Group 1

Abbas, Norwainie D.
Aquino, Rica
Borgoňos, JM
Daamo, Angela Mille T.
Flores, April Rose F.
Mag-usara, Chiqui
Panawidan, Hassanah-Catherine G.

SECURITIES AND REGULATIONS CODE

Prepared by: Aquino & Panawidan

NOTES

The SRC was enacted because of the State's policy to establish a socially conscious,
free market that regulates itself, encourage the widest participation of ownership in enterprises,
enhance democratization of wealth, promote development of the capital market, protect
investors, ensure full and fair disclosure about securities and minimize if not totally eliminate
isnider trading and other fraudulent practices.

ASPECTS OF REGULATION

Laws the regulate securities are called "Blue Skies laws" because they seek to prevent
the public from being victimized into speculative schemes.

IT PROTECTS THE PUBLIC AS FOLLOWS

by imposing a continuing duty of full disclosure of information to the public regarding

securities that are being
by requiring registration of securities
by requiring close monitoring securities & other circumstances that my affect the same.

FUNCTION OF REGULATION

• CONSUMER PROTECTION
• TO SATISFY THE INFORMATION NEEDS OF THE INVESTORS
• TO ENSURE ALLOCATIVE EFFICIENCY/ENSURE ACCURACY OF SECURITIES
PRICES
• TO IMPLEMENT GOVERNANCE RULES
• TO LESSEN AGENCY COST
• TO FOSTER ECONOMIC GROWTH, INNOVATION & ACCESS TO CAPITAL

INVESTMENT CONTRACT

An investment contract is defined as a "contract, transaction, scheme whereby a person

invests his money in a common enterprise and is led to expect profits primarily from the efforts
of others.

It is presumed to exist whenever a person seeks to use the money or property of other
on the promise of profits.

A common enterprise is deemed created when 2 or more investors pool their resources,
creating a common enterprise, even if the promoter receives nothing more than a broker's
commission.
REGISTRATION OF SECURITIES

Securities shall NOT be sold or offered for sale or distribution within the PH without a
registration statement duly filed and approved by the SEC.
In the case of Outstanding shares, the corporation is required to register if:

• they will conduct initial public offering

• if they will for listing on any exchange by way of introduction

In approving, SEC is not only concerned with the full disclosure given to the public but
also the merit of the securities themselves and the issuer.

"PUBLIC OFFERING" - any offering of securities to the public or to anyone, whether solicited
or unsolicited.

• publication in newspaper, magazine or printed reading material distributed within the PH

• presentation in any commercial place
• advertisement or announcement on radio, TV, telephone, or any other forms
• distribution or making available flyers. brochures or any material in public or commercial
place

PERIODIC AND REPORTS TO BE SUBMITTED TO THE SEC consistent with the policy
requiring full disclosure of information.
(Must be disclosed prior to and after the certificates are registered by the SEC)

“Prospectus” - document made by or on behalf of issuer, underwriter or dealer to sell or offer

securities for sale to the public through a registration statement filed with the SEC.

“Registration Statement” - application for the registration of securities required to be filed with
the SEC.

“Gun Jumping” - No person is allowed to sell or offer securities before the effectivity date of
the registration. Disseminating information relating to an offering of securities is prohibited unless
the registration is filed.

EXEMPT SECURITIES

a. Any security issued or guaranteed by the Government of the Philippines, or by any political
subdivision or agency thereof, or by any person controlled or supervised by, and acting as an
instrumentality of said Government.
b. Any security issued or guaranteed by the government of any country with which the
Philippines maintains diplomatic relations, or by any state, province or political subdivision
thereof on the basis of reciprocity: Provided, That the Commission may require compliance with
the form and content for disclosures the Commission may prescribe.
c. Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper
adjudicatory body.
d. Any security or its derivatives the sale or transfer of which, by law, is under the supervision
and regulation of the Office of the Insurance Commission, Housing and Land Use Rule Regulatory
Board, or the Bureau of Internal Revenue.
e. Any security issued by a bank except its own shares of stock.

EXEMPT TRANSACTIONS

a. At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee

in insolvency or bankruptcy.
b. By or for the account of a pledge holder, or mortgagee or any of a pledge lien holder selling
of offering for sale or delivery in the ordinary course of business and not for the purpose of
avoiding the provision of this Code, to liquidate a bonafide debt, a security pledged in good faith
as security for such debt.
c. An isolated transaction in which any security is sold, offered for sale, subscription or
delivery by the owner therefore, or by his representative for the owner’s account, such sale or offer
for sale or offer for sale, subscription or delivery not being made in the course of repeated and
successive transaction of a like character by such owner, or on his account by such representative
and such owner or representative not being the underwriter of such security.
d. The distribution by a corporation actively engaged in the business authorized by its articles
of incorporation, of securities to its stockholders or other security holders as a stock dividend or
other distribution out of surplus.
e. The sale of capital stock of a corporation to its own stockholders exclusively, where no
commission or other remuneration is paid or given directly or indirectly in connection with the
sale of such capital stock.
f. The issuance of bonds or notes secured by mortgage upon real estate or tangible personal
property, when the entire mortgage together with all the bonds or notes secured thereby are sold
to a single purchaser at a single sale.
g. The issue and delivery of any security in exchange for any other security of the same issuer
pursuant to a right of conversion entitling the holder of the security surrendered in exchange to
make such conversion: Provided, That the security so surrendered has been registered under this
Code or was, when sold, exempt from the provision of this Code, and that the security issued and
delivered in exchange, if sold at the conversion price, would at the time of such conversion fall
within the class of securities entitled to registration under this Code. Upon such conversion the par
value of the security surrendered in such exchange shall be deemed the price at which the securities
issued and delivered in such exchange are sold.
h. Broker’s transaction, executed upon customer’s orders, on any registered Exchange or
other trading market.
i. Subscriptions for shares of the capitals stocks of a corporation prior to the incorporation
thereof or in pursuance of an increase in its authorized capital stocks under the Corporation Code,
when no expense is incurred, or no commission, compensation or remuneration is paid or given in
connection with the sale or disposition of such securities, and only when the purpose for soliciting,
giving or taking of such subscription is to comply with the requirements of such law as to the
percentage of the capital stock of a corporation which should be subscribed before it can be
registered and duly incorporated, or its authorized, capital increase.
j. The exchange of securities by the issuer with the existing security holders exclusively,
where no commission or other remuneration is paid or given directly or indirectly for soliciting
such exchange.
k. The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines
during any twelve-month period.
l. The sale of securities to any number of the following qualified buyers:
i.Bank;
ii.Registered investment house;
iii.Insurance company;
iv.Pension fund or retirement plan maintained by the Government of the Philippines or any
political subdivision thereof or manage by a bank or other persons authorized by the
Bangko Sentral to engage in trust functions;
v.Investment company or;
vi.Such other person as the Commission may rule by determine as qualified buyers, on the
basis of such factors as financial sophistication, net worth, knowledge, and experience in
financial and business matters, or amount of assets under management.
SECURITIZATION

Securitization means the process by which assets are sold on a without recourse basis by
the Seller to a Special Purpose Entity (SPE) and the issuance of asset-backed securities (ABS) by
the SPE which depend, for their payment, on the cash flow from the assets so sold and in
accordance with the Plan approved by the SEC.

Asset-backed securities (ABS) – refers to the certificates issued by an SPE, the repayment of
which shall be derived from the cash flow of the assets in accordance with the Plan for
securitization.

Special Purpose Entity – means either a Special Purpose Corporation or a Special Purpose Trust.

Special Purpose Corporation – refers to a juridical person created in accordance with the
Corporation Code of the Philippines solely for the purpose of securitization and to which the Seller
makes a true and absolute sale of assets.

Special Purpose Test – means a trust administered by an entity duly licensed to perform trust
functions under the General Banking Law, and created solely for the purpose of securities and to
which the Seller makes a true and absolute sale of assets.

REVOCATION AND/OR REJECTION OF THE REGISTRATION OF SECURITIES

After due notice and hearing by issuing an order to such effect, the Commission may reject
the registration statement or revoke the registration of a security based on the following grounds:

1. The Issuer:

a. Has been judicially declared Insolvent;

b. Has violated any of the provisions of the Code, the Rules promulgated pursuant thereto, or
any order of the SEC of which the issuer has notice in connection with the offering for
which a registration statement has been filed;
c. Has been or is Engaged or is about to engage in fraudulent transactions;
d. Has made any False or misleading representation of material facts in any prospectus
concerning the issuer or its securities; or
e. Has failed to comply with any requirement that the Commission may impose as a condition
for registration of the security for which registration statement has been filed.
2. The registration statement is on its face Incomplete or inaccurate in any material respect or
includes any untrue statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
3. The issuer, any officer, director or Controlling person of the issuer, or any person
performing similar functions, or any underwriter has been convicted by a competent
judicial or administrative body, upon plea of guilty, or otherwise, of an offense involving
moral turpitude and/or fraud or is enjoined or restrained by the SEC or other competent
judicial or administrative body for violations of securities, commodities and other related
laws; and
4. Any issuer who refuses to permit the Examination to be made by the Commission.

Note: The Commission may compel the production of all the books and papers of the issuer, and
may administer oaths to, and examine the officers of such issuer or any other person connected
therewith as to its business and affairs.

Grounds for suspension of registration:

1. If any time, the Information contained in the registration statement filed is or has become
misleading, incorrect, inadequate or incomplete in any material respect.
2. The sale or offering for sale of the security registered thereunder may work or tend to work
a fraud.
 3. Pending Investigation of the security registered, if the Commission deems it necessary, to
ascertain whether the registration of such security should be revoked on any ground
specified the SRC.
4. Refusal to furnish information required by the Commission.

Grounds for suspension or cancellation of certificate of registration:

1. Fraud in procuring Registration.

2. Serious misrepresentation as to Objectives of corporation.
3. Refusal to comply with lawful order of SEC.
4. Continuous non-operation for at least 5 years.
5. Failure to file By-laws within required period.
6. Failure to file Reports.
7. Other similar grounds.

PERSONS INVOLVED IN THE ISSUANCE AND DISTRIBUTION

1. “Issuer” is the originator, maker, obligor, or creator of the security.

2. “Broker” is a person engaged in the business of buying and selling securities for the
account of others.
3. “Dealer” means any person who buys and sells securities for his/her own account in the
ordinary course of business.
4. “Clearing Agency” is any person who acts as intermediary in making deliveries upon
payment to effect settlement in securities transactions.
5. “Exchange” is an organized marketplace or facility that brings together buyers and sellers
and executes trades of securities and/or commodities.
6. “Promoter” is a person who, acting alone or with others, take initiative in founding and
organizing the business or enterprise of the issuer and receives consideration therefore.
7. “Underwriter” is a person who guarantees on a firm commitment and/or declared best
effort basis the distribution and sale of securities of any kind by another company.

3 TYPES OF UNDERWRITING:

1. A firm commitment underwriting

The underwriter (or syndicate) agrees to purchase all or specific amount of the offering for
cash, subject to certain “market-outs”

2. “Stand-by” underwriting

One in which a new issue is offered only to existing shareholders. The underwriters
agree to ‘stand-by’ and purchase any shares not purchased by existing shareholders, at the
expiration of specified period.

3. “Best-efforts” underwriting

The underwriter neither purchases the securities from the issuer nor resells them to the
investing public; the underwriter agrees only to act as an agent of the issuer in marketing the
issue to investor.

SECURITIES MARKET

Primary Transaction involves the issuance of the unsubscribed portion of the authorized capital
stock of the corporation.

Secondary Transaction involves sale of previously issued and subscribed shares.

Over-the-counter Transactions are those done outside the stock exchange; it is buying and
selling of security on a bilateral basis between the parties outside the exchange.

MANIPULATION OF SECURITY PRICES

The price of securities should be dictated by market forces. It cannot be pegged or

stabilized. The following acts are considered as manipulation of security prices and are therefore
prohibited:

1. Transactions intended to create a false or misleading appearance of active trading in any

listed security traded in an Exchange or any other trading market:

a. Wash Sale – is a transaction in which there is no genuine change in the beneficial

(or actual) ownership of a security;
b. Matched Sale – is a change of ownership in the securities by entering an order for
the purchase or sale of a security with the knowledge that a simultaneous order of
substantially the same size, time, and price, for the sale or purchase of any such
security, has or will be entered by or for the same or different parties; or
c. Similar transactions where there is no change of beneficial ownership.

2. Effecting a series of transactions that will raise or depress the price of securities to induce
the purchase or sale of securities respectively, or creating active trading to induce transactions
through manipulative devices:

a. Marking the close – buying and selling of securities at the close of the market in
an effort to alter the closing price of these securities;
b. Painting the tape – engaging in a series of transactions effected by brokers in
securities that are reported publicly to give the impression or illusion of activity or price
movement in a security, which may trick investors into trading in these securities
because of the alleged trading volume or indications of interest;
c. Squeezing the float – refers to taking advantage of a shortage of securities in the
market by controlling the demand side and exploiting market congestion during such
shortages in a way to create artificial prices. This prevents the actual market from
determining the price of these securities;
d. Hype and dump – engaging in buying activity at increasingly higher prices and
then selling securities in the market at the higher prices;
e. Boiler room operations – refers to activities that involve the use of high pressure
sale tactics such as direct mail offers or telephone follow-ups to investors to promote
purchase and sale of securities wherein there is misrepresentation in these securities.
This is a fraudulent transaction that tricks investors into trading in a fake market;
f. Daisy chain – refers to a series of purchase and sales of the same issue at
successively higher prices by the same group of people with the purpose of
manipulating prices are drawing unsuspecting investors into the market leaving them
defrauded of their money and securities;
g. Front-Running – is the prohibited practice of a broker-dealer executing its
proprietary order before the customer’s order for the same security. This violates the
fiduciary responsibility by the broker- dealer to its customer accounts as well as placing
the customer’s order first; or
h. Churning – involves the excessive trading of securities by a broker-dealer in a
customer’s discretionary account in order to generate commissions, without regard to
the customer’s investment objective.

2. Circulating or disseminating information that the price of any security listed in an

Exchange will or is likely to rise or fall because of manipulative market operations of any
one or more persons conducted for the purpose of raising or depressing the price of that
security for the purpose of inducing the purchase or sale of such security.
 3. To make false or misleading statement with respect to any material fact, which he knew or
had reasonable ground to believe was so false or misleading, for the purpose of inducing
the purchase or sale of any security listed or traded in an Exchange.

5. To effect, either alone or with others, any series of transactions for the purchase and/or sale
of any security traded in an exchange for the purpose of pegging, fixing or stabilizing the price
of such security, unless otherwise allowed by the Code or by rules of the Commission.

“PUT,” “CALL,” AND STRADDLE

The SRC prohibits members of an Exchange from directly or indirectly indorsing or guaranteeing
the performance of a put, call, or straddle.

“Put” is a transferable option or offer to deliver a given number of shares of stock at a stated price
at any given time during a stated period.

“Call” is transferable option to buy a specified number of shares at a stated price.

“Straddle” is a combination of put and call.

INSIDER TRADING

A purchase or sale made by an insider, or such insider’s spouse or his relative by affinity
or consanguinity within the second degree, legitimate or common-law, shall be presumed to be
effected while in possession of material non-public information if transacted after such information
came into existence but prior to the public dissemination of such information, and lapse of
reasonable time for the market to absorb such information.

Insider

A person who is in possession of corporate material information not generally available to

the public.

Who may be an insider:

1. The issuer;
2. A director or officer (or person performing similar functions) of, or a person controlling
the issuer;
3. A person whose relationship or former relationship to the issuer gives or gave him access
to material information about the issuer or the security that is not generally available to the
public;
4. A government employee, or director, or officer of an exchange, clearing agency and/or
self- regulatory organization who has access to material information about an issuer or a
security that is not generally available to the public; or
5. Constructive Insider – A person who learns such information by a communication from
any of the foregoing insiders

Other prohibited acts in an insider trading

1. For an insider to communicate material non- public information about the issuer or the
security to any person who by virtue of the communication thereby becomes an insider,
where the original insider communicating the information knows or has reason to believe
that such person will likely buy or sell a security of the issuer while in possession of such
information.
2. When a tender offer has commenced or is about to commence, it is unlawful for any person,
other than the tender offeror, who is in possession of material non-public information
relating to such tender offer to buy or sell the securities of the issuer that are sought or to
be sought by such tender offer, if such person knows or has reason to believe that the
information is non-public and has been acquired directly or indirectly from the tender offer,
 or those acting on its behalf, the issuer of the securities sought or to be sought by such
tender offer, or any insider of such issuer.
3. When a tender offer has commenced or is about to commence, it is also unlawful for any
tender offeror, or those acting on its behalf, the issuer of securities covered by such tender
offer, and any insider, to communicate material non-public information to any person
relating to the tender offer which would likely result in violation of prohibition of the
insider from trading.

Duties of an Insider

It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession
of material information with respect to the issuer or the security that is not generally available to
the public, unless:

1. The insider proves that the information was not gained from such relationship; or
2. If the other party selling to or buying from the insider (or his agent) is identified, the insider
proves:

a. That he disclosed the information to the other party, or

b. That he had reason to believe that the other party otherwise is also in possession of the
information.
Material non-public information

1. Information about the issuer or the security has not been generally disclosed to the public
and would likely affect the market price of the security after being disseminated to the
public and the lapse of a reasonable time for the market to absorb the information; or
2. Would be considered by a reasonable person important under the circumstances in
determining his course of action whether to buy, sell or hold a security.

SHORT SWING TRANSACTIONS

It is a transaction by the director, issuer or any person controlling the issuer (stockholder
owning 10% of the stocks), whereby such person buys and sells securities within six (6) months.

TENDER OFFER RULE

Tender offer means a publicly announced intention by a person acting alone or in concert
with other persons to acquire equity securities of a public company. It is also an offer by the
acquiring person to stockholders of a public company for them to tender their shares therein on the
terms specified in the offer.

It is an invitation by the acquirer of shares of a company for other stockholders to tender

their shares to the acquirer so that they may sell their shares in the same price and conditions as
the previously acquired shares.

It is given to all stockholders by:

a. Filing with the SEC a declaration to that effect, and paying the filing fee;
b. Furnishing the issuer a statement containing the information required of the issuers as SEC
may prescribe, including subsequent or additional materials; or
c. Publishing all requests or invitations for tender, or materials making a tender offer or
requesting or inviting letters of such security.

Purpose of Tender Offer

Tender offer is in place to protect the interest of minority stockholders of a target company
against any scheme that dilutes the share value of their investments. It affords such minority
shareholders the opportunity to withdraw or exit from the company under reasonable terms or a
chance to sell their shares at the same price as those of the majority stockholders.
Public company

1. Those listed on an exchange;

2. Those with assets of at least PHP 50M and having 200 shareholders owning at least 100
shares each; or
3. Those companies that have an effective registration statement under Section 12 of the SRC.

Mandatory Tender Offer

Tender offer is required to be made when:

1. Any person or group of persons acting in concert, who intends to acquire fifteen percent
(15%) of equity securities in a public company in one or more transactions within a period
of twelve (12) months.
2. Any person or group of persons acting in concert, who intends to acquire thirty five percent
(35%) of the outstanding voting shares or such outstanding voting shares that are sufficient
to gain control of the board in a public company in one or more transactions within a period
of twelve (12) months.
If the tender offer is oversubscribed, the aggregate amount of securities to be acquired at
the close of such tender offer shall be proportionately distributed across selling
shareholders with whom the acquirer may have been in private negotiations and other
shareholders. For purposes of SRC Rule 19.2.2, the last sale that meets the threshold shall
not be consummated until the closing and completion of the tender offer.
Note: If the acquisition is made through the Exchange trading system tender offer is not required
provided after acquisition through the Exchange trading system, they fail to acquire their target of
thirty five percent (35%) or such outstanding voting shares that is sufficient to gain control of the
board.
3. Any person or group of persons acting in concert, who intends to acquire thirty five percent
(35%) of the outstanding voting shares or such outstanding voting shares that are sufficient to gain
control of the board in a public company directly from one or more stockholders.
The sale of shares pursuant to the private transaction or block sale shall not be completed
prior to the closing and completion of the tender offer.
4. Any acquisition that would result in ownership of over fifty percent (50%) of the total
outstanding equity securities of a public company.
Note: Tender offer shall be made at a price supported by a fairness opinion provided by an
independent financial advisor or equivalent third party. The acquirer in such a tender offer shall
be required to accept all securities tendered.

Coverage of the application of tender offer

The mandatory tender offer rule covers not only direct acquisition but also indirect
acquisition or “any type of acquisition.”

The legislative intent of Section 19 of the Securities Regulation Code is to regulate

activities relating to acquisition of control of the listed company and for the protection of the
minority stockholders of a listed corporation. Whatever may be the method by which control of a
public company is obtained, either through the direct purchase of its stocks or through an indirect
means, mandatory tender offer applies. What is decisive is the determination of the power of
control. The legislative intent makes clear that the type of activity intended to be regulated is the
acquisition of control of the listed company through the purchase of shares. Control may be
effected through a direct and indirect acquisition of stock, and when this takes place, irrespective
of the means, a tender offer must occur.

Obligations of person making a tender offer

1. Make an announcement of his intention in a newspaper of general circulation, prior to the

commencement of the offer.
2. At least (2) business days prior to the date of the commencement of the tender offer:
a. File with the SEC a required form for tender offer including all exhibits thereto (and any
amendments thereto), with the prescribed filing fees; and
b. Hand deliver a copy of such form including all exhibits (and amendments thereto) to the
target company and its principal executive office and to each Exchange where such class of target
company’s securities are listed for trading.
3. Report the results of the tender offer by filing with the SEC, not later than ten (10) calendar
days after the termination of the tender offer, copies of the final amendments to the form.

Unlawful and prohibited acts relating to tender offers

It shall be unlawful for any person to:

1. Make any untrue statement of a material fact or omit to state any material fact necessary in
order to make statements made, in the light of the circumstances under which they are
made, not misleading; or
2. Engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with
any tender offer or request or invitation for tenders, or any solicitation of security holders
in opposition to or in favor of any such offer, request, or invitation.

MARGIN TRADING

A kind of trading that allows a broker to advance for the customer/investor part of the
purchase price of the security and to keep the same security as collateral for such advance.

Margin allowance standard

General Rule:

The credit extended must be for an amount not greater than, whichever is higher of:

1. 65% of the current market price of the security; or

2. 100% of the lowest market price during the preceding 36 calendar months, but not more
than 75% of the current market price.
Exception:
The Monetary Board may increase or decrease the above percentages, in order to achieve
the objectives of the Government with due regard for promotion of the economy and prevention
of the use of excessive credit.

Purposes of the margin requirements

They are primarily intended to achieve a macroeconomic purpose – the protection of the
overall economy from excessive speculation in securities. Their recognized secondary purpose is
to protect small investors.

Burden of compliance with margin requirements

The brokers and dealers have the burden of compliance with margin requirements.
Note: In securities trading, the brokers are essentially the counterparties to the stock transactions
at the Exchange. Since the principals of the broker are generally undisclosed, the broker is
personally liable for the contracts thus made. Brokers have a right to be reimbursed for sums
advanced by them with the express or implied authorization of the principal.
 PHILIPPINE COMPETITION ACT
(RA 10667)
Prepared by: Daamo & Flores

It is the primary law of the Philippines for promoting fair market competition. It aims to:
1. Improve consumer protection.
2. Help accelerate investment.
3. Help accelerate job creation in the country.
SCOPE OF THE PCA
These Rules shall apply to any entity engaged in trade, industry or commerce in the Republic of
the Philippines or in international trade, industry or commerce having direct, substantial and
reasonably foreseeable effects in the Philippines, including those that result from acts done outside
the territory of the Philippines.
WHEN NOT APPLICABLE
These Rules shall not apply to the combinations or activities of workers or employees nor to
agreements or arrangements with their employers when such combinations, activities, agreements,
or arrangements are designed solely to facilitate collective bargaining in respect of conditions of
employment.
PHILIPPINE COMPETITION COMMISSION
To implement the national competition policy and attain the objectives and purposes of this Act,
an independent quasi-judicial body is hereby created, which shall be known as the Philippine
Competition Commission (PCC).
COMPOSITION OF THE PCC
The Commission is composed of a Chairman and four Commissioners who serve for a fixed term
of seven years.
Appointments are made by the President and the law requires that he/she appoints senior experts
in economics, law, finance, commerce, or engineering.
PCC QUORUM
Three (3) members of the Commission shall constitute a quorum and the affirmative vote of three
(3) members shall be necessary for the adoption of any rule, ruling, order, resolution, decision or
other acts of the Commission.

POWERS AND FUNCTIONS OF THE PCA

1. Investigate anti-competitive agreements and abuses of market dominance.
2. Decide on mergers and acquisitions.
3. Impose sanctions and penalties.
4. Monitor and analyze the state of competition in markets.
5. Issue advisory opinions and guidelines on competition matters for the effective
enforcement of PCA.
6. Conduct, publish, and disseminate studies and reports on anti-competitive behavior and
agreements to inform and guide the industry and consumers.
Note: While it has original and primary jurisdiction in the enforcement and regulation of all
competition-related issues, the PCC works with relevant sector regulators on matters where the
regulators’ innate expertise and knowledge in the sector are critical.
Question: How does the PCC conduct investigations?
In September 2017, the PCC issued its Rules of Procedure, which governs its investigations,
hearings, and proceedings (Except matters involving mergers and acquisitions unless otherwise
provided in the issuances and guidelines governing the same). In initiating and conducting
investigations, the PCC shall be guided by the enforcement priorities set by the Commission.
Investigations on possible violations of the PCA can be triggered by:
• A verified complaint (A verified complaint contains a statement that the complainant files a
complaint and that he/she read the allegations and verified that these allegations are true to the best
of his/her knowledge and can be supported by records);
• Motu proprio or PCC’s own initiative to look into a case; or
• Referral by a concerned regulatory agency.
On the basis of any of these triggers, the PCC, through its Enforcement Office, shall conduct a
fact finding or preliminary inquiry (PI) to determine whether reasonable grounds exist to
conduct a full administrative investigation (FAI) for any violation of the PCA, its Implementing
Rules and Regulations (IRR), or other competition laws. The PI shall, in all cases, be completed
by the Enforcement Office within ninety (90) days.
Upon finding reasonable grounds, an FAI follows the PI to determine whether there is sufficient
basis to charge an entity for violation of the PCA, its IRR, or other competition laws. After an FAI,
the Enforcement Office shall either file the case with the Commission (assuming there is a
sufficient basis for violation) or, otherwise, close the investigation.
If there is sufficient basis, the Commission then proceeds with adjudication, to determine whether
substantial evidence of a violation of the PCA, its IRR or other competition laws exists, and to
justify the imposition of appropriate penalties and remedies. Final orders or decisions of the
Commission may be appealed before the Court of Appeals in accordance with the Rules of Court.

PROHIBITED ACTS UNDER THE PCA

1. ANTI-COMPETITIVE AGREEMENTS
Anti-competitive agreements are those that substantially prevent, restrict, or lessen competition.
The agreement may be any type or form of contract, arrangement, or understanding between or
among businesses to fix prices or manipulate bids.
Note: It does not matter if the said agreement is formal or informal, explicit (i.e., written or
announced) or tacit, or in written or oral (i.e., verbal) form. It is illegal for business rivals to act
together in ways that can limit competition or hinder other businesses from entering the market.
• The following agreements, between or among competitors, are per se prohibited:

a. PRICE FIXING - restricting competition as to price, or components thereof, or other terms

of trade.

Businesses agree to directly or indirectly fix purchase or selling price, instead of letting
supply and demand determine the prices of goods and services.

b. BID RIGGING - fixing the price at an auction or in any form of bidding, including cover
bidding, bid suppression, bid rotation and market allocation, and other analogous practices
of bid manipulation.

Businesses agree to fix prices at an auction or manipulate bids, forcing buyers to select the
higher-priced “pre-selected” bid instead of the best price.

• The following agreements, between or among competitors, which have the object or
effect of substantially preventing, restricting, or lessening competition shall be
prohibited:

a. OUTPUT LIMITATION - setting, limiting, or controlling production, markets, technical

development, or investment.

Businesses agree to limit production by restricting output or setting quotas, creating an

artificial shortage in the market that subsequently drives up prices
 b. MARKET SHARING - dividing or sharing the market, whether by volume of sales or
purchases, territory, type of goods or services, buyers or sellers, or any other means.
Businesses divide the market and claim dominance according to territory, customer
demographic, sales volume or type, creating local monopolies that deprive consumers of
choice.
Question: How does the Commission determine the existence of an anti-competitive conduct?
In determining whether anti-competitive agreement or conduct has been committed, the
Commission shall:
1. Define the relevant market allegedly affected by the anti-competitive agreement or conduct;
2. Determine if there is actual or potential adverse impact on competition in the relevant market
caused by the alleged agreement or conduct, and if such impact is substantial and outweighs the
actual or potential efficiency gains that result from the agreement or conduct;
3. Adopt a broad and forward-looking perspective, recognizing future market developments, any
overriding need to make the goods or services available to consumers, the requirements of large
investments in infrastructure, the requirements of law, and the need of our economy to respond to
international competition, but also taking account of past behavior of the parties involved and
prevailing market conditions;
4. Balance the need to ensure that competition is not prevented or substantially restricted and the
risk that competition efficiency, productivity, innovation, or development of priority areas or
industries in the general interest of the country may be deterred by overzealous or undue
intervention; and
5. Assess the totality of evidence on whether it is more likely than not that the entity has engaged
in anti-competitive agreement or conduct including whether the entity’s conduct was done with a
reasonable commercial purpose such as but not limited to phasing out of a product or closure of a
business, or as a reasonable commercial response to the market entry or conduct of a competitor.
Question: What are cartels?
A cartel is an organization formed by competitors in a specific industry, which enables them to set
prices or control levels of production. Agreements to form cartels or to collude are considered anti-
competitive agreements.
2. ABUSE OF DOMINANT POSITION
A business may become dominant in a certain industry by gaining a significant share in the
market or becoming an industry leader by virtue of years in operation.
The Competition Act also prohibits entities from abusing their dominant position by
engaging in conduct that would substantially prevent, restrict or lessen competition.
In the conduct of their business, dominant companies – considering their size, scope, and
position of economic strength – may have a disproportionately severe effect on the market. The
PCA defines abuse of dominant position as a conduct of an entity, whether a company or an
individual, with dominant position that substantially prevents, restricts, or lessens competition in
the market.Thus -
Dominant Position refers to a position of economic strength that an entity or entities hold
which makes it capable of controlling the relevant market independently from any or a
combination of the following: competitors, customers, suppliers, or consumers.
Presumption
Presumption of market dominant position if the market share of an entity in the relevant
market is at least fifty percent (50%), unless a new market share threshold is determined by the
Commission for that particular sector. [Sec. 27]
WHAT IS PROHIBITED
Having a dominant position is not in itself prohibited by the Competition Act. As is the case in
most established competition regimes, it is the abuse of a dominant position that is prohibited.
There is an abuse of dominant position when the following acts occur:
1. Selling goods or services below cost with the object of driving competition out of the
relevant market. Provided that in the Commission’s evaluation of this fact, it shall consider
whether such entity or entities had no such object and that the price established was in good
faith to meet or compete with the lower price of a competitor in the same market selling
the same or comparable product or service of like quality. Also known as PREDATORY
PRICING.
2. Imposing barriers to entry or committing acts that prevent competitors from growing within
the market in an anti-competitive manner, except those that develop in the market as a
result of or arising from a superior product or process, business acumen, or legal rights or
laws.
3. Making a transaction subject to acceptance by the other parties of other obligations which,
by their nature or according to commercial usage, have no connection with the transaction.
4. Setting prices or other terms or conditions that discriminate unreasonably between
customers or sellers of the same goods or services, where such customers or sellers are
contemporaneously trading on similar terms and conditions, where the effect may be to
lessen competition substantially; Provided, that the following shall be considered
permissible price differentials:
a. Socialized pricing for the less fortunate sector of the economy.
b. Price differentials which reasonably or approximately reflect differences in the cost
of manufacture, sale, or delivery resulting from differing methods, technical conditions, or
quantities in which the goods or services are sold or delivered to the buyers or sellers.
c. Price differential or terms of sale offered in response to the competitive price of
payments, services, or changes in the facilities furnished by a competitor; and
d. Price changes in response to changing market conditions, marketability of goods or
services, or volume.
5. Imposing restrictions on the lease or contract for sale or trade of goods or services
concerning where, to whom, or in what forms goods or services may be sold or traded, such as:
a. fixing prices, or
b. giving preferential discounts or rebate upon such price, or
c. imposing conditions not to deal with competing entities where the object or effect of the
restrictions is to prevent, restrict or lessen competition substantially: Provided, that nothing
contained in the Act shall prohibit or render unlawful:
a. Permissible franchising, licensing, exclusive merchandising, or exclusive
distributorship agreements, such as those which give each party the right to unilaterally
terminate the 6 agreement, unless found by the Commission to have substantial anti-
competitive effect;
b. Agreements protecting intellectual property rights, confidential information, or
trade secrets;
6. Making supply of particular goods or services dependent upon the purchase of other goods
or services from the supplier which have no direct connection with the main goods or services to
be supplied.
7. Directly or indirectly imposing unfairly low purchase prices for the goods or services of,
among others, marginalized agricultural producers, fisherfolk, micro-, small-, medium-scaled
enterprises, and other marginalized service providers and producers.
8. Directly or indirectly imposing unfair purchase or selling price on their competitors,
customers, suppliers, or consumers, Provided that prices that develop in the market as a result of
or due to a superior product or process, business acumen or legal rights or laws shall not be
considered unfair prices; and
9. Limiting production, markets, or technical development to the prejudice of consumers,
Provided, that limitations that develop in the market as a result of or due to a superior product or
process, business acumen, or legal rights or laws shall not be a violation of this Act.
Question: Are there any instances which are not considered as an abuse of dominant
position?
The ff. may not necessarily be considered an abuse of dominant position:
(1) Having a dominant position in a relevant market that does not substantially prevent, restrict or
lessen competition; or
(2) Any conduct which contributes to improving production or distribution of goods or services
within the relevant market, or promoting technical and economic progress while allowing
consumers a fair share of the resulting benefit. [Sec. 15]
MERGER AND ACQUISITIONS (M&As)
“Merger” refers to the joining of two (2) or more entities into an existing entity or to form a new
entity, including joint ventures.
“Acquisition” refers to the purchase or transfer of securities or assets, through contract or other
means, for the purpose of obtaining control by:
1. One (1) entity of the whole or part of another;
2. Two (2) or more entities over another; or
3. One (1) or more entities over one (1) or more entities.
M&As can benefit consumers because they may lead to businesses that operate more
efficiently, enable the transfer of technologies, broaden access to capital and increase productivity.
However, there are M&As that harm competition and can be disadvantageous to consumers.

POWER OF THE COMMISSION TO REVIEW MERGERS AND ACQUISITION

The Commission, motu proprio or upon notification as provided under these Rules, shall
have the power to review mergers and acquisitions having a direct, substantial and reasonably
foreseeable effect on trade, industry, or commerce in the Philippines, based on factors deemed
relevant by the Commission.

In conducting this review, the Commission shall:

1) Assess whether a proposed merger or acquisition is likely to substantially prevent, restrict,

or lessen competition in the relevant market or in the market for goods and services as may be
determined by the Commission; and

2) Take into account any substantiated efficiencies put forward by the parties to the proposed
merger or acquisition, which are likely to arise from the transaction.

Question: What are the covered transactions?

The Commission shall have the power to review mergers and acquisitions based on factors deemed
relevant by the Commission. [Sec. 16]

RELEVANT MARKET DEFINED

Relevant market refers to the market in which a particular good or service is sold and which is a
combination of the relevant product market and the relevant geographic market, defined as
follows:

1. A relevant product market comprises all those goods and/or services which are regarded
as interchangeable or substitutable by the consumer or the customer, by reason of the goods
and/or services’ characteristics, their prices, and their intended use; and
2. The relevant geographic market comprises the area in which the entity concerned is
involved in the supply and demand of goods and services, in which the conditions of
 competition are sufficiently homogenous and which can be distinguished from neighboring
areas because the conditions of competition are different in those area.

For purposes of determining the relevant market, the following factors, among others, affecting
the substitutability among goods or services constituting such market and the geographic area
delineating the boundaries of the market shall be considered:

(a) The possibilities of substituting the goods or services in question, with others of
domestic or foreign origin, considering the technological possibilities, extent to which
substitutes are available to consumers and time required for such substitution;

(b) The cost of distribution of the good or service, its raw materials, its supplements and
substitutes from other areas and abroad, considering freight, insurance, import duties
and non-tariff restrictions; the restrictions imposed by economic agents or by their
associations; and the time required to supply the market from those areas;

(c) The cost and probability of users or consumers seeking other markets; and

(d) National, local or international restrictions which limit access by users or consumers to
alternate sources of supply or the access of suppliers to alternate consumers. [Sec. 24]

EVALUATION OF THE PCC

In evaluating the competitive effects of a merger or acquisition, the Commission shall endeavor to
compare the competitive conditions that would likely result from the merger or acquisition with
the conditions that would likely have prevailed without the merger or acquisition.

In its evaluation, the Commission may consider, on a case-to-case basis, the broad range of
possible factual contexts and the specific competitive effects that may arise in different
transactions, such as:

• the structure of the relevant markets concerned.

• the market position of the entities concerned.

• the actual or potential competition from entities within or outside of the relevant market.

• the alternatives available to suppliers and users, and their access to supplies or markets;
and

• any legal or other barriers to entry.

NOTIFICATION TO THE COMMISSION

Parties to the merger or acquisition agreement wherein the value of the transaction exceeds
Two Billion Two Hundred Million Pesos (P2,200,000,000.00) are prohibited from consummating
their agreement until thirty (30) days after providing notification to the Commission in the form
and containing the information specified in the regulations issued by the Commission. [Sec. 17]
If notice to the Commission is required for a merger or acquisition, then either of the ff. must each
submit a Notification Form and comply with the procedure set forth:
• All acquiring and acquired pre-acquisition ultimate parent entities; or
• Any entity authorized by the ultimate parent entity to file notification on its behalf.
The parties shall not consummate the transaction before the expiration of the relevant periods
provided in this Rule. [Rule 4, Sec.2(b), IRR]
In the formation of a joint venture (other than in connection with a merger or consolidation), the
contributing entities shall be deemed acquiring entities, and the joint venture shall be deemed the
acquired entity. [Rule 4, Sec.2(c), IRR]
In other words, the law provides for compulsory notification to the PCC by the parties to a merger
that meets the thresholds within 30 days from signing of definitive agreements relating to the
merger. The agreement is void if the parties do not comply with the notice requirement.
Question: Are there any exceptions to the notification requirements?
The Commission shall, from time to time, adopt and publish regulations stipulating exceptions or
exemptions from the notification requirement. [Sec. 19]
An internal restructuring within a group of companies is exempt from notification if the
acquiring and acquired entities have the same ultimate parent entity (UPE).
Mergers or acquisitions are not considered purely internal and, therefore, do not qualify for the
exemption, if the restructuring leads to a change in control.
Such exemption shall not prevent the Commission from commencing a motu proprio review of
mergers and acquisitions under the IRR. [PCC Clarificatory Note 16-002]
THRESHOLDS FOR COMPULSORY NOTIFICATION
In determining if the merger or acquisition falls beyond the threshold imposed by law and the PCC,
it is necessary to apply both the Size of Entity Test and the Size of Transaction Test.
SIZE OF ENTITY TEST.
The aggregate annual gross revenues in, into or from the Philippines, or value of the assets in the
Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities,
including that of all entities that the ultimate parent entity controls, directly or indirectly, exceeds
Five Billion Pesos (PhP5,000,000,000.00).
SIZE OF TRANSACTION TEST.
The value of the transaction exceeds Two Billion Pesos (PhP2,000,000,000.00).
1) With respect to a proposed merger or acquisition of assets in the Philippines if either
i. the aggregate value of the assets in the Philippines being acquired in the proposed
transaction exceeds Two Billion Pesos (PhP2,000,000,000.00); or
ii. the gross revenues generated in the Philippines by assets acquired in the Philippines
exceed Two Billion Pesos (PhP2,000,000,000.00).
2) With respect to a proposed merger or acquisition of assets outside the Philippines, if
i. the aggregate value of the assets in the Philippines of the acquiring entity exceeds Two
Billion Pesos (PhP2,000,000,000.00); and
ii. the gross revenues generated in or into the Philippines by those assets acquired outside
the Philippines exceed Two Billion Pesos (PhP2,000,000,000.00).
3) With respect to a proposed merger or acquisition of assets inside and outside the
Philippines, if
i. the aggregate value of the assets in the Philippines of the acquiring entity exceeds Two
Billion Pesos (PhP2,000,000,000.00); and
ii. the aggregate gross revenues generated in or into the Philippines by assets acquired in the
Philippines and any assets acquired outside the Philippines collectively exceed Two Billion
Pesos (PhP2,000,000,000.00).
The Commission shall, from time to time, adopt and publish regulations stipulating:
(a) The transaction value threshold and such other criteria subject to the notification requirement
of Section 17 of this Act;
(b) The information that must be supplied for notified merger or acquisition;
(c) Exceptions or exemptions from the notification requirement; and
(d) Other rules relating to the notification procedures. [Sec. 19]
Question: Which M&As violate the PCA?
Not all M&As are prohibited. The PCA prevents M&As only if they substantially lessen
competition in the Philippines. For instance, M&As that create companies with dominant market
power could potentially lessen, restrict, or prevent market competition.
The PCC conducts merger review to predict a proposed M&A’s competitive impact. The review
process involves rigorous economic analysis and investigation to determine whether a transaction
might harm consumers.
There are three triggers of merger review:
• Notification by merger parties;
• Motu proprio or PCC’s own initiative; and
• Third party complaints.
Prohibited mergers and acquisitions may, nonetheless, be exempt from prohibition by the
Commission when the parties establish either of the following:
1. The concentration has brought about or is likely to bring about gains in efficiencies that are
greater than the effects of any limitation on competition that result or likely to result from the
merger or acquisition agreement; or
2. A party to the merger or acquisition agreement is faced with actual or imminent financial failure,
and the agreement represents the least anti-competitive arrangement among the known alternative
uses for the failing entity’s assets:
3. Provided, That an entity shall not be prohibited from continuing to own and hold the stock or
other share capital or assets of another corporation which it acquired prior to the approval of this
Act or acquiring or maintaining its market share in a relevant market through such means without
violating the provisions of this Act
4. Provided further that the acquisition of the stock or other share capital of one or more
corporations solely for investment and not used for voting or exercising control and not to
otherwise bring about, or attempt to bring about the prevention, restriction, or lessening of
competition in the relevant market shall not be prohibited. [Sec. 21]
FINES AND PENALTIES
The PCC is empowered to impose fines and penalties on businesses whose conduct or activities
violate the PCA, those found to be in contempt, fail to comply with orders, or supply misleading
or false information to the PCC.
Question: What will the PCC do to an entity or entities found violating the PCA?
The PCA imposes four kinds of administrative penalties as follows:
1. Administrative fines for violations of Sections 14 (Anti-competitive Agreements), 15
(Abuse of Dominant Position), 17 (Compulsory Notification), and 20 (Prohibited Mergers
and Acquisitions).
In fixing the amount of fines, the Commission shall consider both the gravity and duration
of the violation. In cases involving basic necessities and prime commodities as defined in
the Price Act of 1992 (Republic Act No. 7581), the final fine shall be tripled.
2. Fines for failure to comply with an order of the Commission.
Businesses that fail or refuse to comply with a ruling, order, or decision issued by the
Commission are required to pay the penalty for each violation, and a similar amount of
penalty for each day afterwards, until the business fully complies.
These fines shall only accumulate daily starting on the 45th day from the time that the
Commission’s ruling, order, or decision was received.
3. Fines for the supply of incorrect or misleading information.
This fine is applicable to any entity that wittingly or unwittingly supplies incorrect or
misleading information in any document, application, or other paper filed with or submitted
 to the Commission; or supplies incorrect or misleading information in an application for a
binding ruling, a proposal for a consent judgment, proceedings relating to a show cause
order, or application for modification of the Commission’s ruling, order or approval, as the
case may be.
4. Fines for any other violation not specifically penalized under the relevant provisions of the
PCA.
The schedule of fines shall be increased by the Commission every five years to maintain
their real value from the time they were set.
Only the Court of Appeals and the Supreme Court may issue a temporary restraining order
or injunction against the PCC in the exercise of its duties and functions.
FORBEARANCE BY THE PHILIPPINE COMPETITION COMMISSION
The Commission may forbear from applying the provisions of this Act, for a limited time, in whole
or in part, in all or specific cases, on an entity or group of entities, if in its determination:
1. Enforcement is not necessary to the attainment of the policy objectives of this Act;
2. Forbearance will neither impede competition in the market where the entity or group of entities
seeking exemption operates nor in related markets; and
3. Forbearance is consistent with public interest and the benefit and welfare of the
consumers.[Sec.28]
A public hearing shall be held to assist the Commission in making this determination.
In the event that the basis for the issuance of the exemption order ceases to be valid, the order may
be withdrawn by the Commission. [Sec. 28]
Reporting possible violation of the PCA
Question: How can you help the PCC promote consumer welfare?
To be fully effective, competition policy must be supported by a culture of competition that is
shared by everyone – from the government to the private sector, civil society, and the general
public.
The PCC welcomes helpful information from the public. If you notice or are aware of a possible
violation of the PCA, do not hesitate to contact PCC.
You may reach PCC at (+632) 8771-9722 or email at queries@phcc.gov.ph
You may also visit PCC’s office at 25/F Vertis North Corporate Center 1, North Avenue, Quezon
City 1105.
The Philippine Competition Commission is open Mondays through Fridays, from 8:00 a.m. to 5:00
p.m. Submissions of notifications and complaints are accepted during these hours.
Note: The identity of the persons who provide information to PCC under condition of anonymity
is kept confidential. Further, the law protects confidential business information submitted to PCC.
 FOREIGN INVESTMENTS ACT OF 1991
Prepared by: Abbas

1.
MAIN FEATURES OF R.A. 7042

a. Introduced the system of “Negative Lists” under the policy that foreigners can now
invest in all activities or enterprises in the Philippines, except those covered in the
Negative Lists;
b. Liberalized domestic market access for investments activities not restricted in the
Negative List;
c. Liberalized definition of “Export Enterprise” to mean at least 60% export (from the
previous 70% export requirement);
d. Reduced bureaucracy in registration of foreign investment; and
e. Provides stable and transparent policies and procedure.

NOTE:

• SECTION 3 (a), RA 7042:

“Foreign Investments Negative List” or “Negative List” shall mean a list of areas of economic activity
whose foreign ownership is limited to a maximum of forty percent (40%) of the equity capital of the
enterprises engaged therein.

2.
APPLICATION OF FIA ‘91

- When foreign investment in the Philippines is not covered or does not seek incentives
under Omnibus Investment Code, foreign national or entity can ascertain the extent of
allowable foreign equity by simply referring to the Negative Lists, and filing
necessary application with the SEC.

3.
TYPES OF ENTERPRISES COVERED

- To understand FIA ‘91, a foreign national or entity must determine which of the two
kinds of enterprises are to be invested in, thus:

a. DOMESTIC MARKET ENTERPRISE

- An enterprise that produces goods for sale or renders services to the domestic market
entirely, or if exporting a portion of its output fails to consistently export at least 60%
thereof.
- Foreigners can invest as must as 100% equity, except in area included in Negative
Lists.
- If activity in Negative Lists, foreign ownership is generally limited to maximum 40%,
unless Constitution or other laws provide lower limit.
- Foreign ownership can reach 100% should foreign investor invest in an enterprise that
export at least 60% or more of its output. In this case foreign ownership may reach
100%.

However, waiver of foreign ownership limitation will not apply where the Constitution or other
laws provide for an absolute and definite limit on foreign ownership.

b. EXPORT ENTERPRISE
 - An export enterprise is a manufacturing, processing or service enterprise, which
exports 60% or more of its output, or a trader which purchases products manufactured
domestically or exports 60% or more of such purchases.
- As a general rule, there are no restrictions on the extent of foreign ownership (up to
100%) in export enterprises, unless the products and services fall within Negative
Lists A and B or utilize raw materials from depleting natural resources.

4.
FOREIGN INVESTMENT NEGATIVE LISTS

E.O 182 provided for First Regular Foreign Investment Negative List (RFINL) and
effectively displaced the Transitory Negative List.

a. FUNCTION – RFINL lists down business where entry of foreign investment is

denied or limited to a certain percentage.

• LIST A – Enumerates the areas of economic activities reserved for Philippine

nationals by constitutional mandate and specific laws, including exploitation of
natural resources, operation of public utilities, educational institutions, mass
media, labor recruitment and the retail trade.

• LIST B – Lists down activities where foreign ownership is listed for security,
defense, risk to health and morals and protection of small and medium scale
enterprise, including defense-related activities, such as the manufacture and
distribution of firearms and explosives including the manufacture and distribution
of dangerous drugs, gambling, nightclubs, bathhouse, massage parlors and other
similar activities. LIST B also restricts the entry of foreign investment in small
and medium sized domestic market enterprises (i.e., those with paid-in equity of
less than the equivalent of US$100,000 unless they involve advanced technology
as determined by the Department of Science and Technology); and export
enterprises which utilize raw materials from depleting natural resources, with
paid-in equity of less than the equivalent of US$100,000.

- Under the second RFINL, cooperatives, private security agencies, small-scale mining
have been reclassified from Negative List A to Negative List B, which allows up to
40% foreign ownership.

What remains in Negative List A, which expressly prohibits any foreign equity or
investment, are industries reserved solely for Filipino citizens and corporations, namely,
mass media and services involving practice of licensed professions.

5.
PROCEDURE OF REGISTRATION

– foreign national or entity not seeking to avail of incentives shall file an application of
registration as follows:

a. Corporations and partnership – with SEC

b. Single proprietorships – with DTI’s Bureau of Trade Regulation and Consumer
Protection (BTRCP)

6.
DEFINITION OF PHILIPPINE NATIONAL

– for purposes of determining the nationality of investor, “Philippine National” to mean:

a. A Filipino citizen, or 100% Filipino-owned domestic partnerships or associations;

 b. Corporations organized under Philippine laws, which at least 60% of capital stock
outstanding and entitled to vote is owned and held by Filipino citizens;
c. Foreign corporations registered as doing business in the Philippines under
corporation Code of which 100% of the capital stock outstanding and entitled to
vote is wholly owned by Filipino citizens;
d. Trustee of pension, employment retirement or separation benefits funds, where
trustee is a Philippine National and at least 60% of the Fund will accrue to the
benefits of Philippine nationals.

NOTE:

• SECTION 3 (a), RA 7042:

The term “Philippine National” shall mean a citizen of the Philippines or a domestic partnership or
association wholly owned by citizens of the Philippines;

or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines

or a corporation organized abroad and registered as doing business in the Philippine under the Corporation
Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly
owned by Filipinos

or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine
nationals:

Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and
Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock
outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the
Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both
corporations must be citizens of the Philippines, in order that the corporation shall be considered a Philippine
national; (as amended by R.A. 8179).

- Where corporation and its non-Filipino stockholders own stock in a SEC-registered

enterprise, at least 60% of members of Board of Directors of each of both corporation
must be citizens of the Philippines, in order that corporation shall be considered a
Philippine national. The control test shall be considered for this purpose.
7.
FURTHER LIBERALIZATION OF FOREIGN INVESTMENTS UNDER RA 8179
a. EXPANDED COVERAGE OF “PHILIPPINE NATIONAL”

- Expanded to include a corporation organized abroad, provided:

1. Registered as doing business in Philippines under Corporation Code;

2. 100% of outstanding voting capital stock is wholly owned by:
-Filipinos; or
-Trustee of funds for pension or other employee retirement. or separation benefits; Where:
Trustee is Philippine national and at least 60% of Fund will benefit
Philippine nationals.

b. ELIMINATION OF 3-YEAR PERIOD TO CHANGE STATUS

- Elimination of requirement that a domestic enterprise requires a period of 3 years of

consistent exports to change its status as an export enterprise.
c. INVESTMENT RIGHTS OF FORMER NATURAL-BORN FILIPINOS

- New Sec 9 which grants to former natural-born Filipinos same investment rights as
Philippine citizens in cooperatives, rural banks, thrift banks and private development
banks, financing companies.

- However: rights do not extend to activities reserved by Constitution, including exercise

of profession, defense related activities, retail trade activities, operating of security
agency, small-scale mining, rice and corn industry, and cockpit operation and
management.

d. LAND ACQUISITION RIGHTS OF FORMER NATURAL-BORN FILIPINOS

- New Sec 10 which grants to any natural born citizen who has lost his Philippine
citizenship and who has the legal capacity to enter into contract to become a transferee of
a private land up to a maximum of 5,000 square meters in case of urban land, pr 3
hectares in case of rural lang to be used by him for business or other purposes.

(a) In case of Married Couples – one of them may avail of the privilege;
PROVIDED: if both shall avail of such privilege, total shall not exceed the
maximum fixed.

(b) In Case Transferee Already Owns Urban or Rural Land for Business or
Other Purposes – shall still be entitled to be a transferee of additional urban or
rural land for business or other purposes which when added to those already
owned by him shall not exceed the maximum areas fixed.

(c) Right of Transferee – he may acquire not more than 2 lots which should be
situated in different municipalities or cities;; PROVIDED: (i) Total land area
thereof shall not exceed limits fixed; (ii) Transferee who has already acquired
urban land disqualified from acquiring rural land and vice versa.

8.
DOING BUSINESS IN THE PHILIPPINES

a. COVERING LAW

- Aside from direct investment participation discussed above, foreigners may “do
business in the Philippines.”
- This mode of investment is not available for incentives and is, therefore, governed by
the FIA ‘91 and the corporation code.

b. WHAT CONSTITUTES DOING BUSINESS

Under Sec. 3 (d), “doing business in the Philippines”, is deemed to include the following
acts:

(a) soliciting orders, service contracts, opening offices, whether called “liaison”
offices or branches;
(b) appointing representatives or distributors domiciled in the Philippines or who
in any calendar year stay in the country for a period or periods totaling one
hundred eighty (180) days or more;
(c) participating in the management, supervision or control of any domestic
business, firm, entity or corporation in the Philippines;
(d) any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts or works, or
the exercise of some of the functions normally incident to, and in progressive
 prosecution of, commercial gain or of the purpose and object of the business
organization.

c. QUALIFICATION TO DO BUSINESS IN PHILIPPINES

- Non-Philippine national may do business in the Philippines up to 100% of its capital;

PROVIDED:

(a) It does domestic market enterprise business outside Negative Lists;

(b) it is doing business as an export enterprise whose products or services do not
fall within Negative List A and B (except for defense-related activities which may
be approved or authorized);
(c) Provided further that, as required by existing laws, state of the applicant
allows reciprocity to Filipino citizens and corporations.

d. REGISTRATION UNDER FIA ‘91

- Passage of FIA ‘91 did away with the previous requirement that foreign nationals
seeking to do business in Philippines even without incentives must secure a BOI
certificate of authority, aside from a license from SEC and/or BTRCP.

- Registration requirements is the same for direct foreign investors and those merely
seeking to do business in the Philippines.
 DATA PRIVACY ACT

Prepared by: Mag-usara

WHAT IS DATA PRIVACY ACT?

Republic Act No. 10173, otherwise known as the Data Privacy Act is a law that seeks to protect
all forms of information, be it private, personal, or sensitive. It is meant to cover both natural and
juridical persons involved in the processing of personal information.

WHAT IS THE SCOPE?

As mentioned earlier, the Data Privacy Act applies to any natural or juridical persons involved in
the processing of personal information. It also covers those who, although not found or
established in the Philippines, use equipment located in the Philippines, or those who maintain
an office, branch, or agency in the Philippines

WHAT IS PROCESSING OF PERSONAL INFORMATION?

Under Sec. 3(j) of the Data Privacy Act, “[p]rocessing refers to any operation or any set of
operations performed upon personal information including, but not limited to, the collection,
recording, organization, storage, updating or modification, retrieval, consultation, use,
consolidation, blocking, erasure or destruction of data.”

In other words, processing of personal information is any operation where personal

information is involved. Whenever your information is, among other things, collected,
modified, or used for some purpose, processing already takes place.

WHAT IS PERSONAL INFORMATION?

Under Sec. 3(g) of the Data Privacy Act, “[p]ersonal information refers to any information
whether recorded in a material form or not, from which the identity of an individual is apparent
or can be reasonably and directly ascertained by the entity holding the information, or when put
together with other information would directly and certainly identify an individual.”

In other words, personal information is any information which can be linked to your identity,
thus making you readily identifiable

WHAT PRIVELEGED INFORMATION?

Under Sec. 3(k) of the Data Privacy Act, “[p]rivileged information refers to any and all forms of
data which under the Rules of Court and other pertinent laws constitute privileged
communication.” One such example would be any information given by a client to his lawyer.
Such information would fall under attorney-client privilege and would, therefore, be considered
privileged information.

DOES THE DIFFERENCE BETWEEN PERSONAL INFORMATION AND SENSITIVE

PERSONAL INFORMATION MATTER?

Yes. The law treats both kinds of personal information differently. Personal information may be
processed, provided that the requirements of the Data Privacy Act are complied with. On the
other hand, the processing of sensitive personal information is, in general, prohibited. The Data
Privacy Act provides the specific cases where processing of sensitive personal information is
allowed.

IS THERE A DIFFERENCE BETWEEN PERSONAL INFORMATION AND SENSITIVE

PERSONAL INFORMATION

Yes. While personal information refers to information that makes you readily identifiable,
sensitive personal information, as defined in Sec. 3(l) of the Data Privacy Act, refers to personal
information:
(1) About an individual’s race, ethnic origin, marital status, age, color, and religious,
philosophical or political affiliations;

(2) About an individual’s health, education, genetic or sexual life of a person, or to any
proceeding for any offense committed or alleged to have been committed by such person, the
disposal of such proceedings, or the sentence of any court in such proceedings;

(3) Issued by government agencies peculiar to an individual which includes, but not limited to,
social security numbers, previous or cm-rent health records, licenses or its denials, suspension or
revocation, and tax returns; and

(4) Specifically established by an executive order or an act of Congress to be kept classified.

Therefore, any information that can be categorized under any of the enumerated items are
considered sensitive personal information

ARE THERE ANY EXCEPTIONS TO THE APPLICATION OF THE DATA PRIVACY

ACT?
The Data Privacy Act explicitly states that its provisions are not applicable in the following
cases:

(a) Information about any individual who is or was an officer or employee of a government
institution that relates to the position or functions of the individual, including:

(1) The fact that the individual is or was an officer or employee of the government institution;

(2) The title, business address and office telephone number of the individual;

(3) The classification, salary range and responsibilities of the position held by the individual; and

(4) The name of the individual on a document prepared by the individual in the course of
employment with the government

(b) Information about an individual who is or was performing service under contract for a
government institution that relates to the services performed, including the terms of the contract,
and the name of the individual given in the course of the performance of those services;

(c) Information relating to any discretionary benefit of a financial nature such as the granting of
a license or permit given by the government to an individual, including the name of the
individual and the exact nature of the benefit;

(d) Personal information processed for journalistic, artistic, literary or research purposes;

(e) Information necessary in order to carry out the functions of public authority which includes
the processing of personal data for the performance by the independent, central monetary
authority and law enforcement and regulatory agencies of their constitutionally and statutorily
mandated functions. Nothing in this Act shall be construed as to have amended or repealed
Republic Act No. 1405, otherwise known as the Secrecy of Bank Deposits Act; Republic Act
No. 6426, otherwise known as the Foreign Currency Deposit Act; and Republic Act No. 9510,
otherwise known as the Credit Information System Act (CISA);

f) Information necessary for banks and other financial institutions under the jurisdiction of the
independent, central monetary authority or Bangko Sentral ng Pilipinas to comply with Republic
Act No. 9510, and Republic Act No. 9160, as amended, otherwise known as the Anti-Money
Laundering Act and other applicable laws; and

(g) Personal information originally collected from residents of foreign jurisdictions in

accordance with the laws of those foreign jurisdictions, including any applicable data
privacy laws, which is being processed in the Philippines
CAN THERE BE MORE THAN ONE PERSON WHO SHALL PERFORM THE FUNCTIONS
OF A DATA PROTECTION OFFICER IN AN ORGANIZATION?

Yes. The Implementing Rules and Regulations of the Data Privacy Act speaks of an individual
or individuals who shall perform the functions of a Data Protection Officer or a Compliance
Officer.

HOW IS PRIVILEGED INFORMATION TREATED BY THE DATA PRIVACY ACT?

Much like sensitive personal information, the processing of privileged information is prohibited
by the law.

WHAT ARE THE CASES WHERE THE PROCESSING OF SENSITIVE PERSONAL

INFORMATION AND PRIVILEGED INFORMATION IS ALLOWED?

Section 13 of the Data Privacy Act enumerates the cases where sensitive personal information
and privileged information may be processed. These are the following:

(a) The data subject has given his or her consent, specific to the purpose prior to the processing,
or in the case of privileged information, all parties to the exchange have given their consent prior
to processing;

(b) The processing of the same is provided for by existing laws and regulations: Provided, That
such regulatory enactments guarantee the protection of the sensitive personal information and
the privileged information: Provided, further, That the consent of the data subjects are not
required by law or regulation permitting the processing of the sensitive personal information or
the privileged information;
c) The processing is necessary to protect the life and health of the data subject or another person,
and the data subject is not legally or physically able to express his or her consent prior to the
processing;

(d) The processing is necessary to achieve the lawful and noncommercial objectives of public
organizations and their associations: Provided, That such processing is only confined and related
to the bona fide members of these organizations or their associations: Provided, further, That the
sensitive personal information are not transferred to third parties: Provided, finally, That consent
of the data subject was obtained prior to processing;

(e) The processing is necessary for purposes of medical treatment, is carried out by a medical
practitioner or a medical treatment institution, and an adequate level of protection of personal
information is ensured; or

(f) The processing concerns such personal information as is necessary for the protection of
lawful rights and interests of natural or legal persons in court proceedings, or the establishment,
exercise or defense of legal claims, or when provided to government or public authority.
 Rule 14 – SUMMONS
Prepared by: Borgoňos

Section 1. Clerk to issue summons. – Unless the complaint is on its face dismissible under
Section 1, Rule 9, the court shall, within five (5) calendar days from receipt of the initiatory
pleading and proof of payment of the requisite legal fees, direct the clerk of court to issue the
corresponding summons to the defendants. (1a)

DSD
Section 2. Contents. – The summons shall be directed to the defendant, signed by the
clerk of court under seal, and contain:

(a) The name of the court and the names of the parties to the action;

(b) When authorized by the court upon ex parte motion, an authorization for the
plaintiff to serve summons to the defendant;

(c) A direction that the defendant answer within the time fixed by these Rules; and

(d) A notice that unless the defendant so answers, plaintiff will take judgment by
default and may be granted the relief applied for.

A copy of the complaint and order for appointment of guardian ad litem, if any, shall
be attached to the original and each copy of the summons. (2a)

Section 3. By whom served. – The summons may be served by the sheriff, his or her
deputy, or other proper court officer, and in case offailure of service of summons by
them, the court may authorize the plaintiff - to serve the summons - together with the
sheriff.

In cases where summons is to be served outside the judicial region of the court where
the case is pending, the plaintiff shall be authorized to cause the service of summons.

If the plaintiff is a juridical entity, it shall notify the court, in writing, and name its
authorized representative therein, attaching a board resolution or secretary’s
certificate thereto, as the case may be, stating that such representative is duly
authorized to serve the summons on behalf of the plaintiff.

If the plaintiff misrepresents that the defendant was served summons, and it is later
proved that no summons was served, the case shall be dismissed with prejudice, the
proceedings shall be nullified, and the plaintiff shall be meted appropriate sanctions.

If summons is returned without being served on any or all the defendants, the court
shall order the plaintiff to cause the service of summons by other means available
under the Rules.

Failure to comply with the order shall cause the dismissal of the initiatory pleading
without prejudice. (3a)

Summons may be served through the following:

a. sheriff;
b. his/her deputy;
c. other proper court officer

Failure of service of summons (by those mentioned above):

- Plaintiff may authorize by the court, with the sheriff.

Service of summons outside the judicial region:

- Plaintiff shall be authorized to serve the summon
What if plaintiff is a juridical entity?
1. Notify the court in writing;
2. Name the authorized representative; and
3. Attach the board resolution or secretary’s certificate that he/she is authorized to serve the
summons.
Section 4. Validity of summons and issuance of alias summons[.] – Summons shall remain
valid until duly served, unless it is recalled by the court. In case of loss or destruction of
summons, the court may, upon motion, issue an alias summons.

There is failure of service after unsuccessful attempts to personally serve the summons on the
defendant in his or her address indicated in the complaint. Substituted service should be in
the manner provided under Section 6 of this Rule. (5a)

Section 5. Service in person on defendant.

– Whenever practicable, the summons shall be served by handing a copy thereof to the
defendant in person and informing the defendant that he or she is being served, or, if he or she
refuses to receive and sign for it, by leaving the summons within the view and in the presence
of the defendant. (6a)

Section 6. Substituted service. – If, for justifiable causes, the defendant cannot be
served personally after at least three (3) attempts on two (2) different dates, service may
be effected:

(a) By leaving copies of the summons at the defendant’s residence to a person at least
eighteen (18) years of age and of sufficient discretion residing therein;

(b) By leaving copies of the summons at [the] defendant’s office or regular place of
business with some competent person in charge thereof. A competent person
includes, but is not limited to, one who customarily receives correspondences for
the defendant;

(c) By leaving copies of the summons, if refused entry upon making his or her
authority and purpose known, with any of the officers of the homeowners’
association or condominium corporation, or its chief security officer in charge of
the community or the building where the defendant may be found; and

(d) By sending an electronic mail to the defendant’s electronic mail address, if allowed
by the court. (7a)

General rule: Personal service is the preferred mode of service of summons.

Exception: Substituted service

Proof of service shall:

a. Be made in writing by the server and
b. Set forth the manner, place, and date of service; any papers which have been served with the
process, and the name of the person who received the papers served
c. Be sworn to when made by a person, other than the sheriff or his or her deputy. [Sec. 21, Rule
14]

Section 7. Service upon entity without juridical personality. – When persons associated in an
entity without juridical personality are sued under the name by which they are generally or
commonly known, service may be effected upon all the defendants by serving upon any one
of them, or upon the person in charge of the office or place of business maintained in such
name. But such service shall not bind individually any person whose connection with the entity
has, upon due notice, been severed before the action was filed. (8a)
Service of summons upon entity without juridical personality – effected upon:
a. all the defendants by serving upon any one of them; or
b. the person in charge of the office or place of business maintained insuch name.

Note: The service of summons shall not bind individually any person whose connection with the
entity has, upon due notice, been severed before the action was filed.

Section 8. Service upon prisoners. – When the defendant is a prisoner confined in a jail or
institution, service shall be effected upon him or her by the officer having the management of
such jail or institution who is deemed as a special sheriff for said purpose. The jail warden
shall file a return within five (5) calendar days from service of summons to the defendant. (9a)

Section 9. Service consistent with international conventions. – Service may be made through
methods which are consistent with established international conventions to which the
Philippines is a party. (n)

Section 10. Service upon minors and incompetents. – When the defendant is a minor, insane
or otherwise an incompetent person, service of summons shall be made upon him or her
personally and on his or her legal guardian if he or she has one, or if none, upon his or her
guardian ad litem whose appointment shall be applied for by the plaintiff. In the case of a
minor, service shall be made on his or her parent or guardian. (10a)

Section 11. Service upon spouses. – When spouses are sued jointly, service of summons
should be made to each spouse individually. (n)

Section 12. Service upon domestic private juridical entity. – When the defendant is
a corporation, partnership or association organized under the laws of the Philippines with
a juridical personality, service may be made on the president, managing partner, general
manager, corporate secretary, treasurer, or in-house counsel of the corporation wherever
they may be found, or in their absence or unavailability, on their secretaries.

If such service cannot be made upon any of the foregoing persons, it shall be made
upon the person who customarily receives the correspondence for the defendant at its
principal office.

In case the domestic juridical entity is under receivership or liquidation, service of

summons shall be made on the receiver or liquidator, as the case may be.

Should there be a refusal on the part of the persons above-mentioned to receive summons
despite at least three (3) attempts on two (2) different dates, service may be made
electronically, if allowed by the court, as provided under Section 6 of this Rule. (11a)

Service of summons to domestic private juridical entities such as corporations can be made to the
following:
a. The president,
b. Managing partner,
c. General manager,
d. Corporate secretary,
e. Treasurer, or
f. In- house counsel

Note: In the absence of the president, managing partner, general manager, corporate secretary,
treasurer, or in-house counsel, the summons may be served on their secretary.
In case the secretary is also nowhere to be found, the summons can be served on the person who
customarily receives the correspondence for the defendant -- who could be the receptionist or
even the security guard at its principal office.

Should there be refusal by all of the previously mentioned recipients to receive the summons
despite at least three (3) attempts on two (2) different dates, service may be made
electronically with leave of court.
Section 13. Duty of counsel of record. – Where the summons is improperly served and a
lawyer makes a special appearance on behalf of the defendant to, among others, question the
validity of service of summons, the counsel shall be deputized by the court to serve summons
on his or her client. (n)

Section 14. Service upon foreign private juridical entit[ies]. – When the defendant is
a foreign private juridical entity which has transacted or is doing business in the
Philippines, as defined by law, service may be made on its resident agent designated in
accordance with law for that purpose, or, if there be no such agent, on the government
official designated by law to that effect, or onany of its officers, agents, directors or
trustees within the Philippines.

If the foreign private juridical entity is not registered in the Philippines, or has
no resident agent but has transacted or is doing business in it, as defined by law, such
service may, with leave of court, be effected outside of the Philippines through any of
the following means:

(a) By personal service coursed through the appropriate court in the foreign country
with the assistance of the [D]epartment of [F]oreign [A]ffairs;

(b) By publication once in a newspaper of general circulation in the country where

the defendant may be found and by serving a copy of the summons and the court
order by registered mail at the last known address of the defendant;

(c) By facsimile;

(d) By electronic means with the prescribed proof of service; or

(e) By such other means as the court, in its discretion, may direct. (12a)

Service of summons upon foreign private juridical entity - may be made on:
1. Its resident agent designated in accordance with law,
2. If there is no such agent, on the government official designate by law to that effect, or
3. On any of its officers, agents, directors, or trustees within the Philippines.

a. Foreign private juridical entity not registered in the Philippines; or

b. Has no resident agent but has transacted or is doing business in the Philippines

– Service of summons may be made outside the country through the following with leave of
court:
1. Personal service coursed through the appropriate court in the foreign country with the assistance
of the DFA;
2. Publication once in a newspaper of general circulation in the country where the defendant may
be found and by serving a copy of the summons and the court order by registered mail at the last
known address of the defendant;
3. Facsimile;
4. Electronic means with the prescribed proof of service; or
5. Other means as the court, in its discretion, may direct.
Section 15. Service upon public corporations.
– When the defendant is the Republic of the Philippines, service may be effected on the
Solicitor General; in case of a province, city or municipality, or like public corporations,
service may be effected on its executive head, or on such other officer or officers as the law or
the court may direct. (13a)

Service of summons upon public corporation -

Defendant: a. Republic of the Philippines
= Solicitor General
b. Province, City or Municipality, or like public corporations
= Executive head, or on such other officer or officers as the law or
the court may direct.

Section 16. Service upon defendant whose identity or whereabouts are unknown. – In
any action where the defendant is designated as an unknown owner, or the like, or
whenever his or her whereabouts are unknown and cannot be ascertained by diligent
inquiry, within ninety (90) calendar days from the commencement of the action, service
may, by leave of court, be effected upon him or her by publication in a newspaper of
general circulation and in such places and for such time as the court may order.

Any order granting such leave shall specify a reasonable time, which shall not be less
than sixty (60) calendar days after notice, within which the defendant must answer.
(14a)

Section 17. Extraterritorial service. – When the defendant does not reside and is not found in
the Philippines, and the action affects the personal status of the plaintiff or relates to, or the
subject of which is, property within the Philippines, in which the defendant has or claims a
lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in
part, in excluding the defendant from any interest therein, or the property of the defendant has
been attached within the Philippines, service may, by leave of court, be effected out of the
Philippines by personal service as under Section [5]; or as provided for in international
conventions to which the Philippines is a party; or by publication in a newspaper of general
circulation in such places and for such time as the court may order, in which case a copy of the
summons and order of the court shall be sent by registered mail to the last known address of
the defendant, or in any other manner the court may deem sufficient. Any order granting such
leave shall specify a reasonable time, which shall not be less than sixty (60) calendar days
after notice, within which the defendant must answer. (15a)

Section 18. Residents temporarily out of the Philippines. – When any action is commenced
against a defendant who ordinarily resides within the Philippines, but who is temporarily out
of it, service may, by leave of court, be also effected out of the Philippines, as under the
preceding [S]ection. (16a)

Section 19. Leave of court. – Any application to the court under this Rule for leave to effect
service in any manner for which leave of court is necessary shall be made by motion in writing,
supported by affidavit of the plaintiff or some person on his [or her] behalf, setting forth the
grounds for the application. (17a)
 Section 20. Return. – Within thirty (30) calendar days from issuance of summons by
the clerk of court and receipt thereof, the sheriff or process server, or person authorized
by the court, shall complete its service. Within five (5) calendar days from service of
summons, the server shall file with the court and serve a copy of the return to the
plaintiff’s counsel, personally, by registered mail, or by electronic means authorized by
the Rules.

Should substituted service have been effected, the return shall state the following:

(1) The impossibility of prompt personal service within a period of thirty (30) calendar
days from issue and receipt of summons;

(2) The date and time of the three (3) attempts on at least two (2) different dates to cause
personal service and the details of the inquiries made to locate the defendant
residing thereat; and

The name of the person at least eighteen (18) years of age and of sufficient discretion residing
thereat, name of competent person in charge of the defendant’s office or regular place of
business, or name of the officer of the homeowners’ association or condominium corporation
or its chief security officer in charge of the community or building where the defendant may
be found. (4a)

Section 21. Proof of service. – The proof of service of a summons shall be made in
writing by the server and shall set forth the manner, place, and date of service; shall
specify any papers which have been served with the process and the name of the person
who received the same; and shall be sworn to when made by a person other than a sheriff
or his or her deputy.

If summons was served by electronic mail, a printout of said e-mail, with a copy of the
summons as served, and the affidavit of the person mailing, shall constitute as proof of service.
(18a)

Section 22. Proof of service by publication. – If the service has been made by publication,
service may be proved by the affidavit of the publisher, editor, business or advertising
manager, to which affidavit a copy of the publication shall be attached and by an affidavit
showing the deposit of a copy of the summons and order for publication in the post office,
postage prepaid, directed to the defendant by registered mail to his or her last known address.
(19a)

Section 23. Voluntary appearance. – The defendant’s voluntary appearance in the action shall
be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant shall be deemed a voluntary
appearance. (20a)

-Nothing follows-