonable Section 124. Right of Set-off. - If the debtor and
compensation as may determined by the liquidation creditor are mutually debtor and creditor of each
court, which shall not exceed the maximum amount other one debt shall be set off against the other, and
as may be prescribed by the Supreme Court. only the balance, if any shall be allowed in the
liquidation proceedings.
Section 125. - Opposition or Challenge to Claims. - (b) if leave of court is granted under
Within thirty (30 ) days from the expiration of the subsection (a) hereof, the liquidator shall
period for filing of applications for recognition of assign and transfer to the creditor all rights,
claims, creditors, individual debtors, owner/s of the title and interest in the chose in action or
sole proprietorship-debtor, partners of the subject matter of the proceeding, including
partnership-debtor and shareholders or members of any document in support thereof.
the corporation -debtor and other interested parties
may submit a challenge to claim or claims to the (c) Any benefit derived from a proceeding
court, serving a certified copy on the liquidator and taken pursuant to subsection (a) hereof, to
the creditor holding the challenged claim. Upon the the extent of his claim and the costs, belongs
expiration of the (30) day period, the rehabilitation exclusively to the creditor instituting the
receiver shall submit to the court the registry of proceeding, and the surplus, if any, belongs
claims containing the undisputed claims that have not to the estate.
been subject to challenge. Such claims shall become
final upon the filling of the register and may be (d) Where, before an orders is made under
subsequently set aside only on grounds or fraud, subsection (a) hereof, the liquidator signifies
accident, mistake or inexcusable neglect. to the court his readiness to the institute the
proceeding for the benefit of the creditors,
Section 126. Submission of Disputed to the Court. - the order shall fix the time within which he
The liquidator shall resolve disputed claims and shall do so and, in that case the benefit
submit his findings thereon to the court for final derived from the proceedings, if instituted
approval. The liquidator may disallow claims. within the time limits so fixed, belongs to
the estate.

(E) The Liquidation Plan.

(D) Avoidance Proceedings.
Section 129. The Liquidation Plan. - Within three (3)
Section 127. Rescission or Nullity of Certain months from his assumption into office, the
Transactions. - Any transaction occurring prior to the Liquidator shall submit a Liquidation Plan to the
issuance of the Liquidation Order or, in case of the court. The Liquidation Plan shall, as a minimum
conversion of the rehabilitation proceedings prior to enumerate all the assets of the debtor and a schedule
the commencement date, entered into by the debtor or of liquidation of the assets and payment of the
involving its assets, may be rescinded or declared claims.
null and void on the ground that the same was
executed with intent to defraud a creditor or creditors Section 130. Exempt Property to be Set Apart. - It
or which constitute undue preference of creditors. shall be the duty of the court, upon petition and after
The presumptions set forth in Section 58 hereof shall hearing, to exempt and set apart, for the use and
apply. benefit of the said insolvent, such real and personal
property as is by law exempt from execution, and
Section 128. Actions for Rescission or Nullity. - (a) also a homestead; but no such petition shall be heard
The liquidator or, with his conformity, a creditor may as aforesaid until it is first proved that notice of the
initiate and prosecute any action to rescind, or declare hearing of the application therefor has been duly
null and void any transaction described in the given by the clerk, by causing such notice to be
immediately preceding paragraph. If the liquidator posted it at least three (3) public places in the
does not consent to the filling or prosecution of such province or city at least ten (10) days prior to the time
action, any creditor may seek leave of the court to of such hearing, which notice shall set forth the name
commence said action. 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 Section 135. Termination of Proceedings. - Upon
exempted or the property sought to be set aside; and receipt of evidence showing that the debtor has been
the decree must show that such proof was made to removed from the registry of legal entities at the
the satisfaction of the court, and shall be conclusive SEC. The court shall issue an Order terminating the
evidence of that fact. proceedings.

Section 131. Sale of Assets in Liquidation. - The (F) Liquidation of a Securities Market
liquidator may sell the unencumbered assets of the Participant.
debtor and convert the same into money. The sale
shall be made at public auction. However, a private Section 136. Liquidation of a Securities Market
sale may be allowed with the approval of the court if; Participant. - The foregoing provisions of this
(a) the goods to be sold are of a perishable nature, or chapter shall be without prejudice to the power of a
are liable to quickly deteriorate in value, or are regulatory agency or self- regulatory organization to
disproportionately expensive to keep or maintain; or liquidate trade-related claims of clients or customers
(b) the private sale is for the best interest of the of a securities market participant which, for purposes
debtor and his creditors. of investor protection, are hereby deemed to have
absolute priority over other claims of whatever nature
With the approval of the court, unencumbered or kind insofar as trade-related assets are concerned.
property of the debtor may also be conveyed to a
creditor in satisfaction of his claim or part thereof. For purposes of this section, trade -related assets
include cash, securities, trading right and other
Section 132. manner of Implementing the owned and used by the securities market participant
Liquidation Plan. - The Liquidator shall implement in the ordinary course of this business.
the Liquidation Plan as approved by the court.
Payments shall be made to the creditors only in CHAPTER VIII
accordance with the provisions of the Plan. PROCEEDINGS ANCILLARY TO OTHER
INSOLVENCY OR REHABILITAION
Section 133. Concurrence and Preference of Credits. PROCEEDINGS
- The Liquidation Plan and its Implementation shall
ensure that the concurrence and preference of credits (A) Banks and Other Financial Institutions Under
as enumerated in the Civil Code of the Philippines Rehabilitation Receivership Pursuant to a State-
and other relevant laws shall be observed, unless a funded or State-mandated Insurance System.
preferred creditor voluntarily waives his preferred
right. For purposes of this chapter, credits for Section 137. Provision of Assistance. - The court
services rendered by employees or laborers to the shall issue orders, adjudicate claims and provide
debtor shall enjoy first preference under Article 2244 other relief necessary to assist in the liquidation of a
of the Civil Code, unless the claims constitute legal financial under rehabilitation receivership established
liens under Article 2241 and 2242 thereof. by a state-funded or state-mandated insurance
system.
Section 134. Order Removing the Debtor from the
List of Registered Entitles at the Securities and Section 138. Application of Relevant Legislation. -
Exchange Commission. - Upon determining that the The liquidation of bank, financial institutions,
liquidation has been completed according to this Act insurance companies and pre-need companies shall
and applicable law, the court shall issue an Order be determined by relevant legislation. The provisions
approving the report and ordering the SEC to remove in this Act shall apply in a suppletory manner.
the debtor from the registry of legal entities.
(B) Cross-Border Insolvency Proceedings.
Section 139. Adoption of Uncitral Model Law on in accordance with the manner prescribed in
Cross-Border Insolvency. - Subject to the provision this Act; and
of Section 136 hereof and the rules of procedure that
may be adopted by the Supreme Court, the Model (e) the extent that the foreign proceeding has
Law on Cross-Border Insolvency of the United recognized and shown deference to
Nations Center for International Trade and proceedings under this Act and previous
Development is hereby adopted as part of this Act. legislation.

Section 140. Initiation of Proceedings. - The court CHAPTER IX

shall set a hearing in connection with an insolvency FUNDS FOR REHABILITATION OF
or rehabilitation proceeding taking place in a foreign GOVERNMENT-OWNED AND CONTROLLED
jurisdiction, upon the submission of a petition by the CORPORATIONS
representative of the foreign entity that is the subject
of the foreign proceeding. Section 143. Funds for Rehabilitation of Government
-owned and Controlled Corporations. - Public funds
Section 141. Provision of Relief. - The court may for the rehabilitation of government-owned and
issue orders: controlled corporations shall be released only
pursuant to an appropriation by Congress and shall be
(a) suspending any action to enforce claims supported by funds actually available as certified by
against the entity or otherwise seize or the National Treasurer.
foreclose on property of the foreign entity
located in the Philippines; The Department of Finance, in collaboration with the
Department of Budget and Management, shall
(b) requiring the surrender property of the promulgate the rules for the use and release of said
foreign entity to the foreign representative; funds.
or
CHAPTER X
(c) providing other necessary relief. MISCELLANEOUS PROVISIOS

Section 142. Factors in Granting Relief. - In Section 144. Applicability of Provisions. - The
determining whether to grant relief under this provisions in Chapter II, insofar as they are
subchapter, the court shall consider; applicable, shall likewise apply to proceedings in
Chapters II and IV.
(a) the protection of creditors in the
Philippines and the inconvenience in Section 145. Penalties. - An owner, partner, director,
pursuing their claim in a foreign proceeding; officer or other employee of the debtor who commits
any one of the following acts shall, upon conviction
(b) the just treatment of all creditors through thereof, be punished by a fine of not more than One
resort to a unified insolvency or million pesos (Php 1, 000,000.00) and imprisonment
rehabilitation proceedings; for not less than three(3) months nor more than five
(5) years for each offense;
(c) whether other jurisdictions have given
recognition to the foreign proceeding; (a) if he shall, having notice of the
commencement of the proceedings, or
(d) the extent that the foreign proceeding having reason to believe that proceedings
recognizes the rights of creditors and other are about to be commented, or in
interested parties in a manner substantially contemplation of the proceedings hide or
conceal, or destroy or cause to be destroyed
 or hidden any property belonging to the Section 150. Effectivity Clause. - This Act shall take
debtor or if he shall hide, destroy, after effect fifteen (15) days after its complete publication
mutilate or falsify, or cause to be hidden, in the Official Gazette or in at least two (2) national
destroyed, altered, mutilated or falsified, any newspaper of general circulation.
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
Batas Pambansa Bilang 22.chanrobles
(b) if he shall, having knowledge belief of virtual law library
any person having proved a false or THE ANTI-BOUNCING CHECK LAW s
fictitious claim against the debtor, fail to virtual law library
disclose the same to the rehabilitation BATAS PAMBANSA BLG. 22
receiver of liquidator within one (1) month AN ACT PENALIZING THE MAKING OR
after coming to said knowledge or belief; or DRAWING AND ISSUANCE OF A CHECK
if he shall attempt to account for any of the WITHOUT SUFFICIENT FUNDS OR CREDIT
debtors property by fictitious losses or AND FOR OTHER PURPOSES.
expense; or
Section 1. Checks without sufficient funds. - Any
(c) if he shall knowingly violate a person who makes or draws and issues any check to
prohibition or knowingly fail to undertake apply on account or for value, knowing at the time of
an obligation established by this Act. issue that he does not have sufficient funds in or
credit with the drawee bank for the payment of such
Section 146. Application to Pending Insolvency, check in full upon its presentment, which check is
Suspension of Payments and Rehabilitation Cases. - subsequently dishonored by the drawee bank for
This Act shall govern all petitions filed after it has insufficiency of funds or credit or would have been
taken effect. All further proceedings in insolvency, dishonored for the same reason had not the drawer,
suspension of payments and rehabilitation cases then without any valid reason, ordered the bank to stop
pending, except to the extent that in opinion of the payment, shall be punished by imprisonment of not
court their application would not be feasible or would less than thirty days but not more than one (1) year or
work injustice, in which event the procedures set by a fine of not less than but not more than double
forth in prior laws and regulations shall apply. the amount of the check which fine shall in no case
exceed Two Hundred Thousand Pesos, or both such
Section 147. Application to Pending Contracts. - fine and imprisonment at the discretion of the court.
This Act shall apply to all contracts of the debtor
regardless of the date of perfection. The same penalty shall be imposed upon any person
who, having sufficient funds in or credit with the
Section 148. Repeating Clause. - The Insolvency drawee bank when he makes or draws and issues a
Law (Act No. 1956). As amended is hereby repealed. check, shall fail to keep sufficient funds or to
All other laws, orders, rules and regulations or parts maintain a credit to cover the full amount of the
thereof inconsistent with any provision of this Act are check if presented within a period of ninety (90) days
hereby repealed or modified accordingly. from the date appearing thereon, for which reason it
is dishonored by the drawee bank.
Section 149. Separability Clause. - If any provision
of this Act shall be held invalid, the remainder of this Where the check is drawn by a corporation, company
Act not otherwise affected shall remain in full force or entity, the person or persons who actually signed
effect the check in behalf of such drawer shall be liable
under this Act. to any liability for violation of any provision of the
Revised Penal Code. 
Sec. 2. Evidence of knowledge of insufficient funds. -
The making, drawing and issuance of a check Sec. 6. Separability clause. - If any separable
payment of which is refused by the drawee because provision of this Act be declared unconstitutional, the
of insufficient funds in or credit with such bank, remaining provisions shall continue to be in force.
when presented within ninety (90) days from the date
of the check, shall be prima facie evidence of Sec. 7. Effectivity. - This Act shall take effect fifteen
knowledge of such insufficiency of funds or credit days after publication in the Official Gazette.
unless such maker or drawer pays the holder thereof
the amount due thereon, or makes arrangements for
payment in full by the drawee of such check within
(5) banking days after receiving notice that such
check has not been paid by the drawee. REPUBLIC ACT NO. 8799

Sec. 3. Duty of drawee; rules of evidence. - It shall be THE SECURITIES REGULATION CODE
the duty of the drawee of any check, when refusing to
pay the same to the holder thereof upon presentment, Be it enacted by the Senate and the House of
to cause to be written, printed, or stamped in plain Representative of the Philippines in the Congress
language thereon, or attached thereto, the reason for assembled:
drawee's dishonor or refusal to pay the same:
CHAPTER I
Provided, That where there are no sufficient funds in
TITLE AND DEFINITIONS
or credit with such drawee bank, such fact shall
always be explicitly stated in the notice of dishonor
Section 1. Title. - This shall be known as "The
or refusal.  In all prosecutions under this Act, the Securities Regulation Code"
introduction in evidence of any unpaid and
dishonored check, having the drawee's refusal to pay Section 2. Declaration of State Policy. – The State
stamped or written thereon or attached thereto, with shall establish a socially conscious, free market that
the reason therefor as aforesaid, shall be prima facie regulates itself, encourage the widest participation of
evidence of the making or issuance of said check, and ownership in enterprises, enhance the
the due presentment to the drawee for payment and democratization of wealth, promote the development
of the capital market, protect investors, ensure full
the dishonor thereof, and that the same was properly
and fair disclosure about securities, minimize if not
dishonored for the reason written, stamped or totally eliminate insider trading and other fraudulent
attached by the drawee on such dishonored check. or manipulative devices and practices which create
distortions in the free market. To achieve these ends,
Notwithstanding receipt of an order to stop payment, this Securities Regulation Code is hereby enacted.
the drawee shall state in the notice that there were no
sufficient funds in or credit with such bank for the Section 3. Definition of Terms. - 3.1. "Securities" are
payment in full of such check, if such be the fact. shares, participation or interests in a corporation or in
a commercial enterprise or profit-making venture and
evidenced by a certificate, contract, instruments,
Sec. 4. Credit construed. - The word "credit" as used whether written or electronic in character. It includes:
herein shall be construed to mean an arrangement or
understanding with the bank for the payment of such (a) Shares of stocks, bonds, debentures,
check. notes evidences of indebtedness, asset-
backed securities;
Sec. 5. Liability under the Revised Penal Code. -
Prosecution under this Act shall be without prejudice (b) Investment contracts, certificates of
interest or participation in a profit sharing
 agreement, certifies of deposit for a future learns such information by a communication from
subscription; any forgoing insiders.

(c) Fractional undivided interests in oil, gas 3.9. "Pre-need plans" are contracts which provide for
or other mineral rights; the performance of future services of or the payment
of future monetary considerations at the time actual
(d) Derivatives like option and warrants; need, for which plan holders pay in cash or
installment at stated prices, with or without interest or
(e) Certificates of assignments, certificates insurance coverage and includes life, pension,
of participation, trust certificates, voting education, interment, and other plans which the
trust certificates or similar instruments Commission may from time to time approve.

(f) Proprietary or nonproprietary 3.10. "Promoter" is a person who, acting alone or

membership certificates in corporations; and with others, takes initiative in founding and
organizing the business or enterprise of the issuer and
receives consideration therefor.
(g) Other instruments as may in the future be
determined by the Commission.
3.11. "Prospectus" is the document made by or an
behalf of an issuer, underwriter or dealer to sell or
3.2. "Issuer" is the originator, maker, obligor, or offer securities for sale to the public through
creator of the security. registration statement filed with the Commission.

3.3. "Broker" is a person engaged in the business of 3.12. "Registration statement" is the application for
buying and selling securities for the account of the registration of securities required to be filed with
others. the Commission.

3.4. "Dealer" means many person who buys sells 3.13. "Salesman" is a natural person, employed as
securities for his/her own account in the ordinary such as an agent, by a dealer, issuer or broker to buy
course of business. and sell securities.

3.5. "Associated person of a broker or dealer" is an 3.14. "Uncertificated security" is a security evidenced
employee therefor whom, directly exercises control by electronic or similar records.
of supervisory authority, but does not include a
salesman, or an agent or a person whose functions are
solely clerical or ministerial. 3.15. "Underwriter" is a person who guarantees on a
firm commitment and/or declared best effort basis the
distribution and sale of securities of any kind by
3.6. "Clearing Agency" is any person who acts as another company.
intermediary in making deliveries upon payment
effect settlement in securities transactions.
CHAPTER II
SECURITIES AND EXCHANGE COMMISSION
3.7. "Exchange" is an organized market place or
facility that brings together buyers and sellers and
executes trade of securities and/or commodities. Section 4. Administrative Agency. – 4.1. This Code
shall be administered by the Security and Exchange
Commission (hereinafter referred to as the
3.8. "Insider" means (a) the issuer; (b) a director or "Commission") as a Collegial body, composed of a
officer (or any person performing similar functions) chairperson and (4) Commissioners, appointed by the
of, or a person controlling the issuer; gives or gave President for a term of (7) seven years each and who
him access to material information about the issuer or shall serves as such until their successor shall have
the security that is not generally available to the been appointed and qualified. A Commissioner
public; (d) A government employee, director, or appointed to fill a vacancy occurring prior to the
officer of an exchange, clearing agency and/or self- expiration of the term for which his/her predecessor
regulatory organization who has access to material was appointed, shall serve only for the unexpired
information about an issuer or a security that is not portion of their terms under Presidential Decree No.
generally available to the public; or (e) a person who
902-A. Unless the context indicates otherwise, the Section 5. Powers and Functions of the
term "Commissioner" includes the Chairperson. Commission.– 5.1. The commission shall act with
transparency and shall have the powers and functions
4.2. The Commissioners must be natural-born provided by this code, Presidential Decree No. 902-
citizens of the Philippines, at least forty (40) years of A, the Corporation Code, the Investment Houses law,
age for the Chairperson and at least thirty-five (35) the Financing Company Act and other existing laws.
years of age for the Commissioners, of good moral Pursuant thereto the Commission shall have, among
character, or unquestionable integrity, of known others, the following powers and functions:
probity and patriotism, and with recognized
competence in social and economic disciplines: (a) Have jurisdiction and supervision over
Provided, That the majority of Commissioners, all corporations, partnership or associations
including the Chairperson, shall be members of the who are the grantees of primary franchises
Philippine Bar. and/or a license or a permit issued by the
Government;
4.3. The chairperson is chief executive officer of the
Commission. The Chairperson shall execute and (b) Formulate policies and recommendations
administer the policies, decisions, orders and on issues concerning the securities market,
resolutions approved by the Commission and shall advise Congress and other government
have the general executive direction and supervision agencies on all aspect of the securities
of the work and operation of the Commission and it’s market and propose legislation and
members, bodies, boards, offices, personnel and all amendments thereto;
its administrative business.
(c) Approve, reject, suspend, revoke or
4.4. The salary of the Chairperson and the require amendments to registration
Commissioners shall be fixed by the President of the statements, and registration and licensing
Philippines based on the objective classification applications;
system, at a sum comparable to the members of the
Monetary Board and commensurate importance and (d) Regulate, investigate or supervise the
responsibilities attached to the position. activities of persons to ensure compliance;

4.5. The Commission shall hold meetings at least (e) Supervise, monitor, suspend or take over
once a week for the conduct of business or as often as the activities of exchanges, clearing agencies
may be necessary upon the call of the Chairperson or and other SROs;
upon the request of (3) Commissioners. The notice of
the meeting shall be given to all Commissioners and (f) Impose sanctions for the violation of
the presence of three (3) Commissioners shall laws and rules, regulations and orders, and
constitute a quorum. In the absence of the issued pursuant thereto;
Chairperson, the most senior Commissioner shall act
as presiding officer of the meeting.
(g) Prepare, approve, amend or repeal rules,
regulations and orders, and issue opinions
4.6. The Commission may, for purposes of and provide guidance on and supervise
efficiency, delegate any of its functions to any compliance with such rules, regulation and
department of office of the Commission, an orders;
individual Commissioner or staff member of the
Commission except its review or appellate authority
and its power to adopt, alter and supplement any rule (h) Enlist the aid and support of and/or
or regulation. deputized any and all enforcement agencies
of the Government, civil or military as well
as any private institution, corporation, firm,
The commission may review upon its own initiative association or person in the implementation
or upon the petition of any interested party any action of its powers and function under its Code;
of any department or office, individual
Commissioner, or staff member of the Commission.
(i) Issue cease and desist orders to prevent
fraud or injury to the investing public;
 (j) Punish for the contempt of the the Commission, including personnel performing
Commission, both direct and indirect, in supervision and examination functions for all cost
accordance with the pertinent provisions of and expenses reasonably incurred by such persons in
and penalties prescribed by the Rules of connection with any civil or criminal actions, suits or
Court; proceedings to be liable for gross negligence or
misconduct. In the event of settlement or
(k) Compel the officers of any registered compromise, indemnification shall be provided only
corporation or association to call meetings in connection with such matters covered by the
of stockholders or members thereof under its settlement as to which the Commission is advised by
supervision; external counsel that the persons to be indemnified
did not commit any gross negligence or misconduct.
(l) Issue subpoena duces tecum and summon The costs and expenses incurred in defending the
witnesses to appear in any proceedings of aforementioned action, suit or proceeding may be
the Commission and in appropriate cases, paid by the Commission in advance of the final
order the examination, search and seizure of disposition of such action, suit or proceeding upon
all documents, papers, files and records, tax receipt of an undertaking by or on behalf of the
returns and books of accounts of any entity Commissioner, officer or employee to repay the
or person under investigation as may be amount advanced should it ultimately be determined
necessary for the proper disposition of the by the Commission that he/she is not entitled to be
cases before it, subject to the provisions of indemnified as provided in this subsection.
existing laws;
6.2. The Commissioners, officers and employees of
(m) Suspend, or revoke, after proper notice the Commission who willfully violate this Code or
and hearing the franchise or certificate of who are guilty of negligence, abuse or acts of
registration of corporations, partnership or malfeasance or fail to exercise extraordinary
associations, upon any of the grounds diligence in the performance of their duties shall be
provided by law; and held liable for any loss or injury suffered by the
Commission or other institutions such as a result of
such violation, negligence, abuse, or malfeasance, or
(n) Exercise such other powers as may be failure to exercise extraordinary diligence. Similar
provided by law as well as those which may responsibility shall apply to the Commissioners,
be implied from, or which are necessary or officers and employees of the Commission for (1) the
incidental to the carrying out of, the express disclosure of any information, discussion or
powers granted the Commission to achieve resolution of the Commission of a confidential
the objectives and purposes of these laws. nature, or about the confidential operations of the
Commission unless the disclosure is in connection
5.2. The Commission’s jurisdiction over all cases with the performance of official functions with the
enumerated under section 5 of Presidential Decree Commission or prior authorization of the
No. 902-A is hereby transferred to the Courts of Commissioners; or (2) the use of such information
general jurisdiction or the appropriate Regional Trial for personal gain or to the detriment of the
Court: Provided, That the Supreme Court in the government, the Commission or third parties:
exercise of its authority may designate the Regional Provided, however, That any data or information
Trial Court branches that shall exercise jurisdiction required to be submitted to the President and/or
over the cases. The Commission shall retain Congress or its appropriate committee, or to be
jurisdiction over pending cases involving intra- published under the provisions of this Code shall not
corporate disputes submitted for final resolution be considered confidential.
which should be resolved within one (1) year from
the enactment of this Code. The Commission shall Section 7. Reorganization. – 7.1. To achieve the
retain jurisdiction over pending suspension of goals of this Code, consistent with the Civil Service
payment/rehabilitation cases filed as of 30 June 2000 laws, the Commission is hereby authorized to provide
until finally disposed. for its reorganization, to streamline its structure and
operations, upgrade its human resource component
Section 6. Indemnification and Responsibilities of and enable it to more efficiently and effectively
Commissioners.– 6.1. The Commission shall perform its functions and exercise its power under
indemnify each Commissioner and other officials of this Code.
7.2. All positions of the Commissions shall be deems the same necessary to insure full disclosure or
governed by a compensation and position to protect the interest of the investors and the public
classification system and qualification standards in general.
approved by the Commission based on
comprehensive job analysis and audit of actual duties Section 9. Exempt Securities. – 9.1. The requirement
and personal responsibilities. The compensation plan of registration under Subsection 8.1 shall not as a
shall be comparable with the prevailing general rule apply to any of the following classes of
compensation plan in the Bangko Sentral ng Pilipinas securities:
and other government financial institutions and shall
be subject to periodic review by the Commission no (a) Any security issued or guaranteed by the
more than once every two (2) years without prejudice Government of the Philippines, or by any
to yearly merit review or increases based on political subdivision or agency thereof, or by
productivity and efficiency. The Commission shall, any person controlled or supervised by, and
therefore, be exempt from laws, rules, and acting as an instrumentality of said
regulations on compensation, position classification Government.
and qualifications standards. The Commission shall,
however, endeavor to make its system conform as
closely as possible with the principles under the (b) Any security issued or guaranteed by the
Compensation and Position Classification Act of government of any country with which the
1989 (Republic Act. 6758, as amended). Philippines maintains diplomatic relations,
or by any state, province or political
subdivision thereof on the basis of
CHAPTER III reciprocity: Provided, That the Commission
REGISTRATION OF SECURITIES may require compliance with the form and
content for disclosures the Commission may
Section 8. Requirement of Registration of prescribe.
Securities.– 8.1. Securities shall not be sold or
offered for sale or distribution within the Philippines, (c) Certificates issued by a receiver or by a
without a registration statement duly filed with and trustee in bankruptcy duly approved by the
approved by the Commission. Prior to such sale, proper adjudicatory body.
information on the securities, in such form and with
such substance as the Commission may prescribe,
shall be made available to each prospective (d) Any security or its derivatives the sale or
purchaser. transfer of which, by law, is under the
supervision and regulation of the Office of
the Insurance Commission, Housing and
8.2. The Commission may conditionally approve the Land Use Rule Regulatory Board, or the
registration statement under such terms as it may Bureau of Internal Revenue.
deem necessary.
(e) Any security issued by a bank except its
8.3. The Commission may specify the terms and own shares of stock.
conditions under which any written communication,
including any summary prospectus, shall be deemed
not to constitute an offer for sale under this Section. 9.2. The Commission may, by rule or regulation after
public hearing, add to the foregoing any class of
securities if it finds that the enforcement of this Code
8.4. A record of the registration of securities shall be with respect to such securities is not necessary in the
kept in Register Securities in which shall be recorded public interest and for the protection of investors.
orders entered by the Commission with respect such
securities. Such register and all documents or
information with the respect to the securities Section 10. Exempt Transactions. – 10.1. The
registered therein shall be open to public inspection requirement of registration under Subsection 8.1 shall
at reasonable hours on business days. not apply to the sale of any security in any of the
following transactions:
8.5. The Commission may audit the financial
statements, assets and other information of firm (a) At any judicial sale, or sale by an
applying for registration of its securities whenever it executor, administrator, guardian or receiver
or trustee in insolvency or bankruptcy.
(b) By or for the account of a pledge holder, Code. Upon such conversion the par value
or mortgagee or any of a pledge lien holder of the security surrendered in such exchange
selling of offering for sale or delivery in the shall be deemed the price at which the
ordinary course of business and not for the securities issued and delivered in such
purpose of avoiding the provision of this exchange are sold.
Code, to liquidate a bonafide debt, a security
pledged in good faith as security for such (h) Broker’s transaction, executed upon
debt. customer’s orders, on any registered
Exchange or other trading market.
(c) An isolated transaction in which any
security is sold, offered for sale, subscription (i) Subscriptions for shares of the capitals
or delivery by the owner therefore, or by his stocks of a corporation prior to the
representative for the owner’s account, such incorporation thereof or in pursuance of an
sale or offer for sale or offer for sale, increase in its authorized capital stocks
subscription or delivery not being made in under the Corporation Code, when no
the course of repeated and successive expense is incurred, or no commission,
transaction of a like character by such compensation or remuneration is paid or
owner, or on his account by such given in connection with the sale or
representative and such owner or disposition of such securities, and only when
representative not being the underwriter of the purpose for soliciting, giving or taking of
such security. such subscription is to comply with the
requirements of such law as to the
(d) The distribution by a corporation percentage of the capital stock of a
actively engaged in the business authorized corporation which should be subscribed
by its articles of incorporation, of securities before it can be registered and duly
to its stockholders or other security holders incorporated, or its authorized, capital
as a stock dividend or other distribution out increase.
of surplus.
(j) The exchange of securities by the issuer
(e) The sale of capital stock of a corporation with the existing security holders
to its own stockholders exclusively, where exclusively, where no commission or other
no commission or other remuneration is paid remuneration is paid or given directly or
or given directly or indirectly in connection indirectly for soliciting such exchange.
with the sale of such capital stock.
(k) The sale of securities by an issuer to
(f) The issuance of bonds or notes secured fewer than twenty (20) persons in the
by mortgage upon real estate or tangible Philippines during any twelve-month period.
personal property, when the entire mortgage
together with all the bonds or notes secured (l) The sale of securities to any number of
thereby are sold to a single purchaser at a the following qualified buyers:
single sale.
(i) Bank;
(g) The issue and delivery of any security in
exchange for any other security of the same (ii) Registered investment house;
issuer pursuant to a right of conversion
entitling the holder of the security
surrendered in exchange to make such (iii) Insurance company;
conversion: Provided, That the security so
surrendered has been registered under this (iv) Pension fund or retirement plan
Code or was, when sold, exempt from the maintained by the Government of
provision of this Code, and that the security the Philippines or any political
issued and delivered in exchange, if sold at subdivision thereof or manage by a
the conversion price, would at the time of bank or other persons authorized by
such conversion fall within the class of the Bangko Sentral to engage in
securities entitled to registration under this trust functions;
 (v) Investment company or; rule, prescribe. It may dispense with any such
requirements, or may require additional information
(vi) Such other person as the or documents, including written information from an
Commission may rule by determine expert, depending on the necessity thereof or their
as qualified buyers, on the basis of applicability to the class of securities sought to be
such factors as financial registered.
sophistication, net worth,
knowledge, and experience in 12.3. The information required for the registration of
financial and business matters, or any kind, and all securities, shall include, among
amount of assets under others, the effect of the securities issue on ownership,
management. on the mix of ownership, especially foreign and local
ownership.
10.2. The Commission may exempt other
transactions, if it finds that the requirements of 12.4. The registration statement shall be signed by
registration under this Code is not necessary in the the issuer’s executive officer, its principal operating
public interest or for the protection of the investors officer, its principal financial officer, its comptroller,
such as by the reason of the small amount involved or its principal accounting officer, its corporate
the limited character of the public offering. secretary, or persons performing similar functions
accompanied by a duly verified resolution of the
10.3. Any person applying for an exemption under board of directors of the issuer corporation. The
this Section, shall file with the Commission a notice written consent of the expert named as having
identifying the exemption relied upon on such form certified any part of the registration statement or any
and at such time as the Commission by the rule may document used in connection therewith shall also be
prescribe and with such notice shall pay to the filed. Where the registration statement shares to be
Commission fee equivalent to one-tenth (1/10) of one sold by selling shareholders, a written certification by
percent (1%) of the maximum value aggregate price such selling shareholders as to the accuracy of any
or issued value of the securities. part of the registration statement contributed to by
such selling shareholders shall be filed.
Section 11. Commodity Futures Contracts. - No
person shall offer, sell or enter into commodity 12.5. (a) Upon filing of the registration statement, the
futures contracts except in accordance with the rules, issuer shall pay to the Commission a fee of not more
regulations and orders the Commission may prescribe than one-tenth (1/10) of one per centum (1%) of the
in the public interest. The Commission shall maximum aggregate price at which such securities
promulgate rules and regulations involving are proposed to be offered. The Commission shall
commodity futures contracts to protect investors to prescribe by the rule diminishing fees in inverse
ensure the development of a fair and transparent proportion the value of the aggregate price of the
commodities market. offering.

Section 12. Procedure of Registration Securities. - (b) Notice of the filing of the registration
12.1. All securities required to be registered under statement shall be immediately published by
Subsection 8. I shall be registered through the filing the issuer, at its own expense, in two (2)
by the issuer in the main office of the Commission, of newspapers of general circulation in the
a sworn registration statement with the respect to Philippines, once a week for two (2)
such securities, in such form and containing such consecutive weeks, or in such other manner
information and document as the Commission as the Commission by the rule shall
prescribe. The registration statement shall include prescribe, reciting that a registration
any prospectus required or permitted to be delivered statement for the sale of such securities has
under Subsections 8.2, 8.3, and 8.4. been filed, and that aforesaid registration
statement, as well as the papers attached
12.2. In promulgating rules governing the content of thereto are open to inspection at the
any registration statement (including any prospectus Commission during business hours, and
made a part thereof or annex thereto), the copies thereof, photostatic or otherwise,
Commission may require the registration statement to shall be furnished to interested parties at
contain such information or documents as it may, by such reasonable charge as the Commission
may prescribe.
12.6. Within forty-five (45) days after the date of (iv) Has made any false or
filing of the registration statement, or by such later misleading representation of
date to which the issuer has consented, the material facts in any prospectus
Commission shall declare the registration statement concerning the issuer or its
effective or rejected, unless the applicant is allowed securities;
to amend the registration statement as provided in
Section 14 hereof. The Commission shall enter an (v) Has failed to comply with any
order declaring the registration statement to be requirements that the Commission
effective if it finds that the registration statement may impose as a condition for
together with all the other papers and documents registration of the security for
attached thereto, is on its face complete and that the which the registration statement has
requirements have been complied with. The been filed; or
Commission may impose such terms and conditions
as may be necessary or appropriate for the protection (b) The registration statement is on its face
of the investors. incomplete or inaccurate in any material
respect or includes any untrue statements of
12.7. Upon affectivity of the registration statement, a material fact required to be stated therein
the issuer shall state under oath in every prospectus or necessary to make the statement therein
that all registration requirements have been met and not misleading; or
that all information are true and correct as
represented by the issuer or the one making the (c) The issuer, any officer, director or
statement. Any untrue statement of fact or omission controlling person performing similar
to state a material fact required to be stated herein or functions, or any under writer has been
necessary to make the statement therein not convicted, by a competent judicial or
misleading shall constitute fraud. administrative body, upon plea of guilty, or
otherwise, of an offense involving moral
Section 13. Rejection and Revocation of Registration turpitude and /or fraud or is enjoined or
of Securities. – 13.1. The Commission may reject a restrained by the Commission or other
registration statement and refuse registration of the competent or administrative body for
security there-under, or revoke the affectivity of a violations of securities, commodities, and
registration statement and the registration of the other related laws.
security there-under after the due notice and hearing
by issuing an order to such effect, setting forth its For the purposes of this subsection, the term
finding in respect thereto, if it finds that: "competent judicial or administrative body" shall
include a foreign court of competent jurisdiction as
(a) The issuer: provided for under Rules of Court.

(i) Has been judicially declared 13.2. The Commission may compel the production of
insolvent; all the books and papers of such issuer, and may
administer oaths to, and examine the officers of such
(ii) Has violated any of the the issuer or any other person connected therewith as
provision of this Code, the rules to its business and affairs.
promulgate pursuant thereto, or any
order of the Commission of which 13.3. If any issuer shall refuse to permit an
the issuer has notice in connection examination to be made by the Commission, its
with the offering for which a refusal shall be ground for the refusal or revocation
registration statement has been of the registration of its securities.
filed
13.4. If the Commission deems its necessary, it may
(iii) Has been or is engaged or is issue an order suspending the offer and sale of the
about to engage in fraudulent securities pending any investigation. The order shall
transactions; state the grounds for taking such action, but such
order of suspension although binding upon the
persons notified thereof, shall be deemed
confidential, and shall not be published. Upon the Section 15. Suspension of Registration. - 15.1. If at
issuance of the suspension order, no further offer or any time, the information contained in the
sale of such security shall be made until the same is registration statement filed is or has become
lifted or set aside by the Commission. Otherwise, misleading, incorrect, inadequate or incomplete in
such sale shall be void. any material respect, or the sale or offering for sale of
the security registered thereunder may work or tend
13.5. Notice of issuance of such order shall be given to work a fraud, the Commission may require from
to the issuer and every dealer and broker who shall the issuer such further information as may in its
have notified the Commission of an intention to sell judgement be necessary to enable the Commission to
such security. ascertain whether the registration of such security
should be revoked on any ground specified in this
13.6. A registration statement may be withdrawn by Code. The Commission may also suspend the right to
the issuer only with the consent of the Commission. sell and offer for the sale such security pending
further investigation, by entering an order specifying
the grounds for such action, and by notifying the
Section 14. Amendment to the Registration issuer, underwriter, dealer or broker known as
Statement. – 14.1. If a registration statement is on its participating in such offering.
face incomplete or inaccurate in any material respect,
the Commission shall issue an order directing the
amendment of the registration statement. Upon 15.2. The refusal to furnish information required by
compliance with such order, the amended registration the Commission may be a ground for the issuance of
statement shall become effective in accordance with an order of suspension pursuant to Subsection 15.1.
the procedure mentioned in Subsection 12.6 hereof. Upon the issuance of any such order and notification
to the issuer, underwriter, dealer or broken know as
participating in such offering, no further offer or sale
14.2. An amendment filed prior to the effective date of any such security shall be made until the same is
of the registration statement shall recommence the lifted or set aside by the Commission. Otherwise such
forty-five (45) day period within which the sale shall be void.
Commission shall act on a registration statement. An
amendment filed after the effective date of the
registration statement shall become effective only 15.3. Upon issuance of an order of suspension, the
upon such date as determined by the Commission. Commission shall conduct a hearing. If the
Commission determines that the sale of any security
should be revoked is shall issue an order prohibiting
14.3. If any change occurs in the facts set forth in a sale of such security.
registration statement, the issuer shall file an
amendment thereto setting forth the change.
15.4. Until the issuance of a final order, the
suspension of the right to sell, though binding upon
14.4. If, at any time, the Commission finds that the the persons notified there of, shall be deemed
registration statement contains any false statement or confidential, and shall not be published, unless it
omits to state any fact required to be stated therein or shall appear that the order of suspension has been
necessary to make the statements therein not violated after notice. If, however, the Commission
misleading, the Commission may conduct an finds that the sale of the security will neither be
examination, and, after due notice and hearing, issue fraudulent nor result in fraud, it shall forthwith issue
an order suspending the affectivity registration an order revoking the order of suspension, and such
statement. If the statement is duly amended, the security shall be restored to its status as a registered
suspension order may be lifted. security as of the date of such order of suspension.

14.5. In making such examination the Commission or CHAPTER IV

any officer or officers designated by it may REGULATION OF PRE-NEED PLANS
administer oaths and affirmations and shall have
access to, and may demand the production of, any
books, records or documents relevant to the Section 16. Pre-Need Plans. – No person shall sell or
examination. Failure of the issuer, underwriter, or offer for sale to the public any pre-need plan except
any other person to cooperate, or his obstruction or in accordance with rules and regulations which the
refusal to undergo an examination, shall be a ground Commission shall prescribe. Such rules shall regulate
for the issuance of a suspension order. the sale of pre-need plans by, among other things,
requiring the registration of pre-need plans, licensing
persons involved in the sale of pre- need plans, (b) An issuer with a class of securities listed
requiring disclosures to prospective plan holders, for trading on an Exchange; and
prescribing advertising guidelines, providing for
uniform accounting system, reports and recording (c) An issuer with assets of at least Fifty
keeping with respect to such plans, imposing capital, million pesos (50,000,000.00) or such other
bonding and other financial responsibility, and amount as the Commission shall prescribe,
establishing trust funds for the payment of benefits and having two hundred (200) or more
under such plans. holder each holding at least one hundred
(100) share of a class of its equity securities:
Provided, however, That the obligation of
such issuer to file report shall be terminate
CHAPTER V ninety (90) days after notification to the
REPORTORIAL REQUIREMENTS Commission by the issuer that the number of
its holders holding at least one hundred
Section 17. Periodic and Other Reports of Issuer. (100) share reduced to less than one hundred
17.1. Every issuer satisfying the requirements in (100).
Subsection 17.2 hereof shall file with the
Commission: 17.3. Every issuer of a security listed for trading on
an Exchange a copy of any report filed with the
(a) Within one hundred thirty-five (135) Commission under Subsection 17.1. hereof.
days, after the end of the issuer’s fiscal year,
or such other time as the Commission may 17.4. All reports (including financial statements)
prescribe, an annual report which shall required to be filed with the Commission pursuant to
include, among others, a balance sheet, Subsection 17.1 hereof shall be in such form, contain
profit and loss statement and statement of such information and be filed at such times as the
cash flows, for such last fiscal year, certified Commission shall prescribe, and shall be in lieu of
public accountant, an a management any periodical or current reports or financial
discussion and analysis of results of statements otherwise required to be filed under the
operation; and Commission shall prescribe.

(b) Such other periodical reports for interim 17.5. Every issuer which has a class of equity
fiscal periods and current reports on securities satisfying any of the requirements in
significant developments of the issuer as the Subsection 17.2 shall furnish to each holder of such
Commission may prescribe as necessary to equity security an annual report in such form and
keep current information on the operation of containing such information as the Commission shall
the business and financial condition of the prescribe.
issuer.
17.6. Within such period as the Commission may
17.2. The reportorial requirements of Subsection 17.1 prescribe preceding the annual meeting of the holders
shall apply to the following: of any equity security of a class entitled to vote at
such meeting , the issuer shall transmit to such
(a) An issuer which has sold a class of its holders an annual report in conformity with
securities pursuant to a registration under subsection 17.5.
section 12 hereof: Provided however, That
the obligation of such issuer to file reports Section 18. Reports by five per centum (5%) Holders
shall be suspended for any fiscal year after of Equity Securities. – 18.1. In every case in which an
the year such registration became effective if issuer satisfies the requirements of Subsection 17.2
such issuer, as of the first day of any such hereof any person who acquires directly or indirectly
fiscal year, has less than one hundred (100) the beneficial ownership of more than five of per
holder of such class securities or such other centum (5%) of such class or in excess of such lesser
number as the Commission shall prescribe per centum as the Commission by rule may prescribe,
and it notifies the Commission of such; shall, within ten (10) days after such acquisition or
such reasonable time as fixed by the Commission,
submit to the issuer of the securities, to the Exchange
where the security is traded, and to the Commission a such person in the ordinary course of his business and
sworn statement containing the following information were not acquired for the purpose of and do not have
and such order information as the Commission may the effect of changing or influencing the control of
require in the public interest or for the protection of the issuer nor in connection with any transaction
investors. having such purpose or effect.

(a) The personal background, identity, CHAPTER VI

residence, and citizenship of, and the nature PROTECTION OF SHAREHOLDERS
of such beneficial ownership by, such INTERESTS
person and all other person by whom or on
whose behalf the purchases are effected; in Section 19. Tender Offers. – Any person or group of
the event the beneficial owner is a juridical persons acting in concert who intends to acquire at
person, the of business of the beneficial least 15% of any class of any equity security of a
owner shall also be reported; listed corporation of any class of any equity security
of a corporation with assets of at least fifty million
(b) If the purpose of the purchases or pesos (50,000,000.00) and having two hundred(200)
prospective purchases is to acquire control or more stockholders at least one hundred shares each
of the business of the issuer of the securities, or who intends to acquire at least thirty percent(30%)
any plans or proposals which such persons of such equity over a period of twelve months(12)
may have that will effect a major change in shall make a tender offer to stockholders by filling
its business or corporate structure; with the Commission a declaration to that effect; and
furnish the issuer, a statement containing such of the
(c) The number of shares of such security information required in Section 17 of this Code as the
which are beneficially owned, and the Commission may prescribe. Such person or group of
number of shares concerning which there is persons shall publish all request or invitations or
a right to acquire, directly or indirectly, by; tender offer or requesting such tender offers
(i) such person, and (ii) each associate of subsequent to the initial solicitation or request shall
such person, giving the background, contain such information as the Commission may
identity, residence, and citizenship of each prescribe, and shall be filed with the Commission and
such associate; and sent to the issuer not alter than the time copies of
such materials are first published or sent or given to
(d) Information as to any contracts, security holders.
arrangements, or understanding with any
person with respect to any securities of the (a) Any solicitation or recommendation to
issuer including but not limited to transfer, the holders of such a security to accept or
joint ventures, loan or option arrangements, reject a tender offer or request or invitation
puts or call guarantees or division of losses for tenders shall be made in accordance with
or profits, or proxies naming the persons such rules and regulations as may be
with whom such contracts, arrangements, or prescribe.
understanding have been entered into, and
giving the details thereof. (b) Securities deposited pursuant to a tender
offer or request or invitation for tenders may
18.2. If any change occurs in the facts set forth in the be withdrawn by or on behalf of the
statements, an amendment shall be transmitted to the depositor at any time throughout the period
issuer, the Exchange and the Commission. that tender offer remains open and if the
securities deposited have not been
18.3. The Commission, may permit any person to file previously accepted for payment, and at any
in lieu of the statement required by subsection 17.1 time after sixty (60) days from the date of
hereof, a notice stating the name of such person, the the original tender offer to request or
shares of any equity securities subject to Subsection invitation, except as the Commission may
17.1 which are owned by him, the date of their otherwise prescribe.
acquisition and such other information as the
commission may specify, if it appears to the (c) Where the securities offered exceed that
commission that such securities were acquired by which person or group of persons is bound
or willing to take up and pay for, the
 securities that are subject of the tender offers 20.4. No broker or dealer shall give any proxy,
shall be taken up us nearly as may be pro consent or any authorization, in respect of any
data, disregarding fractions, according to the security carried for the account of the customer, to a
number of securities deposited to each person other than the customer, without written
depositor. The provision of this subject shall authorization of such customer.
also apply to securities deposited within ten
(10) days after notice of increase in the 20.5. A broker or dealer who holds or acquire the
consideration offered to security holders, as proxy for at least ten percent (10%) or such
described in paragraph (e) of this subsection, percentage as the commission may prescribe of the
is first published or sent or given to security outstanding share of such issuer, shall submit a report
holders. identifying the beneficial owner of ten days after
such acquisition, for its own account or customer, to
(d) Where any person varies the terms of a the issuer of security, to the exchange where the
tender offer or request or invitation for security is traded and to the Commission.
tenders before the expiration thereof by
increasing the consideration offered to Section 21. Fees of Tender Offers and Certain Proxy
holders of such securities, such person shall Solicitations. – At the time of filling with the
pay the increased consideration to each Commission of any statement required under Section
security holder whose securities are taken up 19 for any tender offer or Section 72.2 for issuer
and paid for whether or not such securities purchases, or Section 20 for proxy or consent
have been taken up by such person before solicitation, The Commission may require that the
the variation of the tender offer or request or person making such filing pay a fee of not more than
invitation. one-tenth (1/10)(1%) of;

19.2. It shall be lawful for any person to make any 21.1. The propose aggregate purchase price in the
untrue statement of a material fact or omit to state case of a transaction under Section 20 or 72.2; or
any material fact necessary in order to make the
statements made in the light of the circumstances 21.2. The proposed payment in cash, and ion value of
under which they are made, not mis-leading, or to any securities or property to be transferred in the
engaged to any fraudulent, deceptive or manipulative acquisition, merger or consolidating, or the cash and
acts or practices, in connection with any tender offer value of any securities proposed to be received upon
or request or invitation for tenders, or any solicitation the sale disposition of such assets in the case of a
for any security holders in opposition to or in favor of solicitation under Section 20. The Commission shall
any such favor of any such offer, request, or prescribe by rule diminishing fees in inverse
invitation. The Commission shall, for the purposes of proportion to the value of the aggregate price of the
this subsection, define and prescribe means offering.
reasonably designed to prevent, such acts and
practices as are fraudulent, deceptive and
manipulative. Section 22. Internal Record Keeping and Accounting
Control. - Every issuer which has a class of securities
that satisfies the requirements of Subsection 17.2
Section 20. Proxy solicitations. - 20.1. Proxies must shall:
be issued and proxy solicitation must be made in
accordance with rules and regulations to be issued by
the Commission; 22.1. Device and maintain a system of internal
accounting controls sufficient to provide reasonable
assurance that: (a) Transactions and access to assets
20.2. Proxies must be in writing, signed by the are pursuant to management authorization; (b)
stockholder or his duly authorized representative and Financial statements are provided in conformity with
file before the scheduled meeting with the corporate generally accepted accounting principles that are
secretary. adopted by the Accounting standards council and the
rules promulgated by the Commission with the regard
20.3. Unless otherwise provided in the proxy, it shall to the preparation of the financial statements; and (c)
be valid only for the meeting for which it is intended. Recorded assets are compared with existing assets at
No proxy shall be valid only for the meting for which reasonable intervals and differences are reconciled.
it is intended. No proxy shall be valid and effective
for a period longer than five (5) years at one time.
Section 23. Transactions of Directors officers and transportation; but no person shall be deemed to have
Principal Stockholders. – 23.1. Every person who is violated this subsection if he proves not withstanding
directly or indirectly the beneficial owner of more the exercise of good faith he was unable to make
than ten per centum (10%) of any class of any equity such delivery in such time, or that to do so would
security which satisfies the requirements of cause undue inconvenience or expense.
subsection 17.2, or who is a director or an officer of
the issuer of such security, shall file, at the time 23.4. The provisions of subsection 23.2 shall not
either such requirement is first satisfied or after ten apply to any purchase and sale, or sale and purchase,
days after he becomes such a beneficial owner, and the provisions of Subsection 23.3 shall not apply
director, or officer, a statement form the Commission to any sale, of an equity security not then or
and, if such security is listed for trading on an thereafter held by him and an investment account, by
exchange, also with the exchange of the amount of all a dealer in the ordinary course of his business and
the equity security of such issuer of which he is the incident to the establishment or maintenance by him
beneficial owner, and within ten days after the close of a primary or secondary market, otherwise than on
of each calendar month thereafter, if there has been a an Exchange, for such security. The Commission
change in such ownership at the close of the calendar may, by such rules and regulations as it deems
month and such changes in his ownership as have necessary or appropriate in the public interest, define
occurred during such calendar month. and prescribe terms and conditions with respect to
securities held in an investment account and
23.2. For the purpose of preventing the unfair use of transactions made in the ordinary course of business
information which may have been obtained by such and incident to the establishment or maintenance of a
beneficial owner, director or officer by reason of his primary or secondary market.
relationship to the issuer, any profit realized by him
from any purchase or sale, or any sale or purchase, of CHAPTER VII
any equity security of such issuer within any period PROHIBITIONS AND FRAUD,
of less than (6) months unless such security was MANIPULATION AND INSIDER TRADING
acquired in good faith in connection with a debt
previously contracted, shall inure to and be Section 24. Manipulation of Security Prices; Devices
recoverable by the issuer, irrespective of any and Practices. – 24.1 It shall be unlawful for any
intention of holding the security purchased or of not person acting for himself or through a dealer or
repurchasing the security sold for a period exceeding broker, directly or indirectly:
six (6) months. Suit to recover such profit may be
instituted before the Regional Trial Court by the
issuer, or by the owner of any security of the issuer in (a) To create a false or misleading
the name and in behalf of the issuer if the issuer shall appearance of active trading in any listed
fail or refuse to bring such suit within sixty (60) days security traded in an Exchange of any other
after request or shall fail diligently to prosecute the trading market (hereafter referred to
same thereafter, but not such shall be brought more purposes of this Chapter as "Exchange"):
than two years after the date such profit was realized.
This Subsection shall not be construed to cover any (i) By effecting any transaction in
transaction were such beneficial owner was not such such security which involves no
both time of the owner or the sale, or the sale of change in the beneficial ownership
purchase, of the security involved, or any transaction thereof;
or transactions which the Commission by rules and
regulations may exempt as not comprehended within (ii) By entering an order or orders
the purpose of this subsection. for the purchase or sale of such
security with the knowledge that a
23.3. It shall be unlawful for any such beneficial simultaneous order or orders of
owner, director or officer, directly or indirectly, to substantially the same size, time
sell any equity security of such issuer if the person and price, for the sale or purchase
selling the principal: (a) Does not own the security of any such security, has or will be
sold: or (b) If owning the security, does not deliver entered by or for the same or
not deliver it against such sale within 20 days different parties; or
thereafter, or does not within five days after such sale
deposit in the mails or the unusual channels of
 (iii) By performing similar act 24.3. The foregoing provisions notwithstanding, the
where there is no change in Commission, having due regard to the public interest
beneficial ownership. and the protection of investors, may, by rules and
regulations, allow certain acts or transactions that
(b) To affect, alone or with others, a may otherwise be prohibited under this Section.
securities or transactions in securities that:
(I) Raises their price to induce the purchase Section 25. Regulation of Option Trading. – No
of a security, whether of the same or a member of an Exchange shall, directly or indirectly
different class of the same issuer or of endorse or guarantee the performance of any put,
controlling, controlled, or commonly call, straddle, option or privilege in relation to any
controlled company by others; or (iii) security registered on a securities exchange. The
Creates active trading to induce such a terms "put", "call", "straddle", "option", or
purchase or sale through manipulative "privilege" shall not include any registered warrant,
devices such as marking the close, painting right or convertible security.
the tape, squeezing the float, hype and
dump, boiler room operations and such other Section 26. Fraudulent Transactions. – It shall be
similar devices. unlawful for any person, directly or indirectly, in
connection with the purchase or sale of any securities
(c) To circulate or disseminate information to:
that the price of any security listed in an
Exchange will or is likely to rise or fall 26.1. Employ any device, scheme, or artifice to
because of manipulative market operations defraud;
of any one or more persons conducted for
the purpose of raising or depressing the 26.2. Obtain money or property by means of any
price of the security for the purpose of untrue statement of a material fact of any omission to
inducing the purpose of sale of such state a material fact necessary in order to make the
security. statements made, in the light of the circumstances
under which they were made, not misleading; or
(d) To make false or misleading statement
with respect to any material fact, which he 26.3. Engage in any act, transaction, practice or
knew or had reasonable ground to believe course of business which operates or would operate
was so false or misleading, for the purpose as a fraud or deceit upon any person.
of inducing the purchase or sale of any
security listed or traded in an Exchange.
Section 27. Insider’s Duty to Disclose When Trading.
– 27.1. It shall be unlawful for an insider to sell or
(e) To effect, either alone or others, any buy a security of the issuer, while in possession of
series of transactions for the purchase and/or material information with respect to the issuer or the
sale of any security traded in an Exchange security that is not generally available to the public,
for the purpose of pegging, fixing or unless: (a) The insider proves that the information
stabilizing the price of such security; unless was not gained from such relationship; or (b) If the
otherwise allowed by this Code or by rules other party selling to or buying from the insider (or
of the Commission. his agent) is identified, the insider proves: (I) that he
disclosed the information to the other party, or (ii)
24.2. No person shall use or employ, in connection that he had reason to believe that the other party
with the purchase or sale of any security any otherwise is also in possession of the information. A
manipulative or deceptive device or contrivance. purchase or sale of a security of the issuer made by
Neither shall any short sale be effected nor any stop- an insider defined in Subsection 3.8, or such insider’s
loss order be executed in connection with the spouse or relatives by affinity or consanguinity
purchase or sale of any security except in accordance within the second degree, legitimate or common-law,
with such rules and regulations as the Commission shall be presumed to have been effected while in
may prescribe as necessary or appropriate in the possession of material nonpublic information if
public interest for the protection of investors. transacted after such information came into existence
but prior to dissemination of such information to the
public and the lapse of a reasonable time for market
to absorb such information: Provided, however, That convertible or exchangeable into such securities or
this presumption shall be rebutted upon a showing by any options or rights in any of the foregoing
the purchaser or seller that he was aware of the securities.
material nonpublic information at the time of the
purchase or sale. CHAPTER VIII
REGULATION OF SECURITIES MARKET
27.2. For purposes of this Section, information is PROFESSIONALS
"material nonpublic" if: (a) It has not been generally
disclosed to the public and would likely affect the Section 28. Registration of Brokers, Dealers,
market price of the security after being disseminated Salesmen and Associated Persons. – 28.1. No person
to the public and the lapse of a reasonable time for shall engage in the business of buying or selling
the market to absorb the information; or (b) would be securities in the Philippine as a broker or dealer, or
considered by a reasonable person important under act as a salesman, or an associated person of any
the circumstances in determining his course of action broker or dealer unless registered as such with the
whether to buy, sell or hold a security. Commission.

27.3. It shall be unlawful for any insider to 28.2. No registered broker or dealer shall employ any
communicate material nonpublic information about salesman or any associated person, and no issuer
the issuer or the security to any person who, by virtue shall employ any salesman, who is not registered as
of the communication, becomes an insider as defined such with the Commission.
in Subsection 3.8, where the insider communicating
the information knows or has reason to believe that 28.3. The Commission, by rule or order, may
such person will likely buy or sell a security of the conditionally or unconditionally exempt from
issuer whole in possession of such information. subsection 28.1 and 28.2 any broker, dealer,
salesman, associated person of any broker or dealer,
27.4. (a) It shall be unlawful where a tender offer has or any class of the foregoing, as it deems consistent
commenced or is about to commence for: with the public interest and the protection of
investors.
(i) Any person (other than the tender
offeror) who is in possession of material 28.4. The Commission shall promulgate rules and
nonpublic information relating to such regulation prescribing the qualifications for
tender offer, to buy or sell the securities of registration of each category of applicant, which
the issuer that are sought or to be sought by shall, among other things, require as a condition for
such tender offer if such person knows or registration that:
has reason to believe that the information is
nonpublic and has been acquired directly or (a) If a natural person, the applicant
indirectly from the tender offeror, those satisfactorily pass a written examination as
acting on its behalf, the issuer of the to his proficiency and knowledge in the area
securities sought or to be sought by such of activity for which registration is sought;
tender offer, or any insider of such issuer;
and
(b) In the case of a broker or dealer, the
applicant satisfy a minimum net capital as
(ii) Any tender offeror, those acting on its prescribed by the Commission, and provide
behalf, the issuer of the securities sought or a bond or other security as the Commission
to be sought by such tender offer, and any may prescribe to secure compliance with the
insider of such issuer to communicate provisions of this Code; and
material nonpublic information relating to
the tender offer to any other person where
such communication is likely to result in a (c) If located outside of the Philippines, the
violation of Subsection 27.4 (a)(I). applicant files a written consent to service of
process upon the Commission pursuant to
Section 65 hereof.
(b) For purposes of this subsection the term
"securities of the issuer sought or to be sought by
such tender offer" shall include any securities 28.5. A broker or dealer may apply for registration by
filing with the Commission a written application in
such forms and containing such information and required, the registration of such person shall be
documents concerning such broker or dealer as the suspended until payment has been made.
Commission by rule shall prescribe.
28.12. The registration of a salesman or associated
28.6. Registration of a salesman or of an associated person shall be automatically terminated upon the
person of a registered broker or dealer may be made cessation of his affiliation with said registered broker
upon written application filed with the Commission or dealer or with an issuer in the case of a salesman
by such salesman or associated person. The employed, appointed or authorized by such issuer.
application shall be separately signed and certified by Promptly following any such cessation of affiliation,
the registered broker or dealer to which such the registered broker or dealer, issuer as the case may
salesman or associated person is to become affiliated, be, shall file with the Commission a notice of
or by the issuer in the case of a salesman employed separation of such salesman or associated person.
appointed or authorized solely by such issuer. The
application shall be in such form and contain such Section 29. Revocation, Refusal or Suspension of
information and documents concerning the salesman Registration of Brokers, Dealers, Salesmen and
or associated person as the Commission by rule shall Associated Persons. – 29.1. Registration under
prescribe. For purposes of this Section, a salesman Section 28 of this Code may be refused , or any
shall not include any employee of an issuer whose registration granted thereunder may be revoked,
compensation is not determined directly or indirectly suspended, or limitations placed thereon, by the
on sales of securities if the issuer. Commission if, after due notice and hearing the
Commission determines the application or registrant.
28.7. Applications filed pursuant to Subsections 28.5
and 28.6 shall be accompanied by a registration fee in (a) Has willfully violated any provision of
such reasonable amount prescribed by the this Code, any rule, regulation or order made
Commission. hereunder, or any other law administered by
the Commission, or in the case of a
28.8. Within thirty (30) days after the filing of any registered broker, dealer or associated
application under this Section, the Commission shall persons has failed to supervise, with a view
by order: (a) Grant registrations if it determines that to preventing such violation, another person
the requirements of this Section and the qualifications who commits such violation;
for registrations set forth in its rules and regulations
have been satisfied ; or (b) Deny said registration. (b) Has willfully made or caused to be made
a materially false or misleading statement in
28.9. The names and addresses of all persons any application for registration or report
approved for the registration as brokers, dealers, filed with the Commission or a self-
associated persons or salesman and all orders of the regulatory organization, or has willfully
Commission with respect thereto shall be recorded in omitted to state any material fact that is
a Register of Securities Market Professionals kept in required to be stated therein;
the office of the Commission which shall be open to
public inspection. (c) Has failed to satisfy the qualifications or
requirements for registration prescribed
28.10. Every person registered pursuant to this under Section 28 and the rules and
Section shall file with the Commission, in such form regulations of the Commission promulgated
as the Commission shall prescribe, information thereunder;
necessary to keep the application for registration
current and accurate, including in the case of a broker (d) Has been convicted, by a competent
or dealer changes in salesmen, associated persons and judicial or administrative body of an offense
owners thereof. involving moral turpitude, fraud,
embezzlement, counterfeiting, theft, estafa,
28.11. Every person registered pursuant to this misappropriation, forgery, bribery, false
Selection shall pay to the Commission an annual fee oath, or perjury, or of a violation of
at such time and in such reasonable amount as the securities, commodities, banking, real state
Commission shall prescribe. Upon notice by the or insurance laws;
Commission that such annual fee has not been paid as
 (e) Is enjoined or restrained by a competent 29.3. The orders of the Commission refusing,
judicial or administrative body from revoking, suspending or placing limitations on a
engaging in securities, commodities, registration as herein above provided, together with
banking, real state or insurance activities or its findings, shall be entered in the Register of
from willfully violating laws governing such Securities Market Professionals. The suspension or
activities; revocation of the registration of a dealer or broker
shall also automatically suspend the registration of all
(f) Is subject to an order of a competent salesmen and associated persons affiliated with such
judicial or administrative body refusing, broker or dealer. The order of the Commission
revoking or suspending any registration, refusing, revoking, suspending or placing limitations
licensed or other permit under this Code, the on a registration as herein above provided, together
rules and regulations promulgated with its findings, shall be entered in the Register of
thereunder, any other law administered by Securities Market Professionals. The suspension or
the Commission; revocation of the registration of a dealer or broker
shall also automatically suspend the registration of a
(g) Is subject to an order of a self-regulatory dealer or broker shall also automatically suspend the
organization suspending or expelling him registration of all salesmen and associated persons
from membership or participating therein or affiliated with such broker or dealer.
from association with a member or
participant thereof; 29.4. It shall be sufficient cause for refusal,
revocation or suspension of a broker’s or dealer’s
(h) Has been found by a competent judicial registrations, if any associated person thereof or any
or administrative body to have willfully juridical entity controlled by such associated person
violated any provisions of securities, has committed any act or omission or is subject to
commodities, banking, real state or any disability enumerated in paragraphs (a) through
insurance laws, or has willfully aided, (i) of Subsection 29. I hereof.
abetted, counseled, commanded, induced or
procured such violation; or Section 30. Transactions and Responsibility of
Brokers and Dealers. – 30.1 No brokers or dealer
(i) Has been judicially declared insolvent. shall deal in or otherwise buy or sell, for its own
account or for its own account or for the account of
customers, securities listed on an Exchange issued by
For purposes of this subsection, the term "competent any corporation where any stockholders, director,
judicial or administrative body" shall include a associated person or salesman, or authorized clerk of
foreign court of competent jurisdiction and a foreign said broker or dealer and all the relatives of the
financial regulator. foregoing within the fourth civil degree of
consanguinity or affinity, is at the same time holding
29.2. (a) In case of charges against a salesman or office in said issuer corporation as a director,
associated person, notice thereof shall also be given president, vice-president, manager, treasurer,
the broker, dealer or issuer employing such salesman comptroller, secretary or any office trust and
or associated person. responsibility, or is a controlling of the issuer.

(b) Pending the hearing, the Commission 30.2. No broker or dealer shall effect any transaction
shall have the power to order the in securities or induce or attempt to induce the
suspensions of such broker’s, dealers, purchase or sale of any security except in compliance
associated person’s or salesman’s with such rules and regulations as the Commission
registration: Provided, That such order shall shall prescribe to ensure fair and honest dealings in
state the cause for such suspension. Until the securities and provide financial safeguards and other
entry of a final order, the suspension of such standards for the operations of brokers and dealers,
registration, though binding upon the including the establishments of minimum net capital
persons notified thereof, shall be deemed requirements, the acceptance of custody and use of
confidential, and shall not be published, securities of customers, and the carrying and use of
unless it shall appear that the order of deposits and credit balances of customers.
suspension has been violated after notice.
Section 31. Development of Securities Market Section 33. Registration of Exchanges. – 33.1. Any
Professionals. – The Commission in joint Exchange may be registered as such with the
undertaking with self regulatory organizations, Commission under the terms and conditions
organizations and associations of finance hereinafter provided in this Section and Section 40
professionals as well as private educational and hereof, by filing an application for registration in
research institute shall undertake or such form and containing such information and
facilitate/organize continuing training, supporting documents as the Commission by rule
conferences/seminars, updating programs, research shall prescribe, including the following:
and developments as well as technology transfer at
the latest and advance trends in issuance and trading (a) An undertaking to comply and enforce
of securities, derivatives, commodity trades and other by its members with the provisions of this
financial instruments, as well as securities markets of Code, its implementing rules and regulations
other countries. and the rules of the Exchange;

CHAPTER IX (b) The organizational charts of the

EXCHANGES AND OTHER SECURITIES Exchange, rules of procedure, and a list of
TRADING MARKETS its officers and members;

Section 32. Prohibition on Use of Unregistered (c) Copies of the rules of the Exchange; and
Exchange; Regulation of Over-the-Counter Markets.
–32.1. No broker, dealer, salesman, associated person (d) An undertaking that in the event a
of a broker or dealer, or Exchange, directly or member firm becomes insolvent or when the
indirectly shall make use of any facility of an Exchange shall have found that the financial
Exchange in the Philippines to effect any transaction condition of its member firm has so
in a security, or to report such transaction, unless deteriorated that it cannot readily meet the
such Exchange is registered as such under Section 33 demands of its customers for the delivery of
of this Code. securities and/or payment of sales proceeds,
the Exchange shall, upon order of the
32.2. (a) No broker, dealer, salesman or associated Commission, take over the operation of the
person of a broker or dealer, singly or in concert with insolvent member firm and immediately
any other person, shall make, create or operate, or proceed to settle the member firm’s
enable another to make, create or operate, any trading liabilities to its customers.
market, otherwise than on a registered Exchange, for
the buying and selling of any security, except in 33.2. Registrations of an Exchange shall be granted
accordance with rules and regulations the upon compliance with the following provisions:
Commission may prescribe.
(a) That the applicant is organized as a stock
(b) The Commission may promulgate rules corporation: Provided, That any registered
and regulations governing transactions by Exchange existing prior to the effectivity of
brokers, dealers, salesmen or associated this Code shall within one (1) year
persons of a broker or dealer, over any reorganize as a stock corporation pursuant to
facilities of such trading market and may a demutualization plan approved by the
require such market to be administered by a Commission;
self-regulatory organization determined by
the Commission as capable of insuring the
protection of investors comparable to that (b) That the applicant is engaged solely in
provided in the case of a registered the business of operating an exchange:
Exchange. Such self-regulatory organization Provided, however, That the Commission
must provide a centralized marketplace for may adopt rules, regulations or issue an
trading and must satisfy requirements order, upon application, exempting an
comparable to those prescribed for Exchange organized as a stock corporation
registration of Exchanges in Section 33 of and owned and controlled by another
this Code. juridical person from the restriction.
(c) Where the Exchange is organized as a independent directors and persons who
stock corporation, that no person may represent the interests of issuers, investors,
beneficially own or control, directly or and other market participants, who are not
indirectly, more than five percent (5%) of associated with any broker or dealer or
the voting rights of the Exchange and no member of the Exchange for a period of two
industry or business group may beneficially (2) years prior to his/her appointment. No
own or control, directly or indirectly, more officer or employee of a member, its
than twenty percent (20%) of the voting subsidiaries or affiliates or related interests
rights of the Exchange: Provided, however, shall become an independent director:
That the Commission may adopt rules, Provided, however, That the Commission
regulations or issue an order, upon may by rule, regulation, or order upon
application from this prohibition where it application, permit the exchange organized
finds that such ownership or control will not as a stock corporation to use a different
negatively impact on the exchange’s ability governance structure: Provided, further,
to effectively operate in the public interest. That the Commission is satisfied that the
Exchange is acting in the public interest and
(d) The expulsion, suspension, or is able to effectively operate as a self-
disciplining of a member and persons regulatory organization under this Code:
associated with a member for conduct or Provided, finally, That any registered
proceeding inconsistent with just and exchange existing prior to the affectivity of
equitable principles of fair trade, and for this Code shall immediately comply with
violations of provisions of this Code, or any this requirement.
other Act administered by the Commission,
the rules, regulations and orders thereunder, (h) The president and other management of
or the rules of the Exchange;’ the Exchange to consist only of persons who
are not members and are not associated in
(e) A fair procedure for the disciplining of any capacity, directly or indirectly with any
members and persons associated with broker or dealer or member or listed
members, the denial of membership to any company of the Exchange: Provided, That
person seeking to be a member, the barring the Exchange may only appoint, and a
of any person from association with a person may only serve, as an officer of the
member, and the prohibition or limitation of exchange if such person has not been a
any person from association with member, member or affiliated with any broker, dealer,
and the prohibition or limitation of any or member of the Exchange for a period of
person from access to services offered by at least two (2) years prior to such
the Exchange; appointment;

(f) That the brokers in the board of the (i) The transparency of transactions on the
Exchange shall comprise of not more than Exchange;
forty-nine percent (49%) of such board and
shall proportionately represent the Exchange (j) The equitable allocation of reasonable
membership in terms of volume/value or dues, fees, and other charges among
trade and paid up capital, and that any members and issuers and other persons
natural person associated with a juridical using any facility or system which the
entity that is a member for this purpose; Exchange operates or controls;
Provide, That any registered Exchange
existing prior to the affectivity of this Code (k) Prevention of fraudulent and
shall immediately comply with this manipulative acts and practices, promotion
requirement; of just and equitable principles of trade, and,
in general, protection of investors and the
(g) For the board of the Exchange to include public interest; and
in its composition (1) the president of the
Exchange, and (ii) no less than fifty one (l) The transparent, prompt and accurate
percent (51%) of the remaining members of clearance and settlement of transactions
the board to be comprised of three (3) effected on the Exchange.
33.3. If the Commission finds that the applicant (d) Any other transaction of a similar nature
Exchange is capable of complying and enforcing as may be defined by the Commission.
compliance by its members, and persons associated
with such members, with the provisions of this Code, 34.2. In all instances where the member-broker
and the rules of the Exchange, and that the rules of effects a transaction on an Exchange for its own
Exchange are fair, just and adequate, the Commission account or the account of an associated person or an
shall cause such Exchange to be registered. If, after account with the respect to which it exercises
notice due and hearing, the Commission finds investment discretion, it shall disclose to such
otherwise, the application shall be denied. customer at or before the completion of the
transaction it is acting for its own account: Provided,
33.4. Within ninety (90) days after the filing of the further, That this fact shall be reflected in the order
application the Commission may issue an order either ticket and the confirmation slip.
granting or denying registration as an Exchange,
unless the Exchange applying for registration shall 34.3. Any member-broker who violates the
withdraw its application or shall consent to the provisions of this Section shall be subject to the
Commission’s deferring action on its application for administrative sanctions provided in Section 54 of
a stated longer period after the date of filing. The this Code.
filing with the Commission of an application for
registration by an Exchange shall be deemed to have Section 35. Additional Fees of Exchanges. – In
taken place upon the receipt thereof. Amendments to addition to the registration fee prescribed in Section
an application may be made upon such terms as the 33 of this Code, every Exchange shall pay to the
Commission may prescribe. Commission, on a semestral basis on or before the
tenth day of the end of the end of every semester of
33.5. Upon the registration of an Exchange, it is shall the calendar year, a fee in such an amount as the
pay a fee in such amount and within such period as Commission shall prescribe, but not more than one-
the Commission may fix. hundredth of one per centum (1%) of the aggregate
amount of the sales of securities transacted on such
33.6. Upon appropriate application in accordance Exchange during the preceding calendar year for the
with the rules and regulations of the Commission and privilege of doing business, during the preceding
upon such terms as the Commission may deemed calendar year or any part thereof.
necessary for the protection of investors, an exchange
may withdraw its registration or suspend its Section 36. Powers with Respect to Exchanges and
operations or resume the same. Other Trading Market. – 36.1. The Commission is
authorized, if in its opinion such action is necessary
Section 34. Segregation and Limitation of functions or appropriate for the protection of investors and the
of Members, Broker and Dealers. - 34.1. It shall be public interest so requires, summarily to suspend
unlawful for any member-broker of an Exchange to trading in any listed security on any Exchange or
effect any transaction on such Exchange for its own other trading market for a period not exceeding thirty
account, the account of an associated person, or an (30) days but not exceeding ninety (90) days:
account with the respect to which it or an associated Provided, however, That the Commission promptly
person thereof exercises the investment discretion: following the issuance of the order of suspension,
Provided, however, That this Section shall not make shall notify the affected issuer of the reasons for such
unlawful- suspension and provide such issuer with an
opportunity for hearing to determine whether the
(a) Any transaction by a member-broker suspension should be lifted.
acting in the capacity of a market maker;
36.2. Wherever two (2) or more Exchanges or other
(b) Any transaction reasonably necessary to trading markets exist, the Commission may require
carry on an odd-lot transactions; and enforce uniformity of trading regulations in
and/or between or among said Exchanges or other
(c) Any transaction to offset a transaction trading markets.
made in error; and
36.3. In addition to the existing Philippine Stock
Exchange, the Commission shall have the authority
to determine the number, size and location of stock and trading of innovative securities, securities of
Exchanges, other trading markets and commodity small, medium, growth and venture enterprises, and
Exchanges and other similar organizations in the light technology-based ventures pursuant to Section 33 of
of national or regional requirements for such this Code.
activities with the view to promote, enhance, protect,
conserve or rationalize investment. Section 38. Independent Directors. – Any
corporation with a class of equity securities listed for
36.4. The Commission, having due regard to the trading on an Exchange or with assets in excess of
public interest, the protection of investors, the Fifty million pesos (P50,000,000.00) and having two
safeguarding of securities and funds, and hundred (200) or more holders, at least of two
maintenance of fair competition among brokers, hundred (200) of which are holding at least one
dealers, clearing agencies, and transfer agents, shall hundred (100) shares of a class of its equity securities
promulgate rules and regulations for the prompt and or which has sold a class of equity securities to the
accurate clearance and settlement of securities public pursuant to an effective registration statement
transactions. in compliance with Section 12 hereof shall have at
least two (2) independent directors or such
36.5. (a) The Commission may establish or facilitate independent directors shall constitute at least twenty
the establishment of trust funds which shall be percent (20%) of the members of such board
contributed by Exchanges, brokers, dealers, whichever is the lesser. For this purpose, an
underwriters, transfer agents, salesmen and other "independent director" shall mean a person other than
persons transacting in securities, as the Commission an officer or employee of the corporation, its parent
may require, for the purpose of compensating or subsidiaries, or any other individual having a
investors for the extraordinary losses or damage they relationship with the corporation, which would
may suffer due to business failure or fraud or interfere with the exercise of independent judgement
mismanagement of the persons with whom they in carrying out the responsibilities of a director.
transact, under such rules and regulations as the
Commission may from time to time prescribe or CHAPTER X
approve in the public interest. REGISTRATION, RESPONSIBILITIES AND
OVERSIGHT OF SELF-REGULATORY
(b) The Commission may, having due regard ORGANIZATIONS
to the public interest or the protection of
investors, regulate, supervise, examine, Section 39. Associations of Securities Brokers, and
suspend or otherwise discontinue such and Dealers, and Other Securities Related Organizations.
other similar funds under such rules and – 39.1. The Commission shall have the power to
regulations which the Commission may register as a self-regulatory organization, or
promulgate, and which may include taking otherwise grant licenses, and to regulate, supervise,
custody and management of the fund itself examine, suspend or otherwise discontinue, as a
as well as investments in and disbursements condition for the operation of organizations whose
from the funds under such forms of control operations are related to or connected with the
and supervision by the Commission as it securities market such as but not limited to
may from time to time require. The authority associations of brokers and dealers, transfer agents,
granted to the Commission under this custodians, fiscal and paying agents, computer
subsection shall also apply to all funds services, news disseminating services, proxy
established for the protection of investors, solicitors, statistical agencies, securities rating
whether established by the Commission or agencies, and securities information processor which
otherwise. are engaged in business of: (a) Collecting,
processing, or preparing for distribution or
Section 37. Registration of Innovative and Other publication, or assisting, participating in, or
Trading Markets. – The Commission, having due coordinating the distribution or publication of,
regard for national economic development, shall information with respect to transactions in or
encourage competitiveness in the market by quotations for any security; or (b) Distributing or
promulgating within six (6) months upon the publishing, whether by means of a ticker tape, a
enactment of this Code, rules for the registration and communications network, a terminal display device,
licensing of innovative and other trading markets or or otherwise, on a current and continuing basis,
Exchanges covering, but not limited to, the issuance information with respect to such transactions or
quotations. The Commission may prescribe rules and (iii) The Board of Directors of the
regulations which are necessary or appropriate in the association includes in its
public interest or for the protection of investors to composition:
govern self-regulatory organizations and other
organizations licensed or regulated pursuant to the (a) The president of the
authority granted in Subsection 39.1 including the association and
requirement of cooperation within and among, and
electronic integration of the records of, all (b) Person who represent
participants in the securities market to ensure the interests of the issuer
transparency and facilitate exchange of information. and public investors and
are not associated with
39.2. An association of brokers and dealers may be any broker or dealer or
registered as a securities association pursuant to member of the
Subsection 39.3 by filing with the Commission an association; that the
application for registration in such form as the president and other
Commission, by rule, may prescribe containing the management of the
rules of the association and such other information association not be a
and documents as the Commission, by rule, may member or associated with
prescribe as necessary or appropriate in the public any broker, dealer or
interest or for the protection of investors. member of the
association;
39.3. An association of brokers and dealers shall not
be registered as a securities association unless the (iv) For the equitable allocation of
Commission determines that: reasonable dues, fees, and other
charges among member and issuers
(a) The association is so organized and has and other persons using any facility
the capacity to be able to carry out the or system which the association
purposes of this Code and to comply with, operates or controls;
and to enforce compliance by its members
and persons associated with its members, (v) For the prevention of fraudulent
with the provisions of this Code, the rules and manipulative acts and
and regulations thereunder, and the rules of practices, the promotion of just and
the association. equitable principles of trade, and,
in general, the protection of
(b) The rules of the association, investors and the public interest;
notwithstanding anything in the Corporation
Code to the contrary, provide that: (vi) That its members and persons
associated with its members shall
(i) Any registered broker or dealer be appropriately disciplined for
may become a member of the violation of any provision of this
association; Code, the rules and regulations
thereunder, or the rules of the
(ii) There exist a fair representation association;
of its members to serve on the
Board of Directors of the (vii) That a fair procedure for the
association and in the disciplining of members and
administration of its affairs, and persons associated with members,
that may any natural person the denial of membership to any
associated with a juridical entity person seeking membership
that is a member shall himself be therein, the barring of any person
deemed to be a member for this from becoming associated with a
purpose; member thereof, and the
prohibition or limitation by the
association of any person with
 respect to access to services offered (ii) Has engage, and there is a
by the association or a member reasonable likelihood he will again
thereof. engage, in acts or practices
inconsistent with just and equitable
39.4. (a) A registered securities association shall deny principles of fair trade.
membership to any person who is not a registered
broker or dealer. A registered securities association may examine and
verify the qualifications of an applicant to become a
(b) A registered securities association may salesman or associated person employed by a
deny membership to, or condition the member in accordance with the procedures establish
membership of, a registered broker or dealer by the rules of the association. A registered
if such broker or dealer: association also may require a salesman or associated
person employed by a member to be registered with
(i) Does not meet the standards of the association in accordance with the procedures
financial responsibility, operational prescribed in the rules of the association.
capability, training, experience or
competence that are prescribe by 39.5. In any proceeding by a registered securities
the rules of the association; or association to determine whether a person shall be
denied membership, or barred from association with
(ii) Has engaged, and there is a a member, the association shall provide notice to the
reasonable likelihood it will again person under review of the specific grounds being
engage, in acts or practices considered for denial, afford him an opportunity to
inconsistent with just and equitable defend against the allegations, and keep a record of
principles of fair trade. the proceedings. A determination by the association
to deny membership shall be supported by a
statement setting forth the specific grounds on which
(c) A registered securities association may the denial is based.
deny membership to a registered broker or
dealer not engage in a type of business in
which the rules of the association require Section 40. Powers with Respect to Self-Regulatory
members to be engaged: Provided, however, Organizations. - 40.1. Upon the filing of an
That no registered securities association may application for registration as an Exchange under
deny membership to a registered broker or Section 33, a registered securities association under
dealer by reason of the amount of business Section 39, a registered clearing agency under
done by the broker or dealer. Section 42, or other self-regulatory organization
under this Section, the Commission shall have ninety
(90) days within which to either grant registration
A registered securities association may should be denied. In the event proceedings are
examine and verify the qualifications of an instituted, the Commission shall have two hundred
applicant to become a member in seventy (270) days within which to conclude such
accordance with procedure established by proceedings at which time it shall, by order, grant or
the rules of the association. deny such registration.

(d) A registered securities association may 40.2. Every self-regulatory organization shall comply
bar a salesman or person associated with a with the provision of this Code, the rules and
broker or dealer from being employed by a regulations thereunder, and its own rules, and enforce
member or set conditions for the compliance therewith, notwithstanding any
employment of a salesman or associated if provisions of the Corporation Code to the contrary,
such person: by its members, persons associated with its members
of its participants.
(i) Does not meet the standards of
training, experience, or competence 40.3. (a) Each self-regulatory organization shall
that are prescribe by the rules of the submit to the Commission for prior approval any
association; or proposed rule or amendment thereto, together with a
concise statement of the reason and effect of the
proposed amendment
 (b) Within sixty (60) days after submission (i) The fixing of reasonable rates of fees,
of a proposed amendment, the Commission interest, listing and other charges, but not
shall, by order, approve the proposed rates of commission;
amendment. Otherwise, the same may be
made effective by the self-regulatory (j) Minimum units of trading;
organization.
(k) Odd-lot purchases and sales;
(c) In the event of an emergency requiring
action for the protection of investors, the (l) Minimum deposits on margin accounts;
maintenance of fair and orderly markets, or and
the safeguarding of securities and funds, a
self-regulatory organization may put a
proposed amendment into effect summarily; (m) The supervision, auditing and
Provided however, That the copy of the disciplining of members or participants.
same shall be immediately submitted to the
Commission. 40.5. The Commission, after due notice and hearing,
is authorized, in the public interest and to protect
40.4. The Commission is further authorized, if after investors:
making appropriate request in writing to a self-
regulatory organization that such organization effect (a) To suspend for a period not exceeding
on its own behalf specified changes in its rules and twelve (12) months or to revoke the
practices and, after due to notice and hearing it registration of a self-regulatory organization,
determines that such changes have not been effected, or to censure or impose limitations on the
and that such changes are not necessary, by the rule activities, functions, and operations of such
or regulation or by order, may alter, abrogate or self-organization, if the Commission finds
supplement the rules of such self-regulatory that such a self-regulatory organization has
organization in so far as necessary or appropriate to willfully violated or is unable to comply
effect such changes in respect of such matters as: with any provision of this Code or of the
rules and regulations thereunder, or its own
(a) Safeguards in respect of the financial or has failed to enforce compliance
responsibility of members and adequate therewith by a member of, person associated
provision against the evasion of financial with a member, or a participant in such self-
responsibility through the use of corporate regulatory organization;
forms or special partnerships;
(b) To expel from a self-regulatory
(b) The supervision of trading practices; organization any member thereof or any
participant therein who is subject to an order
of the Commission under Section 29 of this
(c) The listing or striking from listing of any Code or is found to have willfully violated
security; any provision of this Code or suspend for a
period not exceeding twelve (12) months for
(d) Hours of trading; violation of any provision of this Code or
any other laws administered by the
(e) The manner, methods, and place of Commission, or rules and regulations
soliciting business; thereunder, or effected, directly or
indirectly, any transaction for any person
(f) Fictitious accounts; who, such member or participant had reason
to believe, was violating in respect of such
(g) The time and method of making transaction any of such provisions; and
settlements, payments, and deliveries, and of
closing accounts; (c) To remove from the office or censure
any officer or director of a self-regulatory
(h) The transparency of securities organization if it finds that such officer or
transactions and prices; director has violated any provision of this
Code, any other law administered by the
 Commission, the rules or regulations summarily or after due notice and hearing
thereunder, or the rules of such self- (which hearing may consist solely of the
regulatory organization, abused his submission of affidavits or presentation of
authority, without reasonable justification or oral arguments) that a stay is consistent with
excuse has failed to enforce compliance with the public interest and the protection of
any of such provisions. investors.

40.6. (a) A self-regulatory organization is authorized 40.7. A self-regulatory organization shall promptly
to discipline a member of or participant in such self- notify the Commission of any disciplinary sanction
regulatory organization, or any person associated on any member thereof or participant therein, any
with a member, including the suspension or denial of membership or participation in such
expulsion of such member or participant, and the organization, or the imposition of any disciplinary
suspension or bar from being associated with a sanction on a person associated with a member or a
member, if such person has engage in acts or bar of such person from becoming so associated.
practices inconsistent with just and equitable Within thirty (30) days after such notice, any
principles of fair trade or in willful violation of any aggrieved person may appeal to the Commission
provision of the Code, any other law administered by from, or the Commission from, or the Commission
the Commission, the rules or regulations thereunder, on its own motion within such period, may institute
or the rules of the self-regulatory organization. In any review of, the decision of the self-regulatory
disciplinary proceeding by a self-regulatory organization, at the conclusion of which, after due
organization (other than a summary proceeding notice and hearing (which may consist solely of
pursuant to paragraph (b) of this subsection) the self- review of the record before the self-regulatory
regulatory organization shall bring specific charges, organization), the Commission shall affirm, modify
provide notice to the person charged, afford the or set aside the sanction. In such proceeding the
person charged with an opportunity to defend against Commission shall determine whether the aggrieved
the charges, and keep a record of the proceedings. A person has engaged or omitted to engage in the acts
determination to impose a disciplinary sanction shall and practices as found by the self-regulatory
be supported by a written statement of the offenses, a organization, whether such acts and practices
summary of the evidence presented and a statement constitute willful violations of this Code, any other
of the sanction imposed. law administered by the Commission, the rules or
regulations thereunder, or the rules of the self-
(b) A self-regulatory organization may regulatory organization as specified by such
summarily: (I) Suspend a member, organization, whether such provisions were applied
participant or person associated with a in a manner consistent with the purposes of this
member who has been or is expelled or Code, and whether, with due regard for the public
suspended from any other self-regulatory interest and the protection of investors the sanction is
organization; or (ii) Suspend a member who excessive or oppressive.
the self-regulatory organization finds to be
in such financial or operating difficulty that 40.8. The powers of the Commission under this
the member or participant cannot be Section shall apply to organized exchanges and
permitted to continue to do business as a registered clearing agencies.
member with safety to investors, creditors,
other members, participants or the self- CHAPTER XI
regulatory organization: Provided, That the ACQUISITION AND TRANSFER OF
self-regulatory organization immediately SECURITIES AND SETTLEMENT OF
notifies the Commission of the action taken. TRANSACTION IN SECURITIES
Any person aggrieved by a summary action
pursuant to this paragraph shall be promptly Section 41. Prohibition on Use of Unregistered
afforded an opportunity for a hearing by the Clearing Agency. – It shall be unlawful for any
association in accordance with the broker, dealer, salesman, associated person of a
provisions of paragraph (a) of this broker or dealer, or clearing agency, directly or
subsection. The Commission, by order, may indirectly, to make use of any facility of a clearing
stay a summary action on its own motion or agency in Philippines to make deliveries in
upon application by any person aggrieved connection with transaction in securities or to reduce
thereby, if the Commission determines the number of settlements of securities transactions or
to allocate securities settlement responsibilities or to person from access to services offered by
provide for the central handling of securities so that the clearing agency;
transfers, loans and pledges and similar transaction
can be made by bookkeeping entry or otherwise to (c) The equitable allocation of reasonable
facilitate the settlement of securities transactions dues, fees, and other charges among
without physical delivery of securities certificates, participants;
unless such clearing agency is registered as such
under Section 42 of this Code or is exempted from (d) Prevention of fraudulent and
such registration upon application by the clearing manipulative acts and practices, promotion
agency because, in the opinion of the Commission, of just and equitable principles of trade, and,
by reason of the limited volume of transactions which in general, protection of investors and the
are settled using the clearing agency, it is not public interest;
practicable and not necessary or appropriate in the
public interest or for the protection of investors to
require such registration. (e) The transparent, prompt and accurate
clearance and settlement of transactions in
securities handled by the clearing agency;
Section 42. Registration of Clearing Agencies. - 42.1. and
Any clearing agency may be registered as such with
the Commission under the terms and conditions
hereinafter provided in this Section, by filing an (f) The establishment and oversight of a
application for registration in such form and fund to guarantee the prompt and accurate
containing such information and supporting clearance and settlement of transaction
documents as the Commission by rule shall prescribe, executed on an exchange, including a
including the following: requirement that members each contribute
an amount based on their and a relevant
percentage of the daily exposure of the (4)
(a) An undertaking to comply and enforce largest trading brokers which adequately
compliance by its participants with the reflects trading risks undertaken or pursuant
provisions of this Code, and any to another formula set forth in Commission
amendments thereto, and the implementing rules or regulations or order, upon
rules or regulations made or to be made application: Provided, however, That a
thereunder, and the clearing agency’s rules; clearing agency engaged in the business of
securities depository shall be exempt from
(b) The organizational charts of the this requirement.
Exchange, its rules of procedure, and list of
its officers and participants; 42.3. In the case of an application filed pursuant to
this section, the Commission shall grant registration
(c) Copies of the clearing agency’s rules. if it is finds That the requirements of this code and
the rules and regulations thereunder with respect to
42.2. No registration of a clearing agency shall be the applicant have been satisfied, and shall deny
granted unless the rules of the clearing agency registration if it does not make such finding.
include provision for:
42.4. Upon appropriate application in accordance
(a) The expulsions, suspension, or with the rules and regulations of the Commission and
disciplining of a participant for violations of upon such terms as the Commission may deem
this Code, or any other Act administered by necessary for the protection of investors, a clearing
the Commission, the rules, regulations, and agency may withdraw its registration or suspend its
orders thereunder, or the clearing agency’s operation or resume the same.
rules;
Section 43. Uncertificated Securities. –
(b) A fair procedure for the disciplining of Notwithstanding Section 63 of the Corporation Code
participants, the denial of participation rights of the Philippines: 43.1. A corporation whose
to any person seeking to be a participant, securities are registered pursuant to this Code or
and the prohibition or limitation of any listed on securities exchange may:
 (a) If so resolved by its Board of Directors such transactions between clearing agency shall
and agreed by a shareholder, investor or constitute the best between clearing agency and its
securities intermediary, issue shares to, or participants’ or members’ clients to prove their
record the transfer of some or all its shares rights, title and entitlement with respect to the book-
into the name of said shareholders, investors entry security holdings of the participants or
or, securities intermediary in the form of members held on behalf of the clients. However, the
uncertified securities. The use of uncertified corporation shall not be bound by the foregoing
securities in these circumstances shall be transactions unless the corporate secretary is duly
without prejudice to the rights of the notified in such manner as the Commission may
securities intermediary subsequently to provide.
require the corporation to issue a certificate
in respect of any shares recorded in its Section 45. Pledging a Security or Interest Therein. –
name; and In addition to other methods recognized by law, a
pledge of, including an uncertificated security, is
(b) If so provided in its articles of properly constituted and the instrument proving the
incorporation and by-laws, issue all of the right pledged shall be considered delivered to the
shares of a particular class in the form of creditor under Articles 2093 and 2095 of the Civil
Uncertificated securities and subject to a Code if a securities intermediary indicates by book
condition that investors may not require the entry that such security has been credited to a
corporation to issue a certificate in respect specially designated pledge account in favor of the
of any shares recorded in their name. pledgee. A pledge under this subsection has the effect
of the delivery of a security in bearer form or duly
43.2. The Commission by rule may allow other indorsed in blank representing the quantity or amount
corporations to provide in their articles of of such security or right pledged. In the case of a
incorporation and by-laws for the use of registered clearing agency, the procedures by which,
uncertificated securities. and the exact time at which, such book-entries are
created shall be governed by the registered clearing
43.3. Transfers of securities, including an agency’s rules. However, the corporation shall not be
uncertificated securities, may be validly made and bound by the foregoing transactions unless the
consummated by appropriate book-entries in the corporate secretary is duly notified in such manner as
securities intermediaries, or in the stock and transfer the Commission may provide.
book held by the corporation or the stock transfer
agent and such bookkeeping entries shall be binding Section 46. Issuer’s Responsibility for Wrongful
on the parties to the transfer. A transfer under this Transfer to Registered Clearing Agency. - The
subsection has the effect of the delivery of a security registration of a transfer of a security into the name
in bearer form or duly indorsed in blank representing of and by a registered clearing agency or its name of
the quantity or amount of security or right or by a registered clearing agency or its nominee
transferred, including the unrestricted negotiability of shall be final and conclusive unless the clearing
that security by reason of such delivery. However, agency had notice of an adverse claim before the
transfer of uncertificated shares shall only be valid, registration was made. The above provisions which
so far as the corporation is concerned, when a the claimant may have against the issuer for wrongful
transfer is recorded in the books of the corporation so registration in such circumstances.
as to show the names of the parties to the transfer and
the number of shares transferred. Section 47. Power of the Commission With Respect
to Securities Ownership. – The Commission is
However, nothing in this Code shall compliance by authorize, having due regard to the public interest and
banking and other institutions under the supervision the protection of investors, to promulgate rules and
of the Bangko Sentral ng Pilipinas and their regulations which:
stockholders with the applicable ceilings on
shareholding prescribed under pertinent banking laws 47.1. Validate the transfer of securities by book-
and regulations. entries rather than the delivery of physical
certificates;
Section 44. Evidentiary Value of Clearing Agency
Record. – The official records and book entries of a
clearing agency shall constitute the best evidence of
47.2. Establish when a person acquires a security or months, but not more than seventy-five per
an interest therein and when delivery of a security to centum (75%) of the current market price.
a purchaser occurs;
However, the Monetary Board may increase or
47.3. Establish which records constitute the best decrease the above percentages, in order to achieve
evidence of a person’s interests in a security and the the objectives of the Government with due regard for
effect of any errors in electronic records of promotion of the economy and prevention of the use
ownership; of excessive credit.

47.4. Codify the rights of investors who choose to Such rules and regulations may make appropriate
hold their securities indirectly through a registered provision with respect to the carrying of
clearing agency and/ or other securities undermargined accounts for limited periods and
intermediaries; under specified conditions; the withdrawal of funds
or securities; the transfer of accounts from one lender
47.5. Codify the duties of securities intermediaries to another; special or different margin requirements
(including clearing agencies) who hold securities on for delayed deliveries, short sales, arbitrage
behalf of investors; and transactions, and securities to which letter (b) of the
second paragraph of this subsection does not apply;
47.6 Give first priority to any claims of a registered the methods to be used in calculating loans, and
clearing agency against a participant arising from a margins and market prices; and similar administrative
failure by the participant to meet its obligations under adjustments and details.
the clearing agency’s rules in respect of the clearing
and settlement of transactions in securities, in a 48.2. No member of an Exchange or broker or dealer
dissolution of the participant, and any such rules and shall, directly or indirectly, extend or maintain credit
regulation shall bind the issuers of the securities, is extended and maintain credit or arrange for the
investors in the securities, any third parties with extension or maintenance of credit to or for any
interests in the securities, and the creditors of a customer:
participant of a registered clearing agency.
(a) On any security unless such credit is
CHAPTER XII extended and maintained in accordance with
MARGIN AND CREDIT the rules and regulations which the
Commission shall prescribe under this
Section 48. Margin Requirements. – 48.1. For the Section including rules setting credit in
purpose of preventing the excessive use of credit for relation to net capital of such member,
the purchase or carrying of securities, the broker or dealer; and
Commission, in accordance with the credit and
monetary policies that may be promulgated from time (b) Without collateral or any collateral other
to time by the Monetary Board of the Bangko Sentral than securities, except (I) to maintain a
ng Pilipinas, shall prescribed rules and regulations credit initially extended in conformity with
with respect to the amount of credit that may be rules and regulations of the Commission and
extended on any security. For the extension of credit, (ii) in cases where the extension or
such rules and regulations shall be based upon the maintenance of credit is not for the purpose
following standard: of purchasing or carrying securities or of
evading or circumventing the provisions of
An amount not greater than the whichever is the paragraph (a) of this subsection.
higher of –
48.3 Any person not subject to Subsection 48.2
(a) Sixty-five per centum (65%) of the hereof shall extend or maintain credit or arrange for
current market price of the security, or the extension or maintenance of credit for the
purpose of purchasing or carrying any security, only
in accordance with such rules and regulations as the
(b) One hundred per centum (100%) of the Commission shall prescribe to prevent the excessive
lowest market price of the security during use of credit for the purchasing or carrying of or
the preceding thirty-six (36) calendar trading in securities in circumvention of the other
provisions of this Section.. Such rules and regulations without the written consent of such customer or in
may impose upon all loans made for the purpose of contravention of such rules and regulations as the
purchasing or carrying securities limitations similar Commission shall prescribe.
to those imposed upon members, brokers, or dealers
by Subsection 48.2 and the rules and regulations Section 50. Enforcement of Margin Requirement and
thereunder. This subsection and the rules and Restrictions on Borrowing. – To prevent indirect
regulations thereunder shall not apply: violations of the margin requirements under Section
48, the broker or dealer shall require the customer in
(a) To a credit extension made by a person non-margin transactions to pay the price of the
not in the ordinary course of business; (b) to security purchased for his account within such period
a loan to a dealer to aid in the financing of as the Commission may prescribe, which shall in no
the distribution of securities to customers case exceed the prescribed settlement date.
not through the medium of an Exchange; or Otherwise, the broker shall sell the security
(c) To such other credit extension as the purchased starting on the next trading day but not
Commission shall exempt from the beyond ten (10) trading days following the last day
operation of this subsection and the rules for the customer to pay such purchase price, unless
and regulations thereunder upon specified such sale cannot be effected within said period for
terms and conditions for stated period. justifiable reasons. The sale shall be without
prejudice to the right of the broker or dealer to
Section 49. Restrictions on Borrowings by Members, recover any deficiency from the customer. To prevent
Brokers, and Dealers. – It shall be unlawful for any indirect violation of the restrictions on borrowing
registered broker or dealer, or member of an under Section 49, the broker shall, unless otherwise
Exchange, directly or indirectly; directed by the customer, pay the net sales price of
the securities sold for a customer within the same
49.1. To permit in the ordinary course of business as period as above prescribed by the Commission:
a broker or dealer his aggregate indebtedness Provided, That the customer shall be required to
including customers’ credit balances, to exceed such deliver the instruments evidencing the securities as a
percentage of the net capital (exclusive of fixed condition for such payment upon demand by the
assets and value of Exchange membership) employed broker.
in the business, but not exceeding in any case to
thousand percentum (2,000%), as the Commission CHAPTER XIII
may be rules and regulations prescribe as necessary GENERAL PROVISIONS
or appropriate in the public interest or for the
protection of investors. Section 51. Liabilities of Controlling Persons, Aider
and Abettor and Other Secondary Liability. 51.1.
49.2. To pledge, mortgage, or otherwise encumber or Every person who, by or through stock ownership,
arrange for the pledge, mortgage, or encumbrance of agency, or otherwise, or in connection with an
any security carried for the account of any customer agreement or understanding with one or more other
under circumstances: (a) That will permit the persons, controls any person liable under this Code or
commingling of his securities, without his written the rules or regulations of the Commission
consent, with the securities of any customer; (b) That thereunder, shall also be liable jointly and severally
will permit such securities to be commingled with the with and to the same extent as such controlled
securities of any person other than a bona fide persons to any person to whom such controlled
customer; or (c) that will permit such securities to be person is liable, unless the controlling person proves
pledged, mortgaged or encumbered, or subjected to that, despite the exercise of due diligence on his part,
any lien or claim of the pledgee, for a sum in excess he has no knowledge of the existence of the facts by
of the aggregate indebtedness of such customers in reason of which the liability of the controlled person
respect of such securities. However, the Commission, is alleged to exist.
having due regard to the protection of investors, may,
by rules and regulations, allow certain transactions 51.2. It shall be unlawful for any person, directly, or
that may otherwise be prohibited under this indirectly, to do any act or thing which it would be
subsection. unlawful for such person to do under the provisions
of this Code or any rule or regulation thereunder.
49.3. To lend or arrange for the lending of any
security carried for the account of any customer
51.2. It shall be unlawful for any director or officer transcribed information of any type, whether written
of, or any owner of any securities issued by, any or electronic in character.
issuer required to file any document, report or other
information under this Code or any rule or regulation Section 53. Investigations, Injunctions and
of the Commission thereunder, without just cause, to Prosecution of Offenses. 53.1. The Commission may,
hinder, delay or obstruct the making or filing of any in its discretion, make such investigations as it deems
such document, report, or information. necessary to determine whether any person has
violated or is about to violate any provision of this
51.3. It shall be unlawful for any person to aid, abet, Code, any rule, regulation or order thereunder, or any
counsel, command, induce or procure any violation rule of an Exchange, registered securities association,
of this Code, or any rule, regulation or order of the clearing agency, other self-regulatory organization,
Commission thereunder. and may require or permit any person to file with it a
statement in writing, under oath or otherwise, as the
52.4. Every person who substantially assists the act Commission shall determine, as to all facts and
or omission of any person primarily liable under circumstances concerning the matter to be
Sections 57, 58, 59 and 60 of this Code, with investigated. The Commission may publish
knowledge or in reckless disregard that such act or information concerning any such violations, and to
omission is wrongful, shall be jointly and severally investigate any fact, condition, practice or matter
liable as an aider and abettor for damages resulting which it may deem necessary or proper to aid in the
from the conduct of the person primarily liable: enforcement of the provisions of this Code, in the
Provided, however, That an aider and abettor shall be prescribing of rules and regulations thereunder, or in
liable only to the extent of his relative contribution in securing information to serve as a basis for
causing such damages in comparison to that of the recommending further legislation concerning the
person primarily liable, or the extent to which the matters to which this Code relates: Provided,
aider and abettor was unjustly enriched thereby, however, That any person requested or subpoenaed to
whichever is greater. produce documents or testify in any investigation
shall simultaneously be notified in writing of the
Section 52. Accounts and Records, Reports, purpose of such investigation: Provided, further, That
Examination of Exchanges, members, and Others. – all criminal complaints for violations of this Code,
52.1. Every registered Exchange, broker or dealer, and the implementing rules and regulations enforced
transfer agent, clearing agency, securities association, or administered by the Commission shall be referred
and other self-regulatory organization, and every to the Department of Justice for preliminary
other person required to register under this Code, investigation and prosecution before the proper court:
shall make, keep and preserve for such periods, Provided, furthermore, That in instances where the
records, furnish such copies thereof, and make such law allows independent civil or criminal proceedings
reports, as the Commission by its rules and of violations arising from the same act, the
regulations may prescribe. Such accounts, Commission shall take appropriate action to
correspondence, memoranda, papers, books, and implement the same: provided, finally, That the
other records shall be subject at any time to such investigation, prosecution, and trial of such cases
reasonable periodic, special or other examinations by shall be given priority.
representatives of the Commission as the
Commission may deem necessary or appropriate in 53.2. For the purpose of any such investigation, or
the public interest of for the protection of investors. any other proceeding under this Code, the
Commission or any officer designated by it is
52.2. Any brother, dealer or other person extending empowered to administer oaths and affirmations,
credit, who is subject to the rules and regulations subpoena witnesses, compel attendance, take
prescribed by the Commission pursuant to this Code, evidence, require the production of any book, paper,
shall make such reports to the Commission as may be correspondence, memorandum, or other record which
necessary or appropriate to enable it to perform the the Commission deems relevant or material to the
functions conferred upon it by this Code. inquiry, and to perform such other acts necessary in
the conduct of such investigation or proceedings.
52.3. For purposes of this Section, the term "records
refers to accounts, correspondence, memoranda, 53.3. Whenever it shall appear to the Commission
tapes, discs, papers, books and other documents or that any person has engaged or is about to engage in
any act or practice constituting a violation of any
provision of this Code, any rule, regulation or order complete in all material respects; or (d) Any person
thereunder, or any rule of an Exchange, registered has refused to permit any lawful examinations into its
securities association, clearing agency or other self- affairs, it shall, in its discretion, and subject only to
regulatory organization, it may issue an order to such the limitations hereinafter prescribed, impose any or
person to desist from committing such act or practice: all of the following sanctions as may be appropriate
Provided, however, That the Commission shall not in light of the facts and circumstances:
charge any person with violation of the rules of an
Exchange or other self-regulatory organization unless (i) Suspension, or revocation of any
it appears to the Commission that such Exchange or registration for the offering of securities;
other self-regulatory organization is unable or
unwilling to take action against such person. After (ii) A fine of no less than Ten thousand
finding that such person has engaged in any such act pesos (P10,000.00) nor more than One
or practice and that there is a reasonable likelihood of million pesos (P1,000,000.00) plus not more
continuing, further or future violations by such than Two thousand pesos (P2,000.00) for
person, the Commission may issue ex-parte a cease each day of continuing violation;
and desist order for a maximum period of ten (10)
days, enjoining the violation and compelling
compliance with such provision. The Commission (iii) In the case of a violation of Sections
may transmit such evidence as may be available 19.2, 20, 24, 26 and 27, disqualification
concerning any violation of any provision of this from being an officer, member of the Board
Code, or any rule, regulation or order thereunder, to of Directors, or person performing similar
the Department of Justice, which may institute the functions, of an issuer required to file
appropriate criminal proceedings under this Code. reports under Section 17 of this Code or any
other act, rule or regulation administered by
the Commission;
53.4. Any person who, within his power but without
cause, fails or refuses to comply with any lawful
order, decision or subpoena issued by the (iv) In the case of a violation of Section 34,
Commission under Subsection 53.2 or Subsection a fine of no more than three (3) times the
53.3 or Section 64 of this Code, shall after due notice profit gained or loss avoided as result of the
and hearing, be guilty of contempt of the purchase, sale or communication proscribed
Commission. Such person shall be fined in such by such Section, and
reasonable amount as the Commission may
determine, or when such failure or refusal is a clear (v) Other penalties within the power of the
and open defiance of the Commission’s order, Commission to impose.
decision or subpoena, shall be detained under an
arrest order issued by the Commission, until such 54.2. The imposition of the foregoing administrative
order, decision or subpoena is complied with. sanctions shall be without prejudice to the filing of
criminal charges against the individuals responsible
Section 54. Administrative Sanctions. – 54.1. If, after for the violation.
due notice and hearing, the Commission finds that:
(a) There is a violation of this Code, its rule, or its 54.3. The Commission shall have the power to issue
orders; (b) Any registered broker or dealer, writs of execution to enforce the provisions of the
associated person thereof has failed reasonably to Section and to enforce payment of the fees and other
supervise, with a view to preventing violations, dues collectible under this Code.
another person subject to supervision who commits
any such violation; (c) Any registrant or other person Section 55. Settlement Offers. – 55.1. At any time,
has, in a registration statement or in other reports, during an investigation or proceeding under this
applications, accounts, records or documents required Code, parties being investigated and/or charged may
by law or rules to be filed with the Commission, propose in writing an offer of settlement with the
made any untrue statement of a material fact, or Commission.
omitted to state any material fact required to be stated
their or necessary to make the statements therein not
55.2. Upon receipt of such offer of settlement, the
misleading; or, in the case of an underwriter, has
Commission may consider the offer based on timing,
failed to conduct an inquiry with reasonable diligence
the nature of the investigation or proceeding, and the
to insure that a registration statement is accurate and
public interest.
55.3. The Commission may only agree to a statement, with respect to the statement,
settlement offer based on its findings that such report, or valuation, which purports to have
settlement is in the public interest. Any agreement to been prepared or certified by him.
settle shall have no legal effect until publicly
disclosed. Such decision may be made without a (f) Every selling shareholder who
determination of guilt on the part of the person contributed to and certified as to the
making the offer. accuracy of a portion of the registration
statement, with respect to that portion of the
55.4. The Commission shall adopt rules and registration statement which purports to
procedures governing the filing, review, withdrawal, have been contributed by him.
form of rejection and acceptance of such offers.
(g) Every underwriter with respect to such
Section 56. Civil Liabilities on Account of False security.
Registration Statement. 56.1. Any person acquiring a
security, the registration statement of which or any 56.2. If the person who acquired the security did so
part thereof contains on its effectivity an untrue after the issuer has made generally available to its
statement of a material fact or omits to state a security holders an income statement covering a
material fact required to be stated therein or period of at least twelve (12) months beginning from
necessary to make such statements not misleading, the effective date of the registration statement, then
and who suffers damage, may sue and recover the right of recovery under this subsection shall be
damages from the following enumerated persons, conditioned on proof that such person acquired the
unless it is proved that at the time of such acquisition security relying upon such untrue statement in the
he knew of such untrue statement or omission: registration statement or relying upon the registration
statement and not knowing of such income statement,
(a) The issuer and every person who signed but such reliance may be established without proof of
the registration statement: the reading of the registration statement by such
person.
(b) Every person who was a director of, or
any other person performing similar Section 57. Civil Liabilities Arising in Connection
functions, or a partner in, the issuer at the With Prospectus, Communications and Reports. 57.1.
time of the filing of the registration Any person who:
statement or any part, supplement or
amendment thereof with respect to which his (a) Offers to sell or sells a security in
liability is asserted; violation of Chapter III, or

(c) Every person who is named in the (b) Offers to sell or sells a security, whether
registration statement as being or about to or not exempted by the provisions of this
become a director of, or a person performing Code, by the use of any means or
similar functions, or a partner in, the issuer instruments of transportation or
and whose written consent thereto is filed communication, by means of a prospectus or
with the registration statement; other written or oral communication, which
includes an untrue statement of a material
(d) Every auditor or auditing firm named as fact or omits to state a material fact
having certified any financial statements necessary in order to make the statements, in
used in connection with the registration the light of the circumstances under which
statement or prospectus. they were made, not misleading (the
purchaser not knowing of such untruth or
(e) Every person who, with his written omission), and who shall fail in the burden
consent, which shall be filed with the of proof that he did not know, and in the
registration statement, has been named as exercise of reasonable care could not have
having prepared or certified any part of the known, of such untruth or omission, shall be
registration statement, or as having prepared liable to the person purchasing such security
or certified any report or valuation which is from him, who may sue to recover the
used in connection with the registration consideration paid for such security with
 interest thereon, less the amount of any 60.2. As to each such rule or regulation so
income received thereon, upon the tender of denominated, the Commission by rule shall prescribe
such security, or for damages if he no longer the elements of proof required for recovery and any
owns the security. limitations on the amount of damages that may be
imposed.
57.2. Any person who shall make or cause to be
made any statement in any report, or document filed Section 61. Civil Liability on Account of Insider
pursuant to this Code or any rule or regulation Trading. – 61.1. Any insider who violates Subsection
thereunder, which statement as at the time and in the 27.1 and any person in the case of a tender offer who
light of the circumstances under which it was made violates Subsection 27.4 (a)(I), or any rule or
false or misleading with respect to any material fact, regulation thereunder, by purchasing or selling a
shall be liable to any person who, not knowing that security while in possession of material information
such statement was false or misleading, and relying not generally available to the public, shall be liable in
upon such statement shall have purchased or sold a a suit brought by any investor who,
security at a price which was affected by such contemporaneously with the purchase or sale of
statement, for damages caused by such reliance, securities that is the subject of the violation,
unless the person sued shall prove that he acted in purchased or sold securities of the same class unless
good faith and had no knowledge that such statement such insider, or such person in the case of a tender
was false or misleading. offer, proves that such investor knew the information
or would have purchased or sold at the same price
Section 58. Civil Liability of Fraud in Connection regardless of disclosure of the information to him.
with Securities Transactions. – Any person who
engages in any act or transaction in violation of 61.2. An insider who violates Subsection 27.3 or any
Sections 19.2, 20 or 26, or any rule or regulation of person in the case of a tender offer who violates
the Commission thereunder, shall be liable to any Subsection 27.4 (a), or any rule or regulation
other person who purchases or sells any security, thereunder, by communicating material nonpublic
grants or refuses to grant any proxy, consent or information, shall be jointly and severally liable
authorization, or accepts or declines an invitation for under Subsection 61.1 with, and to the same extent
tender of a security, as the case may be, for the as, the insider, or person in the case of a tender offer,
damages sustained by such other person as a result of to whom the communication was directed and who is
such act or transaction. liable under Subsection 61.1 by reason of his
purchase or sale of a security.
Section 59. Civil Liability for Manipulation of
Security Prices. – Any person who willfully Section 62. Limitation of Actions. – 62.1. No action
participates in any act or transaction in violation of shall be maintained to enforce any liability created
Section 24 shall be liable to any person who shall under Section 56 or 57 of this Code unless brought
purchase or sell any security at a price which was within two (2) years after the discovery of the untrue
affected by such act or transaction, and the person so statement or the omission, or, if the action is to
injured may sue to recover the damages sustained as enforce a liability created under Subsection 57.1 (a),
a result of such act or transaction. unless, brought within two (2) yeas after the violation
upon which it is based. In no event shall an such
Section 60. Civil Liability with Respect to action be brought to enforce a liability created under
Commodity Futures Contracts and Pre-need Plans. – Section 56 or Subsection 57.1 (a) more than five (5)
60.1. Any person who engages in any act or years after the security was bona fide offered to the
transactions in willful violation of any rule or public, or under Subsection 57.1 (b0 more than five
regulation promulgated by the Commission under (5) years after the sale.
Section 11 or 16, which the Commission
denominates at the time of issuance as intended to 62.2. No action shall be maintained to enforce any
prohibit fraud in the offer and sale of pre-need plans liability created under any other provision of this
or to prohibit fraud, manipulation, fictitious Code unless brought within two (20 years after the
transactions, undue speculation, or other unfair or discovery of the facts constituting the cause of action
abusive practices with respect to commodity future and within five (5) years after such cause of action
contracts, shall be liable to any other person accrued.
sustaining damages as a result of such act or
transaction.
Section 63. Amount of Damages to be Awarded. – shall make public such order and a copy thereof shall
63.1. All suits to recover damages pursuant to be immediately furnished to each person subject to
Sections 56, 57, 58, 59, 60 and 61 shall be brought the order.
before the Regional Trial Court, which shall have
exclusive jurisdiction to hear and decide such suits. 64.3. Any person against whom a cease and desist
The Court is hereby authorized to award damages in order was issued may, within five (5) days from
an amount not exceeding triple the amount of the receipt of the order, file a formal request for a lifting
transaction plus actual damages. thereof. Said request shall be set for hearing by the
Commission not later than fifteen (15) days from its
Exemplary damages may also be awarded in cases of filing and the resolution thereof shall be made not
bad faith, fraud, malevolence or wantonness in the later than ten (10) days from the termination of the
violation of this Code or the rules and regulations hearing. If the Commission fails to resolve the
promulgated thereunder. request within the time herein prescribed, the cease
and desist order shall automatically be lifted.
The Court is also authorized to award attorney’s fees
not exceeding thirty percentum (30%) of the award. Section 65. Substituted Service Upon the
Commission. – Service of summons or other process
63.2. The persons specified in Sections 56, 57, 58, shall be made upon the Commission in actions or
59, 60 and 61 hereof shall be jointly and severally legal proceedings against an issuer or any person
liable for the payment of damages. However, any liable under this Code who is not domiciled in the
person who becomes liable for the payment of such Philippines. Upon receipt by the Commission of such
damages may recover contribution from any other summons, the Commission shall within ten (10) days
person who, if sued separately, would have been thereafter, transmit by registered mail a copy of such
liable to make the same payment, unless the former summons and the complaint or other legal process to
was guilty of fraudulent representation and the latter such issuer or person at his last known address or
was not. principal office. The sending thereof by the
Commission, the expenses for which shall be
63.3. Notwithstanding any provision of law to the advanced by the party at whose instance it is made,
contrary, all persons, including the issuer, held liable shall complete such service.
under the provisions of Sections 56, 57, 58, 59, 60
and 61 shall contribute equally to the total liability Section 66. Revelation of Information Filed with the
adjudged herein. In no case shall the principal Commission. – 66.1. All information filed with the
stockholders, directors and other officers of the issuer commission in compliance with the requirements of
or persons occupying similar positions therein, this Code shall be made available to any member of
recover their contribution to the liability from the the general public, upon request, in the premises and
issuer. However, the right of the issuer to recover during regular office hours of the Commission,
from the guilty parties the amount it has contributed except as set forth in this Section.
under this Section shall not be prejudiced.
66.2. Nothing in this Code shall be construed to
Section 64. Cease and Desist Order. – 64.1. The require, or to authorize the Commission to require,
Commission, after proper investigation or the revealing of trade secrets or processes in any
verification, motu proprio or upon verified complaint application, report, or document filed with the
by any aggrieved party, may issue a cease and desist Commission.
order without the necessity of a prior hearing if in its
judgment the act or practice, unless restrained, will 66.3. Any person filing any such application, report
operate as a fraud on investors or is otherwise likely or document may make written objection to the
to cause grave or irreparable injury or prejudice to the public disclosure of information contained therein,
investing public. stating the grounds for such objection, and the
Commission may hear objections as it deems
64.2. Until the Commission issue a cease and desist necessary. The Commission may, in such cases,
order, the fact that an investigation has been initiated make available to the public the information
or that a complaint has been filed, including the contained in any such application, report, or
contents of the complaint, shall be confidential. Upon document only when a disclosure of such information
issuance of a cease and desist order, the Commission is required in the public interest or for the protection
of investors; and copies of information so made
available may be furnished to any person having a Section 68. Special Accounting Rules. – The
legitimate interest therein at such reasonable charge Commission shall have the authority to make, amend,
and under such reasonable limitations as the and rescind such accounting rules and regulations as
Commission may prescribe. may be necessary to carry out the provisions of this
Code, including rules and regulations as may be
66.4. It shall be unlawful for any member, officer, or necessary to carry out the provisions of this Code,
employee of the Commission to disclose to any including rules and regulations governing registration
person other than a member, officer or employee of statements and prospectuses for various classes of
the Commission or to use for personal benefit, any securities and issuers, and defining accounting,
information contained in any application, report, or technical and trade terms used in this Code. Among
document filed with the Commission which is not other things, the Commission may prescribe the form
made available to the public pursuant to Subsection or forms in which required information shall be set
66.3. forth, the items or details to be shown in the balance
sheet and income statement, and the methods to be
66.5. Notwithstanding anything in Subsection 66.4 to followed in the preparation of accounts, appraisal or
the contrary, on request from a foreign enforcement valuation of assets and liabilities, determination of
authority of any country whose laws grant reciprocal depreciation and depletion, differentiation of
assistance as herein provided, the Commission may recurring and non-recurring income, differentiation
provide assistance in accordance with this subsection, of investment and operating income, and in the
including the disclosure of any information filed with preparation, where the Commission deems it
or transmitted to the Commission. If the requesting necessary or desirable of consolidated balance sheets
authority states that it is conducting an investigation or income accounts of any person directly or
which it deems necessary to determine whether any indirectly controlling or controlled by the issuer, or
person has violated, is violating, or is about to violate any person under direct or indirect common control
any laws relating to securities or commodities matters with the issuer.
that the requesting authority administers or enforces.
Such assistance may be provided without regard to Section 69. Effect on Existing Law. – The rights and
whether the facts stated in the request would also remedies provided by this Code shall be in addition
constitute a violation of law of the Philippines. to any and all order rights and remedies that may now
exist. However, except as provided in Section 56 and
Section 67. Effect of action of Commission and 63 hereof, no person permitted to maintain a suit for
Unlawful Representations with Respect Thereto. – damages under the provisions of this Code shall
67.1. No action or failure to act by the Commission recover, through satisfaction of judgment in one or
in the administration of this Code shall be construed more actions, a total amount in excess of his actual
to mean that the Commission has in any way passed damages on account of the act complained of:
upon the merits of or given approval to any security Provided, That exemplary damages may be awarded
or any transactions or transactions therein, nor shall in cases of bad faith, fraud, malevolence or
such action or failure to act with regard to any wantonness in the violation of this Code or the rules
statement or report filed with or examined by the and regulations promulgated thereunder.
Commission pursuant to this Code or the rules and
regulations thereunder to be deemed a finding by the Section 70. Judicial Review of Commission Orders. –
Commission that such statements or report is true and Any person aggrieved by an order of the Commission
accurate on its face or that it is not false or may appeal the order to the Court of Appeals by
misleading. It shall be unlawful to make, or cause to petition for review in accordance with the pertinent
be made, to any prospective purchaser or seller or a provisions of the Rules of Court.
security any representation that any such action or
failure to act by the Commission is to be so construed Section 71. Validity of Contracts. – 71.1. Any
or has such effect. condition, stipulation, provision binding any person
to waive compliance with any provision of this Code
67.2. Nothing contained in Subsection 67.1 shall, or of any rule or regulation thereunder, or of any rule
however, be construed as an exemption from liability of an Exchange required thereby, as well as the
of an employee or officer of the Commission for any waiver itself, shall be void.
nonfeasance, misfeasance or malfeasance in the
discharge of his official duties. 71.2. Every contract made in violation of any
provision of this Code or of any rule or regulation
thereunder, and every contract, including any Code, and prescribing the form or forms in which
contract for listing a security or an Exchange information required in registration statements,
heretofore or hereafter made, the performance of applications, and reports to the Commission shall be
which involves the violation of, or the continuance of set forth. For purposes of its rules or regulations, the
any relationship or practice in violation of, any Commission may classify persons, securities, and
provision of this Code, or any rule or regulation other matters within its jurisdiction, prescribe
thereunder, shall be void: different requirements for different classes of
persons, securities, or matters, and by rule or order,
(a) As regards the rights of any person who, conditionally or unconditionally exempt any person,
in violation of any such provision, rule or security, or transaction, or class or classes of persons,
regulation, shall have made or engaged in securities or transactions, from any or all provisions
the performance of any such contract, and of this Code.

(b) As regards the rights of any person who, Failure on the part of the Commission to issue rules
not being a party to such contract, shall have and regulations shall not in any manner affect the
acquired any right thereunder with actual self-executory nature of this Code.
knowledge of the facts by reason of which
the making or performance of such contract 72.2. The Commission shall promulgate rules and
was in violation of any such provision, rule regulations providing for reporting, disclosure and
or regulation. the prevention of fraudulent, deceptive or
manipulative practices in connection with the
71.3. Nothing in this Code shall be construed: purchase by an issuer, by tender offer or otherwise, of
and equity security of a class issued by it that
(a) To affect the validity of any loan or satisfies the requirements of Subsection 17.2. such
extension of credit made or of any lien rules and regulations may require such issuer to
created prior or subsequent to the effectivity provide holders of equity securities of such dates
of this Code, unless at the time of the with such information relating to the reasons for such
making of such loan or extension of credit or purchase, the source of funds, the number of shares to
the creating of such lien, the person making be purchased, the price to be paid for such securities,
such loan or extension of credit or acquiring the method of purchase and such additional
such lien shall have actual knowledge of the information as the Commission deems necessary or
facts by reason of which the making of such appropriate in the public interest or for the protection
loan or extension of credit or the acquisition of investors, or which the Commission deems to be
of such lien is a violation of the provisions material to a determination by holders whether such
of this Code or any rules or regulations security should be sold.
thereunder, or
72.3. For the purpose of Subsection 72.2, a purchase
(b) To afford a defense to the collection of by or for the issuer or any person controlling,
any debt, obligation or the enforcement of controlled by, or under common control with the
any lien by any person who shall have issuer, or a purchase subject to the control of the
acquired such debt, obligation or lien in issuer or any such person, shall be deemed to be a
good faith for value and without actual purchased by the issuer. The commission shall have
knowledge of the violation of any provision the power to make rules and regulations
of this Code or any rule or regulation implementing this subsection, including exemptive
thereunder affecting the legality of such rules and regulations covering situations in which the
debt, obligation or lien. Commission deems it unnecessary or inappropriate
that a purchase of the type described in this
subsection shall be deemed to be a purchase by the
Section 72. Rules and Regulations; Effectivity. – issuer for the purpose of some or all of the provisions
72.1. This Code shall be self-executory. To effect the of Subsection 72.2.
provisions and purposes of this Code, the
Commission may issue, amend, and rescind such
rules and regulations and orders necessary or 72.4. The rules and regulations promulgated by the
appropriate, including rules and regulations defining Commission shall be published in two (20
accounting, technical, and trade terms used in this newspapers or general circulation in the Philippines,
and unless otherwise prescribed by the Commission,
the same shall be effective fifteen (15) days after the out the reorganization provided in this Code is hereby
date of the last publication. appropriated.

Section 73. Penalties. – Any person who violates any All employees of the Commission who voluntarily
of the provisions of this Code, or the rules and retire or are separated from the service with the
regulations promulgated by the Commission under Commission and whose retirement or separation has
authority thereof, or any person who, in a registration been approved by the Commission, shall be paid
statement filed under this Code, makes any untrue retirement or separation benefits and other
statement of a material fact or omits to state any entitlement granted under existing laws.
material fact required to be stated therein or
necessary to make the statements therein not Section 75. Partial Use of Income. – To carry out the
misleading, shall, upon conviction, suffer a fine of purposes of this Code, the Commission is hereby
not less than Fifty thousand pesos (P50,000.00) nor authorized, in addition to its annual budget, to retain
more than Five million pesos (P5,000,000.00) or and utilize an amount equal to One hundred million
imprisonment of not less than seven (7) years nor pesos (P100,000,000.00) from its income.
more than twenty-one (21) years, or both in the
discretion of the court. If the offender is a The use of such additional amount shall be subject to
corporation, partnership or association or other the auditing requirements, standards and procedures
juridical entity, the penalty may in the discretion of under existing laws.
the court be imposed upon such juridical entity and
upon the officer or officers of the corporation,
partnership, association or entity responsible for the Section 76. Repealing Clause. – The Revised
violation, and if such officer is an alien, he shall in Securities Act (Batas Pambansa Blg. 178), as
addition to the penalties prescribed, be deported amended, are hereby repealed. All other laws, orders,
without further proceedings after service of sentence. rules and regulations, or parts thereof, inconsistent
with any provision of this Code are hereby repealed
or modified accordingly.
Section 74. Transitory Provisions. – The
Commission, as organized under existing laws, shall
continue to exist and exercise its powers, functions Section 77. Separability Clause. – if any portion or
and duties under such laws and this Code: Provided, provision of this Code is declared unconstitutional or
That until otherwise mandated by a subsequent law, invalid, the other portions or provisions hereof, which
the Commission shall continue to regulate and are not affected thereby shall continue in full force
supervise commodity futures contracts as provided in and effect.
Section 11 and pre-need plans and the pre-need
industry as provided in Section 16 of this Code. Section 78. Effectivity. – This Code shall take effect
fifteen (15) days after its publication in the Official
All further requirements herein shall be complied Gazette or in two (2) newspapers of general
with upon approval of this Code: Provided, however, circulation.
That compliance may be deferred for such reasonable
time as the Commission may determine but not to
exceed one (1) year from approval of this Code:
Provided, further, That securities which are being
offered at the time of effectivity of this Code
pursuant to an effective registration and permit, may
RULES AND REGULATION IMPLEMENTING
continue to be offered and sold in accordance with
CERTAIN PROVISIONS
the provisions of the Revised Securities Act in effect
OF THE PHILIPPINE COOPERATIVE CODE
immediately prior to approval of this Code.
OF 2008
(REPUBLIC ACT NO. 9520)
All unexpended funds for the calendar year,
properties, equipment and records of the Securities
Pursuant to the provision of Art. 139 of Republic Act
and Exchange Commission are hereby retained by the
No. 952 otherwise known as the Philippine
Commission as reorganized under this Code and the
Cooperative Code of 2008, the Cooperative
amount of Two hundred million pesos
Development Authority hereby issues the following
(P200,000,000.00) or such amount necessary to carry
rules and regulations implementing certain provisions (7) Authority - shall refer to the
of the said Code. Cooperative Development Authority (CDA).

TITLES AND DEFINITIONS (8) Authorized Share Capital - shall refer

to the capitalization of the cooperative as
Section 1. Title. These Rules shall be known as the prescribed in the Articles of Cooperation
"Rules and Regulations Implementing Certain
Provisions of the Philippine Cooperative Code of (9) Award/Decision - shall refer to any
2008." partial or final decision by an Arbitrator in
resolving the issue in a controversy.
Section 2. Definition of Terms. For the purpose of
these Rules and regulations, the following terms are (10) Board of Liquidators/Trustees - shall
defined as follows: refer to the body appointed by the Board of
Directors or elected by the General
(1) Alternative Dispute Resolution - shall Assembly that shall cause the liquidation of
refer to any process or procedure used to the cooperative in case of voluntary
resolve a dispute or controversy, other than dissolution or appointed by the
by adjudication of a presiding Judge of Authority/Court in case of involuntary
Court or an officer of a government agency, dissolution of a cooperative.
in which a neutral third party participates to
assist in the resolution of issue, which (11) Bond of Membership - shall refer to
includes arbitration, mediation, conciliation, the conditions where members associate
early neutral evaluation, mini trial, or any themselves to attain their common goals and
combination thereof. objectives which may either be residential,
occupational, associational, and institutional.
(2) Arbitrator - shall refer to the person
appointed to render an Award/Decision, (12) By-Laws - shall refer to the By-laws
alone or with others, in a dispute that is the registered under the Code which includes
subject of an Arbitration Agreement. any registered amendments thereto.

(3) Area of Business Operation - shall (13) Capital - shall refer to the sum total of
refer to the principal place of business of a member's share capital including deposits,
cooperative where the cooperative conducts revolving capital, subsidies, donations,
its business as provided for in their Articles legacies, grants, aids, land structures, plants,
of Cooperative and By-laws. equipment facilities, machines and other
assets of a cooperative.
(4) Area of Operation - shall refer to the
area where the cooperative members come (14) Certificate of Merger - shall refer to
from as provided for in their Articles of the document issued by the Authority
Cooperation and By-laws. evidencing registration of merger.

(5) Articles of Cooperation - shall refer to (15) Code - shall refer to the Republic Acts
the Articles of Cooperation registered under No. 9520, otherwise known as the Philippine
the Code, with includes a registered Cooperative Code of 2008.
amendment thereto, if applicable.
(16) Conciliation - shall refer to the process
(6) Associate Member - shall refer to whereby a neutral third party takes a
member of a cooperative who has no right to vigorous and active role in assisting
vote or be voted upon and shall be entitled disputants to formulate between and among
only to such rights and privileges as the By- them an acceptable solution in order to reach
laws may provide. an amicable settlement.
(17) Conservator - shall refer to any person (25) Division - shall refer to the act of
appointed by the Authority empowered to spiting a single cooperative into two or more
take charge of the assets, liabilities, and the cooperatives, wherein the original
management of the cooperative, after cooperative shall be dissolved and the
finding that the cooperative is in the state of resulting cooperatives shall acquire separate
continuing illiquidity or unwillingness to and distinct juridical personalities.
maintain a condition of liquidity which is
deemed adequate to protect the interest of (26) Donated Capital - shall refer to the
members and creditors of the cooperative. subsidies, grants, donations and aids
received by the cooperative from any
(18) Consolidation - shall refer to a union person, whether natural or juridical, local or
of two or more existing cooperatives foreign both government and private.
belonging to the same category to a form a
new cooperative called the consolidated (27) Escheat - shall refer to the right of the
cooperative. State to succeed to property either real or
personal, when no heir or rightful claimant
(19) Constituent Cooperatives - shall refer can be found through an appropriate legal
to two or more existing cooperatives which proceeding.
are parties to a merger or consolidation.
(28) Equity - shall refer to the excess of
(20) Credit Cooperative - shall refer to one cooperative assets over liabilities.
that promotes and undertakes savings and
lending services among its members. It (29) Financial Statements - shall refer to
generates a common pool of funds in order the means i.e. Statement of Financial
to provide financial assistance and other Condition (Balance Sheet), Statement of
related financial services to its members for Operation (Statement of Net Surplus) and
productive and provident purposes. Statement of Cash Flows, by which the
financial information accumulated and
(21) Cumulative Interest - shall refer to the processed in financial accounting, is
interest due to a member that must be added periodically communicated to those who use
to in future interest if it is not paid when it.
due.
(30) Financial Service Cooperative (FSC)
(22) Delay in the submission of reports - - shall refer to one organized for the primary
shall refer to the failure of the cooperatives purpose of engaging in saving and credit
to submit a report on time. services and other financial services
regulated by the Bangko Sentral ng Pilipinas
(23) Dispute - shall refer to intra/inter (BSP).
cooperative controversy or grievance from
any violation or disagreement over any (31) General Assembly - shall refer to the
provisions, including any violations of the full membership of the cooperative duly
rights and conditions of membership assembled for the purpose of exercising all
provided in the cooperative By-laws and/or the rights and performing all the obligations
in the Cooperative Code, which may be the pertaining to cooperatives, as provided by
subject of a formal or informal request for this Code, its Cooperation and By-laws.
conciliation/mediation or arbitration
assistance sought by either one or both (32) Guardian Cooperative - shall refer to
parties. duly registered cooperative to which a
laboratory cooperative is affiliated with.
(24) Dissenting Member - shall refer to a
member present during the meeting and who (33) Internal Control - shall refer to all the
actually voted against the proposed system and procedures adopted to safeguard
activity/project of a cooperative. the cooperative's assets, check the accuracy
and reliability of its accounting data,
promote operational efficiency and whose membership are in large number and
encourage adherence to prescribed geographically scattered/distributed by
managerial policies. reason of geographical location, work shift
or other similar conditions making it
(34) Involuntary Dissolution - shall refer to impossible and difficult to conduct their
the termination of the juridical personality of general assembly meeting.
the cooperative through an appropriate
judicial proceeding or by Order of the (43) Paid-up Share Capital - shall refer to
Authority. the portion of the subscribed share capital,
which has been paid by the members of the
(35) Laboratory Cooperative - shall refer cooperative.
to a cooperative duly recognized by the
Authority, formed and managed principally (44) Parent Cooperative - shall refer to a
by minors and is affiliated with another cooperative, which initiates the
registered cooperative which is called the organizational of another cooperative called
guardian cooperative. a subsidiary cooperative and provides
technical, managerial, and financial
(36) Liquidation - shall refer to the process assistance thereto.
of settlement and closure of the cooperative
affairs, disposition, conveyance and (45) Patronage Refund - shall refer to the
distribution of its assets. amount returned to individual members who
patronize the goods and services of the
(37) Mediation - shall refer to the process in cooperative in proportion to their individual
which a mediator, selected by the disputing patronage.
parties, facilities a communication and
negotiation, and assists the parties in (46) Plan of Merger or Consolidation -
reaching a voluntary agreement regarding a shall refer to a written document containing
dispute. the proposed merger or consolidation of
cooperatives duly approved by the General
(38) Merger - shall refer to a union of two Assembly of each of the constituent
or more existing cooperatives belonging to cooperatives at separate
the same category whereby the surviving General/Representative Assembly Meetings.
cooperative, retaining its identity, absorbs
one or more constituent cooperatives/s. (47) Primary Cooperative - shall refer to a
cooperative, the members of which are
(39) Minor - shall refer to an individual natural persons.
below eighteen (18) years of age but at least
seven (7) years old. (48) Receiver - shall refer to any person of
recognized competence appointed by the
(40) Multipurpose Cooperative - shall Authority empowered to take charge of all
refer to a cooperative, which combines two the assets and liabilities of the cooperative
(2) or more of the business activities of the administer the same for the benefit of its
different types of cooperatives as creditors and exercise such other powers as
enumerated under Art. 23 of the Code. provided under the Revised Rules of Court.

(41) Net worth - shall refer to equity (49) Registration - shall refer to the
inclusive of member's equity, donations, operative act gaining juridical personality to
grants and reserve funds less un-booked a proposed cooperative as evidenced by a
allowance for probable losses on loans, Certificate of Registration.
investment and other assets and other capital
adjustments as may be required by the CDA. (50) Representative Assembly - shall refer
to the full membership of the body of
(42) Numerous and Dispersed representatives elected by each of the
Membership - shall refer to a cooperative sectors, chapters or districts of the
cooperative duly assembled for the purpose scope of operation, cluster, work shift or
of exercising such powers lawfully such other similar sub-groupings.
delegated unto them by the general assembly
in accordance with its By-laws. (58) Settlement - shall refer to any
compromise or arrangements between the
(51) Reports - shall refer to any documents disputants to settle the matters in dispute and
or statement required from cooperatives to thus dispose of controversy. The term may
be submitted to the Authority on a regular be used in the sense of "payment" or
basis. "adjustment" depending upon the
circumstances under which, and the
(52) Representative/Delegate - shall refer connection in which, use of the term is
to a member duly elected during the sector, made.
chapter or district meetings who shall
represent his/her sector, chapter or district to (59) Sequential Election of
the representative assembly meeting. Representative/Delegate - shall refer to the
election of the representatives during the
(53) Revolving Capital - shall refer to the meetings held, one after the other, in
amount available out of the deferred different days and/or at various venues, by
payment of the patronage refund and interest several sectors, chapters or districts of a
on share capital of the members or by cooperative for the purpose of electing their
authorized deduction of a percentage from respective Representatives/Delegates to the
the product sold or per unit of product representative assembly meeting.
handled by the cooperative. The Board of
Director shall issue revolving capital (60) Share Capital - shall refer to the
certificates with serial number, name, money paid or required to be paid by the
amount, and rate of interest to be paid and members for the conduct of the operations
shall distinctly set forth the time of of the cooperative.
retirement of such certificates and the
amounts to be returned. (61) Simultaneous Election of
Representatives/Delegates - shall refer to
(54) Risk Asset - shall refer to the total the election of the representatives during the
assets minus cash on hand, evidences of meetings held, on the same day and at
indebtedness, loans to the extent covered by various venues, by several sectors, chapters,
hold-outs or assignments of deposits, lands or districts of a cooperative for the purpose
owned used for operations, buildings and of electing their respective
land improvements net of depreciation, Representatives/Delegates to the
furniture and fixtures and equipment net of representative assembly meeting.
depreciation, real estate mortgage loan and
other non-risk items as the Authority may, (62) Submission Agreement - shall refer to
from time to time, authorized to be deducted the written agreement signed by the
from total assets. disputing parties to submit the dispute to
voluntary arbitration.
(55) Sanctions - shall refer to the penalties
provided for in the cooperative bylaws, (63) Subsidiary Cooperative - shall refer to
these rules, and other administrative any organization all or minority of whose
issuances, the Code and other related laws membership or shareholders come from a
cooperative called a parent cooperative,
(56) Secondary Cooperative - shall refer to organized for any other purpose different
a cooperative the members of which are from that of, and receives technical,
primaries. managerial, and financial assistance from
the said parent cooperative.
(57) Sector, Chapter or District - shall
refer to a division of a cooperative, which
may be by reason of geographical location,
 (64) Tertiary Cooperative - shall refer to a "(10) Representative Assembly shall refer to the full
cooperative, the members of which are membership of the body of representative elected by
secondary cooperative. each of the sector, chapter, or district of the
cooperative duly assembled for the purpose of
(65) Total Average Share Month - shall exercising such powers lawfully delegated unto them
refer to the sum total of the average share by the general assembly in accordance with its by-
month, which is determined by adding the laws"
monthly ending balances of the member's
share capital and dividing the sum by twelve Section 2. Applicability - This rule shall apply to
(12) months.1avvphi1 cooperatives, which by reason of having numerous
and dispersed membership, the conduct of the general
(66) Unpaid Subscription - shall refer to assembly meetings becomes extremely difficult;
the subscribed share capital, which is not yet Provided, That the adoption of representative
fully paid by a member. assembly shall be stipulated in the cooperative By-
laws, which shall specify the following matters:
(67) Voluntary Arbitration - shall refer to
a dispute resolution process wherein any a. The basis for dividing the cooperative into sector,
intra/inter cooperative dispute is settled by a chapter, or district;
voluntary arbitrator/s chosen by the
disputing parties from a list of qualified and b. The minimum number of regular members to
accredited arbitrators, who shall decide on compose each sector, chapter, or district;
the merits of the case by rendering an award.
c. The quorum required in the sector, chapter, or
(68) Voluntary Arbitrator/Arbitrators - district assembly meeting;
shall refer to any authorized employee of the
Authority or an accredited private individual d. The number of Representative/s or Delegate/s to be
chosen by the parties to hear, decide, and elected to represent the total number of the regular
render an award in a dispute. members in the sector, chapter, or district;

(69) Voluntary Dissolution - shall refer to e. The term of office of the Representative or
the termination of the juridical personality of Delegate;
the cooperative at its own initiative or
instance after complying with the f. The qualification and disqualification of the
requirements set forth in the Code and these Representative or Delegate;
rules.
g. The powers, function and responsibilities of the
RULE 1 Representative or Delegate;
REPRESENTTATIVE ASSEMBLY
h. The election of the sector, chapter, or district
Section 1. Legal Basis. The Legal basis for this rule Representative or Delegate;
is Art. 5 (2), (10) of the Code, quoted as follows:
i. Vacancy in the sector, chapter, or district
"(2) General Assembly shall mean the full Representative or Delegate;
membership of the cooperative duly assembled for
the purpose of exercising all rights and performing all
the obligations pertaining to cooperatives, as j. The resignation or removal as well as the appeal of
provided by this Code, its articles of cooperation and the sector, chapter, or district Representative or
by-laws. Provided; that for cooperatives with Delegate
numerous and dispersed membership, the district of
the cooperative and in accordance with the rules and k. The sector, chapter, or district assembly meetings;
regulations of the Cooperative Development
Authority." l. The quorum required in the representative
assembly meeting;
m. The powers of the Representative Assembly; or Delegate shall have the following powers,
functions, and responsibilities:
n. The conduct of the representative meeting;
(1) To represent the sector, chapter, or
o. The eligibility of the Representative/Delegate to be district in the Representative Assembly
elected as Officers of the cooperative; and Meeting;

p. Other matters relevant to the conduct or (2) To decided for and in behalf of the
representative assembly meeting. sector, chapter, or district he/she represents
in the Representative Assembly Meeting;
Section 3. Division of Cooperative into Sector, and
Chapter, or District. The Number of the members of
the cooperative, which shall be at least One Thousand (3) To inform his/her sector, chapter, or
(1,000) and the geographical location, scope of district of what transpired during the
operation cluster, work shift, or other similar Representative Assembly Meeting.
conditions shall be the basis in dividing the
cooperative into sector, chapter, or district. Section 10. Election of Sector, Chapter, or District
Representative or Delegate. Each sector, chapter, or
Section 4. Composition of the Regular Members of district during the General Assembly meeting
Each Sector, Chapter, or District. The Bylaws shall approving the adoption of the Representative
provide for the number of the regular members to Assembly shall elect its Local election Committee
compose each sector, chapter, or district, which shall that will conduct the election of sector, chapter, or
not be less than one hundred (100) members. district Representative/Delegate to be held no later
than sixty (60) days before the schedule date of the
Section 5. Quorum Requirement for Sector, Chapter, regular representative assembly meeting as provided
or District. At least twenty-five per centum (25%) of for in the By-laws.
the members entitled to vote in each sector, chapter,
or district shall constitute a quorum. The Board of Directors shall direct sector, chapter, or
district Local Election Committee to conduct the
Section 6. Number of Sector, Chapter, or District sector, chapter, or district assembly meeting to elect
Representative. The number of sector, chapter, or its Representative/s or Delegate/s, which may be held
district Representative or Delegate to be elected shall either simultaneously or sequentially.
be provided in the By-laws but in no case, shall be
less than ten percent (10%) of the total number of the In case the sector, chapter, or district failed to elect
regular members entitled to vote of the sector, its Representative/s or Delegate/s, the right to send its
chapter, or district. Representative/s or Delegate/s on that particular
representative or assembly meeting shall be deemed
Section 7. Term of Office of the Sector, Chapter, or and waived.
District Representatives. The term of office of the
Representative or Delegate shall be provided in the Section 11. Vacancy in the Sector, Chapter, or
By-laws but not exceed two (2) years, which shall District Representative or Delegate. Any vacancy
commence on the first regular representative shall be filled up in accordance with the provisions of
assembly meeting. the cooperative By-laws. The Delegate or
Representative elected/appointed to fill a vacancy
Section 8. Qualifications and Disqualifications of the shall serve only the unexpired term of his/her
Representative or Delegate. The sector, chapter, or predecessor.
district representative or delegate shall possess all the
qualifications and none of the disqualifications as Section 12. Resignation and Removal of Sector,
provided in the cooperative By-laws. Chapter, or District Representative or Delegate. The
sector, chapter, or district Representative or Delegate
Section 9. Powers, Functions, and Responsibilities of may resign, for valid reason, as Representative or
the Representative or Delegate. The Representative Delegate of his sector, chapter, or district. Upon the
receipt of the notice, the Board of Directors shall act
on the resignation letter within sixty (60) days
otherwise, the resignation shall be deemed approved. assembly meeting and for such other purposes as
Any sector, chapter, or district maybe provided in the By-laws.
Representative/Delegate may be removed by a vote
of three-fourths (3/4) of all the members with voting In either case, the conduct of the meeting shall be
rights present and constituting a quorum at a sector, called and presided by the Lead Representative of
chapter, or district meeting called for the purpose on Delegate. Such Lead Representative or Delegate shall
the following grounds: be Representative or Delegate who obtained the
highest number of votes during the last sector,
1. Failure to attend the immediate preceding chapter, or district election.
representative assembly meeting for
unjustifiable reason; Section 14. Quorum Requirements for
Representative Assembly. At least twenty-five per
2. Non-performance of any functions and centum (25%) of all Representatives/Delegates shall
responsibilities stated in the By-laws; constitute a quorum for the representative assembly
meeting.
3. Any violation of the provisions of the
Code, the By-laws of the cooperative and Section 15. Power of the Representative Assembly.
other issuances of the Authority; and The Representative Assembly shall exercise the
powers as provided for in the By-laws.
4. Any acts or omissions inimical or
prejudicial to the interest of the cooperative. Section 16. Conduct of Representative Assembly
Meeting. Representative Assembly Meeting shall be
During the same meeting, the sector, chapter, or conducted in accordance with the provision of the
district shall fill the vacancy. In case the removed cooperative By-laws. In the absence thereof, the
Representative or Delegate is an incumbent Officer following shall be observed:
of the Cooperative, his/her position shall be declared
vacant and shall be filled up in accordance with the 1. The representative assembly meeting shall
Rule of Succession as provided for in the By-laws of be held in accordance with the order of
the Cooperative. Unless otherwise provided for in business addressing the agenda prepared by
their By-laws, such successor shall not necessarily the Board of Directors;
assume the position of his/her predecessor. However,
in the case of the membership in the committee, the 2. The chairperson or in his/her absence, the
vacated membership shall be filled up by the Board Vice Chairperson or any member of the
of Directors of the Cooperative from among the Board of Directors shall preside over the
Representatives/Delegates. meeting;

Section 13. Sector, Chapter, or District Assembly 3. The Election Committee shall supervise
Meeting. The sector, chapter, or district meetings of the election of the Board of Directors and
the cooperative adopting this scheme shall be as committee members of the cooperative; and
follows:
4. Each Representative or Delegate shall be
a. Regular entitled to one (1) vote. The Votes of the
sector, chapter, or district Representatives or
b. Special Delegates shall be considered the votes of
all the members of the sector, chapter, or
The regular meeting shall be conducted to elect the district they represent.
sector, chapter, or district Representatives or
Delegates and for such other purposes as maybe The decision of the Representative Assembly shall be
provided in the Bylaws. considered a valid cooperative act.

The special meeting shall be conducted to report Section 17. Eligibility of the Representative or
what has transpired during the representative Delegate to be elected as Officers of the Cooperative.
The Officers of the cooperative shall come from the
Representative/s or Delegate/s of the sector, chapter, regular special general
or district. These Officer shall be elected during the assembly/representative assembly meeting
Representative Assembly Meeting for a term fixed in called for the purpose.
the By-laws but not exceeding a term of two (2) years
and shall hold office until their successor are duly Section 3. Documentary Requirements for
elected and qualified, or until duly removed for Registration of Subsidiary Cooperatives. In addition
cause. to the requirements for registration of a new
cooperative, an applicant Subsidiary Cooperative
The term of office of the Officer of the Cooperative shall submit a resolution from the Parent Cooperative
at the time of adoption of the Representative approving the creation of such Subsidiary
Assembly shall expire on the first representative Cooperative and accepting the responsibilities
assembly meeting. therewith.

RULE 2 Section 4. Conditions. The following conditions shall

SUBSIDIARY COOPERATIVE be considered in the registration and operation of
Subsidiary Cooperative:
Section 1. Legal Basis. The legal basis for this Rule
is Art. 5 (16) of the Code, quoted as follows; 1. Only assistance in the form of technical,
managerial and financial assistance shall be
"Art. 5 (16) Subsidiary Cooperative refers to any provided by the Parent Cooperative to its
organization all or majority of whose membership or Subsidiary Cooperative;
shareholders come from a cooperative, organized for
any other purpose different from that of, and receives 2. Directors or Officers of the Parent
technical, managerial and financial assistance from, a Cooperative cannot be elected or appointed
cooperative, in accordance with the rules and as Officers of the Subsidiary Cooperative.
regulations of the Authority." However, the Parent Cooperative through its
General Assembly may appoint its
Section 2. General Requirements. A parent Representative to act as Ex-Officio member
cooperative may organize a subsidiary cooperative of the Board of Directors of the Subsidiary
provided that: Cooperative;

1. It has been in operation for at least two 3. The Management Staff of the Parent
(2) years and has incurred no losses for the Cooperative cannot be at the time the
two (2) preceding years of operation. Management Staff of the Subsidiary
Cooperative;
2. It has a net worth of at least Ten Million
Pesos (Php 10,000,000.00) as shown in its 4. Transfer of shares of members and other
latest Audited Financial Statements. related interests from Parent Cooperative to
Subsidiary Cooperative and vice versa are
3. All or majority of the Members of the prohibited; and
Parent Cooperative are willing to become
members of the Subsidiary Cooperative. 5. In case of dissolution of the Parent
Cooperative, the Subsidiary Cooperative
4. The business of the Subsidiary cannot be a recipient of any grant, donations
Cooperative shall be different from that of or other interests from the Parent
the Parent Cooperative. Cooperative and vice versa.

5. The creation of a Subsidiary Cooperative Section 5. Name of Subsidiary Cooperative. The

and the technical, managerial and financial subsidiary Cooperative shall include in its name the
assistance to be provided shall be approved word "Subsidiary Cooperative of (Name of Parent
by at least three-fourths (3/4) vote of Cooperative)".
members of Parents Cooperative with voting
rights present and constituting a quorum in a Section 6. Assistance for Parent Cooperative. The
financial assistance to be provided shall not exceed
ten (10%) of the net worth of the Parent Cooperative. 1. Name Verification Slip;
The technical and managerial assistance shall depend
upon the needs of the Subsidiary Cooperative and 2. Articles of Cooperative and By-
capacity of the Parent Cooperative, which shall be Laws;
taken up in the book at actual cost.
3. Treasurer's Affidavit;
The terms and conditions of the financial assistance
provided by the Parent Cooperative to the Subsidiary 4. Surety Bond of Accountable
Cooperative shall be governed by a Memorandum of Officers;
Agreement entered into by both parties.
5. Certificates of Pre-Membership
Section 7. Effect of Dissolution of Parent or Education Seminar (PMES);
Subsidiary Cooperative. The dissolution of either
cooperative shall not affect the existence of the other.
6. Economic Survey;
RULE 3
MULTI-PURPOSE COOPERATIVE 7. Undertaking to Change Name in
the event that another cooperative
has acquired prior right to the use
Section 1. Legal Basis. The legal basis for this Rule of the proposed name;
is Article 10 of the Code quoted as follows:
8. Favorable Endorsement from
"Art. 10. Organizing a Primary Cooperative. - Any Other government Agencies, if
newly organized primary cooperative may be applicable;
registered as multi-purpose cooperative only after
compliance with the minimum requirements for
multi-purpose cooperatives to be set by the 9. Detailed Feasibility Study
Authority. A single-purpose cooperative may indicating viability of the proposed
transform into a multi-purpose or may create business activity;
subsidiaries only after at least two (2) years of
operation." 10. Undertaking to comply with the
auditing and accounting standards
Section 2. Coverage. This Rule shall cover (a) all prescribed by the Authority; and
types of newly organized primary cooperative with
combined two (2) or more business activities of 11. Registration fee.
different types of cooperative as provided for in Art.
23 of the Code, (b) a single-purpose cooperative (2) For existing cooperatives desiring to be
desiring to transform itself into a multi-purpose transformed into a Multi-Purpose
cooperative after at least two (2) years of operation. Cooperative:

Section 3. Minimum Capitalization Requirements. 1. Name Verification Slip, in case

Only those cooperative with a minimum paid-up of change of name;
capital of One Hundred Thousand Pesos
(P100,00.00) or as required in the feasibility study 2. Amended Articles of
whichever is higher shall qualified to register as a Cooperative and By-Laws;
multi-purpose cooperative or can transform into a
multi-purpose cooperative.
3. A Resolution certified by the
cooperative's Secretary and by the
Section 4. Requirements for registration. The majority of the Board of Directors
following documents shall be submitted to the stating the fact that said
Authority: amendments have been duly
approved by at least two-thirds
(1) For a newly organized Multi-Purpose (2/3) vote of all the members with
Cooperative: voting rights;
 4. Surety Bond of Accountable further, That no division of cooperative in fraud of
Officers; creditors shall be valid."

5. Audited Financial Statement Section 2. Procedures. The following procedures

showing profitable operations for shall be observed in the division of cooperatives:
the past two (2) years;
1. Approval of Proposal to Divide;
6. Undertaking to Change Name in
the event that another cooperative 2. Formulation of Plan of Division;
has acquired a prior right to the use
of the proposed name; 3. Presentation and Approval of the Plan of
Division to the General Assembly;
7. Favorable Endorsement from
Other Government Agencies, if 4. Posting and Publication of the Notice of
applicable; Division;

8. Detailed Feasibility Study 5. Written Notification to Creditors;

indicating viability of the proposed
business activities;
6. Filing with the Authority of the Required
Documents for the Registration of Division;
9. Certificate that the cooperative and
has complied with the auditing and
accounting standards prescribed by
the Authority; 7. Issuance of the Certificate of Registration.

10. Proof of business track records Section 3. Proposal of Division. The majority
of the cooperative; and members of the Board of Directors or at least ten
percent (10%) of members with voting rights may
propose for division, which must be approved by at
11. Amendment Fee. least majority of the members of the cooperative with
voting rights present and constituting a quorum in a
Section 5. Book of Accounts. The new and existing general/representative assembly meeting called for
cooperatives transformed into a Multi-Purpose the purpose. Upon approval of the proposal to divide,
Cooperative are required to maintain separate Book a committee to formulate the Plan of Division shall
of Accounts for each business activity. be constituted by the General/Representative
Assembly.
RULE 4
DIVISION OF COOPERATIVES Section 4. Preference of Members. Upon approval by
the General/Representative Assembly in the meeting
Section 1. Legal Basis. The legal basis for this Rule called for the purpose, members of the original
is Art. 20 of the Code, quoted as follows: cooperative shall be allowed within two (2) weeks to
choose the new cooperative they prefer to join. The
"Art. 20. Division of Cooperatives. - Any registered management of the original cooperative shall then
cooperative, may by a resolution approved by a vote transfer the member's share and all other interests to
of three-fourths (3/4) of all the members with voting his/her chosen cooperative.
rights, present and constituting a quorum, resolve to
divide itself into two (2) or more cooperatives. The Section 5. Presentation and Approval of the Plan of
procedure for such division shall be prescribed in the Division. The Board of Directors shall call a
regulations of the Authority. The new cooperatives General/Representative Assembly meeting to action
shall become legally established upon registration such Plan of Division with notice to all members of
with the Authority: Provided, That all the record and Creditors at least thirty (30) days prior to
requirements set forth in this Code have been the scheduled meeting. The Plan of Division shall be
complied with by the new cooperatives: Provided, approved by a vote of three-fourths (3/4) of all
members with voting rights, present and constituting
a quorum in such general/representative assembly noted by the Chairperson, shall publish such plan of
meeting. division once a week for three (3) consecutive weeks
in a newspaper of general circulation within its area
Section 6. Right of a Dissenting Member. A of operation. Said publication may also be
dissenting member shall be entitled to a refund of supplemented by radio and television
his/her share capital and all other interests under Art. announcements.
30 of the Code.
Alternatively, the announcement of the division may
Section 7. Contents of the Plan of Division. The Plan also be done by posting in at least three (3)
of Division must include the following: conspicuous public places for three (3) consecutive
weeks within its area of operation.
1. The rationale or justification for the
division of the cooperative; Likewise, letters/notices duly signed by the
Chairperson announcing such division shall be sent
2. A Financial Statement duly certified by an by the Secretary of the cooperative through registered
independent Certified Public Accountant mails to their creditors.
including a schedule of assets, liabilities and
share capital of the cooperative intending to Section 9. Objection by a Third Party. Within fifteen
divide; (15) days from the day of posting or from the last day
of publication, a party may file an objection or
3. A proposed revaluation of assets, opposition to the Plan of Division before the
determination of liabilities, statutory Authority, copy furnished the cooperative concerned,
reserves, undivided net surplus and which shall be decided within sixty (60) days from
members' share capital; receipt of the objection or opposition. If the objection
or opposition is meritorious, in order not to prejudice
the interest of the third party, the Authority shall
4. List of all the receivables of the cause the deferment or disapproval of the registration
cooperative; of the new cooperatives.

5. List of all the Creditors and their After the lapse of the period to file an
respective claims against the cooperative; objection/opposition and no objection/opposition has
been filed or after all objections/oppositions have
6. Procedure for the division of assets, been resolved, the cooperative can file its application
allocation and settlement of the obligations for registration.
and the collection of receivables of the
cooperative; Section 10. Additional Requirements for
Registration. In addition to the regular requirements
7. Feasibility study ensuring the viability for registration of cooperatives, the following
and sustainability of both cooperatives; documents shall be filed with the Authority:

8. List of members showing their share 1. The resolution of division as approved by

capital contributions certified by the the General/Representative Assembly duly
Secretary and attested by the Board certified by the Secretary and duly noted by
Chairperson of the cooperative; the Chairperson;

9. The proposed name, address and area of 2. The Plan of Division including all its
operation of the new cooperatives; and attachments;

10. Benefit package for Management Staff 3. The Minutes of the

to be affected by the plan. General/Representative Assembly Meeting
approving the Plan of Division;
Section 8. Publication. Within seven (7) days after
the date of approval of the division of the
cooperative, the Secretary of the cooperative, duly
 4. The Financial Statements of each of the (3) The Authority shall issue the guidelines
new cooperatives duly certified by the governing the procedure of merger or consolidation
respective Treasurers and Chairpersons; of cooperatives. In any case, the merger or
consolidation shall be effective upon the issuance of
5. Proof of Notice of Publication and/or the Certificate of Merger or Consolidation by the
posting of the announcement of such Authority.
division;
Art. 22. Effects of Merger and Consolidation. - The
6. Proof of Notice to the Creditors; merger or consolidation of the cooperatives shall
have the following effects:
7. Written Agreement to Settle Obligation;
and (1) The constituent cooperatives
shall become a single cooperative,
8. Original Certificate of Registration. which in case of merger shall be
the surviving cooperative, and in
case of consolidation, shall be the
Section 11. Issuance of Certificate. Once the consolidated cooperative.
registration requirements are found to be completed
and in order, the Authority shall issue the Certificates
of Registration to the new cooperatives. The (2) The separate existence of the
Certificate of Registration of the original cooperative constituent cooperatives shall
shall be surrendered to the Authority for cancellation. cease, except that of the surviving
or the consolidated cooperative.
Section 12. Effect of Registration. Cooperatives
formed and organized under this Rule shall acquire (3) The surviving or the
juridical personality from the date the Authority consolidated cooperative shall
issues a Certificates of Registration under the possess all rights, privileges,
Authority's official seal. immunities and powers and shall be
subject to all the duties and
liabilities of a cooperative
RULE 5 organized under this Code;
GUIDELINES GOVERNING THE
PROCEDURE FOR
MERGER OR CONSOLIDATION (4) The surviving or the
consolidated cooperative shall
possess all the assets, rights,
Section 1. Legal Basis. The legal bases for this Rule privileges, immunities and
are Articles 21 and 22 of the Code, quoted as follows: franchises of each of the
constituent cooperatives; and
"Art. 21. Merger and Consolidation of Cooperatives.
- (5) The surviving or the
consolidated cooperative shall be
Two (2) or more cooperatives may merge into a responsible for all the liabilities and
single cooperative, which shall be either one of the obligations of each of the
constituent cooperatives or the consolidated constituent cooperatives in the
cooperatives. same manner as if the surviving or
consolidated cooperative had itself
No merger or consolidation shall be valid unless incurred such liabilities or
approved by three-fourths (3/4) vote of all members obligations. Any claim, action, or
with voting rights, present and constituting a quorum proceeding pending by or against
of each of the constituent cooperatives at separate any such constituent cooperatives
general assembly meetings. The dissenting members may be prosecuted by or against the
shall have the right to exercise their right to withdraw surviving or consolidated
their membership pursuant to Article 30. cooperative, as the case may be.
Neither the rights of creditors nor
any lien upon the property of any
 of such constituent shall be 2. The Registered Names, Addresses and
impaired by such merger or Registration/Confirmation Numbers,
consolidation." Contact Details and Respective Areas of
Operation of the Constituent Cooperatives;
Section 2. Parties to the Merger or Consolidation.
Only cooperatives belonging to the same category 3. The Proposed Amendments to the
can be parties to Merger or Consolidation. A primary Surviving Cooperative's Articles of
cooperative can only merge or consolidate with a Cooperation and By-laws, in case of Merger
primary cooperative, a secondary with a secondary and with respect to Consolidation, the
cooperative, and a tertiary with a tertiary cooperative. Proposed Articles of Cooperation and By-
laws;
Section 3. Procedures. The following are the
procedures to the Merger or Consolidation of 4. List of Members of each Constituent
cooperatives: Cooperatives showing their Share Capital
Contribution duly certified by the respective
1. Approval of the proposal to merge or Board Secretaries and attested by the
consolidate by the General/Representative respective Board Chairpersons;
Assembly of each constituent cooperatives;
5. The Name, Address and Area of
2. Formulation of Plan of Merger or Operation of the Surviving Cooperative, in
Consolidation by the representatives of the case of Merger, the Proposed Name,
constituent cooperatives; Address and Area of Operation, in case of
Consolidation;
3. Presentation to and Approval of the Plan
of Merger or Consolidation by the 6. Feasibility Study indicating the Viability
General/Representative Assembly of each and Sustainability of the
constituent cooperatives; Merging/Consolidating Cooperatives;

4. Formulation of the Amendment/New 7. The Audited Financial Statements as of

Articles of Cooperation and By-laws; the immediate preceding year including the
schedule of assets, liabilities and capital of
5. Posting/Publication of Merger or the merging or consolidating cooperatives;
Consolidation; and

6. Written Notification to Creditors through 8. Package Benefits of the Management

registered mail with return card and other Staff to be affected by the Plan.
applicable electronic means;
Section 5. Proposal of Merger or Consolidation. The
7. Filing with the Authority the required Proposal to Merge or Consolidate may be made by
documents for the registration of merger or the Board of Directors or by at least ten percent
consolidation; and (10%) of the members with voting rights. It shall be
approved by at least majority of the members of each
of the constituent cooperatives with voting rights,
8. Issuance of Certificate of Registration of present and constituting a quorum in separate
Merger/Consolidation by the Authority. general/representative assembly meetings called for
the purpose.
Section 4. Contents of Plan of Merger or
Consolidation. The Plan of Merger or Consolidation During the same meeting, the General/Representative
shall include the following: Assembly shall appoint or elect the representatives to
the joint committee to draft the Plan of Merger or
1. Statement of Purpose of such Merger or Consolidation.
Consolidation;
Section 6. Approval of the Plan of Merger or
Consolidation. The Plan of Merger or Consolidation
jointly prepared by representatives from the After the lapse of the period to file an
constituent cooperatives shall be submitted for objection/opposition and no objection/opposition has
approval to the members of each constituent been filed or after all objections/oppositions have
cooperative at separate general/representative been resolved, the cooperative can file its application
assembly meetings duly called for the purpose. for registration.
Notice of such meeting shall be given to all members
of the respective cooperative, served either Section 11. Additional Requirements for
personally, or by registered mail with return card or Registration. The Officers of the merged or
electronic means within the period as indicated in consolidated cooperatives shall file with the
their By-laws. Authority the following additional requirements for
registration:
The affirmative vote of members representing at least
three-fourths (3/4) of all members with voting rights, A. For Merger
present and constituting a quorum of each of the
constituent cooperatives at separate 1. The Original Certificate of Registration of
general/representative assembly meetings shall be the absorbed cooperative;
necessary for the approval of the Plan of Merger or
Consolidation, or amendments thereto, if any.
2. The General/Representative Assembly
resolutions of both constituent cooperatives
Section 7. The Articles of Cooperation and By-Laws. approving the Plan of Merger duly certified
In case of Merger, the Amended Articles of by the Secretaries and attested by the
Cooperation and By-Laws, if applicable, shall be respective Chairpersons;
attested by the Incumbent Directors of the Surviving
Cooperative while in Consolidation, the Articles and
By-Laws shall be signed by the Cooperating 3. The excerpts from the minutes of the
Directors. general/representative assembly meeting
stating among others the approval of the
Merger;
Section 8. Posting/Publication. Announcement of the
Merger or Consolidation may be done by posting in
at least three (3) conspicuous places in their 4. Certification of the Secretaries duly
respective areas of operation; or publication in a attested by the Chairpersons of the
newspaper of general circulation once a week for constituent cooperatives that there was a
three (3) consecutive weeks. Said publication may quorum and the required number of votes
also be supplemented by radio and television for the approval was met;
announcements or any other electronic means of
communication. 5. The approved Plan of Merger and all its
attachments as required under Section 4 of
Section 9. Notice to Creditors and Investors. The this Rule;
Officers of the Merging or Consolidating
Cooperatives shall also send letters by registered mail 6. The proposed amendment to the Articles
with return card to the Creditors and investors of their of Cooperation and By-laws of the
respective cooperatives announcing such Merger or Surviving Cooperative, if necessary;
Consolidation.
7. Surety Bond of Accountable Officers;
Section 10. Objection/s by a Third Party. Within
fifteen (15) days after the date of posting or from the 8. Proof of Publication/Posting of the
last day of publication, a third party may file an Announcement of Merger;
objection or opposition to the Plan of Merger or
Consolidation before the Authority which shall be 9. Proof of Notice to Creditors;
decided within sixty (60) days from receipt of the
objection or opposition. Finding the objection or
10. Written Agreement to settle Obligations
opposition meritorious, in order not to prejudice the
interest of the third party, the Authority will cause the
deferment or disapproval of the registration of the 11. The original Certificate of Registration
Merger or Consolidation. of the Surviving Cooperative;
 12. Favorable endorsement from the 13. Undertaking to Change Name in the
concerned government agency if event that another cooperative has acquired
necessary/applicable; and prior right to the use of the proposed name;
and
13. Registration fee in accordance with the
Schedule of Fees prescribed by the 14. Registration fee in accordance with the
Authority. Schedule of Fees prescribed by the
Authority.
B. For Consolidation
Section 12. Issuance of Certificate. Once the
1. The Original Certificate of Registration of registration requirements are complied with, the
both constituent cooperatives; Authority shall issue the Certificate of Merger, or
new Certificate of Registration in case of
2. The General/Representative Assembly consolidation. The Certificate of Registration of the
resolutions approving the consolidation of original cooperatives shall be surrendered to the
the cooperative duly certified by the Authority.
Secretaries and attested by the Chairpersons
of the Consolidating Cooperatives; RULE 6
GUIDELINES FOR LABORATORY
3. The excerpts from the minutes of the COOPERATIVES
General/Representative Assembly meetings
of the Consolidating Cooperatives with their Section 1. Legal Basis. The legal basis for this Rule
respective attendance sheets duly certified is the third paragraph of Art. 26 of the Code, quoted
by the Secretary and Chairperson or as follows:
Presiding Officer;
"Art. 26. Kinds of Membership. - A cooperative
4. Certification of the Secretaries duly organized by minors shall be considered a laboratory
attested by the Chairpersons of the cooperative and must be affiliated with a registered
Constituent Cooperatives that there was a cooperative. A laboratory cooperative shall be
quorum and the required number of votes governed by special guidelines to be promulgated by
for the approval was met; the Authority."

5. The approved Plan of Consolidation and Section 2. Organization of Laboratory Cooperative.

all its attachments as required under Section Fifteen (15) or more minors who are Filipino citizens,
4 of this Rule; actually residing in the community or enrolled in an
educational institution within or near the area of
6. The Economic Survey; operation of the Guardian Cooperative or out of
school minor actually residing in the community,
may organize a Laboratory Cooperative composed of
7. The proposed Articles of Cooperation and minors, which shall be seven (7) years old but below
By-laws of the Consolidated Cooperative; eighteen (18) years of age.

8. Surety Bond of Accountable Officers; Section 3. Purposes of Laboratory Cooperatives. A

Laboratory Cooperative shall be organized for any or
9. Proof of Publication/Posting of the all of the following purposes:
announcement of consolidation;
1. To serve as a training ground for its
10. Proof of Notice to Creditors; members to prepare them for membership in
regular cooperatives;
11. Written Agreement to settle Obligations;
2. To teach the value of thrift and saving
12. The original Certificates of Registration mobilization among its members;
of the Consolidating Cooperatives;
 3. To instill cooperative values, principles, 3. The circumstances under which
financial discipline and leadership skills membership is acquired, maintained and
among its members; lost;

4. To promote and advance Filipino social 4. The procedures to be followed in cases of

and cultural values, ecological awareness termination of membership;
and sustainable development.
5. The conditions under which the transfer
Section 4. Contents of the Articles of Cooperation. of a share or interest of the members shall be
The Articles of Cooperation of a Laboratory permitted;
Cooperative signed by each of the organizers shall
provide the following: 6. The rules and procedures on the agenda,
time, place and manner of calling,
1. The name of the cooperative which shall convening, conducting meetings, quorum
include the words "Laboratory requirements, voting systems, and other
Cooperative"; matters relative to the business affairs of the
general assembly, board of directors, and
2. The purpose or purposes for which it is committees;
organized;
7. The general conduct of the affairs of the
3. The term of existence; cooperative, including the powers and duties
of the General Assembly, the board of
4. The area of operations and the postal directors, committees and, officers, and their
address of the principal office of the qualifications and disqualifications;
laboratory cooperative;
8. The manner in which the capital may be
5. The area of operations and the postal raised and the purposes for which it can be
address of the principal office of the utilized;
guardian cooperative;
9. The accounting and auditing systems;
6. The names, nationality, birthdates, and
postal addresses of the cooperators; 10. The method of distribution of net
surplus;
7. The names, and postal addresses of
members of the board of directors of its 11. The manner of adopting and amending
guardian cooperative; and by-laws;

8. The amount of its share capital, the 12. Other matters incident to the purposes
names, and addresses of its members. and activities of the cooperative.

Section 5. Contents of the By-Laws. The By-laws of a Section 6. Capitalization Requirements. The
Laboratory Cooperative shall provide for the Laboratory Cooperative shall include in its Bylaws a
following: program on continuous Capital Build-Up.

1. The qualifications for admission to Section 7. Affiliation. A Laboratory Cooperative

membership and the payment to be made or must be affiliated with a duly registered cooperative,
interest to be acquired as a condition to the to be known as the Guardian Cooperative, before the
exercise of the right of membership; authority shall issue a Certificate of Recognition.

2. The rights and liabilities of membership; A Laboratory Cooperative primarily composed of

students from a particular school shall be affiliated
with the school's cooperative, if any. If the
Laboratory Cooperative is composed primarily of
out-of-school minors, it shall be affiliated with a The issuance of the Certificate of Recognition does
cooperative of its choice within or nearest its area of not bestow upon a Laboratory Cooperative with a
operation. juridical personality.

In the absence of a duly registered cooperative in the Section 12. Termination of Membership. The
area or refusal of a duly registered cooperative to following shall be conditions for termination of
accept the affiliation of a Laboratory Cooperative, the membership in a Laboratory Cooperative:
said Laboratory Cooperative may request assistance
from the nearest CDA Office in identifying a possible 1. Upon reaching the age of majority (18
Guardian Cooperative. years of age);

Section 8. Responsibility of the Guardian 2. Those provided under Art. 30 of the

Cooperative. The Guardian Cooperative shall Code; and
supervise, monitor, and act for and in behalf of the
Laboratory Cooperative in their dealings, transactions 3. Such other conditions as may be provided
with third parties when capacity to contract is for in the By-laws.
required.
Section 13. Refund of Share Capital. Upon
It shall be responsible for the cooperative education termination of membership, the former member shall
and training of all officers and members of the be entitled to a refund of his share capital
laboratory cooperative. contribution and all other interests in the Laboratory
Cooperative in accordance with Art. 31 of the Code.
Submission of reports to the Authority on the
activities and economic operations of the Laboratory Section 14. Option of Member Who Reaches the Age
Cooperative shall likewise be the responsibility of the of Majority. Any member reaching the age of
Guardian Cooperative. majority may opt to join the Guardian Cooperative
upon compliance of all the requirements for
Section 9. Liability of the Guardian Cooperative. - membership.
The Guardian Cooperative exercising parental
authority may be liable for any violations in the Section 15. Limitation. A Guardian Cooperative shall
cooperative's operation. supervise only one (1) laboratory cooperative.

Section 10. Requirements for Recognition of RULE 7

Laboratory Cooperative. A Laboratory Cooperative FUNCTIONS, RESPONSIBILITIES AND
seeking recognition as such shall submit, through the TRAINING REQUIREMENTS OF
Guardian Cooperative, the following requirements to DIRECTORS, OFFICERS AND COMMITTEE
the Authority for the issuance of a Certificate of MEMBERS
Recognition:
Section 1. Legal Basis. The legal basis for this Rule
1. Articles of Cooperation and By-laws; and is Art. 44 of the Code, quoted as follows:

2. Resolution of the Board of Directors of "Art. 44. Functions, Responsibilities, and Training
the Guardian Cooperative accepting its Requirements of Directors, Officers, and Committee
responsibility and liability as Guardian of Members. The functions and responsibilities of the
the Laboratory Cooperative. directors, officers and committee members, as well as
their training requirements shall be in accordance
Section 11. Issuance of Certificate of Recognition. A with the rules and regulations issued by the
Certificate of Recognition shall be issued by the Authority."
Authority under its official seal upon compliance
with all the requirements set forth by this rule. The Section 2. Officers of the Cooperative. The Officers
Certificate shall be conclusive evidence that the of the cooperative shall include the Members of the
Laboratory Cooperative therein mentioned is duly Board of Directors, Members of the Different
recognized unless such recognition has been earlier Committees created by the General Assembly,
revoked.
General Manager or Chief Executive Officer, f. Evaluate the capability and qualification
Secretary, Treasurer and Members holding other and recommended to the
positions as maybe provided for in their By-laws. As General/Representative Assembly the
such they are entrusted with the power of exercising engagement of the services of an External
authority within the scope of their defined functions Auditor;
which is permanent in nature and include the exercise
of control and discretion in the performance of their g. Appoint the members of the
duly. Mediation/Conciliation and Ethics
Committees and other Officers as specified
Section 3. Committees of Cooperatives. The By-laws in the Code and cooperative By-laws;
shall provide for the creation of the following
committees: h. Decide election related cases involving
the Election Committee or its members;
1. Audit Committee;
i. Act on the recommendation of the Ethics
2. Election Committee; Committee on cases involving violations of
Code of Governance and Ethical Standards;
3. Mediation and Conciliation Committee; and

4. Ethics Committee; and j. Perform such other functions as may be

prescribed in the By-laws or authorized by
5. Other Committees as may be necessary the General/Representative Assembly.
for the conduct of the affairs of the
cooperative. 4.1.2 The Chairperson shall:

The members of Audit Election Committees shall be a. Set the agenda foe board meetings in
elected by the General Assembly while the Board of coordination with the other members of the
Directors shall appoint the rest. Board of Directors;

Section 4. Functions and Responsibilities of the b. Preside over all meetings of the Board of
Officers of the Cooperative. Directors and of the General/Representative
assembly;
4.1 Board of Directors.
c. Sign contracts, agreements, certificates
4.1.1 The Board of Directors shall have the following and other documents on behalf of the
functions and responsibilities: cooperative as authorized by the Board of
Directors or by the General/Representative
Assembly;
a. Provide general policy direction;
d. Issue Certificate of Non-Affiliation with
b. Formulate the strategic development plan; any Federation or Union; and

c. Determine and prescribe the e. Perform such other functions as may be

organizational and operational structure; authorized by the Board of Directors or by
the General/Representative Assembly.
d. Review the Annual Plan and Budget and
recommend for the approval of the 4.1.3 The Vice Chairperson shall:
General/Representative Assembly;
a. Perform all duties and functions of the
e. Establish policies and procedures for the Chairperson in the absence of the latter;
effective operation and ensure proper
implementation of such;
b. To act as ex-officio Chairperson of the
Education and Training Committee; and
 c. Perform such other duties as may be meetings of the Board of Directors and the
delegated to him/her by the Board of General/Representative Assembly;
Directors.
g. Keep copy Treasure's reports and other
4.2 Treasurer. The Treasurer shall: reports;

a. Ensure that all cash collections are h. Keep and maintain the Share and Transfer
deposited in accordance with the policies set Book;
by the Board of Directors;
i. Serve as custodian of the cooperative seal;
b. Have custody of all funds, securities, and and
documentation's relating to all assets,
liabilities, income and expenditures; Perform such other functions as may be prescribed in
the By-laws or authorized by the General/
c. Monitor and review the financial Representative Assembly.
management operations of the cooperative,
subject to such limitations and control as 4.4 Election Committee. The Election Committee
may be prescribed by the Board of shall:
Directors;
a. Formulate election rules and guidelines
d. Maintain full and complete records of and recommended to the
cash transactions; General/Representative Assembly for
approval;
e. Maintain a Petty Cash Fund and Daily
Cash Position Report; and Perform such b. Implement election rules and guidelines
other functions as may be prescribed in the duly approved by the
By-laws or authorized by the General/Representative Assembly;
General/Representative Assembly.
c. Recommended necessary amendments to
4.3 Secretary. The Secretary shall: the election rules and guidelines, in
consultation with the Board of Directors, for
a. Keep an updated and complete registry of the General/Representatives Assembly's
all members; approval;

b. Record, prepare and maintain records of d. Supervise the conduct, manner and
all minutes of meetings of the Board of procedure of election and other election
Directors and the General/Representative related activities and act on the changes
Assembly; thereto;

c. Ensure that necessary Board of Directors e. Canvass and certify the results of the
actions and decisions are transmitted to the election;
management for compliance and
implementation; f. Proclaim the winning candidates;

d. Issue and certify the list of members who g. Decide election and other election related
are in good standing entitled to vote as cases except those involving the Election
determined by the Board of Directors; Committee or its members; and

e. Prepare and issue Share Certificates; h. Perform such other functions as

prescribed in the By-laws or authorized by
f. Serve notice of all meetings called and the General/Representative Assembly.
certify the presence of quorum of all
4.5 Audit Committee. The committee shall:
 a. Monitor the adequacy and effectiveness of 4.7 Ethics Committee. The committee shall:
the cooperative's management and control
system; a. Develop Code of Governance and Ethical
Standards to be observed by the members,
b. Audit the performance of the cooperative officers and employees of the cooperative
and its various responsibility centers; subject to the approval of the Board of
Directors and ratification of the
c. Review continuously and periodically the General/Representative Assembly;
books of account and other financial records
to ensure that these are in accordance with b. Disseminate, promote and implement the
the cooperative principles and generally approved Code of Governance and Ethical
accepted accounting procedures; standards;

d. Submit reports on the result of the internal c. Monitor compliance with the Code of
audit and recommend necessary changes on Governance and Ethical Standards and
policies and other related matters on recommend to the Board of Directors
operation to the Board of Directors and measures to address the gap, if any;
General/Representative Assembly;
d. Conduct initial investigation or inquiry
e. Perform such other functions as may be upon receipt of a complaint involving Code
prescribed in the By-laws or authorized by of Governance and Ethical Standards and
the General/Representative Assembly. submit report to the Board of Directors
together with the appropriate sanctions.
4.6 Mediation and Conciliation Committee. The
committee shall: e. Recommend ethical rules and policy to
the Board of Directors;
a. Formulate and develop the Conciliation-
Mediation Program and ensure that it is f. Perform such other functions as may be
properly implemented; prescribed in the By-laws or authorized by
the General/Representative Assembly.
b. Monitor Conciliation-Mediation program
and processes; 4.8 Other Committees. Other Committees that may
be created shall assist in the formulation of policies
c. Submit semi-annual reports of cooperative and rules and in the implementation of the service of
cases to the Authority within fifteen (15) the cooperative. Their powers, functions, and
days after the end of every semester; responsibilities shall be defined in the By-laws.

d. Accept and file Evaluation Reports; 4.9 General Manager. The General Manager shall:

e. Submit recommendations for a. Oversee the overall day to day business

improvement to the Board of Directors; operations of the cooperative by providing
general direction, supervision, management
f. Recommend to the Board of Directors any and administrative control over all the
member of the cooperative for Conciliation- operating departments subject to such
Mediation Trainings as Cooperative limitations as may be set forth by the Board
Conciliator-Mediator; of Directors or the General/Representative
Assembly;
g. Issue the Certificate of Non-Settlement
(CNS); b. Formulate and recommend in
coordination with the operating departments
under his/her supervision, the Cooperative's
h. Perform such other functions as may be Annual and Medium Term Development
prescribed in the By-laws or authorized by Plan, programs and projects, for approval of
the General/Representative Assembly.
 the Board of Directors and ratification of the f. Policies and Programs of
General/Representative Assembly; Cooperatives;

c. Implement the duly approved plans and g. Cooperative Code of 2008 (RA
programs of the Cooperative and any other 9520);
directive or instruction of the Board of
Directors. h. Implementing Rules and
Regulations of RA 9520;
d. Provide and submit to the Board of
Directors monthly reports on the status of 2. Cooperative Management and
the Cooperative's operation vis-à-vis its Governance.
targets and recommend appropriate policy or
operational changes, if necessary; 3. Policy Development.

e. Represent the Cooperative in any 4. Financial Management.

agreement, contract, business dealing, and in
any other official business transaction as
may be authorized by the Board of 5. Conflict Management.
Directors;
6. Parliamentary Procedure
f. Ensure compliance with all administrative
and other requirements of regulatory bodies; 7. Leadership and Values Re-orientation
and
8. Strategic Planning
g. Perform such other functions as may be
prescribed in the By-laws or authorized by 9. Orientation on Labor and Other Related
the General/Representative Assembly. Laws

Section 5. Training Requirements for the Officers of B. Secretary

the Cooperative. Officers of the cooperative shall be
required to undergo necessary training conducted by 1. Basic Cooperative Course
cooperatives, Federations and/or other trainers or
training institutions duly accredited by the Authority.
2. Records Management for Non Financial
The training program should contain the minimum
Transaction
requirements in the module/curriculum as prescribed
by the Authority. The initial courses or any
equivalent substitute thereof must be undertaken. 3. Parliamentary Procedure

A. Board of Directors 4. Basic Computer Program

1. Basic Cooperative Course primarily on: C. Treasurer

a. Articles of Cooperative and By- 1. Basic Cooperative Course

laws;
2. Records Management (Financial
b. Cooperative Vision; Transaction)

c. Cooperative Mission; 3. Basic Accounting for Non-Accountants

d. Cooperative Strategic Plan; 4. Cooperative Standards

e. Fundamentals of Cooperative; 5. Investment and Banking Procedures

 6. Financial Management 4. Records Management

D. Audit Committee 5. Effective Communication

1. Basic Cooperative Course 6. Basic Computer Program

2. Audit Management H. General Manager / Chief Executive Officer

3. Records Management 1. Basic Cooperative Course

4. Basic Accounting for Non-Accountant 2. Cooperative Management and

Governance
5. Cooperative Standards
3. Cooperative Standards
6. Internal Control including Inventory
System 4. Human Resource Management

7. Basic Computer Program 5. Effective Communication Skills

E. Election Committee 6. Entrepreneurial and Business

Management Course
1. Basic Cooperative Course
7. Labor and other related Laws
2. Records Management
8. Leadership and Values Re-orientation
3. Rules Formulation
9. Computer Literacy Course
4. Leadership and Value Re-orientation
10. Strategic Planning and Management
5. Basic Computer Program
Section 6. Compliance. The training is required for
F. Ethics Committee all cooperative officers. In cases where the incumbent
has not undergone the required training program,
1. Basic Cooperative Course he/she shall undergo such training within twelve (12)
months from the effectivity of this Rule. Non-
compliance with the required trainings shall be
2. Leadership and Values Re-orientation considered grounds for disqualification for future
election or appointment until such time that he/she
3. Conflict Management has complied with all the trainings required for the
position.
4. Records Management
Section 7. Duration of Trainings Attended. All
5. Basic Computer Program trainings attended by cooperative officers shall be
considered valid compliance with the intent of this
G. Mediation/Conciliation Committee Rule for a period of five (5) years from date of
issuance of the Certificate of Training. After which,
they shall be required to undergo re-training of the
1. Basic Cooperative Course
same.
2. Leadership and Values Re-orientation
Section 8. Transitory Period. All cooperatives are
hereby given two (2) years from effectivity of this
3. Conflict Management
Rule to comply with the Training Requirements as 3. Performance Report;
provided above.
4. Audited Financial Statements duly
RULE 8 stamped "Received " by the BIR; and
REPORTS REQUIRED FOR COOPERATIVE
5. List of Officers and Trainings Undertaken
Section 1. Legal Basis. The legal basis for this rule is /Completed.
Art. 53 of this Code, quoted as follows:
Section 3. Additional Reports for Federations and
"Art. 53. Report. Unions. Federations and Unions shall submit to the
Authority the following additional reports:
(1) Every cooperative shall draw up regular
reports of its program of activities, including 1. List of cooperatives which have remitted
those in pursuance of their socio-civic their respective Cooperative Education and
undertakings, showing their progress and Training Funds (CETF);
achievements at the end of every fiscal year.
The reports shall be made accessible to its 2. Business consultancy assistance to
members of record. These reports shall be include the nature and cost; and
filed with the Authority within one hundred
twenty (120) days from the end of the 3. Other training activities undertaken
calendar year. The form and contents of the specifying therein the nature, participants,
reports shall be prescribed by the rules of and cost of each activity.
Authority. Failure to file the required reports
shall subject the accountable officer/s to
fines and penalties as may be prescribed by Section 4. Filling. All registered cooperatives shall
the Authority, and shall be a ground for the file with the Authority a copy of the required reports
revocation of authority of the cooperative to either through personal, registered mail courier, or
operate as such. The fiscal year of every electronic means, within one hundred twenty
cooperative shall be the calendar year, (120)days from the end of every year calendar year.
except as may be otherwise provided in the
by-laws. Section 5. Preparation of the Required Reports. The
reports shall be typewritten or printed in a form
(2) If a cooperative fails to make, publish prescribed by the Authority. The Chairperson and the
and file the reports required herein, or fails General Manager shall certify to the truthfulness of
to include therein any matter required by the statement contained in the reports.
this Code, the Authority within fifteen (15)
days from the expiration of the prescribed Section 6. Preparation of the Submit Reports on
period, send such cooperative a written Time. Failure to submit reports on time shall be
notice stating its non-compliance and the considered as Delay or Default. However, if the
commensurate fines and penalties that will failure to submit reports on time is due to fortuitous
be imposed until such time that the events; such as fire and other natural calamities and
cooperative has complied with the public disorders including strike or lock-out or a
requirement." national emergency which affects the operation of the
cooperative, the failure shall not be considered a
Section 2. Required Regular Reports. The following delay. Provided, That the Authority shall be officially
reports shall submitted to the Authority: notified of the occurrence of such fortuitous events.

1. Cooperative Annual Performance Report Delay or default shall commence on the day
(CAPR); following the last day required for the submission of
reports. However, should the last day of filing falls
on a non-working day in the locality where the
2. Social Audit Report including its program reporting cooperative is situated. Delay or Default
of activities in pursuance of its socio-civic shall start to run\on the day following the next
undertakings showing its achievements and working day.
end of every fiscal year;
For the purpose of establishing Delay or Default, the which the cooperative had in the properties are
date of acknowledgement by the Authority appearing terminated.
on the copies of such reports filed or submitted or
mailing postmarked on the envelope/the date of Upon the winding up the cooperative affairs, any6
registry or special delivery receipt, or the date the asset distributable to any creditor, shareholder or
electronic mail was sent as the case may be shall be member(s) who is unknown or cannot be found shall
considered as the date of filing. be given to the federation or union to which the
cooperative is affiliated with.
Section 7. Sanction For Delayed Submission. Failure
to file the required reports on time shall subject the A cooperative shall only distribute its assets or
Accountable Officer to pay a fine of Php 100.00 per properties upon unlawful dissolution and after
day of delay. payment of all its debts and liabilities, except in the
case of decrease of share capital of the cooperative
Within thirty (30) calendar days upon receipt of and as otherwise allowed by this Code."
Statement of Accounts, the Accountable Officer may
request for Reconsideration of such fine on the "Art. 70. Rules and Regulations on Liquidation. - The
grounds of fortuitous event and court litigation/order, Authority shall issue the appropriate implementing
which the Authority shall act upon within sixty (60) guidelines for the liquidation of cooperatives."
calendar days otherwise the sanctions, shall be
deemed lifted. The decision of the Authority shall "Art. 72. Capital Sources.-xxx
become final and executory.
(b) Subsidies, donations, legacies, grants, aids and
Other than the imposition of monetary penalties, the such other assistance from any local or foreign
Authority may dissolve/revoke, after due process, the institution whether public or private: Provided, That
authority of the cooperative to operate as such. capital coming from such subsidies, donations,
legacies, grants, aids and other assistance shall not be
divided into individual share capital holding at any
time but shall instead from part of the donated capital
RULE 9 or fund of the cooperative.
GUIDELINES FOR THE LIQUIDATION OF
COOPERATIVES Upon dissolution, such donated capital shall be
subject to escheat."
Section 1. Legal Basis. The legal bases for the Rule
are Art. 69,70 and par. 2, Art. 72 (4) of the code, Section 2. Coverage of Liquidation. These
quoted as follows: Guidelines shall cover the following:

"Art. 69. Liquidation of a Cooperative. - Every 1. Cooperatives whose charter expires by its
cooperative whose charter expires by its own own limitation.
limitation or whose existence is terminated by
voluntary dissolution or through an appropriate 2. Cooperatives whose existence is
judicial proceeding shall nevertheless continue to terminated by voluntary dissolution.
exist for three (3) years after the time it is dissolved,
not to continue the business for which was
established but for the purpose of prosecuting and 3. Cooperatives whose existence is
defending suits by or against it; settlement6 and terminated by appropriate judicial
closure of its affairs, disposition, conveyance and proceedings.
distribution of its properties and asset.
Section 3. Mode of Liquidation. The manner of
At any time during the said three (3) years, the liquidation or winding up may be provided for in the
cooperative is authorized and empowered to convey cooperative By-laws and this would prevail unless it
all its properties to trustees for the benefit of its is inconsistent with law. In this jurisdiction, the
members, creditors and other persons in interest. cooperative may avail of the following modes of
From and after any such conveyance, all interests liquidation:
(1) Liquidation by cooperative itself through a Board Authority prior to assumption of their functions and
of Liquidators. The members of cooperative entitled responsibilities.
to vote shall elect from among themselves their
Board Liquidators; and/or The Board of Liquidators/Trustees shall post an
adequate bond as may be fixed by the Authority
By conveying all the cooperative assets to Trustee or during the period of liquidation, to be paid out of the
Trustees who will take charge of liquidation. funds of the cooperative.

Section 4. Procedure of Liquidation. The following The Board of Liquidators/Trustees shall be allowed
procedure shall be observed in liquidation: to receive a reasonable honorarium to be paid out
from the funds of the cooperative which shall be
1. Constitution of the Board of equal to but not less than the honorarium being
Liquidators/Trustees. received by the Board of Directors of the cooperative
before its dissolution.
2. Inventory of Assets and Liabilities of the
Cooperative. Section 6. Functions, Powers and Obligations of the
Board of Liquidators/Trustees. The Board of
3. Payments of Creditors in accordance with Liquidators/Trustees shall:
the Provisions of the New Civil Code on the
Preference and Concurrence of Credits. 1. Make an inventory of all assets and to be
determine all liabilities including Share
4. Transfer of the Statutory Funds to the Capital holdings;
intended beneficiaries.
2. Preserve the existing assets of the
5. Distribution of the remaining assets. cooperative;

6. Submission of the Board of 3. Convert all assets of the cooperative into

Liquidators/Trustees of the Liquidation's cash;
Final Report.
4. Pay the outstanding obligations including
7. Cancellation of the Certificates of any and all valid claims against the
Registration and delisting of the name of the cooperative;
cooperative in the Cooperative Registry.
5. Distribute remaining assets pursuant to
Section 5. Board of Liquidators/Trustees. the provision of the Code and this Rules;
and
Within sixty (60) days from receipt of the Order of
Dissolution from the Authority or competent Court, 6. Make final report on the liquidation and
the board of Directors shall select/constitute the submit the same to the Authority.
Board of Liquidators/Trustees. In the event the Board
of Directors fails or refuses to constitute the Board of Section 7. Power to Sue and Be Sued. In the
Liquidators/Trustees, at least twenty five percent discharge of the above-mentioned functions, the
(25%) of the members entitled to vote shall convene Board of Liquidators/Trustees may sue and be sued
and select/appoint the Liquidators/Trustees. In case under the name of the cooperative in order to protects
the Board of Directors and the and defend its rights and interests.
General/Representative Assembly fail to select the
Board of Liquidators/Trustees, the Authority shall Section 8. Payment of Creditors. Payment of
appoint the same. creditors shall be in accordance with the contract
upon which it is based and the provision of the New
The Board of Liquidators/Trustees shall not be less Civil Code on the Preference and Concurrence of
than three (3) but not more than five (5) members. Credits.
They shall take their oath of office before the
Section 9. Statutory Funds. All the statutory funds cooperative and to the Authority, Federation, or
established by the cooperative shall be disposed of in Union to which the cooperative is affiliated with.
accordance with the provision for Art. 86 of the
Code. Upon receipt of the Final Report of the Board of
Liquidators/Trustees and finding that said final report
Section 10. Treatment of Donated Capital. All is complete and in order, the Authority shall release
studies, donations, legacies, grants, aids and such the Liquidators/Trustees from their duties and
other assistance from any local or foreign institutions functions. Thereafter shall effect the cancellation of
whether public or private shall be subjected to the Certificate of Registration of the subject
escheat. cooperative and delisting of the name of the
cooperative in the Cooperative Registry.
Section 11. Distribution of Assets. Subject to the
preceding sections and upon written authority from For failure to submit the Final Report the Board of
the Authority, any assets remaining after the Liquidators/Trustees shall not be released from their
payments of the cooperative's obligations to its duties and functions, hence no clearance shall be
creditors shall be distributed to the members in issued by the Authority.
payments of their respective share capital. If the
remaining assets is not sufficient to pay the full share Section 15. Summary Proceedings. For cooperative
capital contribution of the members, the distribution with assets of not more that One Hundred Thousand
shall be done in proportion to their capital. Pesos (P100,000.00) as shown in the Audited
Financial Statements and with no known creditors,
Section 12. Undistributed Assets. After the winding the Authority may choose to initiate summary
up of the affairs of the cooperative, the assets proceedings.
distributable to creditor or member whose whereas
about is unknown or cannot be found shall be given The following documents shall be required to be
to the federation/union to which the cooperative is submitted by the Board of Directors to the Authority:
affiliated with, for cooperative development, at the
option of the Board of Liquidators/Trustees. In case 1. Schedule of Assets;
of non-affiliation, the undistributed assets shall be
given to the community where the cooperative
operated. 2. Proposal of Distribution of Assets to its
members;
Section 13. Periods Allowed for the Winding Up of
the Affairs of the Cooperative. The dissolved 3. List of intended beneficiaries of the
cooperative shall continue to exist for three (3) years Statutory Funds;
from the issuance of the Order of Dissolution. The
purpose of which is not to continue the business for 4. Affidavit of No Creditors; and
which it was established but for purpose of
prosecuting and defending suits filed or against the 5. Audited Financial Statement;
cooperative, settlement and closure of its affairs,
distribution of its assets. After due evaluation by the Authority, the same shall
issues a written authority to the Board of Directors to
Nevertheless, at any time during the said three (3) distributed the assets of the cooperative. After which,
year period, the cooperative is authorized and the Board of Directors shall submit a final report.
empowered to convey all its properties to Trustees
for the benefits of its members, creditors and other Section 16. Suppletory Laws. The provisions of
persons in interest, after which, all interest which the Chapter Two (2) and Three (3) of title 19 on the
cooperative had in properties are terminated. Concurrence and Preference of Credit under the New
Civil Code and the provisions of Rule 104 of the
Section 14. Submission of the Board of Revised Rules of Court on the Voluntary Dissolution
Liquidators/Trustees' Financial Report. The of Corporations shall be used as suppletory rules.
Cooperative Board of Liquidators/Trustees shall
submit a final report to the members of the liquidated Section 17. Exception. The Authority, at its own
discretion, may outrightly cancel the Certificate of
Registration of a cooperation of a cooperative which (a) Common Share Capital shall be issued
has been proven to have no assets, or in case the only to regular members. Its holders shall be
cooperative can no longer be located despite the best entitled to vote and be voted under the
to locate it. Such facts shall be stated in the Order of principle of one-man, one vote principle,
Cancellation. and shall receive interest, the rate which
should not exceeded the normal rate on
RULE 10 investment.
CAPITALIZATION AND ACCOUNTING
PROCEDURES OF COOPERATIVES (b) Preferred Share Capital may be issued
to regular and associate members.
Section 1. Legal Basis. The legal basis for this Rule However, associate Members shall not be
is Art. 71 of the Code, quoted as follows: eligible to vote nor be voted on account of
such shareholdings but shall be entitled to,
"Art. 71. Capital. - The Capitalization of cooperatives among others the following:
and the accounting procedures shall be governed by
the provisions of this Code and the regulations which 1. Preference in the payment of
shall be issued." interest as provided for in the
Bylaws of the cooperative; and
Section 2. Capital Sources. Capitalization of a duly
registered cooperative may be derived from any or all 2. In case of liquidation, priority in
of the following sources; the distribution on Preferred Share
Capital shall be prescribed in the
1. Members' Share Capital; By-laws of the cooperative.

2. Loans and Borrowing Including Deposits; Section 4. Preferred Shares. Issuance and limitation
on Preferred Share Capital shall be prescribed in the
By-laws of the cooperative.
3. Revolving Capital which consist of the
deferred payment of patronage refunds, or
interest on share capital; and Section 5. Capital Build-Up. The By-laws of every
cooperative shall provide for a reasonable and
realistic member capital build-up program to allow
4. Subsidies, donations, legacies, grants, aids the continuing growth of the members' investment in
and such other assistance from any local or their cooperative as their own economic conditions
foreign institution whether public or private; continue to improve.
Provided, That capital coming from such
subsidies, donations, legacies, grants, aids
and other assistance shall not be divided into Section 6. Limitation on Share Capital Holdings. No
individual share capital holdings at any time member of a primary cooperative other that a
but shall instead form part of the donated cooperative itself shall own or hold mere than ten
capital or fund of the cooperative. percent (10%) of the share capital of the cooperative.
In the case of Secondary and Tertiary Cooperatives,
members should own not more that ten percent (10%)
Section 3. Share Capital. The Share Capital of a of the share capital of the cooperative.
cooperative, the per value of which may be fixed at
any figure not more than One Thousand Pesos
(P1,000.00), may consist of common share capital Section 7. Fines on Unpaid Subscribed Share
and preferred share capital if the latter is provided for capital. The By-laws of a cooperative shall prescribe
under the cooperative's Articles of Cooperation and a fine on unpaid subscribed share capital. Provided,
By-laws. The share capital contribution of the that such fine is fair and reasonable under the
members shall be considered as equity. Provided, that circumstances as determined by the Board of
it shall not be withdrawn and should not be used in Directors.
offsetting obligations whether past due or current
while the membership subsists. Section 8. Assignment of Share Capital Contribution
or Interest. Subject to the provision of R.A. 9520, no
member shall transfer his/her shares or interest in the
cooperative or any part thereof unless:
 1. He/She has held such share capital Subject to the By-laws of the cooperative, the
contribution or interest for not less than one withdrawing member shall be entitled to a refund of
(1) year; his/her share capital contribution and all other
interests in the cooperative. Provided, That such
2. The assignment is made to the refund shall not be made if upon such payment the
cooperative or to a person who falls within value of the assets of the cooperative would be less
the field of membership of the cooperative; than the aggregate amount of its debts and liabilities
and exclusive of his/her share capital contribution.

3. The Board of Directors has approved such Section 11. Patronage Refund. The principle of
assignment. Patronage Refund is a principle of a equity wherein
an equal right of members to participate in the
Section 9. Interest on Share Capital. Interest on organization and to equitably share in the benefits
Share Capital shall not exceed the Rate of Return on accruing is established. Under the principle, the Net
Investment. Surplus shall not be construed as profit, but as excess
payments made by them from the cooperative and
which shall be deemed to have been returned to them
Unless otherwise provided for in the By-laws of the if the same is distributed as prescribed by the Code
cooperative, share capital shall earn interest; the Rate and by this Rule. Provided, however, That the
of Interest shall be computed as follows: amount allocated for patronage refund shall not be
less than thirty percent (30%) of the net surplus after
X (Net Surplus less deducting the statutory reserves based on the
Statutory Reserves) principle of equity. Provided, further, that in no case
Rate of shall the rate of patronage refund be more than twice
=
Interest the rate of interest on share capital.
Total Average Share
Month
Section 12. Accounting Procedure. The accounting
system to be installed/maintained in the cooperative
Where: X shall be a percentage to be determined by shall be in accordance with the generally accepted
the Board of Directors allocated for interest on share accounting principles and practices, taking into
capital. consideration cooperative principles and practices.
The cooperative shall use the Standard Chart of
No allocation of interest on share capital shall be Accounts and its accompanying Accounting Manual
made without the approval of the Board of Directors prescribed by the Authority.
which may increase or decrease any or both.

Payment of interest, unless otherwise provided for in

the By-laws, must be made on such date as may be
determined by the Board of Directors. The
General/Representative Assembly ',owever, upon the
RULE 11
recommendation of the Board of Directors, may defer
SOCIAL AUDIT OF COOPERATIVE
the payment of such interest including Patronage
Refund to raise Revolving Capital.
Section 1. Legal Basis. The legal basis for this Rule
is Art. 80, paragraph 4, 5 and 6 of the Code, quoted
No cumulative interest shall be allowed for any kind
as follows:
or class of share issued by the cooperative.

"Art. 80. Annual Audit. - Cooperatives registered

Share Capital shall receive a strictly limited Rate of
under this Code shall be subject to an annual
Interest.
financial, performance and social audit."
Section 10. Withdrawal of Share Capital. A member
"The social audit shall be conducted by an
of a cooperative may, for any valid reason, withdraw
independent social auditor accredited by the
his/her membership from the cooperative by giving a
Authority."
sixty (60) days notice to the Board of Directors.
"The Authority in consultation with the cooperative à-vis the socio-economic upliftment and
sector, shall promulgated the rules and standards for empowerment of the members.
the social audit of cooperatives."
2. Assets building. To determine the cooperatives'
Section 2. Coverage. All registered cooperatives performance in building up its economic capacity to
regardless of types and categories shall be subject to respond to its social responsibility and development
social audit. income generating undertakings for its members.

Section 3. Social Audit. It is a procedure where the 3. Community Involvement and Solidarity. To
cooperative assesses its social impact and ethical determine the degree of community, social,
performance vis-à-vis its stated mission, vision, goals environmental involvement and solidarity of the
and code of social responsibility. It is a process to cooperative. In relation to this, all cooperatives are
assess the cooperative's contribution for the encourage to promote environmental awareness and
upliftment of the status not only to its members' instill environmental protection and conservation to
economic needs but also social needs and the their members and the community where they
community where it operates. The cooperative's operate, and as far as practicable to conduct tree-
actual performance and accomplishment are planting activities in the community where they
compared to its vision, goals, and social operate or its immediate environs.
responsibility as it relates to the impact not only to
the community but to its regular members as the 4. Information accessing and dissemination. To
immediate beneficiary of the decisions and actions it determine the capability of the cooperative to access,
promulgated, passed and implemented. Social Audit process and disseminate information from/to its
will serve as control mechanism to account for its members and community. It looks into the function
social performance and evaluate its impact in the of the organization as an empowering and responsive
community taking into account the community mechanism.
development fund which shall be used for projects or
activities that will benefit the community where the 5. Gender, Youth, Elderly, Children, and Persons
cooperative operates. with Disability. To determine how the cooperative
has contributed in the social capital development for
Section 4. Objectives/Uses of Social Audit. Social the welfare of the youth, the elderly, children, and
Audit validates the support of the cooperative to the persons with disability and the promotion of the
seventh cooperative principles on the "Concern gender fair culture and practices.
Community" and determines whether the cooperative
work for the community's sustainable development 6. Leadership and Organizational Management. To
through policies approved by their members. The highlight the attributes of the leaders/officers of the
audit focuses not only to the economic side of the cooperative and efficiency in managing the affairs of
cooperative but also the social aspect of the the organization as it relates with its members and
organization and appraises the cooperative with government.
performance as valuebased organization usually
participative, user and community oriented and non-
profit but service organization and how its social Section 6. Social Audit Manual. The Authority shall
responsibility for its members and the community as develop a Social Audit Manual that will be used for
a whole was fulfilled. Social Auditing is the the purpose.
systematic review of the attitudes, values, behavior,
and degree of interaction of people within the Section 7. Applicability. All registered cooperatives
cooperative as well as the policies, programs and shall submit to the Authority the Annual social Audit
activities being implemented by the cooperative. Report as conducted by an Independent Social
Auditor accredited by the Authority.
Section 5. Components and Social Audit Indicators.
The Social Audit of the cooperative shall consists of Section 8. Sanctions. The failure of the cooperatives
but not limited to the following major to the Authority of the required Social Audit Report
components/categories with its objectives: conducted by the Accredited Independent Social
Auditor shall mean non-compliance with the required
1. Membership. To determine the effectiveness of the reports and will be meted with corresponding
cooperative in meeting the needs of its members vis- penalties in accordance with R.A. 9520.
Section 9. Transitory Period. All cooperative are Section 4. Registration. The Articles of Cooperation
hereby given two (2) years from effectivity of this and By-laws of any FSC, or any amendment thereto,
Rule to comply with the Social Audit Requirements shall be registered with the Authority only if
as provided above. accompanied by a Certificate of Authority issued by
the BSP, under its official seal. Existing cooperative
RULE 12 engaged in credit and multi purpose activities, after it
FINANCIAL SERVICE COOPERATIVE (FSC) has notified the Authority of its decision to exercise
enhanced functions and satisfied the requirements for
Section 1. Legal Basis. The legal basis for this Rule the conversion to Financial Service Cooperative,
is Art. 121 (1) and (14) of the Code, quoted as shall register its amended Articles of Cooperation and
follows: By-laws to the Authority upon approval of the
Authority and favorable certification of the BSP.
"Art. 121. Regulation and Supervision. - The
Authority shall exercise lead regularity powers and Section 5. Revocation of Authority. The authority
supervision over the operations of the financial granted, may be revoked by the BSP if any of the
service cooperatives, to wit: grounds for receivership mentioned under Section 30
of Republic Act. No. 7653, otherwise known as The
New Central Bank Act and sections 53 and 56 of
(1) Issue rules and regulations for the safe and sound Republic Act No. 8791, otherwise known as An Act
operations of financial service cooperatives. xxx Providing for the Regulation of the Organization and
Operations of Banks, Quasi-Banks, Trust Entities and
(14) Appoint a conservator or a receiver as may be for Other Purposes are present or if the FSC has
necessary subject to the rules and regulations to be willfully violated the Code or any of the related rules
promulgated by the Authority in coordination with and regulations.
the BSP, taking into consideration the grounds,
powers and procedures under Sections 29 and 30 of Section 6. Minimum Capitalization Requirements.
Republic Act. No. 7653 as may be deemed Only those cooperatives with minimum Paid-up
appropriate to financial service cooperatives. capital of at least Ten Million pesos (Php
10,000,000.00) shall qualify to register as FSC
The Authority shall include in its rules and regulation without prejudice to additional capital requirements
appropriate sanctions and penalties, on the financial that maybe prescribed by the BSP for a particular
service cooperatives, its members, and officers and financial service regulated by the BSP that will be
responsible, its members, officers and responsible offered by the FSC.
persons, for any action that fails to adhere to sound
and prudent management practices or are inconsistent Section 7. Documentary Requirements. In addition to
with the provisions of this Code xxx." the documents required by the authority for
registration of new cooperative/amendments, the
Section 2. Functions of FSC. A FSC is a financial following shall be likewise submitted:
organization owned and operated by its members and
authorized to provide the following services, 1. Certificate of Authority from BSP;
exclusively to its members: (a) the functions of credit
cooperatives and other cooperatives, including
multipurpose cooperatives, that provide savings and 2. Resolution of the Board stating that:
credit to their members; and (b) other financial
services subject to regulation by the BSP. 2.1 The function or one of the
functions of the cooperative shall
Section 3. Coverage. (1) All Financial Service be savings, credit and other
Cooperative organized for the primary purpose of financial services;
engaging in savings and credit services and other
financial services, and (2) Existing cooperatives with 2.2 The amount of paid-up capital
savings and credit facilities which has formally allocated for such purposes shall be
notified the Authority of their intention to exercise at least Ten Million Pesos (Php
enhanced functions and satisfied the requirements of 10,000,000.00);
CDA for conversion to Financial Service
Cooperative.
 3. Undertaking to accomplish within a year faithful performance of their respective duties and
from the issuance of Certificate of obligations. The Board of Directors shall determine
Registration to establish the business site the adequacy of such bonds.
equipped with facilities, forms, stationeries,
and vault and provide required special Section 12. Compensation. In the absence of any
training/seminar for officers of the provision in the By-laws fixing their compensation,
cooperative; the Directors, shall not receive any compensation
except for reasonable per diems: Provided, however,
4. Audited Financial Statement of the That the Directors and Officers shall not be entitled
immediately preceding year in case of to any per diem when, in the preceding calendar year,
existing cooperative; the cooperative reported a net loss or had dividend
rate less than the official inflation rate for the year.
5. Other papers, which may be required by Any compensation other than per diems may be
Authority. granted to Directors by a majority vote of the
members with voting rights at a regular or special
Section 8. Reportorial Requirements. The FSC shall general assembly meeting specifically called for the
submit the regular reports as provided under Section purpose: Provided further, That no additional
2 of Rule 8 of this Rule. compensation other than per diems shall be paid
during the first year of existence of the FSC.
Provided finally, That the immediately preceding
Section 9. Membership and Affiliation. A FSC shall proviso shall not apply to cooperatives which
have two (2) types of members: (1) Regular converted into Financial Service Cooperative. The
members, who are natural persons; and (2) Associate compensation of Officers as well as the Members of
members who are natural persons but who do not the Committee created pursuant to the Code or its
immediately qualify under the requirements for By-laws maybe fixed in By-laws.
membership set out in the By-laws of the
cooperative. All associate members who are natural
persons shall be given two (2) years to become Section 13. Removal of Officers. All complaints for
regular members. Failure to convert within said the removal of any elected Officer shall be filed with
period shall mean automatic withdrawal of their the Board of Directors. Such Officer shall be given
associate membership. They may, however, re-apply the opportunity to be heard. Majority of the Board of
as regular members after two (2) years. Minors who Directors may place the Officer concerned under
are dependents of regular members can qualify as preventive suspension pending the resolution of the
associate members. When they reach the age of investigation which period shall be specified in the
majority and within two (2) years from acceptance of By-laws or policies of the cooperative duly approved
their associate membership, they have the option to by the General/Representative Assembly. Upon
convert into regular members. As associate members, finding of a prima facie evidence of guilt, the Board
they may open accounts, deposit funds, and withdraw of Directors shall present its recommendation for
from their account, subject to the By-laws and rules removal to the General/Representative Assembly.
of the cooperative, and the rules and regulations of
the Authority, notwithstanding the provisions of An Elective Officer may be removed by three-fourths
existing laws to the contrary. (3/4) vote of the regular members present and
constituting a quorum in a regular or special general
Section 10. Officers. The officers of the FSC shall be assembly meeting called for the purpose. The Officer
composed of the Members of the Board of Directors, concerned shall be given an opportunity to be heard
Committee Members, General Manager or Chief at said assembly.
Executive Officer, Secretary, Treasurer and Members
holding other positions as may be provided for in Section 14. Net worth. The Net Worth of the FSC
their By-laws. shall, at all times, not be less than an amount equal to
eight percent (8%) of its risk assets. The net worth
Section 11. Bonding of Accountable Officers. Every positions should be sufficient to meet competitive
Director, Officer, and Employees handling funds, pressure and adverse economic conditions as they
securities, or property on behalf of the FSC shall be arise. It should enhance the safety of the members'
covered by a surety bond to be issued by a duly share and keep pace with growth in FSC assets.
registered insurance or bonding company for the
Section 15. Deposit and Borrowing Operations. Section 21. Standard Chart of Accounts. All FSCs
Savings and Time Deposits with FSC may be opened shall adopt the Standard Chart of Accounts and its
with a minimum amount to be determined by the accompanying Accounting Manual for Credit and
Board of Directors. Only members and its affiliate Other Types of Cooperatives with Credit Service
laboratory cooperative may open savings and/or time issued by the Authority.
deposit accounts. The FSC, through the Board of
Directors as authorized by the General Assembly, Section 22. Manual of Rules and Regulations. The
may borrow from any source at the best terms or Authority shall develop a Manual that will cover: (1)
conditions available and in such amount that may be the Rules and Regulations for the safe and sound
needed. conduct of operations of Financial Service
Cooperatives; (2) Rules and Regulations for the
Section 16. Reserve Requirements against Deposit appointment of a Conservator or a Receiver as may
Liabilities. FSC shall maintain a Liquidity Reserve be necessary in coordination with the BSP, taking
Fund that will be restricted in nature equivalent to at into consideration the grounds, powers and
least two percent (2%) of their savings and time procedures under Section 29 and 30 of Republic Act
deposit liabilities. No. 7653 as may deemed appropriate to Financial
Service Cooperatives; and (3) the appropriate
Section 17. Loans. The Board of Directors shall be sanctions and penalties on the Financial Service
responsible for setting loan policies and lending Cooperatives, its Members, Officers and Responsible
procedures. It shall comply with the provisions of Persons, for any action that fails to adhere to sound
R.A. 3765, otherwise known as the "Truth in Lending and prudent management practices or are inconsistent
Act" and shall make the true and effective cost of with the provisions of the Code, other applicable laws
borrowing, an integral part of every loan contract. on cooperatives, rules, regulations, circulars or orders
issued by the Authority, and require the cooperative
Section 18. Investment Program. A sound investment to undertake corrective or remedial measures relative
program shall be the sole responsibility and thereto.
accountability of the Board of Directors. The scope
of the program will depend largely on the FSC size The appropriate prudential Rules and Regulations
and the extent of its surplus funds. Investment applicable to the Financial Service Cooperatives will
policies should be in writing and should address the be developed by the BSP, in coordination with the
safety, liquidity and yield, diversification, delegation Authority.
of authority, and valuation/assessment of securities.
The FSC shall not invest in any single entity more Section 23. Prohibition. The terms 'Credit
than 20% of its net worth. Cooperatives', 'Financial Service Cooperative', and
'Financial Service Cooperative Federation' shall be
Section 19. Internal Control. The FSC shall adopt a used exclusively by those who are duly registered
proper plan of organization, accounting control, under the Code, and no person, group of persons, or
accounting system, administrative control, internal organization shall use the said terms unless duly
control standards, accounting records procedures and registered with the Authority. Violations of this
other measures to safeguard the FSC's assets, check prohibition shall be punishable in accordance with
the accuracy and reliability of accounting data, Art. 140 of the Code.
promote operational efficiency, and encourage
adherence to prescribed managerial policies. RULE 13
VOLUNTARY ARBITRATION
Section 20. Performance Standards. A policy of
transparency and openness must be always Section 1. Legal Basis. The legal basis for this Rule
maintained whereby the Books of Accounts, is Art. 137 of the Code quoted as follows:
General/Representative Assembly, Board Resolutions
and Committee Reports are properly kept and made "Art. 137. Settlement of Disputes, Conciliation, and
accessible to members, and the regular financial Mediation Proceedings. - Disputes among members,
statements are periodically prepared and made known officers, directors, and committee members, and
to the members, to the Authority and to other parties intra-cooperative, inter-cooperative, intra-federation
interested in the FSC's operations. or intra-federation disputes shall, as far as
practicable, be settled amicably in accordance with
the conciliation or mediation mechanism embodied in d. To cite contempt any person disturbing
the bylaws of cooperatives and in such other the proceeding and/or who willfully defy
applicable laws. lawful orders of the Voluntary
Arbitrator/Arbitrators.
The conciliation and mediation committee of the
cooperative shall facilitate the amicable settlement of e. To issue a Writ of Execution, if necessary.
intra-cooperative disputes and disputes among
members, officers, directors, and committee f. To exercise such other powers and
members. functions as may be necessary to resolve the
dispute.
Should such conciliation and mediation proceedings
fail, the matter shall be settled through voluntary Section 4. Nature of Proceedings. Voluntary
arbitration: Provided, however, That before any party Arbitration is an administrative proceeding. The
can validly file a complaint with the Authority for technical rules applicable to court or judicial
voluntary arbitration, it must first secure a proceedings may not apply strictly. However, the
certification from its conciliation and mediation requirements of due process must be observed at all
committee and from the cooperative union or times. The hearing may proceed even in the absence
federation to which it belongs that despite all efforts of any party, provided the parties were duly notified
to settle the issues, the same have failed. and their failure to appear in such scheduled meeting
is unjustified as determined by the Voluntary
The jurisdiction of the voluntary arbitration shall be Arbitrator/s handling the proceedings.
exclusive and original and their decisions shall be
appealable to the Office of the President. The Section 5. Coverage. All intra/inter cooperative
Authority shall issue and adopt the proper rules of disputes not resolved amicably in accordance with
procedure governing arbitration as the primary and the Conciliation/Mediation Mechanisms embodied in
exclusive mode for dispute resolution in accordance the By-laws of a cooperative shall be governed by
with the Alternative Dispute Resolution Act of 2004. this Rule.

For this purpose, the Authority shall constitute a list Section 6. Commencement of Action. Any party of a
of Qualified Voluntary Arbitrators." dispute not resolved through Conciliation/Mediation
Proceeding in the primary and union/federation level
Section 2. Exclusive and Original Jurisdiction of the can commence an action for Voluntary Arbitration by
Voluntary Arbitrator/Arbitrator. The Voluntary filing a Verified Complaint with the Authority.
Arbitrator/Arbitrator mutually chosen by the parties
shall have exclusive and original jurisdiction over the In the case of a primary cooperative affiliated with
dispute, and their decision shall be appealable to the any federation/union, the complaint shall be
Office of the President of the Republic of the accompanied by a Certificate of Non-Settlement
Philippines. issued by the said federation/union to which the
primary cooperative is affiliated with.
Section 3. Powers/Authority of the Voluntary
Arbitrator/s. The Voluntary Arbitrator/s shall have In the case of a primary cooperative not affiliated
the following powers/authority: with any federation or union, the complaint shall be
accompanied by a Certificate of Non-Settlement
a. To hold hearings and to receive evidence issued by the Conciliation/Mediation Committee of
necessary to resolve the issue/s subject of such primary cooperative together with a Certificate
the dispute. of Non-Affiliation with any Federation/Union signed
by the Chairperson of the Board of Directors of the
b. To require any person to attend hearing/s same cooperative.
as witness or to cause production of
documents when the relevancy and the Section 7. Venue of Action. All complaints shall be
materiality thereof are vital to the resolution filed with CDA-Extension Office having
of the case. administrative jurisdiction over the cooperatives.
However, for complaints involving cooperatives
c. To administer oath.
registered with the Central Office such complaint Should the parties appear in the Preliminary
shall be filed with the latter. Conference, the parties shall be required to sign a
Submission Agreement.
Section 8. Contents of the Complaint. The complaint
shall contain: Section 12. Contents of the Submission Agreement.
The Agreement shall contain, among other things, the
1. The Names and Addresses of the following matters:
Complainant/s and Respondent/s;
1. The agreement to submit to Voluntary
2. A Brief Description of the Complaint and Arbitration;
the Documentary Evidences, if any; and
2. The specific issue/s or dispute/s to be
3. The Relief Prayed For. submitted for resolution;

Section 9. Parties to the Dispute. The Party who filed 3. The name of the Voluntary Arbitrator/s
the complaint shall be called the "Complainant/s" and chosen by the parties;
the Party complained of shall be called the
"Respondent/s". 4. The manner of paying the cost of
arbitration proceedings including the
Section 10. Procedures. Upon receipt of the Arbitrator's fee;
Complaint, the Authority shall issue a
Notice/Summons to the Respondent/s to file 5. The name of the public official whom the
Answer/Comment. Upon receipt of the parties may designate to execute the final
Answer/Comment, a Preliminary Conference shall be decision or award, if necessary; and
scheduled.
6. The Agreement to perform or abide by the
Section 11. Preliminary Conference. A Notice shall Decision/Award.
be sent to all parties concerned, indicating the time
and date of the conference. The Notice shall be Section 13. Arbitration Proceedings. All parties to
served on Counsel, or on the party who has no the dispute shall attend the arbitration proceedings.
Counsel. It shall be the duty of the parties or their The attendance of any third party or the exclusion of
Counsel to appear at the Preliminary Conference. The any witness in the proceeding shall be determined by
non-appearance of a party may be excused only if a the Voluntary Arbitrator/s. Hearings may be
valid cause is shown therefore or if a Representative adjourned for a valid cause or upon agreement of the
shall appear in his/her behalf fully authorized in parties. Unless the parties agree otherwise, it is
writing. The unjustified failure of the Complaint to mandatory for the Voluntary Arbitrator/s to render a
appear in the Preliminary Conference shall be cause Decision or Award within thirty (30) calendar days
for dismissal of the complaint. A similar failure on from the date the parties agreed to submit the case for
the part of the Respondent at the first instance, a resolution.
second Notice/Summons shall be issued. Non-
compliance with the second Notice/Summons by the Section 14. Decision/Award. The final disposition of
Respondent/s shall be cause for the dismissal of the the issue/s submitted to Voluntary Arbitration is the
complaint. However, a Certificate of Non-Resolution Decision/Award.
may be issued upon request of the Complainant.
The Decision or Award must be stated in clear,
Whenever the Respondent's whereabouts are concise and definite terms. It shall include the facts
unknown or cannot be ascertained by diligent and the law and/or contract upon which the
inquiry, the notice may be effected by publication in Decision/Award is based and shall be signed by the
a newspaper of general circulation at the expense of Voluntary Arbitrator/s. A copy of this
the complainant, otherwise the complaint shall be Decision/Award shall be furnished the Authority.
dismissed. However, a Certificate of Non-Resolution
may be issued to the Complainant.
Section 15. Extent of Decision/Award. The Voluntary provision of these Rules, the same shall be resolved
Arbitrator/s shall have the power to decide only the and interpreted liberally in favor of the cooperatives
matters which have been submitted for arbitration. and their members.

Section 16. Enforcement/Execution of Section 3. Suppletory Rule. Bureau of Local

Decision/Award. The parties shall comply voluntarily Government Finance Memorandum Circular No.
and faithfully the Decision/Award. In instances of ____ and Bangko Sentral ng Pilipinas Circular No.
non-compliance, a Motion to Enforce or Execute may 682, S-2010 shall from part of these Rules. Special
be filed with the Voluntary Arbitrator/s who may Rules, Circulars, Orders and other issuances by
issue a Writ Execution requiring either the sheriff of appropriate government agencies in pursuance of the
the Authority, if any, or the regular courts or any provisions of the Code and these Rules, and not
public official whom the parties may designate in the inconsistent thereto, shall have suppletoy application
submission agreement to execute the final decision or to these Rules.
award.
Section 4. Mandate. The Authority is mandated to
Section 17. Appeal to the Office of the President of implement and enforce these Rules and Regulations.
the Republic of the Philippines. The Decision/Award
rendered shall be appealable to the Office of the Section 5. Applicability. The provisions of this Rule
President of the Republic of the Philippines. The shall apply to Rules 1 to 13.
Appeal is taken by filing a Notice of Appeal within
fifteen (15) days after receipt of the copy of the Section 6. Separability. If any provision of these
Decision/Award appealed from. If no appeal is filed Rules and Regulations is declared null and void or
within the time as provided herein, such unconstitutional, the other provisions not affected
Decision/Award becomes final and executory. thereby shall continue to be in force and effect.

Section 18. Stenographic Notes/Transcript. The Section 7. Amendment. These Rules and Regulations
Voluntary Arbitrator/Arbitrator shall arrange the shall be subject to automatic review three (3) years
taking of stenographic notes/transcript of the after the effectivity thereof. Any amendment thereto,
testimony when one or more parties request such a shall be subject to the review and approval of the
record, and such party or parties thereof assume JCOCC.
payment of the cost.
Section 8. Effectivity. These Rules and Regulations
Section 19. Cost of Arbitration and Arbitrator's Fee. shall take effect fifteen (15) days after publication in
Unless agreed otherwise, the parties shall equally the Official Gazette or in a newspaper or general
share the cost of the proceedings including the circulation.
Arbitrator's Fee.

Section 20. Accreditation of Voluntary Arbitrator/s.

The Authority shall issue guidelines concerning the
accreditation and de-listing of Voluntary Arbitrator/s
as well as the list of qualified Voluntary Arbitrator/s.

COMMON PROVISIONS
REPUBLIC ACT NO. 9576
Section 1. Requirements. A copy of these Rules shall
be among the documents required to be kept ready AN ACT INCREASING THE MAXIMUM
and accessible for inspection and examination by the DEPOSIT INSURANCE COVERAGE, AND IN
members of the cooperative and the Authority in
CONNECTION THEREWITH, TO
accordance with Art. 52 of the Code.
STRENGTHEN THE REGULATORY AND
Section 2. Interpretation. Unless otherwise stated in ADMINISTRATIVE AUTHORITY, AND
these Rules, in case of doubt as to the meaning of any FINANCIAL CAPABILITY OF THE
 PHILIPPINE DEPOSIT INSURANCE for any of the purposes of this Act or included
CORPORATION (PDIC), AMENDING FOR as part of the total deposits or of insured
THIS PURPOSE REPUBLIC ACT NUMBERED deposit: Provided, further, That, subject to the
THREE THOUSAND FIVE HUNDRED approval of the Board of Directors, any insured
NINETY-ONE, AS AMENDED, OTHERWISE bank which is incorporated under the laws of
KNOWN AS THE PDIC CHARTER, AND FOR the Philippines which maintains a branch
OTHER PURPOSES outside the Philippines may elect to include for
insurance its deposit obligations payable only
Be it enacted by the Senate and House of at such branch.
Representatives of the Philippines in Congress
assembled: “The Corporation shall not pay deposit
insurance for the following accounts or
SECTION 1. Statement of State Policy and transactions, whether denominated,
Objectives. – It is hereby declared to be the policy of documented, recorded or booked as deposit by
the State to strengthen the mandatory deposit the bank:
insurance coverage system to generate, preserve,
maintain faith and confidence in the country’s “(1) Investment products such as bonds and
banking system, and protect it from illegal schemes securities, trust accounts, and other similar
and machinations. instruments;

Towards this end, the government must extend all “(2) Deposit accounts or transactions which
means and mechanisms necessary for the Philippine are unfunded, or that are fictitious or
Deposit Insurance Corporation to effectively fulfill fraudulent;
its vital task of promoting and safeguarding the
interests of the depositing public by way of providing “(3) Deposit accounts or transactions
permanent and continuing insurance coverage on all constituting, and/or emanating from, unsafe
insured deposits, and in helping develop a sound and and unsound banking practice/s, as determined
stable banking system at all times. by the Corporation, in consultation with the
BSP, after due notice and hearing, and
SEC. 2. Section 4(f) of Republic Act No. 3591, as publication of a cease and desist order issued
amended, is hereby amended by adding an additional by the Corporation against such deposit
paragraph, to read as follows: accounts or transactions; and

  “(f) The term ‘deposit’ means the unpaid   “(4) Deposits that are determined to be the
balance of money or its equivalent received by proceeds of an unlawful activity as defined
a bank in the usual course of business and for under Republic Act No. 9160, as amended.
which it has given or is obliged to give credit
to a commercial, checking, savings, time or “The actions of the Corporation taken under
thrift account, or issued in accordance with this section shall be final and executory, and
Bangko Sentral rules and regulations and other may not be restrained or set aside by the court,
applicable laws, together with such other except on appropriate petition for certiorari on
obligations of a bank, which, consistent with the ground that the action was taken in excess
banking usage and practices, the Board of of jurisdiction or with such grave abuse of
Directors shall determine and prescribe by discretion as to amount to a lack or excess of
regulations to be deposit liabilities of the bank: jurisdiction. The petition for certiorari may
Provided, That any obligation of a bank which only be filed within thirty (30) days from
is payable at the office of the bank located notice of denial of claim for deposit
outside of the Philippines shall not be a deposit insurance.”
SEC. 3. Section 4 (g) of the same Act is hereby that may have systemic consequences, as
amended to read as follows: defined in Section 17 hereof, as determined by
the Monetary Board, the maximum deposit
“(g) The term “insured deposit” means the insurance cover may be adjusted in such
amount due to any bona fide depositor for amount, for such a period, and/or for such
legitimate deposits in an insured bank net of deposit products, as may be determined by a
any obligation of the depositor to the insured unanimous vote of the Board of Directors in a
bank as of date of closure, but not to exceed meeting called for the purpose and chaired by
Five hundred thousand pesos (P500,000.00). the Secretary of Finance, subject to the
Such net amount shall be determined approval of the President of the Philippines.”
according to such regulations as the Board of
Directors may prescribe. In determining such SEC. 4. The maximum deposit insurance coverage of
amount due to any depositor, there shall be Five hundred thousand pesos (P500,000.00) provided
added together all deposits in the bank in Section 4(g) of Republic Act 3591, as amended
maintained in the same right and capacity for herein, shall be paid by the Corporation: Provided,
his benefit either in his own name or in the That, for the first three (3) years from the effectivity
name of others. A joint account regardless of of this Act, the first Two hundred fifty thousand
whether the conjunction ‘and,’ ‘or,’ ‘and/or’ is pesos (P250,000.00) of the deposit insurance
used, shall be insured separately from any coverage shall be for the account of the Corporation,
individually-owned deposit account: Provided, and those in excess of Two hundred fifty thousand
That (1) If the account is held jointly by two or pesos (P250,000.00) but not more than Five hundred
more natural persons, or by two or more thousand pesos (P500,000.00) shall be for the
juridical persons or entities, the maximum account of the National Government. The Congress
insured deposit shall be divided into as many shall annually appropriate the necessary funding to
equal shares as there are individuals, juridical reimburse the Corporation for any payment to insured
persons or entities, unless a different sharing is depositors paid in excess of Two hundred fifty
stipulated in the document of deposit, and (2) thousand pesos (P250,000.00).
If the account is held by a juridical person or
entity jointly with one or more natural persons, SEC. 5. Section 8, paragraph Eighth of the same Act
the maximum insured deposit shall be is hereby amended to read as follows:
presumed to belong entirely to such juridical
person or entity: Provided, further, That the “Eighth – To conduct examination of banks
aggregate of the interests of each co-owner with prior approval of the Monetary Board:
over several joint accounts, whether owned by Provided, That no examination can be
the same or different combinations of conducted within twelve (12) months from the
individuals, juridical persons or entities, shall last examination date: Provided, however, That
likewise be subject to the maximum insured the Corporation may, in coordination with the
deposit of Five hundred thousand pesos Bangko Sentral, conduct a special examination
(P500,000.00): Provided, furthermore, That as the Board of Directors, by an affirmative
the provisions of any law to the contrary vote of a majority of all of its members, if
notwithstanding, no owner/holder of any there is a threatened or impending closure of a
negotiable certificate of deposit shall be bank: Provided, further, That, notwithstanding
recognized as a depositor entitled to the rights the provisions of Republic Act No. 1405, as
provided in this Act unless his name is amended, Republic Act No. 6426, as amended,
registered as owner/holder thereof in the books Republic Act No. 8791, and other laws, the
of the issuing bank: Provided, finally, That, in Corporation and/or the Bangko Sentral, may
case of a condition that threatens the monetary inquire into or examine deposit accounts and
and financial stability of the banking system all information related thereto in case there is a
 finding of unsafe or unsound banking practice: assessments collected from member banks, and
Provided, finally, That to avoid overlapping of local taxes.”
efforts, the examination shall maximize the
efficient use of the relevant reports, SEC. 9. Section 17 (c) of the same Act shall be
information, and findings of the Bangko accordingly renumbered as Section 17 (d).
Sentral, which it shall make available to the
Corporation.” SEC. 10. Section 19 is hereby amended to read as
follows:
SEC. 6. A new Section 9 (h) of the same Act is
hereby added to read as follows: “SEC. 19. With the approval of the President
of the Philippines, the Corporation is
“(h) Unless the actions of the Corporation or authorized to issue bonds, debentures, and
any of its officers and employees are found to other obligations, both local or foreign, as may
be in willful violation of this Act, performed in be necessary for purposes of providing
bad faith, with malice and/or gross negligence, liquidity for settlement of insured deposits in
the Corporation, its directors, officers, closed banks as well as for financial assistance
employees and agents are held free and as provided herein: Provided, That the Board
harmless to the fullest extent permitted by law of Directors shall determine the interest rates,
from any liability, and they shall be maturity and other requirements of said
indemnified for any and all liabilities, losses, obligations: Provided, further, That the
claims, demands, damages, deficiencies, costs Corporation shall provide for appropriate
and expenses of whatsoever kind and nature reserves for the redemption or retirement of
that may arise in connection with the said obligation.
performance of their functions, without
prejudice to any criminal liability under “All notes, debentures, bonds, or such
existing laws.” obligations issued by the Corporation shall be
exempt from taxation both as to principal and
SEC. 7. Section 9 (h) of the same Act is accordingly interest, and shall be fully guaranteed by the
renumbered as Section 9 (i). Government of the Republic of the Philippines.
Such guarantee, which in no case shall exceed
SEC. 8. An additional paragraph to Section 17 of the two times the Deposit Insurance Fund as of
same Act is hereby added after subparagraph (b) to date of the debt issuance, shall be expressed on
read as follows: the face thereof.

“(c) It is hereby declared to be the policy of the “The Board of Directors shall have the power
State that the Deposit Insurance Fund of the to prescribe rules and regulations for the
Corporation shall be preserved and maintained issuance, reissuance, servicing, placement and
at all times. Accordingly, all tax obligations of redemption of the bonds herein authorized to
the Corporation for a period of five (5) years be issued as well as the registration of such
reckoned from the date of effectivity of this bonds at the request of the holders thereof.”
Act shall be chargeable to the Tax Expenditure
Fund (TEF) in the annual General SEC. 11. Section 21, paragraph (f)(5) is hereby
Appropriations Act pursuant to the provisions amended to read as follows:
of Executive Order No. 93, series of 1986;
Provided, That, on the 6th year and thereafter, “5) splitting of deposits or creation of fictitious
the Corporation shall be exempt from income loans or deposit accounts.
tax, final withholding tax, value-added tax on
 of such provision or section to other persons or
“Splitting of deposits occurs whenever a circumstances, shall not be affected thereby.
deposit account with an outstanding balance of
more than the statutory maximum amount of SEC. 15. Repealing Clause. - All acts or parts of acts
insured deposit maintained under the name of and executive orders, administrative orders, or parts
natural or juridical persons is broken down and thereof, which are inconsistent with the provisions of
transferred into two (2) or more accounts in the this Act, are hereby repealed.
name/s of natural or juridical persons or
entities who have no beneficial ownership on SEC. 16. Effectivity Clause. - This Act shall take
transferred deposits in their names within one effect fifteen (15) days following the completion of
hundred twenty (120) days immediately its publication in the Official Gazette or in two (2)
preceding or during a bank-declared bank newspapers of general circulation.
holiday, or immediately preceding a closure
order issued by the Monetary Board of the
Bangko Sentral ng Pilipinas for the purpose of
availing of the maximum deposit insurance
coverage;”
REPUBLIC ACT No. 1405
SEC. 12. An additional paragraph shall be inserted
under Section 2, to read as follows: AN ACT PROHIBITING DISCLOSURE OF OR
INQUIRY INTO, DEPOSITS WITH ANY
“SEC. 2. xxx The Board of Directors shall BANKING INSTITUTION AND PROVIDING
have the authority: PENALTY THEREFOR.
“x x x
Section 1. It is hereby declared to be the policy of the
“7. To review the organizational set-up of the Government to give encouragement to the people to
Corporation and adopt a new or revised deposit their money in banking institutions and to
organizational structure as it may deem discourage private hoarding so that the same may be
necessary for the Corporation to undertake its properly utilized by banks in authorized loans to
mandate and functions.” assist in the economic development of the country.

SEC. 13. Joint Congressional Oversight Committee. - Section 2. 1 All deposits of whatever nature with
There is hereby created a joint congressional banks or banking institutions in the Philippines
oversight committee to oversee the implementation including investments in bonds issued by the
of this Act. The committee shall be composed of the Government of the Philippines, its political
chairpersons of the Senate Committee on Banks, subdivisions and its instrumentalities, are hereby
Financial Institutions and Currencies and the considered as of an absolutely confidential nature and
Committee on Finance and five (5) senators to be may not be examined, inquired or looked into by any
appointed by the President of the Senate, and the person, government official, bureau or office, except
chairpersons of the House Committee on Banks and upon written permission of the depositor, or in cases
Financial Intermediaries and the Committee on of impeachment, or upon order of a competent court
Appropriations and five (5) members to be appointed in cases of bribery or dereliction of duty of public
by the Speaker of the House of Representatives. officials, or in cases where the money deposited or
invested is the subject matter of the litigation.
SEC. 14. Separability Clause. - If any provision or
section of this Act or the application thereof to any Section 3. It shall be unlawful for any official or
person or circumstances is held invalid, the other employee of a banking institution to disclose to any
provisions or sections of this Act, in the application
person other than those mentioned in Section two the aggregate amount of the unclaimed balances to be
hereof any information concerning said deposits. escheated, the average amount of which is small;

Section 4. All Acts or parts of Acts, Special Charters, WHEREAS, there is a felt need to simplify the
Executive Orders, Rules and Regulations which are procedure for the escheat of unclaimed balances for
inconsistent with the provisions of this Act are the purpose of reducing the expenses therefor;
hereby repealed.
NOW, THEREFORE, I, FERDINAND E.
Section 5. Any violation of this law will subject MARCOS, President of the Philippines, by virtue of
offender upon conviction, to an imprisonment of not the powers in me vested by the Constitution, do
more than five years or a fine of not more than hereby decree and order:
twenty thousand pesos or both, in the discretion of
the court. Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936
are hereby amended to read as follows:
Section 6. This Act shall take effect upon its
approval. "Sec. 1. "Unclaimed balances", within the meaning of
this Act, shall include credits or deposits of money,
bullion, security or other evidence of indebtedness of
any kind, and interest thereon with banks, buildings
PRESIDENTIAL DECREE No. 679 April 2, 1975 and loan associations, and trust corporations, as
hereinafter defined, in favor of any person known to
AMENDING ACT NUMBERED THIRTY NINE be dead or who has not made further deposits or
HUNDRED AND THIRTY SIX, AN ACT withdrawals during the preceding ten years or more.
REQUIRING BANKS, TRUST Such unclaimed balances, together with the increase
CORPORATIONS, AND BUILDING AND and proceeds thereof, shall be deposited with the
LOAN ASSOCIATIONS, TO TRANSFER Treasurer of the Philippines to the credit of the
UNCLAIMED BALANCES HELD BY THEM Government of the Republic of the Philippines to be
TO THE TREASURER OF THE PHILIPPINES used as the National Assembly may direct.
AND FOR OTHER PURPOSES.
"Banks", "building and loan associations" and "trust
WHEREAS, Act No. 3936 requires the publication of corporations", within the meaning of this Act, shall
a sworn statement of unclaimed balances in banks refer to institutions defined under Section two, thirty-
once a week of three consecutive weeks in at least nine and fifty-six, respectively, of Republic Act
two newspapers of general circulation in the locality Numbered Three Hundred Thirty Seven, otherwise
where the banks are situated, if there be any, and if known as the General Banking Act, as amended,
there is none, in the City of Manila, one in English whether organized under special charters or not.
and one in Spanish, the cost of which shall be paid by
the Bureau of Treasury, which shall be reimbursed "Sec. 2. Immediately after the taking effect of this
out of the escheated funds; Act and within the month of January of every odd
year, all banks, building and loan associations, and
WHEREAS, the law also provides for the publication trust corporations shall forward to the Treasurer of
of summons and a notice upon the commencement of the Philippines a statement, under oath, of their
the prescribed judicial proceedings for the escheat of respective managing officers, of all credits and
unclaimed balances; deposits held by them in favor of persons known to
be dead, or who have not made further deposits or
WHEREAS, past experience has shown that the cost withdrawals during the preceding ten years or more,
of publication required by law, the increase of which arranged in alphabetical order according to the names
has been substantial the past few years, is more than of creditors and depositors, and showing:
 "(a) The names and last known place of copy of the complaint and summons to the president,
residence or post office addresses of the cashier, or managing officer of each defendant bank,
persons in whose favor such unclaimed building and loan association or trust corporation and
balances stand; by publication of a copy of such summons in a
newspaper of general circulation, either in English, in
"(b) The amount and the date of the Filipino, or in a local dialect, published in the locality
outstanding unclaimed balance and whether where the bank, building and loan association or trust
the same is in money or in security, and if corporation is situated, if there be any, and in case
the latter, the nature of the same; there is none, in the City of Manila, at such time as
the court may order. Upon the trial, the court must
"(c) The date when the person in whose hear all parties who have appeared therein, and if it
favor the unclaimed balance stands died, if be determined that such unclaimed balances in any
known, or the date when he made his last defendant bank, building and loan association or trust
deposit or withdrawal; and corporation are unclaimed as hereinbefore stated,
then the court shall render judgment in favor of the
"(d) The interest due on such unclaimed Government of the Republic of the Philippines,
balance, if any, and the amount thereof. declaring that said unclaimed balances have
escheated to the Government of the Republic of the
"A copy of the above sworn statement shall be posted Philippines and commanding said bank, building and
in a conspicuous place in the premises of the bank, loan association or trust corporation to forthwith
building and loan association, or trust corporation deposit the same with the Treasurer of the Philippines
concerned for at least sixty days from the date of to credit of the Government of the Republic of the
filing thereof: Provided, That immediately before Philippines to be used as the National Assembly may
filing the above sworn statement, the bank, building direct.
and loan association, and trust corporation shall
communicate with the person in whose favor the "At the time of issuing summons in the action above
unclaimed balance stands at his last known place of provided for, the clerk of court shall also issue a
residence or post office address. notice signed by him, giving the title and number of
said action, and referring to the complaint therein,
"It shall be the duty of the Treasurer of the and directed to all persons, other than those named as
Philippines to inform the Solicitor General from time defendants therein, claiming any interest in any
to time the existence of unclaimed balances held by unclaimed balance mentioned in said complaint, and
banks, building and loan associations, and trust requiring them to appear within sixty days after the
corporations. publication or first publication, if there are several, of
such summons, and show cause, if they have any,
"Sec. 3. Whenever the Solicitor General shall be why the unclaimed balances involved in said action
informed of such unclaimed balances, he shall should not be deposited with the Treasurer of the
commence an action or actions in the name of the Philippines as in this Act provided and notifying
People of the Republic of the Philippines in the Court them that if they do not appear and show cause, the
of First Instance of the province or city where the Government of the Republic of the Philippines will
bank, building and loan association or trust apply to the court for the relief demanded in the
corporation is located, in which shall be joined as complaint. A copy of said notice shall be attached to,
parties the bank, building and loan association or and published with the copy of, said summons
trust corporation and all such creditors or depositors. required to be published as above, and at the end of
All or any of such creditors or depositors or banks, the copy of such notice so published, there shall be a
building and loan association or trust corporations statement of the date of publication, or first
may be included in one action. Service of process in publication, if there are several, of said summons and
such action or actions shall be made by delivery of a notice. Any person interested may appear in said
action and become a party thereto. Upon the AN ACT DEFINING THE CRIME OF MONEY
publication or the completion of the publication, if LAUNDERING, PROVIDING PENALTIES
there are several, of the summons and notice, and the THEREFOR AND FOR OTHER PURPOSES
service of the summons on the defendant banks,
building and loan associations or trust corporations, Be it enacted by the Senate and House of
the court shall have full and complete jurisdiction in Representatives of the Philippines in Congress
the Republic of the Philippines over the said assembled:
unclaimed balances and over the persons having or
claiming any interest in the said unclaimed balances, Section 1. Short Title. – This Act shall be known as
or any of them, and shall have full and complete the "Anti-Money Laundering Act of 2001."
jurisdiction to hear and determine the issues herein,
and render the appropriate judgment thereon. Section 2. Declaration of Policy. – It is hereby
declared the policy of the State to protect and
"Sec. 4. If the president, cashier or managing officer preserve the integrity and confidentiality of bank
of the bank, building and loan association, or trust accounts and to ensure that the Philippines shall not
corporation neglects or refuses to make and file the be used as a money laundering site for the proceeds
sworn statement required by this action, such bank, of any unlawful activity. Consistent with its foreign
building and loan association, or trust corporation policy, the State shall extend cooperation in
shall pay to the Government the sum of five hundred transnational investigations and prosecutions of
pesos a month for each month or fraction thereof persons involved in money laundering activities
during which such default shall continue. whenever committed.

"Sec. 5. Any bank, building and loan association or Section 3. Definitions. For purposes of this Act, the
trust corporation which shall make any deposit with following terms are hereby defined as follows:
the Treasurer of the Philippines in conformity with
the provisions of this Act shall not thereafter be liable (a) "Covered Institution" refers to:
to any person for the same and any action which may
be brought by any person against in any bank, (1) banks, non-banks, quasi-banks,
building and loan association, or trust corporation for trust entities, and all other
unclaimed balances so deposited with the Treasurer institutions and their subsidiaries
of the Philippines shall be defended by the Solicitor and affiliates supervised or
General without cost to such bank, building and loan regulated by the Bangko Sentral ng
association or trust corporation." Pilipinas (BSP);

Section 2. This Decree shall take effect immediately. (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
REPUBLIC ACT NO. 9160       September 29, consultant, (ii) mutual funds, close
2001 and investment companies,
common trust funds, pre-need
companies and other similar
 entities, (iii) foreign exchange papers, deposit certificates, trust
corporations, money changers, certificates, custodial receipts or
money payment, remittance, and deposit substitute instruments,
transfer companies and other trading orders, transaction tickets
similar entities, and (iv) other and confirmations of sale or
entities administering or otherwise investments and money marked
dealing in currency, commodities instruments; and
or financial derivatives based
thereon, valuable objects, cash (4) other similar instruments where
substitutes and other similar title thereto passes to another by
monetary instruments or property endorsement, assignment or
supervised or regulated by delivery.
Securities and Exchange
Commission. (d) "Offender" refers to any person who
commits a money laundering offense.
(b) "Covered transaction" is a single, series,
or combination of transactions involving a (e) "Person" refers to any natural or
total amount in excess of Four million juridical person.
Philippine pesos (Php4,000,000.00) or an
equivalent amount in foreign currency based (f) "Proceeds" refers to an amount derived
on the prevailing exchange rate within five or realized from an unlawful activity.
(5) consecutive banking days except those
between a covered institution and a person (g) "Supervising Authority" refers to the
who, at the time of the transaction was a appropriate supervisory or regulatory
properly identified client and the amount is agency, department or office supervising or
commensurate with the business or financial regulating the covered institutions
capacity of the client; or those with an enumerated in Section 3(a).
underlying legal or trade obligation,
purpose, origin or economic justification. (h) "Transaction" refers to any act
establishing any right or obligation or giving
It likewise refers to a single, series or rise to any contractual or legal relationship
combination or pattern of unusually large between the parties thereto. It also includes
and complex transactions in excess of Four any movement of funds by any means with a
million Philippine pesos (Php4,000,000.00) covered institution.
especially cash deposits and investments
having no credible purpose or origin, (l) "Unlawful activity" refers to any act or
underlying trade obligation or contract. omission or series or combination thereof
involving or having relation to the
(c) "Monetary Instrument" refers to: following:

(1) coins or currency of legal tender (1) Kidnapping for ransom under
of the Philippines, or of any other Article 267 of Act No. 3815,
country; otherwise known as the Revised
Penal Code, as amended;
(2) drafts, checks and notes;
(2) Sections 3, 4, 5, 7, 8 and 9 of
(3) securities or negotiable Article Two of Republic Act No.
instruments, bonds, commercial 6425, as amended, otherwise
known as the Dangerous Drugs Act non-combatant persons and similar
of 1972; targets;

(3) Section 3 paragraphs B, C, E, (13) Fraudulent practices and other

G, H and I of Republic Act No. violations under Republic Act No.
3019, as amended; otherwise 8799, otherwise known as the
known as the Anti-Graft and Securities Regulation Code of
Corrupt Practices Act; 2000;

(4) Plunder under Republic Act No. (14) Felonies or offenses of a

7080, as amended; similar nature that are punishable
under the penal laws of other
(5) Robbery and extortion under countries.
Articles 294, 295, 296, 299, 300,
301 and 302 of the Revised Penal Section 4. Money Laundering Offense. – Money
Code, as amended; laundering is a crime whereby the proceeds of an
unlawful activity are transacted, thereby making them
(6) Jueteng and Masiao punished as appear to have originated from legitimate sources. It
illegal gambling under Presidential is committed by the following:
Decree No. 1602;
(a) Any person knowing that any monetary
(7) Piracy on the high seas under instrument or property represents, involves,
the Revised Penal Code, as or relates to the proceeds of any unlawful
amended and Presidential Decree activity, transacts or attempts to transact said
No. 532; monetary instrument or property.

(8) Qualified theft under, Article (b) Any person knowing that any monetary
310 of the Revised Penal Code, as instrument or property involves the proceeds
amended; of any unlawful activity, performs or fails to
perform any act as a result of which he
(9) Swindling under Article 315 of facilitates the offense of money laundering
the Revised Penal Code, as referred to in paragraph (a) above.
amended;
(c) Any person knowing that any monetary
(10) Smuggling under Republic Act instrument or property is required under this
Nos. 455 and 1937; Act to be disclosed and filed with the Anti-
Money Laundering Council (AMLC), fails
(11) Violations under Republic Act to do so.
No. 8792, otherwise known as the
Electronic Commerce Act of 2000; Section 5. Jurisdiction of Money Laundering Cases.
– The regional trial courts shall have jurisdiction to
(12) Hijacking and other violations try all cases on money laundering. Those committed
under Republic Act No. 6235; by public officers and private persons who are in
destructive arson and murder, as conspiracy with such public officers shall be under
defined under the Revised Penal the jurisdiction of the Sandiganbayan.
Code, as amended, including those
perpetrated by terrorists against Section 6. Prosecution of Money Laundering. –
 (a) Any person may be charged with and (5) to initiate investigations of covered
convicted of both the offense of money transactions, money laundering activities
laundering and the unlawful activity as and other violations of this Act;
herein defined.
(6) to freeze any monetary instrument or
(b) Any proceeding relating to the unlawful property alleged to be proceed of any
activity shall be given precedence over the unlawful activity;
prosecution of any offense or violation
under this Act without prejudice to the (7) to implement such measures as may be
freezing and other remedies provided. necessary and justified under this Act to
counteract money laundering;
Section 7. Creation of Anti-Money Laundering
Council (AMLC). – The Anti-Money Laundering (8) to receive and take action in respect of,
Council is hereby created and shall be composed of any request from foreign states for
the Governor of the Bangko Sentral ng Pilipinas as assistance in their own anti-money
chairman, the Commissioner of the Insurance laundering operations provided in this Act;
Commission and the Chairman of the Securities and
Exchange Commission as members. The AMLC shall (9) to develop educational programs on the
act unanimously in the discharge of its functions as pernicious effects of money laundering, the
defined hereunder: methods and techniques used in money
laundering, the viable means of preventing
(1) to require and receive covered money laundering and the effective ways of
transaction reports from covered institutions; prosecuting and punishing offenders; and

(2) to issue orders addressed to the (10) to enlist the assistance of any branch,
appropriate Supervising Authority or the department, bureau, office, agency or
covered institution to determine the true instrumentality of the government, including
identity of the owner of any monetary government-owned and –controlled
instrument or property subject of a covered corporations, in undertaking any and all
transaction report or request for assistance anti-money laundering operations, which
from a foreign State, or believed by the may include the use of its personnel,
Council, on the basis of substantial evidence facilities and resources for the more resolute
to be in whole or in part, whenever located, prevention, detection and investigation of
representing, involving, or related to, money laundering offenses and prosecution
directly or indirectly, in any manner or by of offenders.
any means, the proceeds of an unlawful
activity; Section 8. Creation of a Secretariat. – The AMLC is
hereby authorized to establish a secretariat to be
(3) to institute civil forfeiture proceedings headed by an Executive Director who shall be
and all other remedial proceedings through appointed by the Council for a term of five (5) years.
the Office of the Solicitor General; He must be a member of the Philippine Bar, at least
thirty-five (35) years of age and of good moral
(4) to cause the filing of complaints with the character, unquestionable integrity and known
Department of Justice or the Ombudsman probity. All members of the Secretariat must have
for the prosecution of money laundering served for at least five (5) years either in the
offenses; Insurance Commission, the Securities and Exchange
Commission or the Bangko Sentral ng Pilipinas
(BSP) and shall hold full-time permanent positions When reporting covered transactions to the AMLC,
within the BSP. covered institutions and their officers, employees,
representatives, agents, advisors, consultants or
Section 9. Prevention of Money Laundering; associates shall not be deemed to have violated
Customer Identification Requirements and Record Republic Act No. 1405, as amended; Republic Act
Keeping. – No. 6426, as amended; Republic Act No. 8791 and
other similar laws, but are prohibited from
(a) Customer Identification, - Covered communicating, directly or indirectly, in any manner
institutions shall establish and record the or by any means, to any person the fact that a covered
true identity of its clients based on official transaction report was made, the contents thereof, or
documents. They shall maintain a system of any other information in relation thereto. In case of
verifying the true identity of their clients violation thereof, the concerned officer, employee,
and, in case of corporate clients, require a representative, agent, advisor, consultant or associate
system of verifying their legal existence and of the covered institution, shall be criminally liable.
organizational structure, as well as the However, no administrative, criminal or civil
authority and identification of all persons proceedings, shall lie against any person for having
purporting to act on their behalf. made a covered transaction report in the regular
performance of his duties and in good faith, whether
The provisions of existing laws to the or not such reporting results in any criminal
contrary notwithstanding, anonymous prosecution under this Act or any other Philippine
accounts, accounts under fictitious names, law.
and all other similar accounts shall be
absolutely prohibited. Peso and foreign When reporting covered transactions to the AMLC,
currency non-checking numbered accounts covered institutions and their officers, employees,
shall be allowed. The BSP may conduct representatives, agents, advisors, consultants or
annual testing solely limited to the associates are prohibited from communicating,
determination of the existence and true directly or indirectly, in any manner or by any means,
identity of the owners of such accounts. to any person, entity, the media, the fact that a
covered transaction report was made, the contents
(b) Record Keeping – All records of all thereof, or any other information in relation thereto.
transactions of covered institutions shall be Neither may such reporting be published or aired in
maintained and safely stored for five (5) any manner or form by the mass media, electronic
years from the date of transactions. With mail, or other similar devices. In case of violation
respect to closed accounts, the records on thereof, the concerned officer, employee,
customer identification, account files and representative, agent, advisor, consultant or associate
business correspondence, shall be preserved of the covered institution, or media shall be held
and safety stored for at least five (5) years criminally liable.
from the dates when they were closed.
Section 10. Authority to Freeze. – Upon
(c) Reporting of Covered Transactions. – determination that probable cause exists that any
Covered institutions shall report to the deposit or similar account is in any way related to an
AMLC all covered transactions within five unlawful activity, the AMLC may issue a freeze
(5) working days from occurrence thereof, order, which shall be effective immediately, on the
unless the Supervising Authority concerned account for a period not exceeding fifteen (15) days.
prescribes a longer period not exceeding ten Notice to the depositor that his account has been
(10) working days. 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 claiming an interest therein may apply, by
AMLC has seventy-two (72) hours to dispose of the verified petition, for a declaration that the
depositor's explanation. If it falls to act within same legitimately belongs to him and for
seventy-two (72) hours from receipt of the depositor's segregation or exclusion of the monetary
explanation, the freeze order shall automatically be instrument or property corresponding
dissolved. The fifteen (15)-day freeze order of the thereto. The verified petition shall be filed
AMLC may be extended upon order of the court, with the court which rendered the judgment
provided that the fifteen (15)-day period shall be of conviction and order of forfeiture, within
tolled pending the court's decision to extend the fifteen (15) days from the date of the order
period. or forfeiture, in default of which the said
order shall become final and executory. This
No court shall issue a temporary restraining order or provision shall apply in both civil and
writ of injunction against any freeze order issued by criminal forfeiture.
the AMLC except the Court of Appeals or the
Supreme Court. (c) Payment in Lieu of Forfeiture. –
Where the court has issued an order of
Section 11. Authority to inquire into Bank Deposits. forfeiture of the monetary instrument or
– Notwithstanding the provisions of Republic Act property subject of a money laundering
No. 1405, as amended; Republic Act No. 6426, as offense defined under Section 4, and said
amended; Republic Act No. 8791, and other laws, the order cannot be enforced because any
AMLC may inquire into or examine any particular particular monetary instrument or property
deposit or investment with any banking institution or cannot, with due diligence, be located, or it
non-bank financial institution upon order of any has been substantially altered, destroyed,
competent court in cases of violation of this Act diminished in value or otherwise rendered
when it has been established that there is probable worthless by any act or omission, directly or
cause that the deposits or investments involved are in indirectly, attributable to the offender, or it
any way related to a money laundering offense: has been concealed, removed, converted or
Provided, That this provision shall not apply to otherwise transferred to prevent the same
deposits and investments made prior to the effectivity from being found or to avoid forfeiture
of this Act. thereof, or it is located outside the
Philippines or has been placed or brought
Section 12. Forfeiture Provisions. – outside the jurisdiction of the court, or it has
been commingled with other monetary
(a) Civil Forfeiture. – When there is a instruments or property belonging to either
covered transaction report made, and the the offender himself or a third person or
court has, in a petition filed for the purpose entity, thereby rendering the same difficult
ordered seizure of any monetary instrument to identify or be segregated for purposes of
or property, in whole or in part, directly or forfeiture, the court may, instead of
indirectly, related to said report, the Revised enforcing the order of forfeiture of the
Rules of Court on civil forfeiture shall monetary instrument or property or part
apply. thereof or interest therein, accordingly order
the convicted offender to pay an amount
(b) Claim on Forfeited Assets. – Where the equal to the value of said monetary
court has issued an order of forfeiture of the instrument or property. This provision shall
monetary instrument or property in a apply in both civil and criminal forfeiture.
criminal prosecution for any money
laundering offense defined under Section 4
of this Act, the offender or any other person
 that it needs relating to any covered
transaction, money laundering offense or
Section 13. Mutual Assistance among States. – any other matter directly or indirectly,
related thereto; (3) to the extent allowed by
(a) Request for Assistance from a Foreign the law of the Foreign State, applying with
State. – Where a foreign State makes a the proper court therein for an order to enter
request for assistance in the investigation or any premises belonging to or in the
prosecution of a money laundering offense, possession or control of, any or all of the
the AMLC may execute the request or persons named in said request, and/or search
refuse to execute the same and inform the any or all such persons named therein and/or
foreign State of any valid reason for not remove any document, material or object
executing the request or for delaying the named in said request: Provided, That the
execution thereof. The principles of documents accompanying the request in
mutuality and reciprocity shall, for this support of the application have been duly
purpose, be at all times recognized. authenticated in accordance with the
applicable law or regulation of the foreign
(b) Power of the AMLC to Act on a State; and (4) applying for an order of
Request for Assistance from a Foreign forfeiture of any monetary instrument or
State. – The AMLC may execute a request property in the proper court in the foreign
for assistance from a foreign State by: (1) State: Provided, That the request is
tracking down, freezing, restraining and accompanied by an authenticated copy of
seizing assets alleged to be proceeds of any the order of the regional trial court ordering
unlawful activity under the procedures laid the forfeiture of said monetary instrument or
down in this Act; (2) giving information property of a convicted offender and an
needed by the foreign State within the affidavit of the clerk of court stating that the
procedures laid down in this Act; and (3) conviction and the order of forfeiture are
applying for an order of forfeiture of any final and that no further appeal lies in
monetary instrument or property in the respect of either.
court: Provided, That the court shall not
issue such an order unless the application is (d) Limitations on Request for Mutual
accompanied by an authenticated copy of Assistance. – The AMLC may refuse to
the order of a court in the requesting State comply with any request for assistance
ordering the forfeiture of said monetary where the action sought by the request
instrument or properly of a person who has contravenes any provision of the
been convicted of a money laundering Constitution or the execution of a request is
offense in the requesting State, and a likely to prejudice the national interest of the
certification of an affidavit of a competent Philippines unless there is a treaty between
officer of the requesting State stating that the Philippines and the requesting State
the conviction and the order of forfeiture are relating to the provision of assistance in
final and then no further appeal lies in relation to money laundering offenses.
respect or either.
(e) Requirements for Requests for Mutual
(c) Obtaining Assistance from Foreign Assistance from Foreign State. – A request
States. – The AMLC may make a request to for mutual assistance from a foreign State
any foreign State for assistance in (1) must (1) confirm that an investigation or
tracking down, freezing, restraining and prosecution is being conducted in respect of
seizing assets alleged to be proceeds of any a money launderer named therein or that he
unlawful activity; (2) obtaining information 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 Section 14. Penal Provisions. –
conviction; (3) gives sufficient particulars as
to the identity of said person; (4) give (a) Penalties for the Crime of Money
particulars sufficient to identity any covered Laundering. The penalty of imprisonment
institution believed to have any information, ranging from seven (7) to fourteen (14)
document, material or object which may be years and a fine of not less than Three
of assistance to the investigation or million Philippine pesos (Php 3,000,000.00)
prosecution; (5) ask from the covered but not more than twice the value of the
institution concerned any information, monetary instrument or property involved in
document, material or object which may be the offense, shall be imposed upon a person
of assistance to the investigation or convicted under Section 4(a) of this Act.
prosecution; (6) specify the manner in which
and to whom said information, document, The penalty of imprisonment from four (4)
material or object detained pursuant to said to seven (7) years and a fine of not less than
request, is to be produced; (7) give all the One million five hundred thousand
particulars necessary for the issuance by the Philippine pesos (Php 1,500,000.00) but not
court in the requested State of the writs, more than Three million Philippine pesos
orders or processes needed by the requesting (Php 3,000,000.00), shall be imposed upon a
State; and (8) contain such other information person convicted under Section 4(b) of this
as may assist in the execution of the request. Act.

(f) Authentication of Documents. – For The penalty of imprisonment from six (6)
purposes of this Section, a document is months to four (4) years or a fine of not less
authenticated if the same is signed or than One hundred thousand Philippine pesos
certified by a judge, magistrate or equivalent (Php 100,000.00) but not more than Five
officer in or of, the requesting State, and hundred thousand Philippine pesos (Php
authenticated by the oath or affirmation of a 500,000.00), or both, shall be imposed on a
witness or sealed with an official or public person convicted under Section 4(c) of this
seal of a minister, secretary of State, or Act.
officer in or of, the government of the
requesting State, or of the person (b) Penalties for Failure to Keep Records.
administering the government or a The penalty of imprisonment from six (6)
department of the requesting territory, months to one (1) year or a fine of not less
protectorate or colony. The certificate of than One hundred thousand Philippine pesos
authentication may also be made by a (Php 100,000.00) but not more than Five
secretary of the embassy or legation, consul hundred thousand Philippine pesos (Php
general, consul, vice consul, consular agent 500,000.00), or both, shall be imposed on a
or any officer in the foreign service of the person convicted under Section 9(b) of this
Philippines stationed in the foreign State in Act.
which the record is kept, and authenticated
by the seal of his office. (c) Malicious Reporting. Any person who,
with malice, or in bad faith, report or files a
(g) Extradition. – The Philippines shall completely unwarranted or false information
negotiate for the inclusion of money relative to money laundering transaction
laundering offenses as herein defined among against any person shall be subject to a
extraditable offenses in all future treaties. penalty of six (6) months to four (4) years
 imprisonment and a fine of not less than One involved in the offense penalized in Section 4 of this
hundred thousand Philippine pesos (Php Act.
100,000.00) but not more than Five hundred
thousand Philippine pesos (Php 500,000.00), Section 16. Prohibitions Against Political
at the discretion of the court: Provided, That Harassment. – This Act shall not be used for political
the offender is not entitled to avail the prosecution or harassment or as an instrument to
benefits of the Probation Law. hamper competition in trade and commerce.

If the offender is a corporation, association, No case for money laundering may be filed against
partnership or any juridical person, the and no assets shall be frozen, attached or forfeited to
penalty shall be imposed upon the the prejudice of a candidate for an electoral office
responsible officers, as the case may be, during an election period.
who participated in the commission of the
crime or who shall have knowingly Section 17. Restitution. – Restitution for any
permitted or failed to prevent its aggrieved party shall be governed by the provisions
commission. If the offender is a juridical of the New Civil Code.
person, the court may suspend or revoke its
license. If the offender is an alien, he shall, Section 18. Implementing Rules and Regulations. –
in addition to the penalties herein Within thirty (30) days from the effectivity of this
prescribed, be deported without further Act, the Bangko Sentral ng Pilipinas, the Insurance
proceedings after serving the penalties Commission and the Securities and Exchange
herein prescribed. If the offender is a public Commission shall promulgate the rules and
official or employee, he shall, in addition to regulations to implement effectivity the provisions of
the penalties prescribed herein, suffer this Act. Said rules and regulations shall be submitted
perpetual or temporary absolute to the Congressional Oversight Committee for
disqualification from office, as the case may approval.
be;
Covered institutions shall formulate their respective
Any public official or employee who is money laundering prevention programs in accordance
called upon to testify and refuses to do the with this Act including, but not limited to,
same or purposely fails to testify shall suffer information dissemination on money laundering
the same penalties prescribed herein. activities and its prevention, detection and reporting,
and the training of responsible officers and personnel
(d) Breach of Confidentiality. The of covered institutions.
punishment of imprisonment ranging from
three (3) to eight (8) years and a fine of not Section 19. Congressional Oversight Committee. –
less than Five hundred thousand Philippine There is hereby created a Congressional Oversight
pesos (Php 500,000.00) but not more than Committee composed of seven (7) members from the
One million Philippine pesos (Php Senate and seven (7) members from the House of
1,000,000.00), shall be imposed on a person Representatives. The members from the Senate shall
convicted for a violation under Section 9(c). be appointed by the Senate President based on the
proportional representation of the parties or coalitions
Section 15. System of Incentives and Rewards. – A therein with at least two (2) Senators representing the
system of special incentives and rewards is hereby minority. The members from the House of
established to be given to the appropriate government Representatives shall be appointed by the Speaker
agency and its personnel that led and initiated an also based on proportional representation of the
investigation, prosecution and conviction of persons parties or coalitions therein with at least two (2)
members representing the minority.
The Oversight Committee shall have the power to TRUST ENTITIES AND FOR OTHER
promulgate its own rules, to oversee the PURPOSES
implementation of this Act, and to review or revise
the implementing rules issued by the Anti-Money CHAPTER I
Laundering Council within thirty (30) days from the TITLE AND CLASSIFICATION OF BANKS
promulgation of the said rules.
Section 1. Title. The short title of this Act shall be
Section 20. Appropriations Clause. – The AMLC "The General Banking Law of 2000." (1a)
shall be provided with an initial appropriation of
Twenty-five million Philippine pesos (Php Section 2. Declaration Of Policy. - The State
25,000,000.00) to be drawn from the national recognizes the vital role of banks providing an
government. Appropriations for the succeeding years environment conducive to the sustained development
shall be included in the General Appropriations Act. of the national economy and the fiduciary nature of
banking that requires high standards of integrity and
Section 21. Separability Clause. – If any provision or performance. In furtherance thereof, the State shall
section of this Act or the application thereof to any promote and maintain a stable and efficient banking
person or circumstance is held to be invalid, the other and financial system that is globally competitive,
provisions or sections of this Act, and the application dynamic and responsive to the demands of a
of such provision or section to other persons or developing economy. (n)
circumstances, shall not be affected thereby.
Section 3. Definition and Classification of Banks. -
Section 22. Repealing Clause. – All laws, decrees,
executive orders, rules and regulations or parts 3.1. "Banks" shall refer to entities engaged in the
thereof, including the relevant provisions of Republic lending of funds obtained in the form of deposits.
Act No. 1405, as amended; Republic Act No. 6426, (2a)
as amended; Republic Act No. 8791, as amended and
other similar laws, as are inconsistent with this Act, 3.2. Banks shall be classified into:
are hereby repealed, amended or modified
accordingly. (a) Universal banks;

Section 23. Effectivity. – This Act shall take effect (b) Commercial banks;
fifteen (15) days after its complete publication in the
Official Gazette or in at least two (2) national (c) Thrift banks, composed of: (i) Savings
newspapers of general circulation. and mortgage banks, (ii) Stock savings and
loan associations, and (iii) Private
The provisions of this Act shall not apply to deposits development banks, as defined in the
and investments made prior to its effectivity. Republic Act No. 7906 (hereafter the "Thrift
Banks Act");

(d) Rural banks, as defined in Republic Act

No. 73S3 (hereafter the "Rural Banks Act");

REPUBLIC ACT NO. 8791             May 23, 2000 (e) Cooperative banks, as defined in
Republic Act No 6938 (hereafter the
AN ACT PROVIDING FOR THE "Cooperative Code");
REGULATION OF THE ORGANIZATION AND
OPERATIONS OF BANKS, QUASI-BANKS, (f) Islamic banks as defined in Republic Act
No. 6848, otherwise known as the "Charter
 of Al Amanah Islamic Investment Bank of For the purposes of this Act, "quasi-banks" shall refer
the Philippines"; and to entities engaged in the borrowing of funds through
the issuance, endorsement or assignment with
(g) Other classifications of banks as recourse or acceptance of deposit substitutes as
determined by the Monetary Board of the defined in Section 95 of Republic Act No. 7653
Bangko Sentral ng Pilipinas. (6-Aa) (hereafter the "New Central Bank Act") for purposes
of re-lending or purchasing of receivables and other
CHAPTER II obligations. (2-Da)
AUTHORITY OF THE BANGKO SENTRAL
Section 5. Policy Direction; Ratios, Ceilings and
Section 4. Supervisory Powers. The operations and Limitations. - The Bangko Sentral shall provide
activities of banks shall be subject to supervision of policy direction in the areas of money, banking and
the Bangko Sentral. "Supervision" shall include the credit. (n)
following:
For this purpose, the Monetary Board may prescribe
4.1. The issuance of rules of, conduct or the ratios, ceilings, limitations, or other forms of
establishment standards of operation for uniform regulation on the different types of accounts and
application to all institutions or functions covered, practices of banks and quasi-banks which shall, to the
taking into consideration the distinctive character of extent feasible, conform to internationally accepted
the operations of institutions and the substantive standards, including of the Bank for International
similarities of specific functions to which such rules, Settlements (BIS). The Monetary Board may exempt
modes or standards are to be applied; particular categories of transactions from such ratios,
ceilings. and limitations, but not limited to
4.2 The conduct of examination to determine exceptional cases or to enable a bank or quasi-bank
compliance with laws and regulations if the under rehabilitation or during a merger or
circumstances so warrant as determined by the consolidation to continue in business, with safety to
Monetary Board; its creditors, depositors and the general public. (2-Ca)

4.3 Overseeing to ascertain that laws and regulations Section 6. Authority to Engage in Banking and
are complied with; Quasi-Banking Functions. - No person or entity shall
engage in banking operations or quasi-banking
4.4 Regular investigation which shall not be oftener functions without authority from the Bangko
than once a year from the last date of examination to Sentral: .Provided, however, That an entity
determine whether an institution is conducting its authorized by the Bangko Sentral to perform
business on a safe or sound basis: Provided, That the universal or commercial banking functions shall
deficiencies/irregularities found by or discovered by likewise have the authority to engage in quasi-
an audit shall be immediately addressed; banking functions.

4.5 Inquiring into the solvency and liquidity of the The determination of whether a person or entity is
institution (2-D); or performing banking or quasi-banking functions
without Bangko Sentral authority shall be decided by
4.6 Enforcing prompt corrective action. (n) the Monetary Board. To resolve such issue, the
Monetary Board may; through the appropriate
The Bangko Sentral shall also have supervision over supervising and examining department of the Bangko
the operations of and exercise regulatory powers over Sentral, examine, inspect or investigate the books and
quasi-banks, trust entities and other financial records of such person or entity. Upon issuance of
institutions which under special laws are subject to this authority, such person or entity may commence
Bangko Sentral supervision. (2-Ca) to engage in banking operations or quasi-banking
function and shall continue to do so unless such No new commercial bank shall be established within
authority is sooner surrendered, revoked, suspended three (3) years from the effectivity of this Act. In the
or annulled by the Bangko Sentral in accordance with exercise of the authority granted herein, the Monetary
this Act or other special laws. Board shall take into consideration their capability in
terms of their financial resources and technical
The department head and the examiners of the expertise and integrity. The bank licensing process
appropriate supervising and examining department shall incorporate an assessment of the bank's
are hereby authorized to administer oaths to any such ownership structure, directors and senior
person, employee, officer, or director of any such management, its operating plan and internal controls
entity and to compel the presentation or production of as well as its projected financial condition and capital
such books, documents, papers or records that are base.
reasonably necessary to ascertain the facts relative to
the true functions and operations of such person or Section 9. Issuance of Stocks. - The Monetary Board
entity. Failure or refusal to comply with the required may prescribe rules and regulations on the types of
presentation or production of such books, documents, stock a bank may issue, including the terms thereof
papers or records within a reasonable time shall and rights appurtenant thereto to determine
subject the persons responsible therefore to the penal compliance with laws and regulations governing
sanctions provided under the New Central Bank Act. capital and equity structure of banks; Provided, That
banks shall issue par value stocks only.
Persons or entities found to be performing banking or
quasi-banking functions without authority from the Section 10. Treasury Stocks. - No bank shall
Bangko Sentral shall be subject to appropriate purchase or acquire shares of its own capital stock or
sanctions under the New Central Bank Act and other accept its own shares as a security for a loan, except
applicable laws. (4a) when authorized by the Monetary Board: Provided,
That in every case the stock so purchased or acquired
Section 7. Examination by the Bangko Sentral. - The shall, within six (6) months from the time of its
Bangko Sentral shall, when examining a bank, have purchase or acquisition, be sold or disposed of at a
the authority to examine an enterprise which is public or private sale. (24a)
wholly or majority-owned or controlled by the bank.
(2-Ba) Section 11. Foreign Stockholdings. - Foreign
individuals and non-bank corporations may own or
CHAPTER III control up to forty percent (40%) of the voting stock
ORGANIZATION, MANAGEMENT AND of a domestic bank. This rule shall apply to Filipinos
ADMINISTRATION OF BANKS. QUASI- and domestic non-bank corporations. (12a; 12-Aa)
BANKS AND TRUST ENTITIES The percentage of foreign-owned voting stocks in a
bank shall be determined by the citizenship of the
Section 8. Organization. - The Monetary Board may individual stockholders in that bank. The citizenship
authorize the organization of a bank or quasi-bank of the corporation which is a stockholder in a bank
subject to the following conditions: shall follow the citizenship of the controlling
stockholders of the corporation, irrespective of the
8.1 That the entity is a stock corporation (7); place of incorporation. (n)

8.2 That its funds are obtained from the public, which Section 12. Stockholdings of Family Groups of
shall mean twenty (20) or more persons (2-Da); and Related Interests. - Stockholdings of individuals
related to each other within the fourth degree of
8.3 That the minimum capital requirements consanguinity or affinity, legitimate or common-law,
prescribed by the Monetary Board for each category shall be considered family groups or related interests
of banks are satisfied. (n) and must be fully disclosed in all transactions by such
corporations or related groups of persons with the members of the board of directors of a bank to the
bank. (12-Ba) extent of the foreign participation in the equity of
said bank. (Sec. 7, RA 7721) The meetings of the
Section 13. Corporate Stockholdings. - Two or more board of directors may be conducted through modern
corporations owned or controlled by the same family technologies such as, but not limited to,
group or same group of persons shall be considered teleconferencing and video-conferencing. (n)
related interests and must be fully disclosed in all
transactions by such corporations or related group of Section 16. Fit and Proper Rule. - To maintain the
persons with the bank. (12-Ba) quality of bank management and afford better
protection to depositors and the public in general the
Section 14. Certificate of Authority to Register. - The Monetary Board shall prescribe, pass upon and
Securities and Exchange Commission shall no review the qualifications and disqualifications of
register the articles of incorporation of any bank, or individuals elected or appointed bank directors or
any amendment thereto, unless accompanied by a officers and disqualify those found unfit. After due
certificate of authority issued by the Monetary Board, notice to the board of directors of the bank, the
under it seal. Such certificate shall not be issued Monetary Board may disqualify, suspend or remove
unless the Monetary Board is satisfied from the any bank director or officer who commits or omits an
evidence submitted to it: act which render him unfit for the position. In
determining whether an individual is fit and proper to
14.1 That all requirements of existing laws and hold the position of a director or officer of a bank,
regulations to engage in the business for which the regard shall be given to his integrity, experience,
applicant is proposed to be incorporated have been education, training, and competence. (9-Aa)
complied with;
Section 17. Directors of Merged or Consolidated
14.2 That the public interest and economic Banks. - In the case of a bank merger or
conditions, both general and local, justify the consolidation, the number of directors shall not
authorization; and exceed twenty-one (21). (l3a)

14.3 That the amount of capital, the financing, Section 18. Compensation and Other Benefits of
organization, direction and administration, as well as Directors and Officers. To protect the finds of
the integrity and responsibility of the organizers and depositors and creditors the Monetary Board may
administrators reasonably assure the safety of regulate the payment by the bark to its directors and
deposits and the public interest. (9) officers of compensation, allowance, fees, bonuses,
stock options, profit sharing and fringe benefits only
The Securities and Exchange Commission shall not in exceptional cases and when the circumstances
register the by-laws of any bank, or any amendment warrant, such as but not limited to the following:
thereto, unless accompanied by a certificate of
authority from the Bangko Sentral. (10) 18.1. When a bank is under comptrollership or
conservatorship; or
Section 15. Board of Directors. - The provisions of
the Corporation Code to the contrary 18.2. When a bank is found by the Monetary Board
notwithstanding, there shall be at least five (5), and a to be conducting business in an unsafe or unsound
maximum of fifteen (15) members of the board or manner; or
directors of a bank, two (2) of whom shall be
independent directors. An "independent director" 18.3. When a bank is found by the Monetary Board
shall mean a person other than an officer or employee to be in an unsatisfactory financial condition. (n)
of the bank, its subsidiaries or affiliates or related
interests. (n) Non-Filipino citizens may become
Section 19. Prohibition on Public Officials. - Except days shall be reported by the Bangko Sentral to the
as otherwise provided in the Rural Banks Act, no secretary of Labor who may assume jurisdiction over
appointive or elective public official whether full- the dispute or decide it or certify the sane to the
time or part-time shall at the same time serve as National Labor Relations Commission for
officer of any private bank, save in cases where such compulsory arbitration. However, the President of the
service is incident to financial assistance provided by Philippines may at any time intervene and assume
the government or a government owned or controlled jurisdiction over such labor dispute in order to settle
corporation to the bank or unless otherwise provided or terminate the same. (6-E)
under existing laws. (13)
CHAPTER IV
Section 20. Bank Branches. - Universal or DEPOSITS. LOANS AND OTHER
commercial banks may open branches or other OPERATIONS
offices within or outside the Philippines upon prior
approval of the Bangko Sentral. Branching by all Article I
other banks shall be governed by pertinent laws. Operations Of Universal Banks

A bank may, subject to prior approval of the Section 23. Powers of a Universal Bank - A
Monetary Board, use any or all of its branches as universal bank shall have the authority to exercise, in
outlets for the presentation and/or sale of the addition to the powers authorized for a commercial
financial products of its allied undertaking or of its bank in Section 29, the powers of an investment
investment house units. A bank authorized to house as provided in existing laws and the power to
establish branches or other offices shall be invest in non-allied enterprises as provided in this
responsible for all business conducted in such Act. (21-B)
branches and offices to the same extent and in the
same manner as though such business had all been Section 24. Equity Investments of a Universal Bank. -
conducted in the head office. A bank and its branches A universal bank may, subject to the conditions
and offices shall be treated as one unit. (6-B; 27) stated in the succeeding paragraph, invest in the
equities of allied and non-allied enterprises as may be
Section 21. Banking Days and Hours. - Unless determined by the Monetary Board. Allied
otherwise authorized by the Bangko Sentral in the enterprises may either be financial or non-financial.
interest of the banking public, all banks including Except as the Monetary Board may otherwise
their branches and offices shall transact business on prescribe:
all working days for at least six (6) hours a day. In
addition, banks or any of their branches or offices 24.1. The total investment in equities of allied and
may open for business on Saturdays, Sundays or non-allied enterprises shall not exceed fifty percent
holidays for at least three (3) hours a day: Provided, (50%) of the net worth of the bank; and
That banks which opt to open on days other than
working days shall report to the Bangko Sentral the 24.2. The equity investment in any one enterprise,
additional days during which they or their branches whether allied or non-allied, shall not exceed twenty-
or offices shall transact business. For purposes of this five percent (25%) of the net worth of the bank.
Section, working days shall mean Mondays to
Fridays, except if such days are holidays. (6-Ca) As used in this Act, "net worth" shall mean the total
of the unimpaired paid-in capital including paid-in
Section 22. Strikes and Lockouts. - The banking surplus, retained earnings and undivided profit, net of
industry is hereby declared as indispensable to the valuation reserves and other adjustments as may be
national interest and, notwithstanding the provisions required by the Bangko Sentral.
of any law to the contrary, any strike or lockout
involving banks, if unsettled after seven (7) calendar
The acquisition of such equity or equities is subject to Monetary Board may promulgate. These rules may
the prior approval of the Monetary Board which shall include the determination of bonds and other debt
promulgate appropriate guidelines to govern such securities eligible for investment, the maturities and
investments. (21-Ba) aggregate amount of such investment.

Section 25. Equity Investments of a Universal Bank Section 30. Equity Investments of a Commercial
in Financial Allied Enterprises. - A universal bank Bank. - A commercial bank may, subject to the
can own up to one hundred percent (100%) of the conditions stated in the succeeding paragraphs, invest
equity in a thrift bank, a rural bank or a financial only in the equities of allied enterprises as may be
allied enterprise. A publicly-listed universal or determined by the Monetary Board. Allied
commercial bank may own up to one hundred percent enterprises may either be financial or non-financial.
(100%) of the voting stock of only one other Except as the Monetary Board may otherwise
universal or commercial bank. (21-B; 21-Ca) prescribe:

Section 26. Equity Investments of a Universal Bank 30.1. The total investment in equities of allied
in Non-Financial Allied Enterprises. - A universal enterprises shall not exceed thirty-five percent (35%)
bank may own up to one hundred percent (100%) of of the net worth of the bark; and
the equity in a non-financial allied enterprise. (21-Ba)
30.2. The equity investment in any one enterprise
Section 27. Equity Investments of a Universal Bank shall not exceed twenty-five percent (25%) of tile net
in Non-Allied Enterprises. - The equity investment of worth of the bank. The acquisition of such equity or
a universal bank, or of its wholly or majority-owned equities is subject to the prior approval of the
subsidiaries, in a single non-allied enterprise shall not Monetary Board which shall promulgate appropriate
exceed thirty-five percent (35%) of the total equity in guidelines to govern such investment.(2lA-a; 21-Ca)
that enterprise nor shall it exceed thirty-five percent
(35%) of the voting stock in that enterprise. (21-B) Section 31. Equity Investments of a Commercial
Bank in Financial Allied Enterprises. - A commercial
Section 28. Equity Investments in Quasi-Banks. - To bank may own up to one hundred percent (100%) of
promote competitive conditions in financial markets, the equity of a thrift bank or a rural bank. Where the
the Monetary Board may further limit to forty percent equity investment of a commercial bank is in other
(40%) equity investments of universal banks in quasi- financial allied enterprises, including another
banks. This rule shall also apply in the case of commercial bank, such investment shall remain a
commercial banks. (12-E) Article II. Operations Of minority holding in that enterprise. (21-Aa; 21-Ca)
Commercial Banks
Section 32. Equity Investments of a Commercial
Section 29. Powers of a Commercial Bank. - A Bank in Non-Financial Allied Enterprises. A
commercial bank shall have, in addition to the commercial bank may own up to one hundred percent
general powers incident to corporations, all such (100%) of the equity in a non-financial allied
powers as may be necessary to carry on the business enterprise. (21-Aa) Article III. Provisions Applicable
of commercial banking such as accepting drafts and To All Banks, Quasi-Banks, And Trust Entities
issuing letters of credit; discounting and negotiating
promissory notes, drafts, bills of exchange, and other Section 33. Acceptance of Demand Deposits. - A
evidences of debt; accepting or creating demand bank other than a universal or commercial bank
deposits; receiving other types of deposits and cannot accept or create demand deposits except upon
deposit substitutes; buying and selling foreign prior approval of, and subject to such conditions and
exchange and gold or silver bullion; acquiring rules as may be prescribed by the Monetary Board.
marketable bonds and other debt securities; and (72-Aa)
extending credit, subject to such rules as the
Section 34. Risk-Based Capital. - The Monetary Section 35. Limit on Loans, Credit Accommodations
Board shall prescribe the minimum ratio which the and Guarantees
net worth of a bank must bear to its total risk assets
which may include contingent accounts. For purposes 35.1 Except as the Monetary Board may otherwise
of this Section, the Monetary Board may require such prescribe for reasons of national interest, the total
ratio be determined on the basis of the net worth and amount of loans, credit accommodations and
risk assets of a bank and its subsidiaries, financial or guarantees as may be defined by the Monetary Board
otherwise, as well as prescribe the composition and that may be extended by a bank to any person,
the manner of determining the net worth and total partnership, association, corporation or other entity
risk assets of banks and their subsidiaries: Provided, shall at no time exceed twenty percent (20%) of the
That in the exercise of this authority, the Monetary net worth of such bank. The basis for determining
Board shall, to the extent feasible conform to compliance with single borrower limit is the total
internationally accepted standards, including those of credit commitment of the bank to the borrower.
the Bank for International Settlements(BIS), relating
to risk-based capital requirements: Provided further, 35.2. Unless the Monetary Board prescribes
That it may alter or suspend compliance with such otherwise, the total amount of loans, credit
ratio whenever necessary for a maximum period of accommodations and guarantees prescribed in the
one (1) year: Provided, finally, That such ratio shall preceding paragraph may be increased by an
be applied uniformly to banks of the same category. additional ten percent (10%) of the net worth of such
In case a bank does not comply with the prescribed bank provided the additional liabilities of any
minimum ratio, the Monetary Board may limit or borrower are adequately secured by trust receipts,
prohibit the distribution of net profits by such bank shipping documents, warehouse receipts or other
and may require that part or all of the net profits be similar documents transferring or securing title
used to increase the capital accounts of the bank until covering readily marketable, non-perishable goods
the minimum requirement has been met The which must be fully covered by insurance.
Monetary Board may, furthermore, restrict or
prohibit the acquisition of major assets and the 35.3 The above prescribed ceilings shall include (a)
making of new investments by the bank, with the the direct liability of the maker or acceptor of paper
exception of purchases of readily marketable discounted with or sold to such bank and the liability
evidences of indebtedness of the Republic of the of a general endorser, drawer or guarantor who
Philippines and of the Bangko Sentral and any other obtains a loan or other credit accommodation from or
evidences of indebtedness or obligations the discounts paper with or sells papers to such bank; (b)
servicing and repayment of which are fully in the case of an individual who owns or controls a
guaranteed by the Republic of the Philippines, until majority interest in a corporation, partnership,
the minimum required capital ratio has been restored. association or any other entity, the liabilities of said
In case of a bank merger or consolidation, or when a entities to such bank; (c) in the case of a corporation,
bank is under rehabilitation under a program all liabilities to such bank of all subsidiaries in which
approved by the Bangko Sentral, Monetary Board such corporation owns or controls a majority interest;
may temporarily relieve the surviving bank, and (d) in the case of a partnership, association or
consolidated bank, or constituent bank or other entity, the liabilities of the members thereof to
corporations under rehabilitation from full such bank.
compliance with the required capital ratio under such
conditions as it may prescribe. Before the effectivity 35.4. Even if a parent corporation, partnership,
of rules which the Monetary Board is authorized to association, entity or an individual who owns or
prescribe under this provision, Section 22 of the controls a majority interest in such entities has no
General Banking Act, as amended, Section 9 of the liability to the bank, the Monetary Board may
Thrift Banks Act, and all pertinent rules issued prescribe the combination of the liabilities of
pursuant thereto, shall continue to be in force. (22a) subsidiary corporations or members of the
partnership, association, entity or such individual of the majority of all the directors of the bank,
under certain circumstances, including but not limited excluding the director concerned: Provided, That
to any of the following situations: (a) the parent such written approval shall not be required for loans,
corporation, partnership, association, entity or other credit accommodations and advances granted to
individual guarantees the repayment of the liabilities; officers under a fringe benefit plan approved by the
(b) the liabilities were incurred for the Bangko Sentral. The required approval shall be
accommodation of the parent corporation or another entered upon the records of the bank and a copy of
subsidiary or of the partnership or association or such entry shall be transmitted forthwith to the
entity or such individual; or (c) the subsidiaries appropriate supervising and examining department of
though separate entities operate merely as the Bangko Sentral. Dealings of a bank with any of
departments or divisions of a single entity. its directors, officers or stockholders and their related
interests shall be upon terms not less favorable to the
35.5. For purposes of this Section, loans, other credit bank than those offered to others. After due notice to
accommodations and guarantees shall exclude: (a) the board of directors of the bank, the office of any
loans and other credit accommodations secured by bank director or officer who violates the provisions
obligations of the Bangko Sentral or of the Philippine of this Section may be declared vacant and the
Government: (b) loans and other credit director or officer shall be subject to the penal
accommodations fully guaranteed by the government provisions of the New Central Bank Act. The
as to the payment of principal and interest; (c) loans Monetary Board may regulate the amount of loans,
and other credit accommodations covered by credit accommodations and guarantees that may be
assignment of deposits maintained in the lending extended, directly or indirectly, by a bank to its
bank and held in the Philippines; (d) loans, credit directors, officers, stockholders and their related
accommodations and acceptances under letters of interests, as well as investments of such bank in
credit to the extent covered by margin deposits; and enterprises owned or controlled by said directors,
(e) other loans or credit accommodations which the officers, stockholders and their related interests.
Monetary Board may from time to time, specify as However, the outstanding loans, credit
non-risk items. accommodations and guarantees which a bank may
extend to each of its stockholders, directors, or
35.6. Loans and other credit accommodations, officers and their related interests, shall be limited to
deposits maintained with, and usual guarantees by a an amount equivalent to their respective
bank to any other bank or non-bank entity, whether unencumbered deposits and book value of their paid-
locally or abroad, shall be subject to the limits as in capital contribution in the bank: Provided,
herein prescribed. however, That loans, credit accommodations and
guarantees secured by assets considered as non-risk
35.7. Certain types of contingent accounts of by the Monetary Board shall be excluded from such
borrowers may be included among those subject to limit: Provided, further, That loans, credit
these prescribed limits as may be determined by the accommodations and advances to officers in the form
Monetary Board.(23a) of fringe benefits granted in accordance with rules as
may be prescribed by the Monetary Board shall not
Section 36. Restriction on Bank Exposure to be subject to the individual limit. The Monetary
Directors, Officers, Stockholders and Their Related Board shall define the term "related interests." The
Interests. - No director or officer of any bank shall, limit on loans, credit accommodations and guarantees
directly or indirectly, for himself or as the prescribed herein shall not apply to loans, credit
representative or agent of others, borrow from such accommodations and guarantees extended by a
bank nor shall he become a guarantor, endorser or cooperative bank to its cooperative shareholders.
surety for loans from such bank to others, or in any (83a)
manner be an obligor or incur any contractual
liability to the bank except with the written approval
Section 37. Loans and Other Credit expenditures and such information as may be
Accommodations Against Real Estate. - Except as the prescribed by law or by rules and regulations of the
Monetary Board may otherwise prescribe, loans and Monetary Board to enable the bank to properly
other credit accommodations against real estate shall evaluate the credit application which includes the
not exceed seventy-five percent (75%) of the corresponding financial statements submitted for
appraised value of the respective real estate security, taxation purposes to the Bureau of Internal Revenue.
plus sixty percent (60%) of the appraised value of the Should such statements prove to be false or incorrect
insured improvements, and such loans may be made in any material detail, the bank may terminate any
to the owner of the real estate or to his assignees. loan or other credit accommodation granted on the
(78a) basis of said statements and shall have the right to
demand immediate repayment or liquidation of the
Section 38. Loans And Other Credit obligation. In formulating rules and regulations under
Accommodations on Security of Chattels and this Section, the Monetary Board shall recognize the
Intangible Properties. - Except as the Monetary peculiar characteristics of micro financing, such as
Board may otherwise prescribe, loans and other cash flow-based lending to the basic sectors that are
credit accommodations on security of chattels and not covered by traditional collateral. (76a)
intangible properties such as, but not limited to,
patents, trademarks, trade names, and copyrights Section 41. Unsecured Loans or Other Credit
shall not exceed seventy-five percent (75%) of the Accommodations. - The Monetary Board is hereby
appraised value of the security, an such loans and authorized to issue such regulations as it may deem
other credit accommodation may be made to the title- necessary with respect to unsecured loans or other
holder of the chattels and intangible properties or his credit accommodations that may be granted by banks.
assignees. (78a) (n)

Section 39. Grant and Purpose of Loans and Other Section 42. Other Security Requirements for Bank
Credit Accommodations. - A bank shall grant loans Credits. - The Monetary Board may, by regulation,
and other credit accommodations only in amounts prescribe further security requirements to which the
and for the periods of time essential for the effective various types of bank credits shall be subject, and, in
completion of the operations to be financed. Such accordance with the authority granted to it in Section
grant of loans and other credit accommodations shall 106 of the New Central Bank Act, the Board may by
be consistent with safe and sound banking practices. regulation, reduce the maximum ratios established in
(75a) The purpose of all loans and other credit Sections 36 and 37 of this Act, or, in special cases,
accommodations shall be stated in the application and increase the maximum ratios established therein. (78)
in the contract between the bank and the borrower. If
the bank finds that the proceeds of the loan or other Section 43. Authority to Prescribe Terms and
credit accommodation have been employed, without Conditions of Loans and Other Credit
its approval, for purposes other than those agreed Accommodations. - The Monetary Board, may,
upon with the bank, it shall have the right to similarly in accordance with the authority granted to
terminate the loan or other credit accommodation and it in Section 106 of the New Central Bank Act, and
demand immediate repayment of the obligation. (77) taking into account the requirements of the economy
for the effective utilization of long-term funds,
Section 40. Requirement for Grant Of Loans or 0ther prescribe the maturities, as well as related terms and
Credit Accommodations. - Before granting a loan or conditions for various types of bank loans and other
other credit accommodation, a bank must ascertain credit accommodations. Any change by the Board in
that the debtor is capable of fulfilling his the maximum maturities, as well as related terms and
commitments to the bank. Toward this end, a bank conditions for various types of bank loans and other
may demand from its credit applicants a statement of credit accommodations. Any change by the Board in
their assets and liabilities and of their income and the maximum maturities shall apply only to loans and
other credit accommodations made after the date of Section 47. Foreclosure of Real Estate Mortgage. -
such action. The Monetary Board shall regulate the In the event of foreclosure, whether judicially or
interest imposed on micro finance borrowers by extra-judicially, of any mortgage on real estate which
lending investors and similar lenders such as, but not is security for any loan or other credit
limited to, the unconscionable rates of interest accommodation granted, the mortgagor or debtor
collected on salary loans and similar credit whose real property has been sold for the full or
accommodations. (78a) partial payment of his obligation shall have the right
within one year after the sale of the real estate, to
Section 44. Amortization on Loans and Other Credit redeem the property by paying the amount due under
Accommodations. - The amortization schedule of the mortgage deed, with interest thereon at rate
bank loans and other credit accommodations shall be specified in the mortgage, and all the costs and
adapted to the nature of the operations to be financed. expenses incurred by the bank or institution from the
In case of loans and other credit accommodations sale and custody of said property less the income
with maturities of more than five (5) years, derived therefrom. However, the purchaser at the
provisions must be made for periodic amortization auction sale concerned whether in a judicial or extra-
payments, but such payments must be made at least judicial foreclosure shall have the right to enter upon
annually: Provided, however, That when the and take possession of such property immediately
borrowed funds are to be used for purposes which do after the date of the confirmation of the auction sale
not initially produce revenues adequate for regular and administer the same in accordance with law. Any
amortization payments therefrom, the bank may petition in court to enjoin or restrain the conduct of
permit the initial amortization payment to be deferred foreclosure proceedings instituted pursuant to this
until such time as said revenues are sufficient for provision shall be given due course only upon the
such purpose, but in no case shall the initial filing by the petitioner of a bond in an amount fixed
amortization date be later than five (5) years from the by the court conditioned that he will pay all the
date on which the loan or other credit damages which the bank may suffer by the enjoining
accommodation is granted. (79a) In case of loans and or the restraint of the foreclosure proceeding.
other credit accommodations to micro finance Notwithstanding Act 3135, juridical persons whose
sectors, the schedule of loan amortization shall take property is being sold pursuant to an extrajudicial
into consideration the projected cash flow of the foreclosure, shall have the right to redeem the
borrower and adopt this into the terms and conditions property in accordance with this provision until, but
formulated by banks. (n) not after, the registration of the certificate of
foreclosure sale with the applicable Register of Deeds
Section 45. Prepayment of Loans and Other Credit which in no case shall be more than three (3) months
Accommodations. - A borrower may at any time prior after foreclosure, whichever is earlier. Owners of
to the agreed maturity date prepay, in whole or in property that has been sold in a foreclosure sale prior
part, the unpaid balance of any bank loan and other to the effectivity of this Act shall retain their
credit accommodation, subject to such reasonable redemption rights until their expiration. (78a)
terms and conditions as may be agreed upon between
the bank and its borrower. (80a) Section 48. Renewal or Extension of Loans and
Other Credit Accommodations. - The Monetary
Section 46. Development Assistance Incentives. - The Board may, by regulation, prescribe the conditions
Bangko Sentral shall provide incentives to banks and limitations under which a bank may grant
which, without government guarantee, extend loans extensions or renewals of its loans and other credit
to finance educational institutions cooperatives, accommodations. (81)
hospitals and other medical services, socialized or
low-cost housing, local government units and other Section 49. Provisions for Losses and Write-Offs. -
activities with social content. (n) 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- Any real property acquired or held under the
secured and in the process of collection shall be circumstances enumerated in the above paragraph
considered bad debts within the meaning of this shall be disposed of by the bank within a period of
Section. The Monetary Board may fix, by regulation five (5) years or as may be prescribed by the
or by order in a specific case, the amount of reserves Monetary Board: Provided, however, That the bank
for bad debts or doubtful accounts or other may, after said period, continue to hold the property
contingencies. Writing off of loans, other credit for its own use, subject to the limitations of the
accommodations, advances and other assets shall be preceding Section. (25a)
subject to regulations issued by the Monetary Board.
(84a) Section 53. Other Banking Services. - In addition to
the operations specifically authorized in this Act, a
Section 50. Major Investments. - For the purpose or bank may perform the following services:
enhancing bank supervision, the Monetary Board
shall establish criteria for reviewing major 53.1. Receive in custody funds, documents and
acquisitions of investments by a bank including valuable objects;
corporate affiliations or structures that may expose
the bank to undue risks or in any way hinder effective 53.2. Act as financial agent and buy and sell, by order
supervision. of and for the account of their customers, shares,
evidences of indebtedness and all types of securities;
Section 51. Ceiling on Investments in Certain Assets.
- Any bank may acquire real estate as shall be 53.3. Make collections and payments for the account
necessary for its own use in the conduct of its of others and perform such other services for their
business: Provided, however, That the total customers as are not incompatible with banking
investment in such real estate and improvements business;
thereof including bank equipment, shall not exceed
fifty percent (50%) of combined capital accounts: 53.4 Upon prior approval of the Monetary Board, act
Provided, further, That the equity investment of a as managing agent, adviser, consultant or
bank in another corporation engaged primarily in real administrator of investment
estate shall be considered as part of the bank's total management/advisory/consultancy accounts; and
investment in real estate, unless otherwise provided
by the Monetary Board. (25a) 53.5. Rent out safety deposit boxes.

Section 52. Acquisition of Real Estate by Way of The bank shall perform the services permitted under
Satisfaction of Claims. - Notwithstanding the Subsections 53.1, 53.2,53.3 and 53.4 as depositary or
limitations of the preceding Section, a bank may as an agent. Accordingly, it shall keep the funds,
acquire, hold or convey real property under the securities and other effects which it receives duly
following circumstances: separate from the bank's own assets and liabilities:
The Monetary Board may regulate the operations
52.1. Such as shall be mortgaged to it in good faith authorized by this Section in order to ensure that such
by way of security for debts; operations do not endanger the interests of the
depositors and other creditors of the bank. In case a
52.2. Such as shall be conveyed to it in satisfaction of bank or quasi-bark notifies the Bangko Sentral or
debts previously contracted in the course of its publicly announces a bank holiday, or in any manner
dealings, or suspends the payment of its deposit liabilities
continuously for more than thirty (30) days, the
52.3. Such as it shall purchase at sales under Monetary Board may summarily and without need
judgments, decrees, mortgages, or trust deeds held by for prior hearing close such banking institution and
it and such as it shall purchase to secure debts due it.
place it under receivership of the Philippine Deposit increasing a loan or other credit
Insurance Corporation. (72a) accommodation or extending the period
thereof;
Section 54. Prohibition to Act as Insurer. - A bank
shall not directly engage in insurance business as the (c) Attempt to defraud the said bank in the
insurer. (73) event of a court action to recover a loan or
other credit accommodation; or
Section 55. Prohibited Transactions.
(d) Offer any director, officer, employee or
55.1. No director, officer, employee, or agent of any agent of a bank any gift, fee, commission, or
bank shall - any other form of compensation in order to
influence such persons into approving a loan
(a) Make false entries in any bank report or or other credit accommodation application.
statement or participate in any fraudulent
transaction, thereby affecting the financial 55.3 No examiner, officer or employee of the Bangko
interest of, or causing damage to, the bank Sentral or of any department, bureau, office, branch
or any person; or agency of the Government that is assigned to
supervise, examine, assist or render technical
(b) Without order of a court of competent assistance to any bank shall commit any of the acts
jurisdiction, disclose to any unauthorized enumerated in this Section or aid in the commission
person any information relative to the funds of the same. (87-Aa)
or properties in the custody of the bank
belonging to private individuals, The making of false reports or misrepresentation or
corporations, or any other entity: Provided, suppression of material facts by personnel of the
That with respect to bank deposits, the Bangko Sental ng Pilipinas shall be subject to the
provisions of existing laws shall prevail; administrative and criminal sanctions provided under
the New Central Bank Act.
(c) Accept gifts, fees, or commissions or any
other form of remuneration in connection 55.4. Consistent with the provisions of Republic Act
with the approval of a loan or other credit No. 1405, otherwise known as the Banks Secrecy
accommodation from said bank; Law, no bank shall employ casual or non regular
personnel or too lengthy probationary personnel in
(d) Overvalue or aid in overvaluing any the conduct of its business involving bank deposits.
security for the purpose of influencing in
any way the actions of the bank or any bank; Section 56. Conducting Business in an Unsafe or
or Unsound Manner - In determining whether a
particular act or omission, which is not otherwise
(e) Outsource inherent banking functions. prohibited by any law, rule or regulation affecting
banks, quasi-banks or trust entities, may be deemed
55.2. No borrower of a bank shall - as conducting business in an unsafe or unsound
manner for purposes of this Section, the Monetary
(a) Fraudulently overvalue property offered Board shall consider any of the following
as security for a loan or other credit circumstances:
accommodation from the bank;
56.1 The act or omission has resulted or may result in
(b) Furnish false or make misrepresentation material loss or damage, or abnormal risk or danger
or suppression of material facts for the to the safety, stability, liquidity or solvency of the
purpose of obtaining, renewing, or institution;
56.2 The act or omission has resulted or may result in Section 58. Independent Auditor. - The Monetary
material loss or damage or abnormal risk to the Board may require a bank, quasi-bank or trust entity
institution's depositors, creditors, investors, to engage the services of an independent auditor to be
stockholders or to the Bangko Sentral or to the public chosen by the bank, quasi-bank or trust entity
in general; concerned from a list of certified public accountants
acceptable to the Monetary Board. The term of the
56.3 The act or omission has caused any undue engagement shall be as prescribed by the Monetary
injury, or has given any unwarranted benefits, Board which may either be on a continuing basis
advantage or preference to the bank or any party in where the auditor shall act as resident examiner, or
the discharge by the director or officer of his duties on the basis of special engagements; but in any case,
and responsibilities through manifest partiality, the independent auditor shall be responsible to the
evident bad faith or gross inexcusable negligence; or bank's, quasi-bank's or trust entity's board of
directors. A copy of the report shall be furnished to
56.4 The act or omission involves entering into any the Monetary Board. The Monetary Board may also
contract or transaction manifestly and grossly direct the board of directors of a bank, quasi-bank,
disadvantageous to the bank, quasi-bank or trust trusty entity and/or the individual members thereof;
entity, whether or not the director or officer profited to conduct, either personally or by a committee
or will profit thereby. created by the board, an annual balance sheet audit of
the bank, quasi-bank or trust entity to review the
Whenever a bank, quasi-bank or trust entity persists internal audit and control system of the bank, quasi-
in conducting its business in an unsafe or unsound bank or trust entity and to submit a report of such
manner, the Monetary Board may, without prejudice audit. (6-Da)
to the administrative sanctions provided in Section 37
of the New Central Bank Act, take action under Section 59. Authority to Regulate Electronic
Section 30 of the same Act and/or immediately Transactions. - The Bangko Sentral shall have full
exclude the erring bank from clearing, the provisions authority to regulate the use of electronic devices,
of law to the contrary notwithstanding. (n) such as computers, and processes for recording,
storing and transmitting information or data in
Section 57. Prohibition on Dividend Declaration. - connection with the operations of a bank; quasi-bank
No bank or quasi-bank shall declare dividends, if at or trust entity, including the delivery of services and
the time of declaration: products to customers by such entity. (n)

57.1 Its clearing account with the Bangko Sentral is Section 60. Financial Statements. - Every bank,
overdrawn; or quasi-bank or trust entity shall submit to the
appropriate supervising and examining department of
57.2 It is deficient in the required liquidity floor for the Bangko Sentral financial statements in such form
government deposits for five (5) or more consecutive and frequency as may be prescribed by the Bangko
days, or Sentral. Such statements, which shall be as of a
specific date designated by the Bangko Sentral, shall
57.3 It does not comply with the liquidity show thee actual financial condition of the institution
standards/ratios prescribed by the Bangko Sentral for submitting the statement, and of its branches, offices,
purposes of determining funds available for dividend subsidiaries and affiliates, including the results of its
declaration; or operations, and shall contain such information as may
be required in Bangko Sentral regulations. (n)
57.4 It has committed a major violation as may be
determined by the Bangko Sentral (84a) 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 Section 63. Settlement of Disputes. - The provisions
understandable to the layman and in such frequency of any law to the contrary notwithstanding, the
as may be prescribed Bangko Sentral, in English or Bangko Sentral shall be consulted by other
Filipino, at least once every quarter in a newspaper of government agencies or instrumentalities in actions
general circulation in the city or province where the or proceedings initiated by or brought before them
principal office, in the case of a domestic institution involving controversies in banks, quasi-banks or trust
or the principal branch or office in the case of a entities arising out of and involving relations between
foreign bank, is located, but if no newspaper is and among their directors, officers or stockholders, as
published in the same province, then in a newspaper well as disputes between any or all of them and the
published in Metro Manila or in the nearest city or bank, quasi-bank or trust entity of which they are
province. The Bangko Sentral may by regulation directors, officers or stockholders. (n)
prescribe the newspaper where the statements
prescribed herein shall be published. The Monetary Section 64. Unauthorized Advertisement or Business
Board may allow the posting of the financial Representation. - No person, association, or
statements of a bank, quasi-bank or trust entity in corporation unless duly authorized to engage in the
public places it may determine, lieu of the publication business of a bank, quasi-bank, trust entity, or
required in the preceding paragraph, when warranted savings and loan association as defined in this Act, or
by the circumstances. Additionally, banks shall make other banking laws, shall advertise or hold itself out
available to the public in such form and manner as as being engaged in the business of such bank, quasi-
the Bangko Sentral may prescribe the complete set of bank, trust entity, or association, or use in connection
its audited financial statements as well as such other with its business title, the word or words "bank",
relevant information including those on enterprises "banking", "banker", "quasi-bank", "quasi-banking",
majority-owned or controlled by the bank, that will "quasi-banker", "savings and loan association", "trust
inform the public of the true financial condition of a corporation", "trust company" or words of similar
bank as of any given time. In periods of national import or transact in any manner the business of any
and/or local emergency or of imminent panic which such bank, corporation or association. (6)
directly threaten monetary and banking stability, the
Monetary Board, by a vote of at least five (5) of its Section 65. Service Fees. - The Bangko Sentral may
members, in special cases and upon application of the charge equitable rates, commissions or fees, as may
bank, quasi-bank or trust entity, may allow such be prescribed by the Monetary Board for supervision,
bank, quasi-bank or trust entity to defer for a stated examination and other services which it renders
period of time the publication of the statement of under this Act. (n)
financial condition required herein. (n)
Section 66. Penalty for Violation of this Act. - Unless
Section 62. Publication of Capital Stock. - A bank, otherwise herein provided, the violation of any of the
quasi-bank or trust entity incorporated under the laws provisions of this Act shall be subject to Sections 34,
of the Philippines shall not publish the amount of its 35, 36 and 37 of the New Central Bank Act. If the
authorized or subscribed capital stock without offender is a director or officer of a bank, quasi-bank
indicating at the same time and with equal or trust entity, the Monetary Board may also suspend
prominence, the amount of its capital actually paid or remove such director or officer. If the violation is
up. No branch of any foreign bank doing business in committed by a corporation, such corporation may be
the Philippines shall in any way announce the amount dissolved by quo warranto proceedings instituted by
of the capital and surplus of its head office, or of the the Solicitor General. (87)
bank in its entirety without indicating at the same
time and with equal prominence the amount of the CHAPTER V
capital, if any, definitely assigned to such branch, PLACEMENT UNDER CONSERVATORSHIP
such fact shall be stated in, and shall form part of the
publication. (82)
Section 67. Conservatorship. - The grounds and or causes to be transferred any securities or property
procedures for placing a bank under conservatorship, of said bank shall be subject to the penal provisions
as well as, the powers and duties of the conservator of the New Central Bank Act. (85a)
appointed for the bank shall be governed by the
provisions of Section 29 and the last two paragraphs CHAPTER VII
of Section 30 of the New Central Bank Act: LAWS GOVERNING OTHER TYPES OF
Provided, That this Section shall also apply to BANKS
conservatorship proceedings of quasi-banks. (n)
Section 71. Other Banking Laws. - The organization,
CHAPTER VI the ownership and capital requirements, powers,
CESSATION OF BANKING BUSINESS supervision and general conduct of business of thrift
banks, rural banks and cooperative banks shall be
Section 68. Voluntary Liquidation. - In case of governed by the provisions of the Thrift Banks Act,
voluntary liquidation of any bank organized under the the Rural Banks Act, and the Cooperative Code,
laws of the Philippines, or of any branch or office in respectively. The organization, ownership and capital
the Philippines of a foreign bank, written notice of requirements, powers, supervision and general
such liquidation shall be sent to the Monetary Board conduct of business of Islamic banks shall be
before such liquidation shall be sent to the Monetary governed by special laws. The provisions of this Act,
Board before such liquidation is undertaken, and the however, insofar as they are not in conflict with the
Monetary Board shall have the right to intervene and provisions of the Thrift Banks Act, the Rural Banks
take such steps as may be necessary to protect the Act, and the Cooperative Code shall likewise apply to
interests of creditors. (86) thrift banks, rural banks, and cooperative banks,
respectively. However, for purposes of prescribing
Section 69. Receivership and Involuntary the minimum ratio which the net worth of a thrift
Liquidation. - The grounds and procedures for bank must bear to its total risk assets, the provisions
placing a bank under receivership or liquidation, as of Section 33 of this Act shall govern. (n)
well as the powers and duties of the receiver or
liquidator appointed for the bank shall be governed CHAPTER VIII
by the provisions of Sections 30, 31, 32, and 33 of FOREIGN BANKS
the New Central Bank Act: Provided, That the
petitioner or plaintiff files with the clerk or judge of Section 72. Transacting Business in the Philippines. -
the court in which the action is pending a bond, The entry of foreign banks in the Philippines through
executed in favor of the Bangko Sentral, in an the establishment of branches shall be governed by
amount to be fixed by the court. This Section shall the provisions of the Foreign Banks Liberalization
also apply to the extent possible to the receivership Act. The conduct of offshore banking business in the
and liquidation proceedings of quasi-banks. (n) Philippines shall be governed by the provisions of the
Presidential Decree No. 1034, otherwise known as
Section 70. Penalty for Transactions After a Bank the "Offshore Banking System Decree." (14a)
Becomes Insolvent. - Any director or officer of any
bank declared insolvent or placed under receivership Section 73. Acquisition of Voting Stock in a
by the Monetary Board who refuses to turn over the Domestic Bank. - Within seven (7) years from the
bank's records and assets to the designated receivers, effectivity of this act and subject to guidelines issued
or who tampers with banks records, or who pursuant to the Foreign Banks Liberalization Act, the
appropriates for himself for another party or destroys Monetary Board may authorize a foreign bank to
or causes the misappropriation and destruction of the acquire up to one hundred percent (100%) of the
bank's assets, or who receives or permits or causes to voting stock of only one (1) bank organized under the
be received in said bank any deposit, collection of laws of the Republic of the Philippines. Within the
loans and/or receivables, or who pays out or permits same period, the Monetary Board may authorize any
foreign bank, which prior to the effectivity of this Act duty of the bank to name and designate promptly
availed itself of the privilege to acquire up to sixty another agent or head upon whom service of
percent (60%) of the voting stock of a bank under the summons and processes in legal proceedings against
Foreign Banks Liberalization Act and the Thrift the bank and of notices affecting the bank may be
Banks Act, to further acquire voting shares such bank made, and to file with the Securities and Exchange
to the extent necessary for it to own one hundred Commission a duly authenticated nomination of such
percent (100%) of the voting stock thereof. In the agent. In the absence of the agent or head or should
exercise of the authority, the Monetary Board shall there be no person authorized by the bank upon
adopt measures as may be necessary to ensure that at whom service of summons, processes and all legal
all times the control of seventy percent (70%) of the notices may be made, service of summons, processes
resources or assets of the entire banking system is and legal notices may be made upon the Bangko
held by banks which are at least majority-owned by Sentral Deputy Governor In-Charge of the
Filipinos. Any right, privilege or incentive granted to supervising and examining departments and such
a foreign bank under this Section shall be equally service shall be as effective as if made upon the bank
enjoyed by and extended under the same conditions or its duly authorized agent or head. In case of
to banks organized under the laws of the Republic of service for the bank upon the Bangko Sentral Deputy
the Philippines. (Secs. 2 and 3, RA 7721 Governor In-charge of the supervising and examining
departments, the said deputy Governor shill register
Section 74. Local Branches of Foreign Banks. - In and transmit by mail to the president or the secretary
the case of a foreign bank which has more than one of the bank at its head or principal office a copy, duly
(1) branch in the Philippines, all such branches shall certified by him, of the summons, process, or notice.
be treated as one (1) unit for the purpose of this Act, The sending of such copy of the summons, process,
and all references to the Philippine branches of or notice shall be a necessary part of the services and
foreign banks shall be held to refer to such units. (68) shall complete the service. The registry receipt of
mailing shall be prima facie evidence of the
Section 75. Head Office Guarantee. - In order to transmission of the summons, process or notice. All
provide effective protection of the interests of the costs necessarily incurred by the said Deputy
depositors and other creditors of Philippine branches Governor for the making and mailing and sending of
of a foreign bank, the head office of such branches a copy of the summons, process, or notice to the
shall fully guarantee the prompt payment of all president or the secretary of the bank at its head or
liabilities of its Philippine branch. (69) Residents and principal office shall be paid in advance by the party
citizens of the Philippines who are creditors of a at whose instance the service is made. (17)
branch in the Philippines of a foreign bank shall have
preferential rights to the assets of such branch in Section 77. Laws Applicable. - In all matters not
accordance with the existing laws. (19) specifically covered by special provisions applicable
only to a foreign bank or its branches and other
Section 76. Summons and Legal Process. - Summons offices in the Philippines any foreign bank licensed to
and legal process served upon the Philippine agent or do business in the Philippines shall be bound by the
head of any foreign bank designated to accept service provisions of this Act, all other laws, rules and
thereof shall give jurisdiction to the courts over such regulations applicable to banks organized under the
bank, and service of notices on such agent or head laws of the Philippines of the same class, except
shall be as binding upon the bank which he represents those that provide for the creation, formation,
as if made upon the bank itself. Should the authority organization or dissolution of corporations or for the
of such agent or head to accept service of summons fixing of the relations, liabilities, responsibilities, or
and legal processes for the bank or notice to it be duties of stockholders, members, directors or officers
revoked, or should such agent or head become of corporations to each other or to the corporation.
mentally incompetent or otherwise unable to accept (18)
service while exercising such authority, it shall be the
Section 78. Revocation of License of a Foreign Bank evasion of the responsibility herein imposed on a
- The Monetary Board may revoke the license to trust entity. (56)
transact business in the Philippines of, any foreign
bank, if it finds that the foreign bank is insolvent or Section 81. Registration of Articles of Incorporation
in imminent danger thereof or that its continuance in and By-Laws of a Trust Entity. - The Securities and
business will involve probable loss to those Exchange Commission shall not register the articles
transacting business with it. After the revocation of of incorporation and by-laws or any amendment
its license, it shall be unlawful for any such foreign thereto, of any trust entity, unless accompanied by a
banks to transact business in the Philippines unless its certificate of authority issued by the Bangko Sentral.
license is renewed or reissued. After the revocation of (n)
such license, the Bangko Sentral shall take the
necessary action to protect the creditors of such Section 82. Minimum Capitalization. - A trust entity,
foreign bank and the public. The provisions of the before it can engage in trust or other fiduciary
New Central Bank Act on sanctions and penalties business, shall comply with the minimum paid-in
shall likewise be applicable. (16) capital requirement which will be determined by the
Monetary Board. (n)
CHAPTER IX
TRUST OPERATIONS Section 83. Powers of a Trust Entity. - A trust entity,
in addition to the general powers incident to
Section 79. Authority to Engage in Trust Business. - corporations, shall have the power to:
Only a stock corporation or a person duly authorized
by the Monetary Board to engage in trust business 83.1 Act as trustee on any mortgage or bond issued
shall act as a trustee or administer any trust or hold by any municipality, corporation, or any body politic
property in trust or on deposit for the use, benefit, or and to accept and execute any trust consistent with
behoof of others. For purposes of this Act, such a law;
corporation shall be referred to as a trust entity. (56a;
57a) 83.2 Act under the order or appointment of any court
as guardian, receiver, trustee, or depositary of the
Section 80. Conduct of Trust Business. - A trust estate of any minor or other incompetent person, and
entity shall administer the funds or property under its as receiver and depositary of any moneys paid into
custody with the diligence that a prudent man would court by parties to any legal proceedings and of
exercise in the conduct of an enterprise of a like property of any kind which may be brought under the
character and with similar aims. No trust entity shall, jurisdiction of the court;
for the account of the trustor or the beneficiary of the
trust, purchase or acquire property from, or sell, 83.3. Act as the executor of any will when it is named
transfer, assign, or lend money or property to, or the executor thereof;
purchase debt instruments of, any of the departments,
directors, officers, stockholders, or employees of the 83.4 Act as administrator of the estate of any
trust entity, relatives within the first degree of deceased person, with the will annexed, or as
consanguinity or affinity, or the related interests, of administrator of the estate of any deceased person
such directors, officers and stockholders, unless the when there is no will;
transaction is specifically authorized by the trustor
and the relationship of the trustee and the other party 83.5. Accept and execute any trust for the holding,
involved in the transaction is fully disclosed to the management, and administration of any estate, real or
trustor of beneficiary of the trust prior to the personal, and the rents, issues and profits thereof; and
transaction. The Monetary Board shall promulgate
such rules and regulations as may be necessary to
prevent circumvention of this prohibition or the
83.6. Establish and manage common trust funds, guardian, trustee, receiver, depositary or any other
subject to such rules and regulations as may be person in interest, the court may, after notice and
prescribed by the Monetary Board. hearing, order that the subject matter of the trust or
any part, thereof be deposited with a trust entity.
Section 84. Deposit for the Faithful Performance of Upon presentation of proof to the court that the
Trust Duties. - Before transacting trust business, subject matter of the trust has been deposited with a
every trust entity shall deposit with the Bangko trust entity. Upon presentation of proof to the court
Sentral, as security for the faithful performance of its that the subject matter of the trust has been deposited
trust duties, cash or securities approved by the with a trust entity, the court may order that the bond
Monetary Board in an amount equal to or not less given by such persons for the faithful performance of
than Five hundred thousand pesos (P500,000.00) or their duties be reduced to such sums as it may deem
such higher amount as may fixed by the Monetary proper: Provided, however, That the reduced bond
Board: Provided, however, That the Monetary Board shall be sufficient to secure adequately the proper
shall require every trust entity to increase the amount administration and care of any property remaining
of its cash or securities on deposit with the Bangko under the control of such persons and the proper
Sentral in accordance with the provisions of this accounting for such property. Property deposited with
paragraph. Should the capital and surplus fall below any trust entity in conformity with this Section shall
said amount, the Monetary Board shall have the same be held by such entity under the orders and direction
authority as that granted to it under the provisions of of the court. (59)
the fifth paragraph of Section 34 of this Act. A trust
entity so long as it shall continue to be solvent and Section 86. Exemption of Trust Entity from Bond
comply with laws or regulations shall have the right Requirement. - No bond or other security shall be
to collect the interest earned on such securities required by the court from a trust entry for the
deposited with the Bangko Sentral and, from time to faithful performance of its duties as court-appointed
time, with the approval of the Bangko Sentral, to trustee, executor, administrator, guardian, receiver, or
exchange the securities for others. If the trust entity depositary. However, the court may, upon proper
fails to comply with any law or regulation, the application with it showing special cause therefore,
Bangko Sentral shall retain such interest on the require the trust entity to post a bond or other security
securities deposited with it for the benefit of rightful for the protection of funds or property confided to
claimants. Al claims rising out of the trust business of such entity. (59)
a trust entity shall have priority over all other claims
as regards the cash or securities deposited as above Section 87. Separation of Trust Business from
provided. The Monetary Board may not permit the General Business. - The trust business and all funds,
cash or securities deposited in accordance with the properties or securities received by any trust entity as
provisions of this Section to be reduced below the executor, administrator, guardian, trustee, receiver, or
prescribed minimum amount until the depositing depositary shall be kept separate and distinct from the
entity shall discontinue its trust business and shall general business including all other funds, properties,
satisfy the Monetary Board that it has complied with and assets of such trust entity. The accounts of all
all its obligations in connection with such business. such funds, properties, or securities shall likewise be
(65a) kept separate and distinct from the accounts of the
general business of the trust entity. (61)
Section 85. Bond of Certain Persons for the Faithful
Performance of Duties. - Before an executor, Section 88. Investment Limitations of a Trust Entity.
administrator, guardian, trustee, receiver or - Unless otherwise directed by the instrument
depositary appointed by the court enters upon the creating the trust, the lending and investment of funds
execution of his duties, he shall, upon order of the and other assets acquired by a trust entity as executor,
court, file a bond in such sum as the court may direct. administrator, guardian, trustee, receiver or
Upon the application of any executor, administrator, depositary of the estate of any minor or other
incompetent person shall be limited to loans or period of three (3) years from the effectivity of this
investments as may be prescribed by law, the Act, the Bangko Sentral shall phase out and transfer
Monetary Board or any court of competent its supervising and regulatory powers over building
jurisdiction. (63a) and loan associations to the Home Insurance and
Guaranty Corporation which shall assume the same.
Section 89. Real Estate Acquired by a Trust Entity. - Until otherwise provided bylaw1 building and loan
Unless otherwise specifically directed by the trustor associations shall continue to be governed by
or the nature of the trust, real estate acquired by a Sections 39 to 55, Chapter VI of the General Banking
trust entity in whatever manner and for whatever Act, as amended, including such rules and regulations
purposes, shall likewise be governed by the relevant issued pursuant thereto. Upon assumption by the
provisions of Section 52 of this Act. (64a) Home Insurance and Guaranty Corporation of
supervising and regulatory powers over building and
Section 90. Investment of Non-Trust Funds. - The loan associations, a references in Sections 39 to 55 of
investment of funds other than trust funds of a trust the General Banking Act, as amended, to the Bangko
entity which is a bank, financing company or an Sentral and the Monetary Board shall be deemed to
investment house shall be governed by the relevant refer to the Home Insurance and Guaranty
provisions of this Act and other applicable laws. (64) Corporation and its board of directors, respectively.
(n)
Section 91. Sanctions and Penalties. - A trust entity
or any of its officers and directors found to have Section 95. Repealing Clause. - Except as may be
willfully violated any pertinent provisions of this Act, provided for in Sections 34 and 94 of this Act, the
shall be subject to the sanctions and penalties General Banking Act, as amended, and the provisions
provided tinder Section 66 of this Act as well as of any other law, special charters, rule or regulation
Sections 36 and 37 of the New Central Bank Act. issued pursuant to said General Banking Act, as
amended, or parts thereof, which may be inconsistent
Section 92. Exemption of Trust Assets from Claims. - with the provisions of this Act are hereby repealed.
No assets held by a trust entity in its capacity as The provisions of paragraph 8, Section 8, Republic
trustee shall be subject to any claims other than those Act No. 3591, as amended by republic Act No. 7400,
of the parties interested in the specific trusts. (65) are likewise repealed. (90a)

Section 93. Establishment of Branches of a Trust Section 96. Separability Clause. - If any provision or
Entity. - The ordinary business of a trust entity shall section of this Act or the application thereof to any
be transacted at the place of business specified in its person or circumstance is held invalid, the other
articles of incorporation. Such trust entity may, with provisions or sections of this Act, and the application
prior approval of the Monetary Board, establish of such provision or section to other persons or
branches in the Philippines and the said entity shall circumstances shall not be affected thereby. (n)
be responsible for all business conducted in such
branches to the same extent and in the same manner Section 97. Effectivity Clause - This Act shall take
as though such business had all been conducted in the effect fifteen (15) days following its publication in
head office. For the purpose of this Act, the trust the Official Gazette or in two (2) national newspapers
entity and its branches shall be treated as one unit. of general circulation. (91)
(67)

CHAPTER X
FINAL PROVISIONS

Section 94. Phase Out of Bangko Sentral Powers REPUBLIC ACT No. 7653
Over Building and Loan Associations. - Within a
 THE NEW CENTRAL BANK ACT of finance companies and non-bank financial
institutions performing quasi-banking functions,
CHAPTER I — ESTABLISHMENT AND hereafter referred to as quasi-banks, and institutions
ORGANIZATION OF THE BANGKO performing similar functions.
SENTRAL NG PILIPINAS
            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
ARTICLE I promote and maintain monetary stability and the
CREATION, RESPONSIBILITIES AND convertibility of the peso.
CORPORATE POWERS OF THE BANGKO
SENTRAL             Section 4. Place of Business. - The Bangko
Sentral shall have its principal place of business in
            Section 1. Declaration of Policy. - The State Metro Manila, but may maintain branches, agencies
shall maintain a central monetary authority that shall and correspondents in such other places as the proper
function and operate as an independent and conduct of its business may require.
accountable body corporate in the discharge of its
mandated responsibilities concerning money, banking             Section 5. Corporate Powers. - The Bangko
and credit. In line with this policy, and considering its Sentral is hereby authorized to adopt, alter, and use a
unique functions and responsibilities, the central corporate seal which shall be judicially noticed; to
monetary authority established under this Act, while enter into contracts; to lease or own real and personal
being a government-owned corporation, shall enjoy property, and to sell or otherwise dispose of the
fiscal and administrative autonomy. same; to sue and be sued; and otherwise to do and
perform any and all things that may be necessary or
            Section 2. Creation of the Bangko Sentral. - proper to carry out the purposes of this Act.
There is hereby established an independent central
monetary authority, which shall be a body corporate             The Bangko Sentral may acquire and hold
known as the Bangko Sentral ng Pilipinas, hereafter such assets and incur such liabilities in connection
referred to as the Bangko Sentral. with its operations authorized by the provisions of
this Act, or as are essential to the proper conduct of
            The capital of the Bangko Sentral shall be such operations.
Fifty billion pesos (P50,000,000,000), to be fully
subscribed by the Government of the Republic,             The Bangko Sentral may compromise,
hereafter referred to as the Government, Ten billion condone or release, in whole or in part, any claim of
pesos (P10,000,000,000) of which shall be fully paid or settled liability to the Bangko Sentral, regardless
for by the Government upon the effectivity of this of the amount involved, under such terms and
Act and the balance to be paid for within a period of conditions as may be prescribed by the Monetary
two (2) years from the effectivity of this Act in such Board to protect the interests of the Bangko Sentral.
manner and form as the Government, through the
Secretary of Finance and the Secretary of Budget and ARTICLE II
Management, may thereafter determine. THE MONETARY BOARD

            Section 3. Responsibility and Primary             Section 6. Composition of the Monetary

Objective. - The Bangko Sentral shall provide policy Board. - The powers and functions of the Bangko
directions in the areas of money, banking, and credit. Sentral shall be exercised by the Bangko Sentral
It shall have supervision over the operations of banks Monetary Board, hereafter referred to as the
and exercise such regulatory powers as provided in Monetary Board, composed of seven (7) members
this Act and other pertinent laws over the operations
appointed by the President of the Philippines for a least be forty (40) years of age, of good moral
term of six (6) years. character, of unquestionable integrity, of known
probity and patriotism, and with recognized
            The seven (7) members are: competence in social and economic disciplines.

(a) the Governor of the Bangko Sentral, who             Section 9. Disqualifications. - In addition to
shall be the Chairman of the Monetary the disqualifications imposed by Republic Act No.
Board. The Governor of the Bangko Sentral 6713, a member of the Monetary Board is
shall be head of a department and his disqualified from being a director, officer, employee,
appointment shall be subject to confirmation consultant, lawyer, agent or stockholder of any bank,
by the Commission on Appointments. quasi-bank or any other institution which is subject to
Whenever the Governor is unable to attend a supervision or examination by the Bangko Sentral, in
meeting of the Board, he shall designate a which case such member shall resign from, and
Deputy Governor to act as his alternate: divest himself of any and all interests in such
Provided, That in such event, the Monetary institution before assumption of office as member of
Board shall designate one of its members as the Monetary Board.
acting Chairman;
            The members of the Monetary Board coming
(b) a member of the Cabinet to be from the private sector shall not hold any other public
designated by the President of the office or public employment during their tenure.
Philippines. Whenever the designated
Cabinet Member is unable to attend a             No person shall be a member of the Monetary
meeting of the Board, he shall designate an Board if he has been connected directly with any
Undersecretary in his Department to attend multilateral banking or financial institution or has a
as his alternate; and substantial interest in any private bank in the
Philippines, within one (1) year prior to his
(c) five (5) members who shall come from appointment; likewise, no member of the Monetary
the private sector, all of whom shall serve Board shall be employed in any such institution
full-time: Provided, however, That of the within two (2) years after the expiration of his term
members first appointed under the except when he serves as an official representative of
provisions of this subsection, three (3) shall the Philippine Government to such institution.
have a term of six (6) years, and the other
two (2), three (3) years.             Section 10. Removal. - The President may
remove any member of the Monetary Board for any
            No member of the Monetary Board may be of the following reasons:
reappointed more than once.
(a) If the member is subsequently
            Section 7. Vacancies. - Any vacancy in the disqualified under the provisions of Section
Monetary Board created by the death, resignation, or 8 of this Act; or
removal of any member shall be filled by the
appointment of a new member to complete the (b) If he is physically or mentally
unexpired period of the term of the member incapacitated that he cannot properly
concerned. discharge his duties and responsibilities and
such incapacity has lasted for more than six
            Section 8. Qualifications. - The members of (6) months; or
the Monetary Board must be natural-born citizens of
the Philippines, at least thirty-five (35) years of age, (c) If the member is guilty of acts or
with the exception of the Governor who should at operations which are of fraudulent or illegal
 character or which are manifestly opposed to The minutes shall reflect the disclosure made and the
the aims and interests of the Bangko Sentral; retirement of the member concerned from the
or meeting.

(d) If the member no longer possesses the             Section 15. Exercise of Authority. - In the
qualifications specified in Section 8 of this exercise of its authority, the Monetary Board shall:
Act.
(a) issue rules and regulations it considers
            Section 11. Meetings. - The Monetary Board necessary for the effective discharge of the
shall meet at least once a week. The Board may be responsibilities and exercise of the powers
called to a meeting by the Governor of the Bangko vested upon the Monetary Board and the
Sentral or by two (2) other members of the Board. Bangko Sentral. The rules and regulations
issued shall be reported to the President and
            The presence of four (4) members shall the Congress within fifteen (15) days from
constitute a quorum: Provided, That in all cases the the date of their issuance;
Governor or his duly designated alternate shall be
among the four (4). (b) direct the management, operations, and
administration of the Bangko Sentral,
            Unless otherwise provided in this Act, all reorganize its personnel, and issue such
decisions of the Monetary Board shall require the rules and regulations as it may deem
concurrence of at least four (4) members. necessary or convenient for this purpose.
The legal units of the Bangko Sentral shall
            The Bangko Sentral shall maintain and be under the exclusive supervision and
preserve a complete record of the proceedings and control of the Monetary Board;
deliberations of the Monetary Board, including the
tapes and transcripts of the stenographic notes, either (c) establish a human resource management
in their original form or in microfilm. system which shall govern the selection,
hiring, appointment, transfer, promotion, or
            Section 12. Attendance of the Deputy dismissal of all personnel. Such system shall
Governors. - The Deputy Governors may attend the aim to establish professionalism and
meetings of the Monetary Board with the right to be excellence at all levels of the Bangko
heard. Sentral in accordance with sound principles
of management.
            Section 13. Salary. - The salary of the
Governor and the members of the Monetary Board             A compensation structure, based on job
from the private sector shall be fixed by the President evaluation studies and wage surveys and subject to
of the Philippines at a sum commensurate to the the Board's approval, shall be instituted as an integral
importance and responsibility attached to the component of the Bangko Sentral's human resource
position. development program: Provided, That the Monetary
Board shall make its own system conform as closely
            Section 14. Withdrawal of Persons Having a as possible with the principles provided for under
Personal Interest. - In addition to the requirements of Republic Act No. 6758: Provided, however, That
Republic Act No. 6713, any member of the Monetary compensation and wage structure of employees
Board with personal or pecuniary interest in any whose positions fall under salary grade 19 and below
matter in the agenda of the Monetary Board shall shall be in accordance with the rates prescribed under
disclose his interest to the Board and shall retire from Republic Act No. 6758.
the meeting when the matter is taken up. The
decision taken on the matter shall be made public.
            On the recommendation of the Governor,             Section 16. Responsibility. - Members of the
appoint, fix the remunerations and other emoluments, Monetary Board, officials, examiners, and employees
and remove personnel of the Bangko Sentral, subject of the Bangko Sentral who willfully violate this Act
to pertinent civil service laws: Provided, That the or who are guilty of negligence, abuses or acts of
Monetary Board shall have exclusive and final malfeasance or misfeasance or fail to exercise
authority to promote, transfer, assign, or reassign extraordinary diligence in the performance of his
personnel of the Bangko Sentral and these personnel duties shall be held liable for any loss or injury
actions are deemed made in the interest of the service suffered by the Bangko Sentral or other banking
and not disciplinary: Provided, further, That the institutions as a result of such violation, negligence,
Monetary Board may delegate such authority to the abuse, malfeasance, misfeasance or failure to
Governor under such guidelines as it may determine. exercise extraordinary diligence.

(d) adopt an annual budget for and authorize             Similar responsibility shall apply to members,
such expenditures by the Bangko Sentral as officers, and employees of the Bangko Sentral for:
are in the interest of the effective (1) the disclosure of any information of a confidential
administration and operations of the Bangko nature, or any information on the discussions or
Sentral in accordance with applicable laws resolutions of the Monetary Board, or about the
and regulations; and confidential operations of the Bangko Sentral, unless
the disclosure is in connection with the performance
(e) indemnify its members and other of official functions with the Bangko Sentral, or is
officials of the Bangko Sentral, including with prior authorization of the Monetary Board or the
personnel of the departments performing Governor; or (2) the use of such information for
supervision and examination functions personal gain or to the detriment of the Government,
against all costs and expenses reasonably the Bangko Sentral or third parties: Provided,
incurred by such persons in connection with however, That any data or information required to be
any civil or criminal action, suit or submitted to the President and/or the Congress, or to
proceedings to which he may be, or is, made be published under the provisions of this Act shall
a party by reason of the performance of his not be considered confidential.
functions or duties, unless he is finally
adjudged in such action or proceeding to be ARTICLE III
liable for negligence or misconduct. THE GOVERNOR AND DEPUTY
GOVERNORS OF THE BANGKO SENTRAL
            In the event of a settlement or compromise,
indemnification shall be provided only in connection             Section 17. Powers and Duties of the
with such matters covered by the settlement as to Governor. - The Governor shall be the chief
which the Bangko Sentral is advised by external executive officer of the Bangko Sentral. His powers
counsel that the person to be indemnified did not and duties shall be to:
commit any negligence or misconduct.
(a) prepare the agenda for the meetings of
            The costs and expenses incurred in defending the Monetary Board and to submit for the
the aforementioned action, suit or proceeding may be consideration of the Board the policies and
paid by the Bangko Sentral in advance of the final measures which he believes to be necessary
disposition of such action, suit or proceeding upon to carry out the purposes and provisions of
receipt of an undertaking by or on behalf of the this Act;
member, officer, or employee to repay the amount
advanced should it ultimately be determined by the (b) execute and administer the policies and
Monetary Board that he is not entitled to be measures approved by the Monetary Board;
indemnified as provided in this subsection.
 (c) direct and supervise the operations and Government and all other persons or
internal administration of the Bangko entities, public or private, whether domestic,
Sentral. The Governor may delegate certain foreign or international;
of his administrative responsibilities to other
officers or may assign specific tasks or (b) sign contracts entered into by the
responsibilities to any full-time member of Bangko Sentral, notes and securities issued
the Monetary Board without additional by the Bangko Sentral, all reports, balance
remuneration or allowance whenever he sheets, profit and loss statements,
may deem fit or subject to such rules and correspondence and other documents of the
regulations as the Monetary Board may Bangko Sentral.
prescribe;
            The signature of the Governor may
(d) appoint and fix the remunerations and be in facsimile whenever appropriate;
other emoluments of personnel below the
rank of a department head in accordance (c) represent the Bangko Sentral, either
with the position and compensation plans personally or through counsel, including
approved by the Monetary Board, as well as private counsel, as may be authorized by the
to impose disciplinary measures upon Monetary Board, in any legal proceedings,
personnel of the Bangko Sentral, subject to action or specialized legal studies; and
the provisions of Section 15(c) of this Act:
Provided, That removal of personnel shall (d) delegate his power to represent the
be with the approval of the Monetary Board; Bangko Sentral, as provided in subsections
(a), (b) and (c) of this section, to other
(e) render opinions, decisions, or rulings, officers upon his own responsibility:
which shall be final and executory until Provided, however, That in order to preserve
reversed or modified by the Monetary the integrity and the prestige of his office,
Board, on matters regarding application or the Governor of the Bangko Sentral may
enforcement of laws pertaining to choose not to participate in preliminary
institutions supervised by the Bangko discussions with any multilateral banking or
Sentral and laws pertaining to quasi-banks, financial institution on any negotiations for
as well as regulations, policies or the Government within or outside the
instructions issued by the Monetary Board, Philippines. During the negotiations, he may
and the implementation thereof; and instead be represented by a permanent
negotiator.
(f) exercise such other powers as may be
vested in him by the Monetary Board.             Section 19. Authority of the Governor in
Emergencies. - In case of emergencies where time is
            Section 18. Representation of the Monetary sufficient to call a meeting of the Monetary Board,
Board and the Bangko Sentral. - The Governor of the the Governor of the Bangko Sentral, with the
Bangko Sentral shall be the principal representative concurrence of two (2) other members of the
of the Monetary Board and of the Bangko Sentral Monetary Board, may decide any matter or take any
and, in such capacity and in accordance with the action within the authority of the Board.
instructions of the Monetary Board, he shall be
empowered to:             The Governor shall submit a report to the
President and Congress within seventy-two (72)
(a) represent the Monetary Board and the hours after the action has been taken.
Bangko Sentral in all dealings with other
offices, agencies and instrumentalities of the
            At the soonest possible time, the Governor Philippines, statistics on the monthly movement of
shall call a meeting of the Monetary Board to submit the monetary aggregates and of prices and other
his action for ratification. statistical series and economic studies useful for the
formulation and analysis of monetary, banking, credit
            Section 20. Outside Interests of the Governor and exchange policies.
and the Full-time Members of the Board. - The
Governor of the Bangko Sentral and the full-time             Section 23. Authority to Obtain Data and
members of the Board shall limit their professional Information. - The Bangko Sentral shall have the
activities to those pertaining directly to their positions authority to request from government offices and
with the Bangko Sentral. Accordingly, they may not instrumentalities, or government-owned or controlled
accept any other employment, whether public or corporations, any data which it may require for the
private, remunerated or ad honorem, with the proper discharge of its functions and responsibilities.
exception of positions in eleemosynary, civic, The Bangko Sentral through the Governor or in his
cultural or religious organizations or whenever, by absence, a duly authorized representative shall have
designation of the President, the Governor or the full- the power to issue a subpoena for the production of
time member is tasked to represent the interest of the the books and records for the aforesaid purpose.
Government or other government agencies in matters Those who refuse the subpoena without justifiable
connected with or affecting the economy or the cause, or who refuse to supply the bank with data
financial system of the country. requested or required, shall be subject to punishment
for contempt in accordance with the provisions of the
            Section 21. Deputy Governors. - The Rules of Court.
Governor of the Bangko Sentral, with the approval of
the Monetary Board, shall appoint not more than             Data on individual firms, other than banks,
three (3) Deputy Governors who shall perform duties gathered by the Department of Economic Research
as may be assigned to them by the Governor and the and other departments or units of the Bangko Sentral
Board. shall not be made available to any person or entity
outside of the Bangko Sentral whether public or
            In the absence of the Governor, a Deputy private except under order of the court or under such
Governor designated by the Governor shall act as conditions as may be prescribed by the Monetary
chief executive of the Bangko Sentral and shall Board: Provided, however, That the collective data
exercise the powers and perform the duties of the on firms may be released to interested persons or
Governor. Whenever the Government is unable to entities: Provided, finally, That in the case of data on
attend meetings of government boards or councils in banks, the provisions of Section 27 of this Act shall
which he is an ex officio member pursuant to apply.
provisions of special laws, a Deputy Governor as
may be designated by the Governor shall be vested             Section 24. Training of Technical Personnel.
with authority to participate and exercise the right to - The Bangko Sentral shall promote and sponsor the
vote in such meetings. training of technical personnel in the field of money
and banking. Toward this end, the Bangko Sentral is
ARTICLE IV hereby authorized to defray the costs of study, at
OPERATIONS OF THE BANGKO SENTRAL home or abroad, of qualified employees of the
Bangko Sentral, of promising university graduates or
            Section 22. Research and Statistics. - The of any other qualified persons who shall be
Bangko Sentral shall prepare data and conduct determined by proper competitive examinations. The
economic research for the guidance of the Monetary Monetary Board shall prescribe rules and regulations
Board in the formulation and implementation of its to govern the training program of the Bangko Sentral.
policies. Such data shall include, among others,
forecasts of the balance of payments of the
            Section 25. Supervision and Examination. - of the restraining order or injunction contemplated in
The Bangko Sentral shall have supervision over, and this section.
conduct periodic or special examinations of, banking
institutions and quasi-banks, including their             Section 26. Bank Deposits and Investments. -
subsidiaries and affiliates engaged in allied activities. Any director, officer or stockholder who, together
with his related interest, contracts a loan or any form
            For purposes of this section, a subsidiary of financial accommodation from: (1) his bank; or (2)
means a corporation more than fifty percent (50%) of from a bank (a) which is a subsidiary of a bank
the voting stock of which is owned by a bank or holding company of which both his bank and the
quasi-bank and an affiliate means a corporation the lending bank are subsidiaries or (b) in which a
voting stock of which, to the extent of fifty percent controlling proportion of the shares is owned by the
(50%) or less, is owned by a bank or quasi-bank or same interest that owns a controlling proportion of
which is related or linked to such institution or the shares of his bank, in excess of five percent (5%)
intermediary through common stockholders or such of the capital and surplus of the bank, or in the
other factors as may be determined by the Monetary maximum amount permitted by law, whichever is
Board. lower, shall be required by the lending bank to waive
the secrecy of his deposits of whatever nature in all
            The department heads and the examiners of banks in the Philippines. Any information obtained
the supervising and/or examining departments are from an examination of his deposits shall be held
hereby authorized to administer oaths to any director, strictly confidential and may be used by the
officer, or employee of any institution under their examiners only in connection with their supervisory
respective supervision or subject to their examination and examination responsibility or by the Bangko
and to compel the presentation of all books, Sentral in an appropriate legal action it has initiated
documents, papers or records necessary in their involving the deposit account.
judgment to ascertain the facts relative to the true
condition of any institution as well as the books and             Section 27. Prohibitions. - In addition to the
records of persons and entities relative to or in prohibitions found in Republic Act Nos. 3019 and
connection with the operations, activities or 6713, personnel of the Bangko Sentral are hereby
transactions of the institution under examination, prohibited from:
subject to the provision of existing laws protecting or
safeguarding the secrecy or confidentiality of bank (a) being an officer, director, lawyer or
deposits as well as investments of private persons, agent, employee, consultant or stockholder,
natural or juridical, in debt instruments issued by the directly or indirectly, of any institution
Government. subject to supervision or examination by the
Bangko Sentral, except non-stock savings
            No restraining order or injunction shall be and loan associations and provident funds
issued by the court enjoining the Bangko Sentral organized exclusively for employees of the
from examining any institution subject to supervision Bangko Sentral, and except as otherwise
or examination by the Bangko Sentral, unless there is provided in this Act;
convincing proof that the action of the Bangko
Sentral is plainly arbitrary and made in bad faith and (b) directly or indirectly requesting or
the petitioner or plaintiff files with the clerk or judge receiving any gift, present or pecuniary or
of the court in which the action is pending a bond material benefit for himself or another, from
executed in favor of the Bangko Sentral, in an any institution subject to supervision or
amount to be fixed by the court. The provisions of examination by the Bangko Sentral;
Rule 58 of the New Rules of Court insofar as they are
applicable and not inconsistent with the provisions of (c) revealing in any manner, except under
this section shall govern the issuance and dissolution orders of the court, the Congress or any
 government office or agency authorized by             Banking and quasi-banking institutions which
law, or under such conditions as may be are subject to examination by the Bangko Sentral
prescribed by the Monetary Board, shall pay to the Bangko Sentral, within the first thirty
information relating to the condition or (30) days of each year, an annual fee in an amount
business of any institution. This prohibition equal to a percentage as may be prescribed by the
shall not be held to apply to the giving of Monetary Board of its average total assets during the
information to the Monetary Board or the preceding year as shown on its end-of-month balance
Governor of the Bangko Sentral, or to any sheets, after deducting cash on hand and amounts due
person authorized by either of them, in from banks, including the Bangko Sentral and banks
writing, to receive such information; and abroad.

(d) borrowing from any institution subject to             Section 29. Appointment of Conservator. -
supervision or examination by the Bangko Whenever, on the basis of a report submitted by the
Sentral shall be prohibited unless said appropriate supervising or examining department, the
borrowings are adequately secured, fully Monetary Board finds that a bank or a quasi-bank is
disclosed to the Monetary Board, and shall in a state of continuing inability or unwillingness to
be subject to such further rules and maintain a condition of liquidity deemed adequate to
regulations as the Monetary Board may protect the interest of depositors and creditors, the
prescribe: Provided, however, That Monetary Board may appoint a conservator with such
personnel of the supervising and examining powers as the Monetary Board shall deem necessary
departments are prohibited from borrowing to take charge of the assets, liabilities, and the
from a bank under their supervision or management thereof, reorganize the management,
examination. collect all monies and debts due said institution, and
exercise all powers necessary to restore its viability.
            Section 28. Examination and Fees. - The The conservator shall report and be responsible to the
supervising and examining department head, Monetary Board and shall have the power to overrule
personally or by deputy, shall examine the books of or revoke the actions of the previous management
every banking institution once in every twelve (12) and board of directors of the bank or quasi-bank.
months, and at such other times as the Monetary
Board by an affirmative vote of five (5) members,             The conservator should be competent and
may deem expedient and to make a report on the knowledgeable in bank operations and management.
same to the Monetary Board: Provided, That there The conservatorship shall not exceed one (1) year.
shall be an interval of at least twelve (12) months
between annual examinations.             The conservator shall receive remuneration to
be fixed by the Monetary Board in an amount not to
            The bank concerned shall afford to the head exceed two-thirds (2/3) of the salary of the president
of the appropriate supervising and examining of the institution in one (1) year, payable in twelve
departments and to his authorized deputies full (12) equal monthly payments: Provided, That, if at
opportunity to examine its books, cash and available any time within one-year period, the conservatorship
assets and general condition at any time during is terminated on the ground that the institution can
banking hours when requested to do so by the operate on its own, the conservator shall receive the
Bangko Sentral: Provided, however, That none of the balance of the remuneration which he would have
reports and other papers relative to such examinations received up to the end of the year; but if the
shall be open to inspection by the public except conservatorship is terminated on other grounds, the
insofar as such publicity is incidental to the conservator shall not be entitled to such remaining
proceedings hereinafter authorized or is necessary for balance. The Monetary Board may appoint a
the prosecution of violations in connection with the conservator connected with the Bangko Sentral, in
business of such institutions. which case he shall not be entitled to receive any
remuneration or emolument from the Bangko Sentral             For a quasi-bank, any person of recognized
during the conservatorship. The expenses attendant to competence in banking or finance may be designed
the conservatorship shall be borne by the bank or as receiver.
quasi-bank concerned.
            The receiver shall immediately gather and
            The Monetary Board shall terminate the take charge of all the assets and liabilities of the
conservatorship when it is satisfied that the institution institution, administer the same for the benefit of its
can continue to operate on its own and the creditors, and exercise the general powers of a
conservatorship is no longer necessary. The receiver under the Revised Rules of Court but shall
conservatorship shall likewise be terminated should not, with the exception of administrative
the Monetary Board, on the basis of the report of the expenditures, pay or commit any act that will involve
conservator or of its own findings, determine that the the transfer or disposition of any asset of the
continuance in business of the institution would institution: Provided, That the receiver may deposit
involve probable loss to its depositors or creditors, in or place the funds of the institution in non-
which case the provisions of Section 30 shall apply. speculative investments. The receiver shall determine
as soon as possible, but not later than ninety (90)
            Section 30. Proceedings in Receivership and days from take over, whether the institution may be
Liquidation. - Whenever, upon report of the head of rehabilitated or otherwise placed in such a condition
the supervising or examining department, the so that it may be permitted to resume business with
Monetary Board finds that a bank or quasi-bank: safety to its depositors and creditors and the general
public: Provided, That any determination for the
(a) is unable to pay its liabilities as they resumption of business of the institution shall be
become due in the ordinary course of subject to prior approval of the Monetary Board.
business: Provided, That this shall not
include inability to pay caused by             If the receiver determines that the institution
extraordinary demands induced by financial cannot be rehabilitated or permitted to resume
panic in the banking community; business in accordance with the next preceding
paragraph, the Monetary Board shall notify in writing
(b) has insufficient realizable assets, as the board of directors of its findings and direct the
determined by the Bangko Sentral, to meet receiver to proceed with the liquidation of the
its liabilities; or institution. The receiver shall:

(c) cannot continue in business without (1) file ex parte with the proper regional trial
involving probable losses to its depositors or court, and without requirement of prior
creditors; or notice or any other action, a petition for
assistance in the liquidation of the institution
(d) has willfully violated a cease and desist pursuant to a liquidation plan adopted by the
order under Section 37 that has become Philippine Deposit Insurance Corporation
final, involving acts or transactions which for general application to all closed banks.
amount to fraud or a dissipation of the assets In case of quasi-banks, the liquidation plan
of the institution; in which cases, the shall be adopted by the Monetary Board.
Monetary Board may summarily and Upon acquiring jurisdiction, the court shall,
without need for prior hearing forbid the upon motion by the receiver after due notice,
institution from doing business in the adjudicate disputed claims against the
Philippines and designate the Philippine institution, assist the enforcement of
Deposit Insurance Corporation as receiver of individual liabilities of the stockholders,
the banking institution. directors and officers, and decide on other
issues as may be material to implement the
 liquidation plan adopted. The receiver shall expenses and fees of the receiver to be allowed by the
pay the cost of the proceedings from the court, the receiver shall pay the debts of such
assets of the institution. institution, under order of the court, in accordance
with the rules on concurrence and preference of
(2) convert the assets of the institutions to credit as provided in the Civil Code.
money, dispose of the same to creditors and
other parties, for the purpose of paying the             Section 32. Disposition of Revenues and
debts of such institution in accordance with Earnings. - All revenues and earnings realized by the
the rules on concurrence and preference of receiver in winding up the affairs and administering
credit under the Civil Code of the the assets of any bank or quasi-bank within the
Philippines and he may, in the name of the purview of this Act shall be used to pay the costs,
institution, and with the assistance of fees and expenses mentioned in the preceding
counsel as he may retain, institute such section, salaries of such personnel whose
actions as may be necessary to collect and employment is rendered necessary in the discharge of
recover accounts and assets of, or defend the liquidation together with other additional
any action against, the institution. The assets expenses caused thereby. The balance of revenues
of an institution under receivership or and earnings, after the payment of all said expenses,
liquidation shall be deemed in custodia legis shall form part of the assets available for payment to
in the hands of the receiver and shall, from creditors.
the moment the institution was placed under
such receivership or liquidation, be exempt             Section 33. Disposition of Banking
from any order of garnishment, levy, Franchise. - The Bangko Sentral may, if public
attachment, or execution. interest so requires, award to an institution, upon
such terms and conditions as the Monetary Board
            The actions of the Monetary Board taken may approve, the banking franchise of a bank under
under this section or under Section 29 of this Act liquidation to operate in the area where said bank or
shall be final and executory, and may not be its branches were previously operating: Provided,
restrained or set aside by the court except on petition That whatever proceeds may be realized from such
for certiorari on the ground that the action taken was award shall be subject to the appropriate exclusive
in excess of jurisdiction or with such grave abuse of disposition of the Monetary Board.
discretion as to amount to lack or excess of
jurisdiction. The petition for certiorari may only be             Section 34. Refusal to Make Reports or
filed by the stockholders of record representing the Permit Examination. - Any officer, owner, agent,
majority of the capital stock within ten (10) days manager, director or officer-in-charge of any
from receipt by the board of directors of the institution subject to the supervision or examination
institution of the order directing receivership, by the Bangko Sentral within the purview of this Act
liquidation or conservatorship. who, being required in writing by the Monetary
Board or by the head of the supervising and
            The designation of a conservator under examining department willfully refuses to file the
Section 29 of this Act or the appointment of a required report or permit any lawful examination into
receiver under this section shall be vested exclusively the affairs of such institution shall be punished by a
with the Monetary Board. Furthermore, the fine of not less than Fifty thousand pesos (P50,000)
designation of a conservator is not a precondition to nor more than One hundred thousand pesos
the designation of a receiver. (P100,000) or by imprisonment of not less than one
(1) year nor more than five (5) years, or both, in the
            Section 31. Distribution of Assets. - In case of discretion of the court.
liquidation of a bank or quasi-bank, after payment of
the cost of proceedings, including reasonable
            Section 35. False Statement. - The willful instruction or regulation issued by the Monetary
making of a false or misleading statement on a Board, or any order, instruction or ruling by the
material fact to the Monetary Board or to the Governor; or any commission of irregularities, and/or
examiners of the Bangko Sentral shall be punished by conducting business in an unsafe or unsound manner
a fine of not less than One hundred thousand pesos as may be determined by the Monetary Board, the
(P100,000) nor more than Two hundred thousand following administrative sanctions, whenever
pesos (P200,000), or by imprisonment of not more applicable:
than (5) years, or both, at the discretion of the court.
(a) fines in amounts as may be determined
            Section 36. Proceedings Upon Violation of by the Monetary Board to be appropriate,
This Act and Other Banking Laws, Rules, but in no case to exceed Thirty thousand
Regulations, Orders or Instructions. - Whenever a pesos (P30,000) a day for each violation,
bank or quasi-bank, or whenever any person or entity taking into consideration the attendant
willfully violates this Act or other pertinent banking circumstances, such as the nature and
laws being enforced or implemented by the Bangko gravity of the violation or irregularity and
Sentral or any order, instruction, rule or regulation the size of the bank or quasi-bank;
issued by the Monetary Board, the person or persons
responsible for such violation shall unless otherwise (b) suspension of rediscounting privileges or
provided in this Act be punished by a fine of not less access to Bangko Sentral credit facilities;
than Fifty thousand pesos (P50,000) nor more than
Two hundred thousand pesos (P200,000) or by (c) suspension of lending or foreign
imprisonment of not less than two (2) years nor more exchange operations or authority to accept
than ten (10) years, or both, at the discretion of the new deposits or make new investments;
court.
(d) suspension of interbank clearing
            Whenever a bank or quasi-bank persists in privileges; and/or
carrying on its business in an unlawful or unsafe
manner, the Board may, without prejudice to the (e) revocation of quasi-banking license.
penalties provided in the preceding paragraph of this
section and the administrative sanctions provided in             Resignation or termination from office shall
Section 37 of this Act, take action under Section 30 not exempt such director or officer from
of this Act. administrative or criminal sanctions.

            Section 37. Administrative Sanctions on             The Monetary Board may, whenever

Banks and Quasi-banks. - Without prejudice to the warranted by circumstances, preventively suspend
criminal sanctions against the culpable persons any director or officer of a bank or quasi-bank
provided in Sections 34, 35, and 36 of this Act, the pending an investigation: Provided, That should the
Monetary Board may, at its discretion, impose upon case be not finally decided by the Bangko Sentral
any bank or quasi-bank, their directors and/or within a period of one hundred twenty (120) days
officers, for any willful violation of its charter or by- after the date of suspension, said director or officer
laws, willful delay in the submission of reports or shall be reinstated in his position: Provided, further,
publications thereof as required by law, rules and That when the delay in the disposition of the case is
regulations; any refusal to permit examination into due to the fault, negligence or petition of the director
the affairs of the institution; any willful making of a or officer, the period of delay shall not be counted in
false or misleading statement to the Board or the computing the period of suspension herein provided.
appropriate supervising and examining department or
its examiners; any willful failure or refusal to comply             The above administrative sanctions need not
with, or violation of, any banking law or any order, be applied in the order of their severity.
            Whether or not there is an administrative ARTICLE V
proceeding, if the institution and/or the directors REPORTS AND PUBLICATIONS
and/or officers concerned continue with or otherwise
persist in the commission of the indicated practice or             Section 39. Reports and Publications. - The
violation, the Monetary Board may issue an order Bangko Sentral shall publish a general balance sheet
requiring the institution and/or the directors and/or showing the volume and composition of its assets and
officers concerned to cease and desist from the liabilities as of the last working day of the month
indicated practice or violation, and may further order within sixty (60) days after the end of each month
that immediate action be taken to correct the except for the month of December, which shall be
conditions resulting from such practice or violation. submitted within ninety (90) days after the end
The cease and desist order shall be immediately hereof.
effective upon service on the respondents.
            The Monetary Board shall publish and submit
            The respondents shall be afforded an the following reports to the President and to the
opportunity to defend their action in a hearing before Congress:
the Monetary Board or any committee chaired by any
Monetary Board member created for the purpose, (a) not later than ninety (90) days after the
upon request made by the respondents within five (5) end of each quarter, an analysis of economic
days from their receipt of the order. If no such and financial developments, including the
hearing is requested within said period, the order condition of net international reserves and
shall be final. If a hearing is conducted, all issues monetary aggregates;
shall be determined on the basis of records, after
which the Monetary Board may either reconsider or (b) within ninety (90) days after the end of
make final its order. the year, the preceding year's budget and
profit and loss statement of the Bangko
            The Governor is hereby authorized, at his Sentral showing in reasonable detail the
discretion, to impose upon banking institutions, for result of its operations;
any failure to comply with the requirements of law,
Monetary Board regulations and policies, and/or (c) one hundred twenty (120) days after the
instructions issued by the Monetary Board or by the end of each semester, a review of the state of
Governor, fines not in excess of Ten thousand pesos the financial system; and
(P10,000) a day for each violation, the imposition of
which shall be final and executory until reversed, (d) as soon as practicable, abnormal
modified or lifted by the Monetary Board on appeal. movements in monetary aggregates and the
general price level, and, not later than
            Section 38. Operating Departments of the seventy-two (72) hours after they are taken,
Bangko Sentral. - The Monetary Board shall, in remedial measures in response to such
accordance with its authority under this Act, abnormal movements.
determine and provide for such operating
departments and other offices, including a public             Section 40. Annual Report. - Before the end
information office, of the Bangko Sentral as it deems of March of each year, the Bangko Sentral shall
convenient for the proper and efficient conduct of the publish and submit to the President and the Congress
operations and the accomplishment of the objectives an annual report on the condition of the Bangko
of the Bangko Sentral. The functions and duties of Sentral including a review of the policies and
such operating departments and other offices shall be measures adopted by the Monetary Board during the
determined by the Monetary Board. 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             Section 41. Signatures on Statements. - The
statement of the financial condition of the Bangko balance sheets and other financial statements of the
Sentral and a statistical appendix which shall present, Bangko Sentral shall be signed by the officers
as a minimum, the following data: responsible for their preparation, by the Governor,
and by the auditor of the Bangko Sentral.
(a) the monthly movement of monetary
aggregates and their components; ARTICLE VI
PROFITS, LOSSES, AND SPECIAL
(b) the monthly movement of purchases and ACCOUNTS
sales of foreign exchange and of the
international reserves of the Bangko Sentral;             Section 42. Fiscal Year. - The fiscal year of
the Bangko Sentral shall begin on January first and
(c) the balance of payments of the end on December thirty-first of each year.
Philippines;
            Section 43. Computation of Profits and
(d) monthly indices of consumer prices and Losses. - Within the first thirty (30) days following
of import and export prices; the end of each year, the Bangko Sentral shall
determine its net profits or losses. In the calculation
(e) the monthly movement, in summary of net profits, the Bangko Sentral shall make
form, of exports and imports, by volume and adequate allowance or establish adequate reserves for
value; bad and doubtful accounts.

(f) the monthly movement of the accounts of             Section 44. Distribution of Net Profits. -
the Bangko Sentral and of other banks; Within the first sixty (60) days following the end of
each fiscal year, the Monetary Board shall determine
(g) the principal data on government receipts and carry out the distribution of the net profits, in
and expenditures and on the status of the accordance with the following rule:
public debt, both domestic and foreign; and
            Fifty percent (50%) of the net profits shall be
(h) the texts of the major legal and carried to surplus and the remaining fifty percent
administrative measures adopted by the (50%) shall revert back to the National Treasury,
Government and the Monetary Board during except as otherwise provided in the transitory
the year which relate to the functions or provisions of this Act.
operations of the Bangko Sentral or of the
financial system.             Section 45. Revaluation Profits and Losses. -
Profits or losses arising from any revaluation of the
            The Bangko Sentral shall publish another Bangko Sentral's net assets or liabilities in gold or
version of the annual report in terms understandable foreign currencies with respect to the Philippine peso
to the layman. shall not be included in the computation of the annual
profits and losses of the Bangko Sentral. Any profits
            Failure to comply with the reportorial or losses arising in this manner shall be offset by any
requirements pursuant to this article without amounts which, as a consequence of such
justifiable reason as may be determined by the revaluations, are owed by the Philippines to any
Monetary Board shall cause the withholding of the international or regional intergovernmental financial
salary of the personnel concerned until the institution of which the Philippines is a member or
requirements are complied with. 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 relative of any member of the Monetary Board or the
shall appear either among the liabilities or among the Chairman of the Commission within the sixth degree
assets of the Bangko Sentral, depending on whether of consanguinity or affinity shall be appointed such
the revaluations have produced net profits or net representative.
losses.
CHAPTER II — THE BANGKO SENTRAL
            The Revaluation of International Reserve AND THE MEANS OF PAYMENT
account shall be neither credited nor debited for any
purposes other than those specifically authorized in ARTICLE I
this section. THE UNIT OF MONETARY VALUE

            Section 46. Suspense Accounts. - Sections 43             Section 48. The Peso. - The unit of monetary
and 43-A of Republic Act No. 265, as amended, value in the Philippines is the "peso," which is
creating the Monetary Adjustment Account (MAA) represented by the sign "P."
and the Exchange Stabilization Adjustment Account
(ESAA), respectively, are hereby repealed. Amounts             The peso is divided into one hundred (100)
outstanding as of the effective date of this Act based equal parts called "centavos," which are represented
on these accounts shall continue to be for the account by the sign "c."
of the Central Bank and shall be governed by the
transitory provisions of this Act. ARTICLE II
ISSUE OF MEANS OF PAYMENT
            The Revaluation of International Reserve
(RIR) account as of the effective date of this Act of             A. CURRENCY
the Central Bank shall continue to be for the account
of the same entity and shall be governed by the             Section 49. Definition of Currency. - The
provisions of Section 44 of Republic Act No. 265, as word "currency" is hereby defined, for purposes of
amended, until otherwise provided for in accordance this Act, as meaning all Philippine notes and coins
with the transitory provisions of this Act. issued or circulating in accordance with the
provisions of this Act.
ARTICLE VII
THE AUDITOR             Section 50. Exclusive Issue Power. - The
Bangko Sentral shall have the sole power and
            Section 47. Appointment and Personnel. - authority to issue currency, within the territory of the
The Chairman of the Commission on Audit shall act Philippines. No other person or entity, public or
as the ex officio auditor of the Bangko Sentral and, as private, may put into circulation notes, coins or any
such, he is empowered and authorized to appoint a other object or document which, in the opinion of the
representative who shall be the auditor of the Bangko Monetary Board, might circulate as currency, nor
Sentral and, in accordance with law, fix his salary, reproduce or imitate the facsimiles of Bangko Sentral
and to appoint and fix salaries and number of notes without prior authority from the Bangko
personnel to assist said representative in his work. Sentral.
The salaries and other emoluments shall be paid by
the Commission. The auditor of the Bangko Sentral             The Monetary Board may issue such
and personnel under him may be removed only by the regulations as it may deem advisable in order to
Chairman of the Commission. prevent the circulation of foreign currency or of
currency substitutes as well as to prevent the
            The representative of the Chairman of the reproduction of facsimiles of Bangko Sentral notes.
Commission must be a certified public accountant
with at least ten (10) years experience as such. No
            The Bangko Sentral shall have the authority Philippines and of the Governor of the Bangko
to investigate, make arrests, conduct searches and Sentral.
seizures in accordance with law, for the purpose of
maintaining the integrity of the currency.             Similarly, the Monetary Board, with the
approval of the President of the Philippines, shall
            Violation of this provision or any regulation prescribe the weight, fineness, designs,
issued by the Bangko Sentral pursuant thereto shall denominations and other characteristics of the coins
constitute an offense punishable by imprisonment of issued by the Bangko Sentral. In the minting of coins,
not less than five (5) years but not more than ten (10) the Monetary Board shall give full consideration to
years. In case the Revised Penal Code provides for a the availability of suitable metals and to their relative
greater penalty, then that penalty shall be imposed. prices and cost of minting.

            Section 51. Liability for Notes and Coins. -             Section 54. Printing of Notes and Mining of
Notes and coins issued by the Bangko Sentral shall Coins. - The Monetary Board shall prescribe the
be liabilities of the Bangko Sentral and may be issued amounts of notes and coins to be printed and minted,
only against, and in amounts not exceeding, the respectively, and the conditions to which the printing
assets of the Bangko Sentral. Said notes and coins of notes and the minting of coins shall be subject.
shall be a first and paramount lien on all assets of the The Monetary Board shall have the authority to
Bangko Sentral. contract institutions, mints or firms for such
operations.
            The Bangko Sentral's holdings of its own
notes and coins shall not be considered as part of its             All expenses incurred in the printing of notes
currency issue and, accordingly, shall not form part and the minting of coins shall be for the account of
of the assets or liabilities of the Bangko Sentral. the Bangko Sentral.

            Section 52. Legal Tender Power. - All notes             Section 55. Interconvertibility of Currency. -
and coins issued by the Bangko Sentral shall be fully The Bangko Sentral shall exchange, on demand and
guaranteed by the Government of the Republic of the without charge, Philippine currency of any
Philippines and shall be legal tender in the denomination for Philippine notes and coins of any
Philippines for all debts, both public and private: other denomination requested. If for any reason the
Provided, however, That, unless otherwise fixed by Bangko Sentral is temporarily unable to provide
the Monetary Board, coins shall be legal tender in notes or coins of the denominations requested, it shall
amounts not exceeding Fifty pesos (P50.00) for meet its obligations by delivering notes and coins of
denominations of Twenty-five centavos and above, the denominations which most nearly approximate
and in amounts not exceeding Twenty pesos (P20.00) those requested.
for denominations of Ten centavos or less.
            Section 56. Replacement of Currency Unfit
            Section 53. Characteristics of the Currency. - for Circulation. - The Bangko Sentral shall withdraw
The Monetary Board, with the approval of the from circulation and shall demonetize all notes and
President of the Philippines, shall prescribe the coins which for any reason whatsoever are unfit for
denominations, dimensions, designs, inscriptions and circulation and shall replace them by adequate notes
other characteristics of notes issued by the Bangko and coins: Provided, however, That the Bangko
Sentral: Provided, however, That said notes shall Sentral shall not replace notes and coins the
state that they are liabilities of the Bangko Sentral identification of which is impossible, coins which
and are fully guaranteed by the Government of the show signs of filing, clipping or perforation, and
Republic of the Philippines. Said notes shall bear the notes which have lost more than two-fifths (2/5) of
signatures, in facsimile, of the President of the their surface or all of the signatures inscribed thereon.
Notes and coins in such mutilated conditions shall be
withdrawn from circulation and demonetized without creditor shall be equivalent to a delivery to the
compensation to the bearer. creditor of cash in an amount equal to the amount
credited to his account.
            Section 57. Retirement of Old Notes and
Coins. - The Bangko Sentral may call in for CHAPTER III — GUIDING PRINCIPLES OF
replacement notes of any series or denomination MONETARY ADMINISTRATION BY THE
which are more than five (5) years old and coins BANGKO SENTRAL
which are more than (10) years old.
ARTICLE I
            Notes and coins called in for replacement in DOMESTIC MONETARY STABILIZATION
accordance with this provision shall remain legal
tender for a period of one (1) year from the date of             Section 61. Guiding Principle. - The
call. After this period, they shall cease to be legal Monetary Board shall endeavor to control any
tender but during the following year, or for such expansion or contraction in monetary aggregates
longer period as the Monetary Board may determine, which is prejudicial to the attainment or maintenance
they may be exchanged at par and without charge in of price stability.
the Bangko Sentral and by agents duly authorized by
the Bangko Sentral for this purpose. After the             Section 62. Power to Define Terms. - For
expiration of this latter period, the notes and coins purposes of this article and of this Act, the Monetary
which have not been exchanged shall cease to be a Board shall formulate definitions of monetary
liability of the Bangko Sentral and shall be aggregates, credit and prices and shall make public
demonetized. The Bangko Sentral shall also such definitions and any changes thereof.
demonetize all notes and coins which have been
called in and replaced.             Section 63. Action When Abnormal
Movements Occur in the Monetary Aggregates,
            B. DEMAND DEPOSITS Credit, or Price Level. - Whenever abnormal
movements in the monetary aggregates, in credit, or
            Section 58. Definition. - For purposes of this in prices endanger the stability of the Philippine
Act, the term "demand deposits" means all those economy or important sectors thereof, the Monetary
liabilities of the Bangko Sentral and of other banks Board shall:
which are denominated in Philippine currency and
are subject to payment in legal tender upon demand (a) take such remedial measures as are
by the presentation of checks. appropriate and within the powers granted to
the Monetary Board and the Bangko Sentral
            Section 59. Issue of Demand Deposits. - Only under the provisions of this Act; and
banks duly authorized to do so may accept funds or
create liabilities payable in pesos upon demand by (b) submit to the President of the Philippines
the presentation of checks, and such operations shall and the Congress, and make public, a
be subject to the control of the Monetary Board in detailed report which shall include, as a
accordance with the powers granted it with respect minimum, a description and analysis of:
thereto under this Act.
(1) the causes of the rise or fall of
            Section 60. Legal Character. - Checks the monetary aggregates, of credit
representing demand deposits do not have legal or of prices;
tender power and their acceptance in the payment of
debts, both public and private, is at the option of the (2) the extent to which the changes
creditor: Provided, however, That a check which has in the monetary aggregates, in
been cleared and credited to the account of the credit, or in prices have been
 reflected in changes in the level of convertibility of the Philippine peso, the Bangko
domestic output, employment, Sentral shall maintain international reserves adequate
wages and economic activity in to meet any foreseeable net demands on the Bangko
general, and the nature and Sentral for foreign currencies.
significance of any such changes;
and             In judging the adequacy of the international
reserves, the Monetary Board shall be guided by the
(3) the measures which the prospective receipts and payments of foreign
Monetary Board has taken and the exchange by the Philippines. The Board shall give
other monetary, fiscal or special attention to the volume and maturity of the
administrative measures which it Bangko Sentral's own liabilities in foreign currencies,
recommends to be adopted. to the volume and maturity of the foreign exchange
assets and liabilities of other banks operating in the
            Whenever the monetary aggregates, or the Philippines and, insofar as they are known or can be
level of credit, increases or decreases by more than estimated, the volume and maturity of the foreign
fifteen percent (15%), or the cost of living index exchange assets and liabilities of all other persons
increases by more than ten percent (10%), in relation and entities in the Philippines.
to the level existing at the end of the corresponding
month of the preceding year, or even though any of             Section 66. Composition of the International
these quantitative guidelines have not been reached Reserves. - The international reserves of the Bangko
when in its judgment the circumstances so warrant, Sentral may include but shall not be limited to the
the Monetary Board shall submit the reports following assets:
mentioned in this section, and shall state therein
whether, in the opinion of the Board, said changes in (a) gold; and
the monetary aggregates, credit or cost of living
represent a threat to the stability of the Philippine (b) assets in foreign currencies in the form
economy or of important sectors thereof. of: documents and instruments customarily
employed for the international transfer of
            The Monetary Board shall continue to submit funds; demand and time deposits in central
periodic reports to the President of the Philippines banks, treasuries and commercial banks
and to Congress until it considers that the monetary, abroad; foreign government securities; and
credit or price disturbances have disappeared or have foreign notes and coins.
been adequately controlled.
            The Monetary Board shall endeavor to hold
ARTICLE II the foreign exchange resources of the Bangko Sentral
INTERNATIONAL MONETARY in freely convertible currencies; moreover, the Board
STABILIZATION shall give particular consideration to the prospects of
continued strength and convertibility of the
            Section 64. International Monetary currencies in which the reserve is maintained, as well
Stabilization. - The Bangko Sentral shall exercise its as to the anticipated demands for such currencies.
powers under this Act to preserve the international The Monetary Board shall issue regulations
value of the peso and to maintain its convertibility determining the other qualifications which foreign
into other freely convertible currencies primarily for, exchange assets must meet in order to be included in
although not necessarily limited to, current payments the international reserves of the Bangko Sentral.
for foreign trade and invisibles.
            The Bangko Sentral shall be free to convert
            Section 65. International Reserves. - In order any of the assets in its international reserves into
to maintain the international stability and
other assets as described in subsections (a) and (b) of of a balanced and sustainable growth of the economy,
this section. the Monetary Board shall propose to the President,
with appropriate notice of the Congress, such
            Section 67. Action When the International additional action as it deems necessary to restore
Stability of the Peso Is Threatened. - Whenever the equilibrium in the international balance of payments
international reserve of the Bangko Sentral falls to a of the Philippines.
level which the Monetary Board considers inadequate
to meet prospective net demands on the Bangko             The Monetary Board shall submit periodic
Sentral for foreign currencies, or whenever the reports to the President and to Congress until the
international reserve appears to be in imminent threat to the international monetary stability of the
danger of falling to such a level, or whenever the Philippines has disappeared.
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 CHAPTER IV — INSTRUMENTS OF BANGKO
under the provisions of this Act; and SENTRAL ACTION

(b) submit to the President of the Philippines ARTICLE I

and to Congress a detailed report which GENERAL CRITERION
shall include, as a minimum, a description
and analysis of:             Section 68. Means of Action. - In order to
achieve the primary objective of price stability, the
(1) the nature and causes of the Monetary Board shall rely on its moral influence and
existing or imminent decline; the powers granted to it under this Act for the
management of monetary aggregates.
(2) the remedial measures already
taken or to be taken by the ARTICLE II
Monetary Board; OPERATIONS IN GOLD AND FOREIGN
EXCHANGE
(3) the monetary, fiscal or
administrative measures further             Section 69. Purchases and Sales of Gold. -
proposed; and The Bangko Sentral may buy and sell gold in any
form, subject to such regulations as the Monetary
(4) the character and extent of the Board may issue.
cooperation required from other
government agencies for the             The purchases and sales of gold authorized by
successful execution of the policies this section shall be made in the national currency at
of the Monetary Board. the prevailing international market price as
determined by the Monetary Board.
            If the resultant actions fail to check the
deterioration of the reserve position of the Bangko             Section 70. Purchases and Sales of Foreign
Sentral, or if the deterioration cannot be checked Exchange. - The Bangko Sentral may buy and sell
except by chronic restrictions on exchange and trade foreign notes and coins, and documents and
transactions or by sacrifice of the domestic objectives instruments of types customarily employed for the
international transfer of funds. The Bangko Sentral foreign exchange assets of the bank, the Bangko
may engage in future exchange operations. Sentral shall, within sixty (60) days from the date the
limit is exceeded, submit a report to the Congress
            The Bangko Sentral may engage in foreign stating the origin of these liabilities, and the manner
exchange transactions with the following entities or in which they will be paid.
persons only:
            Section 72. Emergency Restrictions on
(a) banking institutions operating in the Exchange Operations. - In order to achieve the
Philippines; primary objective of the Bangko Sentral as set forth
in Section 3 of this Act, or protect the international
(b) the Government, its political reserves of the Bangko Sentral in the imminence of,
subdivisions and instrumentalities; or during an exchange crisis, or in time of national
emergency and to give the Monetary Board and the
(c) foreign or international financial Government time in which to take constructive
institutions; measures to forestall, combat, or overcome such a
crisis or emergency, the Monetary Board, with the
(d) foreign governments and their concurrence of at least five (5) of its members and
instrumentalities; and with the approval of the President of the Philippines,
may temporarily suspend or restrict sales of exchange
(e) other entities or persons which the by the Bangko Sentral, and may subject all
Monetary Board is hereby empowered to transactions in gold and foreign exchange to license
authorize as foreign exchange dealers, by the Bangko Sentral, and may require that any
subject to such rules and regulations as the foreign exchange thereafter obtained by any person
Monetary Board shall prescribe. residing or entity operating in the Philippines be
delivered to the Bangko Sentral or to any bank or
            In order to maintain the convertibility of the agent designated by the Bangko Sentral for the
peso, the Bangko Sentral may, at the request of any purpose, at the effective exchange rate or rates:
banking institution operating in the Philippines, buy Provided, however, That foreign currency deposits
any quantity of foreign exchange offered, and sell made under Republic Act No. 6426 shall be exempt
any quantity of foreign exchange demanded, by such from these requirements.
institution, provided that the foreign currencies so
offered or demanded are freely convertible into gold             Section 73. Acquisition of Inconvertible
or United States dollars. This requirement shall not Currencies. - The Bangko Sentral shall avoid the
apply to demands for foreign notes and coins. acquisition and holding of currencies which are not
freely convertible, and may acquire such currencies
            The Bangko Sentral shall effect its exchange in an amount exceeding the minimum balance
transactions between foreign currencies and the necessary to cover current demands for said
Philippine peso at the rates determined in accordance currencies only when, and to the extent that, such
with the provisions of Section 74 of this Act. 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
            Section 71. Foreign Asset Position of the
acquisition and disposition by the Bangko Sentral of
Bangko Sentral. - The Bangko Sentral shall endeavor
foreign exchange which is not freely utilizable in the
to maintain at all times a net positive foreign asset
international market.
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             Section 74. Exchange Rates. - The Monetary
foreign exchange liabilities of the Bangko Sentral Board shall determine the exchange rate policy of the
exceed twice the equivalent amount in pesos of the country.
            The Monetary Board shall determine the rates Monetary Board. The transfers shall be made at the
at which the Bangko Sentral shall buy and sell spot rates established under the provisions of Section 74
exchange, and shall establish deviation limits from of this Act.
the effective exchange rate or rates as it may deem
proper. The Bangko Sentral shall not collect any             The Monetary Board may, whenever
additional commissions or charges of any sort, other warranted, determine the net assets and net liabilities
than actual telegraphic or cable costs incurred by it. of banks and shall, in making such a determination,
take into account the bank's networth, outstanding
            The Monetary Board shall similarly determine liabilities, actual and contingent, or such other
the rates for other types of foreign exchange financial or performance ratios as may be appropriate
transactions by the Bangko Sentral, including under the circumstances. Any such determination of
purchases and sales of foreign notes and coins, but net assets and net liabilities shall be applied in all
the margins between the effective exchange rates and banks uniformly and without discrimination.
the rates thus established may not exceed the
corresponding margins for spot exchange transactions             Section 77. Requirement of Balanced
by more than the additional costs or expenses Currency Position. - The Monetary Board may
involved in each type of transactions. require the banks to maintain a balanced position
between their assets and liabilities in Philippine pesos
            Section 75. Operations with Foreign Entities. or in any other currency or currencies in which they
- The Monetary Board may authorize the Bangko operate. The banks shall be granted a reasonable
Sentral to grant loans to and receive loans from period of time in which to adjust their currency
foreign banks and other foreign or international positions to any such requirement.
entities, both public and private, and may engage in
such other operations with these entities as are in the             The powers granted under this section shall be
national interest and are appropriate to its character exercised only when special circumstances make
as a central bank. The Bangko Sentral may also act as such action necessary, in the opinion of the Monetary
agent or correspondent for such entities. Board, and shall be applied to all banks alike and
without discrimination.
            Upon authority of the Monetary Board, the
Bangko Sentral may pledge any gold or other assets             Section 78. Regulation of Non-spot Exchange
which it possesses as security against loans which it Transactions. - In order to restrain the banks from
receives from foreign or international entities. taking speculative positions with respect to future
fluctuations in foreign exchange rates, the Monetary
ARTICLE III Board may issue such regulations governing bank
REGULATION OF FOREIGN EXCHANGE purchases and sales of non-spot exchange as it may
OPERATIONS OF THE BANKS consider necessary for said purpose.

            Section 76. Foreign Exchange Holdings of             Section 79. Other Exchange Profits and
the Banks. - In order that the Bangko Sentral may at Losses. - The banks shall bear the risks of non-
all times have foreign exchange resources sufficient compliance with the terms of the foreign exchange
to enable it to maintain the international stability and documents and instruments which they buy and sell,
convertibility of the peso, or in order to promote the and shall also bear any other typically commercial or
domestic investment of bank resources, the Monetary banking risks, including exchange risks not assumed
Board may require the banks to sell to the Bangko by the Bangko Sentral under the provisions of the
Sentral or to other banks all or part of their surplus preceding section.
holdings of foreign exchange. Such transfers may be
required for all foreign currencies or for only certain             Section 80. Information on Exchange
of such currencies, according to the decision of the Operations. - The banks shall report to the Bangko
Sentral the volume and composition of their discount or acquisition by the Bangko
purchases and sales of gold and foreign exchange Sentral and resulting from transactions
each day, and must furnish such additional related to:
information as the Bangko Sentral may request with
reference to the movements in their accounts in (1) the importation, exportation,
foreign currencies. purchase or sale of readily saleable
goods and products, or their
            The Monetary Board may also require other transportation within the
persons and entities to report to it currently all Philippines; or
transactions or operations in gold, in any shape or
form, and in foreign exchange whether entered into (2) the storing of non-perishable
or undertaken by them directly or through agents, or goods and products which are duly
to submit such data as may be required on operations insured and deposited, under
or activities giving rise to or in connection with or conditions assuring their
relating to a gold or foreign exchange transaction. preservation, in authorized bonded
The Monetary Board shall prescribe the forms on warehouses or in other places
which such declarations must be made. The accuracy approved by the Monetary Board.
of the declarations may be verified by the Bangko
Sentral by whatever inspection it may deem (b) Production credits. - The Bangko Sentral
necessary. may rediscount, discount, buy and sell bills,
acceptances, promissory notes and other
ARTICLE IV credit instruments having maturities of not
LOANS TO BANKING AND OTHER more than three hundred sixty (360) days
FINANCIAL INSTITUTIONS from the date of their rediscount, discount or
acquisition by the Bangko Sentral and
            A. CREDIT POLICY resulting from transactions related to the
production or processing of agricultural,
            Section 81. Guiding Principles. - The animal, mineral, or industrial products.
rediscounts, discounts, loans and advances which the Documents or instruments acquired in
Bangko Sentral is authorized to extend to banking accordance with this subsection shall be
institutions under the provisions of the present article secured by a pledge of the respective crops
of this Act shall be used to influence the volume of or products: Provided, however, That the
credit consistent with the objective of price stability. crops or products need not be pledged to
secure the documents if the original loan
            B. NORMAL CREDIT OPERATIONS granted by the Bangko Sentral is secured by
a lien or mortgage on real estate property
            Section 82. Authorized Types of Operations. - seventy percent (70%) of the appraised
Subject to the principle stated in the preceding value of which equals or exceeds the amount
section of this Act, the Bangko Sentral may normally of the loan granted.
and regularly carry on the following credit operations
with banking institutions operating in the Philippines: (c) Other credits. - Special credit
instruments not otherwise rediscountable
(a) Commercial credits. - The Bangko under the immediately preceding
Sentral may rediscount, discount, buy and subsections (a) and (b) may be eligible for
sell bills, acceptances, promissory notes and rediscounting in accordance with rules and
other credit instruments with maturities of regulations which the Bangko Sentral shall
not more than one hundred eighty (180) prescribe. Whenever necessary, the Bangko
days from the date of their rediscount, Sentral shall provide funds from non-
inflationary sources: Provided, however, Philippine provincial, city or
That the Monetary Board shall prescribe municipal governments, or by any
additional safeguards for disbursing these Philippine Government
funds. instrumentality, and having
maturities of not more than ten (10)
(d) Advances. - The Bangko Sentral may years from the date of advance.
grant advances against the following kinds
of collaterals for fixed periods which, with The rediscounts, discounts, loans and advances made
the exception of advances against collateral in accordance with the provisions of this section may
named in clause (4) of the present not be renewed or extended unless extraordinary
subsection, shall not exceed one hundred circumstances fully justify such renewal or extension.
eighty (180) days:
            Advances made against the collateral named
(1) gold coins or bullion; in clauses (6) and (7) of subsection (d) of this section
may not exceed eighty percent (80%) of the current
(2) securities representing market value of the collateral.
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) C. SPECIAL CREDIT OPERATION
of this section;
            Section 83. Loans for Liquidity Purposes. -
(4) the credit instruments to which The Bangko Sentral may extend loans and advances
reference is made in subsection (b) to banking institutions for a period of not more than
of this section, for periods which seven (7) days without any collateral for the purpose
shall not exceed three hundred of providing liquidity to the banking system in times
sixty (360) days; of need.

(5) utilized portions of advances in             D. EMERGENCY CREDIT OPERATION

current amount covered by regular
overdraft agreements related to             Section 84. Emergency Loans and Advances.
operations included under - In periods of national and/or local emergency or of
subsections (a) and (b) of this imminent financial panic which directly threaten
section, and certified as to amount monetary and banking stability, the Monetary Board
and liquidity by the institution may, by a vote of at least five (5) of its members,
soliciting the advance; authorize the Bangko Sentral to grant extraordinary
loans or advances to banking institutions secured by
(6) negotiable treasury bills, assets as defined hereunder: Provided, That while
certificates of indebtedness, notes such loans or advances are outstanding, the debtor
and other negotiable obligations of institution shall not, except upon prior authorization
the Government maturing within by the Monetary Board, expand the total volume of
three (3) years from the date of the its loans or investments.
advance; and
            The Monetary Board may, at its discretion,
(7) negotiable bonds issued by the likewise authorize the Bangko Sentral to grant
Government of the Philippines, by emergency loans or advances to banking institutions,
even during normal periods, for the purpose of a subsequent tranche on condition that the principal
assisting a bank in a precarious financial condition or stockholders of the institution:
under serious financial pressures brought by
unforeseen events, or events which, though (a) furnish an acceptable undertaking to
foreseeable, could not be prevented by the bank indemnify and hold harmless from suit a
concerned: Provided, however, That the Monetary conservator whose appointment the
Board has ascertained that the bank is not insolvent Monetary Board may find necessary at any
and has the assets defined hereunder to secure the time; and
advances: Provided, further, That a concurrent vote
of at least five (5) members of the Monetary Board is (b) provide acceptable security which, in the
obtained. judgment of the Monetary Board, would be
adequate to supplement, where necessary,
            The amount of any emergency loan or the assets tendered by the banking institution
advance shall not exceed the sum of fifty percent to collateralize the subsequent tranche.
(50%) of total deposits and deposit substitutes of the
banking institution and shall be disbursed in two (2)             In connection with the exercise of these
or more tranches. The amount of the first tranche powers, the prohibitions in Section 128 of this Act
shall be limited to twenty-five percent (25%) of the shall not apply insofar as it refers to acceptance as
total deposit and deposit substitutes of the institution collateral of shares and their acquisition as a result of
and shall be secured by government securities to the foreclosure proceedings, including the exercise of
extent of their applicable loan values and other voting rights pertaining to said shares: Provided,
unencumbered first class collaterals which the however, That should the Bangko Sentral acquire any
Monetary Board may approve: Provided, That if as of the shares it has accepted as collateral as a result of
determined by the Monetary Board, the foreclosure proceedings, the Bangko Sentral shall
circumstances surrounding the emergency warrant a dispose of said shares by public bidding within one
loan or advance greater than the amount provided (1) year from the date of consolidation of title by the
hereinabove, the amount of the first tranche may Bangko Sentral.
exceed twenty-five percent (25%) of the bank's total
deposit and deposit substitutes if the same is             Whenever a financial institution incurs an
adequately secured by applicable loan values of overdraft in its account with the Bangko Sentral, the
government securities and unencumbered first class same shall be eliminated within the period prescribed
collaterals approved by the Monetary Board, and the in Section 102 of this Act.
principal stockholders of the institution furnish an
acceptable undertaking to indemnify and hold             E. CREDIT TERMS
harmless from suit a conservator whose appointment
the Monetary Board may find necessary at any time.             Section 85. Interest and Rediscount. - The
Bangko Sentral shall collect interest and other
            Prior to the release of the first tranche, the appropriate charges on all loans and advances it
banking institution shall submit to the Bangko Sentral extends, the closure, receivership or liquidations of
a resolution of its board of directors authorizing the the debtor-institution notwithstanding. This provision
Bangko Sentral to evaluate other assets of the shall apply prospectively.
banking institution certified by its external auditor to
be good and available for collateral purposes should             The Monetary Board shall fix the interest and
the release of the subsequent tranche be thereafter rediscount rates to be charged by the Bangko Sentral
applied for. on its credit operations in accordance with the
character and term of the operation, but after due
            The Monetary Board may, by a vote of at consideration has been given to the credit needs of
least five (5) of its members, authorize the release of the market, the composition of the Bangko Sentral's
portfolio, and the general requirements of the aggregate, exceed twenty percent (20%) of the
national monetary policy. Interest and rediscount average annual income of the borrower for the last
rates shall be applied to all banks of the same three (3) preceding fiscal years.
category uniformly and without discrimination.
ARTICLE V
            Section 86. Endorsement. - The documents OPEN MARKET OPERATIONS FOR THE
rediscounted, discounted, bought or accepted as ACCOUNT OF THE BANGKO SENTRAL
collateral by the Bangko Sentral in the course of the
credit operations authorized in this article shall bear             Section 90. Principles of Open Market
the endorsement of the institution from which they Operations. - The open market purchases and sales of
are received. securities by the Bangko Sentral shall be made
exclusively in accordance with its primary objective
            Section 87. Repayment of Credits. - of achieving price stability.
Documents rediscounted, discounted or accepted as
collateral by the Bangko Sentral must be withdrawn             Section 91. Purchases and Sales of
by the borrowing institution on the dates of their Government Securities. - In order to achieve the
maturities, or upon liquidation of the obligations objectives of the national monetary policy, the
which they represent or to which they relate Bangko Sentral may, in accordance with the principle
whenever said obligations have been liquidated prior stated in Section 90 of this Act and with such rules
to their dates of maturity. and regulations as may be prescribed by the
Monetary Board, buy and sell in the open market for
            Banks shall have the right at any time to its own account:
withdraw any documents which they have presented
to the Bangko Sentral as collateral, upon payment in (a) evidences of indebtedness issued directly
full of the corresponding debt to the Bangko Sentral, by the Government of the Philippines or by
including interest charges. its political subdivisions; and

            Section 88. Other requirements. - The (b) evidences of indebtedness issued by

Monetary Board may prescribe, within the general government instrumentalities and fully
powers granted to it under this Act, additional guaranteed by the Government.
conditions which borrowing institutions must satisfy
in order to have access to the credit of the Bangko             The evidences of indebtedness acquired under
Sentral. These conditions may refer to the rates of the provisions of this section must be freely
interest charged by the banks, to the purposes for negotiable and regularly serviced and must be
which their loans in general are destined, and to any available to the general public through banking
other clearly definable aspect of the credit policy of institutions and local government treasuries in
the bank. denominations of a thousand pesos or more.

            Section 89. Provisional Advances to the             Section 92. Issue and Negotiation of Bangko
National Government. - The Bangko Sentral may Sentral Obligations. - In order to provide the Bangko
make direct provisional advances with or without Sentral with effective instruments for open market
interest to the National Government to finance operations, the Bangko Sentral may, subject to such
expenditures authorized in its annual appropriation: rules and regulations as the Monetary Board may
Provided, That said advances shall be repaid before prescribe and in accordance with the principles stated
the end of three (3) months extendible by another in Section 90 of this Act, issue, place, buy and sell
three (3) months as the Monetary Board may allow freely negotiable evidences of indebtedness of the
following the date the National Government received Bangko Sentral: Provided, That issuance of such
such provisional advances and shall not, in their certificates of indebtedness shall be made only in
cases of extraordinary movement in price levels. Said operations of the banking system, all banks operating
evidences of indebtedness may be issued directly in the Philippines shall be required to maintain
against the international reserve of the Bangko reserves against their deposit liabilities: Provided,
Sentral or against the securities which it has acquired That the Monetary Board may, at its discretion, also
under the provisions of Section 91 of this Act, or may require all banks and/or quasi-banks to maintain
be issued without relation to specific types of assets reserves against funds held in trust and liabilities for
of the Bangko Sentral. deposit substitutes as defined in this Act. The
required reserves of each bank shall be proportional
            The Monetary Board shall determine the to the volume of its deposit liabilities and shall
interest rates, maturities and other characteristics of ordinarily take the form of a deposit in the Bangko
said obligations of the Bangko Sentral, and may, if it Sentral. Reserve requirements shall be applied to all
deems it advisable, denominate the obligations in banks of the same category uniformly and without
gold or foreign currencies. discrimination.

            Subject to the principles stated in Section 90             Reserves against deposit substitutes, if

of this Act, the evidences of indebtedness of the imposed, shall be determined in the same manner as
Bangko Sentral to which this section refers may be provided for reserve requirements against regular
acquired by the Bangko Sentral before their maturity, bank deposits, with respect to the imposition,
either through purchases in the open market or increase, and computation of reserves.
through redemptions at par and by lot if the Bangko
Sentral has reserved the right to make such             The Monetary Board may exempt from
redemptions. The evidences of indebtedness acquired reserve requirements deposits and deposit substitutes
or redeemed by the Bangko Sentral shall not be with remaining maturities of two (2) years or more,
included among its assets, and shall be immediately as well as interbank borrowings.
retired and cancelled.
            Since the requirement to maintain bank
ARTICLE VI reserves is imposed primarily to control the volume
COMPOSITION OF BANGKO SENTRAL'S of money, the Bangko Sentral shall not pay interest
PORTFOLIO on the reserves maintained with it unless the
Monetary Board decides otherwise as warranted by
            Section 93. Review of the Bangko Sentral's circumstances.
Portfolio. - At least once every month the Monetary
Board shall review the portfolio of the Bangko             Section 95. Definition of Deposit Substitutes.
Sentral in relation to its future credit policy. - The term "deposit substitutes" is defined as an
alternative form of obtaining funds from the public,
            In reviewing the Bangko Sentral's portfolio, other than deposits, through the issuance,
the Monetary Board shall especially consider whether endorsement, or acceptance of debt instruments for
a sufficiently large part of the portfolio consists of the borrower's own account, for the purpose of
assets with early maturities, in order that a relending or purchasing of receivables and other
contraction in Bangko Sentral credit may be effected obligations. These instruments may include, but need
promptly whenever the national monetary policy so not be limited to, bankers acceptances, promissory
requires. notes, participations, certificates of assignment and
similar instruments with recourse, and repurchase
ARTICLE VII agreements. The Monetary Board shall determine
BANK RESERVES what specific instruments shall be considered as
deposit substitutes for the purposes of Section 94 of
            Section 94. Reserve Requirements. - In order this Act: Provided, however, That deposit substitutes
to control the volume of money created by the credit of commercial, industrial and other non-financial
companies for the limited purpose of financing their Provided, That with reference to holidays or non-
own needs or the needs of their agents or dealers banking days, the reserve position as calculated at the
shall not be covered by the provisions of Section 94 close of the business day immediately preceding such
of this Act. holidays and non-banking days shall apply on such
days.
            Section 96. Required Reserves Against Peso
Deposits. - The Monetary Board may fix and, when it             For the purpose of computing the reserve
deems necessary, alter the minimum reserve ratios to position of each bank or quasi-bank, its principal
peso deposits, as well as to deposit substitutes, which office in the Philippines and all its branches and
each bank and/or quasi-bank may maintain, and such agencies located therein shall be considered as a
ratio shall be applied uniformly to all banks of the single unit.
same category as well as to quasi-banks.
            Section 101. Reserve Deficiencies. -
            Section 97. Required Reserves Against Whenever the reserve position of any bank or quasi-
Foreign Currency Deposits. - The Monetary Board is bank, computed in the manner specified in the
similarly authorized to prescribe and modify the preceding section of this Act, is below the required
minimum reserve ratios applicable to deposits minimum, the bank or quasi-bank shall pay the
denominated in foreign currencies. Bangko Sentral one-tenth of one percent (1/10 of 1%)
per day on the amount of the deficiency or the
            Section 98. Reserves Against Unused prevailing ninety-one-day treasury bill rate plus three
Balances of Overdraft Lines. - In order to facilitate percentage points, whichever is higher: Provided,
Bangko Sentral control over the volume of bank however, That banks and quasi-banks shall ordinarily
credit, the Monetary Board may establish minimum be permitted to offset any reserve deficiency
reserve requirements for unused balances of overdraft occurring on one or more days of the week with any
lines. excess reserves which they may hold on other days of
the same week and shall be required to pay the
            The powers of the Monetary Board to penalty only on the average daily deficiency during
prescribe and modify reserve requirements against the week. In cases of abuse, the Monetary Board may
unused balances of overdraft lines shall be the same deny any bank or quasi-bank the privilege of
as its powers with respect to reserve requirements offsetting reserve deficiencies in the aforesaid
against demand deposits. manner.

            Section 99. Increase in Reserve             If a bank or quasi-bank chronically has a

Requirements. - Whenever in the opinion of the reserve deficiency, the Monetary Board may limit or
Monetary Board it becomes necessary to increase prohibit the making of new loans or investments by
reserve requirements against existing liabilities, the the institution and may require that part or all of the
increase shall be made in a gradual manner and shall net profits of the institution be assigned to surplus.
not exceed four percentage points in any thirty-day
period. Banks and other affected financial institutions             The Monetary Board may modify or set aside
shall be notified reasonably in advance of the date on the reserve deficiency penalties provided in this
which such increase is to become effective. section, for part or the entire period of a strike or
lockout affecting a bank or a quasi-bank as defined in
            Section 100. Computation on Reserves. - The the Labor Code, or of a national emergency affecting
reserve position of each bank or quasi-bank shall be operations of banks or quasi-banks. The Monetary
calculated daily on the basis of the amount, at the Board may also modify or set aside reserved
close of business for the day, of the institution's deficiency penalties for rehabilitation program of a
reserves and the amount of its liability accounts bank.
against which reserves are required to be maintained:
            Section 102. Interbank Settlement. - The ARTICLE VIII
Bangko Sentral shall establish facilities for interbank SELECTIVE REGULATION OF BANK
clearing under such rules and regulations as the OPERATIONS
Monetary Board may prescribe: Provided, That the
Bangko Sentral may charge administrative and other             Section 104. Guiding Principle. - The
fees for the maintenance of such facilities. Monetary Board shall use the powers granted to it
under this Act to ensure that the supply, availability
            The deposit reserves maintained by the banks and cost of money are in accord with the needs of the
in the Bangko Sentral in accordance with the Philippine economy and that bank credit is not
provisions of Section 94 of this Act shall serve as granted for speculative purposes prejudicial to the
basis for the clearing of checks and the settlement of national interests. Regulations on bank operations
interbank balances, subject to such rules and shall be applied to all banks of the same category
regulations as the Monetary Board may issue with uniformly and without discrimination.
respect to such operations: Provided, That any bank
which incurs on overdrawing in its deposit account             Section 105. Margin Requirements Against
with the Bangko Sentral shall fully cover said Letters of Credit. - The Monetary Board may at any
overdraft, including interest thereon at a rate time prescribe minimum cash margins for the
equivalent to one-tenth of one percent (1/10 of 1%) opening of letters of credit, and may relate the size of
per day or the prevailing ninety-one-day treasury bill the required margin to the nature of the transaction to
rate plus three percentage points, whichever is higher, be financed.
not later than the next clearing day: Provided, further,
That settlement of clearing balances shall not be             Section 106. Required Security Against Bank
effected for any account which continues to be Loans. - In order to promote liquidity and solvency of
overdrawn for five (5) consecutive banking days until the banking system, the Monetary Board may issue
such time as the overdrawing is fully covered or such regulations as it may deem necessary with
otherwise converted into an emergency loan or respect to the maximum permissible maturities of the
advance pursuant to the provisions of Section 84 of loans and investments which the banks may make,
this Act: Provided, finally, That the appropriate and the kind and amount of security to be required
clearing office shall be officially notified of banks against the various types of credit operations of the
with overdrawn balances. Banks with existing banks.
overdrafts with the Bangko Sentral as of the
effectivity of this Act shall, within such period as             Section 107. Portfolio Ceilings. - Whenever
may be prescribed by the Monetary Board, either the Monetary Board considers it advisable to prevent
convert the overdraft into an emergency loan or or check an expansion of bank credit, the Board may
advance with a plan of payment, or settle such place an upper limit on the amount of loans and
overdrafts, and that, upon failure to so comply investments which the banks may hold, or may place
herewith, the Bangko Sentral shall take such action a limit on the rate of increase of such assets within
against the bank as may be warranted under this Act. specified periods of time. The Monetary Board may
apply such limits to the loans and investments of each
            Section 103. Exemption from Attachment and bank or to specific categories thereof.
Other Purposes. - Deposits maintained by banks with
the Bangko Sentral as part of their reserve             In no case shall the Monetary Board establish
requirements shall be exempt from attachment, limits which are below the value of the loans or
garnishments, or any other order or process of any investments of the banks on the date on which they
court, government agency or any other administrative are notified of such restrictions. The restrictions shall
body issued to satisfy the claim of a party other than be applied to all banks uniformly and without
the Government, or its political subdivisions or discrimination.
instrumentalities.
            Section 108. Minimum Capital Ratios. - The dealings, negotiations or transactions with the
Monetary Board may prescribe minimum ratios International Bank for Reconstruction and
which the capital and surplus of the banks must bear Development and with other foreign or international
to the volume of their assets, or to specific categories financial institutions or agencies. The President may,
thereof, and may alter said ratios whenever it deems however, designate any of his other financial advisors
necessary. to jointly represent the Government in such dealings,
negotiations or transactions.
ARTICLE IX
COORDINATION OF CREDIT POLICIES BY             Section 113. Official Deposits. - The Bangko
GOVERNMENT INSTITUTIONS Sentral shall be the official depository of the
Government, its political subdivisions and
            Section 109. Coordination of Credit Policies. instrumentalities as well as of government-owned or
- Government-owned corporations which perform controlled corporations and, as a general policy, their
banking or credit functions shall coordinate their cash balances should be deposited with the Bangko
general credit policies with those of the Monetary Sentral, with only minimum working balances to be
Board. held by government-owned banks and such other
banks incorporated in the Philippines as the Monetary
            Toward this end, the Monetary Board may, Board may designate, subject to such rules and
whenever it deems it expedient, make suggestions or regulations as the Board may prescribe: Provided,
recommendations to such corporations for the more That such banks may hold deposits of the political
effective coordination of their policies with those of subdivisions and instrumentalities of the Government
the Bangko Sentral. beyond their minimum working balances whenever
such subdivisions or instrumentalities have
CHAPTER V — FUNCTIONS AS BANKER outstanding loans with said banks.
AND FINANCIAL ADVISOR OF THE
GOVERNMENT             The Bangko Sentral may pay interest on
deposits of the Government or of its political
ARTICLE I subdivisions and instrumentalities, as well as on
deposits of banks with the Bangko Sentral.
FUNCTIONS AS BANKER OF THE
GOVERNMENT             Section 114. Fiscal Operations. - The
Bangko Sentral shall open a general cash account for
            Section 110. Designation of Bangko Sentral the Treasurer of the Philippines, in which the liquid
as Banker of the Government. - The Bangko Sentral funds of the Government shall be deposited.
shall act as a banker of the Government, its political
subdivisions and instrumentalities.             Transfers of funds from this account to other
accounts shall be made only upon order of the
            Section 111. Representation with the Treasurer of the Philippines.
International Monetary Fund. - The Bangko Sentral
shall represent the Government in all dealings,             Section 115. Other Banks as Agents of the
negotiations and transactions with the International Bangko Sentral. - In the performance of its functions
Monetary Fund and shall carry such accounts as may as fiscal agent, the Bangko Sentral may engage the
result from Philippine membership in, or operations services of other government-owned and controlled
with, said Fund. banks and of other domestic banks for operations in
localities at home or abroad in which the Bangko
            Section 112. Representation with Other Sentral does not have offices or agencies adequately
Financial Institutions. - The Bangko Sentral may be equipped to perform said operations: Provided,
authorized by the Government to represent it in however, That for fiscal operations in foreign
countries, the Bangko Sentral may engage the public debt shall also be effected through the Bangko
services of foreign banking and financial institutions. Sentral.

            Section 116. Remuneration for Services. - B. BANGKO SENTRAL SUPPORT OF THE

The Bangko Sentral may charge equitable rates, GOVERNMENT SECURITIES MARKET
commissions or fees for services which it renders to
the Government, its political subdivisions and             Section 120. The Securities Stabilization
instrumentalities. Fund. - There shall be established a "Securities
Stabilization Fund" which shall be administered by
ARTICLE II the Bangko Sentral for the account of the
THE MARKETING AND STABILIZATION OF Government.
SECURITIES FOR THE ACCOUNT OF THE
GOVERNMENT             The operations of the Securities Stabilization
Fund shall consist of purchases and sales, in the open
A. THE ISSUE AND PLACING OF market, of bonds and other evidences of indebtedness
GOVERNMENT SECURITIES issued or fully guaranteed by the Government. The
purpose of these operations shall be to increase the
            Section 117. Issue of Government liquidity and stabilize the value of said securities in
Obligations. - The issue of securities representing order thereby to promote investment in government
obligations of the Government, its political obligations.
subdivisions or instrumentalities, may be made
through the Bangko Sentral, which may act as agent             The Monetary Board shall use the resources
of, and for the account of, the Government or its of the Fund to prevent, or moderate, sharp
respective subdivisions or instrumentality, as the case fluctuations in the quotations of said government
may be: Provided, however, That the Bangko Sentral obligations, but shall not endeavor to alter
shall not guarantee the placement of said securities, movements of the market resulting from basic
and shall not subscribe to their issue except to replace changes in the pattern or level of interest rates.
its maturing holdings of securities with the same type
as the maturing securities.             The Monetary Board shall issue such
regulations as may be necessary to implement the
            Section 118. Methods of Placing Government provisions of this section.
Securities. - The Bangko Sentral may place the
securities to which the preceding section refers             Section 121. Resources of the Securities
through direct sale to financial institutions and the Stabilization Fund. - Subject to Section 132 of this
public. Act, the resources of the Securities Stabilization Fund
shall come from the balance of the fund as held by
            The Bangko Sentral shall not be a member of the Central Bank under Republic Act No. 265 as of
any stock exchange or syndicate, but may intervene the effective date of this Act.
therein for the sole purpose of regulating their
operations in the placing of government securities.             Section 122. Profits and Losses of the Fund. -
The Securities Stabilization Fund shall retain net
            The Government, or its political subdivisions profits which it may make on its operations,
or instrumentalities, shall reimburse the Bangko regardless of whether said profits arise from capital
Sentral for the expenses incurred in the placing of the gains or from interest earnings. The Fund shall
aforesaid securities. correspondingly bear any net losses which it may
incur.
            Section 119. Servicing and Redemption of the
Public Debt. - The servicing and redemption of the
 ARTICLE III from the approval of this Act from all national,
FUNCTIONS AS FINANCIAL ADVISOR OF provincial, municipal and city taxes, fees, charges
THE GOVERNMENT and assessments.

            Section 123. Financial Advice on Official             The exemption authorized in the preceding
Credit Operations. - Before undertaking any credit paragraph of this section shall apply to all property of
operation abroad, the Government, through the the Bangko Sentral, to the resources, receipts,
Secretary of Finance, shall request the opinion, in expenditures, profits and income of the Bangko
writing, of the Monetary Board on the monetary Sentral, as well as to all contracts, deeds, documents
implications of the contemplated action. Such and transactions related to the conduct of the business
opinions must similarly be requested by all political of the Bangko Sentral: Provided, however, That said
subdivisions and instrumentalities of the Government exemptions shall apply only to such taxes, fees,
before any credit operation abroad is undertaken by charges and assessments for which the Bangko
them. Sentral itself would otherwise be liable, and shall not
apply to taxes, fees, charges, or assessments payable
            The opinion of the Monetary Board shall be by persons or other entities doing business with the
based on the gold and foreign exchange resources Bangko Sentral: Provided, further, That foreign loans
and obligations of the nation and on the effects of the and other obligations of the Bangko Sentral shall be
proposed operation on the balance of payments and exempt, both as to principal and interest, from any
on monetary aggregates. and all taxes if the payment of such taxes has been
assumed by the Bangko Sentral.
            Whenever the Government, or any of its
political subdivisions or instrumentalities,             Section 126. Exemption from Customs
contemplates borrowing within the Philippines, the Duties. - The provision of any general or special law
prior opinion of the Monetary Board shall likewise be to the contrary notwithstanding, the importation and
requested in order that the Board may render an exportation by the Bangko Sentral of notes and coins,
opinion on the probable effects of the proposed and of gold and other metals to be used for purposes
operation on monetary aggregates, the price level, authorized under this Act, and the importation of all
and the balance of payments. equipment needed for bank note production, minting
of coins, metal refining and other security printing
            Section 124. Representation on the National operations shall be fully exempt from all customs
Economic and Development Authority. - In order to duties and consular fees and from all other taxes,
assure effective coordination between the economic, assessments and charges related to such importation
financial and fiscal policies of the Government and or exportation.
the monetary, credit and exchange policies of the
Bangko Sentral, the Deputy Governor designated by             Section 127. Applicability of the Civil Service
the Governor of the Bangko Sentral shall be an ex Law. - Appointments in the Bangko Sentral, except
officio member of the National Economic and as to those which are policy-determining, primarily
Development Authority Board. confidential or highly technical in nature, shall be
made only according to the Civil Service Law and
CHAPTER VI — PRIVILEGES AND regulations: Provided, That no qualification
PROHIBITIONS requirements for positions in the Bangko Sentral shall
be imposed other than those set by the Monetary
ARTICLE I Board: Provided, further, That, the Monetary Board
PRIVILEGES or Governor, in accordance with Sections 15(c) and
17(d) of this Act, respectively, may without need of
            Section 125. Tax Exemptions. - The Bangko obtaining prior approval from any other government
Sentral shall be exempt for a period of five (5) years agency, appoint personnel in the Bangko Sentral
whose services are deemed necessary in order not to             Section 131. Implementing Details. - The
unduly disrupt the operations of the Bangko Sentral. Bangko Sentral shall be made operational by the
performance of the following acts:
            Officers and employees of the Bangko
Sentral, including all members of the Monetary (a) the President shall constitute the
Board, shall not engage directly or indirectly in Monetary Board by appointing the members
partisan activities or take part in any election except thereof within sixty (60) days from the
to vote. effectivity of this Act; and

ARTICLE II (b) the transfer of such assets and liabilities

PROHIBITIONS from the Central Bank to the Bangko Sentral
as provided in Section 132 shall be
            Section 128. Prohibitions. - The Bangko completed within ninety (90) days from the
Sentral shall not acquire shares of any kind or accept constitution of the Monetary Board.
them as collateral, and shall not participate in the
ownership or management of any enterprise, either             All incumbent personnel in the Central Bank
directly or indirectly. as of the date of the approval of this Act shall
continue to exercise their duties and functions as
            The Bangko Sentral shall not engage in personnel of the Bangko Sentral subject to the
development banking or financing: Provided, provisions of Section 133: Provided, That such
however, That outstanding loans obtained or personnel in the Central Bank as may be necessary
extended for development financing shall not be for the purpose of implementing Section 132 may be
affected by the prohibition of this section. assigned by the Bangko Sentral Monetary Board to
the Central Bank.
CHAPTER VII — TRANSITORY PROVISIONS
            Section 132. Transfer of Assets and
            Section 129. Phase-out of Fiscal Agency Liabilities. - Upon the effectivity of this Act, three (3)
Functions. - Unless circumstances warrant otherwise members of the Monetary Board, which may include
and approved by the Congress Oversight Committee, the Governor, in representation of the Bangko
the Bangko Sentral shall, within a period of three (3) Sentral, the Secretary of Finance and the Secretary of
years but in no case longer than five (5) years from Budget and Management in representation of the
the approval of this Act, phase out all fiscal agency National Government, and the Chairmen of the
functions provided for in Sections 117, 118, 119, and Committees on Banks of the Senate and the House of
120 as well as in other pertinent provisions of this Representatives shall determine the assets and
Act and transfer the same to the Department of liabilities of the Central Bank which may be
Finance. transferred to or assumed by the Bangko Sentral. The
Committee shall complete its work within ninety (90)
            Section 130. Phase-out of Regulatory Powers days from the constitution of the Monetary Board
Over the Operations of Finance Corporations and submitting a comprehensive report with all its
Other Institutions Performing Similar Functions. - findings and justification.
The Bangko Sentral shall, within a period of five (5)
years from the effectivity of this Act, phase out its             The following guidelines shall be strictly
regulatory powers over finance companies without observed in the determination of which assets and
quasi-banking functions and other institutions liabilities shall be transferred to the Bangko Sentral:
performing similar functions as provided in existing
laws, the same to be assumed by the Securities and (a) the Monetary Board and the Secretary of
Exchange Commission. Finance shall have primary responsibility for
working out creative monetary and financial
solutions to retire the Central Bank liabilities             All actions taken by the Bangko Sentral
and losses at the least cost to the Monetary Board under this section shall be reported
Government; to Congress and the President within thirty (30) days.

(b) the Bangko Sentral shall remit seventy-             Section 133. Mandate to Organize. - The
five percent (75%) of its net profits to a Bangko Sentral shall be organized by the Monetary
special deposit account (sinking fund) until Board without being subject to the provisions of
such time as the net liabilities of the Central Republic Act No. 7430, by adopting if it so desires,
Bank shall have been liquidated through an entirely new staffing pattern on organizational
generally accepted finance mechanisms such structure to suit the operations of the Bangko Sentral
as, but not limited to, write-offs, set-offs, under this Act. No preferential or priority right shall
condonation, collections, reappraisal, be given to or enjoyed by any personnel for
revaluation and bond issuance by the appointment to any position in the new staffing
National Government, or to the National pattern, nor shall any personnel be considered as
Government as dividends; having prior or vested rights with respect to retention
in the Bangko Sentral or in any position which may
(c) the assets and liabilities to be transferred be created in the new staffing pattern, even if he
shall be limited to an amount that will should be the incumbent of a similar position prior to
enable the Bangko Sentral to perform its organization. The formulation of the program of
responsibilities adequately and operate on a organization shall be completed within six (6) months
viable basis: Provided, That the assets shall after the effectivity of this Act, and shall be fully
exceed the liabilities as certified by the implemented within a period of six (6) months
Commission on Audit (COA), by an initial thereafter. Personnel who may not be retained are
amount of Ten billion pesos deemed separated from the service.
(P10,000,000,000);
            Section 134. Separation Benefits. - Pursuant
(d) liabilities to be assumed by the Bangko to Section 15 of this Act, the Monetary Board is
Sentral shall include liability for notes and authorized to provide separation incentives, and all
coins in circulation as of the effective date those who shall retire or be separated from the
of this Act; and service on account of reorganization under the
preceding section shall be entitled to such incentives,
(e) any asset or liability of the Central Bank which shall be in addition to all gratuities and
not transferred to the Bangko Sentral shall benefits to which they may be entitled under existing
be retained and administered, disposed of laws.
and liquidated by the Central Bank itself
which shall continue to exist as the CB             Section 135. Repealing Clause. - Except as
Board of Liquidators only for the purposes may be provided for in Section 46 and 132 of this
provided in this paragraph but not later than Act, Republic Act No. 265, as amended, the
twenty-five (25) years or until such time that provisions of any other law, special charters, rule or
liabilities have been liquidated: Provided, regulation issued pursuant to said Republic Act No.
That the Bangko Sentral may financially 265, as amended, or parts thereof, which may be
assist the Central Bank of Liquidators in the inconsistent with the provisions of this Act are
liquidation of CB liabilities: Provided, hereby repealed. Presidential Decree No. 1792 is
finally, That upon disposition of said likewise repealed.
retained assets and liquidation of said
retained liabilities, the Central Bank shall be             Section 136. Transfer of Powers. - All
deemed abolished. 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 people, for such periods as provided in this
to the Bangko Sentral ng Pilipinas. All references to Act.
the Central Bank of the Philippines in any law or
special charters shall be deemed to refer to the The use of intellectual property bears a social
Bangko Sentral. function. To this end, the State shall promote the
diffusion of knowledge and information for the
promotion of national development and progress and
            Section 137. Separability Clause. - If any the common good.
provision or section of this Act or the application
thereof to any person or circumstance is held invalid, It is also the policy of the State to streamline
the other provisions or sections of this Act, and the administrative procedures of registering patents,
application of such provision or section to other trademarks and copyright, to liberalize the
persons or circumstances, shall not be affected registration on the transfer of technology, and to
thereby. enhance the enforcement of intellectual property
rights in the Philippines. (n)

            Section 138. Effectivity Clause. - This Act

Section 3. International Conventions and
shall take effect fifteen (15) days following its Reciprocity. - Any person who is a national or who is
publication in the Official Gazette or in two (2) domiciled or has a real and effective industrial
national newspapers of general circulation. establishment in a country which is a party to any
convention, treaty or agreement relating to
intellectual property rights or the repression of unfair
competition, to which the Philippines is also a party,
or extends reciprocal rights to nationals of the
Philippines by law, shall be entitled to benefits to the
extent necessary to give effect to any provision of
Republic Act No. 8293             June 6, 1997 such convention, treaty or reciprocal law, in addition
to the rights to which any owner of an intellectual
property right is otherwise entitled by this Act. (n)
AN ACT PRESCRIBING THE INTELLECTUAL
PROPERTY CODE AND ESTABLISHING THE
INTELLECTUAL PROPERTY OFFICE, Section 4. Definitions. - 4.1. The term "intellectual
PROVIDING FOR ITS POWERS AND property rights" consists of:
FUNCTIONS, AND FOR OTHER PURPOSES
a) Copyright and Related Rights;
Be it enacted by the Senate and House of
Representatives of the Philippines in Congress b) Trademarks and Service Marks;
assembled:
c) Geographic Indications;
PART I
THE INTELLECTUAL PROPERTY OFFICE d) Industrial Designs;

Section 1. Title. - This Act shall be known as the e) Patents;

"Intellectual Property Code of the Philippines."
f) Layout-Designs (Topographies) of
Section 2. Declaration of State Policy. - The State Integrated Circuits; and
recognizes that an effective intellectual and industrial
property system is vital to the development of g) Protection of Undisclosed Information (n,
domestic and creative activity, facilitates transfer of TRIPS).
technology, attracts foreign investments, and ensures
market access for our products. It shall protect and 4.2. The term "technology transfer arrangements"
secure the exclusive rights of scientists, inventors, refers to contracts or agreements involving the
artists and other gifted citizens to their intellectual transfer of systematic knowledge for the manufacture
property and creations, particularly when beneficial of a product, the application of a process, or
rendering of a service including management 5.2. The Office shall have custody of all records,
contracts; and the transfer, assignment or licensing of books, drawings, specifications, documents, and
all forms of intellectual property rights, including other papers and things relating to intellectual
licensing of computer software except computer property rights applications filed with the Office. (n)
software developed for mass market.
Section 6. The Organizational Structure of the IPO. -
4.3. The term "Office" refers to the Intellectual 6.1. The Office shall be headed by a Director General
Property Office created by this Act. who shall be assisted by two (2) Deputies Director
General.
4.4. The term "IPO Gazette" refers to the gazette
published by the Office under this Act. (n) 6.2. The Office shall be divided into six (6) Bureaus,
each of which shall be headed by a Director and
Section 5. Functions of the Intellectual Property assisted by an Assistant Director. These Bureaus are:
Office (IPO). - 5.1. To administer and implement the
State policies declared in this Act, there is hereby a) The Bureau of Patents;
created the Intellectual Property Office (IPO) which
shall have the following functions: b) The Bureau of Trademarks;

a) Examine applications for grant of letters c) The Bureau of Legal Affairs;

patent for inventions and register utility
models and industrial designs; d) The Documentation, Information and
Technology Transfer Bureau;
b) Examine applications for the registration
of marks, geographic indication, integrated e) The Management Information System and
circuits; EDP Bureau; and

c) Register technology transfer arrangements f) The Administrative, Financial and

and settle disputes involving technology Personnel Services Bureau.
transfer payments covered by the provisions
of Part II, Chapter IX on Voluntary
Licensing and develop and implement 6.3. The Director General, Deputies Director
strategies to promote and facilitate General, Directors and Assistant Directors shall be
technology transfer; appointed by the President, and the other officers and
employees of the Office by the Secretary of Trade
and Industry, conformably with and under the Civil
d) Promote the use of patent information as Service Law. (n)
a tool for technology development;
Section 7. The Director General and Deputies
e) Publish regularly in its own publication Director General. - 7.1. Functions. - The Director
the patents, marks, utility models and General shall exercise the following powers and
industrial designs, issued and approved, and functions:
the technology transfer arrangements
registered;
a) Manage and direct all functions and
activities of the Office, including the
f) Administratively adjudicate contested promulgation of rules and regulations to
proceedings affecting intellectual property implement the objectives, policies, plans,
rights; and programs and projects of the Office:
Provided, That in the exercise of the
g) Coordinate with other government authority to propose policies and standards
agencies and the private sector efforts to in relation to the following: (1) the effective,
formulate and implement plans and policies efficient, and economical operations of the
to strengthen the protection of intellectual Office requiring statutory enactment; (2)
property rights in the country. coordination with other agencies of
government in relation to the enforcement of
 intellectual property rights; (3) the 7.3. Term of Office. - The Director General and the
recognition of attorneys, agents, or other Deputies Director General shall be appointed by the
persons representing applicants or other President for a term of five (5) years and shall be
parties before the Office; and (4) the eligible for reappointment only once: Provided, That
establishment of fees for the filing and the first Director General shall have a first term of
processing of an application for a patent, seven (7) years. Appointment to any vacancy shall be
utility model or industrial design or mark or only for the unexpired term of the predecessor.
a collective mark, geographic indication and
other marks of ownership, and for all other 7.4. The Office of the Director General. - The Office
services performed and materials furnished of the Director General shall consist of the Director
by the Office, the Director General shall be General and the Deputies Director General, their
subject to the supervision of the Secretary of immediate staff and such Offices and Services that
Trade and Industry; the Director General will set up to support directly
the Office of the Director General. (n)
b) Exercise exclusive appellate jurisdiction
over all decisions rendered by the Director Section 8. The Bureau of Patents. - The Bureau of
of Legal Affairs, the Director of Patents, the Patents shall have the following functions:
Director of Trademarks, and the Director of
the Documentation, Information and 8.1. Search and examination of patent applications
Technology Transfer Bureau. The decisions and the grant of patents;
of the Director General in the exercise of his
appellate jurisdiction in respect of the
decisions of the Director of Patents, and the 8.2. Registration of utility models, industrial designs,
Director of Trademarks shall be appealable and integrated circuits; and
to the Court of Appeals in accordance with
the Rules of Court; and those in respect of 8.3. Conduct studies and researches in the field of
the decisions of the Director of patents in order to assist the Director General in
Documentation, Information and formulating policies on the administration and
Technology Transfer Bureau shall be examination of patents. (n)
appealable to the Secretary of Trade and
Industry; and Section 9. The Bureau of Trademarks. - The Bureau
of Trademarks shall have the following functions:
c) Exercise original jurisdiction to resolve
disputes relating to the terms of a license 9.1. Search and examination of the applications for
involving the author's right to public the registration of marks, geographic indications and
performance or other communication of his other marks of ownership and the issuance of the
work. The decisions of the Director General certificates of registration; and
in these cases shall be appealable to the
Secretary of Trade and Industry. 9.2. Conduct studies and researches in the field of
trademarks in order to assist the Director General in
7.2. Qualifications. - The Director General and the formulating policies on the administration and
Deputies Director General must be natural born examination of trademarks. (n)
citizens of the Philippines, at least thirty-five (35)
years of age on the day of their appointment, holders Section 10. The Bureau of Legal Affairs. - The
of a college degree, and of proven competence, Bureau of Legal Affairs shall have the following
integrity, probity and independence: Provided, That functions:
the Director General and at least one (1) Deputy
Director General shall be members of the Philippine
10.1. Hear and decide opposition to the application
Bar who have engaged in the practice of law for at
for registration of marks; cancellation of trademarks;
least ten (10) years: Provided further, That in the
subject to the provisions of Section 64, cancellation
selection of the Director General and the Deputies
of patents, utility models, and industrial designs; and
Director General, consideration shall be given to such
petitions for compulsory licensing of patents;
qualifications as would result, as far as practicable, in
the balanced representation in the Directorate
General of the various fields of intellectual property.
10.2. (a) Exercise original jurisdiction in incurred in prosecuting the
administrative complaints for violations of laws case in the Bureau of
involving intellectual property rights: Provided, That Legal Affairs.
its jurisdiction is limited to complaints where the
total damages claimed are not less than Two hundred The Director of Legal Affairs may
thousand pesos (P200,000): Provided further, That also require the respondent to
availment of the provisional remedies may be granted submit periodic compliance reports
in accordance with the Rules of Court. The Director and file a bond to guarantee
of Legal Affairs shall have the power to hold and compliance of his undertaking;
punish for contempt all those who disregard orders or
writs issued in the course of the proceedings. (n) (iii) The condemnation or seizure
of products which are subject of the
(b) After formal investigation, the Director offense. The goods seized
for Legal Affairs may impose one (1) or hereunder shall be disposed of in
more of the following administrative such manner as may be deemed
penalties: appropriate by the Director of
Legal Affairs, such as by sale,
(i) The issuance of a cease and donation to distressed local
desist order which shall specify the governments or to charitable or
acts that the respondent shall cease relief institutions, exportation,
and desist from and shall require recycling into other goods, or any
him to submit a compliance report combination thereof, under such
within a reasonable time which guidelines as he may provide;
shall be fixed in the order;
(iv) The forfeiture of paraphernalia
(ii) The acceptance of a voluntary and all real and personal properties
assurance of compliance or which have been used in the
discontinuance as may be imposed. commission of the offense;
Such voluntary assurance may
include one or more of the (v) The imposition of
following: administrative fines in such amount
as deemed reasonable by the
(1) An assurance to Director of Legal Affairs, which
comply with the shall in no case be less than Five
provisions of the thousand pesos (P5,000) nor more
intellectual property law than One hundred fifty thousand
violated; pesos (P150,000). In addition, an
additional fine of not more than
(2) An assurance to refrain One thousand pesos (P1,000) shall
from engaging in unlawful be imposed for each day of
and unfair acts and continuing violation;
practices subject of the
formal investigation; (vi) The cancellation of any permit,
license, authority, or registration
(3) An assurance to recall, which may have been granted by
replace, repair, or refund the Office, or the suspension of the
the money value of validity thereof for such period of
defective goods time as the Director of Legal
distributed in commerce; Affairs may deem reasonable
and which shall not exceed one (1)
year;
(4) An assurance to
reimburse the complainant (vii) The withholding of any
the expenses and costs permit, license, authority, or
 registration which is being secured 11.6. Promote the use of patent information as an
by the respondent from the Office; effective tool to facilitate the development of
technology in the country;
(viii) The assessment of damages;
11.7. Provide technical, advisory, and other services
(ix) Censure; and relating to the licensing and promotion of technology,
and carry out an efficient and effective program for
(x) Other analogous penalties or technology transfer; and
sanctions. (Secs. 6, 7, 8, and 9,
Executive Order No. 913 [1983]a) 11.8. Register technology transfer arrangements, and
settle disputes involving technology transfer
10.3. The Director General may by Regulations payments. (n)
establish the procedure to govern the implementation
of this Section. (n) Section 12. The Management Information Services
and EDP Bureau. - The Management Information
Section 11. The Documentation, Information and Services and EDP Bureau shall:
Technology Transfer Bureau. - The Documentation,
Information and Technology Transfer Bureau shall 12.1. Conduct automation planning, research and
have the following functions: development, testing of systems, contracts with firms,
contracting, purchase and maintenance of equipment,
11.1. Support the search and examination activities of design and maintenance of systems, user
the Office through the following activities: consultation, and the like; and

(a) Maintain and upkeep classification 12.2. Provide management information support and
systems whether they be national or service to the Office. (n)
international such as the International Patent
Classification (IPC) system; Section 13. The Administrative, Financial and
Human Resource Development Service Bureau. -
(b) Provide advisory services for the 13.1. The Administrative Service shall: (a) Provide
determination of search patterns; services relative to procurement and allocation of
supplies and equipment, transportation, messengerial
work, cashiering, payment of salaries and other
(c) Maintain search files and search rooms Office's obligations, office maintenance, proper
and reference libraries; and safety and security, and other utility services; and
comply with government regulatory requirements in
(d) Adapt and package industrial property the areas of performance appraisal, compensation and
information. benefits, employment records and reports;

11.2. Establish networks or intermediaries or regional (b) Receive all applications filed with the
representatives; Office and collect fees therefor, and

11.3. Educate the public and build awareness on (c) Publish patent applications and grants,
intellectual property through the conduct of seminars trademark applications, and registration of
and lectures, and other similar activities; marks, industrial designs, utility models,
geographic indication, and lay-out-designs
11.4. Establish working relations with research and of integrated circuits registrations.
development institutions as well as with local and
international intellectual property professional groups 13.2. The Patent and Trademark Administration
and the like; Services shall perform the following functions among
others:
11.5. Perform state-of-the-art searches;
 (a) Maintain registers of assignments, so, it shall retain all the fees and charges it shall
mergings, licenses, and bibliographic on collect under the same conditions indicated in said
patents and trademarks; Subsection 14.1 but shall forthwith, cease to receive
any funds from the annual budget of the National
(b) Collect maintenance fees, issue certified Government; if not, the provisions of said Subsection
copies of documents in its custody and 14.1 shall continue to apply until such time when the
perform similar other activities; and Director General, subject to the approval of the
Secretary of Trade and Industry, certifies that the
(c) Hold in custody all the applications filed above-stated fees and charges the Office shall collect
with the office, and all patent grants, are enough to fund its operations. (n)
certificate of registrations issued by the
office, and the like. Section 15. Special Technical and Scientific
Assistance. - The Director General is empowered to
13.3. The Financial Service shall formulate and obtain the assistance of technical, scientific or other
manage a financial program to ensure availability and qualified officers and employees of other
proper utilization of funds; provide for an effective departments, bureaus, offices, agencies and
monitoring system of the financial operations of the instrumentalities of the Government, including
Office; and corporations owned, controlled or operated by the
Government, when deemed necessary in the
consideration of any matter submitted to the Office
13.4. The Human Resource Development Service relative to the enforcement of the provisions of this
shall design and implement human resource Act. (Sec. 3, R.A. No. 165a)
development plans and programs for the personnel of
the Office; provide for present and future manpower
needs of the organization; maintain high morale and Section 16. Seal of Office. - The Office shall have a
favorable employee attitudes towards the seal, the form and design of which shall be approved
organization through the continuing design and by the Director General. (Sec. 4, R.A. No. 165a)
implementation of employee development programs.
(n) Section 17. Publication of Laws and Regulations. -
The Director General shall cause to be printed and
Section 14. Use of Intellectual Property Rights Fees make available for distribution, pamphlet copies of
by the IPO. - 14.1. For a more effective and this Act, other pertinent laws, executive orders and
expeditious implementation of this Act, the Director information circulars relating to matters within the
General shall be authorized to retain, without need of jurisdiction of the Office. (Sec. 5, R.A. No. 165a)
a separate approval from any government agency,
and subject only to the existing accounting and Section 18. The IPO Gazette. - All matters required
auditing rules and regulations, all the fees, fines, to be published under this Act shall be published in
royalties and other charges, collected by the Office the Office's own publication to be known as the IPO
under this Act and the other laws that the Office will Gazette. (n)
be mandated to administer, for use in its operations,
like upgrading of its facilities, equipment outlay, Section 19. Disqualification of Officers and
human resource development, and the acquisition of Employees of the Office. - All officers and employees
the appropriate office space, among others, to of the Office shall not apply or act as an attorney or
improve the delivery of its services to the public. patent agent of an application for a grant of patent,
This amount, which shall be in addition to the for the registration of a utility model, industrial
Office's annual budget, shall be deposited and design or mark nor acquire, except by hereditary
maintained in a separate account or fund, which may succession, any patent or utility model, design
be used or disbursed directly by the Director General. registration, or mark or any right, title or interest
therein during their employment and for one (1) year
14.2. After five (5) years from the coming into force thereafter. (Sec. 77, R.A. No. 165a)
of this Act, the Director General shall, subject to the
approval of the Secretary of Trade and Industry, PART II
determine if the fees and charges mentioned in THE LAW ON PATENTS
Subsection 14.1 hereof that the Office shall collect
are sufficient to meet its budgetary requirements. If
 CHAPTER I 22.3. Methods for treatment of the human or animal
GENERAL PROVISIONS body by surgery or therapy and diagnostic methods
practiced on the human or animal body. This
Section 20. Definition of Terms Used in Part II, The provision shall not apply to products and composition
Law on Patents. - As used in Part II, the following for use in any of these methods;
terms shall have the following meanings:
22.4. Plant varieties or animal breeds or essentially
20.1. "Bureau" means the Bureau of Patents, biological process for the production of plants or
animals. This provision shall not apply to micro-
20.2. "Director" means the Director of organisms and non-biological and microbiological
Patents; processes.

20.3. "Regulations" means the Rules of Provisions under this subsection shall not preclude
Practice in Patent Cases formulated by the Congress to consider the enactment of a law
Director of Patents and promulgated by the providing sui generis protection of plant varieties and
Director General; animal breeds and a system of community intellectual
rights protection:
20.4. "Examiner" means the patent
examiner; 22.5. Aesthetic creations; and

20.5. "Patent application" or "application" 22.6. Anything which is contrary to public order or
means an application for a patent for an morality. (Sec. 8, R.A. No. 165a)
invention except in Chapters XII and XIII,
where "application" means an application Section 23. Novelty. . - An invention shall not be
for a utility model and an industrial design, considered new if it forms part of a prior art. (Sec. 9,
respectively; and R.A. No. 165a)

20.6. "Priority date" means the date of filing Section 24. Prior Art. - Prior art shall consist of:
of the foreign application for the same
invention referred to in Section 31 of this 24.1. Everything which has been made available to
Act. (n) the public anywhere in the world, before the filing
date or the priority date of the application claiming
CHAPTER II the invention; and
PATENTABILITY
24.2. The whole contents of an application for a
Section 21. Patentable Inventions. - Any technical patent, utility model, or industrial design registration,
solution of a problem in any field of human activity published in accordance with this Act, filed or
which is new, involves an inventive step and is effective in the Philippines, with a filing or priority
industrially applicable shall be Patentable. It may be, date that is earlier than the filing or priority date of
or may relate to, a product, or process, or an the application: Provided, That the application which
improvement of any of the foregoing. (Sec. 7, R.A. has validly claimed the filing date of an earlier
No. 165a) application under Section 31 of this Act, shall be
prior art with effect as of the filing date of such
Section 22. Non-Patentable Inventions. - The earlier application: Provided further, That the
following shall be excluded from patent protection: applicant or the inventor identified in both
applications are not one and the same. (Sec. 9, R.A.
No. 165a)
22.1. Discoveries, scientific theories and
mathematical methods;
Section 25. Non-Prejudicial Disclosure. . - 25.1. The
disclosure of information contained in the application
22.2. Schemes, rules and methods of performing during the twelve (12) months preceding the filing
mental acts, playing games or doing business, and date or the priority date of the application shall not
programs for computers; prejudice the applicant on the ground of lack of
novelty if such disclosure was made by:
 (a) The inventor; 30.2. In case the employee made the invention in the
course of his employment contract, the patent shall
(b) A patent office and the information was belong to:
contained (a) in another application filed by
the inventor and should not have been (a) The employee, if the inventive activity is
disclosed by the office, or (b) in an not a part of his regular duties even if the
application filed without the knowledge or employee uses the time, facilities and
consent of the inventor by a third party materials of the employer.
which obtained the information directly or
indirectly from the inventor; or (b) The employer, if the invention is the
result of the performance of his regularly-
(c) A third party which obtained the assigned duties, unless there is an
information directly or indirectly from the agreement, express or implied, to the
inventor. contrary. (n)

25.2. For the purposes of Subsection 25.1, "inventor" Section 31. Right of Priority. . - An application for
also means any person who, at the filing date of patent filed by any person who has previously
application, had the right to the patent. (n) applied for the same invention in another country
which by treaty, convention, or law affords similar
Section 26. Inventive Step. - An invention involves privileges to Filipino citizens, shall be considered as
an inventive step if, having regard to prior art, it is filed as of the date of filing the foreign application:
not obvious to a person skilled in the art at the time Provided, That: (a) the local application expressly
of the filing date or priority date of the application claims priority; (b) it is filed within twelve (12)
claiming the invention. (n) months from the date the earliest foreign application
was filed; and (c) a certified copy of the foreign
Section 27. Industrial Applicability. - An invention application together with an English translation is
that can be produced and used in any industry shall filed within six (6) months from the date of filing in
be industrially applicable. (n) the Philippines. (Sec. 15, R.A. No. 165a)

CHAPTER III CHAPTER IV

RIGHT TO A PATENT PATENT APPLICATION

Section 28. Right to a Patent. - The right to a patent Section 32. The Application. - 32.1. The patent
belongs to the inventor, his heirs, or assigns. When application shall be in Filipino or English and shall
two (2) or more persons have jointly made an contain the following:
invention, the right to a patent shall belong to them
jointly. (Sec. 10, R.A. No. 165a) (a) A request for the grant of a patent;

Section 29. First to File Rule. - If two (2) or more (b) A description of the invention;
persons have made the invention separately and
independently of each other, the right to the patent (c) Drawings necessary for the
shall belong to the person who filed an application understanding of the invention;
for such invention, or where two or more applications
are filed for the same invention, to the applicant who (d) One or more claims; and
has the earliest filing date or, the earliest priority
date. (3rd sentence, Sec. 10, R.A. No. 165a.) (e) An abstract.

Section 30. Inventions Created Pursuant to a 32.2. No patent may be granted unless the application
Commission. - 30.1. The person who commissions identifies the inventor. If the applicant is not the
the work shall own the patent, unless otherwise inventor, the Office may require him to submit said
provided in the contract. authority. (Sec. 13, R.A. No. 165a)
Section 33. Appointment of Agent or Representative. group of inventions forming a single general
- An applicant who is not a resident of the Philippines inventive concept.
must appoint and maintain a resident agent or
representative in the Philippines upon whom notice 38.2. If several independent inventions which do not
or process for judicial or administrative procedure form a single general inventive concept are claimed
relating to the application for patent or the patent may in one application, the Director may require that the
be served. (Sec. 11, R.A. No. 165a) application be restricted to a single invention. A later
application filed for an invention divided out shall be
Section 34. The Request. - The request shall contain a considered as having been filed on the same day as
petition for the grant of the patent, the name and the first application: Provided, That the later
other data of the applicant, the inventor and the agent application is filed within four (4) months after the
and the title of the invention. (n) requirement to divide becomes final or within such
additional time, not exceeding four (4) months, as
Section 35. Disclosure and Description of the may be granted: Provided further, That each
Invention. - 35.1. Disclosure. - The application shall divisional application shall not go beyond the
disclose the invention in a manner sufficiently clear disclosure in the initial application.
and complete for it to be carried out by a person
skilled in the art. Where the application concerns a 38.3. The fact that a patent has been granted on an
microbiological process or the product thereof and application that did not comply with the requirement
involves the use of a micro-organism which cannot of unity of invention shall not be a ground to cancel
be sufficiently disclosed in the application in such a the patent. (Sec. 17, R.A. No. 165a)
way as to enable the invention to be carried out by a
person skilled in the art, and such material is not Section 39. Information Concerning Corresponding
available to the public, the application shall be Foreign Application for Patents. - The applicant
supplemented by a deposit of such material with an shall, at the request of the Director, furnish him with
international depository institution. the date and number of any application for a patent
filed by him abroad, hereafter referred to as the
35.2. Description. - The Regulations shall prescribe "foreign application," relating to the same or
the contents of the description and the order of essentially the same invention as that claimed in the
presentation. (Sec. 14, R.A. No. 165a) application filed with the Office and other documents
relating to the foreign application. (n)
Section 36. The Claims. - 36.1. The application shall
contain one (1) or more claims which shall define the CHAPTER V
matter for which protection is sought. Each claim PROCEDURE FOR GRANT OF PATENT
shall be clear and concise, and shall be supported by
the description. Section 40. Filing Date Requirements. - 40.1. The
filing date of a patent application shall be the date of
36.2. The Regulations shall prescribe the manner of receipt by the Office of at least the following
the presentation of claims. (n) elements:

Section 37. The Abstract. - The abstract shall consist (a) An express or implicit indication that a
of a concise summary of the disclosure of the Philippine patent is sought;
invention as contained in the description, claims and
drawings in preferably not more than one hundred (b) Information identifying the applicant;
fifty (150) words. It must be drafted in a way which and
allows the clear understanding of the technical
problem, the gist of the solution of that problem (c) Description of the invention and one (1)
through the invention, and the principal use or uses of or more claims in Filipino or English.
the invention. The abstract shall merely serve for
technical information. (n)
40.2. If any of these elements is not submitted within
the period set by the Regulations, the application
Section 38. Unity of Invention. - 38.1. The shall be considered withdrawn. (n)
application shall relate to one invention only or to a
Section 41. According a Filing Date. - The Office available for inspection without the consent of the
shall examine whether the patent application satisfies applicant. (n)
the requirements for the grant of date of filing as
provided in Section 40 hereof. If the date of filing Section 46. Rights Conferred by a Patent Application
cannot be accorded, the applicant shall be given an After Publication. - The applicant shall have all the
opportunity to correct the deficiencies in accordance rights of a patentee under Section 76 against any
with the implementing Regulations. If the application person who, without his authorization, exercised any
does not contain all the elements indicated in Section of the rights conferred under Section 71 of this Act in
40, the filing date should be that date when all the relation to the invention claimed in the published
elements are received. If the deficiencies are not patent application, as if a patent had been granted for
remedied within the prescribed time limit, the that invention: Provided, That the said person had:
application shall be considered withdrawn. (n)
46.1. Actual knowledge that the invention that he was
Section 42. Formality Examination. - 42.1. After the using was the subject matter of a published
patent application has been accorded a filing date and application; or
the required fees have been paid on time in
accordance with the Regulations, the applicant shall 46.2. Received written notice that the invention that
comply with the formal requirements specified by he was using was the subject matter of a published
Section 32 and the Regulations within the prescribed application being identified in the said notice by its
period, otherwise the application shall be considered serial number: Provided, That the action may not be
withdrawn. filed until after the grant of a patent on the published
application and within four (4) years from the
42.2. The Regulations shall determine the procedure commission of the acts complained of. (n)
for the re-examination and revival of an application
as well as the appeal to the Director of Patents from Section 47. Observation by Third Parties. -
any final action by the examiner. (Sec. 16, R.A. No. Following the publication of the patent application,
165a) any person may present observations in writing
concerning the patentability of the invention. Such
Section 43. Classification and Search. - An observations shall be communicated to the applicant
application that has complied with the formal who may comment on them. The Office shall
requirements shall be classified and a search acknowledge and put such observations and comment
conducted to determine the prior art. (n) in the file of the application to which it relates. (n)

Section 44. Publication of Patent Application. - 44.1. Section 48. Request for Substantive Examination. -
The patent application shall be published in the IPO 48.1. The application shall be deemed withdrawn
Gazette together with a search document established unless within six (6) months from the date of
by or on behalf of the Office citing any documents publication under Section 41, a written request to
that reflect prior art, after the expiration of eighteen determine whether a patent application meets the
( 18) months from the filing date or priority date. requirements of Sections 21 to 27 and Sections 32 to
39 and the fees have been paid on time.
44.2. After publication of a patent application, any
interested party may inspect the application 48.2. Withdrawal of the request for examination shall
documents filed with the Office. be irrevocable and shall not authorize the refund of
any fee. (n)
44.3. The Director General subject to the approval of
the Secretary of Trade and Industry, may prohibit or Section 49. Amendment of Application. - An
restrict the publication of an application, if in his applicant may amend the patent application during
opinion, to do so would be prejudicial to the national examination: Provided, That such amendment shall
security and interests of the Republic of the not include new matter outside the scope of the
Philippines. (n) disclosure contained in the application as filed. (n)

Section 45. Confidentiality Before Publication. - A Section 50. Grant of Patent. - 50.1. If the application
patent application, which has not yet been published, meets the requirements of this Act, the Office shall
and all related documents, shall not be made
grant the patent: Provided, That all the fees are paid 55.2. If the annual fee is not paid, the patent
on time. application shall be deemed withdrawn or the patent
considered as lapsed from the day following the
50.2. If the required fees for grant and printing are expiration of the period within which the annual fees
not paid in due time, the application shall be deemed were due. A notice that the application is deemed
to be withdrawn. withdrawn or the lapse of a patent for non-payment
of any annual fee shall be published in the IPO
50.3. A patent shall take effect on the date of the Gazette and the lapse shall be recorded in the
publication of the grant of the patent in the IPO Register of the Office.
Gazette. (Sec. 18, R.A. No. 165a)
55.3. A grace period of six (6) months shall be
Section 51. Refusal of the Application. - 51.1. The granted for the payment of the annual fee, upon
final order of refusal of the examiner to grant the payment of the prescribed surcharge for delayed
patent shall be appealable to the Director in payment. (Sec. 22, R.A. No. 165a)
accordance with this Act.
Section 56. Surrender of Patent. - 56.1. The owner of
51.2. The Regulations shall provide for the procedure the patent, with the consent of all persons having
by which an appeal from the order of refusal from the grants or licenses or other right, title or interest in and
Director shall be undertaken. (n) to the patent and the invention covered thereby,
which have been recorded in the Office, may
surrender his patent or any claim or claims forming
Section 52. Publication Upon Grant of Patent. - part thereof to the Office for cancellation.
52.1. The grant of the patent together with other
related information shall be published in the IPO
Gazette within the time prescribed by the 56.2. A person may give notice to the Office of his
Regulations. opposition to the surrender of a patent under this
section, and if he does so, the Bureau shall notify the
proprietor of the patent and determine the question.
52.2. Any interested party may inspect the complete
description, claims, and drawings of the patent on file
with the Office. (Sec. 18, R.A. No. 165a) 56.3. If the Office is satisfied that the patent may
properly be surrendered, he may accept the offer and,
as from the day when notice of his acceptance is
Section 53. Contents of Patent. - The patent shall be published in the IPO Gazette, the patent shall cease to
issued in the name of the Republic of the Philippines have effect, but no action for infringement shall lie
under the seal of the Office and shall be signed by the and no right compensation shall accrue for any use of
Director, and registered together with the description, the patented invention before that day for the services
claims, and drawings, if any, in books and records of of the government. (Sec. 24, R.A. No. 165a)
the Office. (Secs. 19 and 20, R.A. No. 165a)
Section 57. Correction of Mistakes of the Office. -
Section 54. Term of Patent. - The term of a patent The Director shall have the power to correct, without
shall be twenty (20) years from the filing date of the fee, any mistake in a patent incurred through the fault
application. (Sec. 21, R.A. No. 165a) of the Office when clearly disclosed in the records
thereof, to make the patent conform to the records.
Section 55. Annual Fees. - 55.1. To maintain the (Sec. 25, R.A. No. 165)
patent application or patent, an annual fee shall be
paid upon the expiration of four (4) years from the Section 58. Correction of Mistake in the Application.
date the application was published pursuant to - On request of any interested person and payment of
Section 44 hereof, and on each subsequent the prescribed fee, the Director is authorized to
anniversary of such date. Payment may be made correct any mistake in a patent of a formal and
within three (3) months before the due date. The clerical nature, not incurred through the fault of the
obligation to pay the annual fees shall terminate Office. (Sec. 26, R.A. No. 165a)
should the application be withdrawn, refused, or
cancelled.
Section 59. Changes in Patents. - 59.1. The owner of
a patent shall have the right to request the Bureau to
make the changes in the patent in order to:
 (a) Limit the extent of the protection (c) That the patent is contrary to public order
conferred by it; or morality.

(b) Correct obvious mistakes or to correct 61.2. Where the grounds for cancellation relate to
clerical errors; and some of the claims or parts of the claim, cancellation
may be effected to such extent only. (Secs. 28 and 29,
(c) Correct mistakes or errors, other than R.A. No. 165a)
those referred to in letter (b), made in good
faith: Provided, That where the change Section 62. Requirement of the Petition. - The
would result in a broadening of the extent of petition for cancellation shall be in writing, verified
protection conferred by the patent, no by the petitioner or by any person in his behalf who
request may be made after the expiration of knows the facts, specify the grounds upon which it is
two (2) years from the grant of a patent and based, include a statement of the facts to be relied
the change shall not affect the rights of any upon, and filed with the Office. Copies of printed
third party which has relied on the patent, as publications or of patents of other countries, and
published. other supporting documents mentioned in the petition
shall be attached thereto, together with the translation
59.2. No change in the patent shall be permitted thereof in English, if not in the English language.
under this section, where the change would result in (Sec. 30, R.A. No. 165)
the disclosure contained in the patent going beyond
the disclosure contained in the application filed. Section 63. Notice of Hearing. - Upon filing of a
petition for cancellation, the Director of Legal Affairs
59.3. If, and to the extent to which the Office changes shall forthwith serve notice of the filing thereof upon
the patent according to this section, it shall publish the patentee and all persons having grants or licenses,
the same. (n) or any other right, title or interest in and to the patent
and the invention covered thereby, as appears of
Section 60. Form and Publication of Amendment. - record in the Office, and of notice of the date of
An amendment or correction of a patent shall be hearing thereon on such persons and the petitioner.
accomplished by a certificate of such amendment or Notice of the filing of the petition shall be published
correction, authenticated by the seal of the Office and in the IPO Gazette. (Sec. 31, R.A. No. 165a)
signed by the Director, which certificate shall be
attached to the patent. Notice of such amendment or Section 64. Committee of Three. - In cases involving
correction shall be published in the IPO Gazette and highly technical issues, on motion of any party, the
copies of the patent kept or furnished by the Office Director of Legal Affairs may order that the petition
shall include a copy of the certificate of amendment be heard and decided by a committee composed of
or correction. (Sec. 27, R.A. No. 165) the Director of Legal Affairs as chairman and two (2)
members who have the experience or expertise in the
CHAPTER VI field of technology to which the patent sought to be
CANCELLATION OF PATENTS AND cancelled relates. The decision of the committee shall
SUBSTITUTION OF PATENTEE be appealable to the Director General. (n)

Section 61. Cancellation of Patents. - 61.1. Any Section 65. Cancellation of the Patent. - 65.1. If the
interested person may, upon payment of the required Committee finds that a case for cancellation has been
fee, petition to cancel the patent or any claim thereof, proved, it shall order the patent or any specified
or parts of the claim, on any of the following claim or claims thereof cancelled.
grounds:
65.2. If the Committee finds that, taking into
(a) That what is claimed as the invention is consideration the amendment made by the patentee
not new or Patentable; during the cancellation proceedings, the patent and
the invention to which it relates meet the requirement
of this Act, it may decide to maintain the patent as
(b) That the patent does not disclose the amended: Provided, That the fee for printing of a new
invention in a manner sufficiently clear and patent is paid within the time limit prescribed in the
complete for it to be carried out by any Regulations.
person skilled in the art; or
65.3. If the fee for the printing of a new patent is not other damages in his favor if warranted by the
paid in due time, the patent should be revoked. circumstances. (Sec. 33, R.A. No. 165a)

65.4. If the patent is amended under Subsection 65.2 Section 69. Publication of the Court Order. - The
hereof, the Bureau shall, at the same time as it court shall furnish the Office a copy of the order or
publishes the mention of the cancellation decision, decision referred to in Sections 67 and 68, which
publish the abstract, representative claims and shall be published in the IPO Gazette within three (3)
drawings indicating clearly what the amendments months from the date such order or decision became
consist of. (n) final and executory, and shall be recorded in the
register of the Office. (n)
Section 66. Effect of Cancellation of Patent or
Claim. - The rights conferred by the patent or any Section 70. Time to File Action in Court. - The
specified claim or claims cancelled shall terminate. actions indicated in Sections 67 and 68 shall be filed
Notice of the cancellation shall be published in the within one (1) year from the date of publication made
IPO Gazette. Unless restrained by the Director in accordance with Sections 44 and 51, respectively.
General, the decision or order to cancel by Director (n)
of Legal Affairs shall be immediately executory even
pending appeal. (Sec. 32, R.A. No. 165a) CHAPTER VIII
RIGHTS OF PATENTEES AND
CHAPTER VII INFRINGEMENT OF PATENTS
REMEDIES OF A PERSON WITH A RIGHT TO
A PATENT Section 71. Rights Conferred by Patent. - 71.1. A
patent shall confer on its owner the following
Section 67. Patent Application by Persons Not exclusive rights:
Having the Right to a Patent. . - 67.1. If a person
referred to in Section 29 other than the applicant, is (a) Where the subject matter of a patent is a
declared by final court order or decision as having the product, to restrain, prohibit and prevent any
right to the patent, such person may, within three (3) unauthorized person or entity from making,
months after the decision has become final: using, offering for sale, selling or importing
that product;
(a) Prosecute the application as his own
application in place of the applicant; (b) Where the subject matter of a patent is a
process, to restrain, prevent or prohibit any
(b) File a new patent application in respect unauthorized person or entity from using the
of the same invention; process, and from manufacturing, dealing in,
using, selling or offering for sale, or
(c) Request that the application be refused; importing any product obtained directly or
or indirectly from such process.

(d) Seek cancellation of the patent, if one 71.2. Patent owners shall also have the right to
has already been issued. assign, or transfer by succession the patent, and to
conclude licensing contracts for the same. (Sec. 37,
67.2. The provisions of Subsection 38.2 shall apply R.A. No. 165a)
mutatis mutandis to a new application filed under
Subsection 67. 1(b). (n) Section 72. Limitations of Patent Rights. - The owner
of a patent has no right to prevent third parties from
Section 68. Remedies of the True and Actual performing, without his authorization, the acts
Inventor. - If a person, who was deprived of the referred to in Section 71 hereof in the following
patent without his consent or through fraud is circumstances:
declared by final court order or decision to be the true
and actual inventor, the court shall order for his 72.1. Using a patented product which has been put on
substitution as patentee, or at the option of the true the market in the Philippines by the owner of the
inventor, cancel the patent, and award actual and product, or with his express consent, insofar as such
use is performed after that product has been so put on (b) A judicial or administrative body has
the said market; determined that the manner of exploitation,
by the owner of the patent or his licensee is
72.2. Where the act is done privately and on a non- anti-competitive.
commercial scale or for a non-commercial purpose:
Provided, That it does not significantly prejudice the 74.2. The use by the Government, or third person
economic interests of the owner of the patent; authorized by the Government shall be subject,
mutatis mutandis, to the conditions set forth in
72.3. Where the act consists of making or using Sections 95 to 97 and 100 to 102. (Sec. 41, R.A. No.
exclusively for the purpose of experiments that relate 165a)
to the subject matter of the patented invention;
Section 75. Extent of Protection and Interpretation
72.4. Where the act consists of the preparation for of Claims. - 75.1. The extent of protection conferred
individual cases, in a pharmacy or by a medical by the patent shall be determined by the claims,
professional, of a medicine in accordance with a which are to be interpreted in the light of the
medical prescription or acts concerning the medicine description and drawings.
so prepared;
75.2. For the purpose of determining the extent of
72.5. Where the invention is used in any ship, vessel, protection conferred by the patent, due account shall
aircraft, or land vehicle of any other country entering be taken of elements which are equivalent to the
the territory of the Philippines temporarily or elements expressed in the claims, so that a claim shall
accidentally: Provided, That such invention is used be considered to cover not only all the elements as
exclusively for the needs of the ship, vessel, aircraft, expressed therein, but also equivalents. (n)
or land vehicle and not used for the manufacturing of
anything to be sold within the Philippines. (Secs. 38 Section 76. Civil Action for Infringement. - 76.1. The
and 39, R.A. No. 165a) making, using, offering for sale, selling, or importing
a patented product or a product obtained directly or
Section 73. Prior User. - 73.1. Notwithstanding indirectly from a patented process, or the use of a
Section 72 hereof, any prior user, who, in good faith patented process without the authorization of the
was using the invention or has undertaken serious patentee constitutes patent infringement.
preparations to use the invention in his enterprise or
business, before the filing date or priority date of the 76.2. Any patentee, or anyone possessing any right,
application on which a patent is granted, shall have title or interest in and to the patented invention,
the right to continue the use thereof as envisaged in whose rights have been infringed, may bring a civil
such preparations within the territory where the action before a court of competent jurisdiction, to
patent produces its effect. recover from the infringer such damages sustained
thereby, plus attorney's fees and other expenses of
73.2. The right of the prior user may only be litigation, and to secure an injunction for the
transferred or assigned together with his enterprise or protection of his rights.
business, or with that part of his enterprise or
business in which the use or preparations for use have 76.3. If the damages are inadequate or cannot be
been made. (Sec. 40, R.A. No. 165a) readily ascertained with reasonable certainty, the
court may award by way of damages a sum
Section 74. Use of Invention by Government. - 74.1. equivalent to reasonable royalty.
A Government agency or third person authorized by
the Government may exploit the invention even 76.4. The court may, according to the circumstances
without agreement of the patent owner where: of the case, award damages in a sum above the
amount found as actual damages sustained: Provided,
(a) The public interest, in particular, national That the award does not exceed three (3) times the
security, nutrition, health or the amount of such actual damages.
development of other sectors, as determined
by the appropriate agency of the 76.5. The court may, in its discretion, order that the
government, so requires; or infringing goods, materials and implements
predominantly used in the infringement be disposed
of outside the channels of commerce or destroyed, Section 81. Defenses in Action for Infringement. - In
without compensation. an action for infringement, the defendant, in addition
to other defenses available to him, may show the
76.6. Anyone who actively induces the infringement invalidity of the patent, or any claim thereof, on any
of a patent or provides the infringer with a of the grounds on which a petition of cancellation can
component of a patented product or of a product be brought under Section 61 hereof. (Sec. 45, R.A.
produced because of a patented process knowing it to No. 165)
be especially adopted for infringing the patented
invention and not suitable for substantial non- Section 82. Patent Found Invalid May be Cancelled.
infringing use shall be liable as a contributory - In an action for infringement, if the court shall find
infringer and shall be jointly and severally liable with the patent or any claim to be invalid, it shall cancel
the infringer. (Sec. 42, R.A. No. 165a) the same, and the Director of Legal Affairs upon
receipt of the final judgment of cancellation by the
Section 77. Infringement Action by a Foreign court, shall record that fact in the register of the
National. - Any foreign national or juridical entity Office and shall publish a notice to that effect in the
who meets the requirements of Section 3 and not IPO Gazette. (Sec. 46, R.A. No. 165a)
engaged in business in the Philippines, to which a
patent has been granted or assigned under this Act, Section 83. Assessor in Infringement Action. - 83.1.
may bring an action for infringement of patent, Two (2) or more assessors may be appointed by the
whether or not it is licensed to do business in the court. The assessors shall be possessed of the
Philippines under existing law. (Sec. 41-A, R.A. No. necessary scientific and technical knowledge required
165a) by the subject matter in litigation. Either party may
challenge the fitness of any assessor proposed for
Section 78. Process Patents; Burden of Proof . - If appointment.
the subject matter of a patent is a process for
obtaining a product, any identical product shall be 83.2. Each assessor shall receive a compensation in
presumed to have been obtained through the use of an amount to be fixed by the court and advanced by
the patented process if the product is new or there is the complaining party, which shall be awarded as part
substantial likelihood that the identical product was of his costs should he prevail in the action. (Sec. 47,
made by the process and the owner of the patent has R.A. No. 165a)
been unable despite reasonable efforts, to determine
the process actually used. In ordering the defendant Section 84. Criminal Action for Repetition of
to prove that the process to obtain the identical Infringement. - If infringement is repeated by the
product is different from the patented process, the infringer or by anyone in connivance with him after
court shall adopt measures to protect, as far as finality of the judgment of the court against the
practicable, his manufacturing and business secrets. infringer, the offenders shall, without prejudice to the
(n) institution of a civil action for damages, be criminally
liable therefor and, upon conviction, shall suffer
Section 79. Limitation of Action for Damages. - No imprisonment for the period of not less than six (6)
damages can be recovered for acts of infringement months but not more than three (3) years and/or a
committed more than four (4) years before the fine of not less than One hundred thousand pesos
institution of the action for infringement. (Sec. 43, (P100,000) but not more than Three hundred
R.A. No. 165) thousand pesos (P300,000), at the discretion of the
court. The criminal action herein provided shall
Section 80. Damages, Requirement of Notice. - prescribe in three (3) years from date of the
Damages cannot be recovered for acts of commission of the crime. (Sec. 48, R.A. No. 165a)
infringement committed before the infringer had
known, or had reasonable grounds to know of the CHAPTER IX
patent. It is presumed that the infringer had known of VOLUNTARY LICENSING
the patent if on the patented product, or on the
container or package in which the article is supplied Section 85. Voluntary License Contract. - To
to the public, or on the advertising material relating encourage the transfer and dissemination of
to the patented product or process, are placed the technology, prevent or control practices and
words "Philippine Patent" with the number of the conditions that may in particular cases constitute an
patent. (Sec. 44, R.A. No. 165a)
abuse of intellectual property rights having an 87.9. Those which restrict the use of the technology
adverse effect on competition and trade, all supplied after the expiration of the technology
technology transfer arrangements shall comply with transfer arrangement, except in cases of early
the provisions of this Chapter. (n) termination of the technology transfer arrangement
due to reason(s) attributable to the licensee;
Section 86. Jurisdiction to Settle Disputes on
Royalties. - The Director of the Documentation, 87.10. Those which require payments for patents and
Information and Technology Transfer Bureau shall other industrial property rights after their expiration,
exercise quasi-judicial jurisdiction in the settlement termination arrangement;
of disputes between parties to a technology transfer
arrangement arising from technology transfer 87.11. Those which require that the technology
payments, including the fixing of appropriate amount recipient shall not contest the validity of any of the
or rate of royalty. (n) patents of the technology supplier;

Section 87. Prohibited Clauses. - Except in cases 87.12. Those which restrict the research and
under Section 91, the following provisions shall be development activities of the licensee designed to
deemed prima facie to have an adverse effect on absorb and adapt the transferred technology to local
competition and trade: conditions or to initiate research and development
programs in connection with new products, processes
87.1. Those which impose upon the licensee the or equipment;
obligation to acquire from a specific source capital
goods, intermediate products, raw materials, and 87.13. Those which prevent the licensee from
other technologies, or of permanently employing adapting the imported technology to local conditions,
personnel indicated by the licensor; or introducing innovation to it, as long as it does not
impair the quality standards prescribed by the
87.2. Those pursuant to which the licensor reserves licensor;
the right to fix the sale or resale prices of the products
manufactured on the basis of the license; 87.14. Those which exempt the licensor for liability
for non-fulfilment of his responsibilities under the
87.3. Those that contain restrictions regarding the technology transfer arrangement and/or liability
volume and structure of production; arising from third party suits brought about by the use
of the licensed product or the licensed technology;
87.4. Those that prohibit the use of competitive and
technologies in a non-exclusive technology transfer
agreement; 87.15. Other clauses with equivalent effects. (Sec.
33-C (2), R.A 165a)
87.5. Those that establish a full or partial purchase
option in favor of the licensor; Section 88. Mandatory Provisions. - The following
provisions shall be included in voluntary license
87.6. Those that obligate the licensee to transfer for contracts:
free to the licensor the inventions or improvements
that may be obtained through the use of the licensed 88.1. That the laws of the Philippines shall govern the
technology; interpretation of the same and in the event of
litigation, the venue shall be the proper court in the
87.7. Those that require payment of royalties to the place where the licensee has its principal office;
owners of patents for patents which are not used;
88.2. Continued access to improvements in
87.8. Those that prohibit the licensee to export the techniques and processes related to the technology
licensed product unless justified for the protection of shall be made available during the period of the
the legitimate interest of the licensor such as exports technology transfer arrangement;
to countries where exclusive licenses to manufacture
and/or distribute the licensed product(s) have already 88.3. In the event the technology transfer
been granted; arrangement shall provide for arbitration, the
Procedure of Arbitration of the Arbitration Law of CHAPTER X
the Philippines or the Arbitration Rules of the United COMPULSORY LICENSING
Nations Commission on International Trade Law
(UNCITRAL) or the Rules of Conciliation and Section 93. Grounds for Compulsory Licensing. -
Arbitration of the International Chamber of The Director of Legal Affairs may grant a license to
Commerce (ICC) shall apply and the venue of exploit a patented invention, even without the
arbitration shall be the Philippines or any neutral agreement of the patent owner, in favor of any person
country; and who has shown his capability to exploit the invention,
under any of the following circumstances:
88.4. The Philippine taxes on all payments relating to
the technology transfer arrangement shall be borne by 93.1. National emergency or other circumstances of
the licensor. (n) extreme urgency;

Section 89. Rights of Licensor. - In the absence of 93.2. Where the public interest, in particular, national
any provision to the contrary in the technology security, nutrition, health or the development of other
transfer arrangement, the grant of a license shall not vital sectors of the national economy as determined
prevent the licensor from granting further licenses to by the appropriate agency of the Government, so
third person nor from exploiting the subject matter of requires; or
the technology transfer arrangement himself. (Sec.
33-B, R.A. 165a) 93.3. Where a judicial or administrative body has
determined that the manner of exploitation by the
Section 90. Rights of Licensee. - The licensee shall owner of the patent or his licensee is anti-
be entitled to exploit the subject matter of the competitive; or
technology transfer arrangement during the whole
term of the technology transfer arrangement. (Sec. 93.4. In case of public non-commercial use of the
33-C (1), R.A. 165a) patent by the patentee, without satisfactory reason;

Section 91. Exceptional Cases. - In exceptional or 93.5. If the patented invention is not being worked in
meritorious cases where substantial benefits will the Philippines on a commercial scale, although
accrue to the economy, such as high technology capable of being worked, without satisfactory reason:
content, increase in foreign exchange earnings, Provided, That the importation of the patented article
employment generation, regional dispersal of shall constitute working or using the patent. (Secs.
industries and/or substitution with or use of local raw 34, 34-A, 34-B, R.A. No. 165a)
materials, or in the case of Board of Investments,
registered companies with pioneer status, exemption
from any of the above requirements may be allowed Section 94. Period for Filing a Petition for a
by the Documentation, Information and Technology Compulsory License. - 94.1. A compulsory license
Transfer Bureau after evaluation thereof on a case by may not be applied for on the ground stated in
case basis. (n) Subsection 93.5 before the expiration of a period of
four (4) years from the date of filing of the
application or three (3) years from the date of the
Section 92. Non-Registration with the patent whichever period expires last.
Documentation, Information and Technology
Transfer Bureau. - Technology transfer arrangements
that conform with the provisions of Sections 86 and 94.2. A compulsory license which is applied for on
87 need not be registered with the Documentation, any of the grounds stated in Subsections 93.2, 93.3,
Information and Technology Transfer Bureau. Non- and 93.4 and Section 97 may be applied for at any
conformance with any of the provisions of Sections time after the grant of the patent. (Sec. 34(1), R.A.
87 and 88, however, shall automatically render the No. 165)
technology transfer arrangement unenforceable,
unless said technology transfer arrangement is Section 95. Requirement to Obtain a License on
approved and registered with the Documentation, Reasonable Commercial Terms. - 95.1. The license
Information and Technology Transfer Bureau under will only be granted after the petitioner has made
the provisions of Section 91 on exceptional cases. (n) efforts to obtain authorization from the patent owner
on reasonable commercial terms and conditions but
such efforts have not been successful within a 97.2. The owner of the first patent shall be entitled to
reasonable period of time. a cross-license on reasonable terms to use the
invention claimed in the second patent;
95.2. The requirement under Subsection 95.1 shall
not apply in the following cases: 97.3. The use authorized in respect of the first patent
shall be non-assignable except with the assignment of
(a) Where the petition for compulsory the second patent; and
license seeks to remedy a practice
determined after judicial or administrative 97.4. The terms and conditions of Sections 95, 96 and
process to be anti-competitive; 98 to 100 of this Act. (Sec. 34-C, R.A. No. 165a)

(b) In situations of national emergency or Section 98. Form and Contents of Petition. - The
other circumstances of extreme urgency; petition for compulsory licensing must be in writing,
verified by the petitioner and accompanied by
(c) In cases of public non-commercial use. payment of the required filing fee. It shall contain the
name and address of the petitioner as well as those of
95.3. In situations of national emergency or other the respondents, the number and date of issue of the
circumstances of extreme urgency, the right holder patent in connection with which compulsory license
shall be notified as soon as reasonably practicable. is sought, the name of the patentee, the title of the
invention, the statutory grounds upon which
compulsory license is sought, the ultimate facts
95.4. In the case of public non-commercial use, constituting the petitioner's cause of action, and the
where the government or contractor, without making relief prayed for. (Sec. 34-D, R.A. No. 165)
a patent search, knows or has demonstrable grounds
to know that a valid patent is or will be used by or for
the government, the right holder shall be informed Section 99. Notice of Hearing. - 99.1. Upon filing of
promptly. (n) a petition, the Director of Legal Affairs shall
forthwith serve notice of the filing thereof upon the
patent owner and all persons having grants or
Section 96. Compulsory Licensing of Patents licenses, or any other right, title or interest in and to
Involving Semi-Conductor Technology. - In the case the patent and invention covered thereby as appears
of compulsory licensing of patents involving semi- of record in the Office, and of notice of the date of
conductor technology, the license may only be hearing thereon, on such persons and petitioner. The
granted in case of public non-commercial use or to resident agent or representative appointed in
remedy a practice determined after judicial or accordance with Section 33 hereof, shall be bound to
administrative process to be anti-competitive. (n) accept service of notice of the filing of the petition
within the meaning of this Section.
Section 97. Compulsory License Based on
Interdependence of Patents. - If the invention 99.2. In every case, the notice shall be published by
protected by a patent, hereafter referred to as the the said Office in a newspaper of general circulation,
"second patent," within the country cannot be worked once a week for three (3) consecutive weeks and once
without infringing another patent, hereafter referred in the IPO Gazette at applicant's expense. (Sec. 34-E,
to as the "first patent," granted on a prior application R.A. No. 165)
or benefiting from an earlier priority, a compulsory
license may be granted to the owner of the second
patent to the extent necessary for the working of his Section 100. Terms and Conditions of Compulsory
invention, subject to the following conditions: License. - The basic terms and conditions including
the rate of royalties of a compulsory license shall be
fixed by the Director of Legal Affairs subject to the
97.1. The invention claimed in the second patent following conditions:
involves an important technical advance of
considerable economic significance in relation to the
first patent; 100.1. The scope and duration of such license shall
be limited to the purpose for which it was authorized;

100.2. The license shall be non-exclusive;

100.3. The license shall be non-assignable, except 101.4. The said Director shall cause the amendment,
with that part of the enterprise or business with which surrender, or cancellation in the Register, notify the
the invention is being exploited; patentee, and/or the licensee, and cause notice thereof
to be published in the IPO Gazette. (Sec. 35-D, R.A.
100.4. Use of the subject matter of the license shall No. 165a)
be devoted predominantly for the supply of the
Philippine market: Provided, That this limitation shall Section 102. Licensee's Exemption from Liability. -
not apply where the grant of the license is based on Any person who works a patented product, substance
the ground that the patentee's manner of exploiting and/or process under a license granted under this
the patent is determined by judicial or administrative Chapter, shall be free from any liability for
process, to be anti-competitive. infringement: Provided however, That in the case of
voluntary licensing, no collusion with the licensor is
100.5. The license may be terminated upon proper proven. This is without prejudice to the right of the
showing that circumstances which led to its grant rightful owner of the patent to recover from the
have ceased to exist and are unlikely to recur: licensor whatever he may have received as royalties
Provided, That adequate protection shall be afforded under the license. (Sec. 35-E, R.A. No. 165a)
to the legitimate interest of the licensee; and
CHAPTER XI
100.6. The patentee shall be paid adequate ASSIGNMENT AND TRANSMISSION OF
remuneration taking into account the economic value RIGHTS
of the grant or authorization, except that in cases
where the license was granted to remedy a practice Section 103. Transmission of Rights. - 103.1. Patents
which was determined after judicial or administrative or applications for patents and invention to which
process, to be anti-competitive, the need to correct they relate, shall be protected in the same way as the
the anti-competitive practice may be taken into rights of other property under the Civil Code.
account in fixing the amount of remuneration. (Sec.
35-B, R.A. No. 165a) 103.2. Inventions and any right, title or interest in and
to patents and inventions covered thereby, may be
Section 101. Amendment, Cancellation, Surrender of assigned or transmitted by inheritance or bequest or
Compulsory License. - 101.1. Upon the request of the may be the subject of a license contract. (Sec. 50,
patentee or the licensee, the Director of Legal Affairs R.A. No. 165a)
may amend the decision granting the compulsory
license, upon proper showing of new facts or Section 104. Assignment of Inventions. - An
circumstances justifying such amendment. assignment may be of the entire right, title or interest
in and to the patent and the invention covered
101.2. Upon the request of the patentee, the said thereby, or of an undivided share of the entire patent
Director may cancel the compulsory license: and invention, in which event the parties become
joint owners thereof. An assignment may be limited
(a) If the ground for the grant of the to a specified territory. (Sec. 51, R.A. No. 165)
compulsory license no longer exists and is
unlikely to recur; Section 105. Form of Assignment. - The assignment
must be in writing, acknowledged before a notary
(b) If the licensee has neither begun to public or other officer authorized to administer oath
supply the domestic market nor made or perform notarial acts, and certified under the hand
serious preparation therefor; and official seal of the notary or such other officer.
(Sec. 52, R.A. No. 165)
(c) If the licensee has not complied with the
prescribed terms of the license; Section 106. Recording. - 106.1. The Office shall
record assignments, licenses and other instruments
101.3. The licensee may surrender the license by a relating to the transmission of any right, title or
written declaration submitted to the Office. interest in and to inventions, and patents or
application for patents or inventions to which they
relate, which are presented in due form to the Office
for registration, in books and records kept for the
purpose. The original documents together with a (b) Section 21, "Patentable Inventions",
signed duplicate thereof shall be filed, and the shall apply except the reference to inventive
contents thereof should be kept confidential. If the step as a condition of protection.
original is not available, an authenticated copy
thereof in duplicate may be filed. Upon recording, the 109.2. Sections 43 to 49 shall not apply in the case of
Office shall retain the duplicate, return the original or applications for registration of a utility model.
the authenticated copy to the party who filed the
same and notice of the recording shall be published in 109.3. A utility model registration shall expire,
the IPO Gazette. without any possibility of renewal, at the end of the
seventh year after the date of the filing of the
106.2. Such instruments shall be void as against any application.
subsequent purchaser or mortgagee for valuable
consideration and without notice, unless, it is so 109.4. In proceedings under Sections 61 to 64, the
recorded in the Office, within three (3) months from utility model registration shall be canceled on the
the date of said instrument, or prior to the subsequent following grounds:
purchase or mortgage. (Sec. 53, R.A. No. 165a)
(a) That the claimed invention does not
Section 107. Rights of Joint Owners. - If two (2) or qualify for registration as a utility model and
more persons jointly own a patent and the invention does not meet the requirements of
covered thereby, either by the issuance of the patent registrability, in particular having regard to
in their joint favor or by reason of the assignment of Subsection 109.1 and Sections 22, 23, 24
an undivided share in the patent and invention or by and 27;
reason of the succession in title to such share, each of
the joint owners shall be entitled to personally make,
use, sell, or import the invention for his own profit: (b) That the description and the claims do
Provided, however, That neither of the joint owners not comply with the prescribed
shall be entitled to grant licenses or to assign his requirements;
right, title or interest or part thereof without the
consent of the other owner or owners, or without (c) That any drawing which is necessary for
proportionally dividing the proceeds with such other the understanding of the invention has not
owner or owners. (Sec. 54, R.A. No. 165) been furnished;

CHAPTER XII (d) That the owner of the utility model

REGISTRATION OF UTILITY MODELS registration is not the inventor or his
successor in title. (Secs. 55, 56, and 57, R.A.
Section 108. Applicability of Provisions Relating to No. 165a)
Patents. - 108.1. Subject to Section 109, the
provisions governing patents shall apply, mutatis Section 110. Conversion of Patent Applications or
mutandis, to the registration of utility models. Applications for Utility Model Registration. - 110.1.
At any time before the grant or refusal of a patent, an
108.2. Where the right to a patent conflicts with the applicant for a patent may, upon payment of the
right to a utility model registration in the case prescribed fee, convert his application into an
referred to in Section 29, the said provision shall application for registration of a utility model, which
apply as if the word "patent" were replaced by the shall be accorded the filing date of the initial
words "patent or utility model registration". (Sec. 55, application. An application may be converted only
R.A. No. 165a) once.

Section 109. Special Provisions Relating to Utility 110.2. At any time before the grant or refusal of a
Models. - 109.1. (a) An invention qualifies for utility model registration, an applicant for a utility
registration as a utility model if it is new and model registration may, upon payment of the
industrially applicable. prescribed fee, convert his application into a patent
application, which shall be accorded the filing date of
the initial application. (Sec. 58, R.A. No. 165a)
Section 111. Prohibition against Filing of Parallel 114.2. The application may be accompanied by a
Applications. - An applicant may not file two (2) specimen of the article embodying the industrial
applications for the same subject, one for utility design and shall be subject to the payment of the
model registration and the other for the grant of a prescribed fee.(n)
patent whether simultaneously or consecutively. (Sec.
59, R.A. No. 165a) Section 115. Several Industrial Designs in One
Application. - Two (2) or more industrial designs
CHAPTER XIII may be the subject of the same application: Provided,
INDUSTRIAL DESIGN That they relate to the same sub-class of the
International Classification or to the same set or
Section 112. Definition of Industrial Design. - An composition of articles. (n)
industrial design is any composition of lines or colors
or any three-dimensional form, whether or not Section 116. Examination. - 116.1. The Office shall
associated-with lines or colors: Provided, That such accord as the filing date the date of receipt of the
composition or form gives a special appearance to application containing indications allowing the
and can serve as pattern for an industrial product or identity of the applicant to be established and a
handicraft. (Sec. 55, R.A. No. 165a) representation of the article embodying the industrial
design or a pictorial representation thereof.
Section 113. Substantive Conditions for Protection. -
113.1. Only industrial designs that are new or 116.2. If the application does not meet these
original shall benefit from protection under this Act. requirements the filing date should be that date when
all the elements specified in Section 105 are filed or
113.2. Industrial designs dictated essentially by the mistakes corrected. Otherwise if the requirements
technical or functional considerations to obtain a are not complied within the prescribed period, the
technical result or those that are contrary to public application shall be considered withdrawn.
order, health or morals shall not be protected. (n)
116.3. After the application has been accorded a
Section 114. Contents of the Application. - 114.1. filing date and the required fees paid on time, the
Every application for registration of an industrial applicant shall comply with the requirements of
design shall contain: Section 114 within the prescribed period, otherwise
the application shall be considered withdrawn.
(a) A request for registration of the
industrial design; 116.4. The Office shall examine whether the
industrial design complies with requirements of
(b) Information identifying the applicant; Section 112 and Subsections 113.2 and 113.3. (n)

(c) An indication of the kind of article of Section 117. Registration. - 117.1. Where the Office
manufacture or handicraft to which the finds that the conditions referred to in Section 113 are
design shall be applied; fulfilled, it shall order that registration be effected in
the industrial design register and cause the issuance
of an industrial design certificate of registration,
(d) A representation of the article of otherwise, it shall refuse the application.
manufacture or handicraft by way of
drawings, photographs or other adequate
graphic representation of the design as 117.2. The form and contents of an industrial design
applied to the article of manufacture or certificate shall be established by the Regulations:
handicraft which clearly and fully discloses Provided, That the name and address of the creator
those features for which design protection is shall be mentioned in every case.
claimed; and
117.3. Registration shall be published in the form and
(e) The name and address of the creator, or within the period fixed by the Regulations.
where the applicant is not the creator, a
statement indicating the origin of the right to 117.4. The Office shall record in the register any
the industrial design registration. change in the identity of the proprietor of the
industrial design or his representative, if proof
thereof is furnished to it. A fee shall be paid, with the (a) If the subject matter of the industrial
request to record the change in the identity of the design is not registrable within the terms of
proprietor. If the fee is not paid, the request shall be Sections 112 and 113;
deemed not to have been filed. In such case, the
former proprietor and the former representative shall (b) If the subject matter is not new; or
remain subject to the rights and obligations as
provided in this Act. (c) If the subject matter of the industrial
design extends beyond the content of the
117.5. Anyone may inspect the Register and the files application as originally filed.
of registered industrial designs including the files of
cancellation proceedings. (n) 120.2. Where the grounds for cancellation relate to a
part of the industrial design, cancellation may be
Section 118. The Term of Industrial Design effected to such extent only. The restriction may be
Registration. - 118.1 The registration of an industrial effected in the form of an alteration of the effected
design shall be for a period of five (5) years from the features of the design. (n)
filing date of the application.
PART III
118.2. The registration of an industrial design may be THE LAW ON TRADEMARKS, SERVICE
renewed for not more than two (2) consecutive MARKS AND TRADE NAMES
periods of five (5) years each, by paying the renewal
fee. Section 121. Definitions. - As used in Part III, the
following terms have the following meanings:
118.3. The renewal fee shall be paid within twelve
(12) months preceding the expiration of the period of 121.1. "Mark" means any visible sign capable of
registration. However, a grace period of six (6) distinguishing the goods (trademark) or services
months shall be granted for payment of the fees after (service mark) of an enterprise and shall include a
such expiration, upon payment of a surcharge stamped or marked container of goods; (Sec. 38, R.A.
No. 166a)
118.4. The Regulations shall fix the amount of
renewal fee, the surcharge and other requirements 121.2. "Collective mark" means any visible sign
regarding the recording of renewals of registration. designated as such in the application for registration
and capable of distinguishing the origin or any other
Section 119. Application of Other Sections and common characteristic, including the quality of goods
Chapters. - 119.1. The following provisions relating
Section 21 - Novelty:
to patents shall apply mutatis mutandis to an
industrial design registration: Prior art: Provided, That the disclosure is
Section 24 - contained in printed documents or in any tangible
form;

Section 25 - Non-prejudicial Disclosure;

119.2. If the essential elements of an industrial design Section 27 - Inventions Created Pursuant to a Commission;
which is the subject of an application have been
obtained from the creation of another person without Section 28 - Right to a Patent;
his consent, protection under this Chapter cannot be
Section 29 - First to File Rule;
invoked against the injured party. (n)
Section 31 Right of Priority: Provided, That the application
Section 120. Cancellation of Design Registration. - for industrial design shall be filed within six (6)
-
months from the earliest filing date of the
120.1. At any time during the term of the industrial corresponding foreign application;
design registration, any person upon payment of the
required fee, may petition the Director of Legal Section 33 - Appointment of Agent or Representative;
Affairs to cancel the industrial design on any of the
Section 51 - Refusal of the Application;
following grounds:
Sections 56
- Surrender, Correction of and Changes in Patent;
to 60

CHAPTER
- Remedies of a Person with a Right to Patent;
VII

CHAPTER Rights of Patentees and Infringement of Patents;

-
VIII and

CHAPTER
- Assignment and Transmission of Rights.
XI
or services of different enterprises which use the sign (i) The same goods or services, or
under the control of the registered owner of the
collective mark; (Sec. 40, R.A. No. 166a) (ii) Closely related goods or
services, or
121.3. "Trade name" means the name or designation
identifying or distinguishing an enterprise; (Sec. 38, (iii) If it nearly resembles such a
R.A. No. 166a) mark as to be likely to deceive or
cause confusion;
121.4. "Bureau" means the Bureau of Trademarks;
(e) Is identical with, or confusingly similar
121.5. "Director" means the Director of Trademarks; to, or constitutes a translation of a mark
which is considered by the competent
121.6. "Regulations" means the Rules of Practice in authority of the Philippines to be well-
Trademarks and Service Marks formulated by the known internationally and in the Philippines,
Director of Trademarks and approved by the Director whether or not it is registered here, as being
General; and already the mark of a person other than the
applicant for registration, and used for
121.7. "Examiner" means the trademark examiner. identical or similar goods or services:
(Sec. 38, R.A. No. 166a) Provided, That in determining whether a
mark is well-known, account shall be taken
of the knowledge of the relevant sector of
Section 122. How Marks are Acquired. - The rights the public, rather than of the public at large,
in a mark shall be acquired through registration made including knowledge in the Philippines
validly in accordance with the provisions of this law. which has been obtained as a result of the
(Sec. 2-A, R A. No. 166a) promotion of the mark;

Section 123. Registrability. - 123.1. A mark cannot (f) Is identical with, or confusingly similar
be registered if it: to, or constitutes a translation of a mark
considered well-known in accordance with
(a) Consists of immoral, deceptive or the preceding paragraph, which is registered
scandalous matter, or matter which may in the Philippines with respect to goods or
disparage or falsely suggest a connection services which are not similar to those with
with persons, living or dead, institutions, respect to which registration is applied for:
beliefs, or national symbols, or bring them Provided, That use of the mark in relation to
into contempt or disrepute; those goods or services would indicate a
connection between those goods or services,
(b) Consists of the flag or coat of arms or and the owner of the registered mark:
other insignia of the Philippines or any of its Provided further, That the interests of the
political subdivisions, or of any foreign owner of the registered mark are likely to be
nation, or any simulation thereof; damaged by such use;

(c) Consists of a name, portrait or signature (g) Is likely to mislead the public,
identifying a particular living individual particularly as to the nature, quality,
except by his written consent, or the name, characteristics or geographical origin of the
signature, or portrait of a deceased President goods or services;
of the Philippines, during the life of his
widow, if any, except by written consent of (h) Consists exclusively of signs that are
the widow; generic for the goods or services that they
seek to identify;
(d) Is identical with a registered mark
belonging to a different proprietor or a mark (i) Consists exclusively of signs or of
with an earlier filing or priority date, in indications that have become customary or
respect of: usual to designate the goods or services in
 everyday language or in bona fide and industrial or commercial establishment, if
established trade practice; any;

(j) Consists exclusively of signs or of (d) Where the applicant is a juridical entity,
indications that may serve in trade to the law under which it is organized and
designate the kind, quality, quantity, existing;
intended purpose, value, geographical
origin, time or production of the goods or (e) The appointment of an agent or
rendering of the services, or other representative, if the applicant is not
characteristics of the goods or services; domiciled in the Philippines;

(k) Consists of shapes that may be (f) Where the applicant claims the priority of
necessitated by technical factors or by the an earlier application, an indication of:
nature of the goods themselves or factors
that affect their intrinsic value; i) The name of the State with
whose national office the earlier
(l) Consists of color alone, unless defined by application was filed or if filed with
a given form; or an office other than a national
office, the name of that office,
(m) Is contrary to public order or morality.
ii) The date on which the earlier
123.2. As regards signs or devices mentioned in application was filed, and
paragraphs (j), (k), and (l), nothing shall prevent the
registration of any such sign or device which has iii) Where available, the application
become distinctive in relation to the goods for which number of the earlier application;
registration is requested as a result of the use that
have been made of it in commerce in the Philippines. (g) Where the applicant claims color as a
The Office may accept as prima facie evidence that distinctive feature of the mark, a statement
the mark has become distinctive, as used in to that effect as well as the name or names
connection with the applicant's goods or services in of the color or colors claimed and an
commerce, proof of substantially exclusive and indication, in respect of each color, of the
continuous use thereof by the applicant in commerce principal parts of the mark which are in that
in the Philippines for five (5) years before the date on color;
which the claim of distinctiveness is made.
(h) Where the mark is a three-dimensional
123.3. The nature of the goods to which the mark is mark, a statement to that effect;
applied will not constitute an obstacle to registration.
(Sec. 4, R.A. No. 166a)
(i) One or more reproductions of the mark,
as prescribed in the Regulations;
Section 124. Requirements of Application. - 124.1.
The application for the registration of the mark shall
be in Filipino or in English and shall contain the (j) A transliteration or translation of the
following: mark or of some parts of the mark, as
prescribed in the Regulations;
(a) A request for registration;
(k) The names of the goods or services for
which the registration is sought, grouped
(b) The name and address of the applicant; according to the classes of the Nice
Classification, together with the number of
(c) The name of a State of which the the class of the said Classification to which
applicant is a national or where he has each group of goods or services belongs;
domicile; and the name of a State in which and
the applicant has a real and effective
 (l) A signature by, or other self- (a) An express or implicit indication that the
identification of, the applicant or his registration of a mark is sought;
representative.
(b) The identity of the applicant;
124.2. The applicant or the registrant shall file a
declaration of actual use of the mark with evidence to (c) Indications sufficient to contact the
that effect, as prescribed by the Regulations within applicant or his representative, if any;
three (3) years from the filing date of the application.
Otherwise, the application shall be refused or the (d) A reproduction of the mark whose
mark shall be removed from the Register by the registration is sought; and
Director.
(e) The list of the goods or services for
124.3. One (1) application may relate to several which the registration is sought.
goods and/or services, whether they belong to one (1)
class or to several classes of the Nice Classification.
127.2. No filing date shall be accorded until the
required fee is paid. (n)
124.4. If during the examination of the application,
the Office finds factual basis to reasonably doubt the
veracity of any indication or element in the Section 128. Single Registration for Goods and/or
application, it may require the applicant to submit Services. - Where goods and/or services belonging to
sufficient evidence to remove the doubt. (Sec. 5, R.A. several classes of the Nice Classification have been
No. 166a) included in one (1) application, such an application
shall result in one registration. (n)
Section 125. Representation; Address for Service. - If
the applicant is not domiciled or has no real and Section 129. Division of Application. - Any
effective commercial establishment in the application referring to several goods or services,
Philippines, he shall designate by a written document hereafter referred to as the "initial application," may
filed in the Office, the name and address of a be divided by the applicant into two (2) or more
Philippine resident who may be served notices or applications, hereafter referred to as the "divisional
process in proceedings affecting the mark. Such applications," by distributing among the latter the
notices or services may be served upon the person so goods or services referred to in the initial application.
designated by leaving a copy thereof at the address The divisional applications shall preserve the filing
specified in the last designation filed. If the person so date of the initial application or the benefit of the
designated cannot be found at the address given in right of priority. (n)
the last designation, such notice or process may be
served upon the Director. (Sec. 3, R.A. No. 166a) Section 130. Signature and Other Means of Self-
Identification. - 130.1. Where a signature is required,
Section 126. Disclaimers. - The Office may allow or the Office shall accept:
require the applicant to disclaim an unregistrable
component of an otherwise registrable mark but such (a) A hand-written signature; or
disclaimer shall not prejudice or affect the applicant's
or owner's rights then existing or thereafter arising in (b) The use of other forms of signature, such
the disclaimed matter, nor such shall disclaimer as a printed or stamped signature, or the use
prejudice or affect the applicant's or owner's right on of a seal instead of a hand-written signature:
another application of later date if the disclaimed Provided, That where a seal is used, it
matter became distinctive of the applicant's or should be accompanied by an indication in
owner's goods, business or services. (Sec. 13, R.A. letters of the name of the signatory.
No. 166a)
130.2. The Office shall accept communications to it
Section 127. Filing Date. - 127.1. Requirements. - by telecopier, or by electronic means subject to the
The filing date of an application shall be the date on conditions or requirements that will be prescribed by
which the Office received the following indications the Regulations. When communications are made by
and elements in English or Filipino: telefacsimile, the reproduction of the signature, or the
reproduction of the seal together with, where
required, the indication in letters of the name of the a filing date as provided in Section 127 and
natural person whose seal is used, appears. The Regulations relating thereto. If the application does
original communications must be received by the not satisfy the filing requirements, the Office shall
Office within thirty (30) days from date of receipt of notify the applicant who shall within a period fixed
the telefacsimile. by the Regulations complete or correct the
application as required, otherwise, the application
130.3. No attestation, notarization, authentication, shall be considered withdrawn.
legalization or other certification of any signature or
other means of self-identification referred to in the 132.2 Once an application meets the filing
preceding paragraphs, will be required, except, where requirements of Section 127, it shall be numbered in
the signature concerns the surrender of a registration. the sequential order, and the applicant shall be
(n) informed of the application number and the filing
date of the application will be deemed to have been
Section 131. Priority Right. - 131.1. An application abandoned. (n)
for registration of a mark filed in the Philippines by a
person referred to in Section 3, and who previously Section 133. Examination and Publication. - 133.1.
duly filed an application for registration of the same Once the application meets the filing requirements of
mark in one of those countries, shall be considered as Section 127, the Office shall examine whether the
filed as of the day the application was first filed in the application meets the requirements of Section 124
foreign country. and the mark as defined in Section 121 is registrable
under Section 123.
131.2. No registration of a mark in the Philippines by
a person described in this section shall be granted 133.2. Where the Office finds that the conditions
until such mark has been registered in the country of referred to in Subsection 133.1 are fulfilled, it shall
origin of the applicant. upon payment of the prescribed fee, forthwith cause
the application, as filed, to be published in the
131.3. Nothing in this section shall entitle the owner prescribed manner.
of a registration granted under this section to sue for
acts committed prior to the date on which his mark 133.3. If after the examination, the applicant is not
was registered in this country: Provided, That, entitled to registration for any reason, the Office shall
notwithstanding the foregoing, the owner of a well- advise the applicant thereof and the reasons therefor.
known mark as defined in Section 123.1(e) of this The applicant shall have a period of four (4) months
Act, that is not registered in the Philippines, may, in which to reply or amend his application, which
against an identical or confusingly similar mark, shall then be re-examined. The Regulations shall
oppose its registration, or petition the cancellation of determine the procedure for the re-examination or
its registration or sue for unfair competition, without revival of an application as well as the appeal to the
prejudice to availing himself of other remedies Director of Trademarks from any final action by the
provided for under the law. Examiner.

131.4. In like manner and subject to the same 133.4. An abandoned application may be revived as a
conditions and requirements, the right provided in pending application within three (3) months from the
this section may be based upon a subsequent date of abandonment, upon good cause shown and
regularly filed application in the same foreign the payment of the required fee.
country: Provided, That any foreign application filed
prior to such subsequent application has been 133.5. The final decision of refusal of the Director of
withdrawn, abandoned, or otherwise disposed of, Trademarks shall be appealable to the Director
without having been laid open to public inspection General in accordance with the procedure fixed by
and without leaving any rights outstanding, and has the Regulations. (Sec. 7, R.A. No. 166a)
not served, nor thereafter shall serve, as a basis for
claiming a right of priority. (Sec. 37, R.A. No. 166a) Section 134. Opposition. - Any person who believes
that he would be damaged by the registration of a
Section 132. Application Number and Filing Date. - mark may, upon payment of the required fee and
132.1. The Office shall examine whether the within thirty (30) days after the publication referred
application satisfies the requirements for the grant of to in Subsection 133.2, file with the Office an
opposition to the application. Such opposition shall 137.3. A certificate of registration of a mark may be
be in writing and verified by the oppositor or by any issued to the assignee of the applicant: Provided, That
person on his behalf who knows the facts, and shall the assignment is recorded in the Office. In case of a
specify the grounds on which it is based and include change of ownership, the Office shall at the written
a statement of the facts relied upon. Copies of request signed by the owner, or his representative, or
certificates of registration of marks registered in other by the new owner, or his representative and upon a
countries or other supporting documents mentioned proper showing and the payment of the prescribed
in the opposition shall be filed therewith, together fee, issue to such assignee a new certificate of
with the translation in English, if not in the English registration of the said mark in the name of such
language. For good cause shown and upon payment assignee, and for the unexpired part of the original
of the required surcharge, the time for filing an period.
opposition may be extended by the Director of Legal
Affairs, who shall notify the applicant of such 137.4. The Office shall record any change of address,
extension. The Regulations shall fix the maximum or address for service, which shall be notified to it by
period of time within which to file the opposition. the registered owner.
(Sec. 8, R.A. No. 165a)
137.5. In the absence of any provision to the contrary
Section 135. Notice and Hearing. - Upon the filing of in this Act, communications to be made to the
an opposition, the Office shall serve notice of the registered owner by virtue of this Act shall be sent to
filing on the applicant, and of the date of the hearing him at his last recorded address and, at the same, at
thereof upon the applicant and the oppositor and all his last recorded address for service. (Sec. 19, R.A.
other persons having any right, title or interest in the No. 166a)
mark covered by the application, as appear of record
in the Office. (Sec. 9, R.A. No. 165) Section 138. Certificates of Registration. - A
certificate of registration of a mark shall be prima
Section 136. Issuance and Publication of Certificate. facie evidence of the validity of the registration, the
- When the period for filing the opposition has registrant's ownership of the mark, and of the
expired, or when the Director of Legal Affairs shall registrant's exclusive right to use the same in
have denied the opposition, the Office upon payment connection with the goods or services and those that
of the required fee, shall issue the certificate of are related thereto specified in the certificate. (Sec.
registration. Upon issuance of a certificate of 20, R.A. No. 165)
registration, notice thereof making reference to the
publication of the application shall be published in Section 139. Publication of Registered Marks;
the IPO Gazette. (Sec. 10, R.A. No. 165) Inspection of Register. - 139.1. The Office shall
publish, in the form and within the period fixed by
Section 137. Registration of Mark and Issuance of a the Regulations, the marks registered, in the order of
Certificate to the Owner or his Assignee. - 137.1. The their registration, reproducing all the particulars
Office shall maintain a Register in which shall be referred to in Subsection 137.2.
registered marks, numbered in the order of their
registration, and all transactions in respect of each 139.2. Marks registered at the Office may be
mark, required to be recorded by virtue of this law. inspected free of charge and any person may obtain
copies thereof at his own expense. This provision
137.2. The registration of a mark shall include a shall also be applicable to transactions recorded in
reproduction of the mark and shall mention: its respect of any registered mark. (n)
number; the name and address of the registered
owner and, if the registered owner's address is outside Section 140. Cancellation upon Application by
the country, his address for service within the Registrant; Amendment or Disclaimer of
country; the dates of application and registration; if Registration. - Upon application of the registrant, the
priority is claimed, an indication of this fact, and the Office may permit any registration to be surrendered
number, date and country of the application, basis of for cancellation, and upon cancellation the
the priority claims; the list of goods or services in appropriate entry shall be made in the records of the
respect of which registration has been granted, with Office. Upon application of the registrant and
the indication of the corresponding class or classes; payment of the prescribed fee, the Office for good
and such other data as the Regulations may prescribe cause may permit any registration to be amended or
from time to time.
to be disclaimed in part: Provided, That the shall be preceded by the number of the class of that
amendment or disclaimer does not alter materially the Classification to which that group of goods or
character of the mark. Appropriate entry shall be services belongs, presented in the order of the classes
made in the records of the Office upon the certificate of the said Classification.
of registration or, if said certificate is lost or
destroyed, upon a certified copy thereof (Sec. 14, 144.2. Goods or services may not be considered as
R.A. No. 166) being similar or dissimilar to each other on the
ground that, in any registration or publication by the
Section 141. Sealed and Certified Copies as Office, they appear in different classes of the Nice
Evidence. - Copies of any records, books, papers, or Classification. (Sec. 6, R.A. No. 166a)
drawings belonging to the Office relating to marks,
and copies of registrations, when authenticated by the Section 145. Duration. - A certificate of registration
seal of the Office and certified by the Director of the shall remain in force for ten (10) years: Provided,
Administrative, Financial and Human Resource That the registrant shall file a declaration of actual
Development Service Bureau or in his name by an use and evidence to that effect, or shall show valid
employee of the Office duly authorized by said reasons based on the existence of obstacles to such
Director, shall be evidence in all cases wherein the use, as prescribed by the Regulations, within one (1)
originals would be evidence; and any person who year from the fifth anniversary of the date of the
applies and pays the prescribed fee shall secure such registration of the mark. Otherwise, the mark shall be
copies. (n) removed from the Register by the Office. (Sec. 12,
R.A. No. 166a)
Section 142. Correction of Mistakes Made by the
Office. - Whenever a material mistake in a Section 146. Renewal. - 146.1. A certificate of
registration incurred through the fault of the Office is registration may be renewed for periods of ten (10)
clearly disclosed by the records of the Office, a years at its expiration upon payment of the prescribed
certificate stating the fact and nature of such mistake fee and upon filing of a request. The request shall
shall be issued without charge, recorded and a printed contain the following indications:
copy thereof shall be attached to each printed copy of
the registration. Such corrected registration shall (a) An indication that renewal is sought;
thereafter have the same effect as the original
certificate; or in the discretion of the Director of the
Administrative, Financial and Human Resource (b) The name and address of the registrant or
Development Service Bureau a new certificate of his successor-in-interest, hereafter referred
registration may be issued without charge. All to as the "right holder";
certificates of correction heretofore issued in
accordance with the Regulations and the registration (c) The registration number of the
to which they are attached shall have the same force registration concerned;
and effect as if such certificates and their issuance
had been authorized by this Act. (n) (d) The filing date of the application which
resulted in the registration concerned to be
Section 143. Correction of Mistakes Made by renewed;
Applicant. - Whenever a mistake is made in a
registration and such mistake occurred in good faith (e) Where the right holder has a
through the fault of the applicant, the Office may representative, the name and address of that
issue a certificate upon the payment of the prescribed representative;
fee: Provided, That the correction does not involve
any change in the registration that requires (f) The names of the recorded goods or
republication of the mark. (n) services for which the renewal is requested
or the names of the recorded goods or
Section 144. Classification of Goods and Services. - services for which the renewal is not
144.1. Each registration, and any publication of the requested, grouped according to the classes
Office which concerns an application or registration of the Nice Classification to which that
effected by the Office shall indicate the goods or group of goods or services belongs and
services by their names, grouped according to the presented in the order of the classes of the
classes of the Nice Classification, and each group said Classification; and
 (g) A signature by the right holder or his Section 149. Assignment and Transfer of Application
representative. and Registration. - 149.1. An application for
registration of a mark, or its registration, may be
146.2. Such request shall be in Filipino or English assigned or transferred with or without the transfer of
and may be made at any time within six (6) months the business using the mark. (n)
before the expiration of the period for which the
registration was issued or renewed, or it may be made 149.2. Such assignment or transfer shall, however, be
within six (6) months after such expiration on null and void if it is liable to mislead the public,
payment of the additional fee herein prescribed. particularly as regards the nature, source,
manufacturing process, characteristics, or suitability
146.3. If the Office refuses to renew the registration, for their purpose, of the goods or services to which
it shall notify the registrant of his refusal and the the mark is applied.
reasons therefor.
149.3. The assignment of the application for
146.4. An applicant for renewal not domiciled in the registration of a mark, or of its registration, shall be
Philippines shall be subject to and comply with the in writing and require the signatures of the
requirements of this Act. (Sec. 15, R.A. No. 166a) contracting parties. Transfers by mergers or other
forms of succession may be made by any document
Section 147. Rights Conferred. - 147.1. The owner of supporting such transfer.
a registered mark shall have the exclusive right to
prevent all third parties not having the owner's 149.4. Assignments and transfers of registrations of
consent from using in the course of trade identical or marks shall be recorded at the Office on payment of
similar signs or containers for goods or services the prescribed fee; assignment and transfers of
which are identical or similar to those in respect of applications for registration shall, on payment of the
which the trademark is registered where such use same fee, be provisionally recorded, and the mark,
would result in a likelihood of confusion. In case of when registered, shall be in the name of the assignee
the use of an identical sign for identical goods or or transferee.
services, a likelihood of confusion shall be presumed.
149.5. Assignments and transfers shall have no effect
147.2. The exclusive right of the owner of a well- against third parties until they are recorded at the
known mark defined in Subsection 123.1(e) which is Office. (Sec. 31, R.A. No. 166a)
registered in the Philippines, shall extend to goods
and services which are not similar to those in respect Section 150. License Contracts. - 150.1. Any license
of which the mark is registered: Provided, That use of contract concerning the registration of a mark, or an
that mark in relation to those goods or services would application therefor, shall provide for effective
indicate a connection between those goods or control by the licensor of the quality of the goods or
services and the owner of the registered mark: services of the licensee in connection with which the
Provided further, That the interests of the owner of mark is used. If the license contract does not provide
the registered mark are likely to be damaged by such for such quality control, or if such quality control is
use. (n) not effectively carried out, the license contract shall
not be valid.
Section 148. Use of Indications by Third Parties for
Purposes Other than those for which the Mark is 150.2. A license contract shall be submitted to the
Used. - Registration of the mark shall not confer on Office which shall keep its contents confidential but
the registered owner the right to preclude third parties shall record it and publish a reference thereto. A
from using bona fide their names, addresses, license contract shall have no effect against third
pseudonyms, a geographical name, or exact parties until such recording is effected. The
indications concerning the kind, quality, quantity, Regulations shall fix the procedure for the recording
destination, value, place of origin, or time of of the license contract. (n)
production or of supply, of their goods or services:
Provided, That such use is confined to the purposes Section 151. Cancellation. - 151.1. A petition to
of mere identification or information and cannot cancel a registration of a mark under this Act may be
mislead the public as to the source of the goods or filed with the Bureau of Legal Affairs by any person
services. (n)
who believes that he is or will be damaged by the action to enforce the rights to same registered mark
registration of a mark under this Act as follows: may be decided. (Sec. 17, R.A. No. 166a)

(a) Within five (5) years from the date of the Section 152. Non-use of a Mark When Excused. -
registration of the mark under this Act. 152.1. Non-use of a mark may be excused if caused
by circumstances arising independently of the will of
(b) At any time, if the registered mark the trademark owner. Lack of funds shall not excuse
becomes the generic name for the goods or non-use of a mark.
services, or a portion thereof, for which it is
registered, or has been abandoned, or its 152.2. The use of the mark in a form different from
registration was obtained fraudulently or the form in which it is registered, which does not
contrary to the provisions of this Act, or if alter its distinctive character, shall not be ground for
the registered mark is being used by, or with cancellation or removal of the mark and shall not
the permission of, the registrant so as to diminish the protection granted to the mark.
misrepresent the source of the goods or
services on or in connection with which the 152.3. The use of a mark in connection with one or
mark is used. If the registered mark becomes more of the goods or services belonging to the class
the generic name for less than all of the in respect of which the mark is registered shall
goods or services for which it is registered, a prevent its cancellation or removal in respect of all
petition to cancel the registration for only other goods or services of the same class.
those goods or services may be filed. A
registered mark shall not be deemed to be 152.4. The use of a mark by a company related with
the generic name of goods or services solely the registrant or applicant shall inure to the latter's
because such mark is also used as a name of benefit, and such use shall not affect the validity of
or to identify a unique product or service. such mark or of its registration: Provided, That such
The primary significance of the registered mark is not used in such manner as to deceive the
mark to the relevant public rather than public. If use of a mark by a person is controlled by
purchaser motivation shall be the test for the registrant or applicant with respect to the nature
determining whether the registered mark has and quality of the goods or services, such use shall
become the generic name of goods or inure to the benefit of the registrant or applicant. (n)
services on or in connection with which it
has been used. (n)
Section 153. Requirements of Petition; Notice and
Hearing. - Insofar as applicable, the petition for
(c) At any time, if the registered owner of cancellation shall be in the same form as that
the mark without legitimate reason fails to provided in Section 134 hereof, and notice and
use the mark within the Philippines, or to hearing shall be as provided in Section 135 hereof.
cause it to be used in the Philippines by
virtue of a license during an uninterrupted
period of three (3) years or longer. Section 154. Cancellation of Registration. - If the
Bureau of Legal Affairs finds that a case for
cancellation has been made out, it shall order the
151.2. Notwithstanding the foregoing provisions, the cancellation of the registration. When the order or
court or the administrative agency vested with judgment becomes final, any right conferred by such
jurisdiction to hear and adjudicate any action to registration upon the registrant or any person in
enforce the rights to a registered mark shall likewise interest of record shall terminate. Notice of
exercise jurisdiction to determine whether the cancellation shall be published in the IPO Gazette.
registration of said mark may be cancelled in (Sec. 19, R.A. No. 166a)
accordance with this Act. The filing of a suit to
enforce the registered mark with the proper court or
agency shall exclude any other court or agency from Section 155. Remedies; Infringement. - Any person
assuming jurisdiction over a subsequently filed who shall, without the consent of the owner of the
petition to cancel the same mark. On the other hand, registered mark:
the earlier filing of petition to cancel the mark with
the Bureau of Legal Affairs shall not constitute a 155.1. Use in commerce any reproduction,
prejudicial question that must be resolved before an counterfeit, copy, or colorable imitation of a
registered mark or the same container or a dominant
feature thereof in connection with the sale, offering Section 157. Power of Court to Order Infringing
for sale, distribution, advertising of any goods or Material Destroyed. - 157.1 In any action arising
services including other preparatory steps necessary under this Act, in which a violation of any right of
to carry out the sale of any goods or services on or in the owner of the registered mark is established, the
connection with which such use is likely to cause court may order that goods found to be infringing be,
confusion, or to cause mistake, or to deceive; or without compensation of any sort, disposed of
outside the channels of commerce in such a manner
155.2. Reproduce, counterfeit, copy or colorably as to avoid any harm caused to the right holder, or
imitate a registered mark or a dominant feature destroyed; and all labels, signs, prints, packages,
thereof and apply such reproduction, counterfeit, wrappers, receptacles and advertisements in the
copy or colorable imitation to labels, signs, prints, possession of the defendant, bearing the registered
packages, wrappers, receptacles or advertisements mark or trade name or any reproduction, counterfeit,
intended to be used in commerce upon or in copy or colorable imitation thereof, all plates, molds,
connection with the sale, offering for sale, matrices and other means of making the same, shall
distribution, or advertising of goods or services on or be delivered up and destroyed.
in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive, shall be 157.2. In regard to counterfeit goods, the simple
liable in a civil action for infringement by the removal of the trademark affixed shall not be
registrant for the remedies hereinafter set forth: sufficient other than in exceptional cases which shall
Provided, That the infringement takes place at the be determined by the Regulations, to permit the
moment any of the acts stated in Subsection 155.1 or release of the goods into the channels of commerce.
this subsection are committed regardless of whether (Sec. 24, R.A. No. 166a)
there is actual sale of goods or services using the
infringing material. (Sec. 22, R.A. No 166a) Section 158. Damages; Requirement of Notice. - In
any suit for infringement, the owner of the registered
Section 156. Actions, and Damages and Injunction mark shall not be entitled to recover profits or
for Infringement. - 156.1. The owner of a registered damages unless the acts have been committed with
mark may recover damages from any person who knowledge that such imitation is likely to cause
infringes his rights, and the measure of the damages confusion, or to cause mistake, or to deceive. Such
suffered shall be either the reasonable profit which knowledge is presumed if the registrant gives notice
the complaining party would have made, had the that his mark is registered by displaying with the
defendant not infringed his rights, or the profit which mark the words '"Registered Mark" or the letter R
the defendant actually made out of the infringement, within a circle or if the defendant had otherwise
or in the event such measure of damages cannot be actual notice of the registration. (Sec. 21, R.A. No.
readily ascertained with reasonable certainty, then the 166a)
court may award as damages a reasonable percentage
based upon the amount of gross sales of the Section 159. Limitations to Actions for Infringement.
defendant or the value of the services in connection - Notwithstanding any other provision of this Act, the
with which the mark or trade name was used in the remedies given to the owner of a right infringed
infringement of the rights of the complaining party. under this Act shall be limited as follows:
(Sec. 23, first par., R.A. No. 166a)
159.1. Notwithstanding the provisions of Section 155
156.2. On application of the complainant, the court hereof, a registered mark shall have no effect against
may impound during the pendency of the action, any person who, in good faith, before the filing date
sales invoices and other documents evidencing sales. or the priority date, was using the mark for the
(n) purposes of his business or enterprise: Provided, That
his right may only be transferred or assigned together
156.3. In cases where actual intent to mislead the with his enterprise or business or with that part of his
public or to defraud the complainant is shown, in the enterprise or business in which the mark is used.
discretion of the court, the damages may be doubled.
(Sec. 23, first par., R.A. No. 166) 159.2. Where an infringer who is engaged solely in
the business of printing the mark or other infringing
156.4. The complainant, upon proper showing, may materials for others is an innocent infringer, the
also be granted injunction. (Sec. 23, second par., R.A. owner of the right infringed shall be entitled as
No. 166a)
against such infringer only to an injunction against Section 162. Action for False or Fraudulent
future printing. Declaration. - Any person who shall procure
registration in the Office of a mark by a false or
159.3. Where the infringement complained of is fraudulent declaration or representation, whether oral
contained in or is part of paid advertisement in a or in writing, or by any false means, shall be liable in
newspaper, magazine, or other similar periodical or a civil action by any person injured thereby for any
in an electronic communication, the remedies of the damages sustained in consequence thereof (Sec. 26,
owner of the right infringed as against the publisher R.A. No. 166)
or distributor of such newspaper, magazine, or other
similar periodical or electronic communication shall Section 163. Jurisdiction of Court. - All actions
be limited to an injunction against the presentation of under Sections 150, 155, 164, and 166 to 169 shall be
such advertising matter in future issues of such brought before the proper courts with appropriate
newspapers, magazines, or other similar periodicals jurisdiction under existing laws. (Sec. 27, R.A. No.
or in future transmissions of such electronic 166)
communications. The limitations of this
subparagraph shall apply only to innocent infringers: Section 164. Notice of Filing Suit Given to the
Provided, That such injunctive relief shall not be Director. - It shall be the duty of the clerks of such
available to the owner of the right infringed with courts within one (1) month after the filing of any
respect to an issue of a newspaper, magazine, or other action, suit, or proceeding involving a mark
similar periodical or an electronic communication registered under the provisions of this Act, to notify
containing infringing matter where restraining the the Director in writing setting forth: the names and
dissemination of such infringing matter in any addresses of the litigants and designating the number
particular issue of such periodical or in an electronic of the registration or registrations and within one (1)
communication would delay the delivery of such month after the judgment is entered or an appeal is
issue or transmission of such electronic taken, the clerk of court shall give notice thereof to
communication is customarily conducted in the Office, and the latter shall endorse the same upon
accordance with the sound business practice, and not the filewrapper of the said registration or registrations
due to any method or device adopted to evade this and incorporate the same as a part of the contents of
section or to prevent or delay the issuance of an said filewrapper. (n)
injunction or restraining order with respect to such
infringing matter. (n) Section 165. Trade Names or Business Names. -
165.1. A name or designation may not be used as a
Section 160. Right of Foreign Corporation to Sue in trade name if by its nature or the use to which such
Trademark or Service Mark Enforcement Action. - name or designation may be put, it is contrary to
Any foreign national or juridical person who meets public order or morals and if, in particular, it is liable
the requirements of Section 3 of this Act and does not to deceive trade circles or the public as to the nature
engage in business in the Philippines may bring a of the enterprise identified by that name.
civil or administrative action hereunder for
opposition, cancellation, infringement, unfair 165.2.(a) Notwithstanding any laws or regulations
competition, or false designation of origin and false providing for any obligation to register trade names,
description, whether or not it is licensed to do such names shall be protected, even prior to or
business in the Philippines under existing laws. (Sec. without registration, against any unlawful act
21-A, R.A. No. 166a) committed by third parties.

Section 161. Authority to Determine Right to (b) In particular, any subsequent use of the
Registration. - In any action involving a registered trade name by a third party, whether as a
mark, the court may determine the right to trade name or a mark or collective mark, or
registration, order the cancellation of a registration, in any such use of a similar trade name or
whole or in part, and otherwise rectify the register mark, likely to mislead the public, shall be
with respect to the registration of any party to the deemed unlawful.
action in the exercise of this. Judgment and orders
shall be certified by the court to the Director, who
shall make appropriate entry upon the records of the 165.3. The remedies provided for in Sections 153 to
Bureau, and shall be controlled thereby. (Sec. 25, 156 and Sections 166 and 167 shall apply mutatis
R.A. No. 166a) mutandis.
165.4. Any change in the ownership of a trade name collective mark if the person requesting the
shall be made with the transfer of the enterprise or cancellation proves that only the registered owner
part thereof identified by that name. The provisions uses the mark, or that he uses or permits its use in
of Subsections 149.2 to 149.4 shall apply mutatis contravention of the agreements referred to in
mutandis. Subsection 166.2 or that he uses or permits its use in
a manner liable to deceive trade circles or the public
Section 166. Goods Bearing Infringing Marks or as to the origin or any other common characteristics
Trade Names. - No article of imported merchandise of the goods or services concerned.
which shall copy or simulate the name of any
domestic product, or manufacturer, or dealer, or 167.4. The registration of a collective mark, or an
which shall copy or simulate a mark registered in application therefor shall not be the subject of a
accordance with the provisions of this Act, or shall license contract. (Sec. 40, R.A. No. 166a)
bear a mark or trade name calculated to induce the
public to believe that the article is manufactured in Section 168. Unfair Competition, Rights, Regulation
the Philippines, or that it is manufactured in any and Remedies. - 168.1. A person who has identified
foreign country or locality other than the country or in the mind of the public the goods he manufactures
locality where it is in fact manufactured, shall be or deals in, his business or services from those of
admitted to entry at any customhouse of the others, whether or not a registered mark is employed,
Philippines. In order to aid the officers of the customs has a property right in the goodwill of the said goods,
service in enforcing this prohibition, any person who business or services so identified, which will be
is entitled to the benefits of this Act, may require that protected in the same manner as other property rights.
his name and residence, and the name of the locality
in which his goods are manufactured, a copy of the 168.2. Any person who shall employ deception or
certificate of registration of his mark or trade name, any other means contrary to good faith by which he
to be recorded in books which shall be kept for this shall pass off the goods manufactured by him or in
purpose in the Bureau of Customs, under such which he deals, or his business, or services for those
regulations as the Collector of Customs with the of the one having established such goodwill, or who
approval of the Secretary of Finance shall prescribe, shall commit any acts calculated to produce said
and may furnish to the said Bureau facsimiles of his result, shall be guilty of unfair competition, and shall
name, the name of the locality in which his goods are be subject to an action therefor.
manufactured, or his registered mark or trade name,
and thereupon the Collector of Customs shall cause
one (1) or more copies of the same to be transmitted 168.3. In particular, and without in any way limiting
to each collector or to other proper officer of the the scope of protection against unfair competition,
Bureau of Customs. (Sec. 35, R.A. No. 166) the following shall be deemed guilty of unfair
competition:
Section 167. Collective Marks. - 167.1. Subject to
Subsections 167.2 and 167.3, Sections 122 to 164 and (a) Any person, who is selling his goods and
166 shall apply to collective marks, except that gives them the general appearance of goods
references therein to "mark" shall be read as of another manufacturer or dealer, either as
"collective mark". to the goods themselves or in the wrapping
of the packages in which they are contained,
or the devices or words thereon, or in any
167.2.(a) An application for registration of a other feature of their appearance, which
collective mark shall designate the mark as a would be likely to influence purchasers to
collective mark and shall be accompanied by a copy believe that the goods offered are those of a
of the agreement, if any, governing the use of the manufacturer or dealer, other than the actual
collective mark. manufacturer or dealer, or who otherwise
clothes the goods with such appearance as
(b) The registered owner of a collective shall deceive the public and defraud another
mark shall notify the Director of any of his legitimate trade, or any subsequent
changes made in respect of the agreement vendor of such goods or any agent of any
referred to in paragraph (a). vendor engaged in selling such goods with a
like purpose;
167.3. In addition to the grounds provided in Section
149, the Court shall cancel the registration of a
 (b) Any person who by any artifice, or Section 170. Penalties. - Independent of the civil and
device, or who employs any other means administrative sanctions imposed by law, a criminal
calculated to induce the false belief that such penalty of imprisonment from two (2) years to five
person is offering the services of another (5) years and a fine ranging from Fifty thousand
who has identified such services in the mind pesos (P50,000) to Two hundred thousand
of the public; or pesos(P200,000), shall be imposed on any person
who is found guilty of committing any of the acts
(c) Any person who shall make any false mentioned in Section 155, Section 168 and
statement in the course of trade or who shall Subsection 169.1. (Arts. 188 and 189, Revised Penal
commit any other act contrary to good faith Code)
of a nature calculated to discredit the goods,
business or services of another.

168.4. The remedies provided by Sections 156, 157

and 161 shall apply mutatis mutandis. (Sec. 29, R.A.
No. 166a) PART IV
THE LAW ON COPYRIGHT
Section 169. False Designations of Origin; False
Description or Representation. - 169.1. Any person CHAPTER I
who, on or in connection with any goods or services, PRELIMINARY PROVISIONS
or any container for goods, uses in commerce any
word, term, name, symbol, or device, or any Section 171. Definitions. - For the purpose of this
combination thereof, or any false designation of Act, the following terms have the following meaning:
origin, false or misleading description of fact, or false
or misleading representation of fact, which:
171.1. "Author" is the natural person who has created
the work;
(a) Is likely to cause confusion, or to cause
mistake, or to deceive as to the affiliation,
connection, or association of such person 171.2. A "collective work" is a work which has been
with another person, or as to the origin, created by two (2) or more natural persons at the
sponsorship, or approval of his or her goods, initiative and under the direction of another with the
services, or commercial activities by another understanding that it will be disclosed by the latter
person; or under his own name and that contributing natural
persons will not be identified;
(b) In commercial advertising or promotion,
misrepresents the nature, characteristics, 171.3. "Communication to the public" or
qualities, or geographic origin of his or her "communicate to the public" means the making of a
or another person's goods, services, or work available to the public by wire or wireless
commercial activities, shall be liable to a means in such a way that members of the public may
civil action for damages and injunction access these works from a place and time
provided in Sections 156 and 157 of this Act individually chosen by them;
by any person who believes that he or she is
or is likely to be damaged by such act. 171.4. A "computer" is an electronic or similar device
having information-processing capabilities, and a
169.2. Any goods marked or labelled in "computer program" is a set of instructions expressed
contravention of the provisions of this Section shall in words, codes, schemes or in any other form, which
not be imported into the Philippines or admitted entry is capable when incorporated in a medium that the
at any customhouse of the Philippines. The owner, computer can read, of causing the computer to
importer, or consignee of goods refused entry at any perform or achieve a particular task or result;
customhouse under this section may have any
recourse under the customs revenue laws or may 171.5. "Public lending" is the transfer of possession
have the remedy given by this Act in cases involving of the original or a copy of a work or sound recording
goods refused entry or seized. (Sec. 30, R.A. No. for a limited period, for non-profit purposes, by an
166a)
institution the services of which are available to the Section 172. Literary and Artistic Works. - 172.1.
public, such as public library or archive; Literary and artistic works, hereinafter referred to as
"works", are original intellectual creations in the
171.6. "Public performance", in the case of a work literary and artistic domain protected from the
other than an audiovisual work, is the recitation, moment of their creation and shall include in
playing, dancing, acting or otherwise performing the particular:
work, either directly or by means of any device or
process; in the case of an audiovisual work, the (a) Books, pamphlets, articles and other
showing of its images in sequence and the making of writings;
the sounds accompanying it audible; and, in the case
of a sound recording, making the recorded sounds (b) Periodicals and newspapers;
audible at a place or at places where persons outside
the normal circle of a family and that family's closest (c) Lectures, sermons, addresses,
social acquaintances are or can be present, dissertations prepared for oral delivery,
irrespective of whether they are or can be present at whether or not reduced in writing or other
the same place and at the same time, or at different material form;
places and/or at different times, and where the
performance can be perceived without the need for
communication within the meaning of Subsection (d) Letters;
171.3;
(e) Dramatic or dramatico-musical
171.7. "Published works" means works, which, with compositions; choreographic works or
the consent of the authors, are made available to the entertainment in dumb shows;
public by wire or wireless means in such a way that
members of the public may access these works from (f) Musical compositions, with or without
a place and time individually chosen by them: words;
Provided, That availability of such copies has been
such, as to satisfy the reasonable requirements of the (g) Works of drawing, painting, architecture,
public, having regard to the nature of the work; sculpture, engraving, lithography or other
works of art; models or designs for works of
171.8. "Rental" is the transfer of the possession of the art;
original or a copy of a work or a sound recording for
a limited period of time, for profit-making purposes; (h) Original ornamental designs or models
for articles of manufacture, whether or not
171.9. "Reproduction" is the making of one (1) or registrable as an industrial design, and other
more copies of a work or a sound recording in any works of applied art;
manner or form (Sec. 41 (E), P.D. No. 49 a);
(i) Illustrations, maps, plans, sketches, charts
171.10. A "work of applied art" is an artistic creation and three-dimensional works relative to
with utilitarian functions or incorporated in a useful geography, topography, architecture or
article, whether made by hand or produced on an science;
industrial scale;
(j) Drawings or plastic works of a scientific
171.11. A "work of the Government of the or technical character;
Philippines" is a work created by an officer or
employee of the Philippine Government or any of its (k) Photographic works including works
subdivisions and instrumentalities, including produced by a process analogous to
government-owned or controlled corporations as a photography; lantern slides;
part of his regularly prescribed official duties.
(l) Audiovisual works and cinematographic
CHAPTER II works and works produced by a process
ORIGINAL WORKS analogous to cinematography or any process
for making audio-visual recordings;
 (m) Pictorial illustrations and 173, no protection shall extend, under this law, to any
advertisements; idea, procedure, system, method or operation,
concept, principle, discovery or mere data as such,
(n) Computer programs; and even if they are expressed, explained, illustrated or
embodied in a work; news of the day and other
(o) Other literary, scholarly, scientific and miscellaneous facts having the character of mere
artistic works. items of press information; or any official text of a
legislative, administrative or legal nature, as well as
any official translation thereof (n)
172.2. Works are protected by the sole fact of their
creation, irrespective of their mode or form of
expression, as well as of their content, quality and Section 176. Works of the Government. - 176.1. No
purpose. (Sec. 2, P.D. No. 49a) copyright shall subsist in any work of the
Government of the Philippines. However, prior
approval of the government agency or office wherein
CHAPTER III the work is created shall be necessary for exploitation
DERIVATIVE WORKS of such work for profit. Such agency or office may,
among other things, impose as a condition the
Section 173. Derivative Works. - 173.1. The payment of royalties. No prior approval or conditions
following derivative works shall also be protected by shall be required for the use of any purpose of
copyright: statutes, rules and regulations, and speeches, lectures,
sermons, addresses, and dissertations, pronounced,
(a) Dramatizations, translations, adaptations, read or rendered in courts of justice, before
abridgments, arrangements, and other administrative agencies, in deliberative assemblies
alterations of literary or artistic works; and and in meetings of public character. (Sec. 9, first par.,
P.D. No. 49)
(b) Collections of literary, scholarly or
artistic works, and compilations of data and 176.2. The author of speeches, lectures, sermons,
other materials which are original by reason addresses, and dissertations mentioned in the
of the selection or coordination or preceding paragraphs shall have the exclusive right of
arrangement of their contents. (Sec. 2, [P] making a collection of his works. (n)
and [Q], P.D. No. 49)
176.3. Notwithstanding the foregoing provisions, the
173.2. The works referred to in paragraphs (a) and (b) Government is not precluded from receiving and
of Subsection 173.1 shall be protected as new works: holding copyrights transferred to it by assignment,
Provided however, That such new work shall not bequest or otherwise; nor shall publication or
affect the force of any subsisting copyright upon the republication by the Government in a public
original works employed or any part thereof, or be document of any work in which copyright is
construed to imply any right to such use of the subsisting be taken to cause any abridgment or
original works, or to secure or extend copyright in annulment of the copyright or to authorize any use or
such original works. (Sec. 8, P.D. 49; Art. 10, appropriation of such work without the consent of the
TRIPS) copyright owner. (Sec. 9, third par., P.D. No. 49)

Section 174. Published Edition of Work. - In addition CHAPTER V

to the right to publish granted by the author, his heirs, COPYRIGHT OR ECONOMIC RIGHTS
or assigns, the publisher shall have a copyright
consisting merely of the right of reproduction of the Section 177. Copyright or Economic Rights. -
typographical arrangement of the published edition of Subject to the provisions of Chapter VIII, copyright
the work. (n) or economic rights shall consist of the exclusive right
to carry out, authorize or prevent the following acts:
CHAPTER IV
WORKS NOT PROTECTED 177.1. Reproduction of the work or substantial
portion of the work;
Section 175. Unprotected Subject Matter. -
Notwithstanding the provisions of Sections 172 and
177.2. Dramatization, translation, adaptation, time, facilities and materials of the
abridgment, arrangement or other transformation of employer.
the work;
(b) The employer, if the work is the result of
177.3. The first public distribution of the original and the performance of his regularly-assigned
each copy of the work by sale or other forms of duties, unless there is an agreement, express
transfer of ownership; or implied, to the contrary.

177.4. Rental of the original or a copy of an 178.4. In the case of a work commissioned by a
audiovisual or cinematographic work, a work person other than an employer of the author and who
embodied in a sound recording, a computer program, pays for it and the work is made in pursuance of the
a compilation of data and other materials or a musical commission, the person who so commissioned the
work in graphic form, irrespective of the ownership work shall have ownership of the work, but the
of the original or the copy which is the subject of the copyright thereto shall remain with the creator, unless
rental; (n) there is a written stipulation to the contrary;

177.5. Public display of the original or a copy of the 178.5. In the case of audiovisual work, the copyright
work; shall belong to the producer, the author of the
scenario, the composer of the music, the film
177.6. Public performance of the work; and director, and the author of the work so adapted.
However, subject to contrary or other stipulations
177.7. Other communication to the public of the among the creators, the producer shall exercise the
work. (Sec. 5, P. D. No. 49a) copyright to an extent required for the exhibition of
the work in any manner, except for the right to collect
performing license fees for the performance of
CHAPTER VI musical compositions, with or without words, which
OWNERSHIP OF COPYRIGHT are incorporated into the work; and

Section 178. Rules on Copyright Ownership. - 178.6. In respect of letters, the copyright shall belong
Copyright ownership shall be governed by the to the writer subject to the provisions of Article 723
following rules: of the Civil Code. (Sec. 6, P.D. No. 49a)

178.1 Subject to the provisions of this section, in the Section 179. Anonymous and Pseudonymous Works.
case of original literary and artistic works, copyright - For purposes of this Act, the publishers shall be
shall belong to the author of the work; deemed to represent the authors of articles and other
writings published without the names of the authors
178.2. In the case of works of joint authorship, the or under pseudonyms, unless the contrary appears, or
co-authors shall be the original owners of the the pseudonyms or adopted name leaves no doubt as
copyright and in the absence of agreement, their to the author's identity, or if the author of the
rights shall be governed by the rules on co- anonymous works discloses his identity. (Sec. 7, P.D.
ownership. If, however, a work of joint authorship 49)
consists of parts that can be used separately and the
author of each part can be identified, the author of CHAPTER VII
each part shall be the original owner of the copyright TRANSFER OR ASSIGNMENT OF
in the part that he has created; COPYRIGHT

178.3. In the case of work created by an author Section 180. Rights of Assignee. - 180.1. The
during and in the course of his employment, the copyright may be assigned in whole or in part.
copyright shall belong to: Within the scope of the assignment, the assignee is
entitled to all the rights and remedies which the
(a) The employee, if the creation of the assignor had with respect to the copyright.
object of copyright is not a part of his
regular duties even if the employee uses the
180.2. The copyright is not deemed assigned inter (b) The making of quotations from a
vivos in whole or in part unless there is a written published work if they are compatible with
indication of such intention. fair use and only to the extent justified for
the purpose, including quotations from
180.3. The submission of a literary, photographic or newspaper articles and periodicals in the
artistic work to a newspaper, magazine or periodical form of press summaries: Provided, That the
for publication shall constitute only a license to make source and the name of the author, if
a single publication unless a greater right is expressly appearing on the work, are mentioned; (Sec.
granted. If two (2) or more persons jointly own a 11, third par., P.D. No. 49)
copyright or any part thereof, neither of the owners
shall be entitled to grant licenses without the prior (c) The reproduction or communication to
written consent of the other owner or owners. (Sec. the public by mass media of articles on
15, P.D. No. 49a) current political, social, economic, scientific
or religious topic, lectures, addresses and
Section 181. Copyright and Material Object. - The other works of the same nature, which are
copyright is distinct from the property in the material delivered in public if such use is for
object subject to it. Consequently, the transfer or information purposes and has not been
assignment of the copyright shall not itself constitute expressly reserved: Provided, That the
a transfer of the material object. Nor shall a transfer source is clearly indicated; (Sec. 11, P.D.
or assignment of the sole copy or of one or several No. 49)
copies of the work imply transfer or assignment of
the copyright. (Sec. 16, P.D. No. 49) (d) The reproduction and communication to
the public of literary, scientific or artistic
Section 182. Filing of Assignment or License. - An works as part of reports of current events by
assignment or exclusive license may be filed in means of photography, cinematography or
duplicate with the National Library upon payment of broadcasting to the extent necessary for the
the prescribed fee for registration in books and purpose; (Sec. 12, P.D. No. 49)
records kept for the purpose. Upon recording, a copy
of the instrument shall be returned to the sender with (e) The inclusion of a work in a publication,
a notation of the fact of record. Notice of the record broadcast, or other communication to the
shall be published in the IPO Gazette. (Sec. 19, P.D. public, sound recording or film, if such
No. 49a) inclusion is made by way of illustration for
teaching purposes and is compatible with
Section 183. Designation of Society. - The copyright fair use: Provided, That the source and of
owners or their heirs may designate a society of the name of the author, if appearing in the
artists, writers or composers to enforce their work, are mentioned;
economic rights and moral rights on their behalf.
(Sec. 32, P.D. No. 49a) (f) The recording made in schools,
universities, or educational institutions of a
CHAPTER VIII work included in a broadcast for the use of
LIMITATIONS ON COPYRIGHT such schools, universities or educational
institutions: Provided, That such recording
Section 184. Limitations on Copyright. - 184.1. must be deleted within a reasonable period
Notwithstanding the provisions of Chapter V, the after they were first broadcast: Provided,
following acts shall not constitute infringement of further, That such recording may not be
copyright: made from audiovisual works which are part
of the general cinema repertoire of feature
films except for brief excerpts of the work;
(a) The recitation or performance of a work,
once it has been lawfully made accessible to
the public, if done privately and free of (g) The making of ephemeral recordings by
charge or if made strictly for a charitable or a broadcasting organization by means of its
religious institution or society; (Sec. 10(1), own facilities and for use in its own
P.D. No. 49) broadcast;
 (h) The use made of a work by or under the (a) The purpose and character of the use,
direction or control of the Government, by including whether such use is of a
the National Library or by educational, commercial nature or is for non-profit
scientific or professional institutions where educational purposes;
such use is in the public interest and is
compatible with fair use; (b) The nature of the copyrighted work;

(i) The public performance or the (c) The amount and substantiality of the
communication to the public of a work, in a portion used in relation to the copyrighted
place where no admission fee is charged in work as a whole; and
respect of such public performance or
communication, by a club or institution for (d) The effect of the use upon the potential
charitable or educational purpose only, market for or value of the copyrighted work.
whose aim is not profit making, subject to
such other limitations as may be provided in
the Regulations; (n) 185.2. The fact that a work is unpublished shall not
by itself bar a finding of fair use if such finding is
made upon consideration of all the above factors.
(j) Public display of the original or a copy of
the work not made by means of a film, slide,
television image or otherwise on screen or Section 186. Work of Architecture. - Copyright in a
by means of any other device or process: work of architecture shall include the right to control
Provided, That either the work has been the erection of any building which reproduces the
published, or, that the original or the copy whole or a substantial part of the work either in its
displayed has been sold, given away or original form or in any form recognizably derived
otherwise transferred to another person by from the original: Provided, That the copyright in any
the author or his successor in title; and such work shall not include the right to control the
reconstruction or rehabilitation in the same style as
the original of a building to which that copyright
(k) Any use made of a work for the purpose relates. (n)
of any judicial proceedings or for the giving
of professional advice by a legal
practitioner. Section 187. Reproduction of Published Work. -
187.1. Notwithstanding the provision of Section 177,
and subject to the provisions of Subsection 187.2, the
184.2. The provisions of this section shall be private reproduction of a published work in a single
interpreted in such a way as to allow the work to be copy, where the reproduction is made by a natural
used in a manner which does not conflict with the person exclusively for research and private study,
normal exploitation of the work and does not shall be permitted, without the authorization of the
unreasonably prejudice the right holder's legitimate owner of copyright in the work.
interests.
187.2. The permission granted under Subsection
Section 185. Fair Use of a Copyrighted Work. - 187.1 shall not extend to the reproduction of:
185.1. The fair use of a copyrighted work for
criticism, comment, news reporting, teaching
including multiple copies for classroom use, (a) A work of architecture in the form of
scholarship, research, and similar purposes is not an building or other construction;
infringement of copyright. Decompilation, which is
understood here to be the reproduction of the code (b) An entire book, or a substantial part
and translation of the forms of the computer program thereof, or of a musical work in graphic
to achieve the inter-operability of an independently form by reprographic means;
created computer program with other programs may
also constitute fair use. In determining whether the (c) A compilation of data and other
use made of a work in any particular case is fair use, materials;
the factors to be considered shall include:
(d) A computer program except as provided
in Section 189; and
 (e) Any work in cases where reproduction owner of copyright in, a computer program, by the
would unreasonably conflict with a normal lawful owner of that computer program: Provided,
exploitation of the work or would otherwise That the copy or adaptation is necessary for:
unreasonably prejudice the legitimate
interests of the author. (n) (a) The use of the computer program in
conjunction with a computer for the
Section 188. Reprographic Reproduction by purpose, and to the extent, for which the
Libraries. - 188.1. Notwithstanding the provisions of computer program has been obtained; and
Subsection 177.6, any library or archive whose
activities are not for profit may, without the (b) Archival purposes, and, for the
authorization of the author of copyright owner, make replacement of the lawfully owned copy of
a single copy of the work by reprographic the computer program in the event that the
reproduction: lawfully obtained copy of the computer
program is lost, destroyed or rendered
(a) Where the work by reason of its fragile unusable.
character or rarity cannot be lent to user in
its original form; 189.2. No copy or adaptation mentioned in this
Section shall be used for any purpose other than the
(b) Where the works are isolated articles ones determined in this Section, and any such copy or
contained in composite works or brief adaptation shall be destroyed in the event that
portions of other published works and the continued possession of the copy of the computer
reproduction is necessary to supply them, program ceases to be lawful.
when this is considered expedient, to
persons requesting their loan for purposes of 189.3. This provision shall be without prejudice to
research or study instead of lending the the application of Section 185 whenever appropriate.
volumes or booklets which contain them; (n)
and
Section 190. Importation for Personal Purposes. -
(c) Where the making of such a copy is in 190.1. Notwithstanding the provision of Subsection
order to preserve and, if necessary in the 177.6, but subject to the limitation under the
event that it is lost, destroyed or rendered Subsection 185.2, the importation of a copy of a work
unusable, replace a copy, or to replace, in by an individual for his personal purposes shall be
the permanent collection of another similar permitted without the authorization of the author of,
library or archive, a copy which has been or other owner of copyright in, the work under the
lost, destroyed or rendered unusable and following circumstances:
copies are not available with the publisher.
(a) When copies of the work are not
188.2. Notwithstanding the above provisions, it shall available in the Philippines and:
not be permissible to produce a volume of a work
published in several volumes or to produce missing (i) Not more than one (1) copy at
tomes or pages of magazines or similar works, unless one time is imported for strictly
the volume, tome or part is out of stock: Provided, individual use only; or
That every library which, by law, is entitled to
receive copies of a printed work, shall be entitled,
when special reasons so require, to reproduce a copy (ii) The importation is by authority
of a published work which is considered necessary of and for the use of the Philippine
for the collection of the library but which is out of Government; or
stock. (Sec. 13, P.D. 49a)
(iii) The importation, consisting of
Section 189. Reproduction of Computer Program. - not more than three (3) such copies
189.1. Notwithstanding the provisions of Section or likenesses in any one invoice, is
177, the reproduction in one (1) back-up copy or not for sale but for the use only of
adaptation of a computer program shall be permitted, any religious, charitable, or
without the authorization of the author of, or other educational society or institution
duly incorporated or registered, or
 is for the encouragement of the fine and the Supreme Court Library the amount of the
arts, or for any state school, retail price of the best edition of the work. Only the
college, university, or free public above mentioned classes of work shall be accepted
library in the Philippines. for deposit by the National Library and the Supreme
Court Library. (Sec. 26, P.D. No. 49a)
(b) When such copies form parts of libraries
and personal baggage belonging to persons Section 192. Notice of Copyright. - Each copy of a
or families arriving from foreign countries work published or offered for sale may contain a
and are not intended for sale: Provided, That notice bearing the name of the copyright owner, and
such copies do not exceed three (3). the year of its first publication, and, in copies
produced after the creator's death, the year of such
190.2. Copies imported as allowed by this Section death. (Sec. 27, P.D. No. 49a)
may not lawfully be used in any way to violate the
rights of owner the copyright or annul or limit the CHAPTER X
protection secured by this Act, and such unlawful use MORAL RIGHTS
shall be deemed an infringement and shall be
punishable as such without prejudice to the Section 193. Scope of Moral Rights. - The author of a
proprietor's right of action. work shall, independently of the economic rights in
Section 177 or the grant of an assignment or license
190.3. Subject to the approval of the Secretary of with respect to such right, have the right:
Finance, the Commissioner of Customs is hereby
empowered to make rules and regulations for 193.1. To require that the authorship of the works be
preventing the importation of articles the importation attributed to him, in particular, the right that his
of which is prohibited under this Section and under name, as far as practicable, be indicated in a
treaties and conventions to which the Philippines may prominent way on the copies, and in connection with
be a party and for seizing and condemning and the public use of his work;
disposing of the same in case they are discovered
after they have been imported. (Sec. 30, P.D. No. 49) 193.2. To make any alterations of his work prior to,
or to withhold it from publication;
CHAPTER IX
DEPOSIT AND NOTICE 193.3. To object to any distortion, mutilation or other
modification of, or other derogatory action in relation
Section 191. Registration and Deposit with National to, his work which would be prejudicial to his honor
Library and the Supreme Court Library. - After the or reputation; and
first public dissemination of performance by
authority of the copyright owner of a work falling 193.4. To restrain the use of his name with respect to
under Subsections 172.1, 172.2 and 172.3 of this Act, any work not of his own creation or in a distorted
there shall, for the purpose of completing the records version of his work. (Sec. 34, P.D. No. 49)
of the National Library and the Supreme Court
Library, within three (3) weeks, be registered and
deposited with it, by personal delivery or by Section 194. Breach of Contract. - An author cannot
registered mail two (2) complete copies or be compelled to perform his contract to create a work
reproductions of the work in such form as the or for the publication of his work already in
directors of said libraries may prescribe. A certificate existence. However, he may be held liable for
of deposit shall be issued for which the prescribed fee damages for breach of such contract. (Sec. 35, P.D.
shall be collected and the copyright owner shall be No. 49)
exempt from making additional deposit of the works
with the National Library and the Supreme Court Section 195. Waiver of Moral Rights. - An author
Library under other laws. If, within three (3) weeks may waive his rights mentioned in Section 193 by a
after receipt by the copyright owner of a written written instrument, but no such waiver shall be valid
demand from the directors for such deposit, the where its effects is to permit another:
required copies or reproductions are not delivered
and the fee is not paid, the copyright owner shall be 195.1. To use the name of the author, or the title of
liable to pay a fine equivalent to the required fee per his work, or otherwise to make use of his reputation
month of delay and to pay to the National Library
with respect to any version or adaptation of his work damage recovered after the creator's death shall be
which, because of alterations therein, would held in trust for and remitted to his heirs, and in
substantially tend to injure the literary or artistic default of the heirs, shall belong to the government.
reputation of another author; or (Sec. 40, P D No. 49)

195.2. To use the name of the author with respect to a CHAPTER XI

work he did not create. (Sec. 36, P.D. No. 49) RIGHTS TO PROCEEDS IN SUBSEQUENT
TRANSFERS
Section 196. Contribution to Collective Work. -
When an author contributes to a collective work, his Section 200. Sale or Lease of Work. - In every sale or
right to have his contribution attributed to him is lease of an original work of painting or sculpture or
deemed waived unless he expressly reserves it. (Sec. of the original manuscript of a writer or composer,
37, P.D. No. 49) subsequent to the first disposition thereof by the
author, the author or his heirs shall have an
Section 197. Editing, Arranging and Adaptation of inalienable right to participate in the gross proceeds
Work. - In the absence of a contrary stipulation at the of the sale or lease to the extent of five percent (5%).
time an author licenses or permits another to use his This right shall exist during the lifetime of the author
work, the necessary editing, arranging or adaptation and for fifty (50) years after his death. (Sec. 31, P.D.
of such work, for publication, broadcast, use in a No. 49)
motion picture, dramatization, or mechanical or
electrical reproduction in accordance with the Section 201. Works Not Covered. - The provisions of
reasonable and customary standards or requirements this Chapter shall not apply to prints, etchings,
of the medium in which the work is to be used, shall engravings, works of applied art, or works of similar
not be deemed to contravene the author's rights kind wherein the author primarily derives gain from
secured by this chapter. Nor shall complete the proceeds of reproductions. (Sec. 33, P.D. No. 49)
destruction of a work unconditionally transferred by
the author be deemed to violate such rights. (Sec. 38, CHAPTER XII
P.D. No. 49) RIGHTS OF PERFORMERS, PRODUCERS OF
SOUNDS RECORDINGS AND
Section 198. Term of Moral Rights. - 198.1. The BROADCASTING ORGANIZATIONS
rights of an author under this chapter shall last during
the lifetime of the author and for fifty (50) years after Section 202. Definitions. - For the purpose of this
his death and shall not be assignable or subject to Act, the following terms shall have the following
license. The person or persons to be charged with the meanings:
posthumous enforcement of these rights shall be
named in writing to be filed with the National 202.1. "Performers" are actors, singers, musicians,
Library. In default of such person or persons, such dancers, and other persons who act, sing, declaim,
enforcement shall devolve upon either the author's play in, interpret, or otherwise perform literary and
heirs, and in default of the heirs, the Director of the artistic work;
National Library.
202.2. "Sound recording" means the fixation of the
198.2. For purposes of this Section, "Person" shall sounds of a performance or of other sounds, or
mean any individual, partnership, corporation, representation of sound, other than in the form of a
association, or society. The Director of the National fixation incorporated in a cinematographic or other
Library may prescribe reasonable fees to be charged audiovisual work;
for his services in the application of provisions of this
Section. (Sec. 39, P.D. No. 49)
202.3. An "audiovisual work or fixation" is a work
that consists of a series of related images which
Section 199. Enforcement Remedies. - Violation of impart the impression of motion, with or without
any of the rights conferred by this Chapter shall accompanying sounds, susceptible of being made
entitle those charged with their enforcement to the visible and, where accompanied by sounds,
same rights and remedies available to a copyright susceptible of being made audible;
owner. In addition, damages which may be availed of
under the Civil Code may also be recovered. Any
202.4. "Fixation" means the embodiment of sounds, 203.2. The right of authorizing the direct or indirect
or of the representations thereof, from which they can reproduction of their performances fixed in sound
be perceived, reproduced or communicated through a recordings, in any manner or form;
device;
203.3. Subject to the provisions of Section 206, the
202. 5. "Producer of a sound recording" means the right of authorizing the first public distribution of the
person, or the legal entity, who or which takes the original and copies of their performance fixed in the
initiative and has the responsibility for the first sound recording through sale or rental or other forms
fixation of the sounds of a performance or other of transfer of ownership;
sounds, or the representation of sounds;
203.4. The right of authorizing the commercial rental
202.6. "Publication of a fixed performance or a sound to the public of the original and copies of their
recording" means the offering of copies of the fixed performances fixed in sound recordings, even after
performance or the sound recording to the public, distribution of them by, or pursuant to the
with the consent of the right holder: Provided, That authorization by the performer; and
copies are offered to the public in reasonable quality;
203.5. The right of authorizing the making available
202.7. "Broadcasting" means the transmission by to the public of their performances fixed in sound
wireless means for the public reception of sounds or recordings, by wire or wireless means, in such a way
of images or of representations thereof; such that members of the public may access them from a
transmission by satellite is also "broadcasting" where place and time individually chosen by them. (Sec. 42,
the means for decrypting are provided to the public P.D. No. 49a)
by the broadcasting organization or with its consent;
Section 204. Moral Rights of Performers. - 204.1.
202.8. "Broadcasting organization" shall include a Independently of a performer's economic rights, the
natural person or a juridical entity duly authorized to performer, shall, as regards his live aural
engage in broadcasting; and performances or performances fixed in sound
recordings, have the right to claim to be identified as
202.9 "Communication to the public of a the performer of his performances, except where the
performance or a sound recording" means the omission is dictated by the manner of the use of the
transmission to the public, by any medium, otherwise performance, and to object to any distortion,
than by broadcasting, of sounds of a performance or mutilation or other modification of his performances
the representations of sounds fixed in a sound that would be prejudicial to his reputation.
recording. For purposes of Section 209,
"communication to the public" includes making the 204.2. The rights granted to a performer in
sounds or representations of sounds fixed in a sound accordance with Subsection 203.1 shall be
recording audible to the public. maintained and exercised fifty (50) years after his
death, by his heirs, and in default of heirs, the
Section 203. Scope of Performers' Rights. - Subject government, where protection is claimed. (Sec. 43,
to the provisions of Section 212, performers shall P.D. No. 49)
enjoy the following exclusive rights:
Section 205. Limitation on Right. - 205.1. Subject to
203.1. As regards their performances, the right of the provisions of Section 206, once the performer has
authorizing: authorized the broadcasting or fixation of his
performance, the provisions of Sections 203 shall
(a) The broadcasting and other have no further application.
communication to the public of their
performance; and 205.2. The provisions of Section 184 and Section 185
shall apply mutatis mutandis to performers. (n)
(b) The fixation of their unfixed
performance. Section 206. Additional Remuneration for
Subsequent Communications or Broadcasts. - Unless
otherwise provided in the contract, in every
communication to the public or broadcast of a
performance subsequent to the first communication Section 211. Scope of Right. - Subject to the
or broadcast thereof by the broadcasting organization, provisions of Section 212, broadcasting organizations
the performer shall be entitled to an additional shall enjoy the exclusive right to carry out, authorize
remuneration equivalent to at least five percent (5%) or prevent any of the following acts:
of the original compensation he or she received for
the first communication or broadcast. (n) 211.1. The rebroadcasting of their broadcasts;

Section 207. Contract Terms. - Nothing in this 211.2. The recording in any manner, including the
Chapter shall be construed to deprive performers of making of films or the use of video tape, of their
the right to agree by contracts on terms and broadcasts for the purpose of communication to the
conditions more favorable for them in respect of any public of television broadcasts of the same; and
use of their performance. (n)
211.3. The use of such records for fresh
CHAPTER XIII transmissions or for fresh recording. (Sec. 52, P.D.
PRODUCERS OF SOUND RECORDINGS No. 49)

Section 208. Scope of Right. - Subject to the CHAPTER XV

provisions of Section 212, producers of sound LIMITATIONS ON PROTECTION
recordings shall enjoy the following exclusive rights:
Section 212. Limitations on Rights. - Sections 203,
208.1. The right to authorize the direct or indirect 208 and 209 shall not apply where the acts referred to
reproduction of their sound recordings, in any in those Sections are related to:
manner or form; the placing of these reproductions in
the market and the right of rental or lending; 212.1. The use by a natural person exclusively for his
own personal purposes;
208.2. The right to authorize the first public
distribution of the original and copies of their sound 212.2. Using short excerpts for reporting current
recordings through sale or rental or other forms of events;
transferring ownership; and
212.3. Use solely for the purpose of teaching or for
208.3. The right to authorize the commercial rental to scientific research; and
the public of the original and copies of their sound
recordings, even after distribution by them by or
pursuant to authorization by the producer. (Sec. 46, 212.4. Fair use of the broadcast subject to the
P.D. No. 49a) conditions under Section 185. (Sec. 44, P.D. No. 49a)

Section 209. Communication to the Public. - If a CHAPTER XVI

sound recording published for commercial purposes, TERM OF PROTECTION
or a reproduction of such sound recording, is used
directly for broadcasting or for other communication Section 213. Term of Protection. - 213.1. Subject to
to the public, or is publicly performed with the the provisions of Subsections 213.2 to 213.5, the
intention of making and enhancing profit, a single copyright in works under Sections 172 and 173 shall
equitable remuneration for the performer or be protected during the life of the author and for fifty
performers, and the producer of the sound recording (50) years after his death. This rule also applies to
shall be paid by the user to both the performers and posthumous works. (Sec. 21, first sentence, P.D. No.
the producer, who, in the absence of any agreement 49a)
shall share equally. (Sec. 47, P.D. No. 49a)
213.2. In case of works of joint authorship, the
Section 210. Limitation of Right. - Sections 184 and economic rights shall be protected during the life of
185 shall apply mutatis mutandis to the producer of the last surviving author and for fifty (50) years after
sound recordings. (Sec. 48, P.D. No. 49a) his death. (Sec. 21, second sentence, P.D. No. 49)

CHAPTER XIV 213.3. In case of anonymous or pseudonymous

BROADCASTING ORGANIZATIONS works, the copyright shall be protected for fifty (50)
years from the date on which the work was first with subsisting protection under the prior law. (Sec.
lawfully published: Provided, That where, before the 55, P.D. No. 49a)
expiration of the said period, the author's identity is
revealed or is no longer in doubt, the provisions of CHAPTER XVII
Subsections 213.1. and 213.2 shall apply, as the case INFRINGEMENT
may be: Provided, further, That such works if not
published before shall be protected for fifty (50) Section 216. Remedies for Infringement. - 216.1. Any
years counted from the making of the work. (Sec. 23, person infringing a right protected under this law
P.D. No. 49) shall be liable:

213.4. In case of works of applied art the protection (a) To an injunction restraining such
shall be for a period of twenty-five (25) years from infringement. The court may also order the
the date of making. (Sec. 24(B), P.D. No. 49a) defendant to desist from an infringement,
among others, to prevent the entry into the
213.5. In case of photographic works, the protection channels of commerce of imported goods
shall be for fifty (50) years from publication of the that involve an infringement, immediately
work and, if unpublished, fifty (50) years from the after customs clearance of such goods.
making. (Sec. 24(C), P.D. 49a)
(b) Pay to the copyright proprietor or his
213.6. In case of audio-visual works including those assigns or heirs such actual damages,
produced by process analogous to photography or including legal costs and other expenses, as
any process for making audio-visual recordings, the he may have incurred due to the
term shall be fifty (50) years from date of publication infringement as well as the profits the
and, if unpublished, from the date of making. (Sec. infringer may have made due to such
24(C), P.D. No. 49a) infringement, and in proving profits the
plaintiff shall be required to prove sales only
Section 214. Calculation of Term. - The term of and the defendant shall be required to prove
protection subsequent to the death of the author every element of cost which he claims, or, in
provided in the preceding Section shall run from the lieu of actual damages and profits, such
date of his death or of publication, but such terms damages which to the court shall appear to
shall always be deemed to begin on the first day of be just and shall not be regarded as penalty.
January of the year following the event which gave
rise to them. (Sec. 25, P.D. No. 49) (c) Deliver under oath, for impounding
during the pendency of the action, upon such
Section 215. Term of Protection for Performers, terms and conditions as the court may
Producers and Broadcasting Organizations. - 215.1. prescribe, sales invoices and other
The rights granted to performers and producers of documents evidencing sales, all articles and
sound recordings under this law shall expire: their packaging alleged to infringe a
copyright and implements for making them.
(a) For performances not incorporated in
recordings, fifty (50) years from the end of (d) Deliver under oath for destruction
the year in which the performance took without any compensation all infringing
place; and copies or devices, as well as all plates,
molds, or other means for making such
(b) For sound or image and sound infringing copies as the court may order.
recordings and for performances
incorporated therein, fifty (50) years from (e) Such other terms and conditions,
the end of the year in which the recording including the payment of moral and
took place. exemplary damages, which the court may
deem proper, wise and equitable and the
215.2. In case of broadcasts, the term shall be twenty destruction of infringing copies of the work
(20) years from the date the broadcast took place. even in the event of acquittal in a criminal
The extended term shall be applied only to old works case.
216.2. In an infringement action, the court shall also (c) Trade exhibit of the article in public,
have the power to order the seizure and impounding shall be guilty of an offense and shall be
of any article which may serve as evidence in the liable on conviction to imprisonment and
court proceedings. (Sec. 28, P.D. No. 49a) fine as above mentioned. (Sec. 29, P.D. No.
49a)
Section 217. Criminal Penalties. - 217.1. Any person
infringing any right secured by provisions of Part IV Section 218. Affidavit Evidence. - 218.1. In an action
of this Act or aiding or abetting such infringement under this Chapter, an affidavit made before a notary
shall be guilty of a crime punishable by: public by or on behalf of the owner of the copyright
in any work or other subject matter and stating that:
(a) Imprisonment of one (1) year to three (3)
years plus a fine ranging from Fifty (a) At the time specified therein, copyright
thousand pesos (P50,000) to One hundred subsisted in the work or other subject
fifty thousand pesos (P150,000) for the first matter;
offense.
(b) He or the person named therein is the
(b) Imprisonment of three (3) years and one owner of the copyright; and
(1) day to six (6) years plus a fine ranging
from One hundred fifty thousand pesos (c) The copy of the work or other subject
(P150,000) to Five hundred thousand pesos matter annexed thereto is a true copy
(P500,000) for the second offense. thereof, shall be admitted in evidence in any
proceedings for an offense under this
(c) Imprisonment of six (6) years and one Chapter and shall be prima facie proof of the
(1) day to nine (9) years plus a fine ranging matters therein stated until the contrary is
from five hundred thousand pesos proved, and the court before which such
(P500,000) to One million five hundred affidavit is produced shall assume that the
thousand pesos (P1,500,000) for the third affidavit was made by or on behalf of the
and subsequent offenses. owner of the copyright.

(d) In all cases, subsidiary imprisonment in 218.2. In an action under this Chapter:
cases of insolvency.
(a) Copyright shall be presumed to subsist in
217.2. In determining the number of years of the work or other subject matter to which the
imprisonment and the amount of fine, the court shall action relates if the defendant does not put in
consider the value of the infringing materials that the issue the question whether copyright
defendant has produced or manufactured and the subsists in the work or other subject matter;
damage that the copyright owner has suffered by and
reason of the infringement.
(b) Where the subsistence of the copyright is
217.3. Any person who at the time when copyright established, the plaintiff shall be presumed
subsists in a work has in his possession an article to be the owner of the copyright if he claims
which he knows, or ought to know, to be an to be the owner of the copyright and the
infringing copy of the work for the purpose of: defendant does not put in issue the question
of his ownership.
(a) Selling, letting for hire, or by way of
trade offering or exposing for sale, or hire, (c) Where the defendant, without good faith,
the article; puts in issue the questions of whether
copyright subsists in a work or other subject
(b) Distributing the article for purpose of matter to which the action relates, or the
trade, or for any other purpose to an extent ownership of copyright in such work or
that will prejudice the rights of the copyright subject matter, thereby occasioning
owner in the work; or unnecessary costs or delay in the
proceedings, the court may direct that any
costs to the defendant in respect of the
 action shall not be allowed by him and that (d) Works first published in the Philippines;
any costs occasioned by the defendant to and
other parties shall be paid by him to such
other parties. (n) (e) Works first published in another country
but also published in the Philippines within
Section 219. Presumption of Authorship. - 219.1. The thirty days, irrespective of the nationality or
natural person whose name is indicated on a work in residence of the authors.
the usual manner as the author shall, in the absence of
proof to the contrary, be presumed to be the author of 221.2. The provisions of this Act shall also apply to
the work. This provision shall be applicable even if works that are to be protected by virtue of and in
the name is a pseudonym, where the pseudonym accordance with any international convention or
leaves no doubt as to the identity of the author. other international agreement to which the
Philippines is a party. (n)
219.2. The person or body corporate whose name
appears on a audio-visual work in the usual manner Section 222. Points of Attachment for Performers. -
shall, in the absence of proof to the contrary, be The provisions of this Act on the protection of
presumed to be the maker of said work. (n) performers shall apply to:

Section 220. International Registration of Works. - A 222.1. Performers who are nationals of the
statement concerning a work, recorded in an Philippines;
international register in accordance with an
international treaty to which the Philippines is or may 222.2. Performers who are not nationals of the
become a party, shall be construed as true until the Philippines but whose performances:
contrary is proved except:
(a) Take place in the Philippines; or
220.1. Where the statement cannot be valid under this
Act or any other law concerning intellectual property.
(b) Are incorporated in sound recordings
that are protected under this Act; or
220.2. Where the statement is contradicted by another
statement recorded in the international register. (n)
(c) Which has not been fixed in sound
recording but are carried by broadcast
CHAPTER XVIII qualifying for protection under this Act. (n)
SCOPE OF APPLICATION
Section 223. Points of Attachment for Sound
Section 221. Points of Attachment for Works under Recordings. - The provisions of this Act on the
Sections 172 and 173. - 221.1. The protection protection of sound recordings shall apply to:
afforded by this Act to copyrightable works under
Sections 172 and 173 shall apply to:
223.1. Sound recordings the producers of which are
nationals of the Philippines; and
(a) Works of authors who are nationals of,
or have their habitual residence in, the
Philippines; 223.2. Sound recordings that were first published in
the Philippines. (n)
(b) Audio-visual works the producer of
which has his headquarters or habitual Section 224. Points of Attachment for Broadcasts. -
residence in the Philippines; 224.1. The provisions of this Act on the protection of
broadcasts shall apply to:
(c) Works of architecture erected in the
Philippines or other artistic works (a) Broadcasts of broadcasting organizations
incorporated in a building or other structure the headquarters of which are situated in the
located in the Philippines; Philippines; and

(b) Broadcasts transmitted from transmitters

situated in the Philippines.
224.2. The provisions of this Act shall also apply to Section 230. Equitable Principles to Govern
performers who, and to producers of sound Proceedings. - In all inter partes proceedings in the
recordings and broadcasting organizations which, are Office under this Act, the equitable principles of
to be protected by virtue of and in accordance with laches, estoppel, and acquiescence where applicable,
any international convention or other international may be considered and applied. (Sec. 9-A, R.A. No.
agreement to which the Philippines is a party. (n) 165)

CHAPTER XIX Section 231. Reverse Reciprocity of Foreign Laws. -

INSTITUTION OF ACTIONS Any condition, restriction, limitation, diminution,
requirement, penalty or any similar burden imposed
Section 225. Jurisdiction. - Without prejudice to the by the law of a foreign country on a Philippine
provisions of Subsection 7.1(c), actions under this national seeking protection of intellectual property
Act shall be cognizable by the courts with rights in that country, shall reciprocally be
appropriate jurisdiction under existing law. (Sec. 57, enforceable upon nationals of said country, within
P.D. No. 49a) Philippine jurisdiction. (n)

Section 226. Damages. - No damages may be Section 232. Appeals. - 232.1. Appeals from
recovered under this Act after four (4) years from the decisions of regular courts shall be governed by the
time the cause of action arose. (Sec. 58, P.D. No. 49) Rules of Court. Unless restrained by a higher court,
the judgment of the trial court shall be executory
CHAPTER XX even pending appeal under such terms and conditions
MISCELLANEOUS PROVISIONS as the court may prescribe.

Section 227. Ownership of Deposit and Instruments. 232.2. Unless expressly provided in this Act or other
- All copies deposited and instruments in writing statutes, appeals from decisions of administrative
filed with the National Library and the Supreme officials shall be provided in the Regulations. (n)
Court Library in accordance with the provisions of
this Act shall become the property of the Section 233. Organization of the Office; Exemption
Government. (Sec. 60, P.D. No. 49) from the Salary Standardization Law and the
Attrition Law. - 233.1. The Office shall be organized
Section 228. Public Records. - The section or within one (1) year after the approval of this Act. It
division of the National Library and the Supreme shall not be subject to the provisions of Republic Act
Court Library charged with receiving copies and No. 7430.
instruments deposited and with keeping records
required under this Act and everything in it shall be 233.2. The Office shall institute its own
opened to public inspection. The Director of the compensation structure: Provided, That the Office
National Library is empowered to issue such shall make its own system conform as closely as
safeguards and regulations as may be necessary to possible with the principles provided for under
implement this Section and other provisions of this Republic Act No. 6758. (n)
Act. (Sec. 61, P.D. No. 49)
Section 234. Abolition of the Bureau of Patents,
Section 229. Copyright Division; Fees. - The Trademarks, and Technology Transfer. - The Bureau
Copyright Section of the National Library shall be of Patents, Trademarks, and Technology Transfer
classified as a Division upon the effectivity of this under the Department of Trade and Industry is hereby
Act. The National Library shall have the power to abolished. All unexpended funds and fees, fines,
collect, for the discharge of its services under this royalties and other charges collected for the calendar
Act, such fees as may be promulgated by it from time year, properties, equipment and records of the Bureau
to time subject to the approval of the Department of Patents, Trademarks and Technology Transfer, and
Head. (Sec. 62, P.D. 49a) such personnel as may be necessary are hereby
transferred to the Office. Personnel not absorbed or
PART V transferred to the Office shall enjoy the retirement
FINAL PROVISIONS benefits granted under existing law, otherwise, they
shall be paid the equivalent of one month basic salary
for every year of service, or the equivalent nearest
fractions thereof favorable to them on the basis of the Bureau for the calendar year pursuant to Sections
highest salary received.(n) 14.1 and 234 of this Act. Thereafter such sums as
may be necessary for its continued implementations
Section 235. Applications Pending on Effective Date shall be included in the annual General
of Act. - 235.1. All applications for patents pending in Appropriations Act. (n)
the Bureau of Patents, Trademarks and Technology
Transfer shall be proceeded with and patents thereon Section 239. Repeals. - 239.1. All Acts and parts of
granted in accordance with the Acts under which said Acts inconsistent herewith, more particularly
applications were filed, and said Acts are hereby Republic Act No. 165, as amended; Republic Act No.
continued to be enforced, to this extent and for this 166, as amended; and Articles 188 and 189 of the
purpose only, notwithstanding the foregoing general Revised Penal Code; Presidential Decree No. 49,
repeal thereof: Provided, That applications for utility including Presidential Decree No. 285, as amended,
models or industrial designs pending at the effective are hereby repealed.
date of this Act, shall be proceeded with in
accordance with the provisions of this Act, unless the 239.2. Marks registered under Republic Act No. 166
applicants elect to prosecute said applications in shall remain in force but shall be deemed to have
accordance with the Acts under which they were been granted under this Act and shall be due for
filed. renewal within the period provided for under this Act
and, upon renewal shall be reclassified in accordance
235.2. All applications for registration of marks or with the International Classification. Trade names
trade names pending in the Bureau of Patents, and marks registered in the Supplemental Register
Trademarks and Technology Transfer at the effective under Republic Act No. 166 shall remain in force but
date of this Act may be amended, if practicable to shall no longer be subject to renewal.
bring them under the provisions of this Act. The
prosecution of such applications so amended and the 239.3. The provisions of this Act shall apply to works
grant of registrations thereon shall be proceeded with in which copyright protection obtained prior to the
in accordance with the provisions of this Act. If such effectivity of this Act is subsisting: Provided, That
amendments are not made, the prosecution of said the application of this Act shall not result in the
applications shall be proceeded with and registrations diminution of such protection. (n)
thereon granted in accordance with the Acts under
which said applications were filed, and said Acts are Section 240. Separability. - If any provision of this
hereby continued in force to this extent for this Act or the application of such provision to any
purpose only, notwithstanding the foregoing general circumstances is held invalid, the remainder of the
repeal thereof (n) Act shall not be affected thereby. (n)

Section 236. Preservation of Existing Rights. - Section 241. Effectivity. - This Act shall take effect
Nothing herein shall adversely affect the rights on the on 1 January 1998. (n)
enforcement of rights in patents, utility models,
industrial designs, marks and works, acquired in good
faith prior to the effective date of this Act. (n)

Section 237. Notification on Berne Appendix. - The

Philippines shall by proper compliance with the
requirements set forth under the Appendix of the
Berne Convention (Paris Act, 1971) avail itself of the
special provisions regarding developing countries,
including provisions for licenses grantable by
competent authority under the Appendix. (n)

Section 238. Appropriations. - The funds needed to

carry out the provisions of this Act shall be charged
to the appropriations of the Bureau of Patents,
Trademarks, and Technology Transfer under the
current General Appropriations Act and the fees,
fines, royalties and other charges collected by the