RFBT 05 17 Special Corporate Laws

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
Special Corporate Laws
COVERAGE:
1. Financial Rehabilitation and Insolvency Act
2. Corporate Governance
3. Foreign Investment Act
4. Philippine Competition Act
5. Securities Regulation Code
6. SRC Rule 68
Financial Rehabilitation and Insolvency Act of 2010
I. Insolvency Law for Insolvent Individual Debtors who are not businessmen (R.A. No.
10142 a.k.a. Financial Rehabilitation and Insolvency Act (FRIA) of 2010)
a. Nature of Proceedings under Financial Rehabilitation and Insolvency Act or

FRIA of 2010
The proceedings under this Act shall be in rem. Jurisdiction over all persons affected by
the proceedings shall be considered as acquired upon publication of the notice of the
commencement of the proceedings in any newspaper of general circulation in the
Philippines in the manner prescribed by the rules of procedure to be promulgated by the
Supreme Court. The proceedings shall be conducted in a summary and non-adversarial
manner consistent with the declared policies of this Act and in accordance with the rules
of procedure that the Supreme Court may promulgate.
b. Persons, institutions or businesses not covered by Financial Rehabilitation and

Insolvency Act or FRIA of 2010
• Bank shall refer to any duly licensed bank or quasi-bank that is potentially or actually
subject to conservatorship, receivership or liquidation proceedings under the New
Central Bank Act (Republic Act No. 7653) or successor legislation;
• Insurance company shall refer to those companies that are potentially or actually
subject to insolvency proceedings under the Insurance Code (Presidential Decree No.
1460) or successor legislation; and
• Pre-need company shall refer to any corporation authorized/licensed to sell or offer to
sell pre-need plans.
• National government agencies
• Local government agencies and units
c. Definition of Insolvency
Insolvency shall refer to (1) the financial condition of a debtor that is generally unable to
pay its or his liabilities as they fall due in the ordinary course of business or (2) financial
condition of a debtor when he has liabilities that are greater than its or his assets.
d. Procedures for Suspension of Payments by an Insolvent Individual Debtor
i. Filing of Petition for Declaration of Statement of Suspension of

Payments - An individual debtor who possessing sufficient property to cover all
his debts but foreseeing the impossibility of meeting them when they
respectively fall due, may file a verified petition that he be declared in the state
of suspension of payments by the court of the province or city in which he has
resided for six (6) months prior to the filing of his petition. He shall attach to his
petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory of
assets; and (c) a proposed agreement with his creditors.
ii. Action by the Court on the Petition - If the court finds the petition sufficient
in form and substance, it shall, within five (5) working days from the filing of the
petition, issue an Order:
1. Calling a meeting of all the creditors named in the schedule of debts and
liabilities at such time not less than fifteen (15) days nor more than forty
1|P a g e RLACO/DSALES/NVALDERRAMA
No. 125 Brgy. San Sebastian
Mobile : 0927 283 8234
Telephone : (043) 723 8412
(40) days from the date of such Order and designating the date, time
and place of the meeting;
2. Directing such creditors to prepare and present written evidence of their
claims before the scheduled creditors' meeting;
3. Directing the publication of the said order in a newspaper of general
circulation published in the province or city in which the petition is filed
once a week for two (2) consecutive weeks, with the first publication to
be made within seven (7) days from the time of the issuance of the
Order;
4. Directing the clerk of court to cause the sending of a copy of the Order
by registered mail, postage prepaid, to all creditors named in the
schedule of debts and liabilities;
5. Forbidding the individual debtor from selling, transferring, encumbering
or disposing in any manner of his property, except those used in the
ordinary operations of commerce or of industry in which the petitioning
individual debtor is engaged, so long as the proceedings relative to the
suspension of payments are pending;
6. Prohibiting the individual debtor from making any payment outside of
the necessary or legitimate expenses of his business or industry, so long
as the proceedings relative to the suspension of payments are pending;
and
7. Appointing a commissioner to preside over the creditors' meeting.
iii. Effects of issuance by Court of an Order Suspending any pending

execution against individual debtor upon motion filed by Insolvent
Debtor
1. No creditor shall sue or institute proceedings to collect claim from the
debtor from the time of the filing of the petition for suspension of
payments and for as long as proceedings remain pending, except
a. Those creditors having claims for personal labor, maintenance,
expense of last illness and funeral of the wife or children of the
debtor incurred in the sixty (60) days immediately prior to the
filing of the petition; and
b. Secured creditors.
2. Properties held as security by secured creditors shall not be the subject
of such suspension order.
iv. Duration of Suspension of Payments or Suspension Order issued by the

Trial Court - The suspension order shall lapse when three (3) months shall
have, passed without the proposed agreement being accepted by the creditors or
as soon as such agreement is denied.
v. Quorum in Meeting of Creditors for the approval of the proposal of

insolvent individual debtor – The presence of creditors holding claims
amounting to at least three-fifths (3/5) of the liabilities shall be necessary for
holding of meeting.
vi. Required Vote by the creditors for the approval of the proposal of
insolvent debtor (Double Majority)
1. Two-thirds (2/3) of the creditors voting unite upon the same proposition;
and
2. The claims represented by said majority vote amount to at least three-
fifths (3/5) of the total liabilities of the debtor mentioned in the petition.
a. Note: No creditor who incurred his credit within ninety (90) days
prior to the filing of the petition shall be entitled to vote.
vii. Instances when the proposed agreement by the insolvent debtor is

deemed rejected by the creditors
1. If the number of creditors required for holding a meeting do not attend
thereat; or
2. If the double majorities required for the approval of the proposed
agreement have not been met.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
viii. Effects of Approval of Proposed Agreement by the insolvent debtor

1. The court shall order that the agreement be carried out and all parties
bound thereby to comply with its terms.
2. The court may also issue all orders which may be necessary or proper to
enforce the agreement on motion of any affected party.
ix. Effects of Failure of Individual Debtor to Perform the Approved

Agreement
1. If the individual debtor fails, wholly or in part, to perform the agreement
decided upon at the meeting of the creditors, all the rights which the
creditors had against the individual debtor before the agreement shall
revest in them.
2. The individual debtor may be made subject to the insolvency
proceedings in the manner established by this Act.
e. Procedures for Voluntary Liquidation of Insolvent Individual Debtor as

initiated by the Insolvent Individual Debtor
i. Application - An individual debtor whose properties are not sufficient to cover
his liabilities, and owing debts exceeding Five hundred thousand pesos
(P500,000), may apply to be discharged from his debts and liabilities by filing a
verified petition with the court of the province or city in which he has resided
for six (6) months prior to the filing of such petition. He shall attach to his
petition a schedule of debts and liabilities and an inventory of assets. The filing
of such petition shall be an act of insolvency.
ii. If the court finds the petition sufficient in form and substance, it shall, within
five (5) working days, issue the Liquidation Order to be discussed below.
iii. Requirements for Voluntary Liquidation of Insolvent Individual Debtor
1. The individual debtor’s properties are not sufficient to cover his liabilities;
and
2. The debts of the individual debtor exceed P500,000.
f. Procedures for Involuntary Liquidation of Insolvent Individual Debtor as
initiated by Creditors
i. Application – Any creditor or group of creditors with a claim of, or with claims
aggregating, at least Five hundred thousand pesos (P500,000) may file a
verified petition for liquidation with the court of the province or city in which
the individual debtor resides.
ii. Acts of Insolvency which must be alleged by the creditors in the
petition
1. That such person is about to depart or has departed from the Republic
of the Philippines, with intent to defraud his creditors;
2. That being absent from the Republic of the Philippines, with intent to
defraud his creditors, he remains absent;
3. That he conceals himself to avoid the service of legal process for the
purpose of hindering or delaying the liquidation or of defrauding his
creditors;
4. That he conceals, or is removing, any of his property to avoid its being
attached or taken on legal process;
5. That he has suffered his property to remain under attachment or legal
process for three (3) days for the purpose of hindering or delaying the
liquidation or of defrauding his creditors;
6. That he has confessed or offered to allow judgment in favor of any
creditor or claimant for the purpose of hindering or delaying the
liquidation or of defrauding any creditor or claimant;
7. That he has wilfully suffered judgment to be take against him by default
for the purpose of hindering or delaying the liquidation or of defrauding
his creditors;
8. That he has suffered or procured his property to be taken on legal
process with intent to give a preference to one or more of his creditors
and thereby hinder or delay the liquidation or defraud anyone of his
creditors;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
9. That he has made any assignment, gift, sale, conveyance or transfer of

his estate, property, rights or credits with intent to hinder or delay the
liquidation or defraud his creditors;
10. That he has, in contemplation of insolvency, made an payment, gift,
grant, sale, conveyance or transfer of his estate, property, rights or
credits;
11. That being a merchant or tradesman, he has generally defaulted in the
payment of his current obligations for a period of thirty (30) days;
12. That for a period of thirty (30) days, he has failed, after demand, to pay
any moneys deposited with him or received by him in a fiduciary
capacity; and '
13. That an execution having been issued against him on final judgment for
money, he shall have been found to be without sufficient property
subject to execution to satisfy the judgment.
iii. Posting of Bond by Creditors - The petitioning creditors shall post a bond in
such a sum as the court direct conditioned that if the petition for liquidation is
dismissed by the court, or withdrawn by the petitioner, or the debtor shall not
be declared an insolvent, the petitioners will pay to the debtor all costs,
expenses, damages occasioned by the proceedings, and attorney's fees.
iv. Orders the court may issue during the involuntary liquidation
1. Upon the filing of such creditors' petition, the court shall issue a Show
Cause Order requiring the individual debtor to show cause, at a time any
place to be fixed by the said court, why he should not be adjudged an
insolvent.
2. Upon good cause shown, the court may issue an Order forbidding the
individual debtor from making payments of any of his debts, and
transferring any property belonging to him. However, nothing contained
herein shall affect or impair the rights of a secured creditor to enforce
his lien in accordance with its terms.
v. Default by Individual Insolvent Debtor – If the individual debtor shall
default or if, after trial, the issues are found in favor of the petitioning
creditors, the court shall issue the Liquidation Order to be discussed below.
II. Corporate Rehabilitation for Insolvent Businessman (R.A. No. 10142 a.k.a. Financial
Rehabilitation and Insolvency Act (FRIA) of 2010)
a. Definition of Terms
i. Administrative Expenses – Those reasonable and necessary expenses
incurred for the filing of petition, arising from rehabilitation, incurred in the
ordinary course of business of the debtor after the commencement order, fees of
rehabilitator and for the payment of new obligations obtained after the
commencement date of rehabilitation.
ii. Affiliate – shall refer to a corporation directly or indirectly, through one or more
subsidiaries, is controlled by, or is under the common control of another
corporation.
iii. Claims – shall refer to all claims or demands of whatever nature or character
against the debtor or its property, whetherfor money or otherwise, liquidated or
unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed
iv. Commencement date - shall refer to the date on which the court issues the
Commencement Order, which shall be retroactive to the date of filing of the
petition for voluntary or involuntary proceedings.
v. Commencement Order – shall refer to the order issued by the court
evidencing the commencement of the rehabilitation proceedings.
vi. Control – shall refer to the power of a parent corporation to direct or govern the
financial and operating policies of an enterprise so as to obtain benefits from its
activities.
vii. Creditor – shall refer to a' natural or juridical person which has a claim against
the debtor that arose on or before the commencement date.
viii. Debtor – shall refer to, unless specifically excluded by a provision of this Act, (1)
a sole proprietorship duly registered with the Department of Trade and Industry
(DTI), (2) a partnership duly registered with the Securities and Exchange
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Commission (SEC), (3) a corporation duIy organized and existing under

Philippine laws, or (4) an individual debtor who has become insolvent as defined
herein.
ix. Encumbered property shall refer to real or personal property of the debtor
upon which a lien attaches.
x. General unsecured creditor shall refer to a creditor whose claim or a portion
thereof is neither secured, preferred nor subordinated under this Act.
xi. Group of debtors shall refer to and can cover only: (1) corporations that are
financially related to one another as parent corporations, subsidiaries or
affiliates; (2) partnerships that are owned more than fifty percent (50%) by the
same person; and (3) single proprietorships that are owned by the same person.
When the petition covers a group of debtors, all reference under these rules to
debtor shall include and apply to the group of debtors.
xii. Individual debtor shall refer to a natural person who is a resident and citizen
of the Philippines that has become insolvent as defined herein ..
xiii. Insolvent shall refer to the financial condition of a debtor that is generally
unable to pay its or his liabilities as they fall due in the ordinary course of
business or has liabilities that are greater than its or his assets.
xiv. Insolvent debtor's estate shall refer to the estate of the insolvent debtor,
which includes all the property and assets of the debtor as of commencement
date, plus the property and assets acquired by the rehabilitation receiver or
liquidator after that date, as well as all other property and assets in which the
debtor has an ownership interest, whether or not these property and assets are
in the debtor's possession as of commencement date: Provided, That trust assets
and bailment, and other property and assets of a third party that are in the
possession of the debtor as of commencement date, are excluded therefrom.
xv. Involuntary proceedings shall refer to proceedings initiated by creditors.
xvi. Liabilities shall refer to monetary claims against the debtor, including
stockholder's advances that have been recorded in the debtor's audited financial
statements as advances for future subscriptions.
xvii. Lien shall refer to a statutory or contractual claim or judicial charge on real or
personal property that legally entitles a creditor to resort to said property for
payment o fthe claim or debt secured by such lien.
xviii. Liquidator shall refer to the natural person or juridical entity appointed as such
by the court and entrusted with such powers and duties as set forth in this Act:
Provided,That, if the liquidator is a juridical entity, it must designate a natural
person who possesses all the qualifications and none of the disqualifications as
its representative, it being understood that the juridical entity and the
representative are solidarily liable for all obligations and responsibilities of the
liquidator.
xix. Officer shall refer to a natural person holding a management position described
in or contemplated by a juridical entity’s articles of incorporation, bylaws or
equivalent documents, except for the corporate secretary, the assistant
corporate secretary and the external auditor.
xx. Ordinary course of business shall refer to transactions in the pursuit of the
individual debtor's or debtor's business operations prior to rehabilitation or
insolvency proceedings and on ordinary business terms.
xxi. Ownership interest shall refer to the ownership interest of third parties in
property held by the debtor, including those covered by trust receipts or
assignments of receivables.
xxii. Parent shall refer to a corporation which has control over another corporation
either directly or indirectly through one or more intermediaries.
xxiii. Party to the proceedings shall refer to the debtor, a creditor, the unsecured
creditors' committee, a stakeholder, a party with an ownership interest in
property held by the debtor, a secured creditor, the rehabilitation receiver,
liquidator or any other juridical or natural person who stands to be benefited or
injured by the outcome of the proceedings and whose notice of appearance is
accepted by the court.
xxiv. Possessory lien shall refer to a lien on property, the possession of which has
been transferred to a creditor or a representative or agent thereof.
xxv. Proceedings shall refer to judicial proceedings commenced by the court's
acceptance of a petition filed under this Act.
xxvi. Property of others shall refer to property held by the debtor in which other
persons have an ownership interest.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
xxvii. Publication notice shall refer to notice through publication in a newspaper of

general circulation in the Philippines on a business day for two (2) consecutive
weeks.
xxviii. Rehabilitation shall refer to the restoration of t.he debtor to a condition of
successful operation and solvency, if it is shown that its continuance of operation
is economically feasible and its creditors can recover by way of the present value
of payments projected in the plan, more if the dehtor continues as a going
concern than if it is immediately liquidated.
xxix. Rehabilitation receiver shall refer to the person or persons, natural or
juridical, appointed as such by the court pursuant to this Act and which shall be
entrusted with such powers and duties as set forth herein.
xxx. Rehabilitation Plan shall refer to a plan by which the financial well~being and
viability of an insolvent debtor can be restored using various means including,
but not limited to, debt forgiveness, debt rescheduling, reorganization or
quasi~reorganization, dacion en pago, debt-equity conversion and sale of the
business (or parts of it) as a going concern, or setting-up of new business entity
as prescribed in Section 62 hereof, or other similar arrangements as may be
approved by the court or creditors.
xxxi. Secured claim shall refer to a claim that is secured by alien.
xxxii. Secured creditor shall refer to a creditor with a secured claim.
xxxiii. Secured party shall refer to a secured creditor or the agent or representative of
such secured creditor.
xxxiv. Securities market participant shall refer to a broker, dealer, underwriter,
transfer agent or other jurdical persons transacting securities in the capital
market.
xxxv. Stakeholder shall refer, in addition to a holder of shares of a corporation, to a
member of a nonstock corporation or association or a partner in a partnership.
xxxvi. Subsidiary shall refer to a corporation more than fifty percent (50%) of the
voting stock of which is owned or controlled directly or indirectly through one or
more intermediaries by another corporation, which thereby becomes its parent
corporation.
xxxvii. Unsecured claim shall refer to a claim that is not secured by a lien.
xxxviii. Unsecured creditor shall refer to a creditor with an unsecured claim.
xxxix. Voluntary proceedings shall refer to proceedings initiated by the debtor.
xl. Voting creditor shall refer to a creditor that is a member of a class of creditors,
the consent of which is necessary for the approval of a Rehabilitation Plan under
this Act.
b. Types of Rehabilitation of a Businessman
1. Court-Supervised Rehabilitation is a type of rehabilitation that involves filing

of a petition before Regional Trial Court wherein the rehabilitation of the
business is under the supervision and control by the rehabilitation court.
a. Voluntary Court-Supervised Rehabilitation is a type of court-

supervised rehabilitation wherein it is the insolvent businessman who
filed the petition for rehabilitation before the rehabilitation court.
b. Involuntary Court-Supervised Rehabilitation is a type of court-

supervised rehabilitation wherein it is the creditors of the insolvent
businessman who filed the petition for rehabilitation before the
rehabilitation court.
2. Pre-negotiated Rehabilitation is a type of rehabilitation that involves the

filing before the Regional Trial Court of rehabilitation plan which is already pre-
negotiated by the insolvent business debtor and its creditors.
3. Out-of-Court Restructuring or Informal Rehabilitation is a type of

rehabilitation that does not involve the filing before the Regional Trial Court of
any petition but the rehabilitation shall be governed by the outside agreement of
the insolvent businessman and its creditors. It will have the same effect as the
other types of rehabilitation filed before the court as long as the requisites
provided by FRIA are present.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
c. Court-Supervised Rehabilitation
i. Voluntary Court-Supervised Rehabilitation (Initiated by Insolvent

Businessman)
1. Required Vote for Voluntary Rehabilitation
a. When approved by the owner in case of a sole proprietorship, or
b. By a majority of the partners in case of a partnership, or,
c. On case of a corporation, by a majority vote of the board of
directors or trustees and authorized by the vote of the
stockholders representing at least two-thirds (2/3) of the
outstanding capital stock, or
d. In case of nonstock corporation, by the vote of at least two-
thirds (2/3) of the members, in a member's meeting duly called
for the purpose.
2. Grounds for Court-Supervised Rehabilitation

a. The debtor is generally unable to pay its or his liabilities as they
fall due in the ordinary course of business; or
b. The debtor has liabilities that are greater than its or his assets.
3. Minimum Allegations for Voluntary Rehabilitation

a. The petition shall be verified to establish the insolvency of the
debtor.
b. The petition shall be verified to establish the viability of the
rehabilitation of the insolvent debtor.
4. Joint Filing of Petition for Rehabilitation by a group of debtors -

A group of debtors may jointly file a petition for rehabilitation under this
Act when one or more of its members foresee the impossibility of
meeting debts when they respectively fall due, and the financial distress
would likely adversely affect the financial condition and/or operations of
the other members of the group and/or the participation of the other
members of the group is essential under the terms and conditions of the
proposed.
5. Contents of Petition for Voluntary Rehabilitation

a. Identification of the debtor, its principal activities and its
addresses;
b. Statement of the fact of and the cause of the debtor's insolvency
or inability to pay its obligations as they become due;
c. The specific relief sought pursuant to this Act;
d. The grounds upon which the petition is based;
e. Other information that may be required under this Act
depending on the form of relief requested;
f. Schedule of the debtor's debts and liabilities including a list of
creditors with their addresses, amounts of claims and collaterals,
or securities, if any;
g. An inventory of all its assets including receivables and claims
against third parties;
h. A Rehabilitation Plan;
i. The names of at least three (3) nominees to the position of
rehabilitation receiver; and
j. Other documents required to be filed with the petition pursuant
to this Act and the rules of procedure as may be promulgated by
the Supreme Court.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
ii. Involuntary Court-Supervised Rehabilitation (Initiated by Creditors of

Insolvent Businessman)
1. Required Vote for Involuntary Rehabilitation

a. Any creditor or group of creditors with a claim of or the
aggregate of whose claims is, at least One million pesos
(P1,000,000) or at least twenty-five percent (25%) of the
subscribed capital stock or partners’s contributions, whichever is
higher, may initiate involuntary proceedings against the debtor
by filing a petition for rehabilitation.
2. Grounds for Involuntary Rehabilitation

a. There is no genuine issue of fact or law on the claims of the
petitioner’s, and that the due and demandable payments thereon
have not been made for at least sixty (60) days or that the
debtor has failed generally to meet its liabilities as they fall due;
or
b. A creditor, other than the petitioners, has initiated foreclosure
proceedings against the debtor that will prevent the debtor from
paying its debts as they become due or will render it insolvent.
3. Contents of Petition for Involuntary Rehabilitation

a. identification of the debtor, its principal activities and its
address;
b. the circumstances sufficient to support a petition to initiate
involuntary rehabilitation proceedings under Section 13 of this
Act;
c. the specific relief sought under this Act;
d. a Rehabilitation Plan;
e. the names of at least three (3) nominees to the position of
rehabilitation receiver;
f. other information that may be required under this Act depending
on the form of relief requested; and
g. other documents required to be filed with the petition pursuant
to this Act and the rules of procedure as may be promulgated by
the Supreme Court.
d. Court’s Action on the Petition for Rehabilitation - If the court finds the petition for
rehabilitation to be sufficient in form and substance, it shall. within five (5) working days
from the filing of the petition, issue a Commencement Order. If, within the same period,
the court finds the petition deficient in form or substance, the court may, in its discretion,
give the petitioner/s a reasonable period of time within which to amend or supplement
the petition, or to submit such documents as may be necessary or proper to put the
petition in proper order. In such case, the five (5) working days provided above for the
issuance of the Commencement Order shall be reckoned from the date of the filing of the
amended or supplemental petition or the submission of such documents.
Note: The rehabilitation proceedings shall commence upon the issuance of the
Commencement Order
e. Effects of the Issuance of Commencement Order

a. It shall vest the rehabilitation receiver with all the powers and functions provided
for in this Act, such as the right to review and obtain all records to which the
debtor's management and directors have access, including bank accounts of
whatever nature of the debtor, subject to the approval by the court of the
performance bond filed by the rehabilitation receiver;
b. It shall prohibit, or otherwise serve as the legal basis for rendering null and void
the results of any extrajudicial activity or process to seize property, sell
encumbered property, or otherwise attempt to collect on or enforce a claim
Mobile : 0927 283 8234
Telephone : (043) 723 8412
against the debtor after the commencement date unless otherwise allowed in
this Act, subject to the provisions of Section 50 hereof;
c. It shall serve as the legal basis for rendering null and void any setoff after the
commencement date of any debt owed to the debtor by any of the debtor's
creditors;
d. It shall serve as the legal basis for rendering null and void the perfection of any
lien against the debtor's property after the commencement date;
e. It shall consolidate the resolution of all legal proceedings by and against the
debtor to the court: Provided, however, That the court may allow the
continuation of cases in other courts where the debtor had initiated the suit.
f. Attempts to seek legal or other recourse against the debtor outside these
proceedings shall be sufficient to support a finding of indirect contempt of court.
g. Upon issuance of the Commencement Order by the court, and until the approval
of the Rehabilitation Plan or dismissal of the petition, whichever is earlier, the
imposition of all taxes and fees, including penalties, interests mid charges
thereof, due to the national government or to LGUs shall be considered waived,
in furtherance of the objectives of rehabilitation.
f. Stay Order a.k.a. Suspension Order in Rehabilitation Proceedings

The rehabilitation proceedings of an insolvent debtor shall commence upon issuance by
the rehabilitation court of Commencement Order which shall include among others a Stay
Order or Suspension Order.
g. Effects of Issuance by Rehabilitation Court of Stay or Suspension Order

i. It shall suspend all actions or proceedings, in court or otherwise, for the
enforcement of claims against the debtor;
ii. It shall suspend all actions to enforce any judgment, attachment or other
provisional remedies against the debtor;
iii. It shall prohibit the debtor from selling, encumbering, transferring or disposing in
any manner any of its properties except in the ordinary course of business; and .
iv. It shall prohibit the debtor from making any payment of its liabilities outstanding
as of the commencement date except as may be provided herein.
v. The issuance of the Commencement Order and the Suspension or Stay Order,
and any other provision of this Act, shall not be deemed in any way to diminish
or impair the security or lien of a secured creditor, or the value of his lien or
security, except that his right to enforce said security or lien may be suspended
during the term of the Stay Order.
Note: The provisions of this Act concerning the effects of the Commencement Order and
the Stay or Suspension Order on the suspension of rights to foreclose or otherwise
pursue legal remedies shall apply to government financial institutions, notwithstanding
provisions in their charters or other laws to the contrary.
h. Exceptions to the Stay or Suspension Order (Cases not covered by Stay or

Suspension Order)
i. to cases already pending appeal in the Supreme Court as of commencement
date: Provided, That any final and executor judgment arising from such appeal
shall be referred to the court for appropriate action;
ii. subject to the discretion of the court, to cases pending or filed at a specialized
court or quasi-judicial agency which, upon determination by the court, is capable
of resolving the claim more quickly, fairly and efficiently than the court: Provided,
That any final and executory judgment of such court or agency shall be referred
to the court and shall be treated as a non-disputed claim;
iii. to the enforcement of claims against sureties and other persons solidarily liable
with the debtor, and third party or accommodation mortgagors as well as issuers
of letters of credit, unless the property subject of the third party or
accommodation mortgage is necessary for the rehabilitation of the debtor as
determined by the court upon recommendation by the rehabilitation receiver;
iv. to any form of action of customers or clients of a securities market participant to
recover or otherwise claim moneys and securities entrusted to the latter in the
ordinary course of the latter's business as well as any action of such securities
market participant or the appropriate regulatory agency or self-regulatory
organization to payor settle such claims or liabilities;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
v. to the actions of a licensed broker or dealer to sell pledged securities of a debtor

pursuant to a securities pledge or margin agreement for the settlement of
securities transactions in accordance with the provisions of the Securities
Regulation Code and its implementing rules and regulations;
vi. the clearing and settlement of financial transactions through the facilities of a
clearing agency or similar entities duly authorized, registered and/or recognized
by the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP)
and the SEC as well as any form of actions of such agencies or entities to
reimburse themselves for any transactions settled for the debtor; and .
vii. any criminal action against the individual debtor or owner, partner, director or
officer of a debtor shall not be affected by any proceeding commenced under
this Act.
i. Receiver
i. Who may serve as a Rehabilitation Receiver - Any qualified natural or

juridical person may serve as a rehabilitation receiver: Provided, That if the
rehabilitation receiver is a juridical entity, it must designate a natural person who
possesses all the qualifications and none of the disqualifications as its
representative, it being understood that for all obligations and responsibilities of
the rehabilitation receiver.
ii. Qualifications of a Rehabilitation Receiver

1. A citizen of the Philippines or a resident of the Philippines in the six (6)
months immediately preceding his nomination;
2. Of good moral character and with acknowledged integrity, impartiality
and independence;
3. Has the requisite knowledge of insolvency and other relevant commercial
laws, rules and procedures, as well as the relevant training and/or
experience that may be necessary to enable him to properly discharge
the d utles and obligations of a rehabilitation receiver; and
4. Has no conflict of interest: Provided, That such conflict of interest may
be waived, expressly or impliedly, by a party who may be prejudiced
thereby.
iii. Appointment of the Rehabilitation Receiver

1. The court shall initially appoint the rehabilitation receiver, who mayor
may not be f:t°om among the nominees of the petitioner, However, at
the initial hearing of the petition, the creditors and the debtor who are
not petitioners may nominate other persons to the position. The court
may retain the rehabilitation receiver initially appointed or appoint
another who mayor may not be from among those nominated.
2. If a qualified natural person or entity is nominated by more than fifty
percent (50%) of the secured creditors and the general unsecured
creditors, and satisfactory evidence is submitted, the court shall appoint
the creditors' nominee as rehabilitation receiver.
iv. Powers, Duties and Responsibilities of the Rehabilitation Receiver

1. To verify the accuracy of the factual allegations in the petition and its
annexes;
2. To verify and correct, if necessary, the inventory of all of the assets of
the debtor, and their valuation;
3. To verify and correct, if necessary, the schedule of debts and liabilities of
the debtor;
4. To evaluate the validity, genuineness and true among of all the claims
against the debtor;
5. To take possession, custody and control, and to preserve the value of all
the property of the debtor;
6. To sue and recover, with the approval of the court, all amounts owed to,
and all properties pertaining to the debtor;
7. To have access to all information necessary, proper or relevant to the
operations and business of the debtor and for Its rehabilitation;
10 | P a g e RLACO/DSALES/NVALDERRAMA
Mobile : 0927 283 8234
Telephone : (043) 723 8412
8. To sue and recover, with the. approval of the court, all property or
money of the debtor paid, transferred or disbursed in fraud of the debtor
or its creditors, or which constitute undue preference of creditor/s;
9. To monitor the operations and the business of the debtor to ensure that
no payments or transfers of property are made other than in the
ordinary course of business;
10. With the court's approval, to engage the services of or to employ
persons or entities to assist him in the discharge of his functions;
11. To determine the manner by which the debtor may be best rehabilitated,
to review) revise and/or recommend action on the Rehabilitation Plan
and submit the same or a new one to the court for approval;
12. To implement the Rehabilitation Plan as approved by the court, if 80
provided under the Rehabilitation Plan;
13. To assume and exercise the powers of management of the debtor, if
directed by the court pursuant to Section 36 hereof;
14. To exercise such other powers as may, from time to time, be conferred
upon him by the court; and
15. To submit a status report on the rehabilitation proceedings every quarter
or as may be required by the court motu proprio or upon motion of any
creditor. or as may be provided, in the Rehabilitation Plan
v. Removal of the Rehabilitation Receiver – The rehabilitation receiver may be

removed at any time by the court either motu proprio or upon motion by any
creditor’s holding more than fifty percent (50%) of the total obligations of the
debtor, on such grounds as the rules of procedure may provide.
vi. Grounds for Removal of Rehabilitation Receiver

1. Incompetence, gross negligence, failure to perform or failure to exercise
the proper degree of care in the performance of his duties and powers;
2. Lack of a particular or specialized competency required by the specific
case;
3. Illegal acts or conduct in the performance of his duties and powers;
4. Lack of qualification or presence of any disqualification;
5. Conflict of interest that arises after his appointment; and
6. Manifest lack of independence that is detrimental to the general body of
the stakeholders.
vii. Compensation, Term of Office and Bonds of a Rehabilitation Receiver
1. The rehabilitation receiver and his direct employees or independent

contractors shall be entitled to compensation for reasonable fees and
expenses from the debtor according to the terms approved by the court
after notice and hearing. Prior to such hearing, the rehabilitation receiver
and his direct employees shall be entitled to reasonable compensation
based on quantum meruit. Such costs shall be considered administrative
expenses.
2. Prior to entering upon his powers, duties and responsibilities, the
rehabilitation receiver shall take an oath and file a bond, in such amount
to be fixed by the court, conditioned upon the faithful and proper
discharge of his powers, duties and responsibilities.
j. Rehabilitation Plan
i. Minimum Contents of Rehabilitation Plan
1. specify the underlying assumptions, the financial goals and the
procedures proposed to accomplish such goals;
2. compare the amounts expected to be received by the creditors under the
Rehabilitation Plan with those that they will receive if liquidation ensues
within the next one hundred twenty(120) days;
3. contain information sufficient to give the various classes of creditors a
reasonable basis for determining whether supporting the Plan is in their
financial interest when compared to the immediate liquidation of the
debtor, including any reduction of principal interest and penalties
payable to the creditors;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
4. establish classes of voting creditors;

5. establish subclasses of voting creditors if prior approval has been
granted by the court;
6. indicate how the insolvent debtor will be rehabilitated including, but not
limited to, debt forgiveness, debt rescheduling, reorganization or quasi-
reorganization. dacion en pago, debt-equity conversion and sale of the
business (or parts of it) as a going concern, or setting-up of a new
business entity or other similar arrangements as may be necessary to
restore the financial well-being and viability of the insolvent debtor;
7. specify the treatment of each class or subclass described in subsections
(d) and (e);
8. provide for equal treatment of all claims within the same class or
subclass, unless a particular creditor voluntarily agrees to less favorable
treatment;
9. ensure that the payments made under the plan follow the priority
established under the provisions of the Civil Code on concurrence and
preference of credits and other applicable laws;
10. maintain the security interest of secured creditors and preserve the
liquidation value of the security unless such has been waived or modified
voluntarily;
11. disclose all payments to creditors for precommencement debts made
during the proceedings and the justifications thereof
12. describe the disputed claims and the provisioning of funds to account for
appropriate payments should the claim be ruled valid or its amount
adjusted;
13. identify the debtor's role in the implementation of the Plan
14. state any rehabilitation covenants of the debtor, the breach of which
shall be considered a material breach of the Plan;
15. identify those responsible for the future management of the debtor and
the supervision and implementation of the Plan, their affiliation with the
debtor and their remuneration;
16. address the treatment of claims arising after the confirmation of the
Rehabilitation Plan;
17. require the debtor and its counter-parties to adhere to the terms of all
contracts that the debtor has chosen to confirm;
18. (arrange for the payment of all outstanding administrative expenses as a
condition to the Plan's approval unless such condition has been waived
;n writing by the creditors concerned;
19. arrange for the payment" of all outstanding taxes and assessments, or
an adjusted amount pursuant to a compromise settlement with the BlR
Or other applicable tax authorities;
20. include a certified copy of a certificate of tax clearance or evidence of a
compromise settlement with the BIR;
21. include a valid and binding r(,solution of a meeting of the debtor's
stockholders to increase the shares by the required amount in cases
where the Plan contemplates an additional issuance of shares by the
debtor;
22. state the compensation and status, if any, of the rehabilitation receiver
after the approval of the Plan; an
23. contains provisions for conciliation and or mediation as a prerequisite to
court assistance or intervention in the event of any disagreement in the
interpretation or implementation of the Rehabilitation Plan.
ii. Required Vote for Creditor Approval of Rehabilitation Plan

1. The rehabilitation plan shall be deemed rejected unless approved by all
classes of creditors whose right are adversely modified or affected by the
Plan.
2. For purposes of this section, the rehabilitation plan is deemed to have
been approved by a class of creditors if members of the said class
holding more than fifty( percent (50%) of the total claims of the said
class vote in favor of the Plan.
iii. Requisites for Court’s Confirmation of the Rehabilitation Plan

notwithstanding the rejection by some opposing Creditors
Mobile : 0927 283 8234
Telephone : (043) 723 8412
1. The rehabilitation plan complies with the requirement as specified in

FRIA;
2. The rehabilitation receiver recommends the confirmation of the
Rehabilitation Plan;
3. The shareholders, owners or' partners of the juridical, debtor lose at
least their controlling interest as a result of the Rehabilitation Plan; and
4. The Rehabilitation Plan would likely provide the objecting class of
creditors with compensation which has a net present value greater than
that which they would have receive4if the debtor were under liquidation.
iv. Submission of Rehabilitation Plan to the Court and Filing of Objection

to Rehabilitation Plan
1. If the rehabilitation plan is approved, the rehabilitation receiver shall
submit the same to the court for confirmation. Within five (5) days from
receipt of the Rehabilitation Plan, the court shall notify the creditors that
the rehabilitation plan has been submitted or confirmation, that any
creditor may obtain copies of the rehabilitation plan and that any creditor
may file an objection thereto.
2. A creditor may file an objection to the rehabilitation plan within twenty
(20) days from receipt of notice from the court that the rehabilitation
plan has been submitted for confirmation.
v. Grounds for objection to Rehabilitation Plan

1. The creditors' support was induced by fraud;
2. The documents or data relied upon in the rehabilitation plan are
materially false or misleading; or
3. The rehabilitation plan is in fact not supported by the voting creditors.
vi. Confirmation of the Rehabilitation Plan by the Court

1. If no objections are filed within the relevant period or, if objections are
filed, the court finds them lacking in merit, or determines that the basis
for the objection has been cured, or determines that the debtor has
complied with an order to cure the objection, the court shall issue an
order confirming the rehabilitation plan.
2. The court may confirm the rehabilitation plan notwithstanding
unresolved disputes over claims if the rehabilitation plan has made
adequate provisions for paying such claim.
vii. Effects of Confirmation by the Court of the Rehabilitation Plan

1. The Rehabilitation Plan and its provisions shall be binding upon the
debtor and all person who may be affected by it, including the creditors,
whether or not such persons have participated in the proceedings or
opposed the Rehabilitation Plan or whether or not their claims have been
scheduled;
2. The debtor shall comply with the provisions of the Rehabilitation Plan
and shall take all actions necessary to carry " out the Plan;
3. Payments shall be made to the creditors in accordance 'with the
provisions of the Rehabilitation Plan;
4. Contracts and other arrangements between the debtor and its creditors
shall be interpreted as continuing to apply to the extent that they do not
conflict with the provisions of the Rehabilitation Plan;
5. Any compromises on amounts or rescheduling of timing of payments by
the debtor shall be binding on creditors regardless of whether or not the
plan is successfully implemented; and·
6. Claims arising after approval of the plan that are otherwise not treated
by the plan are not subject to any Suspension Order.
viii. Period for Court’s Confirmation of Rehabilitation Plan

1. The court shall have a maximum period of one (l} year from the date of
the filing of the petition to confirm a Rehabilitation Plan.
2. If no Rehabilitation Plan is confirmed within the said period, the
proceedings may, upon motion or motu proprio, be converted into one
for the liquidation of the debtor.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
ix. Instances of failure of rehabilitation justifying its termination

1. Dismissal of the petition by the court;
2. The debtor, fails to submit a Rehabilitation Plan;
3. Under the Rehabilitation Plan submitted by the debtor, there is no
substantial likelihood that the debtor can be rehabilitated within a
reasonable period;
4. The Rehabilitation Plan or its amendment is approved, by the court but
in the implementation thereof, the debtor falls to perform its obligations
thereunder, or there is a failure to realize the objectives, targets or goals
set forth therein, including the timelines and conditions for the
settlement of the obligations due to the creditors and other claimants;
The commission of fraud in securing the approval off the Rehabilitation
Plan or its amendment;
5. Other analogous circumstances as may be defined by the rules of
procedure.
x. Effects of termination of Rehabilitation
1. The discharge of the rehabilitation receiver, subject to his submission of
a final accounting; and
2. The lifting of the Stay Order and any other court order holding in
abeyance any action for the enforcement of a claim against the debtor.
Provided, however, that if the termination of proceedings is due to
failure of rehabilitation or dismissal of the petition for reasons other than
technical grounds, the .proceedings shall be immediately converted to
liquidation as provided in Section 92 of this Act.
k. Other Types of Rehabilitation
i. Pre-Negotiated Rehabilitation - An insolvent debtor, by itself or jointly with

any of its creditors, may file a verified petition with the court for the approval of
a Pre-negotiated Rehabilitation Plan.
1. Required Creditor’s Vote for Approval of Pre-negotiated

Rehabilitation Plan
a. Endorsement or Approval by by creditors holding at least two-
thirds (2/3) of the total liabilities of the debtor, including secured
creditors holding more than fifty percent (50%); or
b. Endorsement or Approval by the total secured claims of the
debtor and unsecured creditors holding more than fifty percent
(50%) of the total unsecured claims of the debtor.
ii. Out-of-Court or Informal Restructuring Agreements or Rehabilitation

Plans - An out-of-court or informal restructuring agreement or Rehabilitation
Plan that meets the minimum requirements prescribed in this chapter is hereby
recognized as consistent with the objectives of this Act.
1. Minimum Requirements of Out-of-Court or Informal

Rehabilitation Plans
a. The debtor must agree to the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan;
b. It must be approved by creditors representing at least sixty-
seven percent (67%) of the secured obligations of the debtor;
c. It must be approved by creditors representing at least seventy-
five percent (75%) of the unsecured obligations of the debtor;
and
d. It must be approved by creditors holding at least eighty-five
percent (85%) of the total liabilities, secured and unsecured, of
the debtor.
2. Cram Down Effect - A restructuring/workout agreement or

Rehabilitation Plan that is approved pursuant to an informal workout
framework referred to in this chapter shall have the same legal effect as
confirmation of a Plan under Section of FRIA.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
A. Procedures for Involuntary Liquidation of Insolvent Businessman (Initiated by

Insolvent Juridical Debtor)
a. An insolvent debtor may apply for liquidation by filing a petition for liquidation with the
court. The petition shall be verified, shall establish the insolvency of the debtor and shall
contain, whether as an attachment or as part of the body of the petition:
1. a schedule of the debtor's debts and liabilities including' a list of creditors
with their addresses, amounts of claims and collaterals, or securities, if
any;
2. an inventory of all its assets including receivables and claims against
third parties; and
3. the names of at least three (3) nominees to the position of liquidator .
a. Grounds for Voluntary Liquidation of Insolvent Juridical

Person
i. Insolvency of Juridical Debtor
ii. Conversion of Rehabilitation Proceedings to Liquidation
Proceedings by establishing that the debtor is seeking
immediate dissolution and termination of its corporate
existence
b. Required Vote for Voluntary Liquidation of Insolvent

Juridical Person
i. At least majority vote of the members of the Board of
Directors/Trustees; and
ii. Approval by at least 2/3 of the outstanding
stockholders/members.
B. Procedures for Involuntary Liquidation of Insolvent Juridical Person (Initiated by

Creditors of Insolvent Juridical Person
1. Required Creditor’s Vote for Petition for Involuntary Liquidation

(Initiated by Creditors of Insolvent Debtors)
a. Three (3) or more creditors the aggregate of whose claims is at
least either One million pesos (P1,000,000) or at least twenty-
five percent (25%) of the subscribed capital stock or partner's
contributions of the debtor, whichever is higher.
2. Requisites or Allegations for Involuntary Liquidation of

Insolvent Juridical Person
a. There is no genuine issue of fact or law on the claim/s of the
petitioner/s, and that the due and demandable payments
thereon have not been made for at least one hundred eighty
(180) days or that the debtor has failed generally to meet its
liabilities as they fall due; and
b. There is no substantial likelihood that the debtor maybe
rehabilitated.
3. At any time during the pendency of or after a rehabilitation court

supervised or pre-negotiated rehabilitation proceedings, three (3) or
more creditors whose claims is at least either One million pesos Php
1,000,000.00) or at least twenty-five percent (25%) of the subscribed
capital or partner's contributions of the debtor, whichever is higher, may
also initiate liquidation proceedings by filing a motion in the same court
where the rehabilitation proceedings are pending to convert the
rehabilitation proceedings into liquidation proceedings.
C. Common Provisions for Liquidation of Insolvent Individual Debtor and Insolvent

Businessman
i. Effects of Issuance of Liquidation Order
1. The juridical debtor shall be deemed dissolved and its corporate or
juridical existence terminated.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
2. Legal title to and control of all the assets of the debtor, except those that
may be exempt from execution, shall be deemed vested in the liquidator
or, pending his election or appointment with the court.
3. All contracts of the debtor shall be deemed terminated and/or breached,
unless the liquidator, within ninety (90) days from the date of his
assumption of office, declares otherwise the contracting party agrees.
4. No separate action for the collection of an unsecured claim shall be
allowed. Such actions already pending will be transferred to the
Liquidator for him to accept and settle or contest, If the liquidator
contests or disputes the claim, the court shall I allow, hear and resolve
such contest except when the case is already on appeal. In such a case,
the suit may proceed to judgment, and any final and executory judgment
therein for a claim against debtor shall be filed and allowed in court.
5. No foreclosure proceeding shall be allowed for a period of one hundred
eighty (180) days.
ii. Rights of Secured Creditors in case of Liquidation Proceedings

1. They may waive his rights under the security or lien, prove his claim in
the liquidation proceedings and share in the distribution of the assets of
the debtor; or
2. They may maintain his rights under his security or lien.
iii. Types of Liquidator

1. Elected Liquidator by Creditors
2. Court-Appointed Liquidator
a. Instances when Court may appoint a liquidator
i. on the date set for the election of the liquidator, the creditors
do not attend;
ii. the creditors who attend, fail or refuse to elect a liquidator;
iii. after being elected, the liquidator fails to qualify; or
iv. a vacancy occurs for any reason whatsoever. In any of the
cases provided herein, the court may instead set another
hearing for the election of the liquidator.
iv. Oath, Bond and Qualifications of Liquidator

1. Prior to entering upon his powers, duties and responsibilities, the
liquidator shall take an oath and file a bond, in such amount to be fixed
by the court, conditioned upon the proper and faithful discharge of his
powers, duties and responsibilities.
2. The liquidator shall have the qualifications of Rehabilitator. He may be
removed at any time by the court for cause, either motu proprio or upon
motion of any creditor entitled to vote for the election of the liquidator.
3. Powers, Duties and Responsibilities of Liquidator - The liquidator shall be
deemed an officer of the court with the principal duty of preserving and
maximizing the value and recovering the assets of the debtor, with the
end of liquidating them and discharging to the extent possible all the
claims against the debtor. The powers, duties and responsibilities of the
liquidator shall include, but not be limited to:
a. to sue and recover all the assets, debts and claims, belonging or
due to the debtor;
b. to take possession of all the property of the debtor except
property exempt by law from execution;
c. to sell, with the approval of the court, any property of the debtor
which has come into his possession or control;
d. to redeem all mortgages and pledges, and to satisfy any
judgment which may be an encumbrance on any property sold
by him;
e. to settle all accounts between the debtor and his creditors,
subject to the approval of the court;
f. to recover any property or its value, fraudulently conveyed by
the debtor;
g. to recommend to the court the creation of a creditors' committee
which will assist him in the discharge of his functions and which
Mobile : 0927 283 8234
Telephone : (043) 723 8412
shall have powers as the court deems just, reasonable and

necessary; and
h. upon approval of the court, to engage such professionals as may
be necessary and reasonable to assist him in the discharge of his
duties.
i. In addition to the rights and duties of a rehabilitation receiver,
the liquidator shall have the right and duty to take all reasonable
steps to manage and dispose of the debtor's assets with a view
towards maximizing the proceedings therefrom, to pay creditors
and stockholders, and to terminate the debtor's legal existence.
v. Right of Off-Set - If the debtor and a creditor are mutually debtor and
creditor of each other, one debt shall be set off against the other, and only the
balance, if any, shall be allowed in the liquidation proceedings.
vi. Determination of Claims - Within twenty (20) days from his assumption into
office, the liquidator shall prepare a preliminary registry of claims of secured
and unsecured creditors. Secured creditors who have waived their security or
lien, or have fixed the value of the property subject of their security or lien by
agreement with the liquidator and is admitted as a creditor for the balance,
shall be considered as unsecured creditors. The liquidator shall make the
registry available for public inspection and provide publication notice to
creditors, individual debtors, owners of the sole proprietorship-debtor, the
partners of the partnership-debtor and shareholders or members of the
corporation-debtor, on where and when they may inspect it. All claims must be
duly proven before being paid.
vii. Opposition or Challenge to Claims – Within thirty (30) days from the
expiration of the period for filing of applications for recognition of claims,
creditors, individual debtors, owners of the sole proprietorship-debtor, partners
of the partnership-debtor and shareholders or members of the corporation-
debtor and other interested parties may submit a challenge to a claim or claims
to the court, serving a certified copy on the liquidator and the creditor holding
the challenged claim. Upon the expiration of the thirty (30)-day period, the
rehabilitation receiver shall submit to the court the registry of claims containing
the undisputed claims that have not been subject to challenge. Such claims
shall become final upon the filing of the register and may be subsequently set
aside only on grounds of fraud, accident, mistake or inexcusable neglect.
viii. Submission of Disputed Claims to Court - The liquidator shall resolve

disputed claims and submit his findings thereon to the court for final apl1roval.
The liquidator may disallow claims.
ix. Action for Rescission or Nullity of Certain Transactions - Any

transaction occurring prior .to the issuance of the Liquidation Order or, in case
of the conversion of the rehabilitation proceedings to liquidation proceedings
prior to the commencement date, entered into by the debtor or involving its
assets, may be rescinded or declared null and void on the ground that the
same was executed with intent to defraud a creditor or creditors or which
constitute undue preference of creditors.
x. Submission of Liquidation Plan - Within three (3) months from his

assumption into office, the Liquidator shall submit a Liquidation Plan to the
court. The Liquidation Plan shall, as a minimum, enumerate all the assets of
the debtor, all the claims against the debtor and a schedule of liquidation of
the assets and payment of the claims.
xi. Sale of Assets in Liquidation – The liquidator may sell the unencumbered
assets of the debtor and convert the same into money. The sale shall be made
at public auction. However, a private sale may be allowed with the approval of
the court if: (a) the goods to be sold are of a perishable nature, or are liable to
quickly deteriorate in value, Or are disproportionately - expensive to keep or
maintain; or (b) the private sale is for the best interest of the debtor and his
Mobile : 0927 283 8234
Telephone : (043) 723 8412
creditors. With the approval of the court, unencumbered property of the debtor
may also be conveyed to a creditor in satisfaction of his claim or part thereof.
xii. Manner of Implementing the Liquidation Plan. The liquidator shall

implement the Liquidation Plan as approved by the court. Payments shall be
made to the creditors only in accordance with the provisions of the Plan.
xiii. Concurrence and Preference of Credits. – The Liquidation Plan and its
implementation shall ensure that the -concurrence and preference of credits as
enumerated in the Civil Code of the Philippines and other relevant laws shall be
observed, unless a preferred creditor voluntarily waives his preferred right. For
purposes of this chapter, credits for services rendered by employees or
laborers to the debtor shall enjoy first preference under Article 2244 of the Civil
Code, unless the claims constitute legal liens under Articles 2241 and 2242
thereof.
a. Types of Credits in case of Liquidation
i. Fully secured credits
ii. Partially secured credits
iii. Unsecured credits without priority
iv. Unsecured credits with priority
1. Proper funeral expenses for the debtor, or children under his or her parental authority
who have no property of their own, when approved by the court;
2. Credits for services rendered the insolvent by employees, laborers, or household helpers
for one year preceding the commencement of the proceedings in insolvency;
3. Expenses during the last illness of the debtor or of his or her spouse and children under
his or her parental authority, if they have no property of their own;
4. Compensation due the laborers or their dependents under laws providing for indemnity
for damages in cases of labor accident, or illness resulting from the nature of the
employment;
5. Credits and advancements made to the debtor for support of himself or herself, and
family, during the last year preceding the insolvency;
6. Support during the insolvency proceedings, and for three months thereafter;
7. Fines and civil indemnification arising from a criminal offense;
8. Legal expenses, and expenses incurred in the administration of the insolvent's estate for
the common interest of the creditors, when properly authorized and approved by the
court;
9. Taxes and assessments due the national government, other than those mentioned in
articles 2241, No. 1, and 2242, No. 1;
10. Taxes and assessments due any province, other than those referred to in articles 2241,
No. 1, and 2242, No. 1;
11. Taxes and assessments due any city or municipality, other than those indicated in articles
2241, No. 1, and 2242, No. 1;
12. Damages for death or personal injuries caused by a quasi-delict;
13. Gifts due to public and private institutions of charity or beneficence;
14. Credits which, without special privilege, appear in (a) a public instrument; or (b) in a final
judgment, if they have been the subject of litigation. These credits shall have preference
among themselves in the order of priority of the dates of the instruments and of the
judgments, respectively.
Corporate Governance
I. Revised Code of Corporate Governance

a. Covered entities – The Revised Code of Corporate Governance shall apply to registered
corporations and to branches or subsidiaries of foreign corporations operating in the
Philippines that:
i. sell equity and/or debt securities to the public that are required to be registered
with the SEC, or
ii. have assets in excess of Fifty Million Pesos and at least two hundred (200)
stockholders who own at least one hundred (100) shares each of equity
securities, or
Mobile : 0927 283 8234
Telephone : (043) 723 8412
iii. whose equity securities are listed on an Exchange; or

iv. are grantees of secondary licenses from the SEC.
b. Definition of Terms
i. Corporate Governance – the framework of rules, systems and processes in
the corporation that governs the performance by the Board of Directors and
Management of their respective duties and responsibilities to the stockholders
ii. Board of Directors – the governing body elected by the stockholders that
exercises the corporate powers of a corporation, conducts all its business and
controls its properties
iii. Exchange – an organized market place or facility that brings together buyers
and sellers, and executes trades of securities and/or commodities
iv. Management – the body given the authority by the Board of Directors to
implement the policies it has laid down in the conduct of the business of the
corporation
v. Independent director – a person who, apart from his fees and shareholdings,
is independent of management and free from any business or other relationship
which could, or could reasonably be perceived to, materially interfere with his
exercise of independent judgment in carrying out his responsibilities as a director
vi. Executive director – a director who is also the head of a department or unit of
the corporation or performs any work related to its operation
vii. Non-executive director – a director who is not the head of a department or
unit of the corporation nor performs any work related to its operation
viii. Non-audit work – the other services offered by an external auditor to a
corporation that are not directly related and relevant to its statutory audit
functions, such as, accounting, payroll, bookkeeping, reconciliation, computer
project management, data processing, or information technology outsourcing
services, internal audit, and other services that may compromise the
independence and objectivity of an external auditor
ix. Internal control – the system established by the Board of Directors and
Management for the accomplishment of the corporation’s objectives, the efficient
operation of its business, the reliability of its financial reporting, and faithful
compliance with applicable laws, regulations and internal rules
x. Internal control system – the framework under which internal controls are
developed and implemented (alone or in concert with other policies or
procedures) to manage and control a particular risk or business activity, or
combination of risks or business activities, to which the corporation is exposed
xi. Internal audit – an independent and objective assurance activity designed to
add value to and improve the corporation’s operations, and help it accomplish its
objectives by providing a systematic and disciplined approach in the evaluation
and improvement of the effectiveness of risk management, control and
governance processes
xii. Internal audit department – a department or unit of the corporation and its
consultants, if any, that provide independent and objective assurance services in
order to add value to and improve the corporation’s operations
xiii. Internal Auditor – the highest position in the corporation responsible for
internal audit activities. If internal audit activities are performed by outside
service providers, he is the person responsible for overseeing the service
contract, the overall quality of these activities, and follow-up of engagement
results
c. Rules of Interpretation of Revised Code of Corporate Governance

i. All references to the masculine gender in the salient provisions of this Code shall
likewise cover the feminine gender.
ii. All doubts or questions that may arise in the interpretation or application of this
Code shall be resolved in favor of promoting transparency, accountability and
fairness to the stockholders and investors of the corporation.
d. Board Governance
i. The Board of Directors (the “Board”) is primarily responsible for the governance
of the corporation. Corollary to setting the policies for the accomplishment of the
corporate objectives, it shall provide an independent check on Management.
1. Composition of the Board
Mobile : 0927 283 8234
Telephone : (043) 723 8412
a. The Board shall be composed of at least five (5), but not more
than fifteen (15), members who are elected by the stockholders.
b. All companies covered by this Code shall have at least two (2)
independent directors or such number of independent directors
that constitutes twenty percent (20%) of the members of the
Board, whichever is lesser, but in no case less than two (2). All
other companies are encouraged to have independent directors
in their boards.
c. The membership of the Board may be a combination of
executive and non-executive directors (which include
independent directors) in order that no director or small group of
directors can dominate the decision-making process.
d. The non-executive directors should possess such qualifications
and stature that would enable them to effectively participate in
the deliberations of the Board.
2. Multiple Board Seats

a. The Board may consider the adoption of guidelines on the
number of directorships that its members can hold in stock and
non-stock corporations. The optimum number should take into
consideration the capacity of a director to diligently and
efficiently perform his duties and responsibilities.
b. The Chief Executive Officer (“CEO”) and other executive
directors may be covered by a lower indicative limit for
membership in other boards. A similar limit may apply to
independent or non-executive directors who, at the same time,
serve as full-time executives in other corporations. In any case,
the capacity of the directors to diligently and efficiently perform
their duties and responsibilities to the boards they serve should
not be compromised.
3. The Chair and Chief Executive Officer

a. The roles of Chair and CEO should, as much as practicable, be
separate to foster an appropriate balance of power, increased
accountability and better capacity for independent decision-
making by the Board. A clear delineation of functions should be
made between the Chair and CEO upon their election.
b. If the positions of Chair and CEO are unified, the proper checks
and balances should be laid down to ensure that the Board gets
the benefit of independent views and perspectives.
c. The duties and responsibilities of the Chair in relation to the
Board may include, among others, the following:
i. Ensure that the meetings of the Board are held in
accordance with the by-laws or as the Chair may deem
necessary;
ii. Supervise the preparation of the agenda of the meeting
in coordination with the Corporate Secretary, taking into
consideration the suggestions of the CEO, Management
and the directors; and
iii. Maintain qualitative and timely lines of communication
and information between the Board and Management.
4. Qualifications of Directors
a. In addition to the qualifications for membership in the Board
provided for in the Corporation Code, Securities Regulation Code
and other relevant laws, the Board may provide for additional
qualifications which include, among others, the following:
i. College education or equivalent academic degree;
ii. Practical understanding of the business of the
corporation;
iii. Membership in good standing in relevant industry,
business or professional organizations; and
iv. Previous business experience.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
5. Disqualification of Directors
a. Grounds for Permanent Disqualification
i. Any person convicted by final judgment or order by a
competent judicial or administrative body of any crime
that (a) involves the purchase or sale of securities, as
defined in the Securities Regulation Code; (b) arises out
of the person’s conduct as an underwriter, broker,
dealer, investment adviser, principal, distributor, mutual
fund dealer, futures commission merchant, commodity
trading advisor, or floor broker; or (c) arises out of his
fiduciary relationship with a bank, quasi-bank, trust
company, investment house or as an affiliated person of
any of them;
ii. Any person who, by reason of misconduct, after hearing,
is permanently enjoined by a final judgment or order of
the Commission or any court or administrative body of
competent jurisdiction from: (a) acting as underwriter,
broker, dealer, 5 investment adviser, principal
distributor, mutual fund dealer, futures commission
merchant, commodity trading advisor, or floor broker;
(b) acting as director or officer of a bank, quasi- bank,
trust company, investment house, or investment
company; (c) engaging in or continuing any conduct or
practice in any of the capacities mentioned in sub-
paragraphs (a) and (b) above, or willfully violating the
laws that govern securities and banking activities;
iii. The disqualification shall also apply if such person is
currently the subject of an order of the Commission or
any court or administrative body denying, revoking or
suspending any registration, license or permit issued to
him under the Corporation Code, Securities Regulation
Code or any other law administered by the Commission
or Bangko Sentral ng Pilipinas (BSP), or under any rule
or regulation issued by the Commission or BSP, or has
otherwise been restrained to engage in any activity
involving securities and banking; or such person is
currently the subject of an effective order of a self-
regulatory organization suspending or expelling him
from membership, participation or association with a
member or participant of the organization;
iv. Any person convicted by final judgment or order by a
court or competent administrative body of an offense
involving moral turpitude, fraud, embezzlement, theft,
estafa, counterfeiting, misappropriation, forgery, bribery,
false affirmation, perjury or other fraudulent acts;
v. Any person who has been adjudged by final judgment or
order of the Commission, court, or competent
administrative body to have willfully violated, or willfully
aided, abetted, counseled, induced or procured the
violation of any provision of the Corporation Code,
Securities Regulation Code or any other law
administered by the Commission or BSP, or any of its
rule, regulation or order;
vi. Any person earlier elected as independent director who
becomes an officer, employee or consultant of the same
corporation;
vii. Any person judicially declared as insolvent;
viii. Any person found guilty by final judgment or order of a
foreign court or equivalent financial regulatory authority
of acts, violations or misconduct similar to any of the
acts, violations or misconduct enumerated in sub-
paragraphs (i) to (v) above;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
ix. Conviction by final judgment of an offense punishable by

imprisonment for more than six (6) years, or a violation
of the Corporation Code committed within five (5) years
prior to the date of his election or appointment.
b. Grounds for Temporary Disqualification

i. Refusal to comply with the disclosure requirements of
the Securities Regulation Code and its Implementing
Rules and Regulations. The disqualification shall be in
effect as long as the refusal persists.
ii. Absence in more than fifty (50) percent of all regular
and special meetings of the Board during his
incumbency, or any twelve (12) month period during the
said incumbency, unless the absence is due to illness,
death in the immediate family or serious accident. The
disqualification shall apply for purposes of the
succeeding election.
iii. Dismissal or termination for cause as director of any
corporation covered by this Code. The disqualification
shall be in effect until he has cleared himself from any
involvement in the cause that gave rise to his dismissal
or termination.
iv. If the beneficial equity ownership of an independent
director in the corporation or its subsidiaries and
affiliates exceeds two percent of its subscribed capital
stock. The disqualification shall be lifted if the limit is
later complied with.
v. If any of the judgments or orders cited in the grounds
for permanent disqualification has not yet become final.
1. A temporarily disqualified director shall, within
sixty (60) business days from such
disqualification, take the appropriate action to
remedy or correct the disqualification. If he fails
or refuses to do so for unjustified reasons, the
disqualification shall become permanent.
6. Responsibilities, Duties and Functions of the Board

a. General Responsibility
i. It is the Board’s responsibility to foster the long-term
success of the corporation, and to sustain its
competitiveness and profitability in a manner consistent
with its corporate objectives and the best interests of its
stockholders.
ii. The Board should formulate the corporation’s vision,
mission, strategic objectives, policies and procedures
that shall guide its activities, including the means to
effectively monitor Management’s performance.
b. Duties and Functions

i. To ensure a high standard of best practice for the
corporation and its stockholders, the Board should
conduct itself with honesty and integrity in the
performance of, among others, the following duties and
functions:
1. Implement a process for the selection of
directors who can add value and contribute
independent judgment to the formulation of
sound corporate strategies and policies. Appoint
competent, professional, honest and
highlymotivated management officers. Adopt an
effective succession planning program for
Management.
2. Provide sound strategic policies and guidelines
to the corporation on major capital
Mobile : 0927 283 8234
Telephone : (043) 723 8412
expenditures. Establish programs that can

sustain its long-term viability and strength.
Periodically evaluate and monitor the
implementation of such policies and strategies,
including the business plans, operating budgets
and Management’s overall performance.
3. Ensure the corporation’s faithful compliance with
all applicable laws, regulations and best business
practices.
4. Establish and maintain an investor relations
program that will keep the stockholders
informed of important developments in the
corporation. If feasible, the corporation’s CEO or
chief financial officer shall exercise oversight
responsibility over this program.
5. Identify the sectors in the community in which
the corporation operates or are directly affected
by its operations, and formulate a clear policy of
accurate, timely and effective communication
with them.
6. Adopt a system of check and balance within the
Board. A regular review of the effectiveness of
such system should be conducted to ensure the
integrity of the decision-making and reporting
processes at all times. There should be a
continuing review of the corporation’s internal
control system in order to maintain its adequacy
and effectiveness.
7. Identify key risk areas and performance
indicators and monitor these factors with due
diligence to enable the corporation to anticipate
and prepare for possible threats to its
operational and financial viability.
8. Formulate and implement policies and
procedures that would ensure the integrity and
transparency of related party transactions
between and among the corporation and its
parent company, joint ventures, subsidiaries,
associates, 8 affiliates, major stockholders,
officers and directors, including their spouses,
children and dependent siblings and parents,
and of interlocking director relationships by
members of the Board.
9. Constitute an Audit Committee and such other
committees it deems necessary to assist the
Board in the performance of its duties and
responsibilities.
10. Establish and maintain an alternative dispute
resolution system in the corporation that can
amicably settle conflicts or differences between
the corporation and its stockholders, and the
corporation and third parties, including the
regulatory authorities.
11. Meet at such times or frequency as may be
needed. The minutes of such meetings should
be duly recorded. Independent views during
Board meetings should be encouraged and given
due consideration.
12. Keep the activities and decisions of the Board
within its authority under the articles of
incorporation and by-laws, and in accordance
with existing laws, rules and regulations.
13. Appoint a Compliance Officer who shall have the
rank of at least vice president. In the absence of
Mobile : 0927 283 8234
Telephone : (043) 723 8412
such appointment, the Corporate Secretary,

preferably a lawyer, shall act as Compliance
Officer.
7. A director’s office is one of trust and confidence. A director should

act in the best interest of the corporation in a manner characterized by
transparency, accountability and fairness. He should also exercise
leadership, prudence and integrity in directing the corporation towards
sustained progress. A director should observe the following norms of
conduct:
a. Conduct fair business transactions with the corporation, and
ensure that his personal interest does not conflict with the
interests of the corporation.
i. The basic principle to be observed is that a director
should not use his position to profit or gain some benefit
or advantage for himself and/or his related interests. He
should avoid situations that may compromise his
impartiality. If an actual or potential conflict of interest
may arise on the part of a director, he should fully and
immediately disclose it and should not participate in the
9 decision-making process. A director who has a
continuing material conflict of interest should seriously
consider resigning from his position.
ii. A conflict of interest shall be considered material if the
director’s personal or business interest is antagonistic to
that of the corporation, or stands to acquire or gain
financial advantage at the expense of the corporation.
b. Devote the time and attention necessary to properly and

effectively perform his duties and responsibilities.
i. A director should devote sufficient time to familiarize
himself with the corporation’s business. He should be
constantly aware of and knowledgeable with the
corporation’s operations to enable him to meaningfully
contribute to the Board’s work. He should attend and
actively participate in Board and committee meetings,
review meeting materials and, if called for, ask questions
or seek explanation.
c. Act judiciously.
i. Before deciding on any matter brought before the Board,
a director should carefully evaluate the issues and, if
necessary, make inquiries and request clarification.
d. Exercise independent judgment.

i. A director should view each problem or situation
objectively. If a disagreement with other directors arises,
he should carefully evaluate and explain his position. He
should not be afraid to take an unpopular position.
Corollarily, he should support plans and ideas that he
thinks are beneficial to the corporation.
e. Have a working knowledge of the statutory and

regulatory requirements that affect the corporation,
including its articles of incorporation and by-laws, the
rules and regulations of the Commission and, where
applicable, the requirements of relevant regulatory
agencies.
i. A director should also keep abreast with industry
developments and business trends in order to promote
the corporation’s competitiveness.
f. Observe confidentiality.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
i. A director should keep secure and confidential all non-

public information he may acquire or learn by reason of
his position as director. He should not reveal confidential
information to unauthorized persons without the
authority of the Board.
8. Internal Control Responsibilities of the Board

a. The control environment of the corporation consists of (a) the
Board which ensures that the corporation is properly and
effectively managed and supervised; (b) a Management that
actively manages and operates the corporation in a sound and
prudent manner; (c) the organizational and procedural controls
supported by effective management information and risk
management reporting systems; and (d) an independent audit
mechanism to monitor the adequacy and effectiveness of the
corporation’s governance, operations, and information systems,
including the reliability and integrity of financial and operational
information, the effectiveness and efficiency of operations, the
safeguarding of assets, and compliance with laws, rules,
regulations and contracts.
i. The minimum internal control mechanisms for the
performance of the Board’s oversight responsibility may
include:
1. Definition of the duties and responsibilities of
the CEO who is ultimately accountable for the
corporation’s organizational and operational
controls;
2. Selection of the person who possesses the
ability, integrity and expertise essential for the
position of CEO;
3. Evaluation of proposed senior management
appointments;
4. Selection and appointment of qualified and
competent management officers; and
5. Review of the corporation’s human resource
policies, conflict of interest situations,
compensation program for employees, and
management succession plan
ii. The scope and particulars of the systems of effective
organizational and operational controls may differ
among corporations depending on, among others, the
following factors: nature and complexity of the business
and the business culture; volume, size and complexity of
transactions; degree of risks involved; degree of
centralization and delegation of authority; extent and
effectiveness of information technology; and extent of
regulatory compliance.
iii. A corporation may establish an internal audit system
that can reasonably assure the Board, Management and
stockholders that its key organizational and operational
controls are faithfully complied with. The Board may
appoint an Internal Auditor to perform the audit
function, and may require him to report to a level in the
organization that allows the internal audit activity to
fulfill its mandate. The Internal Auditor shall be guided
by the International Standards on Professional Practice
of Internal Auditing.
9. Board Meetings and Quorum Requirement

a. The members of the Board should attend its regular and special
meetings in person or through teleconferencing conducted in
accordance with the rules and regulations of the Commission.
b. Independent directors should always attend Board meetings.
Unless otherwise provided in the by-laws, their absence shall not
Mobile : 0927 283 8234
Telephone : (043) 723 8412
affect the quorum requirement. However, the Board may, to

promote transparency, require the presence of at least one
independent director in all its meetings.
c. To monitor the directors’ compliance with the attendance
requirements, corporations shall submit to the Commission, on
or before January 30 of the following year, a sworn certification
about the directors’ record of attendance in Board meetings. The
certification may be submitted through SEC Form 17-C or in a
separate filing.
10. Remuneration of Directors and Officers

a. The levels of remuneration of the corporation should be
sufficient to be able to attract and retain the services of qualified
and competent directors and officers. A portion of the
remuneration of executive directors may be structured or be
based on corporate and individual performance.
b. Corporations may establish formal and transparent procedures
for the development of a policy on executive remuneration or
determination of remuneration levels for individual directors and
officers depending on the particular needs of the corporation. No
director should participate in deciding on his remuneration.
c. The corporation’s annual reports and information and proxy
statements shall include a clear, concise and understandable
disclosure of all fixed and variable compensation that may be
paid, directly or indirectly, to its directors and top four (4)
management officers during the preceding fiscal year.
d. To protect the funds of a corporation, the Commission may, in
exceptional cases, e.g., when a corporation is under receivership
or rehabilitation, regulate the payment of the compensation,
allowances, fees and fringe benefits to its directors and officers.
11. Board Committee - The Board shall constitute the proper committees
to assist it in good corporate governance:
a. The Audit Committee shall consist of at least three (3)

directors, who shall preferably have accounting and finance
backgrounds, one of whom shall be an independent director and
another with audit experience. The chair of the Audit Committee
should be an independent director. The committee shall have
the following functions:
i. Assist the Board in the performance of its oversight
responsibility for the financial reporting process, system
of internal control, audit process, and monitoring of
compliance with applicable laws, rules and regulations;
ii. Provide oversight over Management’s activities in
managing credit, market, liquidity, operational, legal and
other risks of the corporation. This function shall include
regular receipt from Management of information on risk
exposures and risk management activities;
iii. Perform oversight functions over the corporation’s
internal and external auditors. It should ensure that the
internal and external auditors act independently from
each other, and that both auditors are given unrestricted
access to all records, properties and personnel to enable
them to perform their respective audit functions;
iv. Review the annual internal audit plan to ensure its
conformity with the objectives of the corporation. The
plan shall include the audit scope, resources and budget
necessary to implement it;
v. Prior to the commencement of the audit, discuss with
the external auditor the nature, scope and expenses of
the audit, and ensure proper coordination if more than
one audit firm is involved in the activity to secure proper
coverage and minimize duplication of efforts;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
vi. Organize an internal audit department, and consider the

appointment of an independent internal auditor and the
terms and conditions of its engagement and removal;
vii. Monitor and evaluate the adequacy and effectiveness of
the corporation’s internal control system, including
financial reporting control and information technology
security;
viii. Review the reports submitted by the internal and
external auditors;
ix. Review the quarterly, half-year and annual financial
statements before their submission to the Board, with
particular focus on the following matters:
1. Any change/s in accounting policies and
practices • Major judgmental areas • Significant
adjustments resulting from the audit • Going
concern assumptions • Compliance with
accounting standards • Compliance with tax,
legal and regulatory requirements
x. Coordinate, monitor and facilitate compliance with laws,
rules and regulations;
xi. Evaluate and determine the non-audit work, if any, of
the external auditor, and review periodically the non-
audit fees paid to the external auditor in relation to their
significance to the total annual income of the external
auditor and to the corporation’s overall consultancy
expenses. The committee shall disallow any non-audit
work that will conflict with his duties as an external
auditor or may pose a threat to his independence. The
non-audit work, if allowed, should be disclosed in the
corporation’s annual report;
xii. Establish and identify the reporting line of the Internal
Auditor to enable him to properly fulfill his duties and
responsibilities. He shall functionally report directly to
the Audit Committee. The Audit Committee shall ensure
that, in the performance of the work of the Internal
Auditor, he shall be free from interference by outside
parties. For Philippine branches or subsidiaries of foreign
corporations covered by this Code, their Internal Auditor
should be independent of the Philippine operations and
should report to the regional or corporate headquarters.
b. Nomination Committee, which may be composed of at least

three (3) members and one of whom should be an independent
director, to review and evaluate the qualifications of all persons
nominated to the Board and other appointments that require
Board approval, and to assess the effectiveness of the Board’s
processes and procedures in the election or replacement of
directors;
c. Compensation or Remuneration Committee, which may be

composed of at least three (3) members and one of whom
should be an independent director, to establish a 14 formal and
transparent procedure for developing a policy on remuneration
of directors and officers to ensure that their compensation is
consistent with the corporation’s culture, strategy and the
business environment in which it operates.
12. The Corporate Secretary - The Corporate Secretary, who should be a

Filipino citizen and a resident of the Philippines, is an officer of the
corporation. He should –
a. Be responsible for the safekeeping and preservation of the
integrity of the minutes of the meetings of the Board and its
committees, as well as the other official records of the
corporation
Mobile : 0927 283 8234
Telephone : (043) 723 8412
b. Be loyal to the mission, vision and objectives of the corporation

c. Work fairly and objectively with the Board, Management and
stockholders
d. Have appropriate administrative and interpersonal skills
e. If he is not at the same time the corporation’s legal counsel, be
aware of the laws, rules and regulations necessary in the
performance of his duties and responsibilities
f. Have a working knowledge of the operations of the corporation
g. Inform the members of the Board, in accordance with the
bylaws, of the agenda of their meetings and ensure that the
members have before them accurate information that will enable
them to arrive at intelligent decisions on matters that require
their approval
h. Attend all Board meetings, except when justifiable causes, such
as, illness, death in the immediate family and serious accidents,
prevent him from doing so
i. Ensure that all Board procedures, rules and regulations are
strictly followed by the members
j. If he is also the Compliance Officer, perform all the duties and
responsibilities of the said officer as provided for in this Code.
13. Compliance Officer - The Board shall appoint a Compliance Officer

who shall report directly to the Chair of the Board. He shall perform the
following duties:
a. Monitor compliance by the corporation with this Code and the
rules and regulations of regulatory agencies and, if any violations
are found, report the matter to the Board and recommend the
imposition of appropriate disciplinary action on the responsible
parties and the adoption of measures to prevent a repetition of
the violation;
b. Appear before the Commission when summoned in relation to
compliance with this Code; and
c. Issue a certification every January 30th of the year on the extent
of the corporation’s compliance with this Code for the completed
year and, if there are any deviations, explain the reason for such
deviation.
e. Adequate and Timely Information

i. To enable the members of the Board to properly fulfill their duties and
responsibilities, Management should provide them with complete, adequate and
timely information about the matters to be taken in their meetings.
ii. Reliance on information volunteered by Management would not be sufficient in
all circumstances and further inquiries may have to be made by a member of the
Board to enable him to properly perform his duties and responsibilities. Hence,
the members should be given independent access to Management and the
Corporate Secretary.
iii. The information may include the background or explanation on matters brought
before the Board, disclosures, budgets, forecasts and internal financial
documents.
iv. The members, either individually or as a Board, and in furtherance of their duties
and responsibilities, should have access to independent professional advice at
the corporation’s expense.
f. Accountability and Audit

i. The Board is primarily accountable to the stockholders. It should provide them
with a balanced and comprehensible assessment of the corporation’s
performance, position and prospects on a quarterly basis, including interim and
other reports that could adversely affect its business, as well as reports to
regulators that are required by law. Thus, it is essential that Management
provide all members of the Board with accurate and timely information that
would enable the Board to comply with its responsibilities to the stockholders.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Management should formulate, under the supervision of the Audit Committee,

the rules and procedures on financial reporting and internal control in accordance
with the following guidelines:
1. The extent of its responsibility in the preparation of the financial
statements of the corporation, with the corresponding delineation of the
responsibilities that pertain to the external auditor, should be clearly
explained;
2. An effective system of internal control that will ensure the integrity of
the financial reports and protection of the assets of the corporation
should be maintained;
3. On the basis of the approved audit plans, internal audit examinations
should cover, at the minimum, the evaluation of the adequacy and
effectiveness of controls that cover the corporation’s governance,
operations and information systems, including the reliability and integrity
of financial and operational information, effectiveness and efficiency of
operations, protection of assets, and compliance with contracts, laws,
rules and regulations;
4. The corporation should consistently comply with the financial reporting
requirements of the Commission;
5. The external auditor should be rotated or changed every five (5) years or
earlier, or the signing partner of the external auditing firm assigned to
the corporation, should be changed with the same frequency. The
Internal Auditor should submit to the Audit Committee and Management
an annual report on the internal audit department’s activities,
responsibilities and performance relative to the audit plans and strategies
as approved by the Audit Committee. The annual report should include
significant risk exposures, control issues and such other matters as may
be needed or requested by the Board and Management. The Internal
Auditor should certify that he conducts his activities in accordance with
the International Standards on the Professional Practice of Internal
Auditing. If he does not, he shall disclose to the Board and Management
the reasons why he has not fully complied with the said standards.
ii. The Board, after consultations with the Audit Committee, shall recommend to the
stockholders an external auditor duly accredited by the Commission who shall
undertake an independent audit of the corporation, and shall provide an
objective assurance on the manner 17 by which the financial statements shall be
prepared and presented to the stockholders. The external auditor shall not, at
the same time, provide internal audit services to the corporation. Non-audit work
may be given to the external auditor, provided it does not conflict with his duties
as an independent auditor, or does not pose a threat to his independence. If the
external auditor resigns, is dismissed or ceases to perform his services, the
reason/s for and the date of effectivity of such action shall be reported in the
corporation’s annual and current reports. The report shall include a discussion of
any disagreement between him and the corporation on accounting principles or
practices, financial disclosures or audit procedures which the former auditor and
the corporation failed to resolve satisfactorily. A preliminary copy of the said
report shall be given by the corporation to the external auditor before its
submission. given by the corporation to the external auditor before its
submission. If the external auditor believes that any statement made in an
annual report, information statement or any report filed with the Commission or
any regulatory body during the period of his engagement is incorrect or
incomplete, he shall give his comments or views on the matter in the said
reports.
g. Stockholders’ Rights and Protection of Minority Stockholders’ Interests

i. The Board shall respect the rights of the stockholders as provided for in the
Corporation Code, namely:
1. Right to vote on all matters that require their consent or approval;
2. Pre-emptive right to all stock issuances of the corporation;
3. Right to inspect corporate books and records;
4. Right to information;
5. Right to dividends; and
6. Appraisal right
Mobile : 0927 283 8234
Telephone : (043) 723 8412
ii. The Board should be transparent and fair in the conduct of the annual and
special stockholders’ meetings of the corporation. The stockholders should be
encouraged to personally attend such meetings. If they cannot attend, they
should be apprised ahead of time of their right to appoint a proxy. Subject to the
requirements of the bylaws, the exercise of that right shall not be unduly
restricted and any doubt about the validity of a proxy should be resolved in the
stockholder’s favour.
iii. It is the duty of the Board to promote the rights of the stockholders, remove
impediments to the exercise of those rights and provide an adequate avenue for
them to seek timely redress for breach of their rights.
iv. The Board should take the appropriate steps to remove excessive or unnecessary
costs and other administrative impediments to the stockholders’ meaningful
participation in meetings, whether in person or by proxy. Accurate and timely
information should be made available to the stockholders to enable them to
make a sound judgment on all matters brought to their attention for
consideration or approval.
v. Although all stockholders should be treated equally or without discrimination, the
Board should give minority stockholders the right to propose the holding of
meetings and the items for discussion in the agenda that relate directly to the
business of the corporation.
h. Governance Self-Rating System

i. The Board may create an internal self-rating system that can measure the
performance of the Board and Management in accordance with the criteria
provided for in this Code.
ii. The creation and implementation of such self-rating system, including its salient
features, may be disclosed in the corporation’s annual report.
i. Disclosure and Transparency

i. The essence of corporate governance is transparency. The more transparent the
internal workings of the corporation are, the more difficult it will be for
Management and dominant stockholders to mismanage the corporation or
misappropriate its assets.
ii. It is therefore essential that all material information about the corporation which
could adversely affect its viability or the interests of the stockholders should be
publicly and timely disclosed. Such information should include, among others,
earnings results, acquisition or disposition of assets, off balance sheet
transactions, related party transactions, and direct and indirect remuneration of
members of the Board and Management. All such information should be
disclosed through the appropriate Exchange mechanisms and submissions to the
Commission.
j. Commitment to Good Corporate Governance

i. All covered corporations shall establish and implement their corporate
governance rules in accordance with this Code. The rules shall be embodied in a
manual that can be used as reference by the members of the Board and
Management. The manual should be submitted to the Commission for its 19
evaluation within one hundred eighty (180) business days from the date this
Code becomes effective to enable the Commission to determine its compliance
with this Code taking into consideration the nature, size and scope of the
business of the corporation; provided, however, that corporations that have
earlier submitted their manual may, at their option, continue to use the said
manual as long it complies with the provisions of this Code.
ii. The manual shall be made available for inspection by any shareholder at
reasonable hours on business days.
k. Regular Review of the Code and the Scorecard

i. To monitor the compliance by covered corporations with this Code, the
Commission may require them to accomplish annually a scorecard on the scope,
Mobile : 0927 283 8234
Telephone : (043) 723 8412
nature and extent of the actions they have taken to meet the objectives of this
Code
ii. The Commission shall periodically review this Code to ensure that it meets its
objectives.
l. Administrative Sanctions
i. A fine of not more than Two Hundred Thousand Pesos (P200,000) shall, after
due notice and hearing, be imposed for every year that a covered corporation
violates the provisions of this Code, without prejudice to other sanctions that the
Commission may be authorized to impose under the law; provided, however,
that any violation of the Securities Regulation Code punishable by a specific
penalty shall be assessed separately and shall not be covered by the
abovementioned fine.
II. Code of Corporate Governance for Publicly-Listed Companies
a. Effectivity Date
i. The Code of Corporate Governance for Publicly-listed Companies shall take effect
on January 1, 2017.
b. Submission of New Manual on Corporate Governance

i. All publicly-listed companies shall be required to submit a new Manual on
Corporate Governance to the SEC on or before May 31, 2017.
c. Definition of Terms
i. Corporate Governance – the system of stewardship and control to guide
organizations in fulfilling their long-term economic, moral, legal and social
obligations towards their stakeholders. Corporate governance is a system of
direction, feedback and control using regulations, performance standards and
ethical guidelines to hold the Board and senior management accountable for
ensuring ethical behavior – reconciling longterm customer satisfaction with
shareholder value – to the benefit of all stakeholders and society. Its purpose is
to maximize the organization’s long-term success, creating sustainable value for
its shareholders, stakeholders and the nation.
ii. Board of Directors - – the governing body elected by the stockholders that
exercises the corporate powers of a corporation, conducts all its business and
controls its properties.
iii. Management – a group of executives given the authority by the Board of
Directors to implement the policies it has laid down in the conduct of the
business of the corporation.
iv. Independent director – a person who is independent of management and the
controlling shareholder, and is free from any business or other relationship which
could, or could reasonably be perceived to, materially interfere with his exercise
of independent judgment in carrying out his responsibilities as a director.
v. Executive director – a director who has executive responsibility of day-to-day
operations of a part or the whole of the organization.
vi. Non-executive director – a director who has no executive responsibility and
does not perform any work related to the operations of the corporation.
vii. Conglomerate – a group of corporations that has diversified business activities
in varied industries, whereby the operations of such businesses are controlled
and managed by a parent corporate entity.
viii. Internal control – a process designed and effected by the board of directors,
senior management, and all levels of personnel to provide reasonable assurance
on the achievement of objectives through efficient and effective operations;
reliable, complete and timely financial and management information; and
compliance with applicable laws, regulations, and the organization’s policies and
procedures.
ix. Enterprise Risk Management – a process, effected by an entity’s Board of
Directors, management and other personnel, applied in strategy setting and
across the enterprise that is designed to identify potential events that may affect
Mobile : 0927 283 8234
Telephone : (043) 723 8412
the entity, manage risks to be within its risk appetite, and provide reasonable
assurance regarding the achievement of entity objectives.
x. Related Party – shall cover the company’s subsidiaries, as well as affiliates and
any party (including their subsidiaries, affiliates and special purpose entities),
that the company exerts direct or indirect control over or that exerts direct or
indirect control over the company; the company’s directors; officers;
shareholders and related interests (DOSRI), and their close family members, as
well as corresponding persons in affiliated companies. This shall also include
such other person or juridical entity whose interest may pose a potential conflict
with the interest of the company.
xi. Related Party Transactions – a transfer of resources, services or obligations
between a reporting entity and a related party, regardless of whether a price is
charged. It should be interpreted broadly to include not only transactions that
are entered into with related parties, but also outstanding transactions that are
entered into with an unrelated party that subsequently becomes a related party.
xii. Stakeholders – any individual, organization or society at large who can either
affect and/or be affected by the company’s strategies, policies, business
decisions and operations, in general. This includes, among others, customers,
creditors, employees, suppliers, investors, as well as the government and
community in which it operates.
d. State Policy
i. The Code of Corporate Governance is intended to raise the corporate governance

standards of Philippine corporations to a level at par with its regional and global
counterparts. The latest G20/OECD1 Principles of Corporate Governance and the
Association of Southeast Asian Nations Corporate Governance Scorecard were
used as key reference materials in the drafting of this Code.
ii. The Code will adopt the “comply or explain” approach. This approach combines
voluntary compliance with mandatory disclosure. Companies do not have to
comply with the Code, but they must state in their annual corporate governance
reports whether they comply with the Code provisions, identify any areas of
noncompliance, and explain the reasons for non-compliance.
iii. The Code is arranged as follows: Principles, Recommendations and Explanations.
The Principles can be considered as high-level statements of corporate
governance good practice, and are applicable to all companies.
iv. The Recommendations are objective criteria that are intended to identify the
specific features of corporate governance good practice that are recommended
for companies operating according to the Code. Alternatives to a
Recommendation may be justified in particular circumstances if good governance
can be achieved by other means. When a Recommendation is not complied with,
the company must disclose and describe this non-compliance, and explain how
the overall Principle is being achieved. The alternative should be consistent with
the overall Principle. Descriptions and explanations should be written in plain
language and in a clear, complete, objective and precise manner, so that
shareholders and other stakeholders can assess the company's governance
framework.
v. The Explanations strive to provide companies with additional information on the
recommended best practice. This Code does not, in any way, prescribe a “one
size fits all” framework. It is designed to allow boards some flexibility in
establishing their corporate governance arrangements. Larger companies and
financial institutions would generally be expected to follow most of the Code’s
provisions. Smaller companies may decide that the costs of some of the
provisions outweigh the benefits, or are less relevant in their case. Hence, the
Principle of Proportionality is considered in the application of its provisions.
vi. The Code of Corporate Governance for publicly listed companies is the first of a
series of Codes that is intended to cover all types of corporations in the
Philippines under supervision of the Securities and Exchange Commission (SEC).
e. The Board’s Governance Responsibilities

i. Principle 1: The company should be headed by a competent, working board to
foster the long-term success of the corporation, and to sustain its
competitiveness and profitability in a manner consistent with its corporate
Mobile : 0927 283 8234
Telephone : (043) 723 8412
objectives and the longterm best interests of its shareholders and other
stakeholders.
ii. Principle 2: The fiduciary roles, responsibilities and accountabilities of the Board
as provided under the law, the company’s articles and by-laws, and other legal
pronouncements and guidelines should be clearly made known to all directors as
well as to stockholders and other stakeholders.
iii. Principle 3: Board committees should be set up to the extent possible to
support the effective performance of the Board’s functions, particularly with
respect to audit, risk management, related party transactions, and other key
corporate governance concerns, such as nomination and remuneration. The
composition, functions and responsibilities of all committees established should
be contained in a publicly available Committee Charter.
iv. Principle 4: To show full commitment to the company, the directors should
devote the time and attention necessary to properly and effectively perform their
duties and responsibilities, including sufficient time to be familiar with the
corporation’s business.
v. Principle 5: The Board should endeavor to exercise objective and independent
judgment on all corporate affairs.
vi. Principle 6: The best measure of the Board’s effectiveness is through an
assessment process. The Board should regularly carry out evaluations to
appraise its performance as a body, and assess whether it possesses the right
mix of backgrounds and competencies.
vii. Principle 7: Members of the Board are duty-bound to apply high ethical
standards, taking into account the interests of all stakeholders.
f. Disclosure and Transparency

i. Principle 8: The company should establish corporate disclosure policies and
procedures that are practical and in accordance with best practices and
regulatory expectations.
ii. Principle 9: The company should establish standards for the appropriate
selection of an external auditor, and exercise effective oversight of the same to
strengthen the external auditor’s independence and enhance audit quality.
iii. Principle10: The company should ensure that material and reportable non-
financial and sustainability issues are disclosed.
iv. Principle 11: The company should maintain a comprehensive and cost-efficient
communication channel for disseminating relevant information. This channel is
crucial for informed decision-making by investors, stakeholders and other
interested users.
g. Internal control System and Risk Management Framework
i. Principle 12: To ensure the integrity, transparency and proper governance in
the conduct of its affairs, the company should have a strong and effective
internal control system and enterprise risk management framework.
h. Cultivating a synergic relationship with shareholders
i. Principle 13: The company should treat all shareholders fairly and equitably,
and also recognize, protect and facilitate the exercise of their rights.
i. Duties to Stakeholders
i. Principle 14: The rights of stakeholders established by law, by contractual
relations and through voluntary commitments must be respected. Where
stakeholders’ rights and/or interests are at stake, stakeholders should have the
opportunity to obtain prompt effective redress for the violation of their rights.
ii. Principle 15: A mechanism for employee participation should be developed to
create a symbiotic environment, realize the company’s goals and participate in its
corporate governance processes.
iii. Principle 16: The company should be socially responsible in all its dealings with
the communities where it operates. It should ensure that its interactions serve its
environment and stakeholders in a positive and progressive manner that is fully
supportive of its comprehensive and balanced development.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
j. Responsibilities of Corporate Secretary - The Corporate Secretary is primarily

responsible to the corporation and its shareholders, and not to the Chairman or President
of the Company and has, among others, the following duties and responsibilities:
i. Assists the Board and the board committees in the conduct of their meetings,
including preparing an annual schedule of Board and committee meetings and
the annual board calendar, and assisting the chairs of the Board and its
committees to set agendas for those meetings;
ii. Safe keeps and preserves the integrity of the minutes of the meetings of the
Board and its committees, as well as other official records of the corporation;
iii. Keeps abreast on relevant laws, regulations, all governance issuances, relevant
industry developments and operations of the corporation, and advises the Board
and the Chairman on all relevant issues as they arise;
iv. Works fairly and objectively with the Board, Management and stockholders and
contributes to the flow of information between the Board and management, the
Board and its committees, and the Board and its stakeholders, including
shareholders;
v. Advises on the establishment of board committees and their terms of reference;
vi. Informs members of the Board, in accordance with the by-laws, of the agenda of
their meetings at least five working days in advance, and ensures that the
members have before them accurate information that will enable them to arrive
at intelligent decisions on matters that require their approval;
vii. Attends all Board meetings, except when justifiable causes, such as illness, death
in the immediate family and serious accidents, prevent him/her from doing so;
viii. Performs required administrative functions;
ix. Oversees the drafting of the by-laws and ensures that they conform with
regulatory requirements; and
x. Performs such other duties and responsibilities as may be provided by the SEC.
k. Responsibilities of Compliance Officer - The Compliance Officer is a member of the

company’s management team in charge of the compliance function. Similar to the
Corporate Secretary, he/she is primarily liable to the corporation and its shareholders,
and not to the Chairman or President of the company. He/she has, among others, the
following duties and responsibilities:
i. Ensures proper onboarding of new directors (i.e., orientation on the company’s
business, charter, articles of incorporation and by-laws, among others);
ii. Monitors, reviews, evaluates and ensures the compliance by the corporation, its
officers and directors with the relevant laws, this Code, rules and regulations and
all governance issuances of regulatory agencies;
iii. Reports the matter to the Board if violations are found and recommends the
imposition of appropriate disciplinary action;
iv. Ensures the integrity and accuracy of all documentary submissions to regulators;
v. Appears before the SEC when summoned in relation to compliance with this
Code;
vi. Collaborates with other departments to properly address compliance issues,
which may be subject to investigation;
vii. Identifies possible areas of compliance issues and works towards the resolution
of the same;
viii. Ensures the attendance of board members and key officers to relevant trainings;
and
ix. Performs such other duties and responsibilities as may be provided by the SEC.
l. Responsibilities of Chairperson - The Board should be headed by a competent and

qualified Chairperson. The roles and responsibilities of the Chairman include, among
others, the following:
i. Makes certain that the meeting agenda focuses on strategic matters, including
the overall risk appetite of the corporation, considering the developments in the
business and regulatory environments, key governance concerns, and
contentious issues that will significantly affect operations;
ii. Guarantees that the Board receives accurate, timely, relevant, insightful, concise,
and clear information to enable it to make sound decisions;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
iii. Facilitates discussions on key issues by fostering an environment conducive for

constructive debate and leveraging on the skills and expertise of individual
directors;
iv. Ensures that the Board sufficiently challenges and inquires on reports submitted
and representations made by Management;
v. Assures the availability of proper orientation for first-time directors and
continuing training opportunities for all directors; and
vi. Makes sure that performance of the Board is evaluated at least once a year and
discussed/followed up on
m. Responsibilities of Audit Committee - The Audit Committee is responsible for

overseeing the senior management in establishing and maintaining an adequate,
effective and efficient internal control framework. It ensures that systems and processes
are designed to provide assurance in areas including reporting, monitoring compliance
with laws, regulations and internal policies, efficiency and effectiveness of operations,
and safeguarding of assets. The Audit Committee has the following duties and
responsibilities, among others:
i. Recommends the approval the Internal Audit Charter (IA Charter), which
formally defines the role of Internal Audit and the audit plan as well as oversees
the implementation of the IA Charter;
ii. Through the Internal Audit (IA) Department, monitors and evaluates the
adequacy and effectiveness of the corporation’s internal control system, integrity
of financial reporting, and security of physical and information assets. Well-
designed internal control procedures and processes that will provide a system of
checks and balances should be in place in order to (a) safeguard the company’s
resources and ensure their effective utilization, (b) prevent occurrence of fraud
and other irregularities, (c) protect the accuracy and reliability of the company’s
financial data, and (d) ensure compliance with applicable laws and regulations;
iii. Oversees the Internal Audit Department, and recommends the appointment
and/or grounds for approval of an internal audit head or Chief Audit Executive
(CAE). The Audit Committee should also approve the terms and conditions for
outsourcing internal audit services;
iv. Establishes and identifies the reporting line of the Internal Auditor to enable him
to properly fulfill his duties and responsibilities. For this purpose, he should
directly report to the Audit Committee;
v. Reviews and monitors Management’s responsiveness to the Internal Auditor’s
findings and recommendations;
vi. Prior to the commencement of the audit, discusses with the External Auditor the
nature, scope and expenses of the audit, and ensures the proper coordination if
more than one audit firm is involved in the activity to secure proper coverage
and minimize duplication of efforts;
vii. Evaluates and determines the non-audit work, if any, of the External Auditor, and
periodically reviews the non-audit fees paid to the External Auditor in relation to
the total fees paid to him and to the corporation’s overall consultancy expenses.
The committee should disallow any non-audit work that will conflict with his
duties as an External Auditor or may pose a threat to his independence3. The
non-audit work, if allowed, should be disclosed in the corporation’s Annual
Report and Annual Corporate Governance Report;
viii. Reviews and approves the Interim and Annual Financial Statements before their
submission to the Board;
ix. Reviews the disposition of the recommendations in the External Auditor’s
management letter;
x. Performs oversight functions over the corporation’s Internal and External
Auditors. It ensures the independence of Internal and External Auditors, and that
both auditors are given unrestricted access to all records, properties and
personnel to enable them to perform their respective audit functions;
xi. Coordinates, monitors and facilitates compliance with laws, rules and regulations;
xii. Recommends to the Board the appointment, reappointment, removal and fees of
the External Auditor, duly accredited by the Commission, who undertakes an
independent audit of the corporation, and provides an objective assurance on the
manner by which the financial statements should be prepared and presented to
the stockholders; and
Mobile : 0927 283 8234
Telephone : (043) 723 8412
xiii. In case the company does not have a Board Risk Oversight Committee and/or
Related Party Transactions Committee, performs the functions of said
committees as provided under Recommendations 3.4 and 3.5.
n. Corporate Governance Committee - The Corporate Governance Committee (CG

Committee) is tasked with ensuring compliance with and proper observance of corporate
governance principles and practices. It has the following duties and functions, among
others:
i. Oversees the implementation of the corporate governance framework and
periodically reviews the said framework to ensure that it remains appropriate in
light of material changes to the corporation’s size, complexity and business
strategy, as well as its business and regulatory environments;
ii. Oversees the periodic performance evaluation of the Board and its committees as
well as executive management, and conducts an annual self-evaluation of its
performance;
iii. Ensures that the results of the Board evaluation are shared, discussed, and that
concrete action plans are developed and implemented to address the identified
areas for improvement;
iv. Recommends continuing education/training programs for directors, assignment
of tasks/projects to board committees, succession plan for the board members
and senior officers, and remuneration packages for corporate and individual
performance;
v. Adopts corporate governance policies and ensures that these are reviewed and
updated regularly, and consistently implemented in form and substance;
vi. Proposes and plans relevant trainings for the members of the Board;
vii. Determines the nomination and election process for the company’s directors and
has the special duty of defining the general profile of board members that the
company may need and ensuring appropriate knowledge, competencies and
expertise that complement the existing skills of the Board; and
viii. Establishes a formal and transparent procedure to develop a policy for
determining the remuneration of directors and officers that is consistent with the
corporation’s culture and strategy as well as the business environment in which it
operates.
o. Board Risk Oversight Committee has the responsibility to assist the Board in
ensuring that there is an effective and integrated risk management process in place. The
BROC has the following duties and responsibilities, among others:
i. Develops a formal enterprise risk management plan which contains the following
elements: (a) common language or register of risks, (b) well-defined risk
management goals, objectives and oversight, (c) uniform processes of assessing
risks and developing strategies to manage prioritized risks, (d) designing and
implementing risk management strategies, and (e) continuing assessments to
improve risk strategies, processes and measures;
ii. Oversees the implementation of the enterprise risk management plan through a
Management Risk Oversight Committee. The BROC conducts regular discussions
on the company’s prioritized and residual risk exposures based on regular risk
management reports and assesses how the concerned units or offices are
addressing and managing these risks;
iii. Evaluates the risk management plan to ensure its continued relevance,
comprehensiveness and effectiveness. The BROC revisits defined risk
management strategies, looks for emerging or changing material exposures, and
stays abreast of significant developments that seriously impact the likelihood of
harm or loss;
iv. Advises the Board on its risk appetite levels and risk tolerance limits;
v. Reviews at least annually the company’s risk appetite levels and risk tolerance
limits based on changes and developments in the business, the regulatory
framework, the external economic and business environment, and when major
events occur that are considered to have major impacts on the company;
vi. Assesses the probability of each identified risk becoming a reality and estimates
its possible significant financial impact and likelihood of occurrence. Priority areas
of concern are those risks that are the most likely to occur and to impact the
performance and stability of the corporation and its stakeholders;
vii. Provides oversight over Management’s activities in managing credit, market,
liquidity, operational, legal and other risk exposures of the corporation. This
Mobile : 0927 283 8234
Telephone : (043) 723 8412
function includes regularly receiving information on risk exposures and risk

management activities from Management; and
viii. Reports to the Board on a regular basis, or as deemed necessary, the company’s
material risk exposures, the actions taken to reduce the risks, and recommends
further action or plans, as necessary.
p. Responsibilities of Related Party Transactions Committee - Subject to a

corporation’s size, risk profile and complexity of operations, the Board should establish a
Related Party Transaction (RPT) Committee, which should be tasked with reviewing all
material related party transactions of the company and should be composed of at least
three non-executive directors, two of whom should be independent, including the
Chairman.
i. Evaluates on an ongoing basis existing relations between and among businesses
and counterparties to ensure that all related parties are continuously identified,
RPTs are monitored, and subsequent changes in relationships with
counterparties (from non-related to related and vice versa) are captured. Related
parties, RPTs and changes in relationships should be reflected in the relevant
reports to the Board and regulators/supervisors;
ii. Evaluates all material RPTs to ensure that these are not undertaken on more
favorable economic terms (e.g., price, commissions, interest rates, fees, tenor,
collateral requirement) to such related parties than similar transactions with
nonrelated parties under similar circumstances and that no corporate or business
resources of the company are misappropriated or misapplied, and to determine
any potential reputational risk issues that may arise as a result of or in
connection with the transactions.
iii. Ensures that appropriate disclosure is made, and/or information is provided to
regulating and supervising authorities relating to the company’s RPT exposures,
and policies on conflicts of interest or potential conflicts of interest. The
disclosure should include information on the approach to managing material
conflicts of interest that are inconsistent with such policies, and conflicts that
could arise as a result of the company’s affiliation or transactions with other
related parties;
iv. Reports to the Board of Directors on a regular basis, the status and aggregate
exposures to each related party, as well as the total amount of exposures to all
related parties;
v. Ensures that transactions with related parties, including write-off of exposures
are subject to a periodic independent review or audit process; and
vi. Oversees the implementation of the system for identifying, monitoring,
measuring, controlling, and reporting RPTs, including a periodic review of RPT
policies and procedures.
q. Responsibilities of Chief Executive Officer - The positions of Chairman of the Board

and Chief Executive Officer should be held by separate individuals and each should have
clearly defined responsibilities.
i. Determines the corporation’s strategic direction and formulates and implements
its strategic plan on the direction of the business;
ii. Communicates and implements the corporation’s vision, mission, values and
overall strategy and promotes any organization or stakeholder change in relation
to the same;
iii. Oversees the operations of the corporation and manages human and financial
resources in accordance with the strategic plan;
iv. Has a good working knowledge of the corporation’s industry and market and
keeps up-to-date with its core business purpose;
v. Directs, evaluates and guides the work of the key officers of the corporation;
vi. Manages the corporation’s resources prudently and ensures a proper balance of
the same;
vii. Provides the Board with timely information and interfaces between the Board and
the employees;
viii. Builds the corporate culture and motivates the employees of the corporation; and
ix. Serves as the link between internal operations and external stakeholders
r. Qualifications of Independent Director

i. Is not, or has not been a senior officer or employee of the covered company
unless there has been a change in the controlling ownership of the company;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
ii. Is not, and has not been in the three years immediately preceding the election, a
director of the covered company; a director, officer, employee of the covered
company’s subsidiaries, associates, affiliates or related companies; or a director,
officer, employee of the covered company’s substantial shareholders and its
related companies;
iii. Has not been appointed in the covered company, its subsidiaries, associates,
affiliates or related companies as Chairman “Emeritus,” “Ex-Officio”
Directors/Officers or Members of any Advisory Board, or otherwise appointed in a
capacity to assist the Board in the performance of its duties and responsibilities
within three years immediately preceding his election;
iv. Is not an owner of more than two percent (2%) of the outstanding shares of the
covered company, its subsidiaries, associates, affiliates or related companies;
v. Is not a relative of a director, officer, or substantial shareholder of the covered
company or any of its related companies or of any of its substantial
shareholders. For this purpose, relatives include spouse, parent, child, brother,
sister and the spouse of such child, brother or sister;
vi. Is not acting as a nominee or representative of any director of the covered
company or any of its related companies;
vii. Is not a securities broker-dealer of listed companies and registered issuers of
securities. “Securities broker-dealer” refers to any person holding any office of
trust and responsibility in a broker-dealer firm, which includes, among others, a
director, officer, principal stockholder, nominee of the firm to the Exchange, an
associated person or salesman, and an authorized clerk of the broker or dealer;
viii. Is not retained, either in his personal capacity or through a firm, as a
professional adviser, auditor, consultant, agent or counsel of the covered
company, any of its related companies or substantial shareholder, or is otherwise
independent of Management and free from any business or other relationship
within the three years immediately preceding the date of his election;
ix. Does not engage or has not engaged, whether by himself or with other persons
or through a firm of which he is a partner, director or substantial shareholder, in
any transaction with the covered company or any of its related companies or
substantial shareholders, other than such transactions that are conducted at
arm’s length and could not materially interfere with or influence the exercise of
his independent judgment;
x. Is not affiliated with any non-profit organization that receives significant funding
from the covered company or any of its related companies or substantial
shareholders; and
xi. Is not employed as an executive officer of another company where any of the
covered company’s executives serve as directors.
s. Functions of Internal Audit

i. Provides an independent risk-based assurance service to the Board, Audit
Committee and Management, focusing on reviewing the effectiveness of the
governance and control processes in (1) promoting the right values and ethics,
(2) ensuring effective performance management and accounting in the
organization, (3) communicating risk and control information, and (4)
coordinating the activities and information among the Board, external and
internal auditors, and Management;
ii. Performs regular and special audit as contained in the annual audit plan and/or
based on the company’s risk assessment;
iii. Performs consulting and advisory services related to governance and control as
appropriate for the organization;
iv. Performs compliance audit of relevant laws, rules and regulations, contractual
obligations and other commitments, which could have a significant impact on the
organization;
v. Reviews, audits and assesses the efficiency and effectiveness of the internal
control system of all areas of the company;
vi. Evaluates operations or programs to ascertain whether results are consistent
with established objectives and goals, and whether the operations or programs
are being carried out as planned;
vii. Evaluates specific operations at the request of the Board or Management, as
appropriate; and Monitors and evaluates governance processes.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
t. Functions of Chief Audit Executive - The CAE shall oversee and be responsible for
the internal audit activity of the organization, including that portion that is outsourced to
a third party service provider
i. Periodically reviews the internal audit charter and presents it to senior
management and the Board Audit Committee for approval;
ii. Establishes a risk-based internal audit plan, including policies and procedures, to
determine the priorities of the internal audit activity, consistent with the
organization’s goals;
iii. Communicates the internal audit activity’s plans, resource requirements and
impact of resource limitations, as well as significant interim changes, to senior
management and the Audit Committee for review and approval;
iv. Spearheads the performance of the internal audit activity to ensure it adds value
to the organization;
v. Reports periodically to the Audit Committee on the internal audit activity’s
performance relative to its plan; and
vi. Presents findings and recommendations to the Audit Committee and gives advice
to senior management and the Board on how to improve internal processes.
u. Risk Management Functions

i. Defining a risk management strategy;
ii. Identifying and analyzing key risks exposure relating to economic,
environmental, social and governance (EESG) factors and the achievement of the
organization’s strategic objectives;
iii. Evaluating and categorizing each identified risk using the company’s predefined
risk categories and parameters;
iv. Establishing a risk register with clearly defined, prioritized and residual risks;
v. Developing a risk mitigation plan for the most important risks to the company, as
defined by the risk management strategy;
vi. Communicating and reporting significant risk exposures including business risks
(i.e., strategic, compliance, operational, financial and reputational risks), control
issues and risk mitigation plan to the Board Risk Oversight Committee; and
vii. Monitoring and evaluating the effectiveness of the organization's risk
management processes.
v. Functions of Chief Risk Officer - In managing the company’s Risk Management

System, the company should have a Chief Risk Officer (CRO), who is the ultimate
champion of Enterprise Risk Management (ERM) and has adequate authority, stature,
resources and support to fulfill his/her responsibilities, subject to a company’s size, risk
profile and complexity of operations.
i. Supervises the entire ERM process and spearheads the development,
implementation, maintenance and continuous improvement of ERM processes
and documentation;
ii. Communicates the top risks and the status of implementation of risk
management strategies and action plans to the Board Risk Oversight Committee;
iii. Collaborates with the CEO in updating and making recommendations to the
Board Risk Oversight Committee;
iv. Suggests ERM policies and related guidance, as may be needed;
v. Provides insights on the following: Risk management processes are performing
as intended; Risk measures reported are continuously reviewed by risk owners
for effectiveness; and Established risk policies and procedures are being
complied with.
Notes in Foreign Investment Act of 1991 (R.A. No. 7042)
A. Declaration of Policy
a. It is the policy of the State to attract, promote and welcome productive investments
from foreign individuals, partnerships, corporations, and governments, including their
political subdivisions, in activities which significantly contribute to national
industrialization and socio-economic development to the extent that foreign investment is
allowed in such activity by the Constitution and relevant laws. Foreign investments shall
be encouraged in the enterprises that significantly expand livelihood and employment
opportunities for Filipinos; enhance economic value of farm products; promote the
welfare of Filipino consumers; expand the scope, quality and volume of exports and their
Mobile : 0927 283 8234
Telephone : (043) 723 8412
access to foreign markets; and/or transfer relevant technologies in agriculture, industry

and support services. Foreign investments shall be welcome as a supplement to Filipino
capital and technology in those enterprises serving mainly the domestic market.
b. As a general rule, there are no restrictions on extent of foreign ownership of export
enterprises. In domestic market enterprises, foreigners can invest as much as one
hundred percent [100%] equity except in areas included in the negative list. Foreign-
owned firms catering mainly to the domestic market shall be encouraged to undertake
measures that will gradually increase Filipino participation in their businesses by taking in
Filipino partners, electing Filipinos to the board of directors, implementing transfer of
technology to Filipinos, generating more employment for the economy and enhancing
skills of Filipino workers.
B. “Philippine National” under R.A. No. 7042

a. Citizen of the Philippines; or
b. Domestic Partnership or Association wholly owned by citizens of the Philippines; or
c. A Corporation organized under the laws of the Philippines of which at least sixty percent
(60%) of the capital stock outstanding and entitled to vote is owned and held by citizens
of the Philippines ; or
d. A Corporation organized abroad and registered as doing business in the Philippines under
the Corporation Code of which one hundred percent (100%) of the capital stock
outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for
pension or other employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit
of Philippine nationals;
e. That where a corporation and its non-Filipino stockholders own stocks in a Securities and
Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the
capital stock outstanding and entitled to vote of each of both corporations must be
owned and held by citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of each of both corporations must be citizens of the
Philippines, in order that the corporation, shall be considered a “Philippine national.”
C. “Foreign Investment” under R.A. No. 7042

The term “foreign investment” shall mean an equity investment made by non-Philippine national
in the form of foreign exchange and/or other assets actually transferred to the Philippines and
duly registered with the Central Bank which shall assess and appraise the value of such assets
other than foreign exchange
D. Requirement before Engaging in Business by a Non-Philippine National

a. A Non-Philippine National must register before the appropriate government agencies
before it engages in business.
i. A sole proprietor non-Philippine National must register before Department of
Trade and Industry.
ii. A partnership or corporation non-Philippine National must register before
Securities and Exchange Commission.
E. Acts considered “Doing Business”

a. Soliciting orders, service contracts, opening offices, whether called “liaison” offices or
branches; appointing representatives or distributors domiciled in the Philippines or who in
any calendar year stay in the country for a period or periods of one hundred eighty [180]
days or more; or
b. Participating in the management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; or
c. Any other act or acts that imply a continuity of commercial dealings or arrangements and
contemplate to that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of commercial gain or
of the purpose and object of the business organization.
F. Acts not considered “Doing Business”
Mobile : 0927 283 8234
Telephone : (043) 723 8412
a. Mere investment as a shareholder by a foreign entity in domestic corporations duly

registered to do business, and/or the exercise of rights as such investor; or
b. Having a nominee director or officer to represent its interests in such corporation; or
c. Appointing a representative or distributor domiciled in the Philippines which transacts
business in its own name and for its own account
G. Tests for Determining Nationality of a Corporation

a. Place of Incorporation Test – It is the principal doctrine as enunciated in BP 68 which
provides that a corporation is a national of the country under whose laws it has been
organized and registered.
b. Control Test – It means that the nationality of a corporation is determined by the
nationality of the majority of the stockholders on whom equity control is vested and it is
normally used as war-time test or to determine the compliance with minimum
requirement of Filipino ownership in industry reserved for Filipinos.
c. Grandfather Rule Test – It is a three-level relationship test by which the percentage of
Filipino equity is computed in a corporation engaged in fully or partly nationalized areas
of activities provided in the Constitution and other nationalization laws, in cases where
corporate shareholders are present in the situation, by attributing the nationality of the
second or even subsequent tier of ownership to determine the nationality of the
corporate shareholder.
H. Effect of Non-Compliance with Minimum Filipino Ownership

a. The corporation shall be considered a de facto corporation. Such non-compliance is
considered a non-automatic ground for corporate dissolution. The juridical personality of
a de facto corporation is subject to a direct attack by the State through the Office of
Solicitor General via Quo Warranto Proceedings.
I. Effects of Engaging in Business by a Foreign Corporation without license

a. The said foreign corporation shall not be permitted to maintain or intervene in any
action, suit, or proceeding in any court or administrative agency of the Philippines.
However, as an exception to the general rule, such foreign corporation may be permitted
to file a case despite on a contract it entered into despite doing business in the
Philippines without the necessary license by virtue of doctrine of Estoppel but it must first
acquire the necessary license before the government agency.
b. The said foreign corporation may be sued or proceeded against before Philippine courts
or administrative tribunals on any valid cause of action recognized under Philippines laws.
Note: The purpose of requiring license on part of foreign corporation doing business in the
Philippines is to subject foreign corporation doing business in the Philippines to the
jurisdiction of Philippine courts but not to subject foreign corporation doing business in the
Philippines to harsher rules, nor commit inequity, injustice or discrimination against them.
J. Effects of Lack of License on the part of foreign corporation not doing business in the
Philippines
a. It may sue in any court or administrative agency of the Philippines for violation of its
intellectual property rights.
b. It may sue and be sued only for isolated transactions, as well as for those which are
casual or incidental thereto.
Philippine Competition Act (R.A. No. 10667)
I. State Policy
a. The efficiency of market competition as a mechanism for allocating goods and services is
a generally accepted precept. The State recognizes that past measures undertaken to
liberalize key sectors in the economy need to be reinforced by measures that safeguard
competitive conditions. The State also recognizes that the provision of equal
opportunities to all promotes entrepreneurial spirit, encourages private investments,
facilitates technology development and transfer and enhances resource productivity.
Unencumbered market competition also serves the interest of consumers by allowing
them to exercise their right of choice over goods and services offered in the market.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
b. 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 no combinations in restraint of
trade or unfair competition shall be allowed, the State shall:
i. 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 of the
Philippines and all of its political agencies as a whole;
ii. Prevent economic concentration which will control the production, distribution,
trade, or industry that will unduly stifle competition, lessen, manipulate or
constrict the discipline of free markets; and
iii. 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.
II. Scope and Application

a. Philippine Competition 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 result from acts done outside the Republic of the Philippines.
b. This Act shall not apply to the combinations or activities of workers or employees nor to
agreements or arrangements with their employers when such combinations, activities,
agreements, or arrangements are designed solely to facilitate collective bargaining in
respect of conditions of employment.
III. Definition of Terms

a. Acquisition refers to the purchase of securities or assets, through contract or other
means, for the purpose of obtaining control by:
i. One (1) entity of the whole or part of another;
ii. Two (2) or more entities over another; or
iii. One (1) or more entities over one (1) or more entities;
b. Agreement refers to any type or form of contract, arrangement, understanding,
collective recommendation, or concerted action, whether formal or informal, explicit or
tacit, written or oral;
c. Conduct refers to any type or form of undertaking, collective recommendation,
independent or concerted action or practice, whether formal or informal;
d. Commission refers to the Philippine Competition Commission created under this Act;
e. Confidential business information refers to information which concerns or relates to
the operations, production, sales, shipments, purchases, transfers, identification of
customers, inventories, or amount or source of any income, profits, losses, expenditures;
f. Control refers to the ability to substantially influence or direct the actions or decisions of
an entity, whether by contract, agency or otherwise;
g. Dominant position refers to a position of economic strength that an entity or entities
hold which makes it capable of controlling the relevant market independently from any or
a combination of the following: competitors, customers, suppliers, or consumers;
h. Entity refers to any person, natural or juridical, sole proprietorship, partnership,
combination or association in any form, whether incorporated or not, domestic or
Mobile : 0927 283 8234
Telephone : (043) 723 8412
foreign, including those owned or controlled by the government, engaged directly or

indirectly in any economic activity;
i. Market refers 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;
j. Merger refers to the joining of two (2) or more entities into an existing entity or to form
a new entity;
k. 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:
i. A relevant product market comprises all those goods and/or services which are
regarded as interchangeable or substitutable by the consumer or the customer,
by reason of the goods and/or services’ characteristics, their prices and their
intended use; and
ii. The relevant geographic market comprises the area in which the entity
concerned is involved in the supply and demand of goods and services, in which
the conditions of competition are sufficiently homogenous and which can be
distinguished from neighboring areas because the conditions of competition are
different in those areas.
IV. Prohibited Acts

a. Anti-Competitive Agreements
i. 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;
ii. 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, Kmiting, or controlling production, markets, technical
development, or investment;
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;
iii. 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: Provided, Those which contribute 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, may not necessarily be deemed a violation of this Act.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
iv. Note: 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.
V. Abuse of Dominant Position

a. 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:
i. 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;
ii. 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;
iii. 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;
iv. Setting prices or other terms or conditions that discriminate unreasonably
between customers or sellers of the same goods or services, where such
customers or sellers are contemporaneously trading on similar terms and
conditions, where the effect may be to lessen competition substantially:
Provided, That the following shall be considered permissible price differentials:
1. 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;
v. 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;
3. 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;
vi. 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;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
vii. 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
viii. Limiting production, markets or technical development to the prejudice of
consumers, provided that limitations that develop in the market as a result of or
due to a superior product or process, business acumen or legal rights or laws
shall not be a violation of this Act:
ix. Note: Provided, That 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 market share through legitimate means that do not
substantially prevent, restrict or lessen competition:
x. Note: Provided, further, That 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 abuse of
dominant position:
xi. Note: Provided, finally, That the foregoing shall not constrain the Commission or
the relevant regulator from pursuing measures that would promote fair
competition or more competition as provided in this Act.
VI. Prohibited Mergers and Acquisitions

a. 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 shall be prohibited.
VII. Exemptions from Prohibited Mergers and Acquisitions

a. Merger or acquisition agreement prohibited under Section 20 of this Chapter may,
nonetheless, be exempt from prohibition by the Commission when the parties establish
either of the following:
i. 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
ii. 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:
iii. Note: Provided, That an entity shall not be prohibited from continuing to own
and hold the stock or other share capital or assets of another corporation which
it acquired prior to the approval of this Act or acquiring or maintaining its market
share in a relevant market through such means without violating the provisions
of this Act:
iv. Note: Provided, further, That the acquisition of the stock or other share capital of
one or more corporations solely for investment and not used for voting or
exercising control and not to otherwise bring about, or attempt to bring about
the prevention, restriction, or lessening of competition in the relevant market
shall not be prohibited.
v. Burden of Proof regarding exemption from prohibited mergers and

acquistions
1. The burden of proof under Section 21 lies with the parties seeking the
exemption. A party seeking to rely on the exemption specified in Section
21(a) must demonstrate that if the agreement were not implemented,
significant efficiency gains would not be realized.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
VIII. Control of an Entity – In determining the control of an entity, the Commission may consider
the following:
a. Control is presumed to exist when the parent owns directly or indirectly, through
subsidiaries, more than one half (1/2) of the voting power of an entity, unless in
exceptional circumstances, it can clearly be demonstrated that such ownership does not
constitute control. Control also exists even when an entity owns one half (1/2) or less of
the voting power of another entity when:
i. There is power over more than one half (1/2) of the voting rights by virtue of an
agreement with investors;
ii. There is power to direct or govern the financial and operating policies of the
entity under a statute or agreement;
iii. There is power to appoint or remove the majority of the members of the board
of directors or equivalent governing body;
iv. There is power to cast the majority votes at meetings of the board of directors or
equivalent governing body;
v. There exists ownership over or the right to use all or a significant part of the
assets of the entity;
vi. There exist rights or contracts which confer decisive influence on the decisions of
the entity.
Securities Regulation Code
I. Securities Regulation Code (R.A. No. 8799)

a. Implementing Agency of Securities Regulation Code – The law shall be
implemented by Securities and Exchange Commission which is a collegial body
composing of Chairperson and four (4) Commissioners.
i. Powers and Functions of Securities and Exchange Commission
1. Have jurisdiction and supervision over all corporations, partnership or
associations who are the grantees of primary franchises and/or a license
or a permit issued by the Government;
2. Formulate policies and recommendations on issues concerning the
securities market, advise Congress and other government agencies on all
aspect of the securities market and propose legislation and amendments
thereto;
3. Approve, reject, suspend, revoke or require amendments to registration
statements, and registration and licensing applications;
4. Regulate, investigate or supervise the activities of persons to ensure
compliance; (e) Supervise, monitor, suspend or take over the activities of
exchanges, clearing agencies and other SROs;
5. Impose sanctions for the violation of laws and rules, regulations and
orders, and issued pursuant thereto;
6. Prepare, approve, amend or repeal rules, regulations and orders, and
issue opinions and provide guidance on and supervise compliance with
such rules, regulation and orders;
7. Enlist the aid and support of and/or deputized any and all enforcement
agencies of the Government, civil or military as well as any private
institution, corporation, firm, association or person in the implementation
of its powers and function under its Code;
8. Issue cease and desist orders to prevent fraud or injury to the investing
public;
9. Punish for the contempt of the Commission, both direct and indirect, in
accordance with the pertinent provisions of and penalties prescribed by
the Rules of Court;
10. Compel the officers of any registered corporation or association to call
meetings of stockholders or members thereof under its supervision;
11. Issue subpoena duces tecum and summon witnesses to appear in any
proceedings of the Commission and in appropriate cases, order the
examination, search and seizure of all documents, papers, files and
records, tax returns and books of accounts of any entity or person under
investigation as may be necessary for the proper disposition of the cases
before it, subject to the provisions of existing laws;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
12. Suspend, or revoke, after proper notice and hearing the franchise or
certificate of registration of corporations, partnership or associations,
upon any of the grounds provided by law; and
13. Exercise such other powers as may be provided by law as well as those
which may be implied from, or which are necessary or incidental to the
carrying out of, the express powers granted the Commission to achieve
the objectives and purposes of these laws.
ii. Jurisdiction of Securities and Exchange Commission to Intra-
Corporate Disputes
1. The Commission's jurisdiction over all cases enumerated under Section 5
of Presidential Decree No. 902-A is hereby transferred to the Courts of
general jurisdiction or the appropriate Regional Trial Court: Provided,
that the Supreme Court in the exercise of its authority may designate the
Regional Trial Court branches that shall exercise jurisdiction over these
cases a.k.a. Special Commercial Courts.
i. Four Principal Departments of Securities and Exchange Commission
1. The Markets and Securities Regulation Department develops the
registration criteria for all market participants and supervises them to
ensure compliance with registration requirements and endorses
infractions of the Code and rules and regulations to the Enforcement and
Investor Protection Department. It registers equity securities and debt
instruments, or recommends their exemption from registration, before
they are sold, offered for sale, or distributed to the public and ensures
that full, timely and accurate information is available about the said
securities.
2. The Corporate Governance and Finance Department registers mutual
funds, including exchange-traded funds, membership certificates, club
shares, both proprietary and non-proprietary, and time shares before
they are offered for sale or sold to the public and ensures that adequate
information is available about the said securities. It also ensures that
investors have access to all material disclosures regarding the said
offering and the securities of public companies. The department also
monitors compliance by the above issuers with the Code and rules and
regulations adopted thereunder and compliance of financing, lending
companies and foundations with existing laws, rules and regulations and
endorse infractions thereof to the Enforcement and Investor Protection
Department. It monitors covered companies' compliance with the
Revised Code of Corporate Governance and other corporate governance
issuances of the Commission.
3. The Company Registration and Monitoring Department registers
domestic corporations, partnerships and associations, including
representative offices and foreign corporations intending to do business
in the Philippines. It also supervises and monitors such entities relative
to their compliance with law, rules and regulations administered by the
Commission.
4. The Enforcement and Investor Protection Department ensures
compliance by all market participants, issuers and individuals, and takes
appropriate enforcement action against them for legal infraction of the
Code and other relevant laws, rules and regulations administered by the
Commission.
b. Requirement for Registration of Securities Prior to Disposal in Public
i. No securities shall be sold or offered for sale, or distributed by any person or

entity within the Philippines unless such securities are duly registered with the
Securities and Exchange Commission.
ii. No information relating to an offering of securities shall be disseminated unless

a registration statement has been filed with the Securities and Exchange
Commission and the written communication proposed to be released contains
the required information under SRC.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
iii. No person shall offer, sell or enter into commodity futures contracts except in
accordance with the rules, regulations and orders the SEC may prescribe in the
public interest. The SEC shall promulgate rules and regulations involving
commodity futures contracts to protect investors to ensure the development of
a fair and transparent commodities market.
iv. Requirements for Registration of Securities
1. All securities required to be registered under Subsection 8. I shall be

registered through the filing by the issuer in the main office of the
Commission, of a sworn registration statement with the respect to such
securities, in such form and containing such information and document
as the Commission prescribe. The registration statement shall include
any prospectus required.
2. The information required for the registration of any kind, and all
securities, shall include, among others, the effect of the securities issue
on ownership, on the mix of ownership, especially foreign and local
ownership.
3. The registration statement shall be signed by the issuer’s executive
officer, its principal operating officer, its principal financial officer, its
comptroller, its principal accounting officer, its corporate secretary, or
persons performing similar functions accompanied by a duly verified
resolution of the board of directors of the issuer corporation. The written
consent of the expert named as having certified any part of the
registration statement or any document used in connection therewith
shall also be filed. Where the registration statement shares to be sold by
selling shareholders, a written certification by such selling shareholders
as to the accuracy of any part of the registration statement contributed
to by such selling shareholders shall be filed.
4. Upon filing of the registration statement, the issuer shall pay to the
Commission a fee of not more than one-tenth (1/10) of one per centum
(1%) of the maximum aggregate price at which such securities are
proposed to be offered.
5. Within forty-five (45) days after the date of filing of the registration
statement, or by such later date to which the issuer has consented, the
SEC shall declare the registration statement effective or rejected, unless
the applicant is allowed to amend the registration statement.
6. Upon affectivity of the registration statement, the issuer shall state under
oath in every prospectus that all registration requirements have been
met and that all information are true and correct as represented by the
issuer or the one making the statement. Any untrue statement of fact or
omission to state a material fact required to be stated herein or
necessary to make the statement therein not misleading shall constitute
fraud.
7. If a registration statement is on its face incomplete or inaccurate in any
material respect, the SEC shall issue an order directing the amendment
of the registration statement.
v. Grounds for Rejection or Revocation of Registration of Securities
1. The issuer:
a. Has been judicially declared insolvent;
b. Has violated any of the provision of this Code, the rules
promulgate pursuant thereto, or any order of the Commission of
which the issuer has notice in connection with the offering for
which a registration statement has been filed
c. Has been or is engaged or is about to engage in fraudulent
transactions;
d. Has made any false or misleading representation of material
facts in any prospectus concerning the issuer or its securities;
e. Has failed to comply with any requirements that the Commission
may impose as a condition for registration of the security for
which the registration statement has been filed; or
Mobile : 0927 283 8234
Telephone : (043) 723 8412
2. The registration statement is on its face incomplete or inaccurate in any

material respect or includes any untrue statements of a material fact
required to be stated therein or necessary to make the statement therein
not misleading; or
3. The issuer, any officer, director or controlling person performing similar
functions, or any under writer has been convicted, by a competent
judicial or administrative body, upon plea of guilty, or otherwise, of an
offense involving moral turpitude and /or fraud or is enjoined or
restrained by the Commission or other competent or administrative body
for violations of securities, commodities, and other related laws.
vi. Grounds for Suspension of Registration of Securities
1. If at any time, the information contained in the registration statement

filed is or has become misleading, incorrect, inadequate or incomplete in
any material respect, or the sale or offering for sale of the security
registered thereunder may work or tend to work a fraud.
2. Refusal to furnish information required by the SEC.
c. Kinds of Securities under Securities Regulation Code
i. Definition of Securities - "Securities" are shares, participation or interests in a

corporation or in a commercial enterprise or profit-making venture and
evidenced by a certificate, contract, instruments, whether written or electronic in
character.
1. Commodity futures contract means a contract providing for the making
or taking delivery at a prescribed in the future of a specific quantity and
quality of a commodity or the cash value thereof, which is customarily
offset prior to the delivery date, and includes standardized contracts
having the indicia of commodities futures, commodity options and
commodity leverage, or margin contracts.
2. Commodity means any goods, articles, agricultural and mineral products,
services, rights and interests, financial instruments, foreign currencies,
including any group or index of any of the foregoing, in which
commodity interest contracts are presently or in the future dealt in.
3. Forward means a contract between a buyer and a seller whereby the
buyer is obligated to take delivery and the seller is obliged to deliver a
fixed amount of an underlying commodity at a pre-determined price and
date. Payment in full is due at the time of delivery.
4. Warrant Certificate - means the certificate representing the right to a
Warrant, which mayor may not be detachable, that is issued by an
Issuer to a Warrant holder.
5. Warrant Instrument - means the written document or deed containing
the terms and conditions of the issue and exercise of a Warrant whose
terms and conditions shall include (i) the maximum underlying shares
that can be purchased upon exercise, (ii) the exercise period, and (iii)
such other terms and conditions as the Commission may require.
6. Detachable Warrant - means a Warrant that may be sold, transferred or
assigned to any person by the Warrant holder separate from, and
independent of, the corresponding Beneficiary Securities.
7. Non-detachable Warrant - means a Warrant that may not be sold,
transferred or assigned to any person by the Warrant holder separate
from, and independent of, the Beneficiary Securities.
8. Beneficiary Securities - means the shares of stock and other securities of
the Issuer which form the basis of entitlement in a Warrant.
9. Underlying Shares - means the unissued shares ofa corporation that may
be purchased by the Warrant holder upon the exercise of the right
granted under the Warrant.
10. Pre-need plans are contracts which provide for the performance of future
services of or the payment of future monetary considerations at the time
actual need, for which plan holders pay in cash or installment at stated
prices, with or without interest or insurance coverage and includes life,
Mobile : 0927 283 8234
Telephone : (043) 723 8412
pension, education, interment, and other plans which the Commission

may from time to time approve.
ii. Securities Required To Be Registered to SEC

1. Shares of stocks,
2. Bonds, debentures, notes or evidences of indebtedness
3. Asset-backed securities and Investment contracts
4. Certificates of interest or participation in a profit sharing agreement
5. Certifies of deposit for a future subscription
6. Fractional undivided interests in oil, gas or other mineral rights
7. Derivatives like option and warrants
8. Certificates of assignments, certificates of participation, trust certificates
9. Voting trust certificates or similar instruments
10. Proprietary or nonproprietary membership certificates in corporations
11. Other instruments as may in the future be determined by the Securities
and Exchange Commission
iii. Exempted Securities from Requirement of Registration with SEC

1. Any security issued or guaranteed by the Government of the Philippines,
or by any political subdivision or agency thereof, or by any person
controlled or supervised by, and acting as an instrumentality of said
Government.
2. Any security issued or guaranteed by the government of any country
with which the Philippines maintains diplomatic relations, or by any state,
province or political subdivision thereof on the basis of reciprocity:
Provided, That the Commission may require compliance with the form
and content for disclosures the Commission may prescribe.
3. Certificates issued by a receiver or by a trustee in bankruptcy duly
approved by the proper adjudicatory body.
4. Any security or its derivatives the sale or transfer of which, by law, is
under the supervision and regulation of the Office of the Insurance
Commission, Housing and Land Use Rule Regulatory Board, or the
Bureau of Internal Revenue.
5. Any security issued by a bank because covered by BSP Regulation except
its own shares of stock.
6. Ordinary deeds or instruments that are not normally sold to the public
such as contract of lease, contract of sale, contract of real estate
mortgage
iv. Exempted Transactions from Requirement of Registration with SEC

1. At any judicial sale, or sale by an executor, administrator, guardian or
receiver or trustee in insolvency or bankruptcy.
2. By or for the account of a pledge holder, or mortgagee or any of a
pledge lien holder selling of offering for sale or delivery in the ordinary
course of business and not for the purpose of avoiding the provision of
this Code, to liquidate a bonafide debt, a security pledged in good faith
as security for such debt.
3. An isolated transaction in which any security is sold, offered for sale,
subscription or delivery by the owner therefore, or by his representative
for the owner’s account, such sale or offer for sale or offer for sale,
subscription or delivery not being made in the course of repeated and
successive transaction of a like character by such owner, or on his
account by such representative and such owner or representative not
being the underwriter of such security.
4. The distribution by a corporation actively engaged in the business
authorized by its articles of incorporation, of securities to its stockholders
or other security holders as a stock dividend or other distribution out of
surplus.
5. The sale of capital stock of a corporation to its own stockholders
exclusively, where no commission or other remuneration is paid or given
directly or indirectly in connection with the sale of such capital stock.
6. The issuance of bonds or notes secured by mortgage upon real estate or
tangible personal property, when the entire mortgage together with all
Mobile : 0927 283 8234
Telephone : (043) 723 8412
the bonds or notes secured thereby are sold to a single purchaser at a

single sale.
7. The issue and delivery of any security in exchange for any other security
of the same issuer pursuant to a right of conversion entitling the holder
of the security surrendered in exchange to make such conversion:
Provided, That the security so surrendered has been registered under
this Code or was, when sold, exempt from the provision of this Code,
and that the security issued and delivered in exchange, if sold at the
conversion price, would at the time of such conversion fall within the
class of securities entitled to registration under this Code. Upon such
conversion the par value of the security surrendered in such exchange
shall be deemed the price at which the securities issued and delivered in
such exchange are sold.
8. Broker’s transaction, executed upon customer’s orders, on any registered
Exchange or other trading market.
9. Subscriptions for shares of the capitals stocks of a corporation prior to
the incorporation thereof or in pursuance of an increase in its authorized
capital stocks under the Corporation Code, when no expense is incurred,
or no commission, compensation or remuneration is paid or given in
connection with the sale or disposition of such securities, and only when
the purpose for soliciting, giving or taking of such subscription is to
comply with the requirements of such law as to the percentage of the
capital stock of a corporation which should be subscribed before it can
be registered and duly incorporated, or its authorized, capital increase.
10. The exchange of securities by the issuer with the existing security
holders exclusively, where no commission or other remuneration is paid
or given directly or indirectly for soliciting such exchange.
11. The sale of securities by an issuer to fewer than twenty (20) persons in
the Philippines during any twelve-month period.
12. The sale of securities to any number of the following qualified buyers: (i)
Bank; (ii) Registered investment house; (iii) Insurance company; (iv)
Pension fund or retirement plan maintained by the Government of the
Philippines or any political subdivision thereof or manage by a bank or
other persons authorized by the Bangko Sentral to engage in trust
functions; (v) Investment company or; (vi) Such other person as the
Commission may rule by determine as qualified buyers, on the basis of
such factors as financial sophistication, net worth, knowledge, and
experience in financial and business matters, or amount of assets under
management.
d. Protection of Shareholders Interest
i. Tender Offer - means a publicly announced intention by a person acting

alone or in concert with other persons (hereinafter referred to as "person") to
acquire outstanding equity securities of a public company as defined in SRC
Rule 3, or outstanding equity securities of an associate or related company of
such public company which controls the said public company.
ii. Issuer Tender Offers - means a publicly announced intention by an Issuer to

reacquire any of its own class of equity securities, or by an associate of such
Issuer to acquire such securities.
iii. Tender offer materials mean: (i) the Offeror's formal offer, including all the
material terms and conditions of the tender offer and all their amendments; (ii)
the related transmittal letter (whereby equity securities of the target company
that are sought in the tender offer may be transmitted to the Offeror or its
depository) and all their amendments; and (iii) press releases, advertisements,
letters and other documents published by the Offeror or sent or given by the
Offeror to security holders which, directly or indirectly, solicit, invite or request
tenders of the equity securities being sought in the tender offer.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
iv. Instances of Mandatory Tender Offers

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

1. Any purchase of securities from the unissued capital stock; Provided, the
acquisition will not result to a fifty percent (50%) or more ownership of
securities by the purchaser or such percentage that is sufficient to gain
control of the board
2. Any purchase of securities from an increase in authorized capital stock
3. Purchase in connection with foreclosure proceedings involving a duly
constituted pledge or security arrangement where the acquisition is
made by the debtor or creditor;
4. Purchases in connection with a privatization undertaken by the
government of the Philippines
5. Purchases in connection with corporate rehabilitation under court
supervision
6. Purchases in the open market at the prevailing market price; and
7. Merger or consolidation.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
vi. Tender Offer by an Issuer or Buy Back - A reacquisition or repurchase by

an Issuer of its own securities shall only be made if such Issuer has
unrestricted retained earnings in its books to cover the amount of shares to be
purchased, and is undertaken for any of the following purposes:
1. To implement a stock option or stock purchase plan;
2. To meet short-term obligations which can be settled by the re-issuance
of the repurchased shares;
3. To pay dissenting or withdrawing stockholders entitled to payment for
their securities under the Corporation Code; and
4. Such other legitimate corporate purposes.
vii. Dissemination Requirements of Tender Offer

1. An Offeror or Issuer shall publish the terms and conditions of the tender
offering in two (2) national newspapers of general circulation in the
Philippines on the date of commencement of the tender offer and for
two (2) consecutive days after compliance with SRC Rule 19.7.1.
2. If a material change occurs in the information published, sent or given to
security holders, the Offeror shall disseminate promptly a disclosure of
such change in a manner reasonably calculated to inform security
holders of such change.
viii. Period and Manner of Making Tender Offers
1. Expiration Period of Tender Offer - A tender offer shall, unless

withdrawn, remain open until the expiration of:
a. At least twenty (20) business days from its commencement; Provided,
that an offer should as much as possible be completed within sixty
(60) business days from the date the intention to make such offer is
publicly announced; or
b. At least ten (10) business days from the date the notice of a change
in the percentage of the class of securities being sought or in the
consideration offered is first published, sent or given to security
holders.
2. In a mandatory tender offer, the Offeror shall be compelled to offer the
highest price paid by him for such securities during the preceding six (6)
months. If the offer involves payment by transfer or allotment of
securities, such securities must be valued on an equitable basis.
3. In case of a tender offer other than by an Issuer, the subject of the
tender offer ("the target company") shall not engage in any of the
following transactions during the course of a tender offer, or before its
commencement if its board has reason to believe that an offer might be
imminent, except if such transaction is pursuant to a contract entered
into earlier, or with the approval of the shareholders in a general
meeting or, where special circumstances exist, the Commission's
approval has been obtained:
a. Issue any authorized but unissued shares;
b. Issue or grant options in respect to any unissued shares;
c. Create or issue, or permit the creation or issuance of, any securities
carrying
d. rights of conversion into, or subscription to, shares;
e. Sell, dispose of or acquire, or agree to acquire, any asset whose value
amounts to five percent (5 %) or more of the total value of the assets
prior to acquisition; or
f. Enter into contracts that are not in the ordinary course of business.
4. The Offeror in a tender offer shall permit the securities tendered to be
withdrawn (i) at any time during the period such tender offer remains
open; and(ii) if not yet accepted for payment, after the expiration of
sixty (60) business days from the commencement of the tender offer.
5. If the tender offer shall be for less than the total outstanding securities
of a class, but a greater number of securities is tendered, the Offeror
shall be obliged to accept and pay the securities on a pro rata basis,
disregarding fractions, according to the number of securities tendered by
each security holder during the period the offer was open.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
6. In the event the Offeror in a tender offer increases the consideration

offered after the tender offer has commenced, the Offeror shall pay such
increased consideration to all security holders whose tendered securities
have been accepted for payment by such Offeror, whether or not the
securities were tendered prior to the variation of the tender offer's
terms.
7. The Offeror in a tender offer shall either pay the consideration offered,
or return the tendered securities, not later than ten (10) business days
after the termination or the withdrawal of the tender offer.
8. No tender offer shall be made unless:
a. It is open to all security holders of the class of securities subject to
the tender offer; and
b. The consideration paid to any security holder pursuant to the tender
offer shall be the highest consideration paid to any other security
holder during such tender offer.
9. Unless with the prior approval of the Commission, if an offer has been
announced but has not become unconditional in all respects and has
been withdrawn or has lapsed, neither the Offeror nor any person who
acted in concert with it in the course of the offer may, within six (6)
months from the date on which such offer has been withdrawn or has
lapsed, announce an offer for the target company nor acquire any
securities of the target company which would require such person to
make a mandatory tender offer under this Rule and Section 19.1 of the
Code.
10. Prohibited Acts in any Tender Offer
a. To employ any device, scheme or artifice to defraud any person;
b. To make any untrue statement of a material fact or to omit to state a
material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not
misleading; or
c. To engage in any act, practice or course of business which operates
or would operate as a fraud or deceit upon any person.
d. If a person shall become aware of a potential tender offer before the
tender offer has been publicly announced, such person shall buy or
sell, directly or indirectly, the securities of the target company until
the tender offer shall have been publicly announced. Such buying or
selling shall constitute insider trading which is prohibited Section 27.4
of the Code.
i. Manipulation of Security Prices, Devices and Practices (Unlawful Acts

Involving Manipulation of Security Prices, Devices and Practices). It shall be
unlawful for any person acting for himself or through a dealer or broker, directly
or indirectly:
1. To create a false or misleading appearance of active trading in any listed

security traded in an Exchange of any other trading market (hereafter
referred to purposes of this Chapter as "Exchange"):
2. By effecting any transaction in such security which involves no change in
the beneficial ownership thereof;
3. By entering an order or orders for the purchase or sale of such security
with the knowledge that a simultaneous order or orders of substantially
the same size, time and price, for the sale or purchase of any such
security, has or will be entered by or for the same or different parties; or
4. By performing similar act where there is no change in beneficial
ownership.
5. To affect, alone or with others, a securities or transactions in securities
that: (I) Raises their price to induce the purchase of a security, whether
of the same or a different class of the same issuer or of controlling,
controlled, or commonly controlled company by others; or (iii) Creates
active trading to induce such a purchase or sale through manipulative
devices such as marking the close, painting the tape, squeezing the
float, hype and dump, boiler room operations and such other similar
devices.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
6. To circulate or disseminate information that the price of any security

listed in an Exchange will or is likely to rise or fall because of
manipulative market operations of any one or more persons conducted
for the purpose of raising or depressing the price of the security for the
purpose of inducing the purpose of sale of such security.
7. To make false or misleading statement with respect to any material fact,
which he knew or had reasonable ground to believe was so false or
misleading, for the purpose of inducing the purchase or sale of any
security listed or traded in an Exchange.
8. No person shall use or employ, in connection with the purchase or sale
of any security any manipulative or deceptive device or contrivance.
Neither shall any short sale be effected nor any stop-loss order be
executed in connection with the purchase or sale of any security except
in accordance with such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest for the
protection of investors.
9. To effect, either alone or others, any series of transactions for the
purchase and/or sale of any security traded in an Exchange for the
purpose of pegging, fixing or stabilizing the price of such security; unless
otherwise allowed by this Code or by rules of the Commission.
ii. Fraudulent Transactions - It shall be unlawful for any person, directly or

indirectly, in connection with the purchase or sale of any securities to:
1. Employ any device, scheme, or artifice to defraud;
2. Obtain money or property by means of any untrue statement of a
material fact of any omission to state a material fact necessary in order
to make the statements made, in the light of the circumstances under
which they were made, not misleading; or
3. Engage in any act, transaction, practice or course of business which
operates or would operate as a fraud or deceit upon any person.
iii. Insider Trading - It shall be unlawful for an insider to sell or buy a security of
the issuer, while in possession of material information with respect to the issuer
or the security that is not generally available to the public, unless: (a) The insider
proves that the information was not gained from such relationship; or (b) If the
other party selling to or buying from the insider (or his agent) is identified, the
insider proves: (I) that he disclosed the information to the other party, or (ii)
that he had reason to believe that the other party otherwise is also in possession
of the information. A purchase or sale of a security of the issuer made by an
insider defined in Subsection 3.8, or such insider’s spouse or relatives by affinity
or consanguinity within the second degree, legitimate or common-law, shall be
presumed to have been effected while in possession of material nonpublic
information if transacted after such information came into existence but prior to
dissemination of such information to the public and the lapse of a reasonable
time for market to absorb such information: Provided, however, That this
presumption shall be rebutted upon a showing by the purchaser or seller that he
was aware of the material nonpublic information at the time of the purchase or
sale.
1. For purposes of this Section, information is "material nonpublic" if: (a) It
has not been generally disclosed to the public and would likely affect the
market price of the security after being disseminated to the public and
the lapse of a reasonable time for the market to absorb the information;
or (b) would be considered by a reasonable person important under the
circumstances in determining his course of action whether to buy, sell or
hold a security.
2. It shall be unlawful for any insider to communicate material nonpublic
information about the issuer or the security to any person who, by virtue
of the communication, becomes an insider as defined in Subsection 3.8,
where the insider communicating the information knows or has reason to
believe that such person will likely buy or sell a security of the issuer
whole in possession of such information.
3. It shall be unlawful where a tender offer has commenced or is about to
commence for: (i) Any person (other than the tender offeror) who is in
possession of material nonpublic information relating to such tender
Mobile : 0927 283 8234
Telephone : (043) 723 8412
offer, to buy or sell the securities of the issuer that are sought or to be
sought by such tender offer if such person knows or has reason to
believe that the information is nonpublic and has been acquired directly
or indirectly from the tender offeror, those acting on its behalf, the
issuer of the securities sought or to be sought by such tender offer, or
any insider of such issuer; and (ii) Any tender offeror, those acting on its
behalf, the issuer of the securities sought or to be sought by such tender
offer, and any insider of such issuer to communicate material nonpublic
information relating to the tender offer to any other person where such
communication is likely to result in a violation of Subsection 27.4.
b. Regulation of Pre-need Plans

i. No person shall sell or offer for sale to the public any pre-need plan except in
accordance with rules and regulations which the Commission shall prescribe.
Such rules shall regulate the sale of pre-need plans by, among other things,
requiring the registration of pre-need plans, licensing persons involved in the sale
of pre- need plans, requiring disclosures to prospective plan holders, prescribing
advertising guidelines, providing for uniform accounting system, reports and
recording keeping with respect to such plans, imposing capital, bonding and
other financial responsibility, and establishing trust funds for the payment of
benefits under such plans.
Securities Regulation Code Rule 68
I. Securities Regulation Code Rule 68 (SRC Rule 68) (Financial Reporting

Requirements)
a. Covered entities
i. Stock corporations with paid-up capital stock of P50,000 or more
ii. Non-stock corporations with total assets of P500,000 or more, or gross annual
receipts of P100,000 or more
iii. Branch offices of stock foreign corporations with assigned capital in the
equivalent amount of P1,000,000 or more
iv. Branch offices of nonstock corporations with total assets in the equivalent
amount of P1,000,000 or more
v. Regional operating headquarters of foreign corporations with total revenues in
the equivalent amount of P1,000,000 or more
b. Definition of Terms
i. Financial reporting framework means a set of accounting principles,
standards, interpretations and pronouncements that must be adopted in the
preparation and submission of the annual financial statements of a particular
class of entities, as defined in this Rule by the Commission. This includes, but not
limited to, the Philippine Financial Reporting Standards and the Philippine
Financial Reporting Standards for Small and Medium Entities. In prescribing the
applicable financial reporting framework for a particular class or sub-class of
entities covered by this Rule, the Commission shall consider the pronouncements
and interpretation of the following bodies: (a) The primary regulator of the
entities concerned, e.g., the Bangko Sentral ng Pilipinas and Insurance
Commission; (b) Philippine Financial Reporting Standards Council; or (c)
International Accounting Standards Board. In case of a conflict in the
pronouncement or interpretation between any of the bodies listed above, the
Commission shall have the authority subject only to prior consultation with
concerned parties, to prescribe the most appropriate requirement that shall form
part of the applicable financial reporting framework of corporations covered by
this Rule.
ii. Entity, when use in this Rule, refers to a juridical person or a corporation
registered under the Corporation Code.
iii. Error means an unintentional mistake in the financial statements which reduces
or increases the consolidated total assets, total liabilities or income of the
company by five percent (5%). It may involve:
1. Mathematical or clerical mistakes in the underlying records and
accounting data
2. Oversight or misinterpretation of facts
Mobile : 0927 283 8234
Telephone : (043) 723 8412
3. Unintentional misapplication of accounting policies

iv. Fraud means an intentional act by one or more individuals among management,
employees, or third parties that results in a misrepresentation of financial
statements which reduces or increases the consolidated total assets, total
liabilities or income of the company by five percent (5%). It may involve:
1. Manipulation, falsification or alteration of records or documents;
2. Misappropriation of assets;
3. Suppression or omission of the effects of transactions from records or
documents;
4. Recording of transactions without substance;
5. Intentional misapplication of accounting policies; or
6. ) Intentional misapplication of accounting policies; or (f) Omission of
material information.
v. Gross negligence means wanton or reckless disregard of the duty of due care
in complying with Philippine Standards on Auditing.
vi. Material information, for purposes of this Rule, means information whose
omission or misstatement could influence the economic decisions of its users.
vii. Significant subsidiary means a subsidiary, including its subsidiaries, which
meet any of the following conditions:
1. The corporation’s and its other subsidiaries’ investments in and advances
to the subsidiary exceed ten percent (10%) of the total assets of the
corporation and its subsidiaries consolidated as of the end of the most
recently completed fiscal year (for a proposed business combination to
be accounted for as a pooling of interests, this condition is also met
when the number of common shares exchanged or to be exchanged by
the corporation exceeds ten percent (10%) of its total common shares
outstanding at the date the combination is initiated); or
2. The corporation’s and its other subsidiaries' proportionate share of the
total assets (after inter-company eliminations) of the subsidiary exceeds
ten percent (10%) of the total assets of the corporation and its
subsidiaries consolidated as of the end of the most recently completed
fiscal year; or
3. The corporation’s and its other subsidiaries’ equity in the income from
continuing operations before income taxes exceeds ten percent (10%) of
such income of the corporation and its subsidiaries consolidated for the
most recently completed fiscal year.
viii. Summarized financial information referred to in this Rule shall mean the
presentation of summarized financial information as to the assets, liabilities and
results of operations of the entity for which the information is required.
Summarized financial information shall include the following disclosures:
1. Current assets, noncurrent assets, current liabilities, noncurrent liabilities
(for specialized industries in which classified balance sheets or
statements of financial position are normally not presented, information
shall be provided as to the nature and amount of the major components
of assets and liabilities);
2. Net sales or gross revenues, gross profit (or, alternatively, costs and
expenses applicable to net sales or gross revenues), income or loss from
continuing operations and net income or loss (for specialized industries,
other information may be substituted for sales and related costs and
expenses if necessary for a more meaningful presentation).
c. Applicable Financial Reporting Framework

i. Full Philippine Financial Reporting Standards (Full PFRS)
1. Large and/or Publicly-Accountable Entities
a. Those with total assets of more than P350M or total liabilities of
more than P250M; or
b. Those which are required to file financial statements under Part
II of SRC Rule 68; or
c. Those in the process of filing their financial statements for the
purpose of issuing any class of instruments in a public market;
or
d. Those which are holders of secondary licenses issued by
regulatory agencies.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
ii. Philippine Financial Reporting Standards for Medium Entities (PFRS for
SMEs)
1. Medium-Sized Entities
a. Total assets of between P100M to P350M or total liabilities of
between P100M to P250M. If the entity is a parent company, the
said amount shall be based on consolidated figures; and
b. Are not required to file financial statements under Part II of SRC
Rule 68; and
c. Are not in the process of filing their financial statements for the
and
d. Are not holders of secondary licenses issued by regulatory
agencies.
iii. Philippine Financial Reporting Standards for Small Entities (PFRS for
Small Entities)
1. Small Entities
a. Total assets of between P3M to P100M or total liabilities of
between P3M to P100M. If the entity is a parent company, the
said amount shall be based on consolidated figures; and
Rule 68; and
and
agencies.
iv. Full PFRS or PFRS for SMEs or PFRS for Small Entities or Tax/Cash
Basis
1. Micro Entities
a. Total assets and total liabilities below P3M; and
Rule 68; and
and
agencies.
d. Responsibility for Financial Statements

i. The financial statements filed with the Commission are primarily the
responsibility of the management of the reporting company and accordingly, the
fairness of the representations made therein is an implicit and integral part of the
management’s responsibility. The Board of Directors, in discharging its
responsibilities, reviews and approves the financial statements before these are
submitted to the stockholders.
ii. The Statement of Management’s Responsibility for Financial Statements that
shall be attached to the financial statements shall read as follows:
STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL
STATEMENTS
The management of (name of reporting company) is responsible for the

preparation and fair presentation of the financial statements including the
schedules attached therein, for the year(s) ended (date), in accordance with the
prescribed financial reporting framework indicated therein, and for such internal
control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
In preparing the financial statements, management is responsible for assessing

the Company’s ability to continue as a going concern, disclosing, as applicable
matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
The Board of Directors (Trustees) is responsible for overseeing the Company’s

financial reporting process.
The Board of Directors (Trustees) reviews and approves the financial statements
including the schedules attached therein, and submits the same to the
stockholders or members
(Name of auditing firm), the independent auditor appointed by the stockholders,

has audited the financial statements of the company in accordance with
Philippine Standards on Auditing, and in its report to the stockholders or
members, has expressed its opinion on the fairness of presentation upon
completion of such audit.
iii. The Chairman of the Board, Chief Executive Officer and Chief Finance Officer
shall all sign the Statement of Management’s Responsibility (SMR) as prescribed
by this Rule. If provided in the company’s by-laws, persons holding equivalent
position as that of the aforementioned signatories shall sign the statement. The
failure of any of the prescribed signatories to sign the SMR constitutes a material
deficiency in the financial statements.
iv. In case of branch offices or regional operating headquarters of foreign
corporations, the SMR shall be signed by its local manager who is in charge of its
operations within the Philippines. The second paragraph of the Statement may
be deleted since the Philippine branch does not have any local Board of Directors
or stockholders.
v. The independent auditor’s responsibility for the financial statements required to
be filed with the Commission is confined to the expression of his opinion on such
statements which he has examined.
vi. In the audit of the company’s financial statements, the management shall
provide the external auditor with the following documents:
1. Complete set of financial statements as prescribed under the applicable
financial reporting framework of the entity, and If applicable, schedules
and reconciliation forming part of the financial statements required under
the existing rules of the Commission;
2. All information, such as records and documentation, and other matters
that are relevant to the preparation and presentation of the financial
statements. These include schedules, computations, projections,
reconciliations, reports, analyses and other financial information;
3. Any additional information that the auditor may request from
management and w
vii. The management shall provide unrestricted access to records and personnel of
the entity from whom the auditor deems it necessary to obtain audit evidence.
viii. The company shall neither allow nor require its independent auditor to prepare
its financial statements and/or any of its supporting documents. The independent
auditor’s duty is to conduct an independent examination of the company’s
financial statements and supporting documents pursuant to the prescribed
auditing standards and practices.
ix. To determine compliance by the company’s management with its representations
in the SMR, this section and other relevant provisions of this Rule, the
Commission may examine the company’s books, records, systems and controls
pursuant to the guidelines set by the Commission.
e. Form, Order and Terminology

i. This section shall be applicable to financial statements filed with the Commission
for all corporations covered by this Rule.
ii. Financial statements shall be filed in such form and order, and shall use such
generally accepted terminology as will best indicate their significance and
character in the light of the provisions applicable thereto. The information
required with respect to any statement shall be furnished as a minimum
Mobile : 0927 283 8234
Telephone : (043) 723 8412
requirement to which shall be added such further material information as is

necessary to make the required statements, in the light of the circumstances
under which they are made, not misleading.
iii. All money amounts required to be shown in financial statements may be
expressed in whole currency units (e.g. pesos) or multiples thereof, as
appropriate: provided, that when stated in other than whole currency units, an
indication to that effect is inserted immediately beneath the caption of the
statement or schedule, at the top of the money columns, or at an appropriate
point in narrative material.
iv. Negative amounts shall be shown in a manner which clearly distinguishes the
negative attribute. When determining methods of display, consideration shall be
given to the limitations of reproduction and microfilming processes.
v. The chronological arrangement of data may be with the most recent date to the
right or to the left. However, the ordering used shall be consistent in all financial
statements, tabular data and footnote data in the document.
vi. The financial statements, other than the consolidated financial statements, shall
have the stamped “received” by the Bureau of Internal Revenue (BIR) or its
authorized banks, unless the BIR allows an alternative proof of submission for its
authorized banks (e.g. bank slips) or prohibits acceptance of the financial
statements in certain case (e.g., on-going examination)
f. Presentation for Receipt of the Audited Financial Statements

i. Financial statements required to be submitted by corporations shall be
accompanied by an auditor's report issued by an independent auditor and
presented in accordance with the requirements of this Rule. Failure to comply
with any of the formal requirements under this Rule including the prescribed
qualifications for independent auditors shall be considered a sufficient ground for
the denial of the receipt of the financial statements or the imposition of
appropriate penalties.
ii. The acceptance and receipt by the Commission of the financial statements shall
be without prejudice to the fines that may be imposed for any material deficiency
or misstatement that may be found upon evaluation of the specific contents
thereof.
g. Other documents to be filed with the financial statements

i. Non-stock and non-profit organizations
1. A schedule showing the nature and amount of each items comprising the
total receipts and disbursements according to sources and activities (e.g.
pursuant to primary purpose or commercial activity);
ii. Foundations
1. A sworn statement of the foundation’s President and Treasurer on the
following:
a. Specific sources of funds;
b. Application of funds with the following information on activities
accomplished, on-going and planned: (a) Complete name,
address and contact number of project officer in-charge; (b)
Complete address and contact number of project office.
c. As supporting documents to the above information, copies of the
certifications from the Office of the Mayor or the Head of either
the Department of Social Welfare and Development or
Department of Health, on the existence of the subject program
or activity in the locality on which it exercises jurisdiction.
iii. Issuers of securities to the public, and stock corporations with
unrestricted retained earnings in excess of 100% of paid-in capital
stock
1. A Reconciliation of Retained Earnings Available for Dividend Declaration
which shall present the prescribed adjustments as indicated in Annex 68-
C of this Rule.
iv. All secondary licensees of the Commission (financing companies,
broker dealer of securities and underwriters) and public companies
1. A schedule showing financial soundness indicators in two comparative
periods, as follows: (i) current/liquidity ratios; (ii) solvency ratios, debt-
to-equity ratios; (iii) asset-to-equity ratios; (iv) interest rate coverage
ratios; (v) profitability ratios; (vi) other relevant ratios as the Commission
Mobile : 0927 283 8234
Telephone : (043) 723 8412
may consider necessary. This schedule shall be submitted with the

annual audited financial statements and if applicable, with the company’s
interim financial statements.
v. Financing companies
1. A schedule showing the following information two comparative periods:
(i) ratio or percentage of total real estate investments to total assets; (ii)
total receivables to total assets; (iii) total DOSRI receivables to net
worth; (iv) amount of receivables from a single corporation to total
receivables. This schedule shall be submitted with the annual audited
financial statements and if applicable, with the company’s interim
financial statements.
vi. Mutual funds
1. A schedule showing the following information two comparative periods:
(i) percentage of investment in a single enterprise to net asset value; (ii)
total investment of the fund to the outstanding securities of an investee
company; (iii) total investments in liquid or semi-liquid assets to total
assets; (iv) total operating expenses to total net worth; (v) total asset to
total borrowings. This schedule shall be submitted with the annual
audited financial statements and if applicable, with the company’s
interim financial statements.
vii. Investment houses
1. Schedules showing the following information:
a. Details (per issue) of underwriting activities for the year
i. (i) Name of the issuer-client;
ii. (ii) Nature of commitment;
iii. (iii) Amount of issue;
iv. (iv) Underwriting and other fees generated;
v. (v) Basis of computation for each.
b. Transactions with DOSRI
i. (i) Name of related party;
ii. (ii) Description of transaction;
iii. (iii) Total volume/amount of transaction for the year;
(iv) Terms and conditions, such as maturity date,
security, mode of payment;
iv. (v) If secured, carrying amount of asset used as
collateral.
viii. Listed companies and investment houses that are part of a
conglomerate or group of companies
1. A map showing the relationships between and among the company and
its ultimate parent company, middle parent, subsidiaries or co-
subsidiaries, and associates.
ix. Listed companies that recently offered securities to the public (either
as initial or additional offering)
1. A schedule showing the following amounts: (i) Gross and net proceeds
as disclosed in the final prospectus; (ii) Actual gross and net proceeds;
(iii) Each expenditure item where the proceeds was used; and (iv)
Balance of the proceeds as of end of reporting period.
2. This schedule shall be submitted with the annual audited financial
statements and if applicable, with the company’s interim financial
statements.
x. Large and/or publicly-accountable entities
1. A schedule, in table format, showing in the first column a list of all the
effective standards and interpretations under the PFRS as of year-end,
and an indication opposite each in the second column on whether it is
“Adopted”, “Not adopted” or “Not applicable”.
xi. Such other schedules or components that the Commission may require
through subsequent pronouncements.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
h. Comparative Financial Statements
i. The financial statements to be filed with the Commission shall be presented in

comparative form. The figures for the most recently ended fiscal year may be
presented at the right portion immediately after the accounts name, followed by
the figures for the last preceding year.
ii. Balance Sheet or Statement of Financial Position - The audited balance sheets or
statements of financial position shall be as of the end of each of the two most
recently completed fiscal years.
iii. Statement of Comprehensive Income, Statement of Cash Flows and Statement of
Changes in Equity - If practicable, these statements shall be for each of the two
most recent completed fiscal years or such shorter period as the company
(including predecessors) has been in existence.
iv. An explanation through a note or otherwise shall be made explaining the reasons
for filing a single-period statement, e.g. it is the first period of a new company.
v. When financial statements are presented on a comparative basis for more than
the periods required, the auditor's report need not extend to prior periods for
which the financial statements are not required to be audited.
1. If the financial statements of the prior year were not audited, such
statements shall be marked prominently as "UNAUDITED." In addition,
the auditor shall disclose this in an “other matter” paragraph in the
auditor’s report.
2. f the financial statements of a prior-period have been examined by
another independent certified public accountant whose report is not
presented, the statements shall be marked to disclose prominently that
they are not being reported upon by the current auditor. If the auditor of
the financial statements for such periods did not give an unqualified
opinion on such statements, the auditor for the current year shall
indicate in an “other matter” paragraph of his report (I) that the financial
statements of the prior-period were examined by other auditors, (II) the
date of their report (III) the type of opinion expressed by the
predecessor auditor and (IV) the substantive reasons it was qualified.
i. Qualifications and Reports of Independent Auditors
i. Examination of Financial Statements by Independent Auditors

1. Financial statements required to be submitted by corporations covered
by this Rule shall be accompanied by an auditor's report issued by an
independent auditor and presented in accordance with the requirements
of this Rule. Failure to comply therewith shall subject the company with
the penalties under paragraph 10 of this Rule and the Scale of Fines
issued by the Commission.
2. All registered corporations covered by this Rule shall have independent
auditors who are duly registered with the Board of Accountancy (BOA) of
the Professional Regulation Commission (PRC) in accordance with the
rules and regulations of said professional regulatory bodies. A
corporation with financial statements audited by an independent auditor
who is not registered with the BOA shall be subject to appropriate fines.
ii. Reportorial Requirements

1. A regulated entity shall report to the Commission its action on a report of
its independent auditor pertaining to any item enumerated under item
(c) below hereof within five (5) business days from the date the report is
submitted by the independent auditor. For companies under Group A,
the report shall be in a SEC Form 17-C. For companies under Groups B
to C, the report shall be in the form of a letter signed by the Chairman of
the Board or Chairman of the Audit Committee. For companies under
Group D, the report shall be submitted to the concerned regulatory
agency, copy furnished the Commission’s Office of the General
Accountant.
2. In case the regulated entity fails to submit the report required above,
the independent auditor shall, within thirty (30) business days from the
submission of his findings to the entity, file a report (SEC Form Au-Rep)
to the Commission.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
3. The following findings shall be disclosed to the Commission:

a. Any material findings involving fraud or error;
b. Losses or potential losses the aggregate of which amounts to at
least ten percent (10%) of the consolidated total assets of the
company;
c. Any finding to the effect that the consolidated assets of the
company, on a going concern basis, are no longer adequate to
cover the total claims of creditors;
d. Material internal control weaknesses which may lead to financial
reporting problems.
4. The independent auditor shall submit his findings to the client company’s
audit committee or Board of Directors. The adverse findings shall be
discussed by the independent auditor with the said body in order to
preserve the concerns of the supervisory authority and independent
auditors regarding the confidentiality of the information.
5. The independent auditor shall document management’s explanation
and/or corrective action taken regarding his adverse findings. The same
shall be included in the report mentioned under item (b) above.
6. The engagement contract between the company and the independent
auditor shall contain a provision that the disclosure of information by the
independent auditor to the Commission shall not constitute a breach of
confidentiality nor shall it be a ground for civil, criminal or disciplinary
proceedings against the independent auditor.
iii. Rotation of External Auditors

1. The independent auditors or in the case of an audit firm, the signing
partner, of the aforementioned regulated entities shall be rotated after
every five (5) years of engagement. A two-year cooling off period shall
be observed in the re-engagement of the same signing partner or
individual auditor.
2. In addition to the requirements in the preceding provisions, the
Commission through subsequent issuance may prescribe other
obligations of accredited external auditors as it may consider necessary
to improve transparency, audit quality and independence of external
auditors.
iv. Independence of Auditors

1. The term independent auditor as used in the foregoing paragraph refers
to an auditor who fully meets the requirements of independence as
provided for in the Code of Ethics for Professional Accountants in the
Philippines and in this Rule
v. Engagement of Independent Auditors

1. The company through its Board of Directors or Audit Committee, if
applicable, shall conduct due diligence in confirming the personal
identification and professional qualifications of the independent auditor
whose services it will engage as independent auditor.
2. Prior to engagement, the company shall require the independent auditor
to present a copy of his/her professional license from the Professional
Regulation Commission (PRC) and the Certificate of Accreditation issued
to him/her by the Board of Accountancy (BOA) as sole independent
auditor or to the auditing firm if he is a partner thereof.
3. The company shall confirm the authenticity of the BOA Certificate of
Accreditation by checking the latest list of accredited practitioners issued
by the BOA.
4. In addition to above, regulated entities shall observe the following
procedures prior to the engagement of an independent auditor:
a. The company shall require the presentation of the Commission’s
Certificate of Accreditation issued to the independent auditor and
its auditing firm, if applicable. The level of accreditation (Group A
to D) indicated in the said certificate shall be at least equivalent
to the company’s classification under this Rule;
b. The authenticity of the said certificate shall be verified against
the official list of accredited auditors and firms.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
5. Preliminary meetings with the management and the exit conference shall
be attended to personally by the independent auditor or by the handling
partner or engagement manager, in case of a firm.
6. A complete documentation of the foregoing requirements shall be
retained by the company. The independent auditor’s file with the
company shall include a copy of his/her PRC license, BOA Accreditation
Certificate, Commission’s Certificate of Accreditation (if applicable),
engagement contract and minutes of conference with the auditors,
among others.
vi. Audit Reports of Independent Auditors

1. The auditor's report shall: (A) be dated; (B) be signed by the certifying
independent auditor; (C) identify the financial statements covered by the
report; (D) state the signing accountant's License, Tax Identification and
PTR numbers, and registration number with BOA including its expiration
date; (E) state the complete mailing address of the client and the
auditor; (F) in the case of an auditing firm, the certifying partner shall
sign his own signature and shall indicate that he is signing for the firm,
the name of which is printed the report.
2. The auditor’s report of a company mentioned under paragraph (B)(i) of
this section shall likewise indicate the signing auditor/partner’s
accreditation number, category and expiration of accreditation. In case
of an auditing firm, the same information with respect to the
accreditation of the firm shall be indicated.
3. The auditor's report shall state whether the examination was made in
accordance with Philippine Standards on Auditing.
4. The auditor's report shall state clearly the opinion of the independent
auditor on the fairness of presentation in conformity with the prescribed
financial reporting framework for the company.
5. Unless exempted under sub-paragraph (viii) below, the external auditor
of a company which has incurred a capital deficiency, shall provide in the
audit report an emphasis paragraph indicating the following information:
a. The fact that the company has incurred a capital deficiency that
raises an issue on its going concern status
b. A brief discussion of a concrete plan of the company to address
the capital deficiency and reference to the note to financial
statements that provides a complete disclosure of the said plan
c. A statement that the auditor conducted sufficient audit
procedures to verify the validity of the aforementioned plan.
6. In case the company fails to present to the external auditor a concrete
plan or sufficient supporting documents to address the capital deficiency,
the auditor shall provide an emphasis paragraph indicating that the
company is no longer a going concern and should use liquidation basis in
the preparation of its financial statements
7. The independent auditor shall likewise consider other instances, e.g.,
loss of major market/customers or ban of major product, which would
raise an issue on going concern status of the company and that, shall
require an emphasis paragraph in his report as required under sub-
paragraph (v) above.
8. The requirement under sub-paragraph (v) above shall not apply to a
company that incurred a capital deficiency due to any of the following
reasons:
a. The entity is at pre-operating stage and has incurred capital
deficiency due to higher pre-operating expenses than its initial
capitalization. Projected financial statements indicate that it will
generate net income once it starts commercial operations;
b. Significant losses incurred in prior years but has generated
positive results (net income) from operations over the current
period due to developments in the business or regularization of
its operation;
c. An entity has incurred capital deficiency during the current
period only due to a significant adjustment arising from the
adoption of new financial reporting framework or occurrence of
non-recurring transaction for the period;
Mobile : 0927 283 8234
Telephone : (043) 723 8412
d. Such other cases which the Commission may consider as valid

ground for considering the company as a going concern.
e. Any company covered by any of above exemptions shall provide
in Note 1 of its audited financial statements a discussion on the
reason for its capital deficiency and a concrete plan to address
the same.
vii. Supplemental Written Statement of Auditor

1. For stock corporations filing under Part I of this Rule (and therefore not
covered by Part II), their independent auditors shall issue a
supplemental written statement as prescribed under Annex 68-B of this
Rule.
2. Such statement may be incorporated in the report accompanying the
Income Tax Return, which is required to be submitted with the BIR
3. To support the above statement, the auditor may undertake the audit
procedures he deems necessary, such as the following:
a. Obtain a certification from the issuer’s corporate secretary on
the number of stockholders and their corresponding
shareholdings; or
b. Inspect the stock and transfer book and conduct the tests
needed to validate their entries and balances.

RFBT 05 17 Special Corporate Laws

Uploaded by

Copyright:

Available Formats

You might also like

RFBT 05 17 Special Corporate Laws

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

RFBT 05 17 Special Corporate Laws

Uploaded by

Copyright:

Available Formats

No. 125 Brgy.

Special Corporate Laws

a. Nature of Proceedings under Financial Rehabilitation and Insolvency Act or

b. Persons, institutions or businesses not covered by Financial Rehabilitation and

d. Procedures for Suspension of Payments by an Insolvent Individual Debtor

i. Filing of Petition for Declaration of Statement of Suspension of

iii. Effects of issuance by Court of an Order Suspending any pending

iv. Duration of Suspension of Payments or Suspension Order issued by the

v. Quorum in Meeting of Creditors for the approval of the proposal of

vii. Instances when the proposed agreement by the insolvent debtor is

viii. Effects of Approval of Proposed Agreement by the insolvent debtor

ix. Effects of Failure of Individual Debtor to Perform the Approved

e. Procedures for Voluntary Liquidation of Insolvent Individual Debtor as

9. That he has made any assignment, gift, sale, conveyance or transfer of

Commission (SEC), (3) a corporation duIy organized and existing under

xxvii. Publication notice shall refer to notice through publication in a newspaper of

b. Types of Rehabilitation of a Businessman

1. Court-Supervised Rehabilitation is a type of rehabilitation that involves filing

a. Voluntary Court-Supervised Rehabilitation is a type of court-

b. Involuntary Court-Supervised Rehabilitation is a type of court-

2. Pre-negotiated Rehabilitation is a type of rehabilitation that involves the

3. Out-of-Court Restructuring or Informal Rehabilitation is a type of

i. Voluntary Court-Supervised Rehabilitation (Initiated by Insolvent

2. Grounds for Court-Supervised Rehabilitation

3. Minimum Allegations for Voluntary Rehabilitation

4. Joint Filing of Petition for Rehabilitation by a group of debtors -

5. Contents of Petition for Voluntary Rehabilitation

ii. Involuntary Court-Supervised Rehabilitation (Initiated by Creditors of

1. Required Vote for Involuntary Rehabilitation

2. Grounds for Involuntary Rehabilitation

3. Contents of Petition for Involuntary Rehabilitation

e. Effects of the Issuance of Commencement Order

f. Stay Order a.k.a. Suspension Order in Rehabilitation Proceedings

g. Effects of Issuance by Rehabilitation Court of Stay or Suspension Order

h. Exceptions to the Stay or Suspension Order (Cases not covered by Stay or

v. to the actions of a licensed broker or dealer to sell pledged securities of a debtor

i. Who may serve as a Rehabilitation Receiver - Any qualified natural or

ii. Qualifications of a Rehabilitation Receiver

iii. Appointment of the Rehabilitation Receiver

iv. Powers, Duties and Responsibilities of the Rehabilitation Receiver

v. Removal of the Rehabilitation Receiver – The rehabilitation receiver may be

vi. Grounds for Removal of Rehabilitation Receiver

vii. Compensation, Term of Office and Bonds of a Rehabilitation Receiver

1. The rehabilitation receiver and his direct employees or independent

4. establish classes of voting creditors;

ii. Required Vote for Creditor Approval of Rehabilitation Plan

iii. Requisites for Court’s Confirmation of the Rehabilitation Plan

1. The rehabilitation plan complies with the requirement as specified in

iv. Submission of Rehabilitation Plan to the Court and Filing of Objection

v. Grounds for objection to Rehabilitation Plan

vi. Confirmation of the Rehabilitation Plan by the Court

vii. Effects of Confirmation by the Court of the Rehabilitation Plan

viii. Period for Court’s Confirmation of Rehabilitation Plan

ix. Instances of failure of rehabilitation justifying its termination

k. Other Types of Rehabilitation

i. Pre-Negotiated Rehabilitation - An insolvent debtor, by itself or jointly with

1. Required Creditor’s Vote for Approval of Pre-negotiated