Law On Other Business Transactions 20181

LAW ON OTHER BUSINESS
TRANSACTIONS
Financial Rehabilitation and
Insolvency
Act (FRIA) of 2010".
"
REPUBLIC ACT No. 10142
AN ACT PROVIDING FOR THE REHABILITATION OR

LIQUIDATION OF
FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS
Introduction
 February 2, 2010, Congress adopted R.A. No. 10142, the Financial

Rehabilitation and Insolvency Act of 2010 (“FRIA”).
 The FRIA lapsed into law and became effective on July 18, 2010.
 The FRIA replaces and repeals the Insolvency Law (Act No. 1956),
which was enacted in 1909.
 The FRIA impliedly amends the Rules of Procedure on Corporate
Rehabilitation (2008).
Introduction
 Insolvency and rehabilitation– opposite ends of the pole
 Rehabilitation “contemplates a continuance of

corporate life and activities in an effort to restore and
reinstate the corporation to its former position of
successful operation and solvency.
 Insolvency - seeks the liquidation and ultimate
dissolution and closure of the debtor as an entity.
The Courts and the FRIA of 2010
The “design of the procedural rules plays a critical role

how risk is to be allocated” amongst its various
participants-
 the distressed debtor,
 the creditors,
 the rehabilitation receiver,
 the management committee, if any is constituted, and
 the rehabilitation court.
PURPOSE
 The purpose of the FRIA is to allow an honest person —

but unfortunate debtor — to obtain a discharge from his
debts in order to reintegrate himself into the business
life of the country as a useful citizen.
 The FRIA provides for the orderly and fair distribution
of the property of the debtor on a pari passu (equally
and with no preference) basis.
Coverage
FRIA covers the rehabilitation of:

1. Sole proprietorships
2. Partnerships
3. Corporations
Question
 Which debtors are not covered by the FRIA?
a. DTI registered sole proprietorship
b. SEC registered partnerships
c. corporation duly organized and existing under
Philippine laws
d. National and local government agencies
Question
Philippine laws
d. National and local government agencies
Definition of Terms
a. Administrative expenses shall refer to those reasonable and necessary
expenses:
(1) incurred or arising from the filing of a petition under the provisions of this
Act;
(2) arising from, or in connection with, the conduct of the proceedings under
this Act, including those incurred for the rehabilitation or liquidation of the
debtor;
(3) incurred in the ordinary course of business of the debtor after the
commencement date;
(4) for the payment of new obligations obtained after the commencement
date to finance the rehabilitation of the debtor;
(5) incurred for the fees of the rehabilitation receiver or liquidator and of the
professionals engaged by them; and
(6) that are otherwise authorized or mandated under this Act
Definition of Terms
(b) Affiliate shall refer to a corporation that directly or indirectly, through one or
more intermediaries, is controlled by, or is under the common control of another
corporation.
(c) Claim shall refer to all claims or demands of whatever nature or character against
the debtor or its property, whether for money or otherwise, liquidated or
unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed,
including, but not limited to;
(1) all claims of the government, whether national or local, including taxes, tariffs
and customs duties; and
(2) claims against directors and officers of the debtor arising from acts done in the
discharge of their functions falling within the scope of their authority:
Provided, That, this inclusion does not prohibit the creditors or third parties from
filing cases against the directors and officers acting in their personal capacities.
Definition of Terms
((d) Commencement date shall refer to the date on which the court
issues the Commencement Order, which shall be retroactive to the date
of filing of the petition for voluntary or involuntary proceedings.
(e) Commencement Order shall refer to the order issued by the court
under Section 16 of this Act.
Definition of Terms
(f) Control shall refer to the power of a parent corporation to direct or govern the
financial and operating policies of an enterprise so as to obtain benefits from its
activities. Control is presumed to exist when the parent owns, directly or indirectly
through subsidiaries or affiliates, more than one-half (1/2) of the voting power of
an enterprise unless, in exceptional circumstances, it can clearly be demonstrated
that such ownership does not constitute control.
Control also exists even when the parent owns one-half (1/2) or less of the voting
power of an enterprise when there is power:
(1) over more than one-half (1/2) of the voting rights by virtue of an agreement
with investors;
(2) to direct or govern the financial and operating policies of the enterprise under a
statute or an agreement;
(3) to appoint or remove the majority of the members of the board of directors or
equivalent governing body; or
(4) to cast the majority votes at meetings of the board of directors or equivalent
governing body.
Definition of Terms
(g) Court shall refer to the court designated by the Supreme Court to hear
and determine, at the first instance, the cases brought under this Act.
(h) Creditor shall refer to a natural or juridical person which has a claim
against the debtor that arose on or before the commencement date.
(i) Date of liquidation shall refer to the date on which the court issues the
Liquidation Order.
(j) Days shall refer to calendar days unless otherwise specifically stated in
this Act.
(k) Debtor shall refer to, unless specifically excluded by a provision of this
Act, a sole proprietorship duly registered with the Department of Trade and
Industry (DTI), a partnership duly registered with the Securities and
Exchange Commission (SEC), a corporation duly organized and existing
under Philippine laws, or an individual debtor who has become insolvent as
defined herein.
Definition of Terms
(l) Encumbered property shall refer to real or personal property of the debtor
upon which a lien attaches.
(m) General unsecured creditor shall refer to a creditor whose claim or a portion
thereof its neither secured, preferred nor subordinated under this Act.
(n) Group of debtors shall refer to and can cover only:

(1) corporations that are financially related to one another as parent corporations,
subsidiaries or affiliates;
(2)partnerships that are owned more than fifty percent (50%) by the same person;
and (3) single proprietorships that are owned by the same person.
When the petition covers a group of debtors, all reference under these rules to
debtor shall include and apply to the group of debtors.
(o) Individual debtor shall refer to a natural person who is a resident and citizen
of the Philippines that has become insolvent as defined herein.
Definition of Terms
(p) Insolvent shall refer to the financial condition of a debtor that is
generally unable to pay its or his liabilities as they fall due in the ordinary
course of business or has liabilities that are greater than its or his assets.
(q) Insolvent debtor's estate shall refer to the estate of the insolvent
debtor, which includes all the property and assets of the debtor as of
commencement date, plus the property and assets acquired by the
rehabilitation receiver or liquidator after that date, as well as all other
property and assets in which the debtor has an ownership interest, whether
or not these property and assets are in the debtor's possession as of
commencement date: Provided, That trust assets and bailment, and other
property and assets of a third party that are in the possession of the debtor
as of commencement date, are excluded therefrom.
Definition of Terms
(r) Involuntary proceedings shall refer to proceedings initiated by creditors.
(s) Liabilities shall refer to monetary claims against the debtor, including
stockholder's advances that have been recorded in the debtor's audited
financial statements as advances for future subscriptions.
(t) Lien shall refer to a statutory or contractual claim or judicial charge on

real or personal property that legality entities a creditor to resort to said
property for payment of the claim or debt secured by such lien.
(u) Liquidation shall refer to the proceedings under Chapter V of this Act.
(v) Liquidation Order shall refer to the Order issued by the court under
Section 112 of this Act.
Question
This refers to a statutory or contractual claim or judicial

charge on real or personal property that legality entities a
creditor to resort to said property for payment of the
claim or debt secured by such.
A. Possessory lien
B. Lien
C. Claim
D. Secured claim
Question
This refers to a statutory or contractual claim or judicial

charge on real or personal property that legality entities a
creditor to resort to said property for payment of the
claim or debt secured by such.
A. Possessory lien
B. Lien
C. Claim
D. Secured claim
Definition of Terms
(w) Liquidator shall refer to the natural person or juridical entity appointed
as such by the court and entrusted with such powers and duties as set forth
in this Act: Provided, That, if the liquidator is a juridical entity, it must
designated a natural person who possesses all the qualifications and none of
the disqualifications as its representative, it being understood that the
juridical entity and the representative are solidarity liable for all obligations
and responsibilities of the liquidator.
(x) Officer shall refer to a natural person holding a management position
described in or contemplated by a juridical entity's articles of incorporation,
bylaws or equivalent documents, except for the corporate secretary, the
assistant corporate secretary and the external auditor.
(y) Ordinary course of business shall refer to transactions in the pursuit of
the individual debtor's or debtor's business operations prior to rehabilitation
or insolvency proceedings and on ordinary business terms.
Definition of Terms
(z) Ownership interest shall refer to the ownership interest of third parties in
property held by the debtor, including those covered by trust receipts or
assignments of receivables.
(aa) Parent shall refer to a corporation which has control over another
corporation either directly or indirectly through one or more intermediaries.
(bb) Party to the proceedings shall refer to the debtor, a creditor, the
unsecured creditors' committee, a stakeholder, a party with an ownership
interest in property held by the debtor, a secured creditor, the rehabilitation
receiver, liquidator or any other juridical or natural person who stands to be
benefited or injured by the outcome of the proceedings and whose notice of
appearance is accepted by the court.
Definition of Terms
(cc) Possessory lien shall refer to a lien on property, the possession of which has
been transferred to a creditor or a representative or agent thereof.
(dd) Proceedings shall refer to judicial proceedings commenced by the court's

acceptance of a petition filed under this Act.
(ee) Property of others shall refer to property held by the debtor in which
other persons have an ownership interest.
(ff) Publication notice shall refer to notice through publication in a newspaper
of general circulation in the Philippines on a business day for two (2)
consecutive weeks.
Definition of Terms
(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of
successful operation and solvency, if it is shown that its continuance of operation
is economically feasible and its creditors can recover by way of the present value
of payments projected in the plan, more if the debtor continues as a going
concern than if it is immediately liquidated.
(hh) Rehabilitation receiver shall refer to the person or persons, natural or

juridical, appointed as such by the court pursuant to this Act and which shall be
entrusted with such powers and duties as set forth herein.
(ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and
viability of an insolvent debtor can be restored using various means including, but
not limited to, debt forgiveness, debt rescheduling, reorganization or quasi-
reorganization, dacion en pago, debt-equity conversion and sale of the business
(or parts of it) as a going concern, or setting-up of new business entity as
prescribed in Section 62 hereof, or other similar arrangements as may be approved
by the court or creditors.
Definition of Terms
(jj) Secured claim shall refer to a claim that is secured by a lien.
(kk) Secured creditor shall refer to a creditor with a secured claim.
(ll) Secured party shall refer to a secured creditor or the agent or
representative of such secured creditor.
(mm) Securities market participant shall refer to a broker dealer, underwriter,
transfer agent or other juridical persons transacting securities in the capital
market.
(nn) Stakeholder shall refer, in addition to a holder of shares of a corporation,
to a member of a nonstock corporation or association or a partner in a
partnership.
(oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the
voting stock of which is owned or controlled directly or indirectly through one
or more intermediaries by another corporation, which thereby becomes its
parent corporation.
Definition of Terms
(pp) Unsecured claim shall refer to a claim that is not secured by a lien.
(qq) Unsecured creditor shall refer to a creditor with an unsecured claim.
(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.
(ss) Voting creditor shall refer to a creditor that is a member of a class of

creditors, the consent of which is necessary for the approval of a Rehabilitation
Plan under this Act.
Section 5. Exclusions
The term debtor does not include:

 banks,
 insurance companies,
 preneed companies, and
 national and local government agencies or units.
Question
Philippine laws
d. banks
Question
Philippine laws
d. banks
Proceedings under the FRIA
The FRIA establishes the procedures and requirements for

the following remedies/proceedings
(1) court-supervised rehabilitation,
(2) pre-negotiated rehabilitation, and
(3) out-of-court or informal restructuring agreements or
rehabilitation plans
Protracted Proceedings
 The underlying philosophy of our rehabilitation and insolvency laws are both
rehabilitative and distributive in character, i.e. preserve and maximize the
value of the assets of the debtors while recognizing creditor rights, and
ensuring speedy and liquidation of debtor assets and settlement of their
obligations, where rehabilitation is no longer feasible.
 And perhaps because of the desire to exhaust all avenues that may help the
distressed debtor to recover, thereby assuring continued employment to a
worried work force, our FRIA provides for quite lengthy periods within which
certain actions may be taken as well as other remedies that appear to take
the cudgels for the debtor.
COURT-SUPERVISED
REHABILITATION
Voluntary Proceedings
Section 12. Petition to Initiate Voluntary Proceedings by Debtor. –
When approved:
 by the owner in case of a sole proprietorship, or
 by a majority of the partners in case of a partnership, or
 a corporation, by a majority vote of the board of directors or trustees and
authorized by the vote of the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock, or in case of nonstock
corporation, by the vote of at least two-thirds (2/3) of the members, in a
stockholder's or member's meeting duly called for the purpose,
- an insolvent debtor may initiate voluntary proceedings under this Act by
filing a petition for rehabilitation with the court and on the grounds
hereinafter specifically provided.
Question
In case of partnerships, the petition for voluntary

insolvency must be approved by the:
A. Majority of the partners
B. All of the partners
C. 2/3 vote of the partners
D. ¾ vote of the partners
Question
In case of partnerships, the petition for voluntary

insolvency must be approved by the:
A. Majority of the partners
B. All of the partners
C. 2/3 vote of the partners
D. ¾ vote of the partners
The petition shall be verified to establish the insolvency of the debtor and the
viability of its rehabilitation, and include, whether as an attachment or as part of
the body of the petition, as a minimum the following:
(a) Identification of the debtor, its principal activities and its addresses;
(b) Statement of the fact of and the cause of the debtor's insolvency or inability to
pay its obligations as they become due;
(c) The specific relief sought pursuant to this Act;
(d) The grounds upon which the petition is based;
(e) Other information that may be required under this Act depending on the form
of relief requested;
xxx
The petition shall be verified to establish the insolvency of the debtor and the
viability of its rehabilitation, and include, whether as an attachment or as part of
the body of the petition, as a minimum the following:
xxx
(f) Schedule of the debtor's debts and liabilities including a list of creditors with
their addresses, amounts of claims and collaterals, or securities, if any;
(g) An inventory of all its assets including receivables and claims against third
parties;
(h) A Rehabilitation Plan;
(i) The names of at least three (3) nominees to the position of rehabilitation
receiver; and
(j) Other documents required to be filed with the petition pursuant to this Act and
the rules of procedure as may be promulgated by the Supreme Court.
Involuntary Proceedings
Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. –
 Any creditor or group of creditors
 with a claim of, or the aggregate of whose claims is, at least One Million Pesos
(Php1,000,000.00) or
 at least twenty-five percent (25%) of the subscribed capital stock or partners'
contributions, whichever is higher,
may initiate involuntary proceedings against the debtor by filing a petition for
rehabilitation with the court if:
(a) there is no genuine issue of fact on law on the claim/s of the petitioner/s, and
that the due and demandable payments thereon have not been made for at least
sixty (60) days or that the debtor has failed generally to meet its liabilities as
they fall due; or
(b) a creditor, other than the petitioner/s, has initiated foreclosure proceedings
against the debtor that will prevent the debtor from paying its debts as they
become due or will render it insolvent.
PRE-NEGOTIATED REHABILITATION
PETITION BY DEBTOR
Section 76. Petition by Debtor. –
An insolvent debtor, by itself or jointly with any of its creditors, may file
a verified petition with the court for the approval of a pre-negotiated
Rehabilitation Plan which has been endorsed or approved by creditors
holding at least two-thirds (2/3) of the total liabilities of the debtor,
including secured creditors holding more than fifty percent (50%) of the
total secured claims of the debtor and unsecured creditors holding more
than fifty percent (50%) of the total unsecured claims of the debtor.
PETITION BY DEBTOR
Section 76. Petition by Debtor. –
The petition shall include as a minimum:
(a) a schedule of the debtor's debts and liabilities;
(b) an inventory of the debtor's assets;
(c) the pre-negotiated Rehabilitation Plan, including the names of at least three
(3) qualified nominees for rehabilitation receiver; and
(d) a summary of disputed claims against the debtor and a report on the
provisioning of funds to account for appropriate payments should any such claims
be ruled valid or their amounts adjusted.
LIQUIDATION OF INSOLVENT
JURIDICAL DEBTORS
Voluntary Liquidation
Section 90. Voluntary Liquidation. - An insolvent debtor may apply for liquidation by
filing a petition for liquidation with the court. The petition shall be verified, shall
establish the insolvency of the debtor and shall contain, whether as an attachment or
as part of the body of the petition;
(a) a schedule of the debtor's debts and liabilities including a list of creditors with
their addresses, amounts of claims and collaterals, or securities, if any;
(b) an inventory of all its assets including receivables and claims against third parties;
and
(c) the names of at least three (3) nominees to the position of liquidator.
 If the petition or the motion, as the case may be, is sufficient in form and
substance, the court shall issue a Liquidation Order mentioned in Section 112
hereof.
Involuntary Liquidation
Section 91. Involuntary Liquidation. –
 Three (3) or more creditors,
 the aggregate of whose claims is at least either One million pesos
(Php1,000,000,00) or at least twenty-five percent (25%0 of the subscribed
capital stock or partner's contributions of the debtor, whichever is higher,
 may apply for and seek the liquidation of an insolvent debtor by filing a
petition for liquidation of the debtor with the court.
The petition shall show that:
(a) there is no genuine issue of fact or law on the claims/s of the petitioner/s,
and that the due and demandable payments thereon have not been made for at
least one hundred eighty (180) days or that the debtor has failed generally to
meet its liabilities as they fall due; and
(b) there is no substantial likelihood that the debtor may be rehabilitated.
INSOLVENCY OF INDIVIDUAL
DEBTORS
A. Suspension of Payments
Section 94. Petition. –

 An individual debtor who,
 possessing sufficient property to cover all his debts
 but foreseeing the impossibility of meeting them when they
respectively fall due,
-----may file a verified petition that he be declared in the state of
suspension of payments by the court of the province or city in which
he has resides for six (6) months prior to the filing of his petition.
He shall attach to his petition, as a minimum:
(a) a schedule of debts and liabilities;
(b) an inventory of assets; and
(c) a proposed agreement with his creditors.
(B) Voluntary Liquidation
Section 103. Application. –

 An individual debtor
 whose properties are not sufficient to cover his liabilities, and
 owing debts exceeding Five hundred thousand pesos
(Php500,000.00),
----may apply to be discharged from his debts and liabilities by filing a
verified petition with the court of the province or city in which he has
resided for six (6) months prior to the filing of such petition.
He shall attach to his petition a schedule of debts and liabilities and
an inventory of assets. The filing of such petition shall be an act of
insolvency.
(C) Involuntary Liquidation
Section 105. Petition; Acts of Insolvency. –

Any creditor or group of creditors
with a claim of, or with claims aggregating at least Five
hundred thousand pesos (Php500, 000.00)
----may file a verified petition for liquidation with the
court of the province or city in which the individual
debtor resides.
ACTS OF INSOLVENCY
1. Intention to depart from the Philippines to defraud
creditors;
2. Absence from the Philippines to defraud creditors;
3. Concealment of debtor to avoid legal process;
4. Concealment or removal of his property to avoid legal
process;
5. Confession of judgment in favor of any creditor to
defraud the others;
xxx
ACTS OF INSOLVENCY
xxx
6. Allowing default judgment in favor of a creditor to
defraud the others;
7. Making conveyance of his property to defraud creditors;
8. Default of a merchant or tradesman to pay his current
obligation for a period of 30 days;
9. Failure to pay money on deposit or received in a
fiduciary capacity for 30 days after demand;
10.Insufficiency of property to satisfy an execution issued
against him.
Question
The following shall be considered acts of insolvency,
except:
A. Intention to depart from the Philippines to defraud
creditors
B. Absence from the Philippines to defraud creditors
C. Concealment of debtor to avoid legal process or
concealment or removal of his property to avoid legal
process.
D. For 30 days after demand, he has paid money on
deposit or received in a fiduciary capacity
Question
The following shall be considered acts of insolvency,
except:
A. Intention to depart from the Philippines to defraud
creditors
B. Absence from the Philippines to defraud creditors
C. Concealment of debtor to avoid legal process or
concealment or removal of his property to avoid legal
process.
D. For 30 days after demand, he has paid money on
deposit or received in a fiduciary capacity
Voluntary vs. Involuntary Rehabilitation
The Rehabilitation Receiver
Section 28.Who May Serve as a Rehabilitation Receiver. –

Any qualified natural or juridical person may serve as a
rehabilitation receiver.
If the rehabilitation receiver is a juridical entity, it must
designate a natural person/s who possess/es all the
qualifications and none of the disqualification’s as its
representative, it being understood that the juridical
entity and the representative/s are solidarily liable for all
obligations and responsibilities of the rehabilitation
receiver.
Section 29.Qualifications of a Rehabilitation Receiver. - The
rehabilitation receiver shall have the following minimum qualifications:
(a) A citizen of the Philippines or a resident of the Philippines in the six
(6) months immediately preceding his nomination;
(b) Of good moral character and with acknowledged integrity, impartiality
and independence;
(c) Has the requisite knowledge of insolvency and other relevant
commercial laws, rules and procedures, as well as the relevant training
and/or experience that may be necessary to enable him to properly
discharge the duties and obligations of a rehabilitation receiver; and
(d)Has no conflict of interest:
Provided, That such conflict of interest may be waived, expressly or
impliedly, by a party who may be prejudiced thereby.
Section 31.Powers, Duties and Responsibilities of the Rehabilitation

Receiver. –
The rehabilitation receiver shall be deemed an officer of the court
with the:
1. principal duty of preserving and maximizing the value of the
assets of the debtor during the rehabilitation proceedings,
2. determining the viability of the rehabilitation of the debtor,
3. preparing and recommending a Rehabilitation Plan to the court,
and
4. implementing the approved Rehabilitation Plan
OUT-OF-COURT OR INFORMAL RESTRUCTURING
AGREEMENTS OR REHABILITATION PLANS
Section 84. Minimum Requirements of Out-of-Court or Informal Restructuring
Agreements and Rehabilitation Plans. - For an out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan to qualify under this
chapter, it must meet the following minimum requirements:
(a) The debtor must agree to the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan;
(b) It must be approved by creditors representing at least sixty-seven (67%) of
the secured obligations of the debtor;
(c) It must be approved by creditors representing at least seventy-five
percent (75%) of the unsecured obligations of the debtor; and
(d) It must be approved by creditors holding at least eighty-five percent (85%)
of the total liabilities, secured and unsecured, of the debtor.
STANDSTILL PERIOD
Section 85. Standstill Period. - A standstill period that may be agreed upon by the
parties pending negotiation and finalization of the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan contemplated herein shall
be effective and enforceable not only against the contracting parties but also
against the other creditors:
Provided, That
(a) such agreement is approved by creditors representing more than fifty percent
(50%) of the total liabilities of the debtor;
(b) notice thereof is publishing in a newspaper of general circulation in the
Philippines once a week for two (2) consecutive weeks; and
(c) The standstill period does not exceed one hundred twenty (120) days from the
date of effectivity.
The notice must invite creditors to participate in the negotiation for out-of-court
rehabilitation or restructuring agreement and notify them that said agreement will
be binding on all creditors if the required majority votes prescribed in Section 84
of this Act are met.
CRAM DOWN EFFECT
Section 86. Cram Down Effect. - A restructuring/workout agreement or
Rehabilitation Plan that is approved pursuant to an informal workout
framework referred to in this chapter shall have the same legal effect as
confirmation of a Plan under Section 69 hereof. The notice of the
Rehabilitation Plan or restructuring agreement or Plan shall be published
once a week for at least three (3) consecutive weeks in a newspaper of
general circulation in the Philippines.
The Rehabilitation Plan or restructuring agreement shall take effect upon the
lapse of fifteen (15) days from the date of the last publication of the notice
thereof.
69.EFFECT OF CONFIRMATION OF THE
REHABILITATION PLAN
Section 69.Effect of Confirmation of the Rehabilitation Plan, - The confirmation
of the Rehabilitation Plan by the court shall result in the following:
(a) The Rehabilitation Plan and its provisions shall be binding upon the debtor and
all persons who may be affected by it, including the creditors, whether or not such
persons have participated in the proceedings or opposed the Rehabilitation Plan or
whether or not their claims have been scheduled;
(b) The debtor shall comply with the provisions of the Rehabilitation Plan and shall
take all actions necessary to carry out the Plan;
(c) Payments shall be made to the creditors in accordance with the provisions of
the Rehabilitation Plan;
69.EFFECT OF CONFIRMATION OF THE
REHABILITATION PLAN
Section 69.Effect of Confirmation of the Rehabilitation Plan, - The
confirmation of the Rehabilitation Plan by the court shall result in the
following:
Xxx
(d) Contracts and other arrangements between the debtor and its creditors
shall be interpreted as continuing to apply to the extent that they do not
conflict with the provisions of the Rehabilitation Plan;
(e) Any compromises on amounts or rescheduling of timing of payments by the
debtor shall be binding on creditors regardless of whether or not the Plan is
successfully implement; and
(f) Claims arising after approval of the Plan that are otherwise not treated by
the Plan are not subject to any Suspension Order.
SUSPENSION OF PAYMENTS, DEFINITION
 It refers to the postponement by court order, of the

payment of debts of one who, while possessing
sufficient property to cover his debts, foresees the
impossibility of meeting them when they respectively
fall due.
INSOLVENCY FROM SUSPENSION OF
PAYMENT
Suspension of Payment Insolvency
The debtor has sufficient property The debtor does not have sufficient
but he foresees the impossibility property to pay his debts
of meeting his debts as they fall
due
The purpose is to suspend or delay The purpose is to discharge the

payment of debts debtor from the payment of certain
debts
The amount of indebtedness is not Some of the creditors may receive
affected less than their credits
The number of creditors is In case of involuntary insolvency,

immaterial three or more creditors are
required
INSOLVENCY FROM SUSPENSION OF
PAYMENT
Suspension of Payment Liquidation
The debtor has sufficient property The debtor does not have sufficient
but he foresees the impossibility of property to pay his debts/insolvent
meeting his debts as they fall due
The purpose is to suspend or delay The purpose is to discharge the debtor
payment of debts from the payment of certain debts
Applies only to individual debtors Both juridical and individual debtors

Filed by he debtor Initiate by debtor in voluntary
liquidation; or filed by creditors in case
of involuntary liquidation
No minimum amount of liabilities Voluntary liquidation – debt >P 500,000

Involuntary – Claim/s must be at least
P500,000
SUSPENSION OF PAYMENT
What is the object of suspension of payment?

The object of suspension of payment is to seek
postponement of the payment of debts in order to provide
the debtor a given period to convert some of his
properties to cash.
What is the financial condition of the applicant when he

filed the petition for suspension of payment?
 The debtor has sufficient property to cover all his debts
but there is impossibility to meet them when they
respectively fall due.
 Where do you file a petition for suspension of payment?

 The petition is filed in the court of the province or of the
city where the debtor resided for six months next
preceding the filing of his petition.
What are the effects of the filing of a petition for
suspension of payment?
1. No disposition in any manner of his property may be
made by the petitioner except insofar as concerns the
ordinary operations of commerce or of industry in which
he is engaged;
2. No payments may be made by the petitioner except in
the ordinary course of his business or industry; and
3. Upon request to the court, all pending executions against
the debtor shall be suspended except execution against
property especially mortgaged.
INSOLVENCY, DEFINITION
 It is a state where a person’s liability is greater than his

assets; the inability of a person to pay his debts as they
become due in the ordinary course of his business.
Distinguish actual insolvency from
technical insolvency.
There is actual insolvency when the corporation’s
assets are not enough to cover its liabilities, while
technical insolvency exists when the corporation has
enough assets but it foresees its inability to pay its
obligations for more than one year from the filing of the
petition. [1]
[1] PNB vs. Court of Appeals, 576 SCRA 537, January 7, 2009.
INVOLUNTARY VS. VOLUNTARY LIQUIDATION
OF INSOLVENT INDIVIDUAL DEBTOR
Involuntary Voluntary
Creditor must prove the act of Insolvency need not be alleged and
insolvency/ Debtor must have proved/ No need for commissions of acts
committed one or more acts of of insolvency
insolvency
Claims/credits must be at least P500,000 Debts exceed P500,000
Filed by creditor/s Filed by the debtor
Petition must be accompanied by a Bond is not required
bond
Liquidation order is issued after trial Liquidation order may be issued w/o
trial if sufficient in form and substance
PROVISIONS COMMON TO LIQUIDATION
IN INSOLVENCY OF INDIVIDUAL
AND JURIDICAL DEBTORS
(A) The Liquidation Order
Section 112. Liquidation Order. - The Liquidation Order shall:
(a) declare the debtor insolvent;
(b) order the liquidation of the debtor and, in the case of a juridical debtor,
declare it as dissolved;
(c) order the sheriff to take possession and control of all the property of the
debtor, except those that may be exempt from execution;
(d) order the publication of the petition or motion in a newspaper of general
circulation once a week for two (2) consecutive weeks;
(e) direct payments of any claims and conveyance of any property due the debtor
to the liquidator;
(f) prohibit payments by the debtor and the transfer of any property by the debtor;
(A) The Liquidation Order
Section 112. Liquidation Order. - The Liquidation Order shall:
xxx
(g) direct all creditors to file their claims with the liquidator within the period
set by the rules of procedure;
(h) authorize the payment of administrative expenses as they become due;
(i) state that the debtor and creditors who are not petitioner/s may submit
the names of other nominees to the position of liquidator; and
(j) set the case for hearing for the election and appointment of the liquidator,
which date shall not be less than thirty (30) days nor more than forty-five (45)
days from the date of the last publication.
Effects of the Liquidation Order
Section 113. Effects of the Liquidation Order. - Upon the issuance of the
Liquidation Order:
(a) the juridical debtor shall be deemed dissolved and its corporate or
juridical existence terminated;
(b) legal title to and control of all the assets of the debtor, except those
that may be exempt from execution, shall be deemed vested in the
liquidator or, pending his election or appointment, with the court;
(c) all contracts of the debtor shall be deemed terminated and/or
breached, unless the liquidator, within ninety (90) days from the date of
his assumption of office, declares otherwise and the contracting party
agrees;
Effects of the Liquidation Order
Section 113. Effects of the Liquidation Order. - Upon the issuance of the
Liquidation Order:
xxx
(d) no separate action for the collection of an unsecured claim shall be
allowed. Such actions already pending will be transferred to the Liquidator
for him to accept and settle or contest. If the liquidator contests or
disputes the claim, the court shall allow, hear and resolve such contest
except when the case is already on appeal. In such a case, the suit may
proceed to judgment, and any final and executor judgment therein for a
claim against the debtor shall be filed and allowed in court; and
(e) no foreclosure proceeding shall be allowed for a period of one hundred
eighty (180) days.
ANTI-MONEY LAUNDERING
LAW
(R.A. 9160, as amended by R.A. 9194)

 Q: What is the policy for the enactment of the Anti‐Money Laundering Act?
 A: To protect and preserve the integrity and confidentiality of bank accounts
and to ensure that the Philippines shall not be used as a money laundering
site for the proceeds of any unlawful activity. (Sec. 1 R.A. 9160, as amended)
POLICY OF THE LAW
1. To protect and preserve the integrity and confidentiality

of bank accounts; and,
2. To ensure that the Philippines shall not be used as a
money laundering site for the proceeds of any unlawful
activity. (Sec. 2)
Definition of Money-Laundering
“Money laundering is a crime whereby the proceeds of an

unlawful activity AS HEREIN DEFINED are transacted,
thereby making them appear to have originated from
legitimate sources. Sec. 4.1 of Republic Act 9160
II. Who May Be Liable
Money laundering may be committed by:
(a) any person knowing that any monetary instrument or property
represents, involves, or relates to, the proceeds of any unlawful
activity, transacts or attempts to transact said monetary instrument
or property or
(b) any person knowing that any monetary instrument or property
involves the proceeds of any unlawful activity, performs or fails to
perform any act as a result of which he facilitates the offense of
money laundering and
(c) any person knowing that any monetary instrument or property is
required under this Act to be disclosed and filed with the Anti-Money
Laundering Council (AMLC), fails to do so.. (Section 4, Republic Act
No. 9160, as amended)
What Constitutes “Unlawful Activity”
 "Unlawful activity" refers to any act or omission or series or
combination thereof involving or having direct relation to the
following: UNLAWFUL ACTIVITIES OR PREDICATE CRIMES
(a) kidnapping for ransom under Article 267 of Act No. 3815, otherwise
known as the Revised Penal Code, as amended;
(b) violation of Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of

Republic Act No. 9165, otherwise known as the Comprehensive
Dangerous Drugs Act of 2002;
(c) graft and corruption under Section 3 paragraphs B, C, E, G, H and I

of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft
and Corrupt Practices Act;
(d) plunder under Republic Act No. 7080, as amended;

What Constitutes “Unlawful Activity”, cont’d.
 "Unlawful activity" refers to any act or omission or series or combination
thereof involving or having direct relation to the following:
(e) robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and
302 of the Revised Penal Code, as amended;
(f) “jueteng” and “masiao’ punished as illegal gambling under Presidential

Decree No. 1602;
(g) piracy on the high seas under the Revised Penal Code, as amended and
Presidential Decree No. 532;
(h) qualified theft under Article 310 of the Revised Penal Code, as
amended;
following:
(i) swindling under Article 315 of the Revised Penal Code, as

amended;
(j) smuggling under Republic Act Nos. 455 and 1937;
(k) offenses related to e-commerce under Republic Act No. 8792,

otherwise known as the Electronic Commerce Act of 2000;
(l) hijacking and other violations under Republic Act No. 6235;
following:
(m) destructive arson and murder, as defined under the Revised

Penal Code, as amended, including those perpetrated by terrorists
against non-combatant persons and similar targets;
(n) fraudulent practices and other violations under Republic Act No.
8799, otherwise known as the Securities Regulation Code of 2000;
and
(o) felonies or offenses of a similar nature that are punishable under

the penal laws of other countries. (Section 3, Republic Act No. 9160,
as amended)
UNLAWFUL ACTIVITIES OR PREDICATE
CRIMES
Q: What are considered as unlawful 10. Smuggling
activities or predicate crimes under AMLA?
11. Violations under the Electronic
A: These refer to any act or omission or Commerce Act of 2000
series or combination thereof involving or
having direct relation to the following: 12. Hijacking, destructive arson, and
murder, including those perpetrated by
1. Kidnapping for ransom terrorists
2. Drug trafficking and related offenses 13. against non‐combatant persons and
similar targets
3. Graft and corrupt practices
14. Fraudulent practices and other
4. Plunder violations under the SRC of 2000;
5. Robbery and Extortion 15. Felonies or offenses of a similar nature
6. Jueteng and Masiao that are punishable under the penal laws
of other countries. (Sec. 3(i) R.A. 9160,
7. Piracy as amended)
8. Qualified theft
9. Swindling
Problem
Q: Alvin is jobless but is reputed to be a jueteng operator. He has never been

charged or convicted of any crime. He maintains several bank accounts
amounting to P100 Million. AMLC charged Alvin with violation of the
Anti‐Money Laundering Law. Can Alvin move to dismiss the case on the ground
that he has no criminal record?
A: No. The contention of Alvin is not tenable because under AMLA, "money
laundering crime" is committed when the proceeds of an "unlawful activity," like
jueteng operations, are made to appear as having originated from legitimate
sources.
The money laundering crime is separate from the unlawful activity of being a
jueteng operator, and requires no previous conviction for the unlawful activity.
(Sec. 3, AMLA)
Problem
Q: In disclosing Alvin's bank accounts to the AMLC, did the bank

violate any law?
A: No, the bank did not violate any law. The bank being specified as a
"covered institution" under the Anti‐Money Laundering Law, is obliged to
report to the AMLC covered and suspicious transactions, without thereby
violating any law. This is one of the exceptions to the Secrecy of Bank
Deposit Act.
DEFINITIONS
 Covered Transaction is a transaction in cash or other
equivalent monetary instrument involving total amount in
excess of P500,000 within one banking day.
 *P500,000 is the threshold/controlling

COVERED TRANSACTIONS
Q: What are Covered Transactions?

A:
1. These are single transactions in cash or other equivalent monetary
instrument involving a total amount in excess of 500,000.00 within 1
banking day.
2. A transaction exceeding P1M in cases of jewelry dealers, dealers in
precious metals and dealers in precious stones.
Note: These transactions are required to be reported to the Anti‐Money
Laundering Council.
DEFINITIONS
Suspicious Transaction are transactions, regardless of amount, where
any of the following circumstances exists:
1. There is no underlying legal or trade obligation, purpose or economic
justification;
2. The client is not properly identified;
3. The amount involved is not commensurate with the business or
financial capacity of the client;
4. Taking into account all known circumstances, it may be perceived
that the client’s transaction is structured in order to avoid being the
subject of reporting requirements under the ACT;
DEFINITIONS
Suspicious Transaction are transactions, regardless of amount, where
any of the following circumstances exists:
xxx
5. Any circumstance relating to the transaction which is observed to
deviate from the profile of the client and/or the client’s past
transactions with the covered institution;
6. The transaction is in any way related to an unlawful activity or any
money laundering activity or offense under this ACT that is about to be,
is being or has been committed; or
7. Any transaction that is similar, analogous or identical to any of the
foregoing.
Creation of the Anti-Money Laundering
Council
Republic Act No. 9160, as amended created the Anti-Money Laundering
Council (AMLC) composed of the:
1. Governor of the Bangko Sentral ng Pilipinas as chairman
Members:
1. Commissioner of the Insurance Commission and the
2. Chairman of the Securities and Exchange Commission.
Council
The AMLC was given the following functions:
(a) to require and receive covered or suspicious transaction reports from covered
institutions;
(b) to issue orders addressed to the appropriate Supervising Authority or the covered
institution to determine the true identity of the owner of any monetary instrument or
property subject of a covered transaction or suspicious transaction report or request
for assistance from a foreign State, or believed by the Council, on the basis of
substantial evidence, to be, in whole or in part, wherever located, representing,
involving, or related to, directly or indirectly, in any manner or by any means, the
proceeds of an unlawful activity.
(c) to institute civil forfeiture proceedings and all other remedial proceedings through
the Office of the Solicitor General;
Council
(d) to cause the filing of complaints with the Department of Justice or the
Ombudsman for the prosecution of money laundering offenses;
(e) to investigate suspicious transactions and covered transactions deemed suspicious
after an investigation by AMLC, money laundering activities, and other violations of
this Act;
(f) to apply before the Court of Appeals, ex parte, for the freezing of any monetary
instrument or property alleged to be the proceeds of any unlawful activity as defined
in Section 3(i) hereof;
(g) to implement such measures as may be necessary and justified under this Act to
counteract money laundering;
Council
(h) to receive and take action in respect of, any request from foreign states for
assistance in their own anti-money laundering operations provided in this Act;
(i) to develop educational programs on the pernicious effects of money

laundering, the methods and techniques used in money laundering, the viable
means of preventing money laundering and the effective ways of prosecuting and
punishing offenders;
Council
((j) to enlist the assistance of any branch, department, bureau, office, agency or
instrumentality of the government, including government-owned and -controlled
corporations, in undertaking any and all anti-money laundering operations, which
may include the use of its personnel, facilities and resources for the more
resolute prevention, detection and investigation of money laundering offenses
and prosecution of offenders; and
(k) to impose administrative sanctions for the violation of laws, rules, regulations
and orders and resolutions issued pursuant thereto.
(Section 7, Republic Act No. 9160, as amended)
COVERED INSTITUTIONS
1. Banks
2. Non‐banks
3. Quasi‐banks
4. Trust entities
5. All other institutions, their subsidiaries and affiliates supervised
or regulated by BSP
6. Insurance companies and all other institutions supervised and
regulated by the Insurance Commission
7. Securities dealers, brokers, salesmen, investment houses and
other similar entities managing securities or rendering services
as investment agent, advisor, or consultant
xxx
COVERED INSTITUTIONS
Xxx
8. Mutual funds, closed‐end investment companies, common
trust funds, pre‐need companies and other similar entities
9. Foreign exchange, corporations, money changers, money
payments, remittance and transfer companies and other similar
entities; and
10. Other entities administering or otherwise dealing in
currency, commodities or financial derivatives based thereon,
valuable objects, cash substitutes, and other similar monetary
instruments or property supervised or regulated by SEC. (Sec. 3
R.A. 9160, as amended)
OBLIGATION OF COVERED INSTITUTIONS
Q: What is the obligation of the covered institutions?

A: They are mandated by the AMLA to submit covered and
suspicious transaction reports to the AMLC.
OBLIGATIONS OF COVERED INSTITUTIONS -
Prevention of Money Laundering
 Customer Identification - Covered institutions shall

establish and record the true identity of its clients
based on official documents.
Question
Under the Anti-Money Laundering Law, a covered

institution is required to maintain a system of verifying
the true identity of their clients as well as persons
purporting to act on behalf of
(A) those doing business with such clients.

(B) unknown principals.
(C) the covered institution.
(D) such clients.
Question
Under the Anti-Money Laundering Law, a covered

institution is required to maintain a system of verifying
the true identity of their clients as well as persons
purporting to act on behalf of
(A) those doing business with such clients.

(B) unknown principals.
(C) the covered institution.
(D) such clients.
 The provisions of existing laws to the contrary

notwithstanding, anonymous accounts, accounts under
fictitious names, and all other similar accounts shall be
absolutely prohibited. Peso and foreign currency non-
checking numbered accounts shall be allowed. The BSP
may conduct annual testing solely limited to the
determination of the existence and true identity of the
owners of such accounts. (Section 9, Republic Act No.
9160, as amended)
 Record Keeping – All records of all transactions of

covered institutions shall be maintained and safely
stored for five (5) years from the date of transactions.
With respect to closed accounts, the records on
customer identification, account files and business
correspondence, shall be preserved and safety stored
for at least five (5) years from the dates when they
were closed. (Section 9, Republic Act No. 9160, as
amended)
 Reporting of Covered Transactions. – Covered

institutions shall report to the AMLC all covered
transactions within five (5) working days from
occurrence thereof, unless the Supervising Authority
concerned prescribes a longer period not exceeding
fifteen daysten (15) working days. (Section 9, Republic
Act No. 9160, as amended)

 Reporting of covered or suspicious transactions to the AMLC by

covered institutions and their officers and employees shall not be
considered as a violation of Republic Act No. 1405, also known as
the Bank Secrecy Act, as amended, Republic Act No. 6426,
otherwise known as the “Foreign Currency Deposit Act of the
Philippines,” as amended, Republic Act No. 8791, also known as
the “General Banking Law of 2000” and other similar laws.
(Section 9, Republic Act No. 9160, as amended)

 Any person who has made a covered or suspicious transaction

report in the regular performance of his duties in good faith,
whether or not such reporting results in any criminal prosecution
under this Act or any other law shall not be subject to any
administrative, criminal or civil proceedings. (Section 9, Republic
Act No. 9160, as amended)
 However, covered institutions, their officers and employees are

prohibited from communicating, directly or indirectly, in any
manner or by any means, to any person or entity such as the
media, the fact that a covered or suspicious transaction report was
made, the contents thereof, or any other information in relation
thereto.
 Neither may such reporting be published or aired in any manner or
form by mass media, electronic mail, or other similar devices. In
case of violation thereof, the concerned officer and employee of
the covered institution or media shall be criminally liable. (Section
9, Republic Act No. 9160, as amended)
AUTHORITY TO INQUIRE INTO BANK
DEPOSITS
Q: When may the Anti‐Money Laundering Council (AMLC) inquire into

bank deposits?
GR: Only upon order of any competent court in cases of violation of R.A.
9160, as amended.
XPN: No need of court order in cases of Kidnapping, Hijacking, Drugs,

Arson, Murder. (Sec. 11 R.A. 9160, as amended)
Covered Institutions
1. One of these institutions is not covered:
a) Banks, non-banks, quasi-banks, trust entities and all other institutions and
their subsidiaries and affiliates supervised by the Bangko Sentral ng
Pilipinas.
b) Insurance companies and all other institutions supervised by the Insurance
Commission.
c) Securities dealers, brokers, salesman, investment houses, and other
similar entities managing securities or rendering services as investment
agent, advisor or consultant.
d) Real estate dealers.
a) Banks, non-banks, quasi-banks, trust entities and all other institutions and
their subsidiaries and affiliates supervised by the Bangko Sentral ng
Pilipinas.
b) Insurance companies and all other institutions supervised by the Insurance
Commission.
c) Securities dealers, brokers, salesman, investment houses, and other
similar entities managing securities or rendering services as investment
agent, advisor or consultant.
d) Real estate dealers.
a) Mutual funds, close-end investment companies, common-trust

funds, pre-need companies and other similar entities.
b) Foreign exchange corporations, money changers, money payment,
remittance and transfer companies and other similar entities.
c) Other entities dealing in currency, commodities or financial
derivatives, valuable objects, cash substitutes and other similar
monetary instruments or property regulated by the Securities and
Exchange Commission.
d) Car dealers.
a) Mutual funds, close-end investment companies, common-trust

funds, pre-need companies and other similar entities.
b) Foreign exchange corporations, money changers, money payment,
remittance and transfer companies and other similar entities.
c) Other entities dealing in currency, commodities or financial
derivatives, valuable objects, cash substitutes and other similar
monetary instruments or property regulated by the Securities and
Exchange Commission.
d) Car dealers.
Obligations of Covered Institutions
3. One of these is not an obligation of covered institutions:
a) To establish and record the true identities of their clients based on

official document.
b) To maintain and store safely all records of all their transactions for
five years from the dates of the transactions.
c) To report to the Anti-Money Laundering Council all covered
transactions and suspicious transactions.
d) To automatically furnish the Anti-Money Laundering Council records
of suspicious transactions.
Obligations of Covered Institutions
3. One of these is not an obligation of covered institutions:
a) To establish and record the true identities of their clients based on

official document.
b) To maintain and store safely all records of all their transactions for
five years from the dates of the transactions.
c) To report to the Anti-Money Laundering Council all covered
transactions and suspicious transactions.
d) To automatically furnish the Anti-Money Laundering Council records
of suspicious transactions.
Suspicious Transactions
4. One of these transactions is not suspicious:
a) There is no underlying legal or trade obligations, purpose or

economic justification.
b) The client is not properly identified.
c) The amount involved is not commensurate with the business or
financial capacity of the client.
d) The client is rushing the transactions.
a) There is no underlying legal or trade obligations, purpose or

economic justification.
b) The client is not properly identified.
c) The amount involved is not commensurate with the business or
financial capacity of the client.
d) The client is rushing the transactions.
a) It may be perceived that the transaction is structured to avoid being

the subject of reporting requirements.
b) Any circumstance which deviates from the profile of the client or the
client’s past transactions with the covered institution.
c) The transaction is related to an unlawful activity.
d) A document is lacking.
a) It may be perceived that the transaction is structured to avoid being

the subject of reporting requirements.
b) Any circumstance which deviates from the profile of the client or the
client’s past transactions with the covered institution.
c) The transaction is related to an unlawful activity.
d) A document is lacking.
Definition of Money Laundering
6. Money laundering is a crime whereby the proceeds of an unlawful
activity are transacted, thereby making them appear to have
originated from legitimate sources. One of these is not guilty of
money laundering:
a) A person knowing that any monetary instrument or property relates to
the proceeds of any unlawful activity transacts it.
b) A person knowing that any monetary instrument or property involves
the proceeds of any unlawful activity performs or fails to perform any
act as a result of which he facilitates its transaction.
c) A person knowing that any monetary instrument or property is
required to be disclosed and filed with the Anti-Money Laundering
Council, fails to do so.
d) A person who performs an operation to change the appearance of a
person suspected to be engaged in money laundering.
Definition of Money Laundering
6. Money laundering is a crime whereby the proceeds of an unlawful
activity are transacted, thereby making them appear to have
originated from legitimate sources. One of these is not guilty of
money laundering:
a) A person knowing that any monetary instrument or property relates to
the proceeds of any unlawful activity transacts it.
b) A person knowing that any monetary instrument or property involves
the proceeds of any unlawful activity performs or fails to perform any
act as a result of which he facilitates its transaction.
c) A person knowing that any monetary instrument or property is
required to be disclosed and filed with the Anti-Money Laundering
Council, fails to do so.
d) A person who performs an operation to change the appearance of a
person suspected to be engaged in money laundering.
Predicate Crimes
7. One of these is not a predicate crime:
a) Kidnapping for ransom

b) Sections 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15 or 16 of the
Comprehensive Dangerous Drugs Act
c) Section 3, paragraphs B, C, D, E, G, H and I of the Anti-Graft and
Corrupt Practices Act
d) Theft of motor vehicles
Predicate Crimes
a) Kidnapping for ransom

b) Sections 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15 or 16 of the
Comprehensive Dangerous Drugs Act
c) Section 3, paragraphs B, C, D, E, G, H and I of the Anti-Graft and
Corrupt Practices Act
d) Theft of motor vehicles
Predicate Crimes
a) Plunder
b) Robbery and extortion
c) Jueteng and masiao
d) Sale of counterfeit digital video disks
Predicate Crimes
a) Plunder
b) Robbery and extortion
c) Jueteng and masiao
d) Sale of counterfeit digital video disks
Predicate Crimes
a) Piracy on the high seas

b) Qualified theft under Article 310 of the Revised Penal Code
c) Swindling under Article 315 of the Revised Penal Code
d) Anti-fencing
Predicate Crimes
a) Piracy on the high seas

b) Qualified theft under Article 310 of the Revised Penal Code
c) Swindling under Article 315 of the Revised Penal Code
d) Anti-fencing
Predicate Crimes

a) Smuggling
b) Violation of the Electronic Commerce Act
c) Hijacking, destructive arson and murder
d) Counterfeiting bank notes
Predicate Crimes

a) Smuggling
b) Violation of the Electronic Commerce Act
c) Hijacking, destructive arson and murder
d) Counterfeiting bank notes
Predicate Crimes
12. One of these is a predicate crime:
a) Fraudulent practices under the Securities Regulations Code
b) Tax evasion under the National Internal Revenue Code
c) Malversation
d) Destruction of official documents.
Predicate Crimes
12. One of these is a predicate crime:
a) Fraudulent practices under the Securities Regulations Code
b) Tax evasion under the National Internal Revenue Code
c) Malversation
d) Destruction of official documents.
Important Functions of Anti-Money
Laundering Council
13. One of these statements is not correct:
a) To require and receive covered or suspicious transaction reports from covered
institutions.
b) To issue orders to the Supervising Authority or covered institution to
determine the true identity of the owner of any monetary investment or
property subject of a covered transaction or suspicious transaction report or
request for assistance from a foreign state, or believed on the basis of
substantial evidence to be the proceeds of an unlawful activity.
c) To institute civil forfeiture proceedings and all other remedial proceedings
through the Office of the Solicitor General.
d) To order the closure of any establishment engaged in money laundering.
Laundering Council
a) To require and receive covered or suspicious transaction reports from covered
institutions.
b) To issue orders to the Supervising Authority or covered institution to
determine the true identity of the owner of any monetary investment or
property subject of a covered transaction or suspicious transaction report or
request for assistance from a foreign state, or believed on the basis of
substantial evidence to be the proceeds of an unlawful activity.
c) To institute civil forfeiture proceedings and all other remedial proceedings
through the Office of the Solicitor General.
d) To order the closure of any establishment engaged in money laundering.
Laundering Council
14. One of these is not an important function of the Anti-Money Laundering

Council:
a) To cause the filing of complaints with the Department of Justice or the

Ombudsman for the prosecution of money laundering offense.
b) To investigate suspicious transactions and covered transactions deemed
suspicious after an investigations by AMLC, money laundering activities, and
other violations of the law.
c) To apply before the Court of Appeals ex parte for the freezing of any monetary
instrument or property alleged to be proceeds of any unlawful activity.
d) To conduct an administrative investigation of any public officer for violation of
the Anti-Money Laundering Act.
Laundering Council
14. One of these is not an important function of the Anti-Money Laundering

Council:
a) To cause the filing of complaints with the Department of Justice or the

Ombudsman for the prosecution of money laundering offense.
b) To investigate suspicious transactions and covered transactions deemed
suspicious after an investigations by AMLC, money laundering activities, and
other violations of the law.
c) To apply before the Court of Appeals ex parte for the freezing of any monetary
instrument or property alleged to be proceeds of any unlawful activity.
d) To conduct an administrative investigation of any public officer for violation of
the Anti-Money Laundering Act.
Freezing of Property and Examination of
Bank Deposit
a) The Court of Appeals, upon application ex parte by the Anti-Money Laundering
Council, and after determination that probable cause exists that any monetary
instrument or property is related to an unlawful acting may issue a freeze order for
twenty days unless extended by it.
b) The Anti-Money Laundering Council may inquire into any deposit or investment
with any bank or financial institution upon order of a court in case of violation of
this Act if there is probable cause that it is related to an unlawful activity or a
money laundering activity but no court order is required in cases involving
unlawful activities in Section 3 (i) (1) (2) and (12), i.e. kidnapping for ransom,
violation of the Comprehensive Dangerous Drugs Act, and hijacking, destructive
arson and murder.
c) The court order cannot be issued ex parte.
d) The Bangko Sentral ng Pilipinas may not inquire into any deposit or investment
with any bank or financial institution in the course of a periodic or special
examination.
Freezing of Property and Examination of
Bank Deposit
a) The Court of Appeals, upon application ex parte by the Anti-Money Laundering
Council, and after determination that probable cause exists that any monetary
instrument or property is related to an unlawful acting may issue a freeze order for
twenty days unless extended by it.
b) The Anti-Money Laundering Council may inquire into any deposit or investment
with any bank or financial institution upon order of a court in case of violation of
this Act if there is probable cause that it is related to an unlawful activity or a
money laundering activity but no court order is required in cases involving
unlawful activities in Section 3 (i) (1) (2) and (12), i.e. kidnapping for ransom,
violation of the Comprehensive Dangerous Drugs Act, and hijacking, destructive
arson and murder.
c) The court order cannot be issued ex parte.
d) The Bangko Sentral ng Pilipinas may not inquire into any deposit or investment
with any bank or financial institution in the course of a periodic or special
examination.
SECRECY IN BANK
DEPOSITS (R.A. 1405)
PURPOSE
Q: What is the purpose?
A:
1. To encourage deposit in banking institutions; and
2. To discourage private hoarding so that banks may lend
such funds and assist in the economic development of the
country.
PROHIBITED ACTS
Q: What are the prohibited acts under the law?
1. Examination/inquiry/looking into all deposits of

whatever nature with banks or banking institutions in
the Philippines (including investment in bonds issued by
the government) by any person, government official or
office (Sec. 2)
2. Disclosure by any official or employee of any banking
institution to any authorized person of any information
concerning said deposit (Sec. 3)
DEPOSITS COVERED
Q: What are the kinds of deposits covered?
A:
1. All deposits of whatever nature with banks or banking
institutions found in the Philippines; or
2. Investments in bonds issued by the Philippine
government, its branches, and institutions. (Sec. 2, R.A.
1405)
DEPOSITS
 Deposits - refer to money or funds placed with a bank

that can be withdrawn on the depositor’s order or
demand, such as deposit accounts in the form of
savings, current and time deposits.
INVESTMENTS IN GOVERNMENT BONDS
 Investments in Government Bonds refer to investments in

bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities.
 Government bonds are debt securities which are
unconditional obligations of the State, and backed by its
full taxing power.
 Government bonds include treasury bills, treasury notes,
retail treasury bonds, dollar linked peso notes, and other
risk-free bonds.
DEPOSITS COVERED
Q: Are trust funds covered by the term “deposit?”
A: Yes, the money deposited under the trust agreement is intended not
merely to remain with the bank but to be invested by it elsewhere. To
hold that this type of account is not protected by R.A. 1405 would
encourage private hoarding of funds that could otherwise be invested by
banks in other ventures, contrary to the policy behind the law. (Ejercito
v. Sandiganbayan, G.R. No. 157294‐95, Nov. 30, 2006)
Note: Despite such pronouncement that trust funds are considered
deposits, trust funds remain not covered by PDIC.
Related Laws
The General Banking Law prohibits bank directors, officers,

employees or agents from disclosing to any unauthorized person,
without order of a competent court, any information relative to funds
or properties belonging to private individuals, corporations, or any
other entity in the custody of the bank. (Sec. 55[b], Rep. Act No.
8791)
The Thrift Banks Act and the Rural Banks Act likewise prohibit any
bank officer, employee or agent from disclosing any information on
such funds or properties. (Sec. 21[a][2], Rep. Act No. 7906 & Sec.
26[a][2], Rep. Act No. 7353)
DEPOSITS not COVERED
Q: Are foreign currency deposits covered by the Secrecy in Bank
Deposits (R.A. 1405)?
A: No. Foreign currency deposits are covered by R.A. 6426 otherwise
known as the Foreign Currency Act. Under the same law, all
authorized foreign currency deposits are considered of an absolutely
confidential nature and, except upon the written permission of the
depositors, in no instance shall be examined, inquired or looked into
by any person, government official, bureau or office whether judicial
or administrative private.
General Rule
All deposits of whatever nature in banks or banking

institutions in the Philippines and investments in
government bonds are absolutely confidential in nature.
(Sec. 2, Rep. Act No. 1405)
EXCEPTIONS TO COVERAGE
1. Upon the debtor’s written permission
2. In cases of Impeachment
3. Upon a competent court’s order in cases of bribery of, or
dereliction of duty by, public officials
4. In cases where money deposited or invested is the subject matter
of litigation (Dean Villanueva, Commercial Law Review)
5. In cases where a compromise of tax liability is based on the
ground of financial incapacity. (Sec. 6 (f), RA 8424)
6. In cases of Anti-Graft or Corrupt Practices Act (Sec. 8, RA 3019)
7. In cases of violation of Anti-Money Laundering Act (PNB v.
Gancayco)
8. Under Section 6 (f) of RA 8424 (National Internal Revenue Code).
Q: What are the instances where examination or disclosure of
information about deposits can be allowed?
A:
1. Upon written consent of the depositor. (Sec. 2)
2. In cases of impeachment. (Sec. 2)
3. Upon order of competent court in cases of bribery or dereliction
of duty of public officials. (Sec. 2)
4. In cases where the money deposited or invested is the subject
matter of the litigation. (Sec. 2)
EXCEPTIONS TO COVERAGE, cont’d
Q: What are the instances where examination or disclosure of
information about deposits can be allowed?
xxx
5. Upon order of the Commissioner of Internal Revenue in respect of
the bank deposits of a decedent for the purpose of determining such
decedent’s gross estate. (Sec. 6[F][1], NIRC)
6. Upon the order of the Commissioner of Internal Revenue in respect
of bank deposits of a taxpayer who has filed an application for
compromise of his tax liability by reason of financial incapacity to pay
his tax liability. (Sec. 6[f][1],NIRC)
7. In case of dormant accounts/deposits for at least 10 years under
the Unclaimed Balances Act. (Sec. 2, Act No. 3936).
Q: What are the instances where examination or disclosure of information
about deposits can be allowed?
xxx
8. When the examination is made by the BSP to insure compliance with
the AML Law in the course of a periodic or special examination
9. With court order:
 In cases of unexplained wealth under Sec. 8 of the Anti‐Graft and
Corrupt Practices Act (PNB v. Gancayco, L‐18343, Sept. 30, 1965)
 in cases filed by the Ombudsman and upon the latter’s authority to
examine and have access to bank accounts and records (Marquez v.
Desierto, GR 138569, Sept. 11, 2003)
Q: What are the instances where examination or disclosure of information
about deposits can be allowed?
xxx
10. Without court order: If the AMLC determines that a particular deposit
or investment with any banking institution is related to the following:
HK‐MAD
a. Hijacking,
b. Kidnapping,
c. Murder,
d. Destructive Arson, and
e. Violation of the Dangerous Drugs Act. (2004, 2006 Bar Question)
Q: The Law on Secrecy of Bank Deposits provides that all deposits of whatever
nature with banks or banking institutions are absolutely confidential in nature
and may not be examined, inquired or looked into by any person,
governmental official, bureau or office. However, the law provides exceptions
in certain instances. Which of the following may not be among the
exceptions?
1. in cases of impeachment
2. in cases involving bribery
3. in cases involving BIR inquiry
4. in cases of anti‐graft and corrupt practices
5. in cases where the money involved is the subject of litigation
Q: The Law on Secrecy of Bank Deposits provides that all deposits of whatever
nature with banks or banking institutions are absolutely confidential in nature
and may not be examined, inquired or looked into by any person,
governmental official, bureau or office. However, the law provides exceptions
in certain instances. Which of the following may not be among the
exceptions?
1. in cases of impeachment
2. in cases involving bribery
3. in cases involving BIR inquiry
4. in cases of anti‐graft and corrupt practices
5. in cases where the money involved is the subject of litigation
GARNISHMENT
Under Section 7 of Rule 57, as a provisional remedy, an order

of garnishment may be issued by a court including bank
accounts. (Sec 57 (d), Rules of Court).
GARNISHMENT
Q: Can the foreign currency deposit of a transient foreigner who

illegally detained and raped a minor Filipina, be garnished to satisfy
the award for damages to the victim?
A: The exemption from garnishment of foreign currency deposits under
R.A. 6426 cannot be invoked to escape liability for the damages to the
victim. The garnishment of the transient foreigner’s foreign currency
deposit should be allowed to prevent injustice and for equitable grounds.
The law was enacted to encourage foreign currency deposit and not to
benefit a wrongdoer. (Salvacion vs. Central Bank of the Philippines, G.R.
94723, August 21, 1997)
PENALTIES
Any violation of this law will subject offender upon

conviction, to an imprisonment of not more than five
years or a fine of not more than twenty thousand pesos or
both, in the discretion of the court. (Sec. 5, RA 1405).
Penalties
Violation of Republic Act No. 1405 will subject the offender, upon
conviction, to the following penalties:
(i) imprisonment of not more than five years;
(ii) fine of not more than P20,000.00; or
(iii) both imprisonment and fine.
PRESIDENTIAL DECREE No. 679 April 2,
1975
AMENDING ACT 3936, AN ACT REQUIRING BANKS, TRUST

CORPORATIONS, AND BUILDING AND LOAN ASSOCIATIONS, TO
TRANSFER UNCLAIMED BALANCES HELD BY THEM TO THE TREASURER
OF THE PHILIPPINES AND FOR OTHER PURPOSES.
UNCLAIMED BALANCES LAW
DEFINITIONS
"Sec. 1. "Unclaimed balances“ –
include credits or deposits of money, bullion, security or other evidence of
indebtedness of any kind, and interest thereon with
1. banks,
2. buildings and loan associations, and
3. trust corporations,
in favor of any person
 Known to be dead or
 who has not made further deposits or withdrawals
 during the preceding ten years or more.
Such unclaimed balances, together with the increase and proceeds thereof, shall be
deposited with the Treasurer of the Philippines to the credit of the Government of the
Republic of the Philippines to be used as the National Assembly may direct.
Procedural Requirements, Sec. 2
Within the month of January of every odd year, all banks, building and loan
associations, and trust corporations shall forward to the Treasurer of the
Philippines a statement, under oath, of their respective managing officers, of all
credits and deposits held by them in favor of persons known to be dead, or who
have not made further deposits or withdrawals during the preceding ten years or
more, arranged in alphabetical order according to the names of creditors and
depositors, and showing:
(a) The names and last known place of residence or post office addresses of the
persons in whose favor such unclaimed balances stand;
(b) The amount and the date of the outstanding unclaimed balance and whether
the same is in money or in security, and if the latter, the nature of the same;
(c) The date when the person in whose favor the unclaimed balance stands died,
if known, or the date when he made his last deposit or withdrawal; and
(d) The interest due on such unclaimed balance, if any, and the amount thereof.
Posting requirement-
A copy of the above sworn statement shall be posted in a conspicuous place in
the premises of the bank, building and loan association, or trust corporation
concerned for at least sixty days from the date of filing thereof:
Provided, That immediately before filing the above sworn statement, the bank,
building and loan association, and trust corporation shall communicate with the
person in whose favor the unclaimed balance stands at his last known place of
residence or post office address.
"It shall be the duty of the Treasurer of the Philippines to inform the Solicitor
General from time to time the existence of unclaimed balances held by banks,
building and loan associations, and trust corporations.
 Upon the trial, the court must hear all parties who have appeared
therein.
 If it be determined that such unclaimed balances in any defendant
bank, building and loan association or trust corporation are
unclaimed, then the court shall render judgment in favor of the
Government of the Republic of the Philippines,
 --- declaring that said unclaimed balances have escheated to the
Government of the Republic of the Philippines and commanding
said bank, building and loan association or trust corporation to
forthwith
 --- deposit the same with the Treasurer of the Philippines to credit
of the Government of the Republic of the Philippines to be used as
the National Assembly (Congress) may direct.
THE NEW CENTRAL BANK ACT (RA
7653)
Bangko Sentral ng Pilipinas
Q: What is Bangko Sentral ng Pilipinas (BSP)?

A: The state’s central monetary authority; it is the government agency
charged with the responsibility of administering the monetary, banking
and credit system of the country and is granted the power of supervision
and examination over bank and non‐bank financial institutions
performing quasi‐banking functions, including savings and loan
associations. (Busuego vs. CA, G.R. No. L‐48955, June 30, 1987)
PRIMARY OBJECTIVES
Q: What are the primary objectives of BSP

A:
1. To maintain price stability conducive to a balanced and sustainable growth
of the economy.
2. To promote and maintain monetary stability and the convertibility of the
peso. (Sec. 3)
FUNCTION OF BSP
What are the function of BSP
1. Issuer of currency. (Sec. 49‐60)
2. Custodian of reserves. (Secs. 64‐66, 94, 103)
3. Clearing channel or house; especially where the PCHC does not operate
.(Sec. 102)
4. Banker of the government – the BSP shall be the official depository of the
Government and shall represent it in all monetary fund dealings (Secs. 110‐
116)
5. Financial advisor of the government (Secs. 123‐124) – Under Article VII,
Sec. 20 of the 1987 Constitution, the President may contract or guarantee
foreign loans but with the prior concurrence of the Monetary Board.
6. Source of credit (Secs. 61‐63, 81‐89, 109)
7. Supervisor of the banking system (Sec. 25)
Legal Tender
Q: What is Legal Tender?
A: All notes and coins issued by the Bangko Sentral are fully guaranteed
by the Republic and shall be legal tender in the Philippines for all debts,
both public and private (Sec. 52)
Q: What is the legal tender power of coins?
A:
1. 1‐Peso, 5‐Peso and 10‐Peso coins: In amounts not exceeding
P1,000.00
2. 25 centavo coin or less: In amounts not exceeding P100.00 (Circular
No. 537, 2006)
Philippine currency notes have no limit to their legal tender power.

Legal Tender
Q: What are the rules on BSP’s Authority to replace legal tender?
 Notes and coins called in for replacement shall remain legal tender
for a period of one year from the date of call.
 After that period, they shall cease to be legal tender during the
following year or for such longer period as MB may determine.
 After the expiration of this latter period, the notes and coins which
have not been exchanged shall cease to be a liability of BSP and shall
be demonetized. (Sec. 57)
Legal Tender
Note: Checks representing demand deposits do not have legal tender

power and their acceptance in the payment of debts, both public and
private, is at the option of the creditor.
However, a check which has been cleared and credited to the account
of the creditor shall be equivalent to a delivery to the creditor of cash
in an amount equal to the amount credited to his account (Sec. 60).
HOW BSP HANDLES BANKS IN DISTRESS
Q: What is the function of the BSP on a distressed bank?
A: Appointment of a conservator or receiver or closure of

the bank.
Appointment of Conservator
 Sec. 29 of the New Central Bank Act states that: “Whenever, on the basis of
a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi-bank is in a
state of continuing inability or unwillingness to maintain a condition of
liquidity deemed adequate to protect the interest of depositors and
creditors, the Monetary Board may appoint a conservator with such powers
as the Monetary Board shall deem necessary to take charge of the assets,
liabilities, and the management thereof, reorganize the management,
collect all monies and debts due said institution, and exercise all powers
necessary to restore its viability. The conservator shall report and be
responsible to the Monetary Board and shall have the power to overrule or
revoke the actions of the previous management and board of directors of
the bank or quasi-bank.
 The conservator should be competent and knowledgeable in bank
operations and management. The conservatorship shall not exceed one (1)
year.
CONSERVATORSHIP
Q: Who is a conservator?
A: One appointed if the bank is in the state of illiquidity or
the bank fails or refuses to maintain a state of liquidity
adequate to protect its depositors and creditors.
The bank still has more assets than its liabilities but its
assets are not liquid or not in cash thus it cannot pay its
obligation when it falls due. The bank, not the Central
Bank, pays for fees.
POWERS OF A CONSERVATOR
1. To take charge of the assets, liabilities, and the management
thereof
2. Recognize the management
3. collect all monies and debts due said bank
4. Exercise all powers necessary to restore its viability with the
power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi‐bank
(First Philippine International Bank vs. CA, G.R. No. 115849, Jan.
24, 1996).
5. To bring court actions to assail or repudiate contracts entered into
by the bank.
Termination
Q: When is conservatorship terminated?

A: When Monetary Board is satisfied that the institution
can continue to operate on its own and the
conservatorship is no longer necessary.
Note: When the Monetary Board, on the basis of the
report of the conservator or of its own findings,
determine that the continuance in business of the
institution would involve probable losses to its depositors
or creditors, the bank will go under receivership.
CLOSURE
Q: When may the Monetary Board close a bank or quasi bank?
1. Cash Flow test ‐ Inability to pay liabilities as they become due in

the ordinary course of business (Sec. 30 [a] NCBA).
2. Balance sheet test – Insufficiency of realizable assets to meet its
liabilities (Sec 30 [b] NCBA).
3. Inability to continue business without involving probable losses to
its depositors and creditors (Sec 30 [c] NCBA).
4. willful violation of a cease and desist order under Section 37 that
has become final, involving acts or transactions which amount to
fraud or a dissipation of the assets (Sec 30 [d] NCBA).
5. Notification to the BSP or public announcement of a bank holiday
(Sec 53, GBL).
CLOSURE
Q: When may the Monetary Board close a bank or quasi bank?
6. Suspension of payment of its deposit liabilities continuously for

more than 30 days (Sec 53, GBL).
7. Persisting in conducting its business in an unsafe or unsound
manner (Sec 56, GBL).
CLOSE NOW‐HEAR LATER DOCTRINE
What is the close now‐hear later doctrine?
 The law does not contemplate prior notice and hearing before the
bank may be directed to stop operations and placed under
receivership.
 The purpose is to prevent unwarranted dissipation of the bank’s
assets and as a valid exercise of police power to protect the
depositors, creditors, stockholders and the general public. (Central
Bank of the Philippines v. CA, G.R. No. 76118 Mar. 30, 1993)
Purpose: To avoid creation of panic from the depositors or

public.
Reason: The government has responsibility to see to it
that the person dealing with the bank is protected.
Effects of receivership and liquidation:
1. Suspension of operation
2. The assets under receivership or liquidation shall be deemed in
custodia legis in the hands of the receiver and shall be exempt
from garnishment, levy, attachment or execution
3. Bank is not liable to pay interest on deposits during the period of
suspension of operation
4. Banks under liquidation retain their legal personality
5. *The bank can sue and be sued but any case should be initiated
and prosecuted through the liquidator.
6. There will be no preference even if the claimant-depositor
obtained a writ of preliminary attachment.
Appointment of Receiver
Sec. 30 of the New Central Bank Act provides that: “Whenever, upon report of the
head of the supervising or examining department, the Monetary Board finds that a
bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of
business: Provided, That this shall not include inability to pay caused by extraordinary
demands induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet
its liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has become
final, involving acts or transactions which amount to fraud or a dissipation of the
assets of the institution; in which cases, the Monetary Board may summarily and
without need for prior hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit Insurance Corporation as receiver of
the banking institution.
RECEIVERSHIP
Q: Who is a receiver?
A: One appointed if bank is already insolvent which means
that its liabilities are greater than its assets.
DUTIES OF A RECEIVER
1. The receiver shall immediately gather and take charge of all the
assets and liabilities of the institution.
2. Administer the same for the benefit of the creditors, and exercise
the general powers of a receiver under the Revised Rules of Court
3. Shall not, with the exception of administrative expenditures, pay
or commit any act that will involve the transfer or disposition of
any asset of the institution: Provided that the receiver may deposit
or place the funds of the institution in non‐speculative investments
(Sec 30, NCBA).
DUTIES OF A RECEIVER
Q: Is the receiver authorized to transact business in connection with

the bank’s assets and property?
A: No, the receiver only has authority to administer the same for the
benefit of its creditors. (Abacus Real Estate Development Center, Inc. v.
Manila Banking Corp, G.R. No. 162270, Apr. 6, 2005)
LIQUIDATION
Q: What is liquidation?
A: It is an act of settling a debt by payment or other

satisfaction. It is also the act or process of converting
assets into cash especially to settle debts (Black’s Law
Dictionary).
LIQUIDATION
Q: Can the liquidator of a distressed bank prosecute and defend suits
against the bank and foreclose mortgages for and in behalf of the
bank while the issue on receivership and liquidation is still pending?
A: Yes. The Central Bank is vested with the authority to take charge and
administer the monetary and banking systems of the country and this
authority includes the power to examine and determine the financial
conditions of banks for the purpose of closure on the ground of
insolvency.
Even if the bank is questioning the validity of its closure, during the
pendency of the case the liquidator can continue prosecution suits for
collection and foreclosure of mortgages, as they are acts done in the
usual course of administration of the bank. (Banco Filipino v. Central
Bank, G.R. No. 70054, Dec. 11, 1991)
CONSERVATORSHIP, RECEIVERSHIP AND
LIQUIDATION
CONSERVATORSHIP RECEIVERSHIP LIQUIDATION
Effects:
1.Juridical personality 1. Juridical personality Same with
is retained. is retained conservatorship
2.Perfected 2. Suspension of
transactions cannot be operation /stoppage
repudiated; of business
3. Assets deemed in
custodia legis
(Domingo v. NLRC,
G.R. 156761, Oct 17,
2006
CONSERVATORSHIP, RECEIVERSHIP AND
LIQUIDATION
CONSERVATORSHIP RECEIVERSHIP LIQUIDATION
Grounds
1. Bank is in the state of 1. Inability to pay 1. Insolvency
illiquidity; liabilities as they fall 2. Bank cannot be
2. The bank fails or due e.g: bank run, rehabilitated
refuses to maintain a rumors, etc.
state of liquidity 2. Assets are less than its
liabilities
3. Cannot continue
business without
causing damage;
4. Violation of a cease and
desist order
5. “Bank holiday” for
more than 30 days.
(Sec. 30)
GENERAL BANKING ACT
(RA 8791)
DEFINITION AND CLASSIFICATION OF BANKS
“Banks” shall refer to entities engaged in the lending of

funds obtained in the form of deposits (Sec. 3.1, RA 8791).
DEFINITION AND CLASSIFICATION OF BANKS
Q: What are the elements determinative of a bank?
A:
1. Must be authorized by law;
2. Accepts fund, in the form of a deposit, from the
public; and
3. Lends money to the public.
Requirements
Section 8, “The Monetary Board may authorize the organization of a
bank or quasi-bank subject to the following conditions:
 That the entity is a stock corporation;
 That its funds are obtained from the public, which shall mean
twenty (20) or more persons; and
 That the minimum capital requirements prescribed by the
Monetary Board for each category of banks are satisfied.
*To be registered as bank, it must be a stock corporation.

*Banks must obtain funds from the public. Minimum number of
depositor is 20 persons.
Nature of Business
 Sec. 2 of the General Banking Law, “The State recognizes the vital
role of banks providing an environment conducive to the sustained
development of the national economy and the fiduciary nature of
banking that requires high standards of integrity and performance.
 In furtherance thereof, the State shall promote and maintain a
stable and efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of a
developing economy.”
Nature of Business
 Consequences:
 Sec. 9 of the General Banking Law provides that: “The
Monetary Board may prescribe rules and regulations on
the types of stock a bank may issue, including the terms
thereof and rights appurtenant thereto to determine
compliance with laws and regulations governing capital
and equity structure of banks; Provided, That banks
shall issue par value stocks only.”
 Bank must be an open corporation
 Reason: Vital to industry
Nature of Business
 Consequences:
xxx
 The word “bank” cannot be used if such person or
entity is not engaged in banking business.
 It is subject to heavy and close supervision and/or
regulation by the Bangko Sentral ng Pilipinas.
 Banks must observe highest degree of diligence
FUNCTIONS OF THE BANK
 Deposit Functions
 Loan Functions
FUNCTIONS OF THE BANK
Deposit Function:
*The relationship created is one of creditor-debtor relation.
*There is passing of ownership to the bank.
*The bank can appropriate the deposits without the consent of
the depositor.
*Legal compensation can take place because they are mutually
creditor-debtor of each other.
*Prior to incorporation, the deposits can be named to corporate
treasurer. He will held it in trust for the corporation.
CLASSIFICATION OF BANKS
1. Universal banks ‐ Primarily governed by the General Banking Law
(GBL), can exercise the powers of an investment house and invest in
non‐allied enterprises and have the highest capitalization requirement.
2. Commercial banks ‐ Ordinary banks governed by the GBL which have a
lower capitalization requirement than universal banks and can neither
exercise the powers of an investment house nor invest in non‐allied
enterprises.
3. Thrift banks – These are
a. Savings and mortgage banks;
b) Stock savings and loan associations;
c) Private development banks, which are primarily governed by the Thrift
Banks Act (R.A. 7906).
CLASSIFICATION OF BANKS
4. Rural banks – Mandated to make needed credit available and readily
accessible in the rural areas on reasonable terms and which are primarily
governed by the Rural Banks Act of 1992 (RA 7353).
5. Cooperative banks – Those banks organized whose majority shares are
owned and controlled by cooperatives primarily to provide financial and
credit services to cooperatives. It shall include cooperative rural banks. They
are governed primarily by the Cooperative Code (RA 6938).
6. Islamic banks – Banks whose business dealings and activities are subject
to the basic principles and rulings of Islamic Shari’a, such as the Al Amanah
Islamic Investment Bank of the Philippines which was created by RA 6848.
7. Other classification of banks as determined by the Monetary Board of the
Bangko Sentral ng Pilipinas.
UNIVERSAL BANKS, COMMERCIAL
BANKS AND THRIFT BANKS
UNIVERSAL BANKS COMMERCIAL BANKS THRIFT BANKS
Governing laws
General Banking Law (GBL) GBL Thrift Banks Act (R.A.
7906)
Powers
1. Has the authority to exercise To engage in allied All the powers of a
the powers of a commercial undertakings and, in addition commercial bank, except:
bank. to the general powers incident To issue imported LC
2. To act as an investment house to a corporation, may exercise
– a corporation that sells and all such powers as may be To accept or open
guarantees sale of securities and necessary to carry on the checking account except
shares of stocks. i.e. Petron will business of commercial with prior approval by the
tap an investment house in order banking. Monetary Board (MB
to sell its stocks. requires at least a net
3. To engage in a non‐allied Note: Allied undertakings are asset worth of 28M)
undertaking – which is not those activities or entities
related at all to banking. e.g. which enhance or complement
Realty banking.
UNIVERSAL BANKS, COMMERCIAL BANKS AND
THRIFT BANKS
Capitalization
4.950 Billion 2.4 Billion Manila‐ 3.25M
Elsewhere‐ 6.25M
Equity investment
Can be a stock holder in both Only allied undertaking Only allied undertaking
allied and non‐allied undertaking
Non‐allied transactions
Can invest but shall not exceed . Cannot invest Cannot invest
25% of the investee (receiving)
corporation
Total amount of investment equity
Not to exceed 50% of the bank’s Not to exceed 35% of bank’s Not to exceed 35% of
net worth. net worth. bank’s net worth.
Single equity investment
Not to exceed 25% of bank’s net worth
THRIFT BANKS
Capitalization
Head Office only - P 3 B Head Office only - P 2 B Head Office in the NCR)
Up to 10 branches - 6 B Up to 10 branches - 4 B Head Office only – 500M
11 to 100 branches – 15 B 11 to 100 branches – 10 B Up to 10 branches – 750M
More than 100 branches – 20B More than 100 branches – 15B 11 to 50 branches – 1B
More than 50 branches- 2B
Head Office in All Other

Areas Outside NCR
Head Office only – 200M
Up to 10 branches – 300M
11 to 50 branches – 400M
More than 50 branches –
800M
THRIFT BANKS
Equity investment
Can be a stock holder in both Only allied undertaking Only allied undertaking
allied and non‐allied undertaking
Non‐allied transactions
Can invest but shall not exceed . Cannot invest Cannot invest
25% of the investee (receiving)
corporation
Total amount of investment equity
Not to exceed 50% of the bank’s Not to exceed 35% of bank’s Not to exceed 35% of
net worth. net worth. bank’s net worth.
Single equity investment
Not to exceed 25% of bank’s net worth
Alphabetical List of Universal Banks in the
Philippines
1. Al-Amanah Islamic Investment Bank 12. Land Bank of the Philippines
of the Philippines
13. Metropolitan Bank & Trust Company
2. ANZ Banking Group Ltd.
14. Mizuho Bank, Ltd. - Manila Branch
3. Asia United Bank Corporation
15. Philippine National Bank
4. Bank of the Philippine Islands
16. Philippine Trust Company
5. BDO Unibank, Inc.
17. Rizal Commercial Banking
6. China Banking Corporation Corporation
7. Deutsche Bank AG 18. Security Bank Corporation
8. Development Bank of the Philippines 19. Standard Chartered Bank
9. East West Banking Corporation 20. Union Bank of the Philippines
10. The Hongkong & Shanghai Banking 21. United Coconut Planters Bank
Corporation
11. ING Bank N.V.*
Scope of Activities of Universal Banks
 Universal Banks have a wider scope of activities

than Commercial Banks.
 In addition to commercial banking activities, universal

banks are authorized to:
- engage in underwriting
- and in other activities of investment houses
- and to invest in equities of non-allied institutions.
Commercial Banks
1. Citibank, N.A. 15. KEB Hana Bank -- Manila Branch

2. Bank of Commerce 16. Bangkok Bank Public Co. Ltd.
3. Maybank Philippines, Inc. 17. Cathay United Bank Co., Ltd. - Manila
4. Robinsons Bank Corporation Branch
5. Philippine Bank of Communications 18. Industrial Bank of Korea - Manila
6. The Bank of Tokyo-Mitsubishi UFJ, Ltd. Branch
7. BDO Private Bank, Inc. 19. United Overseas Bank Limited, Manila
8. Philippine Veterans Bank Branch
9. CTBC Bank (Philippines) Corporation 20. Shinhan Bank - Manila Branch
10. JP Morgan Chase Bank, N.A.
21. First Commercial Bank, Ltd., Manila
11. Sumitomo Mitsui Banking Corporation -
Branch
Manila Branch
12. Bank of America, N.A. 22. Hua Nan Commercial Bank, Ltd. -
13. Mega International Commercial Bank Manila Branch
Co., Ltd.
14. Bank of China Limited - Manila Branch
Loan Function of the Banks
 A bank shall grant loans and other credit

accommodations only in amounts and for the periods of
time essential for the effective completion of the
operations to be financed.
LIMITATIONS IMPOSED UPON BANKS
Q: What are the limitations imposed upon banks with respect to its loan
function?
A:
GR: Single borrower’s limit – The total amount of loans, credit
accommodations and guarantees that the bank could grant should at no
time exceed 25% of the bank’s net worth. (Sec 35.1, GBL)
XPN:
a. As the Monetary Board may otherwise prescribe for reasons of national
interest
b. Deposits of rural banks with government‐owned or controlled financial
institutions like LBP, DBP, and PNB.
Single Borrower’s Limit
Sec. 35.1 of the General Banking Law provides that: “Except

as the Monetary Board may otherwise prescribe for reasons
of national interest, the total amount of loans, credit
accommodations and guarantees as may be defined by the
Monetary Board that may be extended by a bank to any
person, partnership, association, corporation or other entity
shall at no time exceed twenty-five percent (25%) of the net
worth of such bank. The basis for determining compliance
with single borrower limit is the total credit commitment of
the bank to the borrower.
Single Borrower’s Limit
Sec. 35.2 of the General Banking Law states that: “Unless the
Monetary Board prescribes otherwise, the total amount of
loans, credit accommodations and guarantees prescribed in the
preceding paragraph may be increased by an additional ten
percent (10%) of the net worth of such bank provided the
additional liabilities of any borrower are adequately secured
by trust receipts, shipping documents, warehouse receipts or
other similar documents transferring or securing title covering
readily marketable, non-perishable goods which must be fully
covered by insurance.”
SINGLE BORROWER’S LIMIT
The total amount of loans, credit accommodations and guarantees that may
be extended by a bank to any person, partnership, association, corporation or
other entity shall at no time exceed 25% of the net worth of such bank (BSP
Circular 425).
The basis for determining compliance with single borrower limit is the total
credit commitment of the bank to the borrower (Sec. 35.1, RA 8791).
The total amount of loans, credit accommodations and guarantees prescribed

in the preceding paragraph may be increased by an additional 10% of the net
worth of such bank provided the additional liabilities of any borrower are
adequately secured by trust receipts, shipping documents, warehouse
receipts or other similar documents transferring or securing title covering
readily marketable, non-perishable goods which must be fully covered by
insurance (Sec. 35.1, RA 8791).
Question
One of these statements is not correct:

A. The total amount of loans that may be extended by a bank to a single
borrower shall not exceed twenty five per cent of the net worth of the
bank.
B. The total amount of loans to a single borrower may be increased by ten
per cent if the additional loans are secured by trust receipts, shipping
documents, warehousing receipts or other similar documents covering
goods which are readily marketable, non-perishable, and fully insured.
C. The Monetary Board may not prescribe a different limitation on the total
loans to a single borrower.
D. Loans secured by obligations of the Bangko Sentral or of the Philippine
Government are excluded in computing the total amount of the loans.
Question

A. The total amount of loans that may be extended by a bank to a single
borrower shall not exceed twenty five per cent of the net worth of the
bank.
B. The total amount of loans to a single borrower may be increased by ten
per cent if the additional loans are secured by trust receipts, shipping
documents, warehousing receipts or other similar documents covering
goods which are readily marketable, non-perishable, and fully insured.
C. The Monetary Board may not prescribe a different limitation on the total
loans to a single borrower.
D. Loans secured by obligations of the Bangko Sentral or of the Philippine
Government are excluded in computing the total amount of the loans.
DOSRI ACCOUNTS
Sec. 36 of the General Banking Law,

“No director or officer of any bank shall, directly or indirectly, for himself
or as the representative or agent of others, borrow from such bank nor shall he
become a guarantor, endorser or surety for loans from such bank to others, or in
any manner be an obligor or incur any contractual liability to the bank except
with the written approval of the majority of all the directors of the bank,
excluding the director concerned:
Provided, That such written approval shall not be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit
plan approved by the Bangko Sentral. The required approval shall be entered
upon the records of the bank and a copy of such entry shall be transmitted
forthwith to the appropriate supervising and examining department of the
Bangko Sentral.
RESTRICTIONS ON BANK EXPOSURE TO
DOSRI
Loans granted to DOSRI:
a. Director
b. Officer
c. Stockholder those whose stockholdings and/or together with any of
the following persons, amount to 2% or more of the total subscribed
capital stock of the bank.
d. Related Interests, such as DOS’s spouses, their relatives within the
first degree whether by consanguinity or affinity, partnership
whereby DOS is a partner or a corporation where DOS owns at least
20%.
DOSRI ACCOUNTS
Sec. 36 of the General Banking Law,

“No director or officer of any bank shall, directly or indirectly, for
himself or as the representative or agent of others, borrow from such bank
nor shall he become a guarantor, endorser or surety for loans from such bank
to others, or in any manner be an obligor or incur any contractual liability to
the bank except with the written approval of the majority of all the directors
of the bank, excluding the director concerned:
Provided, That such written approval shall not be required for loans, other
credit accommodations and advances granted to officers under a fringe
benefit plan approved by the Bangko Sentral. The required approval shall be
entered upon the records of the bank and a copy of such entry shall be
transmitted forthwith to the appropriate supervising and examining
department of the Bangko Sentral.
DOSRI ACCOUNTS
 Sec. 36 of the General Banking Law,

Xxx
Dealings of a bank with any of its directors, officers or
stockholders and their related interests shall be upon terms not less
favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of
any bank director or officer who violates the provisions of this
Section may be declared vacant and the director or officer shall
be subject to the penal provisions of the New Central Bank Act
Purpose
 To protect the general public from the abuse of the

directors, officers, stockholders and related interests of
the bank.
Requisites
1. The borrower is a director, officer or any stockholder of a bank;
2. He contract a loan or any form of financial accommodation;
3. The loan or financial accommodation is from:
a. his bank, or
b. a bank that is a subsidiary of a bank holding company of which both his bank
and lending bank are subsidiaries,
c. a bank in which a controlling proportion of the shares is owned by the same
interest that owns a controlling proportion of the shares of his bank; and
4. The loan or financial accommodation of the director, officer or
stockholder, singly or with that of his related interest, is in excess of 5% of
the capital and surplus of the lending bank or in the maximum amount
permitted by law, whichever is lower.
Examples
 If there is interlocking directors – subject to DOSRI restrictions

 General partner is either a director, officer, stockholder or related
interest of a lending bank – subject to DOSRI restrictions
 Stranger applied for a loan and a property was used as collateral:
a. if the property is owned by stranger alone – not subject to DOSRI
restrictions;
b. if the property is co-owned by a director, officer, stockholder or
related interest of the bank – subject to DOSRI restrictions
 A director, officer, stockholder, or related interests owned more
than 20% share in a corporation (borrower) – subject to DOSRI
restriction.
RESTRICTIONS ON BANK EXPOSURE TO
DOSRI
Q: In case of DOSRI accounts, what are the requirements that must be
complied with?
A:
Procedural requirement ‐ Loan must be approved by the majority of all
the directors not including the director concerned. CB approval is not
necessary; however, there is a need to inform them prior to the
transaction. Loan must be entered in the books of the corporation. (Sec.
36)
Substantive requirement ‐ Loan must not exceed the paid in contribution
and unencumbered deposits. (Not to exceed 15% of the portfolio or 100%
of the net worth, whichever is lower.) (Sec. 36 [4])
Question
One of these is not a procedural requirement for loans to directors or

officers of a bank:
A. There must be a written approval of majority of all the directors

excluding the directors concerned.
B. The approval shall be entered upon the records of the bank.
C. A copy of the entry shall be transmitted to the Bangko Sentral.
D. There must be a certificate signed by the corporate secretary.
Question
One of these is not a procedural requirement for loans to directors or

officers of a bank:
A. There must be a written approval of majority of all the directors

excluding the directors concerned.
B. The approval shall be entered upon the records of the bank.
C. A copy of the entry shall be transmitted to the Bangko Sentral.
D. There must be a certificate signed by the corporate secretary.
Question
Pio is the president of Western Bank. His wife applied for a
loan with the said bank to finance an internet cafe. The loan
officer told her that her application will not be approved
because the grant of loans to related interests of bank
directors, officers, and stockholders is prohibited by the
General Banking Law. Explain whether the loan officer is
correct.
Question
ANSWER: Section 36 of the General Banking Law of 2000 does not
entirely prohibit directors or officers of the bank, directly or indirectly,
from borrowing from the bank. In this case, Pio is the president of
Western Bank, which makes him an officer, director and stockholder of
the said bank. The General Banking Law provides for additional
restrictions to the bank before it can lend to its directors or officers. A
written approval of the majority vote of all the directors of the bank,
excluding the director concerned, is required.
Furthermore, such dealings must be upon terms not less favorable to
the bank than those offered to others (Section 1326, Central Bank's
"Manual of Regulations for Banks and Other Financial Intermediaries,
cited in Ranioso v. CA, G.R. No. 117416, December 8, 2000). A
violation of this provision will cause his or her position to be declared
vacant and the erring director or officer subjected to the penal
provisions of the New Central Bank Act.
EXCLUSIONS
Q: What are excluded from such loan limitations?
A: Non‐risk loans, such as:
1. Loans secured by obligations of the Bangko Sentral ng Pilipinas or the
Philippine Government
2. Loans fully guaranteed by the Government
3. Loans covered by assignment of deposits maintained in the lending bank
and held in the Philippines
4. Loans, credit accommodations and acceptances under letters of credit to
the extent covered by margin deposits
5. Other loans or credit accommodations which the MB may specify as
non‐risk items.
JSS PRACTICE
Q: What is joint and solidary signature (JSS) practice?

A: A common banking practice requiring as an additional
security for a loan granted to a corporation the joint and
solidary signature of a major stockholder or corporate
officer of the borrowing corporation. (Security Bank v.
Cuenca, G.R. No. 138544, Oct. 3, 2000)
TRANSACTIONS COVERED
Q: What are the transactions covered by the DOSRI

regulation?
A: The transaction covered are loan and credit
accommodation. Not being a loan, the ceiling will not apply
to lease and sale. However, it should still comply with the
procedural requirement.
ARMS‐LENGTH RULE
Q: What is the arms‐length rule?
A: It provides that any dealings of a bank with any of its DOSRI shall be upon
terms not less favorable to the bank than those offered to others. [Sec. 36
(2)]
Q: Can the bank terminate the loan and demand immediate payment if
the borrower used the funds for purposes other than that agreed upon?
A: If the bank finds that the borrower has not employed the funds borrowed
for the purpose agreed upon between the bank and the borrower, the bank
may terminate the loan and demand immediate payment. (Banco de Oro v.
Bayuga, G.R. No. L‐49568, Oct. 17, 1979)
PENALTIES FOR VIOLATION
Q: What are the acts that may be penalized of fine and imprisonment as
provided in the New Central Bank Act (NCBA)?
A:
1. Refusal to Make Reports or Permit Examination (Sec. 34 NCBA)
2. False Statement (Sec. 35. NCBA)
3. Other acts that violates any banking laws (Sec. 36, NCBA)
Q: What are the acts that may be penalized of fine and imprisonment as
provided in the New Central Bank Act (NCBA)?
A:
1. Refusal to Make Reports or Permit Examination (Sec. 34 NCBA)
2. False Statement (Sec. 35. NCBA)
3. Other acts that violates any banking laws (Sec. 36, NCBA)
Q: What are the administrative sanctions that the Monetary Board may impose
notwithstanding with Sections 34‐36 of NCBA?
A:
1. Fines in amounts as may be determined by the Monetary Board to be appropriate,
but in no case to exceed P30,000 a day for each violation, taking into
consideration the attendant circumstances, such as the nature and gravity of the
violation or irregularity and the size of the bank or quasi‐bank
2. Suspension of rediscounting privileges or access to Bangko Sentral credit facilities
3. Suspension of lending or foreign exchange operations or authority to accept new
deposits or make new investments
4. Suspension of interbank clearing privileges; and/or
5. Revocation of quasi‐banking license. (Sec 37, NCBA)
Note: Resignation or termination from office shall not exempt such director or officer
from administrative or criminal sanctions.
PDIC Law
7.1 PDIC Law *
7.1.1 Insurable deposits
7.1.2 Maximum liability
7.1.3 Requirements for Claims
PHILIPPINE DEPOSIT
INSURANCE
CORPORATION
R.A. 3591, AS AMENDED BY R.A. 9302
BASIC POLICY
What is the basic policy for the creation of the PDIC?

A: PDIC shall promote and safeguard the interests of the
depositing public by way of providing permanent and
continuing insurance coverage in all insured deposits. (As
Amended by Sec. 1, R.A. 9302)
Deposit Insurance
*All deposits of any bank are insured with the PDIC.

*Obligation to pay the premium lies on the bank.
Risk insured against: closure of banks due to liquidity

problems.
COVERAGE OF INSURANCE
Q: What is the coverage of the insurance?
A: The deposit liabilities of any bank or banking

institution, which is engaged in the business of receiving
deposits, shall be insured with PDIC. The coverage is
compulsory.
Concept of Insured Deposits
 What is an insured deposit?

 A: Insured deposit means the amount due to any bona
fide depositor for legitimate deposits in an insured bank
net of any obligation of the depositor to the insured bank
as of the date of closure, but not to exceed
P500,000.00. Such net amount shall be determined
according to such regulations as the Board of Directors
may prescribe. (As amended by Sec. 3, R.A. 9576)
Liability to Depositors
Deposit Liabilities Required to be
Insured with PDIC
Q: What are the deposits covered by the insurance?
A:
1. The unpaid balance of money or its equivalent received by a bank in the
usual course of business and for which it has given of is obliged to give credit
to a commercial, checking, savings, time or thrift account, or issued in
accordance with Banko Sentral rules and regulations and other applicable
laws, together with such other obligations of a bank, which, consistent with
banking usage and practices, the Board of Directors shall determine and
prescribe by regulations to be deposit liabilities of the bank; and
2. Subject to the approval of the Board of Directors, any insured bank which
is incorporated under the laws of the Philippines which maintains a branch
outside the Philippines may elect to include for insurance its deposit
obligations payable only at such branch. (As Amended by Sec. 2 R.A. 9576)
Deposit Liabilities Required to be
Insured with PDIC
Commencement of Liability
Q: When will the liability by the corporation to pay

insured deposits commence?
A: Whenever an insured bank shall have been closed by the
Monetary Board pursuant to Section 30 (Proceedings in
Receivership and Liquidation) of R.A. 7653, otherwise known
as the New Central Bank Act, payment of the insured
deposits on such closed bank shall be made by the
Corporation as soon as possible. (Sec 14 R.A.3591, as
amended)
Deposit Accounts Not Entitled to
Payment
 What are NOT covered by PDIC deposit insurance?
The following, whether denominated, documented, recorded or booked as deposit
by the bank, are excluded from PDIC deposit insurance (Section 4 (f) of the PDIC
Charter):
1. Investment products such as bonds and securities, trust accounts and other
similar instruments
2. Deposit accounts or transactions that:
a) Are unfunded, fictitious or fraudulent
b) Constitute and/or emanate from unsafe and unsound banking practice/s3 as
determined by the PDIC, in consultation with the BSP, after due notice and
hearing and publication of PDIC’s cease & desist order against such deposit
accounts/transactions
c) Are determined to be proceeds of an unlawful activity as defined in the Anti-
Money Laundering Act (Republic Act 9160, as amended)
Deposit Accounts Not Entitled to
Payment
3/ Unsafe and unsound deposit-related activities include, among others: (PDIC
Regulatory Issuance No. 2011-01)
a. Deposit-related practice/activity/transaction without the approval or
adequate controls required under existing laws, rules and regulations --
Failure to keep bank records within bank premises
b. Granting high interest rates, when bank has:
(i) negative unimpaired capital, or
(ii) liquid assets to deposit ratio less than 10%
c. Non-compliance with PDIC regulations
Question
An employee of a large manufacturing firm earns a salary which
is just a bit more than what he needs for a comfortable living.
He is just able to maintain a P10,000 savings account, a P20,000
checking account, a P30,000 money market placement, and a
P40,000 trust fund in a commercial bank. Which of the four
accounts are deemed insured by the PDIC?
a. The P10,000 savings account and P20,000 checking account
b. The P30,000 money market placement and P40,000 trust
fund
c. The P10,000 savings account and P40,000 trust fund
d. The P20,000 checking account and P30,000 money market
Question
An employee of a large manufacturing firm earns a salary which
is just a bit more than what he needs for a comfortable living.
He is just able to maintain a P10,000 savings account, a P20,000
checking account, a P30,000 money market placement, and a
P40,000 trust fund in a commercial bank. Which of the four
accounts are deemed insured by the PDIC?
a. The P10,000 savings account and P20,000 checking account
b. The P30,000 money market placement and P40,000 trust
fund
c. The P10,000 savings account and P40,000 trust fund
d. The P20,000 checking account and P30,000 money market
Maximum Deposit Insurance Coverage
(MDIC)
PDIC shall pay deposit insurance on all valid deposits up to the Maximum
Deposit Insurance Coverage of Php500,000, per depositor, of a closed
bank. Accounts maintained in the same right and capacity for a
depositor’s benefit, whether in his own name or in the name of others,
are covered by deposit insurance.
Deposits are considered valid upon the determination by the PDIC, based
on bank records, that the deposits were made with a corresponding
inflow of cash.
Question
X is a depositor of ABC bank. He has 3 deposit accounts all under his

name. one in a checking account, another in a savings account, one in
a time deposit. Each account has a balance of P500,000. ABC bank
became insolvent and the Monetary Board ordered its closure. X is
unable to withdraw from all her accounts so he filed his claims with
the PDIC. Which stamen is correct?
A. X can claim P1.5M from all the 3 accounts
B. X can only claim a total of P500,000 for all the three accounts
C. X can only claim P1M from the 3 accounts
D. X cannot claim anything
Question
X is a depositor of ABC bank. He has 3 deposit accounts all under his

name. one in a checking account, another in a savings account, one in
a time deposit. Each account has a balance of P500,000. ABC bank
became insolvent and the Monetary Board ordered its closure. X is
unable to withdraw from all her accounts so he filed his claims with
the PDIC. Which stamen is correct?
A. X can claim P1.5M from all the 3 accounts
B. X can only claim a total of P500,000 for all the three accounts
C. X can only claim P1M from the 3 accounts
D. X cannot claim anything
PDIC Member Banks
PDIC member banks include the following institutions authorized by the

Bangko Sentral ng Pilipinas (BSP) to perform banking functions in the
Philippines:
1. Banks incorporated under Philippine laws, such as commercial banks,
savings banks, mortgage banks, development banks, rural banks and
cooperative banks and stock savings and loan associations.
2. Domestic branches of foreign banks
 What are covered by PDIC deposit insurance?
 PDIC insures valid deposits in domestic offices of its
member banks.
INSURED DEPOSITS
By Deposit Type:
• Savings
• Special Savings
• Demand/ Checking
• Negotiable Order of Withdrawal (NOW)
• Certificate of Time Deposits
INSURED DEPOSITS
By Deposit Account:
• Single Account
• Joint Account
• Account “By”, “In Trust For” (ITF) or “For the
Account of” (FAO) another person
INSURED DEPOSITS
By Currency:
• Philippine peso
• Foreign currencies considered as part of BSP’s
international reserves
INSURED DEPOSITS
Single Accounts are individually-owned accounts

or accounts held under one name, either as
natural person or juridical entity.
•Natural Person refers to any individual person.
Single proprietors are considered natural persons.
•Juridical entity refers to a corporation,
partnership or cooperative.
INSURED DEPOSITS
 Joint Accounts are accounts held under more

than one name.
INSURED DEPOSITS
• A joint account regardless of whether the conjunction “and”, “or”

or “and/or” is used shall be insured separately from single accounts.
• Unless a different sharing is stipulated in the deposit documents,
the insured amount up to the Maximum Deposit Insurance Coverage of
Php500,000 shall be divided equally between or among co-owners of
a joint account.
• The total shares of a co-owner in several joint accounts may exceed
Php500,000 but will only be insured up to the Maximum Deposit
Insurance Coverage of Php500,000.
• Joint accounts held in the names of a juridical entity and a natural
person shall be presumed to belong solely to the juridical entity.
INSURED DEPOSITS
“BY”, “ITF” or “FAO” Accounts
• In a “By” account, Ana by Ben, Ana is the depositor.

• In an “In Trust For” (ITF) account, Ana In Trust For Ben,
Ben is the depositor.
• In a “For the Account of” (FAO) account, Ana For the
Account of Ben, Ben is the depositor.
INSURED DEPOSITS
To simplify:
 In the case where a depositor is the sole beneficial owner
of a single, “For the Account of”, “By”, and “In Trust For”
accounts, the consolidated balances of these accounts
shall be insured up to Php500,000.
 The depositor’s total shares in his/her joint accounts shall
be separately insured up to Php500,000.
 A depositor with single accounts and joint accounts may
have insured deposits of up to Php1,000,000.
Illustrative examples:
1. How much is Fe Santos’s insured deposit if she has the following four deposit
accounts in the same bank?
2. How much is Fe Santos’s insured deposit if she has the following three joint
accounts in the same bank?
3. How much is Fe Santos’s insured deposit for all her single and joint accounts in
the same bank?
 For purposes of computing the insured deposits, all obligations or loans of the
depositor with the closedbank, as of bank closure, shall be deducted from the
depositor’s total deposits with the said bank. (PDIC Regulatory Issuance No.
2011-04)
Q: Is the liability of PDI on a per bank or per branch basis?
A: Per bank basis. (Catindig 2003, Verde Publications)
Mode of Payment
Payment of the insured deposits shall be made by the

Corporation as soon as possible either:
1. By cash or
2. By making available to each depositor a transferred
deposit in another insured. (Sec. 14, RA 3591)
Effect of Payment
1) PDIC is discharged from obligations.

2) PDIC is subrogated to depositor’s rights
Effect of failure to Settle Claim of Insured
Depositor
 Failure to settle the claim, within 6 months from the date of filing
of claim for insured deposit, where such failure was due to grave
abuse of discretion, gross negligence, bad faith, or malice, shall
subject the directors, officers or employees responsible to
imprisonment from 6 months to 1 year.
Failure of Depositor to Claim Insured
Deposits
 Unless otherwise waived by PDIC, if the depositor in the
closed bank shall fail to claim his insured deposits with
the PDIC:
 Within 2 years from actual takeover of the closed bank by the
receiver, or;
 Within 2 years after the two-year period to file a claim, all
rights of the depositor against the Corporation shall be barred.
 However, all rights of the depositor against the closed
bank and its shareholders or the receivership estate to
which the Corporation may have become subrogated, shall
revert to the depositor.
Prohibition against Splitting of Deposits
 The penalty of prision mayor or fine of not less than P50,000 but
not more than P2,000,000 or both shall be imposed upon any
director, officer, employee or agent of a bank for:
 Xxx 5) splitting of deposits or creation of fictitious loans or deposit
accounts. (Sec. 21 [f], RA 3591).
INTELLECTUAL PROPERTY
LAWS
RA 8293
Intellectual Property Law (except provisions under Part 1
(Intellectual Property Office) *
The Law on Patents
The Law on Trademark, Service Marks and Trade Names
The Law on Copyright
INTELLECTUAL PROPERTY RIGHTS
Property rights which result from the physical manifestation of original

thought. (Ballantine’s Law Dictionary, 3d Ed.)
NOTE: There are NO property rights protected by law in mere ideas or

mental conceptions. When creations of mind are put in tangible form,
there is appropriate subject that is protected by law. (63A Am Jur3d,
Property, Section 5)
INTELLECTUAL PROPERTY RIGHTS
Q: What are covered by intellectual property rights?

A:
1. Copyright and Related Rights
2. Mark (trade, service and collective)
3. Geographic indications
4. Industrial designs
5. Patents
6. Layout designs (Topographies) of Integrated Circuits
7. Protection of Undisclosed Information. (Sec. 4.1, Intellectual
Property Code [IPC])
CONSTITUTIONAL BASIS OF IPL
 The State shall protect and secure the exclusive rights of

scientists, inventors, artists and other gifted citizens to their
intellectual property and creations, particularly when beneficial to
the people, for such period as may be provided by law (Article XIV,
Section 13).
Civil Code Provision
Article 721 of the NCC provides the rule on ownership relative to

intellectual property:
By intellectual creation, the following persons acquire ownership:

1. The author with regard to his literary, dramatic, historical, legal,
philosophical, scientific or other work;
2. The composer, as to his musical composition;
3. The painter, sculptor, or other artist, with respect to the product
of his art;
4. The scientist or technologist or any other person with regard to his
discovery or invention.
PATENTS
Q: What is a patent?
A: A statutory grant which confers to an inventor or his
legal successor, in return for the disclosure of the
invention to the public, the right for a limited period of
time to exclude others from making, using, selling or
importing the invention within the territory of the country
that grants the patent.
PATENTS
 Any technical solution of a problem in any field of human

activity which is new, involves an inventive step and is
industrially applicable is patentable (Sec. 21, IPC).
 A patent is a document, issued, upon application, by a

government office, which describes an invention and creates
a legal situation in which the patented invention can normally
only be exploited (manufactured, used, sold, imported) with
the authorization of the owner of the patent. (Aquino citing
WIPO 75, p. 203)
.
PATENTABLE INVENTIONS
Q: What are the patentable inventions?

A: Any technical solution of a problem in any field of
human activity which is new, involves an inventive step
and is industrially applicable. It may be, or may relate to,
a product, or process, or an improvement of any of the
foregoing. (Sec. 21)
PATENTABLE INVENTIONS
To be patentable, a product must be:
1. A technical solution of a problem in any field of human
activity;
2. Novel;
3. An invention;
4. Industrially applicable.
These criteria may apply to:

a. Products
b. Processes
c. Improvements of either products or processes
CONDITIONS FOR PATENTABILITY
Q: What are the conditions for patentability?

A: NIA
Novelty – An invention shall not be considered new if it forms part of a
prior art. (Sec. 23, IPC)
Involves an inventive step – if, having regard to prior art, it is not
obvious to a person skilled in the art at the time of the filing date or
priority date of the application claiming the invention.
Industrially Applicable – An invention that can be produced and used in

any industry, shall be industrially applicable (Sec. 27, IPC).
PRIOR ART
Q: What is prior art?
A: 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
The whole contents of a published application, 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
the IPC, there shall be a 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. (Sec. 24, IPC)
PRODUCT, PROCESS, IMPROVEMENT
Process- consists of an act, operation, or step, or of a series thereof, performed
upon a specified subject matter to produce a physical result. Where a process
consists of more than a single step, the arrangement, order, or sequence in which
these component steps are to be performed may itself be of patentable significance.
(Aquino citing 1 Rosenberg 6.01,1, IPL, p. 206)
Product- broad enough a term to include every output of human ingenuity, every
tangible result of human craftsmanship or partisanship. Products, like processes, are
patentable subject matter, but not all products are, because not all possess the
requirements of patentability. (Aquino, IPL, p. 211)
Improvements- An inventor should be allowed to dominate future inventions of

others where those inventions are based in some way on his teachings. Such
improvements, while not obvious from his teachings, are still within his contribution,
since the improvement is made possible by his work. (Aquino, IPL, p. 218)
Effectivity
Q: When shall the patent take effect?

A: A patent shall take effect on the date of the publication
of the grant of the patent in the IPO Gazette. (Sec. 50.3,
IPC)
Duration
What is the duration of a patent, utility model and industrial
design?
A:
Patent – 20 years from date of filing of application without
renewal. (Sec. 54, IPC)
Utility Model – 7 years from the filing date of the application
without renewal. (Sec. 109.3, IPC)
Industrial Design – 5 years from the filing date of the
application, renewable for not more than two (2) consecutive
periods of five (5) years each. (Sec. 118.2, IPC)
Remedy
Q: What is the remedy of a true inventor?
A: He may only ask the court to substitute him as

a patentee or to cancel the patent and ask for
damages when the application of the false
inventor is granted.
NON‐PATENTABLE INVENTIONS
PAD‐SCAD
1. Discoveries, scientific theories and mathematical methods
2. In the case of Drugs and medicines, mere discovery of a
new form or new property of a known substance which does
not result in the enhancement of the efficacy of that
substance
3. Schemes, rules and methods of performing mental acts,
playing games or doing business, and programs for
computers
4. Methods for treatment of the human or Animal body
xxx
PAD‐SCAD
5. Plant varieties or animal breeds or essentially biological
process for the production of plants or animals. This
provision shall not apply to micro‐organisms and
non‐biological and microbiological processes
6. Aesthetic creations
7. Anything which is Contrary to public order or morality. (Sec.
22, IPC as amended by R.A. 9502)
Are computer programs patentable?

A:
GR: Computer programs are not patentable but are
copyrightable.
XPN: They can be patentable if they are part of a process
(e.g. business process with a step involving the use of a
computer program).
Question
One of these cannot be patented:
A. A useful machine
B. A product
C. A process
D. Discoveries, scientific theories, and mathematical
methods.
Question
A. A useful machine
B. A product
C. A process
D. Discoveries, scientific theories, and mathematical
methods.
Question
A. An improvement of a machine, product, or process.

B. Micro-organisms
C. The theory of relativity
D. Non-biological and microbiological processes
Question
A. An improvement of a machine, product, or process.

B. Micro-organisms
C. The theory of relativity
D. Non-biological and microbiological processes
Question
One of these can be patented:
A. In the case of drugs and medicines, the mere discovery of new

form or new property of a known substance which does not result
in the enhancement of the known efficacy of that substance, or
the new discovery of any new property or new use for a known
substance.
B. The improved process for making pre-cast tiles which resulted in
durability of the tiles.
C. Schemes, rules and methods of performing mental acts, playing
games or doing business, and computer programs.
D. Methods for treatment of the human body by surgery or therapy
and diagnostic methods practiced on the human or animal body.
Question
A. In the case of drugs and medicines, the mere discovery of new

form or new property of a known substance which does not result
in the enhancement of the known efficacy of that substance, or
the new discovery of any new property or new use for a known
substance.
B. The improved process for making pre-cast tiles which resulted in
durability of the tiles.
C. Schemes, rules and methods of performing mental acts, playing
games or doing business, and computer programs.
D. Methods for treatment of the human body by surgery or therapy
and diagnostic methods practiced on the human or animal body.
Question
A. Plant varieties or animal breeds or essentially

biological process for the production of plants or
animals.
B. Aesthetic creations.
C. Anything which is contrary to public order or morality.
D. An improvement in mascots used in restaurants by the
use of a device to move the facial parts of the mascot.
Question
A. Plant varieties or animal breeds or essentially

biological process for the production of plants or
animals.
B. Aesthetic creations.
C. Anything which is contrary to public order or morality.
D. An improvement in mascots used in restaurants by the
use of a device to move the facial parts of the mascot.
Question
One of these is not a condition of patentability:
A. Novelty, which means it does not form part of a prior art.

B. Involvement of inventive step, which means that it is not obvious
to a person skilled in the art.
C. Durability
D. Industrial applicability, which means that it can be produced and
used in an industry.
Question
One of these is not a condition of patentability:
A. Novelty, which means it does not form part of a prior art.

B. Involvement of inventive step, which means that it is not obvious
to a person skilled in the art.
C. Durability
D. Industrial applicability, which means that it can be produced and
used in an industry.
Question
A. The patent belongs to the inventor, his heirs, or assigns.

B. Even if the contract provides otherwise, the person who
commissioned a work will own the patent.
C. When two or more persons jointly make an invention, the patent
belongs to them jointly.
D. The person who commissioned a work will own the patent.
Question
A. The patent belongs to the inventor, his heirs, or assigns.

B. Even if the contract provides otherwise, the person who
commissioned a work will own the patent.
C. When two or more persons jointly make an invention, the patent
belongs to them jointly.
D. The person who commissioned a work will own the patent.
Question
A. An employee who made an invention in the course of his
employment owns the patent, if that is not part of his regular
duties.
B. An employee owns the patent if he made an invention in the
course of employment if that is not part of his duties even if he
used the time, facilities and materials of the employer.
C. An employer owns the patent for an invention if an employee
made it as a result of the performance of his regularly assigned
duties.
D. The employer owns the patent for an invention if an employee
duties even if there is an agreement to the contrary.
Question
A. An employee who made an invention in the course of his
employment owns the patent, if that is not part of his regular
duties.
B. An employee owns the patent if he made an invention in the
course of employment if that is not part of his duties even if he
used the time, facilities and materials of the employer.
C. An employer owns the patent for an invention if an employee
duties.
D. The employer owns the patent for an invention if an employee
duties even if there is an agreement to the contrary.
TRADEMARKS
A. DEFINITION OF MARKS, COLLECTIVE MARKS,

TRADENAMES
What is a trademark and how does it differ from a trade
name?
A: Any visible sign capable of distinguishing the goods
(trademark) or services (service mark) of an enterprise. A
trade name is a name or designation identifying or
distinguishing an enterprise.
TRADEMARKS
Collective Mark
Q: What is a collective mark?

A: A "collective mark" or collective trade‐name" is a mark or
trade‐name used by the members of a cooperative, an
association or other collective group or organization. (Sec.
40, R.A. 166)
Functions of Trademark
What are the functions of trademark?

1. To point out distinctly the origin or ownership of the
articles to which it is affixed.
2. To secure to him who has been instrumental in bringing
into market a superior article or merchandise the fruit
of his industry and skill
3. To prevent fraud and imposition. (Etepha v. Director of
Patents, G.R. No. L‐20635, Mar. 31, 1966)
ACQUISITION OF OWNERSHIP OF MARK
Q: How are marks acquired?
A: Marks are acquired solely through registration. (Sec.
122, IPC)
Q: What marks may be registered?

A: Any word, name, symbol, emblem, device, figure, sign,
phrase, or any combination thereof except those
enumerated under Section 123, IPC.
ACQUISITION OF OWNERSHIP OF MARK
Q: What are the requirements for a mark to be registered?
A:
1. A visible sign (not sounds or scents); and
2. Capable of distinguishing one’s goods and services from
another.
DOCTRINE OF SECONDARY
MEANING
Q: What is the doctrine of secondary meaning?
A: This doctrine is to the effect that a word or phrase originally
incapable of exclusive appropriation with reference to an article
on the market, because it is geographical or otherwise
descriptive, may nevertheless be used exclusively by one
producer with reference to his article so long as in that trade
and to that branch of the purchasing public, the word or
phrase has come to mean that the article was his product. (G.
and C. Merriam Co. v. Saalfield, 198 F. 369, 373, cited in Ang v.
Teodoro, G.R. No. L‐48226, Dec. 14, 1942)
DOCTRINE OF SECONDARY MEANING
Q: Is there an infringement of trademark when two similar

goods use the same words, “PALE PILSEN”?
A: No, because “pale pilsen” are generic words descriptive

of the color (pale) and of a type of beer (pilsen), which is a
light bohemian beer with strong hops flavor that originated
in the City of Pilsen in Czechoslovakia. Pilsen is a primarily
geographically descriptive word, hence, non‐registrable
and not appropriable by any beer manufacturer (Asia
Brewery, Inc. v. CA, G.R. No. 103543, July 5, 1993).
Question
Laberge, Inc., manufactures and markets after‐shave lotion, shaving cream,
deodorant, talcum powder and toilet soap, using the trademark “PRUT”, which is
registered with the Phil. Patent Office. Laberge does not manufacture briefs and
underwear and these items are not specified in the certificate of registration. JG
who manufactures briefs and underwear, wants to know whether, under our laws,
he can use and register the trademark “PRUTE” for his merchandise. What is your
advice?
A: Yes, he can use and register the trademark “PRUTE” for his merchandise. The
trademark registered in the name of Laberge Inc. covers only after‐shave lotion,
shaving cream, deodorant, talcum powder and toilet soap. It does not cover briefs
and underwear. The limit of the trademark is stated in the certificate issued to
Laberge Inc. It does not include briefs and underwear which are different products
protected by Laberge’s trademark. JG can register the trademark “PRUTE” to cover
its briefs and underwear (Faberge Inc. v. IAC, G.R. No. 71189, Nov. 4, 1992) (1994 Bar
Question)
ACQUISITION AND OWNERSHIP OF
TRADE NAME
Q: How are trade names acquired?
A: Trade names or business names are acquired

through adoption and use. Registration is not
required. (Sec. 165, IPC)
TEST TO DETERMINE CONFUSING SIMILARITY
BETWEEN MARKS
Q: What are the tests in determining whether there is a trademark
infringement?
A:
Dominancy test – Focuses on the similarity of the prevalent features of the
competing marks. If the competing trademark contains the main or essential
or dominant features of another, and confusion is likely to result,
infringement takes place. (Asia Brewery v. CA, G.R. No. 103543, 5 July
1993)
Totality or holistic test – Confusing similarity is to be determined on the

basis of visual, aural, connotative comparisons and overall impressions
engendered by the marks in controversy as they are encountered in the
marketplace.
Question
N Corporation manufactures rubber shoes under the

trademark “Jordann” which hit the Philippine market in
1985, and registered its trademark with the Bureau of
Patents, Trademarks and Technology in 1990. PK Company
also manufactures rubber shoes with the trademark
“Javorski” which it registered with BPTTT in 1978. In
1992, PK Co adopted and copied the design of N
Corporation’s “Jordann” rubber shoes, both as to shape
and color, but retained the trademark “Javorski” on its
products. May PK Company be held liable to N Co? Explain.
Question
A: PK Co may be liable for unfairly competing against N

Co. By copying the design, shape and color of N
Corporation’s “Jordann” rubber shoes and using the same
in its rubber shoes trademarked “Javorski,” PK is
obviously trying to pass off its shoes for those of N.
(Converse Rubber Co. v. Jacinto Rubber & Plastics Co.,
G.R. Nos. 27425, 30505, Apr. 28, 1980) (1996 Bar
Question)
UNFAIR COMPETITION
Q: What distinguishes infringement of trademark from unfair competition?
UNFAIR COMPETITION
Q: What is the right protected under unfair competition?
A: A person who has identified in the mind of the public the
goods he manufactures or deals in, his business or services
from those of others, whether or not a registered mark is
employed, has a property right in the goodwill of the said
goods, business or services so identified, which will be
protected in the same manner as other property rights. (Sec.
168.1, IPC)
TRADE NAMES OR BUSSINESS NAMES
Q: What is a trade name or business name?

A: Any individual name or surname, firm name, device nor
word used by manufacturers, industrialists, merchants,
and others to identify their businesses, vocations or
occupants (Converse rubber Corp. vs. Universal Rubber
Products, GR No. L‐27425, L‐30505, April 28, 1980).
TRADE NAMES
Q: What are the limitations on use of trade name or business name?

A: A person may not:
1. Use any name or designation contrary to public order or morals
2. Use a name if it is liable to deceive trade circles or the public as to the
nature of the enterprise identified by that name. (Sec. 165.1, IPC)
3. Subsequently use a trade name likely to mislead the public as a third
party. (Sec. 165.2, b, IPC)
4. Copy or simulate the name of any domestic product (for imported
products).
5. Copy or simulate a mark registered in accordance with the provisions of
IPC (for imported products).
6. Use mark or trade name calculated to induce the public to believe that the
article is manufactured in the Philippines, or that it is manufactured in
any foreign country or locality other than the country or locality where it
is in fact manufactured.
(Sec. 166, IPC).
COPYRIGHTS
Q: What is copyright?
A: A right over literary and artistic works which are

original intellectual creations in the literary and artistic
domain protected from the moment of creation. (Sec.
171.1, IPC)
BASIC PRINCIPLES
Q: What are the elements of copyrightability?

A:
1. Originality
2. Expression
BASIC PRINCIPLES
Q: What are the elements of originality?
A:
1. It is independently created by the author, and
2. It possesses some minimal degree of creativity
BASIC PRINCIPLES
Q: When does copyright vest?
A: Works are protected from the time of their creation,

irrespective of their mode or form of expression, as well
as of their content, quality and purpose.
COPYRIGHTABLE WORKS
1. Literary and Artistic Works
2. Derivative Works
Literary and Artistic Works
BOLD‐MAN‐GAS‐PAP‐CO
a. Books, pamphlets, articles and other writings
b. Lectures, sermons, addresses, dissertations prepared for Oral
delivery, whether or not reduced in writing or other material
form
c. Letters
d. Dramatic, choreographic works
e. Musical compositions
f. Works of Art
g. Periodicals and Newspapers
h. Works relative to Geography, topography, architecture or
science
Literary and Artistic Works
BOLD‐MAN‐GAS‐PAP‐CO
Xxx
i. Works of Applied art
j. Works of a Scientific or technical character
k. Photographic works
l. Audiovisual works and cinematographic works
m. Pictorial illustrations and advertisements
n. Computer programs; and
o. Other literary, scholarly, scientific and artistic works. (Sec.
172.1, IPC)
Derivative Works
a. Dramatizations, translations, adaptations, abridgements,
arrangements, and other alterations of literary or artistic
works;
b. Collections of literary, scholarly, or artistic works and

compilations of data and other materials which are original
by reason of the selection or coordination or arrangement of
their contents. (Sec. 173)
NON‐COPYRIGHTABLE WORKS
Q: What are the subjects not protected?
A:
1. Idea, procedure, system, method or operation, concept, principle,
discovery or mere data as such
2. News of the day and other items of press information
3. Any official text of a legislative, administrative or legal nature, as well
as any official translation thereof
4. Pleadings
5. Decisions of courts and tribunals – this refers to original decisions and
not to annotated decisions such as the SCRA or SCAD as these already fall
under the classification of derivative works, hence copyrightable
xxx
NON‐COPYRIGHTABLE WORKS
Q: What are the subjects not protected?
6. Any work of the Government of the Philippines
7. TV programs, format of TV programs (Joaquin v. Drilon, G.R.
No. 108946, Jan. 28, 1999)
8. Systems of bookkeeping; and
9. Statutes.
Question
Q: BJ Productions, Inc. (BJPI) is the holder/grantee of a copyright of

“Rhoda and Me”, a dating game show aired from 1970 to 1977.
Subsequently, however, RPN aired the game show “It’s a Date”, which
was produced by IXL Productions, Inc. (IXL). As such, an information
for copyright infringement was filed against RPN. The DOJ Secretary
directed the prosecutor to dismiss the case for lack of probable
cause. Was the decision of the DOJ Secretary correct?
Question
A: Yes, the format of a show is not copyrightable. The
copyright law enumerates the classes of work entitled to
copyright protection.The format or mechanics of a television
show is not included in the list of protected works. (Joaquin
v. Drilon, G.R. No. 108946, Jan. 28, 1999)
Question
Q: Rural is a certified public utility providing telephone service to
several communities in Manila. It obtains data for the directory from
subscribers, who must provide their names and addresses to obtain
telephone service. Feist Publications, Inc., is a publishing company
that specializes in area‐wide telephone directories covering a much
larger geographic range than directories such as Rural's. Feist
extracted the listings it needed from Rurals’s directory without its
consent. Are directories copyrightable?
Question
A: No, directories are not copyrightable and therefore the use of them
does not constitute infringement. The Intellectual Property Code
mandates originality as a prerequisite for copyright protection. This
requirement necessitates independent creation plus a modicum of
creativity. Since facts do not owe their origin to an act of authorship, they
are not original, and thus are not copyrightable.
(Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340)
RIGHTS OF A COPYRIGHT OWNER
1. Economic rights
2. Moral rights
3. Droit de suite (Right to proceeds in subsequent
transfers or follow up rights)
RULES ON OWNERSHIP OF COPYRIGHT
Q: Who owns copyright?
A:
 Author – Original literary and artistic works. (Sec.
178.1, IPC)
 Co‐authors – Works of joint authorship; in the absence

of agreement, their rights shall be governed by the
rules on co‐ownership.
RULES ON OWNERSHIP OF COPYRIGHT
In the course of employment, the copyright shall belong

to:
a. The employee, if not a part of his regular duties even if

the employee uses the time, facilities and materials of the
employer. (Sec. 178.3, IPC)
b. The employer, if the work is the result of the
performance of his regularly‐assigned duties, unless there
is an agreement, express or implied, to the contrary.
(ibid.)
Question
X came up with a new way of presenting a telephone directory in a

mobile phone, which he dubbed as the "iTel" and which uses lesser time
for locating names and telephone numbers. May X have his "iTel"
copyrighted in his name?
(A) No, because it is a mere system or method.

(B) Yes, because it is an original creation.
(C) Yes, because it entailed the application of X's intellect.
(D) No, because it did not entail any application of X's intellect.
Question
X came up with a new way of presenting a telephone directory in a

mobile phone, which he dubbed as the "iTel" and which uses lesser time
for locating names and telephone numbers. May X have his "iTel"
copyrighted in his name?
(A) No, because it is a mere system or method.

(B) Yes, because it is an original creation.
(C) Yes, because it entailed the application of X's intellect.
(D) No, because it did not entail any application of X's intellect.
Question
T, an associate attorney in XYZ Law Office, wrote a newspaper

publisher a letter disputing a columnist’s claim about an incident in the
attorney’s family. T used the law firm’s letterhead and its computer in
preparing the letter. T also requested the firm’s messenger to deliver
the letter to the publisher. Who owns the copyright to the letter?
(A) T, since he is the original creator of the contents of the letter.

(B) Both T and the publisher, one wrote the letter to the other who has
possession of it.
(C) The law office since T was an employee and he wrote it on the
firm’s letterhead.
(D) The publisher to whom the letter was sent.
Question
T, an associate attorney in XYZ Law Office, wrote a newspaper

publisher a letter disputing a columnist’s claim about an incident in the
attorney’s family. T used the law firm’s letterhead and its computer in
preparing the letter. T also requested the firm’s messenger to deliver
the letter to the publisher. Who owns the copyright to the letter?
(A) T, since he is the original creator of the contents of the letter.

(B) Both T and the publisher, one wrote the letter to the other who has
possession of it.
(C) The law office since T was an employee and he wrote it on the
firm’s letterhead.
(D) The publisher to whom the letter was sent.
Question
Apart from economic rights, the author of a copyright also has moral
rights which he may transfer by way of assignment. The term of
these moral rights shall last
(A) during the author's lifetime and for 50 years after his death.
(B) forever.
(C) 50 years from the time the author created his work.
(D) during the author's lifetime.
Question
Apart from economic rights, the author of a copyright also has moral
rights which he may transfer by way of assignment. The term of
these moral rights shall last
(A) during the author's lifetime and for 50 years after his death.
(B) forever.
(C) 50 years from the time the author created his work.
(D) during the author's lifetime.
Question
X invented a device which, through the use of noise, can recharge a

cellphone battery. He applied for and was granted a patent on his device,
effective within the Philippines. As it turns out, a year before the grant of
X's patent, Y, also an inventor, invented a similar device which he used in
his cellphone business in Manila. But X files an injunctive suit against Y to
stop him from using the device on the ground of patent infringement.
Will the suit prosper?
(A) No, since the correct remedy for X is a civil action for damages.
(B) No, since Y is a prior user in good faith.
(C) Yes, since X is the first to register his device for patent registration.
(D) Yes, since Y unwittingly used X’s patented invention.
Question
X invented a device which, through the use of noise, can recharge a

cellphone battery. He applied for and was granted a patent on his device,
effective within the Philippines. As it turns out, a year before the grant of
X's patent, Y, also an inventor, invented a similar device which he used in
his cellphone business in Manila. But X files an injunctive suit against Y to
stop him from using the device on the ground of patent infringement.
Will the suit prosper?
(A) No, since the correct remedy for X is a civil action for damages.
(B) No, since Y is a prior user in good faith.
(C) Yes, since X is the first to register his device for patent registration.
(D) Yes, since Y unwittingly used X’s patented invention.
QUESTION
Under the Intellectual Property Code, lectures, sermons, addresses or

dissertations prepared for oral delivery, whether or not reduced in
writing or other material forms, are regarded as
(A) non-original works.

(B) original works.
(C) derivative works.
(D) not subject to protection.
QUESTION
Under the Intellectual Property Code, lectures, sermons, addresses or

dissertations prepared for oral delivery, whether or not reduced in
writing or other material forms, are regarded as
(A) non-original works.

(B) original works.
(C) derivative works.
(D) not subject to protection.
QUESTION
One of these set of trademarks are not confusingly

similar:
A. Planters Cocktail Peanuts and Planters Cereal Peanuts

B. Gold Toe and Gold Top
C. Big Mac and Big Mak
D. Victorias and Valentino
QUESTION
One of these set of trademarks are not confusingly

similar:
A. Planters Cocktail Peanuts and Planters Cereal Peanuts

B. Gold Toe and Gold Top
C. Big Mac and Big Mak
D. Victorias and Valentino
QUESTION
One of these cannot be copyrighted:
A. Works of drawing, painting, architecture, sculpture,

engraving, or other works of art.
B. Original ornamental designs or models for articles of
manufacture.
C. Illustrations, maps, plans, sketches, charts and three
dimensional works relative to geography, topography,
architecture or science.
D. Sportswear
QUESTION
One of these cannot be copyrighted:
A. Works of drawing, painting, architecture, sculpture,

engraving, or other works of art.
B. Original ornamental designs or models for articles of
manufacture.
C. Illustrations, maps, plans, sketches, charts and three
dimensional works relative to geography, topography,
architecture or science.
D. Sportswear
QUESTION
One of these is not included in the exclusive economic rights of an
owner of a copyright:
A. Reproduction of the work or substantial party of the works.

B. Dramatization, translation, adaptation, abridgment, arrangement,
or other transformation of the work.
C. The first public distribution of the original and each copy of the
work by sale or other forms of transfer of ownership.
D. Reproduction of a chapter of a work for purposes of research.
QUESTION
One of these is not included in the exclusive economic rights of an
owner of a copyright:
A. Reproduction of the work or substantial party of the works.

B. Dramatization, translation, adaptation, abridgment, arrangement,
or other transformation of the work.
C. The first public distribution of the original and each copy of the
work by sale or other forms of transfer of ownership.
D. Reproduction of a chapter of a work for purposes of research.
QUESTION
A. Infringement consists in the doing by any person without the

consent of the owner of the copyright of anything the sole right to
do which is conferred by statute on the owner of the copyright.
B. A distributor of software who was authorized to produce only one
copy for each customer who made additional copies to be used for
other purposes is liable for infringement.
C. The copying of 88 percent of the words in dictionary of a previous
author is infringement.
D. A photographer who photographed the same scenic spots shown in
postcards and used a different arrangement and composition is
liable for infringement.
QUESTION
A. Infringement consists in the doing by any person without the

consent of the owner of the copyright of anything the sole right to
do which is conferred by statute on the owner of the copyright.
B. A distributor of software who was authorized to produce only one
copy for each customer who made additional copies to be used for
other purposes is liable for infringement.
C. The copying of 88 percent of the words in dictionary of a previous
author is infringement.
D. A photographer who photographed the same scenic spots shown in
postcards and used a different arrangement and composition is
liable for infringement.
DISTINCTIONS COPYRIGHT, PATENT AND
TRADEMARK
COPYRIGHT TRADEMARK PATENT
Subject matter of the right
Literary or artistic work Any sign to distinguish Technical solution of
which are intellectual the goods or services a problem which is
creations of an enterprise. new, involves an
inventive step, and
is industrially
applicable
Where rights registered
The National Library Intellectual Property Intellectual Property
Office Office
Duration of right
Generally up to 50 10 years 20 years from filing
years after the death of or priority date
the author
End
THANK YOU!!!

Law On Other Business Transactions 20181

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Law On Other Business Transactions 20181

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LAW ON OTHER BUSINESS

AN ACT PROVIDING FOR THE REHABILITATION OR

 February 2, 2010, Congress adopted R.A. No. 10142, the Financial

 Insolvency and rehabilitation– opposite ends of the pole

 Rehabilitation “contemplates a continuance of

The “design of the procedural rules plays a critical role

 The purpose of the FRIA is to allow an honest person —

FRIA covers the rehabilitation of:

(n) Group of debtors shall refer to and can cover only:

(t) Lien shall refer to a statutory or contractual claim or judicial charge on

This refers to a statutory or contractual claim or judicial

This refers to a statutory or contractual claim or judicial

(dd) Proceedings shall refer to judicial proceedings commenced by the court's

(hh) Rehabilitation receiver shall refer to the person or persons, natural or

(qq) Unsecured creditor shall refer to a creditor with an unsecured claim.

(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.

(ss) Voting creditor shall refer to a creditor that is a member of a class of

The term debtor does not include:

The FRIA establishes the procedures and requirements for

In case of partnerships, the petition for voluntary

In case of partnerships, the petition for voluntary

Section 94. Petition. –

Section 103. Application. –

Section 105. Petition; Acts of Insolvency. –

Section 28.Who May Serve as a Rehabilitation Receiver. –

Section 31.Powers, Duties and Responsibilities of the Rehabilitation

 It refers to the postponement by court order, of the

The purpose is to suspend or delay The purpose is to discharge the

The number of creditors is In case of involuntary insolvency,

Applies only to individual debtors Both juridical and individual debtors

No minimum amount of liabilities Voluntary liquidation – debt >P 500,000

What is the object of suspension of payment?

What is the financial condition of the applicant when he

 Where do you file a petition for suspension of payment?

 It is a state where a person’s liability is greater than his

(R.A. 9160, as amended by R.A. 9194)

1. To protect and preserve the integrity and confidentiality

“Money laundering is a crime whereby the proceeds of an

(b) violation of Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of

(c) graft and corruption under Section 3 paragraphs B, C, E, G, H and I

(d) plunder under Republic Act No. 7080, as amended;

(f) “jueteng” and “masiao’ punished as illegal gambling under Presidential

(i) swindling under Article 315 of the Revised Penal Code, as

(j) smuggling under Republic Act Nos. 455 and 1937;

(k) offenses related to e-commerce under Republic Act No. 8792,

(m) destructive arson and murder, as defined under the Revised

(o) felonies or offenses of a similar nature that are punishable under

Q: Alvin is jobless but is reputed to be a jueteng operator. He has never been

Q: In disclosing Alvin's bank accounts to the AMLC, did the bank

 *P500,000 is the threshold/controlling

Q: What are Covered Transactions?

(i) to develop educational programs on the pernicious effects of money

Q: What is the obligation of the covered institutions?

 Customer Identification - Covered institutions shall

Under the Anti-Money Laundering Law, a covered

(A) those doing business with such clients.

Under the Anti-Money Laundering Law, a covered

(A) those doing business with such clients.

 The provisions of existing laws to the contrary

 Record Keeping – All records of all transactions of

 Reporting of Covered Transactions. – Covered

 Reporting of covered or suspicious transactions to the AMLC by