Professional Documents
Culture Documents
Reviewer in RFBT Part 1 PDF
Reviewer in RFBT Part 1 PDF
Reviewer in RFBT Part 1 PDF
Part 1
New Law Topics for CPA Board Exam October
2017
Contains:
Insolvency Law
Corporate Rehabilitation
Bouncing Checks Law
Securities Regulations Code
Code of Corporate Governance
PDIC Law
Secrecy of Bank Deposits
Unclaimed Balances Law
kcbdeleon
INSOLVENCY LAW (Act No. 1956) When a debtor is in the state of insolvency, he
may petition that he be declared in the state of
suspension of payments by the court, or the judge
thereof in vacation, of the province or of the city
INSOLVENCY DEFINED
in which he has resided for six months next
- Under the Insolvency Law, a person is preceding the filing of his petition.
insolvent when his liabilities are more than
his assets. The petition must have an attached schedule and
- Under the Civil Code, a person is insolvent inventory of:
when even though he possesses sufficient a. Statement of debts and liabilities
assets to cover his liabilities, he is unable to b. Description of real and personal property
regularly pay said obligations as they fall c. Verification
due. d. Proposed agreement requested with
- In general terms, it is the state wherein a Creditors
debtor, possessing sufficient property to
cover all his debts, be it an individual person, 2. Issuance by the court of an order calling a
be it a sociedad or corporation, foresees the meeting of creditors
impossibility of meeting them when they
respectively fall due. - The meeting must take place in not less
than 2 weeks nor more than 8 weeks from
PHILOSOPHY BEHIND THE INSOLVENCY LAW the calling of such order
There are times when a person wants to pay his - The order must designate the day, hour,
debts but cannot pay them despite his efforts and and place of meeting of said creditors as
desire to do so. The philosophy behind the well as a newspaper of general circulation
Insolvency Law is to allow such debtor to turn over published in the province or city in which the
all his assets, except those exempt from execution, petition is filed
for distribution among his creditors and, thereafter, - Said order shall further contain an absolute
to turn a new leaf in his economic life. Then he can injunction forbidding the petitioning debtor
start anew without being bothered by his old from disposing in any manner of his property,
creditors. or making payments for expense, except
those in the ordinary course of the business.
SUSPENSION OF PAYMENTS (SOP) is the
postponement by court order of the payment of 3. Publication of the order and service of summons
debts of one who, while possessing sufficient
property to cover his debts, foresees the - A copy of said order shall immediately be
impossibility of meeting them when they published 1 by the clerk of said court.
respectively fall due. - Copies of orders must also be sent to all the
PURPOSE & BASIS OF SOP creditors declared in the attachments to the
petition.
- The purpose of a suspension of payments is
to suspend or delay the payment of debts 4. Meeting of creditors for the consideration of
the amount of which isn’t affected the debtor’s proposition
although a postponement is declared
- The basis is the probability of the debtor’s - The presence of the creditors representing at
inability to meet his obligation when they least three-fifths of the liabilities shall be
respectively fall due, despite the fact that he necessary for holding a meeting.
has sufficient assets to cover all his liabilities.
5. Approval of the creditors of the debtor’s
STEPS IN SUSPENSION OF PAYMENTS
proposition
1. Filing of petition by the debtor
6. Objections, if any, to the decision which must In simple terms, it is called “voluntary” insolvency
be made within 10 days following the meeting because the debtor admits that he cannot pay his
obligations as they come due. He is declared
GROUNDS FOR OBJECTION TO DECISION:
insolvent from the time he admits such (i.e.
a. Defects in the call for the meeting, in the submission of petition).
holding thereof, and in and the deliberations ASSIGNEE IN INSOLVENCY
had thereat which prejudice the rights of the
creditors; - role is in a nature of a receiver.
b. Fraudulent connivance between one or more - gathers all the assets of the debtor, and
creditors and in debtor to vote in favor of the proceeds to make the inventory. If he
proposed agreement; discovers some properties of the debtor to be
c. Fraudulent conveyance of claims for the in the possession of third parties, he must
purpose of obtaining a majority. take action to recover them. His main
function is to preserve the property and
7. Issuance of order by the court directing convert the assets into cash to await the
that the agreement be carried out in case the order of the court for the payment of
decision is declared valid, or when no objection approved claims.
to said decision has been presented.
INVOLUNTARY INSOLVENCY - an adjudication of
KINDS OF INSOLVENCY insolvency may be made by the petition of 3 or
more creditors, residents of the Philippines,
VOLUNTARY INSOLVENCY - an insolvent debtor
whose credits or demands accrued in the
owing debts exceeding in amount in the sum of
Philippines, for the amount of which credits
P1000, may apply to be discharged from his debts
or demands are in the aggregate of not less than
and liabilities by petition to the RTC of the province
P1000.
or city in which he has resided for 6 months next
preceding the filing of the petition. NATURE OF INVOLUNTARY INSOLVENCY
PROCEEDINGS
STEPS IN VOLUNTARY INSOLVENCY
- An involuntary insolvency isn’t a mere personal
a. Filing of the petition by the debtor praying
action against the insolvent for the collection of
for the declaration of insolvency debts; but its purpose is to impound all of his
b. Issuance of order of adjudication declaring non-exempt property, to distribute it equitably
the petitioner insolvent
among his creditors and to release him from
c. Publication and service of the order
further liability. It is an action in rem and action in
d. Meeting of the creditors to elect the assignee in
persona.
insolvency
e. Conveyance of the debtor’s property by the clerk STEPS IN INVOLUNTARY INSOLVENCY
of court to the assignee
a. Filing of the petition by three or more creditors
f. Liquidation of the debtor’s assets and payment
b. Issuance of order requiring the debtor to show
of his debts
cause why he shouldn’t be adjudged insolvent
g. Composition, if agreed upon
c. Service of order to show cause
h. Discharge of the debtor on his application,
d. Filing of answer or motion to dismiss
except a corporation
e. Hearing of the case
i. Objection, if any, to the discharge
f. Issuance of order or decision adjudging debtor
j. Appeal to the SC in certain cases
insolvent
g. Publication and service of order
In voluntary insolvency, a debtor is deemed
h. Meeting of creditors for election of an
insolvent upon filing of the petition. The filing of such
assignee in insolvency
petition on the part of the debtor is considered an
i. Conveyance of debtor’s property by clerk of court
admission of insolvency on his part.
j. Liquidation of assets and payments of debts
k. Composition, if agreed upon
l. Discharge of the debtor on his application, If the court finds the petition to be sufficient in
except a corporation form and substance, it shall, not later than five (5)
m. Objection if any to the discharge days from the filing of the petition, issue a Stay
n. Appeal to the SC in certain cases Order:
(a) appointing a Rehabilitation Receiver and
fixing his bond;
END
(b) staying enforcement of all claims
CORPORATE REHABILITATION (c) prohibiting the debtor from selling,
encumbering, transferring, or disposing in any
(A.M. NO. 00-8-10-SC) manner any of its properties except in the ordinary
course of business;
(d) prohibiting the debtor from making any
DEFINITION OF TERMS payment of its liabilities outstanding as at the date of
filing of the petition;
"Administrative expenses" shall refer to those (e) prohibiting the debtor's suppliers of goods or
expenses incurred in the ordinary course of services from withholding supply of goods and
business of the debtor after the issuance of the stay services in the ordinary course of business for as
order, excluding interest payable to creditors. long as the debtor makes payments for the services
"Affidavit of General Financial Condition" shall refer and goods supplied after the issuance of the stay
to a verified statement on the general financial order;
condition of the debtor required in Section 2, Rule 4 (f) directing the payment in full of all
of these Rules. administrative expenses incurred after the issuance
of the stay order;
"Board of Directors" shall include the executive (g) fixing the initial hearing on the petition not
committee or the management of a partnership or earlier than forty five (45) days but not later than sixty
association. (60) days from the filing thereof;
(h) directing the petitioner to publish the Order in
"Claim" shall include all claims or demands of
a newspaper of general of general circulation in the
whatever nature or character against a debtor or its
Philippines once a week for two (2) consecutive
property, whether for money or otherwise.
weeks;
"Creditor" shall mean any holder of a Claim. (i) directing all creditors and all interested parties
(including the SEC) to file and serve on the debtor a
"Court" shall refer to the proper Regional Trial Court verified comment on or opposition to the petition,
designated to hear and decide the cases with supporting affidavits and documents, not later
contemplated under these Rules. than ten (10) days before the date of the initial
"Debtor" shall mean any corporation, partnership, or hearing and putting them on notice that their failure
association, whether supervised or regulated by the to do so will bar them from participating in the
Securities and Exchange Commission or other proceedings; and
government agencies, on whose behalf a petition for (j) directing the creditors and interested parties
rehabilitation has been filed under these Rules. to secure from the court copies of the petition and its
annexes within such time as to enable themselves
"Stockholder" shall include a member of a non-stock to file their comment on or opposition to the petition
corporation or association, in a partnership. and to prepare for the initial hearing of the petition.
STAY ORDER
The petitioner shall immediately serve a copy of the
A stay order is sometimes essential to the stay order on the Rehabilitation Receiver appointed
survival of a distressed company. A stay order keeps by the court, who shall manifest his acceptance or
at bay the pack of unhappy and understandably non-acceptance of his appointment not later than
impatient creditors and prevents them from tearing ten (10) days from receipt of the order.
apart and bringing about the certain death of the
helpless company.
Period of the Stay Order. - The stay order shall be or creditors holding at least twenty-five percent
effective from the date of its issuance until the (25%) of the debtor's total liabilities, may petition
dismissal of the petition or the termination of the the proper Regional Trial Court to have the debtor
rehabilitation proceedings. placed under rehabilitation.
General Rule:
The making, drawing and issuance of a check
payment of which is refused by the drawee because
of insufficient funds in or credit with such bank, when
presented within ninety (90) days from the date of END
SECURITIES REGULATION CODE "Issuer" is the originator, maker, obligor, or creator
(R.A. 8799) of the security.
"Broker" is a person engaged in the business of
RATIONALE OF ENACTING THE SRC buying and selling securities for the account of
- establish a socially conscious, free market others.
that regulates itself
- encourage the widest participation of "Dealer" means many person who buys sells
ownership in enterprises securities for his/her own account in the ordinary
- enhance the democratization of wealth course of business.
- promote the development of the capital
market "Associated person of a broker or dealer" is an
- protect investors employee therefor whom, directly exercises control
- ensure full and fair disclosure about of supervisory authority, but does not include a
securities salesman, or an agent or a person whose functions
- minimize if not totally eliminate insider are solely clerical or ministerial.
trading and other fraudulent or manipulative
devices and practices which create "Clearing Agency" is any person who acts as
distortions in the free market. intermediary in making deliveries upon payment
effect settlement in securities transactions.
Securities - are shares, participation or interests in
a corporation or in a commercial enterprise or profit- "Exchange" is an organized market place or facility
making venture and evidenced by a certificate, that brings together buyers and sellers and executes
contract, instruments, whether written or electronic
trade of securities and/or commodities.
in character
"Insider" means
Kinds of Securities
(a) the issuer;
a. Debt Instruments - shares of stocks, bonds,
(b) a director or officer (or any person
debentures, notes evidences of
performing similar functions) of, or a person
indebtedness, asset-backed securities;
controlling the issuer;
b. Equity Instruments - shares of stock,
(c) gives or gave him access to material
certificate of deposit for a future subscription,
information about the issuer or the security that is
proprietary or non-propriety membership
not generally available to the public;
certificates in corporations;
(d) A government employee, director, or
c. Investment Instruments – investment
officer of an exchange, clearing agency and/or self-
contracts, fractional undivided interests in oil,
regulatory organization who has access to material
gas or other mineral rights;
information about an issuer or a security that is not
d. Derivatives - like options and warrants;
generally available to the public; or
e. Trust Instruments - certificates of
(e) a person who learns such information by
assignments, certificates of participation,
a communication from any forgoing insiders.
trust certificates, voting trust certificates or
similar certificates;
"Pre-need plans" are contracts which provide for the
f. Catch-All - other instruments as may in the
performance of future services of or the payment of
future determined by the Commission
future monetary considerations at the time actual
need, for which plan holders pay in cash or
DEFINITION OF TERMS
installment at stated prices, with or without interest
or insurance coverage and includes life, pension,
education, interment, and other plans which the c. The person intends to acquire shares that
Commission may from time to time approve. would result in ownership of more than 50%
of the equity shares of a public company.
"Promoter" is a person who, acting alone or with
others, takes initiative in founding and organizing the Securities deposited may be withdrawn at any time
business or enterprise of the issuer and receives throughout the period that the tender offer remains
consideration therefor. open and if deposited have not been previously
accepted for payment, and at any time after 60 days
"Prospectus" is the document made by or an behalf from the date of the original tender offer or request
of an issuer, underwriter or dealer to sell or offer or invitation.
securities for sale to the public through registration
statement filed with the Commission. Unlawful and Prohibited Acts Relating to Tender
Offers:
"Registration statement" is the application for the to make an untrue statement of a material
registration of securities required to be filed with the fact or omit to state any material fact in order
Commission. to make the statements made, not
misleading
"Salesman" is a natural person, employed as such to engage in any fraudulent, deceptive, or
as an agent, by a dealer, issuer or broker to buy and manipulative act or practices.
sell securities.
Unlawful Sale of Securities
"Uncertificated security" is a security evidenced by
electronic or similar records. It shall be unlawful for any such beneficial owner,
director, or officer, directly or indirectly, to sell any
"Underwriter" is a person who guarantees on a firm equity security of such issuer if person selling
commitment and/or declared best effort basis the security or his principal:
distribution and sale of securities of any kind by a. does not own the security sold
another company. b. if owning the security, does not deliver it
against such sale within 20 days
TENDER OFFER thereafter, or does not within 5 days after
- A publicly announced intention by a such sale deposit it in the mails or other
person acting alone or in concert with other usual channels of transportation.
persons to acquire equity securities of a
“public company”. Prohibition does NOT apply to a dealer in the
- It is mandatory to make a tender offer for ordinary course of his business and incident to the
equity shares of a public company in an establishment or maintenance by him of a primary or
amount equal to the number of shares that secondary market, otherwise than in an Exchange,
the person intends to acquire in the following for such security.
circumstances:
a. The person intends to acquire 15%or more INSIDER TRADING
of the equity shares of a public company - The selling or buying of a security by an
pursuant to an agreement made between or insider while in possession of material non-
among the person and one or more sellers; public information with respect to the issuer
b. The person intends to acquire 30%or more or the security.
of the equity shares of a public company - It is considered unlawful unless:
within a period of 12 months; or
1. The insider proves that the where applicable, the requirements of relevant
information was not gained from regulatory agencies.
such relationship; or (vi) Observe confidentiality.
2. If the other party selling to or buying
from the insider (or his agent) is FILING OF GIS AND AFS
identified, the insider proves:
a. that he disclosed the information
to the other party; or
b. that he had reason to believe that
the other party otherwise is also
in possession of the information.
Presumption:
A purchase or sale made by an insider, his spouse,
or relatives, shall be presumed to have been
effected while in possession of material non-public
information if transacted after such information came
into existence but prior to public dissemination of
such information.
A director should observe the following norms The GIS, AFS, General and Special FS reports
of conduct: should be printed on an A4-sized (8.27”x11.69”)
(i) Conduct fair business transactions with the bond paper under a standard cover page or sheet.
corporation, and ensure that his personal interest The original and all conformed pages should use
does not conflict with the interests of the corporation. only one side of the paper.
(ii) Devote the time and attention necessary to
properly and effectively perform his duties and GENERAL INFORMATION SHEET (GIS)
responsibilities. The GIS should be certified and sworn to by
(iii) Act judiciously. the corporate secretary.
(iv) Exercise independent judgment. In the submission of the General Information
(v) Have a working knowledge of the statutory and sheet (GIS), the 30- calendar day period shall be
regulatory requirements that affect the corporation, counted from the date the annual stockholders’
including its articles of incorporation and by-laws, meeting was actually held.
the rules and regulations of the Commission and,
If the corporation is unable to hold the 4) The FS of the following foreign corporations shall,
meeting for the calendar year, the GIS shall be filed at the minimum, be certified under oath by the
not later than January of the following year. treasurer of the of the corporation:
If the corporation is not in operation, it should a) branch office of a stock foreign corporation
submit an Affidavit of Non-Operation within 120 with assigned capital of less than PhP50,000.00;
calendar days after the end of the fiscal year as b) branch office of a non-stock foreign
specified in the by-laws, with the GIS and FS. corporation with total assets of less than
PhP500,000.00;
ANNUAL FINANCIAL STATEMENTS (AFS) c) representative office of a foreign
corporation with total assets of less than
1) The FS of the following domestic corporations PhP500,000.00;
shall be audited by an independent certified public d) regional operating headquarters of
accountant (CPA) registered with the Board of multinational companies with assigned capital of
Accountancy: less than PhP500,000.00;
a) stock corporations with paid-up capital of e) regional operating headquarters of
PhP50,000.00 or more; and multinational companies with total assets of less
b) non-stock corporations with annual gross than PhP500,000.00
receipts of PhP100,000.00 or more, or total
assets of PhP50,000,000.00 or more
END
2) The FS of the following domestic corporations
shall, at the minimum, be certified under oath by the
treasurer of the corporation:
a) stock corporations with paid-up capital of
less than PhP50,000.00; and
b) non-stock corporations with annual gross
receipts of less than PhP100,000.00 or a
total assets of less than PhP500,000.00.