Page 1 of 6 | RFBT 0 ) REAL PHILIPPINE COMPETITION AC 4% EXCELLENCE ‘ATTY. NICKO SORIANO, CP. A PHILIPPINE COMPETITION ACT ATTY. NICKO SORIANO, CPA TOPIC OUTLINE: 1. Definition and Scope of Application 2. Prohibited Acts a. Anti-Competitive Agreements b. Abuse of Dominant Position c. Prohibited Mergers and Acquisitions d. Exceptions 3. Covered Transactions a. Thresholds for compulsory notification b._ Notifying entity . Period of notifications d. Exceptions PHILIPPINE COMPETITION ACT (RA No. 10667) DECLARATION OF POLICY: The efficiency of market competition as a mechanism for allocating goods and services is < generally accepted precept. The State recognizes that past measures undertaken to liberalize key sectors in the economy eed to be reinforced by measures that safeguard competitive conditions. The State also recognizes that the provision 0 equal opportunities to all promotes entrepreneurial spirit, encourages private investments, facilitates technolog} development and transfer and enhances resource productivity. Unencumbered market competition also serves the interes of consumers by allowing them to exercise their right of choice over goods and services offered in the market Pursuant to the constitutional goals for the national economy to attain a more equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged and the constitutional mandate that the State shall regulate or prohibit monopolies when the public interest so requires and that nc combinations in restraint of trade or unfair competition shail be allowed, the State shall (2) Enhance economic efficiency and promote free and fair competition in trade, industry and all commercial economic activities, as well as establish a National Competition Policy to be implemented by the Government of the Republic 0 the Philippines and all of its political agencies as a whole; (b) Prevent economic concentration which will control the production, distribution, trade, or industry that will unduly stil competition, lessen, manipulate or constrict the discipline of free markets; and (©) Penalize all forms of anti-competitive agreements, abuse of dominant position and anti-competitive mergers and acquisitions, with the objective of protecting consumer welfare and advancing domestic and international trade and economic development. APPLICABILITY: This Act shall be enforceable against any person or entity engaged in any trade, industry and commerce in the Republic of the Philippines. It shall likewise be applicable to international trade having direct, substantial, and reasonably foreseeable effects in trade, industry, or commerce in the Republic of the Philippines, including those that resul from acts done outside the Republic of the Philippines. Exclusion: This Act shall not apply to the combinations or activities of workers or em} arrangements with their employers when such combinations, activities, a ‘solely to facilitate collective bargaining in respect of conditions of employme iployees nor to agreements or greements, or arrangements are designed rent coke aun U aaa laa os) Effectiveness. Efficiency. Convenience Reena REAL EXCELLENCE ONLINE GPA REVIEW @ (074) 885.6774 @ 0916 840 0651 © support@reocparaviewph MAY 2023 CPA REVIEW SEASONPage Zor | rest us “REAL EXCELLENCE PHILIPPINE COMPETITION ACT DEFINITION OF TERMS: ‘Acquisition refers to the purchase of securities or assets, through coniract 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, — ‘Agreement refers to any type or form of contract, arrangement, understanding, collective recommendation, or __| concerted action, whether formal or informal, explicit of tacit, written or oral refers to any type or form of undertaking, collective recommendation, independent or concerted | action or practice, whether formal or informal: ‘Commission refers to the Philippine Competition Commission Confidential refers to information which concerns or relates to the operations, production, sales, shipments, business Purchases, transfers, identification of customers, inventories, or amount or source of any income, information profits, losses, expenditures Conduct Control + | refers to the ability to substantially influence or direct the actions or decisions of an entity, whether | by contract, agency or otherwise Dominant refers to a position of economic strength that an entity or entities hold which makes it capable of position controlling the relevant market independently from any or a combination of the following: competitors, customers, suppliers, or consumers Entity efers to any person, natural or juridical, sole proprietorship, partnership, combination or association in any form, whether incorporated or not, domestic or foreign, including those owned or controlled by the government, engaged directly or indirectly in any economic activity; Market tefers to the group of goods or services that are sufficiently interchangeable or substitutable and the object of competition, and the geographic area where said goods or services are offered Merger refers to the joining of two (2) or more entities into an existing entity or to form a new entity 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) Arelevant 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 concemed 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 areas PROHIBITED ACTS Prohibited Acts under the Philippine Competition Act includes 4. Anti-Competitive Agreements 2. Abuse of Dominant Position 3, Prohibited Mergers ANTI-COMPETITIVE AGREEMENT: a) The following agreements, between or among competitors, are per se prohibited 1) Restricting competition as to price, or components thereof, or other terms of trade, 2) Fixing 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 b) The following agreements, between or among competitors which have the object or effect of substantially preventing restricting or lessening competition shall be prohibited: 1) Setting, [limiting], or controlling production, markets, technical development, or investment; REO CPA REVIEW PHILIPPINES: y Effectiveness. Efficiency. Convenience www.reocpareview.ph REAL EXCELLENCE ONLINE CPA REVIEW @ (074) 6656774 @ 0916 8400661 © support@reocpareview.ph MAY 2023 CPA REVIEW SEASONPage 3 of 6| RFBT 08 , REAL ATTY. NICKO SORIANO, CPA EXCELLENCE PHILIPPINE COMPETITION ACT 2) 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, i ©) Agreements other than those specified in (a) and (b) of this section which have the object or effect of substantially Preventing, restricting or lessening competition shall also be prohibited Defense: An agreement may not necessarily be deemed a violation of this Act, if the transaction contributes to improving the production or distribution of goods and services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits Excluded from ‘competitors’: An entity that controls, is controlled by, or is under common control with another entity or entities, have common economic interests, and are not otherwise able to decide or act independently of each other, shall not be considered competitors for purposes of this section. ABUSE OF DOMINANT POSITION: It shall be prohibited for one or more entities to abuse their dominant position by engaging in conduct that would substantially prevent, restrict or lessen competition: a) 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 the entity or entities have no such object and 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; b) 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; ©) 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 ot 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 4) Socialized pricing for the less fortunate sector of the economy; 2) Price differential 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; 3) 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 4) Price changes in response to changing market conditions, marketability of goods or services, or volume; e) 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 fixing prices, giving preferential discounts or rebate upon such price, or 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 this Act shall prohibit or render unlawful: 1) Permissible franchising, licensing, exclusive merchandising or exclusive distributorship agreements such as those Which give each party the right to unilaterally terminate the agreement; or 2) Agreements protecting intellectual property rights, confidential information, or trade secrets; f) 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: g) Directly or indirectly imposing unfairly low purchase prices for the goods or services of, among others, marginalized agricultural producers, fisherfolk, micro-, small, medium-scale enterprises, and other marginalized service providers and producers; h) 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 "REO CPAREVIEWPHILIPPINES: Effectiveness. Efficiency. Convenience __www.reocpareview.ph’ REAL EXCELLENCE ONLINE CPA REVIEW © (074) 665.6774 @ 09168400061 © support@reocpareview.ph MAY 2023 CPA REVIEW SEASONPage 4 of 6| RFBT 08, REAL ATTY. NICKO SORIANO, CPA EXCELLENCE PHILIPPINE COMPETITION ACT }) Limiting production, markets or technical development to the prejudice of consumers, provided that limitations that Gevelop in the market as a result of or due to a superior product oF process, business acumen or legal rights or laws shall not be a violation of this Act Subject to the following 4 Nothing in this Act shall be construed or interpreted as a prohibition on having a dominant position in a relevant market or on acquiring. maintaining and increasing marke! share through legitimate means that do not substantially prevent restrict or lessen competition 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 may not necessarily be considered an abuise of dominant position. 3. That the foregoing shali not constrain the Commission or the relevant regulator from pursuing measures that would promote fair competition or more competition as provided in this Act. MERGERS AND ACQUISITIONS REVIEW OF MERGERS AND ACQUISITIONS: The Commission shall have the power to review mergers and acquisitions based on factors deemed relevant by the Commission. PROHISITED MERGERS AND ACQUISITIONS: Merger or acquisition agreements that substantially prevent, restrict or lessen competition in the relevant market or in the market for goods or services as may be determined by the Commission ‘shail De prohibited. EXCEPTIONS: 1. Merger or acquisition agreement may, nonetheless, be exempt from prohibition by the Commission when the parties establish either of the following: 3) 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 b) 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. 2. Anentity 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. 3. 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, Burden of Proof: The burden of proof for exemptions above lies with the parties seeking the exemption. A party seeking to rely on the exemption specified in 1(a) above must demonstrate that if the agreement were not implemented, significant efficiency gains would not be realized. Finality of Ridings on Mergers and Acquisitions: Merger or acquisition agreements that have received a favorable ruling from the Commission, except when such ruling was obtained on the basis of fraud or false material information, may not be challenged under this Act. COMPULSORY NOTIFICATION: Parties to the merger or acquisition agreement wherein the value of the transaction ‘one billi 4,000,000,000.00) 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. REO CPA REVIEW PHILIPPINES “ * © Effectiveness. Efficiency. Convenience www. reocpareview.ph REAL EXCELLENCE ONLINE CPA REVIEW © (074) 665 6774 @ 0916 840.0661 © support@reocpareview.ph MAY 2023 CPA REVIEW SEASONPage 5 of 6 | RFBT 08 Rone ATTY, NICKO SORIANO, CPA van, EXCELLENCE PHILIPPINE COMPETITION ACT he Commission shall promulgate other criteria, such as increased market share in the relevant market in oer inimum thresholds, that may be applied specifically to a sector, or across some or all sectors, in determining whether arties to a merger or acquisition shall notify the Commission . fect of no notice: lend . An agreement consummated in violation of this requirement to notify the Commission shall be considered void an 2. Subject the parties to an administrative fine of 1% to 5% of the value of the transaction. Request for further information; effect: Should the Commission deem it necessary, it may request further information that are reasonably necessary and directly relevant to the prohibition under Section 20 (Prohibited Mergers and Acquisitions) rom the parties to the agreement before the expiration of the thirty (30)-day period. The issuance of such a request has the effect of extending the period within which the agreement may not be consummated for an additional sixty (60) days, beginning on the day after the request for information is received by the parties. In no case shall the total period for review by the Commission of the subject agreement exceed ninety (90) days from initial notification by the parties Expiration of the period of review: When the period has expired and no decision has been promulgated for whatever reason, the merger or acquisition shall be deemed approved and the parties may proceed to implement or consummate it. Confidentiality: All notices, documents and information provided to or emanating from the Commission shall be subject to confidentiality rule except when the release of information contained therein is with the consent of the notifying entity or is mandatorily required to be disclosed by law or by a valid order of a court of competent jurisdiction, or of 2 government or regulatory agency, including an exchange Effect on the requirement of favorable recommendation: In the case of the merger or acquisition of banks, banking institutions, building and loan associations, trust companies, insurance companies, public utilities, educational institutions and other special corporations governed by special laws, a favorable or no-objection ruling by the Commission shall not be construed as‘dispensing of the requirement for a favorable recommendation by the appropriate government agency under Section 79 of the Corporation Code of the Philippines. A favorable recommendation by a governmental agency with a competition mandate shall give rise to a disputable presumption that the proposed merger or acquisition is not violative of this Act. Effect of Notification: If within the relevant periods mentioned above, the Commission determines that such agreement is prohibited and does not qualify for exemption, the Commission may 1. Prohibit the implementation of the agreement, 2. Prohibit the implementation of the agreement unless and until itis modified by changes specified by the Commission 3. Prohibit the implementation of the agreement unless and until the pertinent party or parties enter into legally enforceable agreements specified by the Commission. Notification Threshold: 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; . ©) Exceptions or exemptions from the notification requirement; and 4) Other rules relating to the notification procedures. FINES AND PENALTIES ADMINISTRATIVE FINES: The Commission may impose administrative fines of upto P100M for the first offense and P100M to P200M for the second offense for the investigations relative to the following: 1. Anti-Competitive Agreements; REO CPA REVIEW PHILIPPINES wnw.reocpareview,ph @ (074) 6656774 @ 0916 8400661 © Effectiveness. Efficiency. Convenience REAL EXCELLENCE ONLINE CPA REVIEW ‘Support@reocpareview.ph MAY 2023 CPA REVIEW SEASONPage 6 of 6 | RFBT 08 REAL ATTY. NICKO SORIANO, CPA EXCELLENCE PHILIPPINE COMPETITION ACT 2. Abuse of Dominant Position 3. Compulsory Notification on Mergers and Acquisitions 4. Prohibited Mergers and Acquisitions {In fixing the amount of the fine, the Commission shall have regard to both the gravity and the duration of the violation. FAILURE TO COMPLY WITH AN ORDER OF THE COMMISSION: An entity which fails or refuses to comply with a ruling, order or decision issued by the Commission shall pay a penalty of P50,000 to P2,000,000 for each violation and a similar ‘amount of penalty for each day thereafter until the said entity fully complies. Provided that these fines shall only accrue dally beginning forty-five (45) days from the time that the said decision, order or ruling was received. SUPPLY OF INCORRECT OR MISLEADING INFORMATION: The Commission may likewise impose upon any entity fines of up to P1,000,000 where, intentionally or negligently, they supply incorrect or misleading information in any document, application or other paper filed with or submitted to the Commission or supply 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. OTHER VIOLATIONS: Any other violations not specifically penalized under the relevant provisions of this Act shall be penalized by a fine P50,000 to P2,000,000. Provided that the schedule of fines indicated in this section shall be increased by the Commission every five (5) years to maintain their real value from the time it was set, CRIMINAL PENALTIES: An entity that enters into any anti-competitive agreement shall, for each and every violation, be penalized by imprisonment from two (2) to seven (7) years, and a fine of not less than fifty million pesos (P50,000,000.00) but not more than two hundred fifty million pesos (P250,000,000.00). The penalty of imprisonment shall be imposed upon the responsible officers, and directors of the entity. ‘When the entities involved are juridical persons, the penalty of. imprisonment shall be imposed on its officers, directors, or employees holding managerial positions, who are knowingly and willfully responsible for such violation "REO CPA REVIEW PHILIPPINES: woww.reacpareview.ph. ° sae ‘Effectiveness. Efficiency. Convenience : REAL EXCELLENCE ONLINE CPA REVIEW @ (074) 685 6774" 0916 840.0861 © suppori@reocpareview ph MAY 2023 CPA REVIEW SEASONPage 1 of 14 | REBT 0F EXCELLENCE aL ade ATTY. NICKO SORIANO, CPA GOVERNMENT PROCUREMENT LAW ATTY. NICKO SORIANO, CPA TOPIC OUTLINE: 1. General principles 2. Scope and application 3. Definition of terms 4. Procurement procedures + Preparation of bidding documents + Invitation to bid + Receipt and opening of bids + Bid evaluation + Post-qualification + _ Award, implementation and termination of the contract 5, Disclosure of relations 6. Alternative methods of procurement GOVERNMENT PROCUREMENT REFORM ACT (RA No. 9184) GENERAL PRINCIPLES, SCOPE AND APPLICATION DECLARATION OF POLICY: It is the declared policy of the State to promote the ideals of good governance in all its branches, departments, agencies, subdivisions, and instrumentalities, including government-owned and/or -controlled corporations and local government units, GOVERNING PRINCIPLES: All procurement of the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government -owned and/or-controlled corporations, government financial institutions and local government units, shall, in all cases, be governed by these principles: 2) Transparency in the procurement process and in the implementation of procurement contracts. ») Competitiveness by extending equal opportunity to enable private contracting parties who are eligible and qualified to participate in public bidding, Streamlined procurement process that wll uniformly apply to all government procurement. The procurement process shal simple and made adaptable to advances in modern technology in order to ensure an effective and efficient method System of accountability where both the public offcials directly or indirectly involved in the procurement process ag well as in the implementation of procurement contracts and the private parties that deal with govemment are, when warranted by circumstances, investigated and held liable for their actions relative thereto e) Public monitoring of the procurement process and the im guaranteeing that these contracts are awarded pursuant to the provisions of this Act and its implementing rules and regulations, and that all these contracts are performed strictly according to specifications, SCOPE AND APPLICATION: This act shall apply to the: 1. Procurement of infrastructure Projects 2. Goods and Consulting Services °) 4) Regardless of source of funds, whether local of foreign, by all branches and instrumentaliti ; . S of government, its seeeerenis,offees and agencies, including government-owned andior-controlled corporations and local acon subject to the provisions of Commonwealth Act No. 138, . Geek ats eee ele nT ee Senay eameceattareste Mite Naa) Ra a TG CNETPage 2 of 14 | RFBT 02 REAL ATTY, NICKO SORIANO, CPA, Ke Exc ‘Any treaty or international or executive agreement affecting the subject matter of this A ELLENCE GOVERNMENT PROCUREMENT LAW ct to which the Philippine government is signatory shall be observed. DEFINITION OF TERMS ‘Approved Budget forthe Contract (ABC) Talars to the budget for the contact duly approved by the Head of the Procuring Entity, as provided forin the General Appropriations Act andior continuing appropriations, in he National Government ‘Agencies; the Corporate Budget for the contract approved by the governing Boards, pursuant 1 E.0.No 518, series of 1979, in the case of Government Financial Institutions and State Universities and Colleges, and the Budget for the contract approved by the respective Sanggunian. in the case of Local Government Unis. BAC tefers to the Bids and Awards Committee Bidding Documents | refer to documents issued by the Procuring Entity as the basis for Bids, furnishing all information necessary for a prospective bidder to prepare @ bid for the Goods, Infrastructure Projects, and Consulting Services to be provided. _ Bid refers to signed offer or proposal submited by a supplier, manufacturer, distributor, contractor or consultant in response to the Bidding Documents, Competitive Bidding | refers to a method of procurement which is open to participation by any interested party and which consist of the following processes: advertisement, pre-bid conference, eligibility screening of bids, evaluations of bids, post - qualification, and award of contract, the specific requirements and mechanics of which shall be defined in the IRR to be promulgated under this Act. Consulting Services Tefer to services for Infrastructure Projects and other types of projects or activities of the Government requiring adequate external technical and professional experts that are beyond the capability and/or capacity of the government to undertake such as, but not limited to: (1) advisory and review services; (ii) pre investment or feasibility studies; (ii) design; (iv) construction supervision; (v) management and related services; and (vi) other technical services or special studies G-EPS refers to the Government Electronic Procurement System. Goods refer to all items, supplies, materials and general support services, except consulting services and infrastructure projects, which may be needed in the transaction of the public businesses or in the pursuit of any government undertaking, project or activity, whether in the nature of equipment, furniture, stationery, materials for construction, or personal property of any kind, including non ~ personal or contractual services such as the repait and maintenance of equipment and furniture, as well as trucking, hauling, janitorial, security, and related or analogous services, as well as procurement of materials and supplies provided by the procuring entity or such services. GPPB. ‘efers to the Government Procurement Policy Board Head of the Procuring Entity refers to: i. The head of the agency or his duly authorized official, for national government agencies; ‘The governing board or its duly authorized official, for government-owned andior-controlled corporations; or ii, The local chief executive, for local government units. Provided, That in a department, office or agency where the procurement is decentralized, the Head of each decentralized unit shall be considered as the Head of the Procuring Entity subject to the limitations and authority delegated by the head of the department, office or agency ; Infrastructure Projects include the construction, improvement, rehabilitation, demolition, repair, restoration or maintenance of roads and bridges, railways, airports, seaports, communication faciSlities, civil works components of information technology projects, irigation, flood control and drainage, water Supply, sanitation, sewerage and sold waste management systems, shore protection, energy/power and electrification facilities, national buildings, school buildin; i Construction projects of the government. ° Cea! | REO CPA REVIEW PHILIPPINES "= Effectiveness: Efficiency. Convenience ‘www.reocpareviewsph Soe “REAL EXCELLENCE ONLINE CPA REVIEW iors) 665.674 @os16 8400661 @yport@reocpareview.ph MAY 2023 CPA REVIEW SEASONae Page 3 of 14 | RFOT 09 y REAL ATTY, NICKO SORIANO, CPA EXCELLENCE GOVERNMENT PROCUREMENT LAW ONLIN IRR forte The Inplamenting fules and regulations to be promulgated in accordance with this Ret Portal seers fo a website that aggregates a wide variety of content for the purpose of attracting large number of users. Procurement sree othe anqusiion of Goods, Consiiling Services, and the contracting for Infrasiructi® Projects by the Procuring Entity. Procurement shall also include the lease of ‘goods and real estate. With respect to real property, its procurement shall be governed by the provisions ‘of Republic Act No.8974 entitled "An Act to Facilitate the Acquisition of Right-of Way Site or Location of National eet ont infrastructure Projects and for Other Purposes” and other applicable laws, rules and regulations. Frocuning Enily [refers to any branch, department, office, agency, or instrumentality of the government, including Ee ary pea and colleges, government-owned andior - controlled corporations, government aaa ary esttations, and local ‘goverment units procuring Goods, Consulting Services and Infrastructure Projects. PREPARATION OF BIDDING DOCUMENTS FORM AND CONTENTS OF BIDDING DOCUMENTS: The Bidding Documents shall be prepared by the Procuring Entity following the standard forms and manuals prescribed by the GPPB, The Bidding Documents shall include the following: a) Approved Budget for the Contract, 5). Instructions to Bidders, including criteria for eligibility, id evaluation and post-qualification, as well as the date, time land place of the pre-bid Conference (where applicable), submission of bids and opening of bids; ¢) Terms of Reference; d) Eligibility Requirements; ) Plans and Technical Specifications, f)_ Formof Bid, Price Form, and List of Goods or Bill of Quantities; {q) Delivery Time or Completion Schedule; h) Form and Amount of Bid Security; )_ Form and Amount of Performance Security and Warranty; and, |) Form of Contract, and General and special Conditions of Contract. ‘The Procuring Entity may require additional document requirements or specifications necessary to complete the information required for the bidders to prepare and submit their respective bids Reference to Brand Names: Specifications for the Procurement of Goods shall be based on relevant characteristics and/or performance requirements. Reference to brand names shall not be allowed. ‘Access to Information: In all stages of the preparation of the Bidding Documents, the Procuring entity shall ensure equal ccess to information. Prior to their official release, no aspect of the Bidding Documents shall be divulged or released on any prospective bidder or having direct or indirect interest in the project to be procured. INVITATION TO BID PRE-PROCUREMENT CONFERENCE: Prior to the issuance of the Invitation to Bid, the BAC is mandated to hold a pre- procurement conference on each and every procurement, except those contracts below a certain level or amount specified in the IRR, in which case, the holding of the same is optional. ‘The pre-procurement conference shall assess the readiness of the procurement in terms of confirming the certification of availability of funds, as well as reviewing all relevant documents and the draft Invitation to Bid, as well as consultants hired by the agency concerned and the representative of the end -user. ADVERTISING AND CONTENTS OF THE INVITATION TO BID: In line with the principle of transy : it rency and ‘competitiveness, all Invitations to Bid contracts under competitive bidding shall be advertised by the Procunng Entiy i such REO CPA REVIEW PHILIPPINES |” Effectiveness. Efficiency. Convenience www.reocpareview.ph REAL EXCELLENCE ONLINE CPA REVIEW Gora) 6656774 @o918 2400661 Qpport@reocpareview.ph MAY 2023 CPA REVIEW SEASONage 4 of 4 | rer 09 SRCELLENCE ATTY. cKO SORIANO, CPA " GOVERNMENT PROCUREMENT UN manner and for such length of time as may be necessary under the circumstances, in order to ensure the widest possible dissemination thereof, such as, but not limited to, posting in the Procuring Entity’s premises, in newspapers of general circulation, the G-EPS and the website of the Procuring Entity, if available. The details and mechanics of implementation shall be provided in the IRR to be promulgated under this Act. Contents: The Invitation to Bid shall contain, among others: a) Abrief description of the subject matter of the Procurement; b) A general statement on the criteria to be used by the Procuring entity for the eligibility check, the short listing of prospective bidders, in the case of the Procurement of Consulting Services the examination and evaluation of Bids, and Post-qualification; The date, time and place of the deadlines for the submission and receipt of the eligibility requirements, the pre-bid conference if any, the submission and receipt of bids, and the opening of bids; d) The Approved Budget for the Contract to be bid; e) The source of funds; ‘The period of availabilty of the Bidding Documents, and the place where these may be secured and; g) The contract duration; and Such other necessary information deemed relevant by the Procuring Entity. Pre-bid Conference: At least one pre-bid conference shall be conducted for each procurement, unless otherwise provided in the IRR. Subject to the approval of the BAC, a pre-bid conference may also be conducted upon the written request of any prospective bidder. The Pre-bid conference(s) shall be held within a reasonable period before the deadiine for receipt of the bids to allow prospective bidders to adequately prepare their bids, which shall be specified in the IRR RECEIPT AND OPENING OF BIDS “ELIGIBILITY REQUIREMENTS FOR THE PROCUREMENT OF GOODS AND INFRASTRUCTURE PROJECTS: The BAC or, under special circumstances specified in IRR, its duly designated organic office shall determine the eligibility of prospective bidders for the procurement of Goods and Infrastructure Projects, based on the bidders’ compliance with the eligibility requirements within the period set forth in the Invitation to Bid. The eligibility requirements shall provide for fair and equal access to all prospective bidders. The documents submitted in satisfaction of the eligibility requirements shall be made under oath by the prospective bidder or by his duly authorized representative certifying to the correctness of the statements made and the completeness and authenticity of the documents submitted A prospective bidder may be allowed to submit his eligibility requirements electronically. However, said bidder shall later on certify under oath as to correctness of the statements made and the completeness and authenticity of the documents submitted. ELIGIBILITY REQUIREMENTS AND SHORT LISTING FOR CONSULTING SERVICES: The Eligibility of prospective bidders for the Procurement of Consulting Services shall be determined by their compliance with the eligibility requirements prescribed for the competitive Bidding concemed, within the period stated in the Invitation to bid. The eligibility requirements shall provide for fair and equal access to all prospective bidders. The prospective bidder shall certify under oath as to the correctness of the statements made, and the completeness and authenticity of the documents submitted A prospective bidder may be allowed to submit his eligibility requirements electronically. However, said bidder shall later on certify under oath as to correctness of the statements made and the completeness and authenticity of the documents submitted ‘The eligible prospective bidders shall then be evaluated using numerical ratings on the basis of the short listing requirements Prescribed for the Competitive Bidding concemed, within the period stated in the Invitation to Bid to determine the shortlist of bidders who shall be allowed to submit their respective bids. REO CPAREVIEW PHILIPPINES Effectiveness. Efficiency. Convenience 2 aN a REAL EXCELLENCE ONLINE CPA REVIEW @pporte@reocpareview.ph MAY 2023 CPA REVIEW SEASON i074) 665674 Boars s40 0661Page 5 of 14 | RFBT 0: REAL ATTY. NICKO SORIANO, CPA EXCELLENCE coieniberrtcineuet SUBMISSION AND RECEIPT OF BIDS SUBMISSION AND RECEIPT OF BIDS: A bid shall have two(2) components, namely: 1, The technical components; and 2. The financial components ‘Subject to the following rules \ 1. The bids’ components should be in separate sealed envelopes, and which shall be submitted simultaneous! ly. 2. The bids shall be received by the BAC on such date, time and place specified in the invitation to bid. 3. The deadline for the receipt of bids shall be fixed by the BAC, giving the prospective bidders sufficient time to study and prepare their bids. The deadline shall also consider the urgency of the procurement involved. Bids submitted after the deadline shall not be accepted ‘The GPPB may prescribe innovative procedure for the submission, receipt and opening of bids through the G-EPS. MODIFICATION OF BIDS: A bidder may modify his bid, provided that this is done before the deadline for the receipt of bids. The modification shall be submitted in a sealed envelope duly identified as @ modification of the original bid and stamped received by the BAC. WITHDRAWAL OF BIDS: A bidder may, through a letter, withdraw his bid or express his intention not to participate in the bidding before the deadline for the receipt of bids. In such case, he shall no longer be allowed to submit another Bid for the same contract either directly or indirectly BID SECURITY: All Bids shall be accompanied by a Bid security, which shall serve as guarantee that, after receipt of the Notice of Award, the winning bidders shall enter into contract with the Procuring Entity within the stipulated time and furnish the required performance security. The specific amounts and allowable forms of the Bid security shall be prescribed in the IRR, BID VALIDITY: Bids and Bid securities shall be valid for such reasonable period of time indicated in the Bidding Documents. ‘The duration for each undertaking shall take into account the time involved in the process of Bid evaluation and award of contract BID OPENING: the BAC shall publicly open all bids at the time, date, and place specified in the bidding documents. The minutes of the bid opening shall be made available to the public upon written request and payment of a specified fee. BID EVALUATION PRELIMINARY EXAMINATION OF BIDS: Prior to Bid evaluation, the BAC shall examine first the technical components of the bids using “pass/fail” criteria to determine whether all required documents are present Only bids that are determined to contain all the bid requirements of the technical component shall be considered for opening and evaluation of their financial component. CEILING FOR BID PRICES: The ABC shall be the upper limit or ceiling for the Bid prices Bid prices that exceed this celling shall be disqualified outright from further participating in the biddi lowe mitt the amount of fe award, auld out asin eae bial lineal ~ REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience www .reocpareview.ph_ REAL EXCELLENCE ONLINE CPA REVIEW. ior) 665.6773 @oa168400661 — @pport@reocpareview.ph MAY 2023 CPA REVIEW SEASON.Page of 14 | RFBT 09 REAL ; EXCELLENCE te noc anee GOVERNMENT PROCUREMENT LAW BID FOR THE PROCUREMENT OF GOODS AND INFRASTRUCTURE PROJECTS: For the procurement of Goods and Infrastructure Projects, the BAC shall evaluate the financial component of the bids. The bids that passed the preliminary examination shall be ranked from lowest to highest in terms of their corresponding calculated price shall be referred to as the “Lowest Calculated Bid’ BID EVALUATION OF SHORT LISTED BIDDERS FOR CONSULTING SERVICES: For the Procurement of Consulting Services, the Bids of the short listed bidders shall be evaluated and ranked using numerical ratings in accordance with the evaluation criteria stated in the Bidding Documents, which shall include factors such as, but not limited to Experience Performance Quality or Personnel Price and ‘ Methodology ‘The Bids shall be ranked from highest to lowest in terms of their corresponding calculated ratings. The Bid with the highest calculated rating shall be the "Highest Rated Bid.” After approved by the Head of the Procuring Entity of the Highest Rated Bid, the BAC shall invite the bidder concemed for negotiation and/or clarification on the following items; Financial proposal submitted by the bidder Terms of reference ‘Scope of services Methodology and work program Personnel to be assigned to job Servicesifaciliies/data to be provided by the Procuring Entity concemed, and Provisions of the contract, Noesena When negotiations with first-in-rank bidder fails, the financial proposal of the second rank bidder shall opened for negotiations: Provided, that the amount indicated in the financial envelope shall be made as the basis for negotiations and the total contract amount shall not exceed the amount indicated in the envelope and the ABC Whenever necessary, the same process shall be repeated until the bid awarded to the winning bidder. POST-QUALIFICATION ‘OBJECTIVE AND PROCESS OF POST-QUALIFICATION: Post-qualification is the stage where the bidder with the Lowest Calculated Bid, in the case of Goods and Infrastructure Projects, or the Highest Rated Bid, in the case of Consulting Services, undergoes verification and validation whether he has passed all the requirements and conditions as specified in the Bidding Documents, If the bidder with the Lowest Calculated Bid or Highest Rated Bid passes alll the criteria for post-qualification, his Bid shall be considered: 1. The "Lowest Calculated Responsive Bid,” in the case of Goods and Infrastructure or 2. the "Highest Rated Responsive Bid,” in the case of Consulting Services. However, if a bidder falls to meet any of the requirements or conditions, he shall be “post-disqualified" and the BAC shall conduct the post-qualification on the bidder with the second Lowest Calculate Bid o7 Highest Rated Bid If the bidder with the second Lowest Calculated Bid or Highest Rated Bid is post-disqualified, the same procedure shall be repeated until the Lowest Calculated Responsive Bid or Highest Rated Responsive Bid is finally determined REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience www.reocpareview.ph REAL EXCELLENCE ONLINE CPA REVIEW @io74) 6656774 — @o916 840.0661 ~ ‘@yport@reocpareview.ph MAY 2073 CPA REVIEW SEASON4B Page 7 of 14 | RFBT 09 y REAL ATTY. NICKO SORIANO, CPA ™ EXCELLENCE GOVERNMENT PROCUREMENT LAW ‘mall cases, the contract shall be awarded only to the bidder with the Lowest Calculated Responsive Bid or Highest Rated Responsive Bid. FAILURE OF BIDDING: there shall be a failure of bidding if a. No bids are received; b. No bid qualifies as the Lowest Calculated Responsive Bid/Highest Rated Responsive Bid; or, : Whenever the bidder with the highest rated/owest calculated responsive bid refuses, without justifiable cause to accept the award of contract, as the case may be. Under any of the above instances, the contract shall be re-advertised and re-bid. The BAC shall observe the same process and set the new periods according to the same rules followed during the first bidding, ‘After the second failed bidding, however, the BAC may resort to negotiated procurement, as provided below. SINGLE CALCULATEDIRATED AND RESPONSIVE BID SUBMISSION: A single calculatedirated and responsive bid shall be considered for award if it falls under of the following circumstances 2. Ifatter advertisement, only one prospective bidder submits a Letter of Intent and/or applies for eligibility check, and meets the eligibility requirements or criteria, after which it submits a bid, which is found to be responsive to the bidding requirements; b. Ifafter the advertisement, more than one prospective bidder applies for eligibility check, but only one bidder meets the eligibility requirements or criteria, after which in submits a bid which is found to be responsive to the bidding requirements; or c. Matter the eligibility check, more than one bidder meets the eligibility requirements, but only one bidder submits, ‘a bid, and its bid is found to be responsive to the bidding requirements. In all instances, the Procuring Entity shall ensure that the ABC reflects the most advantageous prevailing price for the government AWARD, IMPLEMENTATION AND TERMINATION OF THE CONTRACT NOTICE AND EXECUTION OF AWARD: Within a period not exceeding fifteen (15) calendar days from the determination and declaration by the BAC of the Lowest Calculated Responsive Bid or Highest Rated Responsive Bid, and the recommendation of the award, the Head of the Procuring Entity or his duly authorized representative shall approve or disapprove the said recommendation. Notice of Award: In case of approval, the Head of the Procuring Entity or his duly authorized representative shall immediately issue the Notice of Award to the bidder with the Lowest Calculated Responsive Bid or Highest Rated Responsive Bid, Entering into the contract: 1 ‘Within ten (10) calendar days from receipt of the Notice of Award, the Winning bidder shall formall contract with the Procuring Entity ° Y enter into When further approval of higher authority is required, the approving authority for the contracts shall maximum of twenty (20) calendar days to approve or disapprove it. seas In the case of government-owned and/or -controlled corporations, the concemed board shall ‘said recommendation within thirty (30) calendar days from receipt thereof er iete Seton on ie 2; 3 Notice to Proceed: The Procuring Entity shail issue the Notice to Proceed to the winni inning bidder not later calendar days from the date of approval of the contract by the appropriate authority. All notices called for mine terme of the contract shall be effective only at the time of receipt thereof by the contractor. . ° REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience ‘www.reocpareview.ph " REAL EXCELLENCE ONLINE CPA REVIEW Qio7a) 665.6774 @osr6s400661 — @yport@reochareviewph MAY 2023 CPA REVIEW SEASON,Page 8 of 14 | RFaT 09 REAL ATTY. NICKO SORIANO, CPA , EXCELLENCE GOVERNMENT PROCUREMENT LAW PERIOD OF ACTION ON PROCUREMENT ACTIVITIES: The procurement procens from the: Siiaiinatemcnig oa award of contract shall not exceed three (3) months, or a shorter period to De i i concerned. The different procurement actives shall be completed within reasonable periods to be specified in the IRR. i is duly authorized representative, or by the lf no action on the contract is taken by the head of the procuring entity or by his concerned board, in the case government-owned ‘and/or -controlled corporations, within the periods specified above, the contract concerned shall be deemed approved. f guarantee for PERFORMANCE SECURITY: Prior to the signing of the contract, the winning bidder shall, as a measure o! the faithful performance of, and compliance with, his obligations under the contract prepared in accordance with ime Bidding Documents, bé required to post a performance security in such form and amount as specified in the Bidding Documents. FAILURE TO ENTER INTO CONTRACT AND POST PERFORMANCE SECURITY: If, for justifiable causes, the bidder with the Lowest Calculated Responsive Bid or Highest Rated Responsive Bid fails, refuses or is otherwise unable to entor into contract with the Procuring Entity, or if the bidder fails to post the required performance security within the period stipulated in the Bidding Documents, the BAC shall disqualify the said bidder and shall undertake post-qualification for the next-ranked Lowest Calculated Bid or Highest Rated Bid, This procedure shall be repeated until an award is made. However, if no award is possible, the contract shall be subjected to a new bidding, In the case of a failure to post the required performance security, the bid security shall be forfeited without prejudice to the imposition of sanctions prescribed under this Act. RESERVATION CLAUSE: The Head of the Agency reserves the right to (1) reject any and all Bids, (2) declare a failure of bidding, or (3) not award the contract in the following situations: a. Ifthere is prima facie evidence of collusion between appropriate public officers or employees of the Procuring Entity, or between the BAC and any of the bidders, or ifthe collusion is between or among the bidders themselves, or between a bidder and a third party, including any act which restricts, suppresses or nullfies or tends to restrict, suppress or nullify ‘competition; b._ Ifthe BAC is found to have failed in following the prescribed bidding procedures; or c. For any justifiable and reasonable ground where the award of the contract will not redound to the benefit of the government as defined in the IRR. CONTRACT IMPLEMENTATION AND TERMINATION: The rules and guidelines for the implementation and termination of contracts awarded pursuant to the provisions of this Act shall be prescribed in the IRR. The rules and guidelines shall include standard general and special conditions for contracts. ‘SPLITTING OF GOVERNMENT CONTRACTS: Splitting of Government Contracts is not allowed. Splitting of Government Contracts means the division or breaking up of government of the Philippine contracts into smaller quantities and amounts, or dividing contract implementation into artificial phases or sub-contracts for the purpose of evading or circumventing the requirements of law and its IRR, particularly the necessity of competitive bidding and the requirements for the alternative methods of procurement. ~ Infrastructure Projects: for Infrastructure Projects to be implemented by phases, the Procuring Entity shall ensure that there is a clear delineation of work for each phase, which must be usable and structurally sound. GROUNDS FOR TERMINATION A. Termination for Default 1. Incontracts for Goods: The following are ground for termination of contract for default: . The Procuring Entity may terminate the contract when outside of force majeure, the Supplier fails to deliver or Perform any or all of the Goods within the period(s) specified in the contract, or within any extension thereof REO CPA REVIEW PHILIPPINES © : iveness. E / ‘wow.reocpareview.ph Effectiveness. Efficiency. Convenience REAL EXCELLENCE ONLINE CPA REVIEW | @io74) 665.6776 osx sa00661 — Dpport@reocpareview.ph MAY 2023 CPA REVIEW SEASON10 9 0f 14 | REBT 09 REAL ‘ ATTY, BICKO SORIANO, CPA ie EXCELLENCE GOVERNMENT PROCUREMENT LAW granted by the Procuring Entity pursuant to a request made by the Supplier prior to the delay, and such failure amounts to at least ten percent (10%) of the contract price; The Procuring Entity may terminate the contract when, as a result of force majeure, the Supplier is unable to 10%) of the contract price, for a deliver or perform any or all of the Goods, amounting to at least ten percent ( period of not less than sixty (60) calendar days after receipt of the notice from the Procuring Entity stating that the circumstance of force majeure is deemed to have ceased; or . The Procuring Entity shall terminate the contract when the Supplier fails to perform any other obligation under the Contract. s 2. In contracts for Infrastructure Projects: The Procuring Entity shall terminate a contract for default when any of the following conditions attend its implementation: a. Dueto he Contactor fault and while the project is on-going, it has incurred negative slippage of fifteen percent (15%) or more in accordance with Presidential Decree 1870; ; b. Due to the Contractor's fault and after the contract time has expired, it has incurred a negative slippage of ten percent (10%) or more in the completion of the work; or The Contractor: i. abandons the contract works, refuses or fails to comply with a valid instruction of the Procuring Entity or fails to proceed expeditiously and without delay despite a written notice by the Procuring Entity, ii. does not actually have on the project site the minimum essential equipment listed on the Bid necessary to prosecute the Works in accordance with the approved work plan and equipment deployment schedule as required for the project: ili, does not execute the Works in accordance with the contract or persistently or flagrantly neglects to carry out its obligations under the contract; jv, neglects or refuses to remove materials or to perform a new work that has been rejected as defective or unsuitable; or v. _sub-lets any part of the contract works without approval by the Procuring Entity. 3. In contracts for Consulting Services: the Procuring Entity shall terminate a contract for default when any of the following conditions attend its implementation a. Outside of force majeure, the Consultant fails to deliver or perform the Outputs and Deliverables within the Period(s) specified in the contract, or within any extension thereof granted by the Procuring Entity pursuant to a request made by the Consultant prior to the delay; b. Asa result of force majeure, the Consultant is unable to deliver or perform a material portion of the Outputs and Deliverables for a period of not less than sixty (60) calendar days after the Consultant's receipt of the notice from the Procuring Entity stating that the circumstance of force majeure is deemed to have ceased: or cc. The Consultant fails to perform any other obligation under the contract. B. Termination for Convenience: the Procuring Entity may terminate the Contract, in whole or in part, at any time for its convenience. The Head of the Procuring Entity may terminate a contract for the convenience of the Government if he has determined the existence of conditions that make Project Implementation economically, financially or technically impractical and/or unnecessary, such as, but not limited to, fortuitous event(s) or changes in law and national government policies. C. Termination for Insolvency: The Procuring Entity shall terminate the contract if the Supplier/ContractoriCe onsultant declared bankrupt or insolvent as determined with finality by a court of competent jurisdiction. In this event terminat, Sea Sone to the Supplier/Contractor/Consultant, Provided that such termination will not Prejudice or affect any right of action or remedy which has accrued or will accrue thereafter to the Pr Supplier/Contractor/Consultant eee ete REO CPA REVIEW PHILIPPINES, Effectiveness, Efficiency. Convenience www.teocpareview.ph REAL EXCELLENCE ONLINE CPA REVIEW ©1071 6656778 @oar62409661 @pportereocpareview.ph MAY 2023 (CPA REVIEW SEASON :Page 10 of 14 | RFBT 09 REAL ATTY, NICKO SORIANO, CPA EXCELLENCE (GOVERNMENT PROCUREMENT LAW a. Corrupt, fraudulent, collusive and coercive practices, b. Drawing up or using forged documents, ©. Using adulterated materials, means or methods, or engaging in production contrary to rules of science or the trade; and 4d, Any other act analogous to the foregoing E, Termination by Contractor/Consultant r 1 In connnes for Infrastructure Projects. the Contractor may terminate its contract with the eeocana| a he works are completely stopped for a continuous period of at least sixty (60) calendar days throug! due to any of the following reasons a. Failure of the Procuring Entity to deliver, wi items itis obligated to furnish under the terms of the contract, or b._ The prosecution of the work is disrupted by the adverse peace and order situation, as certified by the Armed Forces of the Phiippines Provincial Commander and approved by the Secretary of National Defense 2. In contracts for Consulting Services. the Consultant may terminate its agreement with the Procuring Entity if the latter is in material breach of its obligations pursuant to the contract and has not remedied the same within sixty (60) calendar days following its receipt of the Consultant's notice specifying such breach. thin a reasonable time, supplies, materials, right-of-way, or other DISCLOSURE OF RELATIONS DISCLOSURE OF RELATIONS: In addition to the proposed contents of the Invitation to Bid as mentioned above, all bidding documents shall be accompanied by a sworn affidavit of the bidder that of their corporation in not rel 9f the Procurins hird civil di Failure to comply with the aforementioned provision shall be a ground for the automatic disqualification of the bid and shall therefore not be considered for opening and evaluation of financial component ALTERNATIVE METHODS OF PROCUREMENT ALTERNATIVE METHODS: Subject to the prior approval of the Head of the Procuring Entity or his duly authorized representative, and whenever justified by the conditions provided inthis Act, the Procuring Entity may. in order to promote economy and efficiency, resort to any of the following alternative methods of Procurement A LIMITED SOURCE BIDDING, otherwise known as SELECTIVE BIDDING ‘A method of Procurement that involves direct invitation to bid by the Procuring Entity from a set of pre-sel fr lected Suppliers or consultants with known experience and proven capability relative to the requirements of a parterne contract ° Limited Source Bidding may be resorted to only in any ofthe folowing condi 2 Procurement of highly specialized types of Goods and Consulting Services which are knows > Snt,tom a ited number of sources, or ° ite ‘Seurement of major plant components where itis deemed advantageous to limit the biddin, jim ing to Hgib bidders in order to maintain an optimum and uniform level of quality and performance of the pls, aura cam inable 8 DIRECT CONTRACTING, otherwise known as SINGLE SOURCE PROCUREMENT Smuited of Procurement that does not require elaborate Bidding Documents because the supplier is simp to submit a price quotatior immediately or ater sommes reece forma Involce together with the conditions of sale, which ofr may be ly asked ace; REO CPA REVIEW PHILIPPINES.” x “Effectiveness. Efficiency. ce sreocpareview.ph 3 (REAL EXCELLENCE ONLINE CPA REVIEW Gor csc @ 074) emis eAo 066: Qopori@reocpareview.ch MAY 2023 CPA REVIEW SEASONPage 11 of 14 | RFBTO9 REAL pas EXCELLENCE overnvent NOCUREMENT LA Direct Contracting may be resorted to only in any of the following conditions a. Procurement of Goods of propriety nature, which can be obtained only from the propriety source, i.e. when patents, trade secrets and copyrights prohibit others from manufacturing the same items; b. When the Procurement of critical components from a specific manufacturer, supplier, or distributor is a condition precedent to hold a contractor to guarantee its project performance, in accordance with the provisions his contract; or, c. Those sold by an exclusive dealer or manufacturer, which does not have sub-dealers selling at lower prices and for which no suitable substitute can be obtained at more advantageous terms to the government C. REPEAT ORDER - a method of Procurement that involves a direct Procurement of Goods from the previous winning bidder, whenever there is a need to replenish Goods procured under a contract previously awarded through Competitive Bidding ‘When provided for in the Annual Procurement Plan, Repeat Order may be allowed wherein the Procuring Entity directly procures Goods from the previous winning bidder whenever there arises a need to replenish goods procured under a contract previously awarded through Competitive Bidding, subject to post-qualification process prescribed in the Bidding Documents and provided all the following conditions are present a, The unit price must be equal to or lower than that provided in the original contract, b. The repeat order does not result in splitting of requisitions or purchase orders; ¢. Except in special circumstances defined in the IRR the repeat order shall be availed of only within six (6) months from the date of the Notice to Proceed arising from the original contract, and, d. The repeat order shall not exceed twenty-five percent (25%) of the quantity of each item of the original contract. D. SHOPPING -a method of Procurement whereby the Procuring Entity simply requests for the submission of price quotations for readily available off-the-shelf Goods or ordinary/reqular equipment to be procured directly from suppliers of known qualification. Shopping may be resorted to under any of the following instane a. When there is an unforeseen contingency requiring immediate purchase, the amount shall not exceed the following: i. For NGAs, GOCCs, GFls, SUCs, and Autonomous Regional Government, P200,000 ji, For LGUs, in accordance with the following schedule: DOF ‘Maximum Amount (in Philippine Peso) Classification | Province | City | Municipality of LGUs ist Class 200,000 | 200,000_| 700,000 2nd Class 200,000 | 200,000 | 100,000 ‘3rd Class 200,000 |” 160,000 | 100,000 4th Class 160,000 | 120,000 | 100,000 Sth Class 120,000 | 100,000 | 100,000 6th Class. 100,000 [100,000 |" 400,000 b. Procurement of ordinary or regular office suppli not to exceed the following: i For NGAs, GOCCs, GFis, SUCs, and Autonomous Regional Government, P1,000,000. ii. For LGUs, in accordance with the following schedule: and equipment not available in the DBM-PS, in the amount REO CPA REVIEW PHILIPPINES. Effectiveness. Efficiency. Convenience ‘www.reocpareview.ph - REAL EXCELLENCE ONLINE CPA REVIEW @io7a) 665.6774 @o916 8400661 Dpport@reocpareview.ph MAY 2023 CPA REVIEW SEASONPage 12 of 4 | RIO Uy ATTY. NICKO SORIANO, CPA EXCELLENC E GOVERNMENT PROCUREMENT LAW DOF ‘Maximum Amount (in Philippine Peso) Classification | Province Cily Municipality of LG 4,000,000 | 1,000,000 |” 200,000 1,000,000 | 1,000,000 | 200,000 [3* Class. #/000,000 | 800,000 | 200,000 | 4Class | 800,000 | 600,000 | 100,000 8° Class, 600,000 | 400,000 100,000 _ Cl t “400,000 | 200,000 | 100,000 __ in the case of barangays, Fifly Thousand Pesos (P50, 000) ‘The phrase “ontinary or regular office supplies” ‘shall be understood to include those supplies, commodities, or eel Jikan ons necessary in the transaction of official businesses, and consumed in the day-to-day operations, 1 abl Sa Siiates shall not nelude services such as repair and maintenance of equipment and furniture, as well a8 WUCKING, paubng, janitonal, security, and related or analogous services. E NEGOTIATED PROCUREMENT -a method of Procurement that may be resorted under the extraordinary Circumstances provided for in Section 53 of this Act and other instances that shall be specified in the IRR, whereby SSESS ans Entty diectly negotiates a contract with a technically, legally and financially capable supplier, contractor or consutant Negotiated Procurement shall be allowed only in the following instances. in case of two (2) failed biddings, 5 Incase of imminent danger to life or property during a state of calamity, or when time is of the essence ‘ansing from natural or man-made calamities or other causes where immediate action is necessary to prevent Gamage to oF loss of life or property, oF to restore vital public services, infrastructure facilities and other public utes, Take-over of contracts, which have been rescinded or terminated for causes provided for in the contract and g laws, where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities, 4 Where the subject contract is adjacent or contiguous to an on-going infrastructure project, as defined in the IRR, subject to the following i. The onginal contract is the result of a Competitive Bidding it The subject contract to be negotiated has similar or related scopes of work; ja Itis within the contracting capacity of the contractor, wv The contractor uses the same prices or lower unit prices as in the original contract less mobilization cost, Vv. The amount involved does not exceed the amount of the ongoing project; and, vi The contractor has no negative slippage Provided, that negotiations for the procurement are commenced before the expiry of the ori ¥ ginal contract. Wherever applicable, the pnnciple shall also govern consultancy contract, where the consultants have unique experience and expertise to delver the required service. oF udject to the guidelines specified in the IRR, purchases of Goods from another a : gency of the governm: such as the Procurement Service of the DBM, which s tasked with a centralized procurement of commonly med Goods fo" the government in accordance with Letters of Instruction No. 786 and Executive Order No. 359, series Selene. bays hat Artinte Work, Exclusive Technology and Media Services. Where Goods, Infrastructure can be contracted to Ss Ccrrinad ty cnerional oes aa aoa @ particular supplier, contractor or consultant and as 1. The requirement is for: a Work of art; commissioned work or a re Services of an artist for a specific artist skill (e.9., Singer, poet, writer, REO CPA REVI th a EW eT Effectiveness. Efficiency. Convenience revies REAL EXCELLENCE ONLINE CPA REVIEW. Y078) 685 6774 ior) 685 67 0016 8100661 @pport@rencpareview ph MAY 2023 CPA REVIEW SEASONPage 13 of 14 | RFBT 09 REAL | rr. mcro somo, cPA EXCELLENCE GOVERNMENT PROCUREMENT LAW b. Scientific, academic, scholarly work or research, or legal services: c. Highly-specialized life-saving medical equipment, as certified by the Departme tee d. Scientific, technical, economic, business, trade or legal journal, magazine, paper, subs exclusive statistical publications and references, or . Media documentation, advertisement, or announcement through tele other communication media. int of Health (DOH); n, or other vision, radio, newspaper, internet, and Due to the nature ofthe information to be disseminated, alongside principles of transparency, efficiency and economy, award to more than one (1) supplier may be made by the Procuring Entity. 2. The construction or installation of an infrastructure facility where the material, equipment, or technology under a proprietary right can only be obtained from the same contractor. Highly Technical Consultants. In the case of individual consultants hired to do work that is (i) highly technical or ® Greprietary: or (i) primarly confidential or policy determining, where trust and confidence are the primary ‘consideration for the hiring of the consultant: Provided, however, That the term of the individual consultants shall, at the most, be on a six month basis, renewable atthe option of the appointing HoPE, but in no case shall exceed the term of the latter. ; h. Defense Cooperation Agreement; Defense Inventory-Based Items-The DND may directly negotiate with an agency or instrumentality of another country with which the Philippines has entered into a defense cooperation ‘agreement or otherwise maintains diplomatic relations when the procurement involves major defense equipment or ‘material and/or defense-related consultancy services i. Small Value Procurement: Procurement of (a) goods not covered by Shopping under (b) infrastructure projects, and (c) consulting services, where the amount involved does not exceed the following threshold: 1. ForNGAs, GOCCs, GFis, SUCs, and Autonomous Regional Government, P 1,000,000. 2. For LGUs, in accordance with the following schedule: DOF Maximum Amount (in Philippine Peso) Classification [ Province | City | Municipality of LGUs 4" Class. 7,000,000 | 7,000,000 [200,000 2° Class | 1,000,000 | 1,000,000 | 200,000 37 Class | 1,000,000 | 800,000 | 200,000 ‘4° Class. ‘800,000 _| ~600,000__| “100,000 5 Class 600,000 | 400,000 | "100,000 6" Class 400,000_| 200,000_| "100,000 In the caso of barangays, Fifty Thousand Pesos (P 50,000) Lease of Real Property and Venue for official use NGO Participation: When an appropriation law or ordinance earmarks an amount to be specifically contracted out te Non-Governmental Organizations (NGOs), the Procuring Entiy may enter into a Memorandum of Agreement with an | Community Participation: Where, in the interest of project sustainability or to achieve certain speci i objectives, itis desirable in selected projects, or its components, to call for paticpaion of local communism the delivery of goods, including non-consulting services, and simple infrastructure projects, subject to the Community Participation Procurement Manual (CPPM) issued by the GPPB 'm. United Nations Agencies, International Organizations or International Financing Institutions - Procurement {from specialized agencies of the United Nations, International Organizations or International Financing Institutions 1. Direct Retall Purchase of Petroleum Fuel, Oil and Lubricant (POL) Products and Airline TicketsPage 14 of 14 | RFBT 09 ATTY. NICKO SORIANO, CPA GOVERNMENT PROCUREMENT LAW. REAL EX ‘CELLENCE , including the pecific terms and conditions cified in thods mentioned above shall be spe* 10 of Alternative Methods: The st Terms and Conditions for the usi ication of each of the alternative met limitations and restrictions, for the app the IRR. -—- END OF HANDOUTS ‘REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience ‘www.reocpareview.ph REAL EXCELLENCE ONLINE CPA REVIEW @ ora) 665674 @os1e. 8100661 Oprort@reocpareview.ph MAY 2023 CPA REVIEW SEASONPage 1 of 15 | RFBT 10 REAL PARTNERSHIP sé EXCELLENCE arr Soman, PARTNERSHIP ATTY. NICKO SORIANO, CPA ‘TOPIC OUTLINE: 1. Contract of Partnership, in general 2. Kinds of partnerships 3. Obligations of partners a. To the partnership and to the partners b. To third persons Rights of a partner Dissolution and winding up Limited Partnership CONTRACT OF PARTNERSHIP, IN GENERAL PARTNERSHIP is a contract whereby two or more persons bind themselves to contribute money, property or industry to a ‘common fund, with the intention of dividing the profits among themselves, or in order to exercise a profession CHARACTERISTIC: 1. Consensual - its perfected by mere consent or the meeting of minds between parties (Art. 1305). Bilateral or Multilateral - it is entered into between two or more persons: Nominate - itis designated by a specific name and there are specific rules applicable only to it; Principal —its existence does not depend on the existence of another contract; ‘Onerous — certain contributions have to be made to become a partner, Preparatory — in the sense that after it has been entered into, other contracts essential in the carrying out of its purposes can be entered into. Principles applicable: There must be Affectio Societatis — the desire to formulate an ACTIVE union with people among whom there exist mutual confidence and trust. In connection thereto, the principle of Delectus Personae (Personal Choices), which pertains to the right to choose who to associate with, is also applicable. PURPOSE: can either be for the intention of dividin; Nevertheless, it is required that a partnership must dissolved by judicial decree, and the profits shall be PARTNERSHIP VS. CORPORATION ig the profits among themselves, or in order to exercise a profession have a LAWFUL object or purpose, otherwise it may be declared confiscated in favor of the state. (Art. 1770) PARTNERSHIP ‘CORPORATION Creation Voluntary agreement of parties. Created by the state in the form of a spacial character or by a general enabling law (The — _ Corporation Code) f ‘or more ~ Reel Not more than 15 O.CPA REVIEW PHILIPPINES " REO.CPA REVIEW PHILIPPINES Bae sero ated REAL EXCELLENCE ONLINE CPA RI DERN retPoge 2of 15 | RIOT 10 REAL / EXCELLENCE ATM ARNE Existence No time limit except agreement of parties. Not more than 50 years (now with perpetual ————— | existence under the Revised Corporation Code) Laity of may extend to private property Liable only upto th contributions owners ‘Transferability of | Ail partners need fo Consent to the transfer of | Does not need the consent ofthe other stockholders: [interest interest to another | Abitty of owners wneraily, partners acting on behall of the | Generally, stockholders cannot bind corporations to bind the fim _| partnership are agents thereof since its official acts are through a board of directors Remedies in | A partner can sue another partner who | A stockholder cannot sue a director _ who case of mismanages mismanages, it must be in the name of the mismanagement corporation, through a derivative suit Natonality ‘A partnership is a national ofthe country where | Generally, under whose laws it was created as to itwas created, and dependent on percentage | whether domestic or foreign, and as to nationality, . | of ownership fon the ownership of the outstanding capital stock. Tegal from the time the contract Begins ‘Generally from issuance of COR. Personality | Right of None. Daath, retirement, insolvency, civil | Yes, Such causes do not dissolve a corporation Succession interdiction, of insanity of a partner dissolves the partnership. SEPARATE JURIDICAL PERSONALITY: The partnership has a judicial personality separate and distinct from that of each of the partners. The partnership can, in general, 1. Acquite and possess property of all kinds, 2. Incur obligations, 3. Bring civil or cnminal actions; 4. Adjudged insolvent even if the individual members be each financially solvent RULES TO APPLY IN DETERMINING EXISTENCE OF PARTNERSHII 4. There is no partnership: fa. Between persons who are not partners as to each other are not partners as to third persons, except a partnership by estoppel b_ Co-ownership of co-possession of itself, whether such-co-owners or co-possessors do or do not share any profits made by the use of the property; c. The sharing of gross returns, whether or not the persons sharing them have a joint or common right or interest in ‘any property from which the retums are derived, 2. Presumption: the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: AS a debt by installments or otherwise; As wages of an employee or rent to a landlord; ‘AS an annuity to a widow or representative of a deceased partner, {AS interest on a loan, though the amount of payment vary with the profits of the business; {As the consideration for the sale of a goodwill of a business or other property by installments or otherwise FORMAL REQUIREMENTS: eaoge General Rule: partnership may be constituted in any form, Except: A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property 's not made, signed by the parties, and attached to the public instrument,s Page 3 of 15 | RFBT 10 REAL ATTY. NICKO SORIANO, CPA EXCELLENCE PARTNERSHIP “apital is P3,000 or more ~ the contract of partnership must appear in a public instrument, which must be recorded in the This does not in any way affect validity of the partnership as itis intended only to affect third persons. KINDS OF PARTNERSHIPS, According to OBJECT: 1. Universal: . PROFITS VS. ALL PRESENT PROPERTY — ALL PROFITS ‘ALL PRESENT PROPERTY Only the USUFRUCT of the properties of | ALL the property actually belonging to the partners are contributed both the partners become common property. | ownership and naked ownership, NAKED OWNERSHIP is retained by each of the partners _ | oe __ ALL PROFITS acquired by industry or work | AS a rule, aside from the contributed properties, only the PROFITS OF of the partners become common property | THE CONTRIBUTED PROPERTY. (regardless of whether or not said profits were obtained through the _usufruct | Profits from other sources may become partnership property, but only if contributed) there is a stipulation to such effect Properties subsequently acquired by inheritance, legacy, or donation, cannot be included in the stipulation, BUT the fruits thereof can be _ included in the stipulation + In case of ambiguity: If the Articles of Universal Partnership does not specify the nature of the Universal Partnership, it is deemed that what is constituted is only a universal partnership of profits. + Persons not allowed to form a universal partnership: those who cannot donate to each other, namely: a, Husband and Wife (Art. 133) b. Those guilty of adultery and concubinage (Art 739); . Those guilly of the same criminal offense, if the parinership was entered into in consideration of the same (Art. 739), A universal partnership is virtually a donation to each other of the partner's properties (or at least their usufruct) Therefore. if persons are prohibited by law to donate to each other, they should not be allowed to do indirectly what the law forbids directly 2. Particular where the object are: a, Determinate things, their use or fruits; b. A specific undertaking, or c.The exercise of a profession or occupation. QUESTION: May a husband and wife form or be partners in a general professional partnership? JABILI 1. Genoral where all the partners are general partners whose liability extends to ther individual properties, after the assets of the partnership have been exhausted: 2, Limited where at least one of the partners are liable only up to the extent of his contribution. REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience ‘any sealexcellenceonline.com,ph REAL EXCELLENCE ONLINE CPA REVIEW i074) 665.678 B16 8400661 — @mingoveo.comah MAY 2023 CPA REVIEW SEASONPage 4of 15 | nFBT 10 REAL ATTY, nicka SORIANO, CPA EXCELLENCE PARTNERSHIP ERM: fixed term or fulfilment of a particular 4. Partnership with a fixed term or particular undertaking - upon arrival of the undertaking, partnership is dissolved, and if continued, it will constitute a partnership at will and the rights and duties of the partners remain the same, so far as is consistent with a partnership at will 2. Partnership at will - when there is no fixed term or particular undertaking. KINDS OF PARTNERS ACCORDING TO CONTRIBUTION: 1. Capitalist Partners — contributes capital, and 2. Industrial Partners — furnishes industry or labor. 3. Capitalist-Industrial Partners — furnishes both. AS TO LIABILITY: 1. Goneral Partnors - liable upto his personal assets. 2, Limited Partners - liable upto his capital contributions only. OTHER KINDS OF PARTNERS: 1. Silent Partner ~ one who does not participate in the management of the partnership 2. Secrot Partner - one who is not known to third persons as a partner 3. Dormant Partner - one who is both a silent and secret partner 4, Ostensible Partner ~ direct opposite of a dormant partner or one who participates in the management and is known to third parties as a partner. §. Managing Partner - one who undertakes the management of the partnership. 6. Liquidating Partner - one who undertakes the winding-up of partnership affairs after its dissolution 7, Incoming Partner - one who is admitted to the partnership after it has already been constituted. OBLIGATIONS OF A PARTNER:TO THE PARTNERSHIP AND OTHER PARTNERS 1. To give his contribution a, Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital of the partnership. b. As a rule, the contribution must be provided upon perfection of the contract, except if the partners stipulate otherwise. . A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation, Thus, no demand shall be necessary since the law specifically provides for the liability in case of delay d, Apartner is likewise liable similar to a vendor: i. He is bound to deliver the fruits thereof from the time they should have been delivered, without need of demand (Art. 1786), ii, A partner must exercise due diligence in preserving the thing promised to be contributed: othenwise, he shall be liable for loss and deterioration. ii, Warrant the thing delivered against eviction Risk of Loss: Bi PAI a. Thing contributed is specific and determinate whi the common benefit; and b. There is stipulation that he shall bear the loss of the thing brought and appraised in the inventory. ich is NOT fungible and only their use and fruits may be for REO CPA REVIEW PHILIPPINES. aww realexcellenceonline,com.ph Qio71) 6656778 @onre 2400661 Qniowrgocoman Effectiveness. Efficiency. Convenience REAL EXCELLENCE ONLINE CPA REVIEW MAY 2023 CPA REVIEW SEASON2 3 5. Page 5 of 15 | RFBT 10 “g y REAL ATTY. NICKO SORIANO, CPA EXCELLENCE si PARTNERSHID ONLINE BORNE BY THE P/ HIP: Things contributed are i. fungible; ii, cannot be kept without deteriorating; or iii, they were contributed to be sold; and - . here was appraisal in the inventory and no stipulation that partner will bear the loss. To give additional contribution in case of imminent losses: In case of an imminent loss of the business ef os partnership, any partner who refuses to contribute an additional share to the capital to save the venture, shall he oblig to sell his interest to the other partners. Except: a, Industrial partners except if there is stipulation that he will ikewise contribute b. If there is stipulation to the contrary Prohibition to engage in other businesses: i a. Industrial partners - cannot engage in business for himself except when the capitalist partners permit him to do so. Effect of non-compliance: The capitalist partners may either i. Exclude him from the firm or li, Avail themselves of the benefits which he may have obtained in violation of this provision. b. Capitalist partners ~ the prohibition is limited to businesses in the sare industry as that of the partnership which ‘may result in competition. Exceptions i. When itis expressly stipulated that the capitalist partner can so engage himself, li, When the other partners allow him to do so, whether expressly or impliedly; During the period of liquidation and winding up, when the partnership is already non-existent. iv. When the general-capitalist partner becomes a limited partner in a competitive enterprise. Effect of non-compliance: i. He shall bring to the partnership all the profits illegally obtained; ji, He is liable, personally, for all the losses; ji, He may be ousted for loss of trust and confidence. Credit to the firm the payment made by a debtor who owes both the partnership and the managing partnor (Art. 1792) MANAGING PARTNER COLLECTING FROM A COMMON DEBTOR: To prevent the managing partner from furthering his personal interest to the detriment of the firm, if such managing partner collects a sum from a common debtor who ‘owes money both to said partner and to the partnership: a. If the managing partner issued a receipt in the name of the partnership: the payment shi li Hf te managing pa ip: the payment shall be applied to the b. Ifthe managing partner issued a receipt in his name: the payment shall be applied proportionate to the ar Its of the two debts. EXCEPT: When the debt owed by the debtor to the managing partner is more onerous, the debter may choose to apply the payment exclusively to such . Other obligations of Partners to the partnership and to other partners; Noto convert Barinership funds! propery for his own use (At. 1788) unt for anc Id as trustee, unauthorized (or secret) personal profit L Pay for damages caused by his fault (Art. 1794) prem bows ast007) Share with other i auc Partners the share of the partnership credit which he has received from an insolvent firm debtor eespPage Gof 35 | Rrat 10 ) REAL He ioehe Be EXCELLENCE fe ee . Keep the partnership books in the principal office (except when otherwise agreed) and allow other partners to have access, inspect and copy the same. { Reimburse the partnership of damages suffered by it through his fault. i. The liability for damages is not compensable with profits and benefits earned for the partnership. ji, Damages, however, may be decreased by courts if through the partner's extraordinary efforts, the partnership earned unusual profits. g. To inform the other partners on all matters affecting the partnership or relative to partnership affairs, h. To observe the diligence of a good father of a family in all his dealings. i, To adhere to the partnership agreement and decisions of appointed managing partner(s) OBLIGATIONS OF PARTNERS: TO THIRD PARTIES |. FIRM NAME: Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. ‘Strangers who include their name in the firm are liable as partners because of estoppel but do not have the rights of partners. ~ this is to protect customers from being misled. Under Art. 1846, if a limited partner included his name in the firm name, he shall be liable as a general partner. 2. LIABILITY AFTER EXHAUSTION OF PARTNERSHIP ASSETS: All partners, including industrial ones, shall be liable Pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which ‘may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract Any stipulation to the contrary shall be void, except as to the partners. 3. AUTHORITY TO ACT FOR AND IN BEHALF OF THE PARTNERSHIP: Every partner is an agent of the partnership for the purpose of its business. The authority of the partner to act in behalf of the partnership may be a. Express — those expressly granted to the partner, or b. Implied ~ those which may be implied from the express authority: or c. Apparent ~ when he apparently carries on the usual business of the partnership and the person to whom he is dealing has no knowledge of the fact that he has no such authority IT the partner is not carrying on the usual business of the partnership, the act will not bind the partnership unless it is authorized by the other partners, Consent of ALL partners necessary to: Assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts of the partnership: Dispose of the good-will of the business; Do any other act which would make it impossible to carry on the ordinary business of a partnership; Confess a judgment; Enter into a compromise concerning a partnership claim or liability; ‘Submit a partnership claim or liability to arbitration; Renounce a claim of the partnership. a b, ©. 4. e. f 9. Except when authorized by the other partners or unless they have abandoned the business., REAL ITTY. NICKO SORIANO, CPA EXCELLENCE 5 NCO ISN Admission of Partners: an admission made by one partner within he scope of his authority is evidence against the partnership ‘Notice to a Partner: operates as notice to the partnership, except in case of fraud committed by such partner. 4. EFFECTS OF CONVEYANCE OF REAL PROPERTY: Property Is inthe | Conveyance is in| Who conveyed the Effect name of the name of property _ Partnership Partnership Partner Valid conveyance but partnership may recover, except (no right to recover) One or more (One or more (One or more a. When the transfer binds the parinership partners partners partners b. Transferee had no knowledge of lack or excess of authority Partnership Pariner Partner Passes only equitable interest of the partnership if within the authority (if not, One or more Partner/Partnership | Partner apparently nothing transfers) partners/Third persons (in trust) All partners Allpartners Allpariners: Valid transfer 5. SOLIDARY LIABILITY FOR TORTS/QUASI-DELICT: Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of co-partners, loss of injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act. 6. SOLIDARY LIABILITY FOR MISAPPROPRIATION: The partnership is bound to make good the loss, in two situations: a. Pertains to partner as receiver: Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it b. Pertains to partnership as receiver: Where the partnership in the course of its business receives money or property ofa third person and the money or property so received is misapplied by any partner while itis in the custody of the partnership. In both § and 6 above, all partners are solidarily liable with each other and the partnership. 7. PARTNER BY ESTOPPEL: ‘a. One who represents himself as a partner of an existing partnership with or without consent of the partnership: i. When the partnership consented — a partnership by estoppel is created between the original members and the deceiver. A partnership liablty results. ii. When the partnership did NOT consent - deceiver becomes a partner by estoppel where he is liable as a partner but does not acquire the rights thereof. No partnership liability exists. Only those who consented shall be liable. b. One who represents himself as a partner of a NON-existent partnership. Liability of parties is pro rata, since there is no partnership liablity. This applies whenever the third person is misled by the representation. 8, LIABILITY OF NEW (or INCOMING) PARTNER: a. Debts incurred prior to admission: liable upto his contribution (Except if there is stipulation) b. Debts incurred after admission: liable upto his personal assets. REO CPA REVIEW PHILIPPIN alexcellenceonline.co Effectiveness. Efficiency. Convenience REAL EXCELLENCE ONLINE CPA REVIEW, @io74) 6656774 Qos16 8400561 Qnn@reo.comph MAY 2023 CPA REVIEW SEASON.Page B of 15 | ArBT 10 REAL ATTY. Nicko SoMIANa, co j EXCELLENCE PARTIR RIGHTS OF A PARTNER 4. Right to share in the profits DISTRIBUTION OF PROFITS: ‘a Inaccordance with the agreement as to the distribution of profits; b.Ifthere was no such agreement, in proportion to contribution and the industrial partner shalll receive such share a: may be just and equitable. DISTRIBUTION OF LOSSES: a. In accordance with agreement as to distribution of losses; b._Ifthere was no agreement as to losses, same proportion as to the agreement as to profits; c.f no agreement as to losses and profits, in proportion to contribution but the industrial partner shall not be liable fo losses, ‘An industrial may be made liable for losses only if there was stipulation to that effect. Void Stipulation: A stipulation which excludes one or more partners from any share in the profits or losses is void, this is otherwise known as Pactum Leonina. 2. Property rights (Art. 1810) PROPERTY RIGHTS OF A PARTNER: ‘@. His rights in specific partnership property — a partner is a co-owner with his partners of specific partnership property. The incidents of such co-ownership are: i. A partner, subject to any agreement between the partners, has an equal right with his partners to possess ‘ specific partnership property for partnership purposes; but he has no right fo possess such property for any other purpose without the consent of his partners; ji. A partner's right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property, iii A partner's right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, ot any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws; iv. A partner's right in specific partnership property is not subject to legal support, b. His interest in the partnership - A partner's interest in the partnership is his share of the profits and surplus. Effect of conveyance of a partner's whole interest: i. Does not, in itself, dissolve the partnership. The partnership is deemed dissolved only if there is stipulation to that effect. ii The conveyee does not necessarily become a partner and such has no right to 1) demand a¢counting and settlement; 2) interfere in the management ot administration of the partnership business, or 3) demand information, accounting and inspection of the partnership books. Rights of the assignee/conveyee: i. To get profits the assignor-partner would have obtained; ii. To avail of the usual remedies in case of fraud in the management; ii, Receive assignor's interest in the event of a dissolution. REO CPA REVIEW PHILIPPINES, Effectiveness. Efficiency. Convenience yoww.realexcellenceonline.com.ph REAL EXCELLENCE ONLINE CPA REVIEW iors) 6656774 @osis2400661 @minereocomoh MAY 2023 CPA REVIEW SEASONwe Page 9 of 15 | RFBT 10 , REAL Ive sons eon EXCELLENCE wa ae ONLINE Partner's Interest may be subject to a charge or attachment by the court: . i Only the interest that is protte and surplus of the partner and not his share in the specific properties of the partnership li, Priority is still given to creditors of the partnership ili, Such interest may be redeemed prior to foreclosure with 1) The separate property of any one or more of the partners; or 2)_ partnership property with the consent of ALL the other partners Note: for limited partners, their interest may only be redeemed with the separate property of the general partners and not with the property of the partnership, ¢. His right to participate in the management. RULES ON MANAGEMENT i ONE MANAGING PARTNER MANAGING PARTNER in the ARTICLES OF PARTNERSHIP: May execute all acts of administration, in good faith ‘even with opposition from the other partners; The power to execute all acts of administration can only be revoked if (a) with just or lawful cause; and (2) by a vote of the partners representing the controlling interest. MANAGING PARTNER AFTER PARTNERSHIP HAS BEEN CONSTITUTED: The power as manager may be revoked by a vote of the partners representing the controlling interest EVEN WITHOUT just or lawful cause. ii, MULTIPLE MANAGING PARTNERS: 1) With stipulation that no Managing Partner may act without the consent of the others — no one can perform an act of administration without the others’ consent. 2) With Specification of Duties - each Managing Partner can perform an act of administration within their respective duties. 3) Without specification of their respective duti consent of all the others: a) Each managing partner may separately execute all acts of administration b) Should one of the managing partners oppose the act of another, the matter shall be decided by a majority of the managing partners per head count, ©) Should there be a tie in the votes of the managing partners, the controlling interest of ALL the partners shall prevail, . or without a stipulation that one of them shall not act without the i, NO MANAGING PARTNER; WITH STIPULATION THAT NO PARTNER CANNOT ACT WITHOUT THE SUPPORT OF PARTNERS: the concurrence ofall shall be necessary for the validity of the acts, and the absence or disability of any one of them cannot be alleged. Except: if there is imminent danger of grave or irreparable injury to the partnership. v. NO AGREEMENT AS TO MANAGEMENT OF PARTNERSHIP: All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnersh without prejudice to the provisions of Article 1801 (on Multiple Managing Partners) meme ponnersne REO CPA REVIEW PHILIPPINES” © Effectiveness. Efficiency. Convenience www.realexcellenceonline’cotn. ph REAL EXCELLENCE ONLINE CPA REVIEW Oio7s) 6656774 @o916 8400561 @min@reo.comph MAY 2023 CPA REVIEW SEASONPage 100f 15 | RFBT 10 ) REAL ont a: EXCELLENCE pa 9 Except: None of the partners may, without the consent of the others, make any Important alteration in the immovable property of the partnership, even if it may be useful to the partnership. Exception to the excoption: i the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, the court's intervention may be sought. THER RIGHTS OF A PARTNER: |. To associate with another person In his share (Art. 1804) - every partner may associate another person with him in his share, but the associate shall not be admitted into the partnership without the consent of all the other partners, even if the partner having an associate should be a manager. . To inspoct and copy partnership books (Art 1808) ~ the partnership books shall be kept in the principal place of business unless otherwise agreed. follow fo demand a formal account (Art. 1809) in the following cases: a. A partner was wrongfully cncluded tom the partnership business or possession of its property by his co-partners; b. When there is a stipulation granting such right ©. Asto information affecting partnership affairs, such as secret profits earned by other partners; d. Whenever just and reasonable. . To ask for a dissolution of the firm at the proper time (Art. 1830-31) and the right to return of capital and advancements — subject to the rules of distribution of partnership assets during liquidation 5. Right to compensation — exists only when there is an agreement or stipulation granting such right or entitlement 3. Right to reimbursement — the partnership is responsible to every partner for the amounts he may have disbursed on behalf of the partnership and for the corresponding interest from the time the expense was made DISSLUTION AND WINDING-UP Dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated inthe carrying on as distinguished from the winding up of the business. On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed. Winding up: on the other hand, is the process of settling business affairs after dissolution. Termination: is the point where all the partnership affairs have been wound up. CAUSES OF DISSOLUTION: Extrajudicial causes: without intervention of the court: 1. Without violation of the agreement between the partners: a. By the termination of the definite term or particular undertaking specified in the agreement; b. By the express will of any partner, who must act in good faith, when no definite term or particular is specified: ¢. By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking: 4. By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners; 2. In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time; Note: that the partnership may be dissolved with or without contravention to the agreement of the parties, but if it is dissolved in contravention to the agreement, the partner who causes the dissolution will be liable for damages. In Ortega vs. CA, it was held by the SC that “neither would the presence of a period for its specific duration or the statement of a SoS affectiveness. Efficiency. Convenience c 00" OREAL EXCELLENCE ONLINE CPA REVIEW. MAY 2023 CPA REVIEW SEASON. tee REO CPA REVIEW PHILIPPINES! yww.realexcellenceoniine.com.ph Bio74) 665.6778 W916 8100661 - BniigresicomsnPage 11 of 15 | RFBT 10 mp) REAL fed EXCELLENCE Boa tr ee ONLINE il of @ partner. Among particular purpose for its creation prevent the dissolution of any partnership by an act or wil partners, mutual agency arises and the doctrine of delectus porsonae allows thom to have the power, although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages." (GR No. 109248; July 3, 1995) 3. By operation of I a. By any event which ma carry it on in partnership; b. Whena specific thing which a partner had promised to contribute to the partnership, porishes before the delivery; in any case by the loss of the thing, when the partner who contributed it having reserved the ownership thereof, has only transferred to the partnership the use or enjoyment of the same; but the partnership shall not be dissolved by the loss of the thing when it occurs after the partnership has acquired the ownership thereof, ¢, By the death of any partner, d._ By the insolvency of any partner or of the partnership; e. By the civil interdiction of any partner; it unlawful for the business of the partnership to be carried on or for the members to Judicial causes: where the dissolution of the partnership is decreed by the court 4. Apartner has been deciared insane in any judicial proceeding or is shown to be of unsound mind: 2. Apartner becomes in any other way incapable of performing his part of the partnership contract; 3. A partner has been guilty of such conduct as tends to affect prejudiclally the carrying on of the business; 4. A partner wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that itis not reasonably practicable to carry on the business in partnership with him; 5. The business of the partnership can only be carried on at a loss: 6. Other circumstances render a dissolution equitable. Note that in all the above judicial causes, a trial will be necessary to prove the facts necessary to dissolve the partnership. EFFECTS OF DISSOLUTION: 4. The mutual agency is terminated. As a rule, the partners can no longer act to bind the partnership, subject to the following rules: a. If the cause of the dissolution is Acts, Insolvency or Death (AID) ~ NOTICE should be given by the partners to terminate the mutual agency b. If the cause is NOT AID - the mutual agency is terminated and the dissolution is binding even without notice. 2. The following acts are still binding even after dissolution: a. Acts to for winding-up of the affairs of the partnership b. Contracts with creditors who had no notice of the dissolution 3. The partners may continue the partnership after dissolution of the old partnership. Such continuation still dissolves the old partnership and a new partnership is created. The creditors of the old partnership are also creditors of the person or partnership continuing the business. WINDING UP OR LIQUIDATION This Is the process ofquidatng the partnership assets and the estbuting the proceeds to saisy the claims against the partnership. Liquidator: the liquidator shall be: 4. Aparty who has not wrongfully caused the dissolution; 2. The legal representative of the last surviving partner (if all are dead), if not insolvent; 3. The court, upon cause shown by a partner, his legal representative or assignee. e Efficiency. Convenience ng.com.p ~ REAL EXCELLENCE ONLINE CPA REVIEW ors) 665.6774 @o916 8400661 Bnin@reo.comph [MAY 2023 CPA REVIEW SEASON.ay : ; REAL ATTY. NICKO SORIANO, CPA EXCELLENCE anne ONLINE Distribution of Assets: will be done in the following order: 1. ‘Those owing to creditors other than partners; 2. Those owing to partners other than for capital and profits; 3. Those owing to partners in respect of capital; 4. Those owing to partners in respect of profits. Note: that in the distribution of a Limited Partnership's assets, priority is given to the share of partners as to the profits over their share as to capital. Partner's Liability: in case the assets of the partnership are not sufficient to cover the liabilities, the remaining claims may be satisfied against the separate assets of the partners, However, where a partner has become insolvent, the claims against his separate property shall be satisfied in the following order: 1. Those owing to separate creditors; 2. Those owing to partnership creditors; 3. Those owing to partners by way of contribution. LIMITED PARTNERSHIP Limited Partnership: is one formed by two or more persons having as members one or more general partners and one or more limited partners. Limited liability: a limited partners’ liabilty is limited only to his capital contribution. Such that, after exhaustion of partnership assets, he cannot be made to contribute to answer the remaining liabilities to third parties. FORMATION: Two or more persons desiring to form a limited partnership shall ‘Sign and swear to a certificate, which shall state - a. The name of the partnership, adding thereto the word “Limited”, - absence of the word Limited or “LTD” in the firm name, the partnership will be treated as a general partnership. The character of the business; The location of the principal place of business; The name and place of residence of each member, general and limited partners being respectively designated; ‘The term for which the partnership is to exist; The amount of cash and a description of and the agreed value of the other property contributed by each limited partner; The additional contributions, if any, to be made by each limited partner and the times at which or events on the happening of which they shall be made; onmeaog (f) and (g) are important because as to any difference (in amount stated in the certificate and actual cont to provide additional contributions), the limited partner will be liable as a debtor to the partnership eae h. The time, if agreed upon, when the contribution of each limited partner is to be returned: Note, however, that the limited partner may nevertheless demand the return of his contribution: i. After he has six months’ notice in writing to all other members, if no time is specified in the certificate, either for the return of the contribution or for the dissolution of the partnership; or li, On the dissolution of a partnership; The above, however, is stil subject to availabilty of funds after partnership debts are pai REO CPA REVIEW PHILIPPINES “0°77 Effectiveness. Efficiency. Convenience “Yeww realexcellenceonline.com.phy © ©) - eres REAL EXCELLENCE ONLINE CPA REVIEW t074) 665 6774 @oa16 #400661. Bnineovéo.comioh MAY 2023 CPA REVIEW SEASONPage 13 of 15 | RFAT 10 "REAL ATTY. nlck0 SORIANO, COA EXCELLENCE i aca PARTNERSHIP ason The share of the profits or the other compensation by way of income which each limited partner shall recelve by re of his contribution; ; : ‘The right if given, ofa limited partner to substitute an assignee as contributor in his place, and the terms and condition: of the substitution; r, the assignee does not necessarily become a substitute limited partner. ro Subsutute Lined Partner A Substituted Limited Partner sa person admited to all the rights of a limited partner who has died or has assigned his interest in a partnership: Provided 4) Allthe partners consent; 2 ‘The assignor (Limited Partner), being thereunto empowered by the certificate, gives the assignee that right ii,_The substitute has all the rights and powers and is subject to all the restrictions and liabilities of his assignor excep! those liabilties of which he was ignorant at the time he became a limited partner and which could not be ascertaines from the certificate 1). The substitution does not release the original limited partner from liability to the partnership 2) If the assignee does not become an substitute, he has no right to require any information or account of the partnership books; he is only entitled to receive the share of the profits or other compensation by way of income or the retum of his contribution to which his assignor would otherwise be entitled; The assignee is still an OUTSIDER to the Partnership. Limited Partners’ Interest: or his share in the profits and surplus may likewise be the subject of assignment or attachmenvexecution. However, unlike the interest of a general partner, a limited partners’ interest may only be redeemed with the general partners’ property and not with partnership property. (see Rights of a Partner) a. The right, if given, of the partners to admit additional limited partners; b. The right, if given, of one or more of the limited partners to priority over other limited partners, as to contributions or as to compensation by way of income, and the nature of such priority; . The right, if given, of the remaining general partner or partners to continue the business on the death, retirement, civil interdiction, insanity or insolvency of a general partner, and d._ The right, if given, of a limited partner to demand and receive property other than cash in return for his contribution The said certificate wil be filed with the SEC and a limited partnership is formed if there has been substantial compliance in good faith with the foregoing requirements. If such certificate is not filed, the partnership may be liable in the same manner as a general partnership. LIMITATIONS ON A LIMITED PARTNER: 1. Alimited partner cannot be an industrial partner. His contribution must aways be money or property. 2. The surname of a limited partner shall not appear in the partnership name unless: a. Itis also the sumame of a general partner, or . Prior to the time when the limited partner became such, the business has been carried on under a name in which his surname appeared. 3. The limited partner cannot take part in the management of the partnership. Ifa limited partner contributed industry, or his name appears in the partnership name andlor took part in the management of the partnership, he shall be liable as if he is a ger RIGHTS OF A LIMITED PARTNER: 1. Have the partnership books kept at the principal place of business of ere ee mielbosts principal pl of the partnership, and at a reasonable hour to 2. Have on demand true and full information of all things affecting the partnershi affairs whenever circumstances render it just and reasonable; and 3. Have dissolution and winding up by decree of court (except for the above exceptions) neral partner. ip, and a formal account of partnership REO CPA REVIEW PHILIPPINES ‘j Effectiveness. Efficiency. Convenience Moww.realexcellenceontine com.ph * REAL EXCELLENCE ONLINE CPA REVIEW. Gor 665.674 @o016 8400661 Gnin@reo com oh MAY 2023 CPA REVIEW SEASONPage 14 of 15 | nFBT 10 REAL . | ‘ EXCELLENCE NT Dd eee times ONLINE 4. Receive a share of the profits or other compensation by way of income, and to the return of his contribution. However, a limited partner shall not receive any part of his contribution until a. Al lables of the partnership. except lables to general parners and to limited partners on account of thei contributions, have been paid or there remains property of the partnership sufficient to pay them; b. The consent of all members is had, unless the retumn of the contribution may be rightfully demanded as provided in number 5; and c._The certificate is cancelled or so amended as to set forth the withdrawal or reduction 5. Rightfully demand for his contribution: On the dissolution of a partnership; or b. When the date specified in the certificate for its return has arrived, or ©. After he has six months’ notice in writing to all other members, if no time is specified in the certificate, either for the return of the contribution or for the dissolution of the partnership. 6. Have his written consent or ratification be sought by the general partneris in order to: a. Do any act in contravention of the certificate; b. Do any act which would make it impossible to carry on the ordinary business of the partnership; c. Confess a judgment against the partnership; d. Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose; e. Admit a person as a general partner, f. Admit a person as a limited partner, unless the right so to do is given in the certificate; 9. Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right s0 to do is given in the certificate. 7. A limited partner may loan money and to transact other business with the partnership, subject to the following restrictions: a. He cannot receive or hold as collateral security any partnership property; b. He cannot receive any payment, conveyance or release from liability if atthe time the assets of the partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners. Any violation of the above restrictions would be in fraud of creditors and may thus be treated as a rescissible contract. GENERAL-LIMIED PARTNER: A person may be a general partner and a limited partner in the same partnership, provided that this fact is stated in the certificate. He shall have the rights and powers and be subject to all the restrictions of a general partner. Except that, in respect of his contribution, he shall have the rights against the other partners which he would have had if he were not also a general partner. DISSOLUTION AND WINDING-UP Grounds: The retirement, death, insolvency, insanity or civil interdiction of a GENERAL PARTNER dissolves the Partnership. Except: If the partnership business is continued by the remaining general partners under a right to do so as stated in the Certificate of Limited Partnership OR with the consent of all the partners, A limited partner may have the partnership dissolved and its affairs wound up when he rightfully but unsuccessfuly demands the return of his contribution, Distribution of Assets of a Limited Partnership: ‘Those owing to creditors other than partners; ‘Those owing to the limited partners, other than capital and profits; Those owing to the limited partners in respect of profits; ‘Those owing to the limited partners in respect of capital: ill be done in the following order: Bons