| COVERAGE: Special Laws Direction: Read and study the following concepts. T._ Securities Regulation Code (R.A. No. 8799) & Implementing Agency of Securities Regulation Code — The law shall be implemented by Securities and Exchange ‘Commission which is a collegial body composing of Chelrperson and four (4) Commissioners. 1. Powers and Functions of Securities and Exchange Commission CPA REVIEW SCHOOL OF THE PHILIPPINES REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS. 1, Have jurisdiction and supervision over all corporations, partnership or associations who are the ‘grantees of primary franchises and/or a license or a permit issued by the Government; 2. Formulate policies and recommendations on issues concerning the securities market, advise Congress and other goverament agencies on all aspect of the securit legislation and amendments thereto; 8 market and propose 3. Approve, reject, suspend, revoke or require amendments to registration statements, and ‘registration and licensing applications; 4. Regulate, investigate or supervise the activities of persons to ensure compliance; (e) Supervise, ‘monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs; 5. Impose sanctions for the violation of laws and rules, regulations and orders, and issued pursuant thereto; 6. Prepare, approve, amend of repeal rules, regulations and orders, and issue opinions and provide ‘guidance on and supervise compliance with such rules, regulation and orders; 7. Enlist the aid and support of and/or deputized any and all enforcement agencies of the Government, civil or military as well as any private institution, corporation, firm, association or person in the implementation of its powers and function under its Code; 8. Issue cease and desist orders to prevent fraud or injury tothe investing public; 9. Punish for the contempt of the Commission, both direct and indirect, in accordance with the ‘Pertinent provisions of and penalties prescribed by the Rules of Court; 10. Compel the officers of any registered corporation or association to call meetings of stockholders or ‘members thereof under its supervision; 11, Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Conimission and in appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax retuns and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provisions of existing laws; 12, Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or associations, upon any of the grounds provided by law; and 13, Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws, 4i, Jurisdiction of Securities and Exchange Commission to Intra-Corporate Disputes 1. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No, 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional ‘Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases aka. Special Commercial Courts, 4. Four Principal Departments of Securities and Exchange Commission 1, The Markets and Securities Regulation Department develops the registration criteria for all ‘market participants and supervises them to ensure compliance with registration requirements and endorses infractions of the Code and rules and regulations to the Enforcement and Investor Protection Department, It registers equity securities and debt instruments, or recommends their exemption from registration, before they are sold, offered for sale, or distributed to the public and ‘ensures that full, timely and accurate information is available about the said securities. 2. The Corporate Governance and Finance Department registers mutual funds, including ‘exchange-traded funds, membership certificates, club shares, both proprietary and non-proprietary, and time shares before they aro offered for sale or sold to the public and ensures that adequate information is available about the said securities, It also ensures that investors have access to all ‘material disclosures regarding the seld offering and the securities of public companies. The department also monitors compliance by the above issuers with the Code and rules and regulations adopted thereunder and compliance of financing, lending companies and foundations with existing, Jaws, rules and regulations ayd endorse infractions thereof to the Enforcement and Investor Protection Department, It monitors covered companies’ compliance with the Revised Code of Corporate Governance and othgr corporate governance issuances of the Commission. 3. The Company Registration and Monitoring Department registers domestic corporations, Partnerships and associations, including representative offices and foreign corporations intending to do business in the Philippines. It also supervises and monitors such entities relative to their compliance with law, rules and regulations administered by the Commission. 4, The Enforcement and Investor Protection Department ensures compliance by all market participants, issuers and individuals, and takes appropriate enforcement action against them for {egal infraction of the Code and other relevant laws, rules and regulations administered by the Commission,b, Requirement for Registration of Securities Prior to Disposal In Publle |. No-securtios shall be sold or offered for sul, or distributed by.nny.person.or entity within the Philippines lunless such securities ore duly registered with the Securities and Exchange Commnlaalon, 4. No information relating to an offering of securltes shall be disseminated unloss a rogstration statement hs ‘been filed with the Securities and Exchange Corumisston and the wrlton communleation proponed to be released contains the required information under SRC, fil, No person shall offer, sell or enter into commodity futures contracts except in accordance with the rules, regulations and orders the SEC may prescribe in the public interest, The SEC shall promulgate rules and regulations involving commodity futures contracts to protect investors to ensure the development of a fair and transparent commodities market. Ww, Requirements for Registration of Securities |. All securities required to be registered under Subsection 8.1 shal bo registered through the fling by the issuer in the main office of the Commission, of a sworn regisiration statement with the respect to such securities, in such form and containing such information and document as the Commission prescribe, The registration statement shal include any prospectus required. The information required for the registration of any kind, and all securities, shall include, among ‘others, the effect of the securities issue on ownership, on the mix of ownership, especially foreign and local ownership. ‘The registration statement shall be signed by the issuer's executive officer, its principal operating officer, its principal financial officer, ts comptroller, its principal accounting officer, its corporate Secretary, or persons performing similar functions acoompanied by a duly verified resolution of the board of directors of the issuer corporation, The written consent of the expert named as having Certified any part of the registration statement or any document used in connection therewith shall also be filed. Where the registration statement shares to be sold by selling shareholders, a written certification by such selling shareholders as to the accuracy of any part of the registration statement contributed to by such selling shareholders shal be filed. 4. Upon filing of the registration statement, the issuer shall pay to the Commission a fee of not more than one-tenth (1/10) of one per centum (1%) of the maximum aggregate price at which such securities are proposed to be offered. 5. Within forty-five (45) days after the date of filing of the registration statement, or by such later date to which the issuer has consented, the SEC shall declare the registration statement effective or rejected, unless the applicant is allowed to amend the registration statement. 6. Upon affectivity ofthe registration statement, the issuer shall state under oath in every prospectus that all registration requirements have been met and that all information are true and correct as represented by the issuer or the one making the statement. Any untrue siatément of factor ‘omission to state a material fact required to be stated herein or necessary to make the statement therein not misleading shall constitute fraud. 7. fa registration statement is om its face incomplete or inaccurate in any material respect, the SEC shall issue an order directing the amendment ofthe registration statement ¥. Grounds for Rejection or Revocation of Registration of Secu 1. The issuer: Has been judicially declared insolvent; b. Has violated any of the provision of this Code, the rules promulgate pursuant thereto, or any order of the Commission of which the issuer has notice in connection with the offering for which a registration statement has been filed © Has been or is engaged or is about to engage in fraudulent transactions; 4. Has made any false or misleading representation of material facts in any prospectus concerning the issuer or its securities; © Has failed to comply with any requirements that the Commission may impose as a condition for registration of the security for which the registration statement has been filed; or 2. The registration statement is on its face incomplete or inaccurate in any material respect or includes any untrue statements of a material fact required to be stated therein or necessary to make the statement therein not misleading; or 3. The issuer, any officer, director or controlling person performing similar functions, or any under writer has been convicted, by a competent judicial or administrative body, upon-plea.af-guiltyy or ‘otterwise, of an offense involving moral turpitude and /or fraud or is enjoined or restrained by the ‘Commission or other competent or administrative body for violations of securities, commodities, and other related laws, vi. Grounds for Suspension of Registration of Securities 1f at auy time, the information contained in the registration statement filed is or has become ‘misleading, incorrect, inadequate or incomplete in any material respect, or the sale or offering for sale ofthe security registered thereunder may work or tend to work a fraud, 2. Refusal to furnish information required by the SEC. Page 2 of 30 ‘Framework for Business Transactions RFBT 8706©. Kinds of Securities under Securities Regulation Code 1 Detnton of Secures - “Sears” ae shares, pain or interes ina corporation rin 2 ammeria| enterprise or profit-making venture and evidenced by a cerifete, contact, struments, er written or electronic in charncter, 1, Commodity futures contract means a contract providing for the making or taking delivery at a Prescribed in the future ofa specific quantity and quality of a commodity or the cash value thereof, ‘hich is customarily offset prior (othe delivery date, and includes standardized contracts heving the indicia of commodities futures, commodity options and commodity leverage, oF margin contracts, 2. Commodity means any goods, aticles, agricultural and mineral products, services, rights and interests, financial instruments, foreign currencies, including any group or index of any of the foregoing, in which commodity interest contracts are presently or in the furure dealt in 3. Forward means a contract between a buyer and a seller whereby the buyer is obligated to take delivery and the seller is obliged to deliver a fixed amount of an underlying commodity at a pre- determined price and date. Payment in full is due at the time of delivery. 4, Warrant Certifieate - means the certificate representing the right o.@ Warrant, which mayor may not be detachable, that is issued by an Issuet to @ Warrant holder. 5. Warrant Instrument « means the written document or deed conteining the terms and conditions of the issue and exercise of a Warrant whose terms and conditions shall include (i) the maximum ‘underlying shares that can be purchased upon exercise, such other terms and conditions as the Commission may require. 6. Detachable Warrant - means @ Warrant that may be sol by the Warrant holder separate from, and independent of, the correspor Securities. - 7. Non-detachable Warrant - means a Warrant that may not be sold, transferred or assigned to any person by the Warrant holder separate from, and independent of, the Beneficiary Secunties. 8, Beneffciary Securities - means the shares of stock and other securities of the Issuer which form the basis of entitlement in a Warrant. 9, Underlying Shares - means the unissued shares ofa corporation that may be purchased by the ‘Warrant holder upon the exercise of the right granted under the Warrant. : 10, Pre-need plans are contracts which provide for the performance of future services of or the payment of future monetary considerations atthe time actual need, for which plan holders pay in Cash or installment at stated prices, with or without interest or insurance coverage and includes life, pension, education, interment, and other plans which the Commission may from time to time approve. (ii) the exercise period, and id, transferred or assigned to any person nding Beneficiary fi, Securities Required To Be Registered to SEC 1, Shares of stocks, 2. Bonds, debentures, notes or evidences of indebtedness 3. Asset-backed securities and Investment contracts 4. Certificates of interest or participation in a profit sharing agreement 5. Certifies of deposit fora future subscription 6, Fractional undivided interests in oil, gas or other mineral rights 7. Derivatives like option and warrants 8. Certificates of assignments, certificates of participation, trust certificates 9. Voting trust certificates or similar instruments 10. Proprietary o nonproprietary membership certificates in corporations 11. Other instruments as may in the future be determined by the Securities and Exchange Commission iii, Exempted Securities from Requirement of Registration with SEC 1. Any security issued of guaranteed by the Government of the Philippines, or by any political subdivision or agency thereof, or by any person controlled or supervised by, and acting as an instrumentality of seid Government. 2. Any security issued or guaranteed by the government of any country with which the Philippines ‘maintains diplomatic relations, or by any state, province or political subdivision thereof on the basis of reciprocity: Provided, That the Commission may require compliance with the form and content for disclosures the Coramission may prescribe. 3. Certificates issued by a receiver or by a trustee in bankruptey duly approved by the proper adjudicatory body. 4. Any security or its derivatives the sale or transfer of which, by law, is under the supervision and regulation of the Office of the Insurance Commission, Housing and Land Use Rule Regulatory Board, or the Bureau of Internal Revenue. 5, Any security issued by a bank because covered by BSP Regulation except its own shares of stock 6. Ordinary deeds or instruments that are not normally sold to the public such as contract of lease, contract of sale, contract of real estate mortgage Fn CRAR- Regulatory Framework for Business Transactions RFBT 8705 Page 3 of 30Iv, Exempted Transactions from Requirement of Registration with SEC : 4, At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy. 2. By or for the account of a pledge holder, or mortgagee or any of a pledge lien holder selling of offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding, the provision of this Code, to liquidate a bonafide debt, a security pledged in good faith as sec for such debt. 3. An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner therefore, or by his representative for the owner's account, such sale or offet for sale or offer for sale, subscription or delivery not being made in the course of repeated and successive transaction of a like character by such owner, or on his account by such representative and such ‘owner or representative not being the underwriter of such secu 4, The distribution by a corporation actively engaged in the business authorized by its articles of incorporation, of securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus. 5. The sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock. 16. The issuance of bonds or notes secured by mortgage upon realestate or tangible personal property, when the entire mortgage together with all the bonds or notes secured thereby are sold to a single purchaser at a single sale 7. The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security surrendered in exchange to rake such conversion: Provided, That the security so surrendered has been registered under this Code or was, when sold, exempt from the provision of this Code, and that the security issued and delivered in exchange, if sold at the conversion price, would at the time of such conversion fall within the clas of securities entitled to registration under this Code. Upon such conversion the par value of the security surrendered in such exchange shall be deemed the price at which the securities issued and delivered in such exchange are sold. 8. Broker's transaction, executed upon customer's orders, on any registered Exchange or other trading market. 9. Subscriptions for shares of the capitals stocks of a corporation prior to the incorporation thereof or in pursuance of an increase in its authorized capital stocks under the Corporation Code, when no expense is incurred, or no commission, compensation or remuneration is paid or given in ‘connection withthe sale or disposition of such securities, and only when the purpose for soliciting, giving or taking of such subscription is to comply with the requirements of such law as to the percentage of the capital stock of a corporation which should be subscribed before it can be registered and duly incorporated, o its authorized, capital increase. 10, The exchange of securities by the issuer with the existing security holders exclusively, where no commission or other remuneration is paid or given directly or indvectly for soliciting such exchange. 11, The sale of securities by an issuer to fewer than twenty (20) persons in the Philippi twelve-month period. on a 12, The sale of securities to any number of the following qualified buyers: (i) Bank; (i) Registered investment house; (il) Insurance company; (iv) Pension fund or retirement plan maintained by the Goverament of the Philippines or aay policical subdivision thereof or manage by a bank or other persons authorized by the Bangko Sentral to engage in rust functions; (v) Investment company or, (vi) Such other person as the Coramission may rule by determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management. 4. Protection of Shareholders Interest i, Tender Offer - means a publicly ancounced intention by a person acting alone or in concert with other persons (hereinafter referred to as "person”) to acquire outstanding equity securities ofa public company as defined in SRC Rule 3, or outstanding equity securities of an associate or related company of such public company which controls the said public company. fi, Issuer Tender Offers - means « publicly announced intention by an Issuer to reacquire any of ts own class of equity securities, or by an associate of such Issuer to acquire such securities, iii, "Tender offer materials" mean: (i) the Offeror's formal offer, including all the material terms and conditions of the tender offer and all their amendments; (i) the related transmittal letter (whereby equity securities ofthe target company that are sought inthe tender offer may be transmitted to the Offeror or its depository) and all their amendments; and (ii) press releases, advertisements, letters and other documents published by the Offeror or sent or given by the Offeror to security holders which, directly or indirectly, solicit, invite or request tenders ofthe equity securities being sought inthe tender offer. ‘Business Transactions RFBT 8705 Page 4 of 30ty Instances of Mandatory Tender Offers ees Person or group of persons acting in concert, who intends to acquire fifteen percent (15 %) of quity securities in a public company in one or more transactions within a period of twelve (12) ‘months, shall file a declaration to that effect with the SEC. ee Person or group of persons acting in concert, who intends to acquire thirty five percent (35%) of the outstanding voting shares or such outstanding voting shares that are sufficient to gain Control of the board in a public company in one or more transactions within a period of twelve (12) months, shall disclose such intention and contemporaneously make a tender offer for the Percentage sought to all holders of such securities within the said period. If the tender offer is ‘oversubscribed, the aggregate amount of securities to be acquired at the close of such tender offer shall be proportionately distributed across selling shareholders with whom the acquirer may have been in private negotiations and other shareholders. For purposes of SRC Rule 19.2.2, the last sale that mets the trestod sal nt be consmmated un the closing and completion of the tender offer. ‘Any person or group of persons acting in concert, who intends to acquire thiry five percent (35%) of the outstanding voting shares or such outstanding voting shares that are sufficient to gain control of the board in a public company through the Exchange trading system shall not be required to make a tender offer even if such person or group of persons acting in concert acquire the remainder through a block sale if, after acquisition through the Exchange trading system, they il to acquire their target of thirty five percent (35%) or such outstanding voting shares that is sufficient to gain control of the board ‘Any person or group of persons acting in concert, who intends to acquire thirty five percent (35%) of the outstanding voting shares or such outstanding voting shares that are sufficient to gain control of the board in a public company directly from one or more stockholders shall be required to make a tender offer forall the outstanding voting shares. The sale of shares pursuant to the private transaction or block sale shall not be completed prior fo the closing and completion of the tender offer. If any acquisition that would result in ovmership of over fifty percent (50%) of the toral outstanding equity securities ofa public company, the acquirer shall be required to make a tender offer under this Rule forall the outstanding equity securities to all remaining stockholders of the Said company at a price supported by a fairness opinion provided by an independent financial advisor of equivalent third party. The acquirer in such a tender offer shall be required to accept all securities tendered vy. Transactions Exempted from Mandatory Tender Offers "Any purchase of securities from the unissued capital stock; Provided, the acquisition will not result a fifty percent (50%) or more ownership of securities by the purchaser or such percentage that is sufficient to gain control of the board ‘Any purchase of securities from an increase in authorized capital stock : Purchase in connection with foreclosure proceedings involving a duly constituted pledge or security arrangement where the acquisition is made by the debtor or creditor; Purchases in connection witha privatization undertaken by the government of the Philippines Purchases in connection with corporate rehabilitation under court supervision Purchases in the open market atthe prevailing market price; and “Merger or consolidation. vi Tender Offer by an Issuer or Buy Back - A reacquisition or repurchase by an Issuer of its own securities shall only be made if such Issuer has unrestricted retained eamings in its books to cover the amount of shares to be purchased, and is undertaken for any of the following purposes: 1 2 3. 4 To implement a stock option or stock purchase plan; To meet short-term obligations which can be settled by the re-issuance of the repurchased shares; To pay dissenting or withdrawing stockholders entitled to payment for their securities under the Corporation Code; and Such other legitimate corporate purposes. vii, Dissemination Requirements of Tender Offer 1 1 ‘An Offeror or Issuer shall publish the terms and conditions of the tender offering in two (2) national newspapers of general circulation in the Philippines on the date of commencement of the tender offer and for two (2) consecutive days after compliance with SRC Rule 19.7. If a material change occurs in the information published, sent or given to security holders, the Offeror shall disseminate promptly a disclosure of such change in a manner reasonably calculated to inform security holders of such change, Period and Manner of Making Tender Offers Expiration Period of Tender Offer - A tender offer shall, unless withdrawn, remain open until the expiration of: ‘a. At least twenty (20) business days from its commencement; Provided, that an offer should as much as possible be completed within sixty (60) business days from the date the intention to ‘make such offer is publicly announced; or b. At least fen (10) business days from the date the notice of a change in the percentage of the class of securities being sought or in the consideration offered is first published, sent or given to security holders, a —_ ———— —— OPRAR,- Regulatory Framework for Business Transactions RFBT 8705 Page 5 of 3010, In a mandatory tender offer, the Offeror shall be compelled to offer the highest price paid by him for such securities during the preceding six (6) months. Ifthe offer involves payment by transfer or allotment of securities, such securities must be valued on an equitable basis. In case of a tender offer other than by an Issuor, the subject of the tender offer ("the target company") shall not engago in any of the following transactions during the course of a tender offer, of before its commencement if ils board has reason to boliove that an offer might be imminent, except if such transaction is pursuant to a contract entered into earlier, or with the approval of the shareholders in a general meeting or, where special circumstances exist, the ‘Commission's approval has been obtained: Issue any authorized but unissued shares; Issue of grant options in respect to any unissued shares; Create or issue, or permit the creation or issuance of, any securities carrying rights of conversion Into, or subscription to, shares; Sell, dispose of or acquire, or agree to acquire, any asset whose value amounts to five percent (S36) or more ofthe total value ofthe assets prior to acquisition; or Enter into contracts that are not in the ordinary course of business. ‘The Offeror in a tender offer shall permit the securities tendered to be withdrawn (i) at any time during the period such tender offer remains open; and(li) if not yet accepted for payment, after the expiration of sixty (60) business days ftom the commencement of the tender offer. If the tender offer shall be for Jess than the total outstanding securities of a class, but a greater ‘number of securities is tendered, the Offeror shall be obliged to accept and pay the securities on pro rata basis, disregarding fractions, according to the number of securities tendered by each security holder during the period the offer was open. In the event the Offeror in a tender offer increases the consideration offered after the tender offer has commenced, the Offeror shall pay such increased consideration to all security holders whose tendered securities have been accepted for payment by such Offeror, whether or not the securities were tendered prior to the variation of the tender offer's terms. The Offeror in a tender offer shall either pay the consideration offered, or retum the tendered securities, not later than ten (10) business days after the termination or the withdrawal of the tender offer. No tender offer shall be made unless Itis open to all security holders of the class of securities subject tothe tender offer; and The consideration paid to any security holder pursuant to the tender offer shall be the highest consideration paid to any other security holder during such tender offer. Unless with the prior approval of the Commission, if an offer has been announced but has not become unconditional in all respects and has been withdrawn or has lapsed, neither the Offeror nor any person who acted in concert with it in the course of the offer may, within six (6) months from the date on which such offer has been withdrawn or has lapsed, announce an offer for the target company nor acquire any securities of the target company which would require such person to make a mandatory tender offer under this Rule and Section 19.1 of the Code. Prohibited Acts in any Tender Offer a, To employ any device, scheme or artifice to desraud any person; b. To make any untrue statement of a material factor to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or ©. To engage in any act, praciice or course of business which operates or would operate as a fraud or deceit upon any person. 4. If a person shall become aware of a potential tender offer before the tender offer has been publicly announced, such person shall buy or sel, directly or indirectly, the securities of the target company until the tender offer shall have been publicly announced, Such buying or selling shall constitute insider trading which is prohibited Section 27.4 of the Code. i, Manipulation of Security Prices, Devices and Practices (Unlawful Acts Involving Manipulation of Security Prices, Devices and Prac es). It shall be unlawful for any person acting for himself or through ‘a dealer or broker, directly or indirectly: 1 To create a false or misleading appearance of active trading in any listed security traded in an Exchange of any other trading market (hereafter referred to purposes of this Chapter as Exchange") By effecting ony transaction in such security which involves no change inthe beneficial ownership thereof, By entering an order or orders for the purchase or sale of such security with the knowledge that a simultaneous order ot orders of substantially the same size, time and price, forthe sale or purchase ‘of any such security, has or will be entered by oF forthe same or different parties; or By performing similar act wifere there is no change in beneficial ownership. ‘To affect, alone oF with others, a securities or transactions in securities that: (I) Raises their price to induce the purchase ofa security, whether of the same or a different class of the same issuer oF of controlling, controlled, or comionly controlled company by others; or (ii) Creates active trading to induce such a purchase or sule through manipulative devices such as marking the close, Daintng the tape, squeezing the Nox, hype and dump, boiler room operations and such other similar devices To circulate or disseminate infermation that the price of any security listed in an Exchange will or 1s likely to rise or fall because of manipulative market operations of any one or more persons Conducted for the purpose of raising or depressing the price of the security for the purpose of inducing the 9 sale of such security.il b. Regulation of Pre-need Plan i 7. To make false or misleading statement with respect to any material fact, which he knew or had reasonable ground to believe was so false or misleading, for the purpose of inducing the purchase cor sale of any security listed or traded in an Exchange. 8. No person shell use or employ, in connection with the purchase or sale of any security any manipulative or deceptive device or contrivance. Neither shall any short sale be effected nor any ‘stop-loss order be executed in connection with the purchase or sale of any security except in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest for the protection of investors. 9, To effect, either alone or others, any series of transactions for the purchase and/or sale of any security traded in an Exchange for the purpose of pegging, fixing or stabilizing the price of such security; unless otherwise allowed by this Code or by rules of the Commission. Fraudulent Transactions - It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities to: 1. Employ any device, scheme, or artifice to defraud; 2° Obtain money or property by means of any untrue statement of a material fact of any omission to State a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; oF 3. Engage in any act, transaction, practice or course of business which operates or would operate as & fraud or deceit upon any person. Insider Trading - It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect tothe Issuer or the security that is not generally available to the public, unless: (a) The insider proves thatthe information was not gained from such relationship; or (b) If the other party selling to or buying from the insider (or his agent is identified, the insider proves: (1) that he disclosed the information to the other party, or (ii) that he had reason to believe that the other party ctherwise is also in possession ofthe information. A purchase or sale of a security ofthe issuer made by an insider defined in Subsection 3.8, or such insider's spouse or relatives by affinity or consanguinity within the second degree, legitimate or common-law, shall be presumed to have been effected while in possession of material nonpublic information if 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 this presumption shall be rebutted upon a showing by the purchaser or seller that he was aware of the material nonpublic information atthe time of the purchase or sale 1. For purposes ofthis Section, information is "material nonpublic” ift (a) It has not been generally disclosed to the public and would likely affect the market price of the security after being disseminated to the public and the lapse of a reasonable time for the market to absorb the information; or (o) would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sel or hold a security 2. It shall be unlawful for any insider to communicate material nonpublic information about the issuer or the security 10 any person who, by virtue ofthe communication, becomes an insider as defined in Subsection 3.8, where the insider communicating the information knows or has reason to believe that such person will likely buy or sella security of the issuer whole in possession of such information. 3. It shall be unlawful where a tender offer has commenced or is about to commence for: (i) Ay person (other than the tender offeror) who is in possession of material nonpublic information relating to such tender offer, to buy or sell the securities of the issuer that are sought or to be sought by such tender offer if such person knows or has reason to believe that the information is nonpublic and has been acquired directly or indirectly from the tender offeror, those acting on its behalf, the issuer of the securities sought or to bs sought by such tender offer, or any insider of such issuer; and (ii) Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, and any insider of such issuer to communicate material nonpublic information relating to the tender offer to any other person where such communication is likely to result in a violation of Subsection 27.4 No person shall sell or offer for sale 10 the public any pre-need plan except in accordance with rules and regulations which the Commission shall prescribe, Such rules shall regulate the sale of pre-need plans by, among other things, requiring the regisiration of pre-need plans, licensing persons involved in the sale of pre- need plans, requiring disclosures to prospective plan holders, prescribing advertising guidelines, providing for uniform accounting sytem, reports and recording Keeping with respect to such plans, imposing capital bonding and other nancial responsi, and establishing wus funds forthe payment of enefits under such plans —r————O ee CPAR- Regulatory Framework for Business Transactions. RFBT 8705 Page 7 of 30Code of Corporate Governance (Revised Code of Corporate Governance) x, Companies Covered by the Revised Code of Corporate Governance 1. Corporations that sell equity and/or debt securities to the public that are required tobe registered with the Commission, or 2. Corporations that have assets in excess of Fifty Million Pesos and at least two hundred (200) stockholders who own at least one hundred (100) shares each of equity securities, or 3. Conporations whose equity securities are listed on an Exchange Market; or 4. Corporations that are grantees of secondary licenses from the SEC. x, Corporation Governance refers to the framework of rules, systems and processes in the corporation that governs the performance by the Board of Directors and Management of their respective duties and responsibilities to the stockholders. xi, Board of Directors refers to the governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties, xil, Composition of the Board of Directors of Corporations covered by Revised Code of Corporate Governance 1. ‘The Board shal be composed of at least five (5), but not more than fifteen (1.5), members who are lected by the stockholders. 2. All companies covered by this Code shall have at least two (2) independent directors or such number of independeat directors that constitutes twenty percent (20%) of the members of the ‘Board, whichever is lesser, but in no case less than two (2). All other companies are encouraged to hhave independent directors in their boards. 3. The membership of the Board may be a combination of executive and non-executive directors hich include independent directors) in order that no director or small group of directors can dominate the decision making process. 4. The non-executive directors should possess such qualifications and stature that would enable them to effectively participate in the deliberations of the Board ii, Additional Qualifications of Directors of Corporations covered by Revised Code of Corporate Governance. In addition to the qualifications for membership in the Board provided for in the Corporation Code, Securities Regulation Code and other relevant laws, the Board may provide for ‘additional qualifications which include, among others, the following: 1. College education or equivalent academic degree; 2. Practical understanding of the business ofthe corporation; 3. Membership in good standing in relevant industry, business or professional organizations; and 4. Previous business experience. iv. Grounds for Permanent Disquaifications of Directors of Corporations covered by Revised Code of Corporate Governance 1.” Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (Q) arses out of the person's conduct as an underwriter, broke, dealer, investment adviser, principal, disoibutor, mutual fund dealer, futures commission merchant, commodity tading advisor, o floor broker ot (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an afliliated person of any of thems 2. Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission oF aay cour or administative body of competent Jurisdiction from: (2) acting as underwriter, broker, dealer, investment advise, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor or floor broker; (b) acting a director or officer of a bank, qusibank, trst company, investment house, or investment company, 3. engaging in or continuing any conductor practice in any of the capacities mentioned in sub- paragraphs (2) and (b) above, or wilfully violating the laws that govern securities and banking activites. The disqualification sal also apply ifsuch person is currently the subject ofan order of the Commission or any court or administative body denying, revoking or suspending any registration, license or pemit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission of Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commision or BSP, or bas otherwise ben restrained to engage in any activity involving securities and banking; o such person is curently the subject of an effective order ofa self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization; 4. Any person convicted by final judgment or order by a cour or competent administrative body of an offense involving moral” tupitude, ‘fraud, embezzlement, thet, estas, counterfeiting, misappropriation, forgery, bribery, fase alimation, perjury or ober favdulent acts; 5. Any person who bas been adjudged by final judgment or order of the Commission, cour, or competent administrative body to have wilflly violated, or wilfully aided, abetted, counselled, {induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law administered by the Commission or BSP, or any ofits rule regulation or 6 ay ‘person earlier elected as independent director who becomes an officer, employee or consultant of the same corporation; «Regulatory Framework for Business Transactions RFBT 8705 Page 8 of 307. Any person judicially declared as insolvent; (vil) Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated in sub-paragraphs (') {0(v) above; 8. Conviction by final judgment of an offense punis Years, or a violation of the Corporation Code com: his election or appointment. ishable by imprisonment for more than six (6) sited within five (5) yeas prior tothe date of x. Grounds for Temporary Disqualification of Directors of Corporations covered by Revised Code of Corporate Governance 1. Refusal to comply with the disclosure requirements of the Securities Regulation Code ane ft Implementing Rules and Regulations. The disqualification shall be in etfect as long the refusal persists 2. Absence in more than fifty (50) pereent of all regular and spe incumbency, or any twelve (12) month period during the sa ddue to illness, death in the immediate family or serious accident. The for purposes ofthe succeeding election. 3. Dismissal or termination for cause as d disqualification shal be in effect until he has cleared ki that gave rise to his dismissal or termination. oe i anna rrcial equity ownership ofan independeat director inthe comporation or iis subsites ie rates exceeds two percent of ils subscribed capital stock. The disqualiicaion shall be cial meetings of the Board during his id incumbeney, unless the absence is disqualification shall apply rector of any corporation covered by this Code, The imself from any involvement in the cause lifted ifthe limit is later complied with. : 5, Ifany ofthe judgments or orders cited inthe grounds for permanent disqualification has not yet ‘become final “ | 6 Avtemporarly disqualified deector shall, within sixty (60) business d8YS from_ suc! ‘isquaifeation, take the appropriate ation to remedy or correc the disqualification. Ife fails or feftses to do s0 for unjustified reasons, the disqualification shall become permanent. xvi. Specific Duties and Responsibilities of a Director - A disector's office is one of trust and confidence. A riieetor should act in the best interest of the corporation in a manner characterized by transparene aeeailty and faimess. He should also exerise leadership, prudence and integrity in directing (he corporation towards sustained progress. 1. Conduct fair business transactions wit not conflict with the interests ofthe corporation. 2, Devote the time and attention necessary to properly and effectively perform his duties and responsibilities. 3. Act judiciously. 4, Exercise independent judgment. ‘5. Have a working knowledge of the statutory and regulatory requirements that affect the corporation, including its articles of incorporation and by-laws, the rules and regulations of the ‘Commission and, where applicable, the requirements of relevant regulatory agencies. 6. Observe confidentiality. th the corporation, and ensure that his personal interest does xvii, Establishment of Audit Committee 1. Audit Committee shall assist the Board in the performance of its oversight responsibility for the financial reporting process, system of internal control, audit process, and monitoring of compliance with applicable laws, rules and regulations 2, The Audit Committee shall consist of at least three (3) directors, who shall preferably have accounting and finance backgrounds, one of whom shall be an independent director and another with audit experience. The chair of the Audit Committee should be an independent director. xviii, Appointment of Compliance Officer - The Board shall appoint a Compliance Officer who shall report directly to the Chair of the Board, He shall perform the following duties: 1. Monitor compliance by the corporation with this Code and the rules and regulations of regulatory agencies and, if any violations are found, report the matter to the Board and recommend the imposition of appropriate disciplinary action on the responsible parties and the adoption of measures to prevent a repetition of the violation; 2, Appear before the Commission when summoned in relation to compliance with this Code; and 3. Issue a certification every January 30th of the year on the extent of the corporation's compliance wih his Code forthe completed yar anc thee are ary deviations, explain the reason for such feviation. SE CAR Regulatory Framework for Business Transactions RFBT 8705 Page 9 0f30I Information Sheot (SEC Circular No. 2 Series of 20 ‘Corporation whose fiscal year ends on a date other than December 31~ The audited financial statements shal be filed within 120 calendar days from the end offical year. 1i, Corporation whose fiscal year ends on December 31 The SEC issues a specific schedule or specific date depending on the lcense number of the corporation for the submission of audited financial statements. ‘There are various date provided inthe citeular depending on the registration number of the emtty, Ii, The audited financial statements shall have the stumped “received by the BIR or its authorized banks.” iv. Allcorporatons shal iled their General Information Sheet within 30 calendar days from 1. Stock corporation ~ date of actual annual stockholder's meeting, 2, Non-stock corporation date of acto! annuel member's meeting 3, Foreign comporation = Anniversary date ofthe issuance of the SEC License. | ‘ge Securities Regulation Code Rule 68 (SRC Rule 68) (Financial Reporting Requirements) (a) Covered entities i, Stock corporations with paid-up eapltel stock of P50,000 or more li, Non-stock corporations with total assets of P500,000 or more, or gross annual receipts of 100,000 or more ill, Branch offices of stock foreign corporations with assigned capital in the equivalent amount of 1,000,000 or more Branch offices of nonstock corporations with total assets in the equivalent amount of P1,000,000 ‘or more v. Regional operating headquarters of foreign corporations with total revenues in the equivalent ‘amount of P1,000,000 or more (b) Applicable Financial Reporting Framework 4. Full Philippine Financial Reporting Standards (Full PFRS) 1. Large and/or Publicly-Accountable Entities ', Those with total assets of more than P3S0M or total liabilities of more than 250M; or ', Those which are required to file financial statements under Part 11 of SRC Rule 68; or ©, Those in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market; or 4. Those which are holders of secondary licenses issued by regulatory agencies. fi, Philippine Financial Reporting Standards for Medium Ei ies (PFRS for SMEs) 1. Medium-Sized Entities ‘a. Total assets of between PIOOM to P3S0M or total liabilities of between PLOOM to P250M. If the entity is a parent company, the said amount shall be based on consolidated figures; and b. Are not required to file financial statements under Part Il of SRC Rule 68; and ©. Are not in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market; and 4. Arenot holders of secondary licenses issued by regulatory agencies. ili, Philippine Financial Reporting Standards for Small Entities (PFRS for Small Entities) 1, Small Entities a, Total assets of between P3M to PLOOM or total liabilities of between P3M to PIOUM, If the entity is a parent company, the said amount shall be based on consolidated figures; and ‘Are not requited to file financial statements under Part It of SRC Rule 68; and ©. Are nol in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market; and 4d, Are not holders of secondary licenses issued by regulatory agencies. iv. Full PFRS or PERS for SMEs or PFRS for Small Entities or Tax/Cash Basis 1. Micro Entities ‘a, Total assets and total liabilities below P3M; and b. Are not required to file financial statements under Part Il of SRC Rule 68; and cc, Are not in the process of filing thelr financial statements for the purpose of issuing any class of instruments in a public market; and 4. Are not holders of secondary licenses issued by regulatory agencies. Lstory Framework for Business Transactions RFBT 8705 Page 10 of 30Code of Corporate Governance for Publicly Listed! Companies (9) Coverage or Applicability and Esfectivty Date The Code of Corporate Goverane for Publy-Listed ‘ompanes shall take effect on January 1, 2017 to all Publey-Listed Companles which ae required to submit anew Manual on Corporate Governance to SEC on or before May 31,2017, (©) Introduction to Code of Corpornte Governance for Publicly Listed Companies . The Code of Corporate Governance is intended to raise the corporate governance standards of hits regional and global counterparts. The latest G20/OECD1 Principles of Corporate Governance and the Association of Southeast Asian Nations Corporate Governance Scorecard were used as key reference materials in the drafting ofthis Code il, ‘The Code will adopt the “comply or explain” approach. This approach combines voluntary compliance with mandatory disclosure. Companies do not have to comply withthe Code, but they tnust state in their annual corporate governance reports whether they comply with the Code ain the reasons for non-compliance. provisions, identify any areas of non-compliance, and exp! : ie Fr ere earn at follow: Principles, Recommendations and Explanation. The Principles can be considered as high-level statemenis of corporate governance good practice, and are applicable to all companies. corporate governance good practice that ae recommended for companies operating according 12 the Code. Alteratives ta Recommendation may be justified in particular cumstances if good fovernance can be achieved by other means. When a Recommendation is not complied with, the company must disclose and describe this non-compliance, and explain how the overall Principle ls being achieved, The alternative should be consistent with the overall Principle. Descriptions and explanations should be written in plain language and in a clear, complete, objective and precise Inanner, 80 that shareholders and other stakeholders can assess the company's governance Philippine corporations to a level at par wi framework i vy. The Explanations strive to provide companies with additional information on the recommended best practice. This Code does not, in any way, prescribe a “one size fits all” framework. It is designed to allow boards some flexibility in establishing their corporate governance arrangements Larger companies and financial institutions would generally be expected to follow most of the Code's provisions. Smaller companies may decide that the costs of some of the provisions outweigh the benefits, or ae less relevant in their case. Hence, the (©) Definition of Terms i. Corporate Governance ~ fulfilling their long-term economic, moral, legal and s‘ Corporate governance Is a system of direction, performance standards and ethical guidelines to hold the Board and senior management ‘accountable for ensuring ethical behavior — reconciling long-term customer satisfaction with shareholder value ~ to the benefit of all stakeholders and society. Its purpose is to maximize the organization's long-term success, creating sustainable value for its shareholders, stakeholders and the nation iL Board of Directors — the governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties. Management ~ a group of executives given the authority by the Board of Directors to implement the policies it has laid down in the conduct ofthe business of the corporation. Independent director — a person who is independent of management and the controlling shareholder, and is free from any business or other relationship which could, or could reasonably be perceived (o, materially interfere with his exercise of independent judgment in carrying out his responsibilities asa director, v. Executive director a director who has executive responsibility of day-to-day operations of @ part or the whole of the organization, Non-exeeutive director ~a director who has no executive responsibility and does not perform any ‘work related to the operations of the corporation, vii, Conglomerate ~ a group of corporations that has diversified business activities in varied industries, whereby the operations of such businesses are controlled and managed by a parent corporate entity Internal control — a process designed and effected by the board of directors, senior management, and all levels of personnel to provide reasonable assurance on the achievement of objectives through efficient and effective operations; reliable, complete and timely financial and management information; and compliance with applicable laws, regulations, and the organization's policies and procedures, Ix. Enterprise Risk Management ~ a process, effected by an entity's Board of Directors, management and other persofnel, applied in strategy setting and across the enterprise that is designed to identify potential events that may affect the entity, manage risks to be within its risk appetite, and provide reasonable assurance regarding the achievement of entity objectives. x. Related Party — shall cover the company’s subsidiaries, as well as affiliates and any party (ocluding their subsidiaries, affiliates and spectal purpose entities), thatthe company exerts direct or indirect control over or that exerts director indirect control over the company; the company’s directors; officers; shareholders and related interests (DOSRI), and their close femily members, as well as corresponding persons in affiliated companies. This shall also include such other person or Juridical entity whose interest may pose a potential conflict with the interest ofthe company. the system of stewardship and control to guide organizations in social obligations towards their stakeholders. feedback and control using regulations, oo CRAR- Regulatory Framework for Business Transactions RFBT 8705 Page 11 of 30‘XL Related Party Transnetions ~ a transfer of resources, services or obligations between a reporting emtty anda related party, regardless of whether a price is charged, It should be interpreted Broadly to include not only transactions that are entered into with related parties, but also outstanding transactions thal are entered into with an unreloted party that subsequently becomes a related party. |. Stakeholders - any individual, organization or society at large who can cither affect and/or be alfected by the company's strategie, polices, business decisions and operations, in genera. This includes, among others, customers, creditors, employees, suppliers, investors, as well asthe government and community in which it operates. {Operational risk suromarizes the uncertainties and hazards a company faces when it attempts to do its day-to-day business activities within a given field or industry. A type of business risk, It can result fiom breakdowns In intemal procedures, people and systems—as opposed. to Problems incurred from external forces, such as politcal or economie events, of inherent to the entire market or market segment, known as systematic risk, (@) The Board’s Governance Responsibilities i. Principte 1: The company should be headed by a competent, working board to foster the long- term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the long-term best interests of its shareholders and other stakeholders, li, Principle 2: The fiduciary roles, responsibilities and accountabilities of the Board as provided under the law, the company’s articles and by-laws, and other legal pronouncements and guidelines should be clearly made known to all directors as well as to stockholders and other stakeholders. lil, Principle 3: Board committees should be set up tothe extent possible to support the effective performance of the Board's functions, particularly with respect to audit, risk management, related party transactions, and other key corporate governance concems, such as nomination and. Femuneration. The composition, functions and responsibilities ofall committees established should be contained in a publicly available Committee Charter. iv. Principle 4: To show full commitment tothe company, the directors should devote the time and attention necessary to properly and effectively perform their duties and responsibilities, including sufficient time to be familiar with the corporation's business. ¥. Principle 5: The Board should endeavor to exercise objective and independent judgment on all corporate affairs. vi. Principle 6: The best measure of the Board's effectiveness is through an assessment process. The Board should regularly carry out evaluations to appraise its performance as a body, and assess whether it possesses the right mix of backgrounds and competencies. vil. Principle 7: Members of the Board are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders. © Disclosure and Transparency 1. Principle 8: The company should establish corporate disclosure policies and procedures that are practical and in accordance with best practices and regulatory expectations. ji, Principle 9: The company should establish standards for the appropriate selection of an external auditor, and exercise effective oversight of the same to strengthen the external auditor's independence and enhance audit quality. {il Prineiple10: The company should ensure that material and reportable non-financial and sustainability issues are disclosed, 'v. Principle 11: The company should maintain a comprehensive and cost-efficient communication channel for disseminating relevant information. This channel is crucial for informed decision ‘making by investors, stakeholders and other interested users, (Internal Control and Risk Management Framework |. Principle 12: To ensure the integrity, transparency and proper governance in the conduct of its affairs, the company should have a strong and effective intemal contol system and enterprise risk ‘management framework, (g) Cultivating a Synergic Relationship with Stockholders 4. Principle 13: The company should treat ell shareholders fairly and equitably, and also recognize, protect and facilitate the exercise of their rights (h) Duties of Stockholders 4. Principle 14: The rights of stakeholders established by law, by contractual relations and through voluntary commitments must be respected. Where stakeholders’ rights and/or interests are at stake, stakeholders should have the opportunity to obtain prompt effective redress for the violation of their rights. Ih. Principle 18: A mechanism for employee Participation should be developed to create a symbiotic ‘environment, realize the company’s goals and participate in its corporate governance processes, ili, Principle 16: The company should be socially responsible in all its dealings with the communities where it operates, It should ensure that its interactions serve its environment and stakeholders in a positive and progressive manner that is fully supportive of its comprehensive and balanced development. tory Framework for Business Transactions RFBT 8705 Page 12 of 30ia ‘Notes in Foreign Investment Act of 1991 (R.A. No. 7042) ‘A. Declaration of Policy It is the policy of the State to attract, promote and welcome productive investments from foreign individuals, Partnerships, corporations, and governments, including their political subdivisions, in activites which significantly Contribute to national industrialization and socio-economic development to the extent that foreign investment is allowed in stich activity by the Constitution and relevant laws, Foreign investments shall be encouraged in the enterprises that significantly expand livelihood and employment opportunities for Filipinos; enhance economic value of farm products; promote the welfare of Filipino consumers; expand the scope, quality and volume of exports and their access to foreign markets; and/or transfer relevant technologies in agriculture, industry and support services, Foreign investments shall be welcome as @ supplement to Filipino capital and technology in those enterprises serving mainly the domestic market. : b. Asa general rule, there are no restrictions on extent of foreign ownership of export enterprises. In domestic market ‘enterprises, foreigners can invest as much as one hundred percent [100%] equity except in areas included in the negative list. Foreign-owmed firms catering mainly to the domestic market shall be encouraged to undertake ‘measures that will gradually increase Filipino participation in their businesses by taking in Filipino partners, electing Filipinos to the board of director, implementing transfer of technology to Filipinos, generating more employment forthe economy and enhancing skills of Filipino workers, “Philippine National” under R.A. No. 7042 a. Citizen of the Philippines; or b. Domestic Partnership or Association wholly owned by citizens of the Philippines; or : € A Corporation organized under the laws ofthe Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines ; oF : 4. A Corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of ‘hich one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is @ Philippine national and atleast sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals; — €. That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (GEC) registered enterprise, atleast sixty percent (60%) of the capital stock outstanding and entitled to vote of each Of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (6076) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order thatthe corporation, shall be considered a “Philippine national.” “Foreign Investment” under R.A. No, 7042 : ‘The term “foreign investment” shall mean an equity investment made by non-Philippine national in the form of fo exchange and/or other assets actually transferred to the Philippines and duly registered with the Central Bank which shall assess and appraise the value of such assets other than foreign exchange Requirement before Engaging in Business by a Non-Philippine National a. ANon-Philippine National must register before the appropriate government agencies before it engages in business. i. A sole proprietor non-Philippine National must register before Department of Trade and Industry. ii, A partnership or corporation son-Philippine National must register before Securities and Exchange ‘Acts considered “Doing Business” ‘a. Soliciting orders, service contracts, opening offices, whether called “liaison” offices or branches; appointing representatives of distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods of one hundred eighty [180] days or more; or b, Participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; oF ¢, Any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressi prosecution of commercial gain or of the purpose and object of the business organization, ‘Acts not considered “Doing Business” ‘a. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; o 'b. Having a nominee director or officer to represent its interests in such corporation; or Appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account ‘Tests for Determining Nationality of a Corporation ‘8. Place of Incorporation Test It is the principal doctrine as enunciated in BP 68 which provides that a corporation is a national ofthe country under whose laws it has been organized and registered. b. Control Test ~ It means that the nationality of a corporation is determined by the nationality of the majority of the stockholders on whom equity control is vested and it is normally used as war-time test or to determine the compliance with minimum requirement of Filipino ownership in industry reserved for Filipinos. ©. Grandfather Rule Test — Its a three-level relationship test by which the percentage of Filipino equity is computed in a corporation engaged in fully or partly nationalized areas of activites provided in the Constitution and other nationalization laws, in cases where corporate shareholders are present in the situation, by attributing the nationality of the second or even subsequent tier of ownership to determine the nationality of the corporate shareholder. Effect of Non-Compliance with Minimum Filipino Ownership ‘The corporation shall be considered a de facto corporation. Such non-compliance is considered a non-automatic ground for corporate dissolution. The juridical personality of a de facto corporation is subject to a direct attack by the State through the Office of Solicitor General via Quo Warranto Proceedings. rT CRAR- Regulatory Framework for Business Transactions RFBT 8705 Page 13 of 30L.- Effects of Engaging in Business by a Foreign Corporation without license ‘The said foreign corporation shall not be permitted to maintain or intervene in any action, suit, o proceeding in any court or administrative agency of the Philippines. However, as an exception to the general rule, such foreign corporation may be permitted to file a ease despite on a contract it entered into despite doing business in the Philippines without the necessary license by virtue of doctrine of Estoppel but it must first acquire the necessary license before the government agency 'b. The said foreign corporation may be sued or proceeded against before Philippine courts or administrative tribunals ‘on any valid cause of action recognized under Philippines laws. ‘Note: The purpose of requiring license on part of foreign corporation doing business in the Philippines is to subject foreign corporation doing business in the Philippines to the jurisdiction of Philippine courts but not to subject foreign corporation doing business in the Philippines to harsher rules, nor commit inequity, injustice or discrimination against them, 4. Effects of Lack of License on the part of forelgn corporation not doing business in the Philippines 7 ‘a. Itmay sue in any court or administrative agency of the Philippines for violation of its intellectual property right. ’.Itmay sue and be sued only for isolated transactions, as well as for those which are casual or incidental thereto. TH. Intellectual Property Law (R.A. No, 8293 a.k.a. Intellectual Property Code of the Philippines) 1, The Law on Patents, Utility Model and Industrial Design i. Definition of Patent —It is a grant issued by the government through the Intellectual Property Office ofthe Philippines (IP Philippines). It is an exclusive right granted for a product, process or an improvement of a product or process which is new, inventive and useful. This exclusive right gives the inventor the right to exclude others from making, using, or selling the product of his invention during the life ofthe patent. i. Definition of Utility Model - Its a protection option, which is designed to protect innovations that are not sufficiently inventive to meet the inventive threshold required for standard patents application. it may be ‘any useful machine, implement, tools, product, composition, process, improvement or part of the same, ‘That is of practical utility, novelty and industrial applicability. It is entitled to seven (7) years of protection from the date of filing, with no possibilty of renewal iii, Definition of Industrial Design - It is any composition of lines or colors or any three-dimensional form, whether or not associated with lines oF colors; provided that such composition or form gives a special appearance to and can serve as pattern for an industrial product or handicraft. It shall be valid for five (5) years from the Gling date of the application. Ir may be renewed for not more than two (2) consecutive periods of five (5) years each, by paying the renewal fee. ; iv. Mode of ereation of right —it must be registered with IPO to be protected by law (Created by Registration with IPO), ¥. Term of Patent - A patent has a term of protection of twenty (20) years providing an inventor significant commercial gain. In retum, the patent owner must share the full description of the invention. This information is made availabe tothe public inthe form of the Intellectual Property Official Gazette and can be utilized as basis for future research and will in tum promote innovation and development. vi, Requisites of Patentable Inventions 1. It must be a technical solution to a problem in any field of human activity. It may be, or may relate to, a product, or process, or an improvement of any of the foregoing. 2. (Novelty) It must be new. An invention shall not be considered new if it forms part of a prior art. ‘a. Prior art shall consist of: i, Everything which has been made available to the public anywhere in the world, before the filing date or the priority date of the application claiming the invention; and ii, The whole contents of an application for a patent, utility model, or industrial design registration, published in accordance with this Act, filed or effective in ‘the Philippines, with a filing or priority date that is earlier than the filing or priority date of the application: Provided, That the application which has validly claimed the filing date of an earlier application under Section 31 of this Act shall be prior art with effect as of the filing date of such earlier application: Provided further, That the applicant or the inventor identified in both applications are not one and the same. 3. (Inventive Step) It must involve an inventive step. An invention involves an inventive step if, having regard to prior art, itis not obvious to a person skilled in the art atthe time of the fling date or priority date of the application claiming the invention. 4, (Industrial Applicability) It must be industrially applicable, An invention that can be produced and used in any industry shall be industrially applicable. vii, Non-Patentable Inventions, The following shal be excluded from patent protection: I. Discoveries, scientific theories and mathematical method 2. Schemes, rules and methods of performing mental acts, playing games or doing business, and programs for computers; 3. Methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on the human or animal body. This provision shall not apply to products and ‘composition for use in any of these meth 4, Plant varieties or animal breeds or essentially biological process for the production of plants or animals. This provision shall not apply to microorganisms and non-biological and microbiological processes. Provisions under this subsection shall not preclude Congress to consider the enactment of a law providing sui generis protection of plant varieties and animal breeds and a system of ‘community intellectual rights protection: 5. Aesthetic creations; and 6. Anything which is contrary to public order or morality Page 14 of 30wil First to le Rute. — Ifo (2) or more persons have made the invention separately and independently of cach other, the right to the patent shall belong othe person who filed an aplication fr such Invention or where two or more applications are filed for the same invention, to the applicant who has the earliest filing date or, the earliest priority date. ix. Right of Priority, — An application for patent filed by any person who has previously applied for the same invention in another country which by treaty, convention, or law affords similar privileges to Filipino citizens, shall be considered as filed as ofthe date of filing the foreign application: Provided, That: a. the local application expressly claims priority; b. is filed within twelve (12) months from the date the earliest foreign application was filed; and c. a certified copy of the foreign application together with an English translation is filed within six (6) months from the date of filing inthe Philippi 1, hls heirs, or assigns. When two (2) or all belong to them jointly. ‘The right to a patent belongs to the inventor x. Right to a Patent. jointly made an invention, the right to a patent s ‘more persons hi Inventions Created Pursuant to a Commission. The person who commissions the work shall own the patent, unless otherwise provided in the contract. 30.2. 1. Inease the employee made the invention in the course of his employment contract, the patent shal belong to: ; | a. The employee, ifthe inventive activity is not a part of his regular duties even if the ‘employee uses the time, fcilties and materials of the employer. : bb. ‘The employer, if the invention is the result of the performance of his regularly-assigned duties, unless there is an agreement, express or implied, to the contrary. xii, Patent Infringement refers to the unauthorized making, using, offering for sale or selling any patented invention or products of the patented invention without consent from the patent holder. lll, Tests of Patent Infringement | 1. Literal infringement ~ In using literal infingement as atest, resort must be bad, in the first instance, to the words of the claim. If accused matter clearly falls within the claim, infringement is made out and that isthe end of t." To determine whether the particular iter falls within the literal meaning of the patent claims, the court must juxtapose the claims of the patent and the accused product within the overall context of the clas and specifications, to determine whether there is ‘exact identity ofall material elements. 2. Doctrine of equivalents infringement device appropriates a prior invention by incorporating i some modification and change, performs substantially the way to achieve substantially the same result, It requires satis result test. xi It provides that infringement also takes place when a its innovative concept and, although with e same fimetion in substantially the same faction of the function-means-and- b. The Law on Trademarks, Service Marks and Trade Names 1. Definition of Terms 1. “Trademark” — It means any visible sign capable of distinguishing the goods of an enterprise and shall include a stamped or marked container of goods. 2. Service mark” It means any visible sign capable of distinguishing services of an enterprise and shall include a stamped or marked container of services. 3. "Collective mark" means any visible sign designated as such in the application for registration and capable of distinguishing the origin or any other common characteristic, including the quality ‘of goods or services of different enterprises which use the sign under the control of the registered owner of the collective mark. 4, "Trade name" means the name or designation identifying or distinguishing an enterprise. ii, Mode of creation of right ~ Trademark, service mark and collective mark must be registered with IPO to be protected by law while trade name need not be registered to be protected. (Created by Registration) Non-registrable marks - A mark cannot be registered if it: 1. Consists of immoral, deceptive or scandalous matter, or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, oF ring them into contempt or disrepute 2. Consists of the flag or coat of arms or other insignia of the Philippines or any of its political subdivisions, or of any foreign nation, or any simulation thereof 3. Consists of a name, portrait or signature identifying a particular living individual except by his written consent, or the name, signature, or portrait of a deceased President of the Philippines, during the life of his widow, ifany, except by written consent of the widow 4. Is identical with a registered ‘mark belonging to a different proprietor or « mark with an earlier filing or priority date, in respect of: { The same goods or services, or Ii, Closely related goods or services, or ii, If t nearly resembles such a mark as to be likely to deceive or cause confusion; 5. Is identical with, or confusingly similar to, or constitutes a translation of a mark which is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not itis registered here, as being already the mark of a person other than the applicant for registration, and used for identical or similar goods or services: Provided, ‘That in determining whether a mark is well-known, account shall be taken ofthe knowledge of the relevant sector of the public, rather than of the public at large, including knowledge in the Philippines which has been obtained as a result ofthe promotion of the mark ——— CRAR.- Regulatory Framework for Business Transactions RFBT 8705 Page 15 of 306. Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well- known in accordance with the preceding paragraph, which is registered in the Philippines with respect to goods of services which are not similar to those with respect to which registration is applied for: Provided, That use of the mark in relation to those goods or services would indicate a connection between those goods or services, and the owner of the registered mark: Provided further, That the interests of the owner of the registered mark are likely to be damaged by such use 7. Is likely to mislead the publi, particularly as to the nature, quality, characteristics or geographical ‘origin of the goods or service 8. Consists exclusively of signs that ae generic forthe goods or services that they seek to identify 9. Consists exclusively of signs or of indications that have become customary or usual to designate the goods or services in everyday language or in bona fide and established trade practice 10. Consists exclusively of signs or of indications that may serve in trade to designate the kind, ~ quality, quantity, intended purpose, value, geographical origin, time or production of the goods or rendering ofthe services, or other characteristics of the goods or services; 11, Consists of shapes that may be necessitated by technical factors or by the nature of the goods themselves or factors that affect their intrinsic value 12, Consists of color alone, unless defined by a given form 13, Is contrary to public order or morality. iv. Term of Trademark and Service Mark ~ It has a term of 10 years but subject to unlimited times of renewal. Therefore, it has indefinite life ¥. Trademark Infringement is the unauthorized use of a trademark or service mark on or in connection with ‘goods/services in a manner that is likely to cause confusion, deception, or mistake about the source of the ‘goods and/or serviess. Vi. Tests of Trademark Int 1, Dominaney Test ~ It focuses on the similarity of the main, prevalent or essential features of the ‘competing trademarks that might cause confusion. Infringement takes place when the competing trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or deceive purchasers, 2. Holistic Test - The focus is not only on the predominant words but also on the other features appearing on the labels. Difference between Trademark Infringement and Unfair Competition 1. Trademark Infringement means any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as tothe source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade- ‘name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to civil action by the registrant for any or all of the remedies herein provided. To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the ‘mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion. 2. Unfair competition has been defined asthe passing off (or palming off) or attempting to pass off ‘upon the public ofthe goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition are (1) confusing similarity in the general appearance of the goods; and (2) intent to deceive the put and defraud @ competitor. Jurisprudence also formulated the following true test of unfair ‘competition: whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to recover can exist Note: there can be trademark infringement without unfair competition such as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. In this case, no issue of confusion arises because the same manufactured products are sold; only the ownership ofthe trademarks is a issue. 3. Distinctions between trademark infringement and unfair competition a. Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition isthe passing off of one's goods as those of another. b. In infringement of trademark fraudulent intent is unnecessary whereas in unfair competition fraudulent intent is essential. ¢. In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. Seaulatory Framework for Business Transactions RFBT 8705 Page 16 of 30& The Law on Copyright i. Definition of Copyright — It is the legal protection extended to the owner ofthe rights in an original work. i, Definition of “Original Work’ ~ It refers to every production in the literary, scientific and artistic domain. ‘Among the literary and artistic works enumerated in the IP Code includes books and other writings, ‘musical works, films, paintings and other works, and computer programs. ili, Mode of ereation of right - Works are protected by the sole fact of their creation, irrespective of their ‘mode or form of expression, as well as their content, quality and purpose. Thus, it does not matter if, in the eyes of some critics, a certain work has litle artistic value. So long as it has been independently created and has a minimum of creativity, the same enjoys copyright protection. (From the moment of Creation without ‘anced for registration) f copyright for original and derivative works is the iv. ‘Term of copyright - In general, the term of protection of ee ran i fe specifies the terms of protection for the life of the author plus fifty (50) years after his death. The Cod : different types of works. In calculating the term of protection, the tem of protection subsequent to the death of the author shall run from the date of his death or of publication, but such terms shall always be deemed to begin on the first day of January of the year following the event which gave rise to them (i.e. death, publication, making). ¥. Two rights under Copyright 1 Economie ah which ‘enable the creator to obtain remuneration from the exploitation of his works by third partes. Reproduction . Transformation . First public distribution Rental fe. Public display £ Public performance . Other communication to the public of the work 2. Moral rights which make it possible forthe creator to undertake measures to maintain and protect the personal connection between himself and the work. i a. Right of atribution b. Right of alteration cc. Right of integrity (to object to any prejudicial distortion) d._ Right to restrain use of his name vi Ownership of copyright 1. Generally, the natural person who created the literary and artistic work owns the copyright to the same. 2. For work created during or in the course of employment (works for hire) a. Employee - if the work is not part of his regular duties, even if he used the time, facilities and materials of the employer; b. Employer - ifthe work is the result of the performance of his regularly assigned duties, unless there is an express or implied agreement to the contrary. 3. For commissioned works: the person who commissioned the work owns the work but the copyright thereto remains with the creator, unless there isa written agreement to the contrary. 4. For audiovisual works: the producer, the author of the scenario, the composer of the music, the film director, and the author ofthe work so adapted, vii, Infringement of Copyright ~ It consists in infringing any right secured or protected under the Code. It ‘may also consist in aiding or abetting such infringement. The law also provides for the liability of a person who at the time when copyright subsists in a work has in his possession an article which he knows, or ought to know, to be an infringing copy of the work for the purpose of: 1, Selling or letting for hire, or by way of trade offering or exposing for sale or hire, the article; 2, Distributing the article for the purpose of trade, or for any other purpose to an extent that will prejudice the rights of the copyright owner in the work; or 3. Trade exhibit of the article in public. CRAR.- Regulatory Framework for Business Transactions RFBT 8705 Page 17 of 30vill, Works that can be protected by Copyrights (Copyrightable Works) 1, Books, pamphlets, articles und other writings; 2. Periodicals and newspapers; 43. Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not reduced in ‘writing or other material form; i 4. Letters; 5. Dramatic or dramatico-musical compositions; choreographic works or entertainment in dumb shows; 6. Musical compositions, with or without words; 7. Works of drawing, painting, architecture, sculpture, engraving, lithography ot other works of art; = models or designs for works of art; 8. Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design, and other works of applied art; 9, Illustrations, maps, plans, sketches, charts and three-dimensional works relative to geography, topography, architecture or science; 10, Drawings or plastic works ofa scientific or technical character; 11, Photographic works including works produced by @ process analogous to photography; lantem slides; 42, Audiovisual works and cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings; 13, Pictorial illustrations and advertisements; 14, Computer programs; 15. Other literary, scholarly, sicutific and artistic works. iat are not protected by Copyrights (Nou-copyrightable Works) 1. any idea, procedure, system, method or operation, concept, principle, discovery or mere data as such, even ifthey are expressed, explained, illustrated or embodied in a work; 2. news of the day and other miscellaneous facts having the character of mere items of press information; or 3. any official text of a legislative, administrative or legal nature, as well as any official translation thereof, Doctrine of Fair Use - It is "a privilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as copying the theme or ideas rather than their expression."It is an exception to the copyright owner's monopoly of the use of the work to avoid stifling "the very creativity which that law is designed to foster. In determining whether the use made of a work in any particular case is fair use, the factors to be considered shall include the following 4. The purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes 5. The nature of the copyrighted work 6. The amount and substantiality ofthe portion used in relation to the copyrighted work as a whole 7. The effect of the use upon the potential market for or value ofthe copyrighted work. IV. Data Privacy Act of 2012 (R.A. No, 10173) ‘A. Policies of the State ‘a. Its the policy of the State to protect the fundamental human right of privacy, of communication while ensuring free flow of information to promote innovation and growth . The State recognizes the vital role of information and communications technology in nation-building and its inherent obligation to ensure that personal information in information and communications systems in the government and in the private sector are secured and protected, cc. Data privacy refers to the right while data protection refers to the means to implement the right to data privacy. B. Definition of Terms ; : ‘2. Commission shall refer to the Netional Privacy Commission created by virtue of this Act. b. Consent of the data subject refers to any freely given, speoific, informed indication of will, whereby the data subject agrees to the collection and processing of personal information about and/or relating to him or her. Consent shall be evidenced by written, electronic or recorded means, It may also be given on behalf of the data subject by an agent specifically authorized by the data subject to do so, ject refers to an individual whose personal information is processed. ata subj ; S Dittet marketing refers to communication by whatever means of any advertising or marketing material which is i cular individuals. ec ao any ato norman sling to wat o jd! persons tothe extent ha, although he Sik : tion is not processed by equipment operating automatically in response to instructions given for that information ris structured, either by reference to Individuals or by reference to criteria relating o individuals, in Purpos iy that specific information relating to a paricular person is readily accessible, e such away te pe amiclins Syste rel 10 a syste) for geterating, song, resin, storing or £ Information and Comeronie data messages or electronic documents and includes the computer system or ober similar devies Y fage of electronic data, electronic message, or electronic document, transmission or storage OF any information whether recorded in a material form or no, fom which the identity Personal information refs © vgn be reasonably and dretly ascertained by the entity holding the information, or of an individuals Peri formation would directly and certainly identify an individual. ‘when put together with o mnsactions RFBT 8705 Page 18 of 30 latory Genmenineé for Pusiness Tra!Personal information controller refers to a person or organization who controls the collection, holding, processing Sees of Personal information, including person or organization who instructs another person or organization . hold, process, use, transfer or disclose personal information on his or her behalf. The terma Personal information controller excludes the following: i, A person or organization who performs such functions as instructed by another person or organization; and ji, An individual who collects, holds, processes or uses personal information in connection with the individual's persona, family or housenold affairs. Personal information processor refers to any natural or juridical person qualified to act as such under this Act to ‘whom a personal information controller may outsource the processing of personal daia pertaining to a data subject J. Processing refers to any operation or any set of operations performed upon personal information including, but not limited to, the collection, recording, organization, storage, updating or modification, rewieval, consultation, use, consolidation; blocking, erasure or desiriction of data. : K. Privileged information refers to any and all forms of data which under the Rules of Court and other pertinent laws constitute privileged communication Sensitive personal information refers to personal information about the following: | i, About an individual's race, ethnic origin, marital status, age, color, and religious, philosophical or political affiliations; m ii. About an individual's health, education, genetic or sexual life of a person, or to any proceeding for any offense committed or alleged to have been committed by such person, the disposal of such proceedings, or the sentence of any court in such proceedings; ae ii, Issued by goverment agencies peculiar to an individual which includes, but nat limited to, soeal security numbers, previous or current health records, licenses or its denials, suspension or revocation, and tax retums; and . iv. Specifically established by an executive order or an act of Congress to be kept classified. C. Scope of Data Privacy Act -The law applies to the processing of all types of personal information and to any natural and juridical person involved in personal information processing including those personal information controllers and processors ‘who, although not found or established in the Philippines, use equipment that are located in the Philippines, or those who raintain an office, branch or agency inthe Philippines subject to the immediately succeeding paragraph: Provided, That the requirements of Section 5 are complied with. Section 5 affords protection to journalists and their sources. Nothing in this Act shall be construed as to have amended or repealed the provisions of Republic Act No. 53, which affords the publishers, editors or duly accredited reporters of any newspaper, magazine or periodical of general circulation protection from being compelled to reveal the source of aay news report or information appearing in said publication which was related in any ‘confidence to such publisher, editor, or reporter D. Exceptions to Coverage of Data Privacy Act ~ The law does not apply tothe following: - ‘2. Information about any individual who is or was an officer or employee of a government institution that relates to the position or functions of the individual, including: i, The fact thatthe individual is or was an officer or employee of the government institution; ji, The ttle, business address and office telephone number ofthe individual; iii, The classification, salary range and responsibilities ofthe position held by the individual; and iv. The name of the individual on a document prepared by the individual in the course of employment with the government; 'b. Information about an individual who is or was performing service under contract for a goverment institution that relates to the services performed, including the terms of the contract, and the name of the individual given in the course of the performance of those services; . Information relating to any discretionary benefit of a financial nature such as the granting of a license or permit, given by the government to an individual, including the name of the individual and the exact nature ofthe benefit; 4. Personal information processed for journalistic, asic literary or research purposes; Information riecessary in order to carry out the functions of public authority which includes the processing of personal data for the performance by the independent, central monetary authority and law enforcement and regulatory agencies of their constitutionally and statutorily mandated functions. Nothing in this Act shall be construed as to have amended or repealed Republic Act No. 1405, otherwise known as the Secrecy of Bank Deposits ‘Act; Republic Act No, 6426, otherwise known as the Foreign Currency Deposit Act; and Republic Act No. 9510, otherwise known as the Credit Information System Act (CISA): £ Information necessary for banks and other financial institutions under the jurisdiction of the independent, central monetary autiority or Bangko Sentral ng Pilipinas to comply with Republic Act No. 9510, and Republic Act No. 9160, as amended, otherwise known as the Anti-Money Laundering Act and other applicable laws; and ‘& Personal information originally collected from residents of foreign jurisdictions in accordance with the laws of those foreign jurisdictions, including any applicable data privacy laws, which is being processed in the Philippines. E. Extraterritorial Application of Data Privacy Act ~ The law applies to an act done or practice engaged in and outside of the Philippines by an entity if: a. The act, practice or processing relates to personal information about a Philippine citizen or a resident; '. The entity has a link with the Philippines, and'he entity is processing personal information in the Philippines or even ifthe processing is outside the Philippines as long as itis about Philippine citizens or residents such as, but not limited to, the following: i, A contract is entered in the Philippines; Hi Jurdcal ent unincorporated i the Pitppines but has central management and contol nthe county; an iil, An entity that has a branch, agency, office or subsidiary in the Philippines and the parent or affiliate of the Philippine entity has access to personal information; and ©. The entity has other links in the Philippines such as, but not limited to: ‘The entity carries on business in the Philippines; and The personal information was collected or held by an entity inthe Philippin re OPAR.- Regulatory Framework for Business Transactions. RFBT 8705 Page 19 of 30F, National Privacy Commission, which is an independent body, implement the pro standards st for data protection, refers to the government agency entrusted to administer and. “ons of Data Privacy Act, and to monitor and ensure compliance of the country with intemational a, Functions of National Privacy Commission xii, xiv, xvi. xvii, Ensure compliance of personal information controllers with the provisions ofthis Act; Receive complaints, institute investigations, facilitate or enable setlement of complaints through the use of alternative dispute resolution processes, adjudicate, award indemnity on matters affecting any personal information, prepare reports on disposition of complaints and resolution of any investigation ‘it tntites, and, in cases it deems appropriate, publicize any such report: Provided, That in resolving any complaint or investigation (except where amicable settlement is reached by the parties), the Commission shall act as a collegial body. For this purpose, the Commission may be given access to personal information that is subject of any complaint and to collect the information necessary to perform its functions under this Act, Issue cease and desist orders, impose a temporary or permanent ban on the processing of personal information, upon finding that the processing will be detrimental o national security and public interes; ‘Compel or petition any entity, government agency or instrumentality to abide by its orders or take action on 1 matter affecting data privacy; “Monitor the compliance of other government agencies or instrumentalities on their security and technical measures and recommend the necessary action in order to meet minimum standards for protection of personal information pursuant to this Act; Coordinate with other government agencies and the private sector on efforts to formulate and implement plans and policies to strengthen the protection of personal information in the country; Publish on a regular basis a guide to all laws relating o data protection; Publish @ compilation of agency system of records and notices, including index and other finding aids; Recommend to the Department of Justice (DOJ) the prosecution and imposition of penalties specified in Sections 25 to 29 ofthis Act; Review, approve, reject or require modification of privacy codes voluntarily adhered to by personal information controllers: Provided, That the privacy codes shall adhere to the underlying data privacy Principles embodied in this Act Provided, further, That such privacy codes may include private dispute Fesolution mechanisms for complaints against any participating personal information controller. For this Purpose, the Commission shall consult with relevant regulatory agencies in the formulation and administration of privacy codes applying the standards set out in this Act, with respect to the persons, entities, business activities and business sectors that said regulatory bodies are authorized to principally ‘egulate pursuant to the law: Provided, finaly. That the Commission may review such privacy codes and require changes thereto for purposes of complying wit this Act; Provide assistance on matters relating to privacy or data protection at the request of @ national or local ‘agency, a private entity or any person; ‘Comment on the implication on data privacy of proposed national or local statutes, regulations or procedures, issue advisory opinions and interpre the provisions of this Act and other data privacy laws; Propose legislation, amendments or modifications to Philippine laws on privacy or data protection as may be necessary; Ensure proper and effective coordination with data privacy regulators in other countries and private accountability agents, participate in international and regional initiatives for data privacy protection; Negotiate and contract with other data privacy authorities of other countries for cross-border application and implementation of respective privacy laws; Assist Philippine companies doing business abroad to respond to foreign privacy or data protection laws and regulations; and Generally perform such acts as may be necessary to facilitate cross-border enforcement of data privacy protection. b. Confidentiality in National Privacy Commission ~The National Privacy Commission shall ensure at all times the confidentiality of any personal information that comes to its knowledge and possession. Organizational Structure of National Privacy Commission (NPC) i. Composition - The Commission shall be attached to the Department of Information and Communications ‘Technology (DICT) and shall be headed by a Privacy Conumissioner, who shall also act as Chairman of the Commission. The Privacy Commissioner shall be assisted by two (2) Deputy Privacy Commissioners, one to be responsible for Data Processing Systems and one to be responsible for Policies and Planning, Appointment to the NPC - The Privacy Commissioner and the two (2) Deputy Privacy Commissioners shall be appointed by the President of the Philippines. Vacancies in the Commission shall be filled in the same manner in which the original appointment was made Term of Office ~ The Privacy Commissioner and the two (2) Deputy Privacy Commissioners shall have a term of three (3) years, and may be reappointed for enother term of three (3) years. Qualifications of NPC Commissioners 1. The Privacy Commissioner must be at least thirty-five (35) years of age and of good moral character, unquestionable integrity and known probity, and a recognized expert in the Geld of information technology and data privacy. The Privacy Commissioner shall enjoy the benefits, privileges and emoluments equivalent tothe rank of Secretary. 2 The Deputy Privacy Commissioners must be recognized experts in the field of information and communications technology and data privacy. They shall enjoy the benefits, privileges and ‘emoluments equivalent to the rank of Undersecretary. Liability of NPC Commissioners aulatory Framework for Business Transactions RFBT 8705 Page 20 of 30Asa general rule, the Privacy Commissioner, the Deputy Commissioners, or any person acting on their behalf or under their direction, shall not be civilly liable for acts done in good faith in the Performance of their duties. 2. However, he or she shall be liable for willful or negligent acts done by him or her which are contrary to lav, morals, public policy and good customs even if he or she acted under orders or instructions of superiors: Provided, That in case a Inwsuit is filed against such official on the subject of the performance of his or her duties, where such performance is lawful, he or she shall be reimbursed by the NPC for reasonable costs of litigation. G._ Processing of Personal Information General Data Privacy Principles - The processing of personal information shall be allowed, subject to compliance with the requirements ofthis ae and other Jaws: allowing disclosure of information to the public and adherence to the principles of transparency, legitimate purpose and proportionality. It is the duty of personal eee controller to ensure implementation of personal information processing principles set out below. The following are the general data privacy principles: il Personal information must be collected for specified and legitimate purposes determined and declared bbofore, or as soon as reasonably practicable after collection, and later processed in a way compatible wi such declared peified and legitimate purposes onl Personal information must be processed fairly and lawfully; a Personal information must be accurate, relevant and, where necessary for purposes for which it is to be used the processing of personal information, Kept up to date, inaccurate or incomplete data must rectified, supplemented, destroyed or their further processing restricted; . Personal ination most be adequate and not excessive in relation tothe purposes fr which they a collected and processed; Personal information must be retained only for 3s long as necessary fr the fulfillment ofthe purposes for Which the data was obiained or forthe establishment, exercise or defense of legal claims, or for legtimat i 5, oF as provided by law; and : Personal infematn mat be hep ive fom which permis detention of at subjet fr no longer than is necessary for the purposes for which the data were collected and processed: Provided, That personal information collected for otber purposes may lie processed for historical, statistical or scientific purposes, ‘and in eases laid down in law may be stored for longer periods: Provided, further, That adequate safegu: are guaranteed by said laws authorizing their processing. b. Criteria for Lawful Processing of Personal Information - The processing of personal information shall be permitted only if not otherwise prohibited by law, and when atleast one ofthe following conditions exists vi © Sensitive Personal Information and Pri The data subject has given his or her consent; The processing of personal information is necessary and is related to the fulfilment of a contract with the data subject or in order to take steps atthe request of the data subject prior to entering into a contract; ‘The processing is necessary for compliance with a legal obligation to which the personal information controller is subject; ‘The processing is necessary to protect vitally important interests of the data subject, including life and health; ‘The processing is necessary in order to respond to national emergency, to comply with the requirements of public order and safety, orto fulfill functions of public authority which necessarily includes the processing ‘of personal data forthe fulfillment of its mandate; or The processing is necessary for the purposes of the legitizeato interests pursued by the personal information controller or by a thitd party or parties to whom the data is disclosed, except where such interests are overridden by fundamental rights and freedoms of the data subject which require protection under the Philippine Constitution. ileged Information ~ As a general rule, the processing of sensitive personal information and privileged information shall be prohibited. However, the following are the exceptional ceases wherein processing of sensitive personal informetion and privileged information may be allowed: The data subject has given his or her consent, specific to the purpose prior to the processing, or in the case of privileged information, all partes to the exchange have given their consent prior to processing; The processing of the same is provided for by existing laws and regulations: Provided, That such regulatory enactments guarantee the protection of the sensitive personal information and the privileged information: Provided, further, That the consent of the data subjects are not required by law or regulation permitting the processing of the sensitive personal information or tho privileged information; ‘The processing is necessary to protect the life and health of the data subject or another person, and the data subject is not legally or physically able to express his or her consent prior to the processing; ‘The processing Is necessary to achieve the lawful and noncommercial objectives of public organizations ‘and their associations: Provided, That such processing is only confined and related to the bona fide members of these organizations &r their associations: Provided, further, That the seusitive personal information are not transferred to third parties: Provided, finally, That consent of the data subject was ‘obteined prior to processing; The processing is necessary for purposes of medical treatment, is carried out by a medical practitioner or a ‘medical treatment institution, and an adequate level of protection of personal information is ensured; ot ‘The processing concems such personal information as is necessary for the protection of lawful rights and interests of natural or legal persons in court proceedings, or the establishment, exercise or defense of legal claims, or when provided to government or public authority, CPAR.- Regulatory Framework for Business Transactions REBT 8705 Page 21 of 30 Mi4. Subcontract of Personal Information - A personal information controller may subcontract the processing of personal information: Provided, That the personal information controller shall be responsible for ensuring that proper safegulirds are in place to ensure the confidentiality of the personal information processed, prevent its use for {unauthorized purposes, and generally, comply with the requirements of this Act and other laws for processing of personal information. The personal information processor shall comply with all the requirements of this Act and other applicable laws. ¢, Extension of Privileged Communication and Inadmissibilty of Privileged Information as Evidence - Personal information controllers may invoke the principle of privileged communication over privileged information that they lawfully control or process. Subject to existing laws and regulations, any evidence gathered on privileged information is inadmissible. H. Rights of Data Subject 4. The following are the rights of the Data Subject: Right fo be informed whether personal information pertaining to him or her shall be, are being or have been processed; ji, Right to be furnished the information indicated hereunder before the entry of his or her personal information into the processing system of the personal information controller, of at the next practical opportunity’ I Description of the personal information to be entered into the system; Purposes for which they are being or are to be processed; Scope and method of the personal information processing; The recipients or classes of recipients to whom they are or may be disclosed; ‘Methods utilized for automated access, ifthe same is allowed by the data subject, and the extent to which such access is authorized; 6. The identity and contact detils ofthe personal information controller or its representative; 7. The period for which the information will be stored; and 8. The existence of their righs, ie, to access, correction, as well as the before the Commission. 9. Any information supplied or declaration made to the data subject on these matters shall not be * amended without prior notification of data subject: Provided, That the notification under subsection (b) shall not apply should the personal information be needed pursuant to a subpoena or when the collection and processing are for obvious purposes, including when it is necessary for the performance of or in reltion to a contract or service or when necessary or desirable in the context of an employer-employee relationship, between the collector and the data subject, or when the information is being collected and processed as a result of legal obligation; ght to lodge a complaint iii. Right to have reasonable access to, upon demand, the following: ‘Contents of his or her personal information that were processed; Sources from which personal information were obtained; [Names and addresses of recipients of the personal information; Manner by which such data were processed Reasons forthe disclosure of the personal information to recipients; Information on automated processes where the data will or likely to be made as the sole basis for any decision significantly affecting or will affect the data subject; 7. Date when his or her personal information concerning the data subject were last accessed and modified; and 8, The designation, or name or identity and address ofthe personal information controller; iv. Right to dispute the inaceuracy or error in the personal information and have the personal information controller correct it immediately and accordingly, unless the request is vexatious or otherwise unreasonable, If the personal information have been corrected, the personal information controller shall ensure the accessibility of both the new and the retracted information and the simultaneous receipt of the new and the retracted information by recipients thereof: Provided, That the third parties who have previously received such processed personal information shall he informed of its inaccuracy and its rectification upon reasonable request of the data subject; v. Right to suspend, withdraw or order the blocking, removal or destruction of his or her personal information from the personal information controller's filing system upon discovery and substantial proof that the personal information are incomplete, outdated, false, unlawfully obtained, used for unauthorized purposes or are no longer necessary for the purposes for which they were collected. In this case, the personal information controller may notify third parties who have previously received such processed personal information; and vi. Right to be indemnified for any damages sustained due to such inacourte, incomplete outdated, false, unlawfully obtained or unauthorized use of personal information. b. Tronsmissibility of Rights of Data Subject - The lawful heirs and assigns of the data subject may invoke the rights ‘rahe data subject for, which be or she isan her or assignee at any time after the death of the data subject or when the data subject is incapacitated or incapable of exercising the rights as enumerated above. ‘aulatory Framework for Business Transactions RFBT 8705 Page 22 of 301. Security of Personal Information - The following are the internal control measures to be implemented by the information controller to secure personal informatior A Right to Data Portability - The date subject shall have the right, where personal information is processed by electronic means and in a structured and commonly used format, to obtain from the personal information | controller a Copy of data ‘undergoing processing in an electronic or structured format, which is commonly used and allows for further use by the data subject. The Commission may specify the electronic format referred to above, as well as the technical standards, modalities and procedures for their transfer. Non-Applicability of the Rights of Data Subject - The data privacy subject rights are not applicable if the processed personal information are used only for the needs of scientific and statistical research and, on the basis of such, no activities are carried out and no decisions are taken regarding the data subject: Provided, That the personal information shall be held under strict confidentiality and shall be used only for the declared purpose, Likewise, the immediately preceding sections are not applicable to processing of personal information gathered forthe purpose of investigations in relation to any criminal, administrative or tax liabilities of « data subject. personal t reasonable and appropriate organizational, physical and ‘The personal information controller must implement : th a yainst any accidental or unlawful technical measures intended for the protection of personal information agi destruction, alteration and disclosure, as well as against any other unlawful processing. : ‘The personal information controller shall implement reasonable and appropriate measures to protect pefsoet, informetion against natural dangers such as accidental loss or destruction, and human dangers such as unlaw' access, fraudulent misuse, unlawful destruction, alteration and contamination. : the ‘The determination of the appropriate level of security under this section must take into account the nature of Le personal information to be protected, the risks represented by the processing, the size of the organizali, tot Complexity ofits operations, current data privacy best practices and the cost of security implementation. Subject guidelines as the Commission may issue from time to time, the measures implemented must Include: i. Safeguards to protect its computer network against accidental, unlawful or unauthorized usage or interference with or hindering of their functioning or availability; ii. A security policy with respect to the processing of personal information; iii. A process for identifying and accessing reasonably foreseeable vulnerabilities in ‘and for taking preventive, corrective and mitigating action against security incidents that ct security breach; and jv. Regular monitoring for security br action against security incidents that can lead to a security breach. ; ‘The personal information controller must further ensure that third parties processing personal information on its behalf shall implement the security measures required by this provision ‘ ‘The employees, agents or representatives of a personal information controller who are involved in the processing of personal information shall operate and hold personal information under strict confidentiality if the personal information are not intended for public disclosure. This obligation shall continue even after leaving the public service, transfer to another position or upon termination of employment or contractual relations. ‘The personal information controller shall promptly notify the Commission and affected data subjects when sensitive personal infotmation or other information that may, under the circumstances, be used to enable identity fraud are reasonably believed to have been acquired by an unauthorized person, and the personal information controller or the Commission believes (bat such unauthorized acquisition is likely to give rise to a real risk of serious harm to any affected data subject. The notification shall at least describe the nature of the breach, the sensitive personal information possibly involved, and the measures taken by the entity to address the breach. Notification may be delayed only to the extent necessary to determine the scope of the breach, to prevent further disclosures, or to restore reasonable integrity to the information and communications system. i. In evaluating if notification is unwarranted, the Commission may take into account compliance by the personal information controller with this section and existence of good faith in the acquisition of personal information, fi, The Commission may exempt a personal information controller from notification where, in its reasonable Judgment, such noifaton would ot be inthe puble Interest a i the interests of the fected dat subjects. iii, The Commission may authorize postponement of notification where it may hinder the progress of a criminal investigation related to a serious breach. ilties in its computer networks, an lead to a reaches and a process for taking preventive, corrective and mitigating J. Accountability of Personal Information Controller for Transfer of Personal Information CRAR- Regulatory Framework for Business Transactions REBT 8706 Page 23 of 30 Bach personal information controller is responsible for personal information under its control or custody, including information that have been transferred to a third party for processing, whether domestically or internationally, subject to cross-border arrangement and cooperation. The personal information controller is accountable for complying with the requirements of this Act and shall use contractual of other reasonable means to provide a comparable level of protection while the information are being processed by a third party. ‘The personal information controller shall designate an individual or individuals who are accountable for the organization's compliance with this Act, The identity of the individual(s) so designated shall be made known to any data subject upon request.Y. _Bleetronic Commerce Act of 2000 (R.A. No. 8792) A. Policies of the State = The State recognizes the vital role of information and communications technology (ICT) in nation- building; the need to create an information-friendly environment which supports and ensures the availability, diversity and affordability of ICT products and services; the primary responsibility of the private sector in contributing investments and services in telecommunications and information technology; the need to develop, with appropriate training programs and institutional policy changes, human resources for the information technology age, a labor force skilled in the use of ICT and a population capable of operating and utilizing electronic appliances and computers; its obligation to facilitate the trensfer and promotion of technology: to ensure network security, connectivity and neutrality of technology for the national benefit; and the need to marshal, organize and deploy national information infrastructures, comprising in both telecommunications network and strategic information services, including their interconnection to the global information networks, with the necessary and appropriate legal, financial, diplomatic and technical framework, systems and facilites, B. Objective of the Law ~ The law aims to facilitate domestic and international dealings, transactions, arrangements agreements, contracts and exchanges and storage of information through the utilization of electronic, optical and similar medium, mode, instrumentality and technology to recognize the authenticity and reliability of electronic documents related to such activites and to promote the universal use of electronic transaction in the government and general public. C. Coverage or Sphere of Application of Law — The {aw shall apply to any kind of data message and electronic document used in the context of commercial and non-commercial activities to include domestic and international dealings, transactions, arrangements, agreements contracts and exchanges and storage of information, D. Definition of Terms Addressee refers to a person who is intended by the originator to receive the electronic data message or electronic document, The term does not include a person acting 8s an intermediary with respect to that electronic data message oF electronic data document. 5. Computer refers to any device or apparass which, by electronic, electro-mechanical, or magneti impulse, or by other means, is capable of receiving, recording transmitting, storing, processing, retrieving, or producing information, data, figures, symbols or other modes of writen expression according fo mathematical and logical rules or of performing any one or more ofthese functions 6. Electronic Data Message refers to information generated, sent, received or stored by electron, optical or si means, 4. Information and Communications System refers to a system intended for and capable of generating, sending, receiving, string, oF otherwise processing electronic data messages or electronic documents and includes the computer system oF other similar device by or in which date is recorded oF stored and any procedures related tothe recording or storage of electronic data message or electronic document © _Eleetronle Signature refers to any distinctive mark, characteristic and/or sound ia electronic form, representing, the ‘deniy ofa person and attached to or logically associated with the electronic data message or electronic document oF any methodology or procedures employed or adopted by @ person and executed or adopted by such person with the intention of authenticating or approving an electronic data message or clecronie document £ Electronic Document refers to information or the representation of information, data, figures, symbols or other modes of written expression, described or however represented, by which a right is established or an obligation extinguished, oF by which a fact may be prove and affirmed, which i receive, recorded, transmitted, stored, processed, otreved or produced electronically & Electronic Key refers to a secret code which secures and defends sensitive information that cross over public channels into a form decipherable only with a matching electron ke, 1h. Intermediary refers toa person who in behalf of anciber person and with respect to particular electonic document sends, receives andlor stores provides ater services in respect ofthat electronic data message or electronic dosumont Originator refers toa person by whom, or on whose bebalf, the electronic documeut purpors to have beer seated, fenerated andor sent. The frm doesnot include rerion esting a an intermediary with respect to Tht elctnie jocument. J. Service provider refers to a provider of - 1. On-line services or network accessor the operator of faites therefor, including entities offering the transmission routing, or providing of connections for osline communications, digital or otherwise, between or among points specified by a user, of electronic document ofthe uter's choosing: or 2. The necessary techaical means by which electonic documents of an originator may be stored and made accessible to designated or undesignatd third party. ilar Such service providers shall have no authority modify or alter the context of the electronic data message or electronic document recsived or to make any eatry therein on behalf of the originator, addressee or any third pasty unless specifically authorized to do so, and who shall retain the electronic document in accordance with the speiffe requestor as necessary forthe purpose of performing the services it was engaged to perform E, Legal Recognition of Electronic Data Messages - Information shail not be denied legal effect, validity or enforceability solely ‘on the grounds that it is in the data message purporting to give rise to such legal effect, or that itis merely referred to in that electronic data message. se eet Story Framework for Business Transactions RFBT 8705 Page 24 of 30‘Legal Recogultion of Electronic Documents - Electronic documonts shall have the legal effect, validity or enforceability as Bother document oF legal writing, and — (a) Where the law requires a document to be in writing, that requirement is met by an electronic document if the said electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent reference, in that — i, The electronic document has remained complete and unaltered, apart from the addition of any endorsement and any authorized change, or any change which arises in the normal course of communication, storage and display; and . i. The electronic document is reliable in the light of the purpose for which it was generated and in the light ofall relevant circumstances. (©) Paragraph (a) applies whether the requirement therein is inthe form of an obligation or whether the law simply provides consequences for the document not being presented or retained in its original from. (© Where the law requires that a document be presented or retained in its original form, that requirement is met by an electronic document if= | i. There exists a reliable assurance as fo the integrity of the document from the time generated in its final form; and i, That document is capable of being displayed tothe person no provision of this Act shall apply to vary any and all re required in the execution of documents for their validity. when it was first ‘to whom it is to be presented: Provided, That -quirements of existing laws on formalities Jent of a written document under ‘of electronic data massages or cexisting laws. This Act does not modify any statutory ru ‘electronic documents, except the rules relating to authentication and best evidence, G. Legal Recognition of Electronic Signatures. - An electronic signature on the electronic document shall be equivalent io the signature ofa person on a writen dogument if that signature is proved by showing that a prescribed procedure, not alterable By the parties interested in the electronic document, existed under which ~ () A method is used to identity the party sought to be bound and to indicate sald party's access to the electronic document necessary for his consent or approval through the electronic signature; (b) Said method is reliable and appropriate for the purpose for which the electronic document was generated or ‘communicated, in the light of all circumstances, including any relevant agreement; | (©) It is necessary for the party sought to be bound, in or order to proceed further with the transaction, to have executed or provided the electronic signature; and (@) The other party is authorized and enabled to verify the electronic signature and to make the decision to proceed ‘with the transaction authenticated by the same. olving an electronic signature, it shall be presumed H. Presumption Relating to Electronic Signatures - In any proceedin that «| (@) The electronic signature isthe signature of the person to whom it correlates; and (b) The electronic signature was affixed by that person with the intention of signing or approving the electronic Gocument unless the person relying on the electronically signed electronic document knows or has noticed of defects, in or unreliability ofthe signature or reliance on the electronic signature is not reasonable under the circumstances. I. Original Documents. — (1) Where the law requires information to be presented or retained in its original form, that requirement is met by an electronic data message or electronic document if, (@) the integrity of the information from the time when it was first generated in its final form, as an electronic data message or electronic document is shown by evidence aliunde or otherwise; and (b) where itis required that information be resented, that the information is capable of being displayed to the person to whom itis to be presented, (2) Paragraph (1) applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the information not thing presented or retained in its original form. (@) For the purpose of subparagraph (a) of paragraph (1) (@) the criteria for assessing integrity shall be whether the information has remained complete and unaltered, apart from the addition of any endorsement and any change which aise inthe normal course of communication, storage and display ; and (b) the standard of reliability required shall be assessed in the light of purposed for which the information ‘was generated and inthe light of all the relevant circumstances. aaoo— EE S_— EEE CPAR.- Regulatory Framework for Business Transactions REBT 8705 Page 25 of 30J. Admissibility and Evidential Weight of Electronle Data Message or Electronic Document. - In any legal proceedings, nothing in the application of the rules on evidence shall deny the admissibility of an electronic data message or electronic document in evidence ~ (a) On the sole ground that itis in electronic form; or (b) On the ground that it is not in the standard writen form, and the electronic data message or electronic document ‘meeting, and complying with the requirements under Sections 6 or 7 hereof shall be the best evidence of the agreement and transaction contained therein. In assessing the evidential weight of an electronic data message or electronic document, the reliability of the manner in which it was generated, stored or communicated, the reliability of the manner in which its originator was identified, and other relevant factors shall be given due regard K. Retention of Electronic Data Message or Electronic Document. - Notwithstanding any provision of law, rule or regulation to the contrary ~ (@) The requirement in any provision of law that certain documents be retained in their original form is satisfied by retaining them in the form of an electronic data message or electronic document which — (i) Remains accessible so as to be usable for subsequent reference; Gi) Is retained in the format in which it was generated, sent or received, or in a format which can be demonstrated to accurately represent the electronic data message or electronic document generated, sent ot received; (iii) Enables the identification of its originator and addressee, as well as the determination of the date and the time it was sent or received. (©) The requirement referred to in paragraph (a) is satisfied by using the services of a third party, provided that the conditions set fourth in subparagraph s (), (i) and (ii) of paragraph (a) are met. L. Formation of Validity of Blectronie Contracts (1) Except as otherwise agreed by the partes, an offer, the acceptance of an offer and such other elements required under existing laws for the formation of contracts may be expressed in, demonstrated and proved by means of electronic data messages or electronic documents and no contract shall be denied validity or enforceability on the sole ground that i is in the form of an electronic data message or electronic document, or that any or all ofthe elements required under existing laws for the formation of contracts is expressed, demonstrated and proved by means of electronic data messages or electronic focuments. 2) Electronic transactions made through networking among banks, or linkages thereof with other entities or networks, and vice versa, shall be deemed consummated upon the actual dispensing of cash or the debit of one account and the corresponding credit to another, whether such transaction is initiated by the depositor or by an authorized collecting party: Provided, that the obligation of one bank, entity or person similarly situated to another arising therefrom shall be considered absolute and shall not be subjected to the process of preference of credits M. Recognition ies of Electronic Data Message or Electronic Document - As between the origi fo ¢ originator and the addressee of an electronic data message or electronic document, a declaration of will or other statement shall not be denied legal effect, validity or enforceability solely on the ground that it isin the form of an electronie data message, Page 26 of 30 aulatory Framework for Business Transactions RFBT 8705