DOF releases draft IRR for Personal Property

Security Act
THE Department of Finance (DOF) has released the draft implementing rules and regulations
(IRR) for Republic Act 11057 or the “Personal Property Security Act” (PPSA) on its website,
where stakeholders and interested parties may review and download the proposed IRR and
provide online comments and suggestions.

The draft was posted online ahead of the public hearing that is scheduled on Wednesday, July 17,
2019 at the University of the Philippines Law Center in Diliman, Quezon City.

PPSA was signed into law in 2018 by President Rodrigo Duterte “in sync with his vision for
sustained high growth and greater financial inclusion,” said Finance Secretary Carlos Dominguez
III.

The PPSA aims to promote economic activity by increasing access to least-cost credit,
particularly for micro, small and medium enterprises (MSMEs), by establishing a unified and
modern legal framework for securing obligations with personal property.

It also seeks to increase access to credit of MSMEs, as well as farmers and fisherfolk.

MSMEs comprise 99.6 percent of total businesses in the country, of which 96 percent are micro
businesses.

PPSA Law

Under the PPSA, MSMEs, farmers and fisherfolks can now secure their borrowings by using
non-traditional collateral such as account receivables, inventory, negotiable instruments,
electronic securities, crops, livestock, consumer goods, machinery, equipment as well as
intellectual property rights.

The PPSA also provides that future property can now secure a borrower’s financial needs
through the creation of a security interest in the security agreement. However, the security
interest in that property is created only when the borrower acquires rights in it or the power to
encumber it.

Moreover, this new law has simplified the process as security interest may be perfected by
registration of a notice with the Registry, possession of the collateral by the secured creditor or
by control of investment property and deposit account. On perfection, a security interest becomes
effective against third parties.

The centralized notice Registry established under the PPSA will provide electronic means for
registration and searching of notices. The electronic records will be considered as public record.
There will also be no fee for electronic searches of the Registry records or for the registration of
termination notices.

The draft IRR was prepared by the DOF Legal Services Group in consultation with experts,
practitioners and professors in commercial laws and credit transactions of the UP Law Center.

The microsite on the draft IRR can be accessed at

https://www.dof.gov.ph/index.php/advocacies/personal-property-security-act/.

It contains the full text of the law, the draft IRR, including invites and notices regarding the
upcoming public consultation on PPSA’s implementing rules.

Big milestone

The PPSA supports President Duterte’s 10-point socioeconomic agenda, particularly increasing
competitiveness in the country. The passage of the law is expected to strengthen the country’s
position in the “Getting Credit Indicator” of the Ease of Doing Business ranking.

“This law is indeed a big milestone in increasing access to finance for MSMEs and farmers in
the Philippines and a true collaborative effort from the public and private sectors to promote the
growth of MSMEs and agribusiness,” said Yuan Xu, International Finance Corp. country
manager for the Philippines. “This is only the first step, and more work will be needed to support
financial institutions to lend more to MSMEs and farmers.”

“With a sustained effort and ownership from all partners including the private sector, and
leadership from key government agencies especially DOF and Land Registration Authority, the
country can achieve a more competitive and sustainable growth,” the IFC manager added. PR