Commercial Laws Supplement P1

PART V Final Provisions 27
COMMERCIAL LAWS A.M. No. 01-7-01-SC | Rules on Electronic Evidence 28
OF THE PHILIPPINES RULE 1 Coverage

RULE 2 Definition of Terms and Construction
28
28
RULE 3 Electronic Documents 29
Supplement to the Compendium RULE 4 Best Evidence Rule 29
RULE 5 Authentication of Electronic Documents 29
RULE 6 Electronic Signatures 30
TABLE OF CONTENTS
RULE 7 Evidentiary Weight of Electronic Documents

30
EO No 226 | The Omnibus Investments Code of 1987 4 RULE 8 Business Records as Exception to the Hearsay
Rule 30
PRELIMINARY TITLE 4
RULE 9 Method of Proof 30
CHAPTER I Title and Declaration of Policy 4
RULE 10 Examination of Witnesses 30
CHAPTER II Board of Investments 4
RULE 11 Audio, Photographic, Video, and Ephemeral
BOOK I Investments with Incentives 6 Evidence 31
TITLE I Preferred Areas of Investments 6 RULE 12 Effectivity 31
CHAPTER I Definitions of Terms 6
CHAPTER II Investment Priorities Plan 7 RA No 10667 | Philippine Competition Act 31
CHAPTER III Registration of Enterprises 8 CHAPTER I GENERAL PROVISIONS 31
TITLE II Basic Rights and Guarantees 9 CHAPTER II PHILIPPINE COMPETITION COMMISSION
TITLE III Incentives to Registered Enterprises 9 32
TITLE IV Incentives to Less-Developed-Area CHAPTER III PROHIBITED ACTS 33
Registered Enterprise 11 CHAPTER IV MERGERS AND ACQUISITIONS 34
TITLE V General Provisions 11 CHAPTER V DISPOSITION OF CASES 35
BOOK II Foreign Investments Without Incentives 11 CHAPTER VI FINES AND PENALTIES 36
TITLE I 11 CHAPTER VII ENFORCEMENT 37
CHAPTER I Definitions and Scope of this Book CHAPTER VIII OTHER PROVISIONS 39
11 CHAPTER IX FINAL PROVISIONS 39
CHAPTER II Investments 11
Rules and Regulations Implementing the Philippine
CHAPTER III License to Do Business 12
Competition Act 40
TITLE II General Provisions 13
RULE 1 Title and Scope 40
BOOK III Incentives To Multinational Companies
Establishing Regional Or Area Headquarters And RULE 2 Definition of Terms 40
Regional Operating Headquarters In The Philippines RULE 3 Prohibited Acts 41
13 RULE 4 Mergers and Acquisitions 42
CHAPTER I Licensing Of Regional Or Area RULE 5 Determination of the Relevant Market 45
Headquarters 13 RULE 6 Determination of Control 45
CHAPTER II Licensing Of Regional Operating RULE 7 Determination of Anti-Competitive
Headquarters 14 Agreement or Conduct 46
CHAPTER III Incentives to Expatriates 14 RULE 8 Determination of Dominance 46
CHAPTER IV Incentives To Regional Or Area RULE 9 Forbearance 47
Headquarters And Regional Operating
Headquarters 15 RULE 10 Final Provisions 47
BOOK IV Incentives To Multinational Companies RA No 10142 | Financial Rehabilitation and Insolvency
Establishing Regional Warehouses To Supply Spare (FRIA) Act of 2010 47
Parts, Components, Semi-finished Products And Raw
Materials To The Asia-pacific Region And Other CHAPTER I General Provisions 47
Foreign Markets 15 CHAPTER II Court-Supervised Rehabilitation 50
BOOK V Special Investors Resident Visa 17 (A) Initiation Proceedings. 50
BOOK VI Incentives of Export Processing Zone (1) Voluntary Proceedings. 50
Enterprises 17 (2) Involuntary Proceedings. 50
Final Provisions 18 (B) Action on the Petition and Commencement
of Proceedings. 50
RA No 7042 | Foreign Investments Act of 1991 19
(C) The Rehabilitation Receiver, Management
RA No 8792 | Electronic Commerce Act 22 Committee and Creditors' Committee. 52
PART I Short Title and Declaration of Policy 22 (D) Determination of Claims. 54
PART II Electronic Commerce in General 22 (E) Governance. 55
CHAPTER I General Provisions 22 (F) Use, Preservation and Disposal of Assets and
Treatment of Assets and Claims after
CHAPTER II Legal Recognition of Electronic Data Commencement Date. 55
Messages and Electronic Documents 23
(G) Avoidance Proceedings. 56
CHAPTER III Communication of Electronic Data
Messages or Electronic Documents 24 (H) Treatment of Secured Creditors. 56
PART III Electronic Commerce in Carriage of Goods 26 (I) Administration of Proceedings. 57
PART IV Electronic Transactions in Government 26 (J) Termination of Proceedings. 58
CHAPTER III Pre-Negotiated Rehabilitation 59

© Compiled by Rehne Gibb Larena | JD-2 | University of San Carlos

COMMERCIAL LAWS SUPPLEMENT

CHAPTER IV Out-of-Court or Informal Restructuring CHAPTER III Food Establishment 96

Agreements or Rehabilitation Plans 59 CHAPTER IV Markets and Abattoirs 100
CHAPTER V Liquidation of Insolvent Juridical Debtors CHAPTER V Public Laundry 101
60
CHAPTER VI School Sanitation and Health Services 101
CHAPTER VI Insolvency of Individual Debtors 60
CHAPTER VII Industrial Hygiene 102
(A) Suspension of Payments. 60
CHAPTER VIII Public Swimming or Bathing Places 103
(B) Voluntary Liquidation. 62
CHAPTER IX Rest Areas, Bus Terminals, Bus Stops,
(C) Involuntary Liquidation. 62 and Service Stations 103
CHAPTER VII Provisions Common to Liquidation in CHAPTER X Camps and Picnic Grounds 104
Insolvency of Individual and Juridical Debtors 63
CHAPTER XI Dancing Schools, Dance Halls and Night
(A) The Liquidation Order. 63 Clubs 104
(B) The Liquidator. 63 CHAPTER XII Tonsorial and Beauty Establishments 104
(C) Determination of Claims. 64 CHAPTER XIII Massage Clinics and Sauna Bath
(D) Avoidance Proceedings. 64 Establishments 104
(E) The Liquidation Plan. 65 CHAPTER XIV Hotels, Motels and Apartments,
(F) Liquidation of a Securities Market Participant. Lodging, Boarding, or Tenement Houses, and
65 Condominiums 105
CHAPTER VIII Proceedings Ancillary to Other CHAPTER XV Port, Airport, Vessel and Aircraft
Insolvency or Rehabilitation Proceedings 65 Sanitation 105
(A) Banks and Other Financial Institutions Under CHAPTER XVI Vermin Control 106
Rehabilitation Receivership Pursuant to a CHAPTER XVII Sewage Collection and Disposal,
State-funded or State-mandated Insurance Excreta Disposal and Drainage 106
System. 65 CHAPTER XVIII Refuse Disposal 107
(B) Cross-Border Insolvency Proceedings. 65 CHAPTER XIX Nuisances and Offensive Trades and
CHAPTER IX Funds for Rehabilitation of Occupations 107
Government-Owned and -Controlled Corporations 66 CHAPTER XX Pollution of the Environment 108
CHAPTER X Miscellaneous Provisions 66 CHAPTER XXI Disposal of Dead Persons 108
RA No 7394 | Consumer Act of the Philippines 66 CHAPTER XXII Final Provisions 110
TITLE I General Provisions 66 PD No 1096 | National Building Code of the Philippines
TITLE II 70 110
CHAPTER I Consumer Product Quality and Safety CHAPTER 1 General Provisions 111
70 CHAPTER 2 Administration and Enforcement 111
CHAPTER II Food, Drugs, Cosmetics and Devices CHAPTER 3 Permits and Inspection 112
73
CHAPTER 4 Types of Construction 113
CHAPTER III Hazardous Substance 77
CHAPTER 5 Requirements for Fire Zones 114
TITLE III Protection Against Deceptive, Unfair and
Unconscionable Sales Acts or Practices 78 CHAPTER 6 Fire-Resistive Requirements in
Construction 114
CHAPTER I Deceptive, Unfair and Unconscionable
Sales Acts or Practices 78 CHAPTER 7 Classification and General Requirement
of all Buildings by Use of Occupancy 114
CHAPTER II Regulation of Practices Relative to
Weights and Measures 79 CHAPTER 8 Light and Ventilation 116
General Provision 79 CHAPTER 9 Sanitation 117
Prohibited Acts 79 CHAPTER 10 Building Projection Over Public Streets
118
CHAPTER III Consumer Product and Service
Warranties 80 CHAPTER 11 Protection of Pedestrians During
Construction or Demolition 118
CHAPTER IV Labeling and Fair Packaging 81
CHAPTER 12 General Design and Construction
CHAPTER V Liability for Product and Service 84 Requirements 119
CHAPTER VI Advertising and Sales Promotion 86 CHAPTER 13 Electrical and Mechanical Regulations 129
False, Deceptive and Misleading CHAPTER 14 Photography and X-ray Films 129
Advertisement 86
CHAPTER 15 Pre-Fabricated Construction 129
Promotion of Sales of Consumer Products
and Services 86 CHAPTER 16 Plastics 130
CHAPTER VII Regulation of Repair and Service CHAPTER 17 Sheet Metal Paint Spray Booths 131
Firms 87 CHAPTER 18 Glass and Glazing 131
TITLE IV Consumer Credit Transaction 87 CHAPTER 19 The Use of Computers 131
TITLE V The National Consumer Affairs Council 89 CHAPTER 20 Signs 131
CHAPTER I Establishment and Composition 89 CHAPTER 21 Transitory and Final Provisions 132
CHAPTER II Powers and Functions 89 ANNEX "A" WORDS, TERMS AND PHRASES 132
CHAPTER III Consumer Complaints 90 ANNEX "B-1"Tables 136
TITLE VI Transitory and Final Provisions 91
RA No 9514 | Fire Code of the Philippines of 2008 137
RA No 7581 | Price Act 91
RA No 9510 | Credit Information System Act 142
PD No 856 | Code on Sanitation of the Philippines 95
RA No 5980 | Financing Company Act of 1998 146
CHAPTER I General Provisions 95
CHAPTER II Water Supply 96
© Compiled by RGL 2 of 203


NOTICE OF CLOSURE AND TAKEOVER ACTIVITIES 183

RA No 9474 | Lending Company Regulation Act of 2007
148 PURCHASE OF ASSETS AND ASSUMPTION OF
LIABILITIES 183
RA No 9505 | Personal Equity and Retirement Account CONVENTIONAL LIQUIDATION 183
(PERA) Act of 2008 149 A. ASSET MANAGEMENT AND CONVERSION 183
B. PETITION FOR ASSISTANCE IN THE
RA No 9267 | The Securitization Act of 2004 151
LIQUIDATION OF A CLOSED BANK 184
ARTICLE 1 GENERAL PROVISIONS 152 C. WINDING-UP 184
ARTICLE II SPECIAL PURPOSE ENTITY 152 DIVIDEND DECLARATION 185
ARTICLE III THE SERVICER 154 PAYMENT OF INSURED DEPOSITS 185
ARTICLE IV TAX AND OTHER RELATED ISSUES 154 CORPORATE FUNDS AND ASSETS 185
ARTICLE V SECONDARY MORTGAGE INSTITUTION 155 FINANCIAL ASSISTANCE 186
ARTICLE VI RATING SYSTEM 155 AUTHORITY TO BORROW 186
ARTICLE VII PENAL PROVISIONS 156 ISSUANCE OF BONDS, DEBENTURES AND OTHER
ARTICLE VIII MISCELLANEOUS PROVISIONS 156 OBLIGATIONS 186
RA No 10000 | The Agri-Agra Reform Credit Act of 2009 PD No 114 | Pawnshop Regulation Act 188
156
ARTICLE I GENERAL PROVISIONS 156 PD No 1034 | Authorizing the Establishment of an
ARTICLE II AGRICULTURAL CREDIT, INSURANCE AND Offshore Banking System in the Philippines 190
FINANCING SYSTEM 157
RA No 6426 | Foreign Currency Deposit Act of the
ARTICLE III MISCELLANEOUS PROVISIONS 158 Philippines 192
RA No 7353 | The Rural Bank Act of 1992 158 RA No 9829 | Pre-Need Code of the Philippines 193
RA No 7721 | An Act Liberalizing the Entry and Scope of CHAPTER I GENERAL PROVISIONS 193
Foreign Banks in the Philippines and for other CHAPTER III ORGANIZATION, LICENSING AND
purposes 163 MANAGEMENT OF PRE-NEED COMPANIES 195
CHAPTER IV REGISTRATION OF PRE-NEED PLANS 195
RA No 9178 | Barangay Micro Business Enterprises
CHAPTER V LICENSING OF SALES COUNSELORS AND
(BMBE's) Act of 2002 164 GENERAL AGENTS 196
PRELIMINARY PROVISIONS 164 CHAPTER VI DEFAULT AND TERMINATION BY
REGISTRATION AND OPERATION OF BMBE 164 PLANHOLDERS 196
INCENTIVES AND BENEFITS 165 CHAPTER VII CLAIMS SETTLEMENT 197
INFORMATION DISSEMINATION 165 CHAPTER VIII TRUST FUND 197
PENALTY 165 CHAPTER IX ACTUARIES FOR PRE-NEED COMPANIES
MISCELLANEOUS PROVISIONS 165 199
CHAPTER X REPORTS AND EXAMINATION 200
RA No 8367 | Revised Non-Stock Savings and Loan
CHAPTER XI FINANCIAL ACCOUNTING STANDARDS
Association Act of 1997 166 201
RA No 7906 | Thrift Banks Act of 1995 169 CHAPTER XII SUSPENSION OR REVOCATION OF
AUTHORITY 201
CHAPTER I Declaration of Policy and Definitions 169
CHAPTER XIII CONSERVATORSHIP AND
CHAPTER II Organization 170 PROCEEDINGS UPON INSOLVENCY 201
CHAPTER III Ownership and Capital Requirements 170 CHAPTER XIV ADMINISTRATIVE SANCTIONS AND
CHAPTER IV Powers 171 CRIMINAL PENALTIES 202
CHAPTER V Supervision 172 CHAPTER XV MISCELLANEOUS PROVISIONS 203
CHAPTER VI Incentives 172

CHAPTER VII Exemptions 172
CHAPTER VIII Prohibitions 173
CHAPTER IX General Provisions 173
RA No 10846 | An Act Enhancing the Resolution and

Liquidation Framework for Banks 174
THE CREATION OF THE PHILIPPINE DEPOSIT
INSURANCE CORPORATION 174
STATE POLICY 174
BOARD OF DIRECTORS: COMPOSITION AND
AUTHORITY 174
DEFINITION OF TERMS 176
DEPOSIT INSURANCE COVERAGE 177
ASSESSMENT OF MEMBER BANKS 177
SANCTIONS AGAINST UNSAFE AND UNSOUND
BANKING PRACTICES 178
BANK RESOLUTION 180
LIQUIDATION OF A CLOSED BANK 181
AUTHORITIES OF A RECEIVER AND EFFECTS OF
PLACEMENT OF A BANK UNDER LIQUIDATION 181


Philippine economy and that it is the responsibility of

Government to define these roles and provide the climate
EO No 226 | The Omnibus Investments for their entry and growth.
Code of 1987 7. The State recognizes that industrial peace is an
As amended by RA No 7369, 7888, 7918, 8756 essential element of economic growth and that it is a
principal responsibility of the State to ensure that such a
July 16, 1987 condition prevails.
THE OMNIBUS INVESTMENTS CODE OF 1987 8. Fiscal incentives shall be extended to stimulate the
establishment and assist initial operations of the
WHEREAS, the Government is committed to encourage enterprise, and shall terminate after a period of not more
investments in desirable areas of activities; than 10 years from registration or start-up of operation
WHEREAS, to facilitate investment, there is a need to unless a specific period is otherwise stated.
adopt a cohesive and consolidated investments The foregoing declaration of investment policies shall
incentives law; apply to all investment incentive schemes.
WHEREAS, it is imperative to integrate basic laws on
investment, to clarify and harmonize their provisions for CHAPTER II Board of Investments
the guidance of domestic and foreign investors;
ARTICLE 3. The Board of Investments. — The Board of
NOW, THEREFORE, I, CORAZON C. AQUINO, President of Investments shall implement the provisions of Books One
the Philippines, do hereby order and ordain the following: to Five of this Code.
ARTICLE 4. Composition of the Board. — The Board of
PRELIMINARY TITLE Investments shall be composed of seven (7) governors:
The Secretary of Trade and Industry, three (3)
CHAPTER I Title and Declaration of Policy Undersecretaries of Trade and Industry to be chosen by
the President, and three (3) representatives from other
ARTICLE 1. Short Title. — This Order shall be known as the government agencies and the private sector. The
"Omnibus Investments Code" of 1987. Secretary of Trade and Industry shall be concurrently
ARTICLE 2. Declaration of Investment Policies. — To Chairman of the Board and the Undersecretary of the
accelerate the sound development of the national Department of Trade and Industry for Industry and
economy in consonance with the principles and Investments shall be concurrently the Vice-Chairman of
objectives of economic nationalism and in pursuance of a the Board and its Managing Head. The three (3)
planned economically feasible and practical dispersal of representatives from the other government agencies and
industries and the promotion of small and medium scale the private sector shall be appointed by the President for
industries, under conditions which will encourage a term of four (4) years: Provided, That upon the
competition and discourage monopolies, the following expiration of his term, a governor shall serve as such until
are declared policies of the State: his successor shall have been appointed and qualified:
Provided, further, That no vacancy shall be filled except
1. The State shall encourage private Filipino and foreign for the unexpired portion of any term, and that no one
investments in industry, agriculture, forestry, mining, may be designated to be governor of the Board in an
tourism and other sectors of the economy which shall: acting capacity but all appointments shall be ad interim
provide significant employment opportunities relative to or permanent.
the amount of the capital being invested; increase
productivity of the land, minerals, forestry, aquatic and ARTICLE 5. Qualifications of Governors of the Board. —
other resources of the country, and improve utilization of The governors of the Board shall be citizens of the
the products thereof; improve technical skills of the Philippines, at least thirty (30) years old, of good moral
people employed in the enterprise; provide a foundation character and of recognized competence in the fields of
for the future development of the economy; meet the economics, finance, banking, commerce, industry,
tests of international competitiveness; accelerate agriculture, engineering, law, management or labor.
development of less developed regions of the country; ARTICLE 6. Appointment of Board Personnel. — The
and result in increased volume and value of exports for Board shall appoint its technical staff and other personnel
the economy. subject to Civil Service Law, rules and regulations.
2. The State shall ensure holistic development by ARTICLE 7. Powers and Duties of the Board. — The Board
safeguarding the well-being of the social, cultural and shall be responsible for the regulation and promotion of
ecological life of the people. For this purpose, investments in the Philippines. It shall meet as often as
consultation with affected communities will be may be necessary generally once a week on such day as it
conducted whenever necessary. may fix. Notice of regular and special meetings shall be
3. The State shall extend to projects which will given all members of the Board. The presence of four (4)
significantly contribute to the attainment of these governors shall constitute a quorum and the affirmative
objectives, fiscal incentives without which said projects vote of four (4) governors in a meeting validly held shall
may not be established in the locales, number and/or be necessary to exercise its powers and perform its duties,
pace required for optimum national economic which shall be as follows:
development. Fiscal incentive systems shall be devised to (1) Prepare annually the Investment Priorities Plan as
compensate for market imperfections, to reward defined in Article 26, which shall contain a listing of
performance contributing to economic development, be specific activities that can qualify for incentives under
cost-efficient and be simple to administer. Book I of this Code, duly supported by the studies of
4. The State considers the private sector as the prime existing and prospective demands for such products and
mover for economic growth. In this regard, private services in the light of the level and structure of income,
initiative is to be encouraged, with deregulation and production, trade, prices and relevant economic and
self-regulation of business activities to be generally technical factors of the regions as well as existing
adopted where dictated by urgent social concerns. facilities;
5. The State shall principally play a supportive role, rather (2) Promulgate such rules and regulations as may be
than a competitive one, providing the framework, the necessary to implement the intent and provisions of this
climate and the incentives within which business activity Code relevant to the Board:
is to take place. (3) Process and approve applications for registration with
6. The State recognizes that there are appropriate roles for the Board, imposing such terms and conditions as it may
local and foreign capital to play in the development of the deem necessary to promote the objectives of this Code,


including refund of incentives when appropriate, President of the Philippines, the suspension of the
restricting availment of certain incentives not needed by nationality requirement provided in this Code in cases of
the project in the determination of the Board, requiring ASEAN projects, or investments by ASEAN nationals,
performance bonds and other guarantees, and payment regional ASEAN or multilateral financial institutions
of application, registration, publication and other including their subsidiaries in preferred projects and/or
necessary fees and when warranted, may limit the projects allowed through either financial or technical
availment of the tax holiday incentive to the extent that assistance agreements entered into by the President, and
the investor's country law or treaties with the Philippines in the case of regional complementation for the
allows a credit for taxes paid in the Philippines; manufacture of a particular product which seeks to take
(4) After due hearing, decide controversies concerning advantage of economies of scale. For the purpose of this
the implementation of the relevant books of this Code Act, a multilateral financial institution shall refer to a
that may arise between registered enterprises or financial agency or entity, and its affiliates which satisfy
investors therein and government agencies, within thirty the following qualifications:
(30) days after the controversy has been submitted for (1) The institution is either owned or controlled by
decision: Provided,That the investor or the registered member countries but does not possess any national
enterprise may appeal the decision of the Board within identity;
thirty (30) days from receipt thereof to the President; (2) The institution sources its funds from capital stock
(5) Recommend to the Commissioner of Immigration and subscriptions and contributions by member countries;
Deportation the entry into the Philippines for and
employment of foreign nationals under this Code; (3) The primary responsibility of the institution is to
(6) Periodically check and verify, either by inspection of provide funds for developmental purposes and
the books or by requiring regular reports, the proportion international economic stability. (as amended by RA No
of the participation of Philippine nationals in a registered 7888)
enterprise to ascertain compliance with its qualification (14) Extend the period of availment of incentives by any
to retain registration under this Code; registered enterprise; Provided, That the total period of
(7) Periodically check and verify the compliance by availment shall not exceed ten (10) years, subject to any of
registered enterprises with the relevant provisions of this the following criteria:
Code, with the rules and regulations promulgated under (a) The registered enterprise has suffered operational
this Code and with the terms and conditions of force majeure that has impaired its viability;
registration;
(b) The registered enterprise has not fully enjoyed the
(8) After due notice, cancel the registration or suspend incentives granted to it for reasons beyond its control;
the enjoyment of incentives benefits of any registered
enterprise and/or require refund of incentives enjoyed by (c) The project of the registered enterprise has a gestation
such enterprise including interests and monetary period which goes beyond the period of availment of
penalties, for (a) failure to maintain the qualifications needed incentives; and
required by this Code for registration with the Board of (b) (d) The operation of the registered enterprise has been
for violation of any provisions of this Code, of the rules and subjected to unforeseen changes in government policies,
regulations issued under this Code, of the terms and particularly, protectionism policies of importing countries,
conditions of registration, or of laws for the protection of and such other supervening factors which would affect
labor or of the consuming public: Provided, That the the competitiveness of the registered firm;
registration of an enterprise whose project timetable, as
set by the Board is delayed by one year, shall be (15) Regulate the making of investments and the doing of
considered automatically cancelled unless otherwise business within the Philippines by foreigners or business
reinstated as a registered enterprise by the Board; organizations owned in whole or in part by foreigners;
(9) Determine the organizational structure taking into (16) Prepare or contract for the preparation of industry
account Article 6 of this Code; appoint, discipline and and sectoral development programs and gather and
remove its personnel consistent with the provisions of the compile statistical, technical, marketing, financial and
Civil Service Law and Rules; other data required for the effective implementation of
this Code;
(10) Prepare or contract for the preparation of feasibility
and other pre-investment studies for pioneer areas either (17) Within four (4) months after the close of the fiscal
upon its own initiative; or upon the request of Philippine year, submit annual reports to the President which shall
nationals who commit themselves to invest therein and cover its activities in the administration of this Code,
show the capability of doing so; Provided, That if the including recommendations on investment policies;
venture is implemented, then the amount advanced by (18) Provide, directly or through Philippine Diplomatic
the Board shall be repaid within five (5) years from the Missions, such information as may be of interest to
date the commercial operation of said enterprise starts; prospective foreign investors;
(11) When feasible and considered desirable by the Board, (19) Collate, analyze and compile pertinent information
require registered enterprises to list their shares of stock and studies concerning areas that have been or may be
in any accredited stock exchange or directly offer a declared preferred areas of investments;
portion of their capital stock to the public and/or their
employees; (20) Enter into agreements with other agencies of
government for the simplification and facilitation of
(12) Formulate and implement rationalization programs systems and procedures involved in the promotion of
for certain industries whose operation may result in investments, operation of registered enterprises and
dislocation, overcrowding or inefficient use of resources, other activities necessary for the effective
thus impeding economic growth. For this purpose, the implementation of this Code; and
Board may formulate guidelines for progressive
manufacturing programs, local content programs, (21) Generally, exercise all the powers necessary or
mandatory sourcing requirements and dispersal of incidental to attain the purposes of this Code and other
industries. In appropriate cases and upon approval of the laws vesting additional functions on the Board.
President, the Board may restrict, either totally or ARTICLE 8. Powers and Duties of the Chairman. — The
partially, the importation of any equipment or raw Chairman shall have the following powers and duties:
materials or finished products involved in the (1) To preside over the meetings of the Board;
rationalization program;
(2) To render annual reports to the President and such
(13) To the extent that such activities are allowed by the special reports as may be requested;
Constitution and relevant laws, to recommend to the


(3) To act as liaison between investors seeking joint ARTICLE 15. "Philippine national" shall mean a citizen of
venture arrangements in particular areas of investments; the Philippines or a domestic partnership or association
(4) Recommend to the Board such policies and measures wholly-owned by citizens of the Philippines; or a
he may deem necessary to carry out the objectives of this corporation organized under the laws of the Philippines
Code; and of which at least sixty per cent (60%) of the capital stock
outstanding and entitled to vote is owned and held by
(5) Generally, to exercise such other powers and perform citizens of the Philippines, or a trustee of funds for
such other duties as may be directed by the Board of pension or other employee retirement or separation
Governors from time to time. benefits, where the trustee is a Philippine national and at
ARTICLE 9. Powers and Duties of the Vice-Chairman. — least sixty per cent (60%) of the fund will accrue to the
The Vice-Chairman shall have the following powers and benefit of Philippine nationals; Provided, That where a
duties: registered and its non-Filipino stockholders own stock in
a registered enterprise, at least sixty per cent (60%) of the
(1) To act as Managing Head of the Board; capital stock outstanding and entitled to vote of both
(2) To preside over the meetings of the Board in the corporations must be owned and held by the citizens of
absence of the Chairman; the Philippines and at least sixty per cent (60%) of the
members of the Board of Directors of both corporations
(3) Prepare the Agenda for the meetings of the Board and must be citizens of the Philippines in order that the
submit for its consideration and approval the policies and corporation shall be considered a Philippine national.
measures which the Chairman deems necessary and
proper to carry out the provisions of this Code; ARTICLE 16. "Preferred areas of investments" shall mean
the economic activities that the Board shall have
(4) Assist registered enterprises and prospective investors declared as such in accordance with Article 28 which shall
to have their papers processed with dispatch by all be either non-pioneer or pioneer.
government offices, agencies, instrumentalities and
financial institutions; and ARTICLE 17. "Pioneer enterprise" shall mean a registered
enterprise (1) engaged in the manufacture, processing or
(5) Perform the other duties of the Chairman in the production, and not merely in the assembly or packaging
absence of the latter, and such other duties as may be of goods, products, commodities or raw materials that
assigned to him by the Board of Governors. have not been or are not being produced in the
Philippines on a commercial scale or (2) which uses a
design, formula, scheme, method, process or system of
BOOK I Investments with Incentives production or transformation of any element, substance
or raw materials into another raw material or finished
TITLE I Preferred Areas of Investments goods which is new and untried in the Philippines or (3)
engaged in the pursuit of agricultural, forestry and
mining activities and/or services including the industrial
CHAPTER I Definitions of Terms aspects of food processing whenever appropriate,
ARTICLE 10. "Board" shall mean the Board of Investments pre-determined by the Board, in consultation with the
created under this Code. appropriate Department, to be feasible and highly
essential to the attainment of the national goal, in
ARTICLE 11. "Registered Enterprises" shall mean any relation to a declared specific national food and
individual, partnership, cooperative, corporation or other agricultural program for self-sufficiency and other social
entity incorporated and/or organized and existing under benefits of the project or (4) which produces
Philippine laws; and registered with the Board in non-conventional fuels or manufactures equipment
accordance with this Book: Provided, however, That the which utilize non-conventional sources of energy or uses
term "registered enterprise" shall not include commercial or converts to coal or other non-conventional fuels or
banks, savings and mortgage banks, rural banks, savings sources of energy in its production, manufacturing or
and loan associations, building and loan associations, processing operations. Provided, That the final product in
development banks, trust companies, investment banks, any of the foregoing instances, involves or will involve
finance companies, brokers and dealers in securities, substantial use and processing of domestic raw materials,
consumers cooperatives and credit unions, and other whenever available; taking into account the risks and
business organizations whose principal purpose or magnitude of investment: Provided, further, That the
principal source of income is to receive deposits, lend or foregoing definitions shall not in any way limit the rights
borrow money, buy and sell or otherwise deal, trade or and incentives granted to less-developed-area enterprises
invest in common or preferred stocks, debentures, bonds provided under Title V, Book I hereof.
or other marketable instruments generally recognized as
securities, or discharge other similar intermediary, trust or ARTICLE 18. "Non-pioneer enterprise" shall include all
fiduciary functions. registered producer enterprises other than pioneer
enterprises.
ARTICLE 12. "Technological assistance contracts" shall
mean contracts for: (1) the transfer, by license or ARTICLE 19. "Expansion" shall include modernization and
otherwise, of patents, processes, formulas or other rehabilitation and shall mean increase of existing volume
technological rights of foreign origin; and/or (2) foreign or value of production or upgrading the quality of the
assistance concerning technical and factory registered product or utilization of inefficient or idle
management, design, planning, construction, operation equipment under such guidelines as the Board may
and similar matters. adopt.
ARTICLE 13. "Foreign loans" shall mean any credit facility ARTICLE 20. "Measured capacity" shall mean the
or financial assistance other than equity investment estimated additional volume of production or service
denominated and payable in foreign currency or where which the Board determines to be desirable in each
the creditor has the option to demand payment in preferred area of investment in order to supply the needs
foreign exchange and registered with the Central Bank of the economy at reasonable prices, taking into account
and the Board. the export potential of the product, including economies
of scale which would render such product competitive in
ARTICLE 14. "Foreign Investments" shall mean equity the world market. Measured capacity shall not be less
investments owned by a non-Philippine national made in than the amount by which the measurable domestic and
the form of foreign exchange or other assets actually country's potential export market demand exceeds the
transferred to the Philippines and registered with the existing productive capacity in said preferred areas. For
Central Bank and the Board, which shall assess and export market industries, when warranted the Board shall
appraise the value of such assets other than foreign base measured capacity on the availability of domestic
exchange.


raw materials after deducting the needs of the domestic manufacturing or processing the products of a registered
market therefor. enterprise.
ARTICLE 21. "Tax credit" shall mean any of the credits ARTICLE 25. "Processing" shall mean converting of raw
against taxes and/or duties equal to those actually paid or materials into marketable form through physical,
would have been paid to evidence which a tax credit mechanical, chemical, electrical, biochemical, biological
certificate shall be issued by the Secretary of Finance or or other means or by a special treatment or a series of
his representative, or the Board, if so delegated by the actions, such as slaughtering, milling, pasteurizing, drying
Secretary of Finance. The tax credit certificates including or dessicating, quick freezing, that results in a change in
those issued by the Board pursuant to laws repealed by the nature or state of the products. Merely packing or
this Code but without in any way diminishing the scope packaging shall not constitute processing.
of negotiability under their laws of issue are transferable ARTICLE 26. "Investment Priorities Plan" shall mean the
under such conditions as may be determined by the over-all plan prepared by the Board which includes and
Board after consultation with the Department of Finance. contains:
The tax credit certificate shall be used to pay taxes, duties,
charges and fees due to the National Government; (a) The specific activities and generic categories of
Provided, That the tax credits issued under this Code shall economic activity wherein investments are to be
not form part of the gross income of the encouraged and the corresponding products and
grantee/transferee for income tax purposes under commodities to be grown, processed or manufactured
Section 29 of the National Internal Revenue Code and are pursuant thereto for the domestic or export market;
therefore not taxable: Provided, further, That such tax (b) Specific public utilities which can qualify for incentives
credits shall be valid only for a period of ten (10) years under this Code and which shall be supported by studies
from date of issuance. of existing and prospective regional demands for the
ARTICLE 22. "Export products" shall mean manufactured services of such public utilities in the light of the level and
or processed products the total F.O.B. Philippine port structure of income, production, trade, prices and
value of the exports of which did not exceed five million relevant economic and technical factors of the regions as
dollars in the United States Currency in the calendar year well as the existing facilities to produce such services;
1968 and which meet the local content requirement, if (c) Specific activities where the potential for utilization of
any, set by the Board, and standards of quality set by the indigenous non-petroleum based fuels or sources of
Bureau of Product Standards, or, in default of such energy can be best promoted; and
standards, by the Board or by such public or private
organization, chamber, group or body as the Board may (d) Such other information, analyses, data, guidelines or
designate. The above definition notwithstanding, the criteria as the Board may deem appropriate.
Investment Priorities Plan may include other products for The specific and generic activities to be included in the
export subject to such conditions and limited incentives Investment Priorities Plan with their status as pioneer or
as may be determined by the Board. non-pioneer shall be determined by the Board in
ARTICLE 23. "Export sales" shall mean the Philippine port accordance with the criteria set forth in this Book.
F.O.B. value, determined from invoices, bills of lading,
inward letters of credit, landing certificates, and other CHAPTER II Investment Priorities Plan
commercial documents, of exports products exported
directly by a registered export producer or the net selling ARTICLE 27. Investment Priorities Plan. — Not later than
price of export product sold by a registered export the end of March of every year, the Board of Investments,
producer to another export producer, or to an export after consultation with the appropriate government
trader that subsequently exports the same: Provided, agencies and the private sector, shall submit to the
That sales of export products to another producer or to an President an Investment Priorities Plan: Provided,
export trader shall only be deemed export sales when however, That the deadline for submission, may be
actually exported by the latter, as evidenced by landing extended by the President.
certificates or similar commercial documents: Provided, ARTICLE 28. Criteria in Investment Priority Determination.
further, That without actual exportation the following — No economic activity shall be included in the
shall be considered constructively exported for purposes Investment Priorities Plan unless it is shown to be
of this provision: (1) sales to bonded manufacturing economically, technically and financially sound after
warehouses of export-oriented manufacturers; (2) sales to thorough investigation and analysis by the Board.
export processing zones; (3) sales to registered export
The determination of preferred areas of investment to be
traders operating bonded trading warehouses supplying
listed in the Investment Priorities Plan shall be based on
raw materials used in the manufacture of export products
long-run comparative advantage, taking into account the
under guidelines to be set by the Board in consultation
value of social objectives and employing economic
with the Bureau of Internal Revenue and the Bureau of
criteria along with market, technical, and financial
Customs; (4) sales to foreign military bases, diplomatic
analyses.
missions and other agencies and/or instrumentalities
granted tax immunities, of locally manufactured, The Board shall take into account the following:
assembled or repacked products whether paid for in (a) Primarily, the economic soundness of the specific
foreign currency or not: Provided, further, That export activity as shown by its economic internal rate of return;
sales of registered export trader may include commission
income: and Provided, finally, That exportation of goods (b) The extent of contribution of an activity to a specific
on consignment shall not be deemed export sales until development goal;
the export products consigned are in fact sold by the (c) Other indicators of comparative advantage;
consignee.
(d) Measured capacity as defined in Article 20; and
Sales of locally manufactured or assembled goods for
household and personal use to Filipinos abroad and other (e) The market and technical aspects and considerations
non-residents of the Philippines as well as returning of the activity proposed to be included.
Overseas Filipinos under the Internal Export Program of In any of the declared preferred areas of investment, the
the government and paid for in convertible foreign Board may designate as pioneer areas the specific
currency inwardly remitted through the Philippine products and commodities that meet the requirements
banking systems shall also be considered export sales. of Article 17 of this Code and review yearly whether such
ARTICLE 24. "Production cost" shall mean the total of the activity, as determined by the Board, shall continue as
cost of direct labor, raw materials, and manufacturing pioneer, otherwise, it shall be considered as non-pioneer
overhead, determined in accordance with generally and accordingly listed as such in the Investment Priorities
accepted accounting principles, which are incurred in Plan or removed from the Investment Priorities Plan.


ARTICLE 29. Approval of the Investment Priorities Plan. — (c) That the pioneer area it will engage in is one that is not

The President shall proclaim the whole or part of such within the activities reserved by the Constitution or other
plan as in effect; or alternatively, return the whole or part laws of the Philippines to Philippine citizens or
of the plan to the Board of Investments for revision. corporations owned and controlled by Philippine citizens;
Upon the effectivity of the plan or portions thereof, the (2) The applicant is proposing to engage in a preferred
President shall issue all necessary directives to all project listed or authorized in the current Investment
departments, bureaus, agencies or instrumentalities of Priorities Plan within a reasonable time to be fixed by the
the government to ensure the implementation of the Board or, if not so listed, at least fifty percent (50%) of its
plan by the agencies concerned in a synchronized and total production is for export or it is an existing producer
integrated manner. No government body shall adopt any which will export part of production under such
policy or take any course of action contrary to or conditions and/or limited incentives as the Board may
inconsistent with the plan. determine; or that the enterprise is engaged or proposing
ARTICLE 30. Amendments. — Subject to publication to engage in the sale abroad of export products bought
requirements and the criteria for investment priority by it from one or more export producers; or the enterprise
determination, the Board of Investments may, at any is engaged or proposing to engage in rendering
time, add additional areas in the plan, alter any of the technical, professional or other services or in exporting
terms of the declaration of an investment area or the television and motion pictures and musical recordings
designation of measured capacities, or terminate the made or produced in the Philippines, either directly or
status of preference. In no case, however, shall any through a registered trader.
amendment of the plan impair whatever rights may have (3) The applicant is capable of operating on a sound and
already been legally vested in qualified enterprises which efficient basis and of contributing to the national
shall continue to enjoy such rights to the full extent development of the preferred area in particular and of the
allowed under this Code. The Board shall not accept national economy in general; and
applications in an area of investment prior to the approval (4) If the applicant is engaged or proposes to engage in
of the same as a preferred area nor after approval of its undertakings or activities other than preferred projects, it
deletion as a preferred area of investment. has installed or undertakes to install an accounting
ARTICLE 31. Publication. — Upon approval of the plan, in system adequate to identify the investments, revenues,
whole or in part, or upon approval of an amendment costs, and profits or losses of each preferred project
thereof, the plan or the amendment, specifying and undertaken by the enterprise separately from the
declaring the preferred areas of investment and their aggregate investment, revenues, costs and profits or
corresponding measured capacity shall be published in at losses of the whole enterprise or to establish a separate
least one (1) newspaper of general circulation and all such corporation for each preferred project if the Board should
areas shall be open for application until publication of an so require to facilitate proper implementation of this
amendment or deletion thereof, or until the Board Code.
approves registration of enterprises which fill the ARTICLE 33. Application. — Applications shall be filed
measured capacity. with the Board, recorded in a registration book and the
date appearing therein and stamped on the application
CHAPTER III Registration of Enterprises shall be considered the date of official acceptance.
ARTICLE 32. Qualifications of a Registered Enterprise. — Whenever necessary, the Board, through the People's
To be entitled to registration under the Investment Economic Councils, shall consult the communities
Priorities Plan, an applicant must satisfy the Board that: affected on the acceptability of locating the registered
enterprise within their community.
(1) He is a citizen of the Philippines, in case the applicant
is a natural person, or in case of a partnership or any other ARTICLE 34. Approval and Registration Procedures. —
association, it is organized under Philippine laws and that The Board is authorized to adopt rules and regulations to
at least sixty percent (60%) of its capital is owned and facilitate action on applications filed with it; prescribe
controlled by citizens of the Philippines; or in case of a criteria for the evaluation of several applications filed in
corporation or a cooperative, it is organized under one preferred area; devise standard forms for the use of
Philippine laws and that at least sixty per cent (60%) of applicants and delegate to the regional offices of the
the capital stock outstanding and entitled to vote is Department of Trade and Industry the authority to
owned and held by Philippine nationals as defined under receive and process applications for enterprises to be
Article 15 of this Code, and at least sixty per cent (60%) of located in their respective regions.
the members of the Board of Directors are citizens of the Applications filed shall be considered automatically
Philippines. If it does not possess the required degree of approved if not acted upon by the Board within twenty
ownership as mentioned above by Philippine nationals, (20) working days from official acceptance thereof.
the following circumstances must be satisfactorily
established: ARTICLE 35. Criteria for Evaluation of Applications. — The
following criteria will be considered in the evaluation of
(a) That it proposes to engage in a pioneer project as applications for registration under a preferred area:
defined in Article 17 of this Code, which, considering the
nature and extent of capital requirements, processes, (a) The extent of ownership and control by Philippine
technical skills and relative business risks involved, is in citizens of the enterprises;
the opinion of the Board of such a nature that the (b) The economic rates of return;
available measured capacity thereof cannot be readily
and adequately filled by Philippine nationals; or, if the (c) The measured capacity: Provided, That estimates of
applicant is exporting at least seventy per cent (70%) of is measured capacities shall be regularly reviewed and
total production, the export requirement herein provided updated to reflect changes in market supply and demand
may be reduced in meritorious cases under such conditions; Provided, Further, That measured capacity
conditions and/or limited incentives as the Board may shall not result in a monopoly in any preferred area of
determine; investment which would unduly restrict trade and fair
competition nor shall it be used to deny the entry of any
(b) That it obligates itself to attain the status of a enterprise in any field of endeavor or activity;
Philippine national, as defined in Article 15, within thirty
(30) years from the date of registration or within such (d) The amount of foreign exchange earned, used or
longer period as the Board may require taking into saved in their operations;
account the export potential of the project: Provided, That (e) The extent to which labor, materials and other
a registered enterprise which exports one hundred resources obtained from indigenous sources are utilized;
percent (100%) of its total production need not comply
with this requirement;


(f) The extent to which technological advances are (e) Requisition of Investment. — There shall be no
applied and adopted to local conditions; requisition of the property represented by the investment
(g) The amount of equity and degree to which the or of the property of enterprises, except in the event of
ownership of such equity is spread out and diversified; war or national emergency and only for the duration
and thereof. Just compensation shall be determined and paid
either at the time of requisition or immediately after
(h) Such other criteria as the Board may determine. cessation of the state of war or national emergency.
ARTICLE 36. Appeal from Board's Decision. — Any order Payments received as compensation for the requisitioned
or decision of the Board shall be final and executory after property may be remitted in the currency in which the
thirty (30) days from its promulgation. Within the said investment was originally made and at the exchange rate
period of thirty (30) days, said order or decision may be prevailing at the time of remittance, subject to the
appealed to the Office of the President. Where an appeal provisions of Section 74 of Republic Act No. 265 as
has been filed, said order or decision shall be final and amended.
executory ninety (90) days after the perfection of the
appeal, unless reversed. TITLE III Incentives to Registered Enterprises
ARTICLE 37. Certificate of Registration. — A registered ARTICLE 39. Incentives to Registered Enterprises. — All
enterprise under this Code shall be issued a certificate of registered enterprises shall be granted the following
registration under the seal of the Board of Investments incentives to the extent engaged in a preferred area of
and the signature of its Chairman and/or such other investment:
officer or employee of the Board as it may empower and
designate for the purpose. The certificate shall be in such (a) Income Tax Holiday. —
form and style as the Board may determine and shall (1) For six (6) years from commercial operation for pioneer
state, among other matters: firms and four (4) years for non-pioneer firms, new
(a) The name of the registered enterprise; registered firms shall be fully exempt from income taxes
levied by the national government. Subject to such
(b) The preferred area of investment in which the guidelines as may be prescribed by the Board, the
registered enterprise is proposing to engage; income tax exemption will be extended for another year
(c) The nature of the activity it is undertaking or in each of the following cases:
proposing to undertake, whether pioneer or non-pioneer, (i) The project meets the prescribed ratio of capital
and the registered capacity of the enterprise; and equipment to number of workers set by the Board;
(d) The other terms and conditions to be observed by the (ii) Utilization of indigenous raw materials at rates set by
registered enterprise by virtue of the registration. the Board;
(iii) The net foreign exchange savings or earnings amount
TITLE II Basic Rights and Guarantees to at least US$500,000 annually during the first three (3)
ARTICLE 38. Protection of Investments. — All investors years of operation.
and registered enterprises are entitled to the basic rights The preceding paragraph notwithstanding, no registered
and guarantees provided in the Constitution. Among pioneer firm may avail of this incentive for a period
other rights recognized by the Government of the exceeding eight (8) years.
Philippines are the following:
(2) For a period of three (3) years from commercial
(a) Repatriation of Investments. — In the case of foreign operation, registered expanding firms shall be entitled to
investments, the right to repatriate the entire proceeds of an exemption from income taxes levied by the national
the liquidation of the investment in the currency in which government proportionate to their expansion under such
the investment was originally made and at the exchange terms and conditions as the Board may determine:
rate prevailing at the time of repatriation, subject to the Provided, however, That during the period within which
provisions of Section 74 of Republic Act No. 265 as this incentive is availed of by the expanding firm it shall
amended; not be entitled to additional deduction for incremental
For investments made pursuant to Executive Order No. 32 labor expense.
and its implementing rules and regulations, remittability (3) The provision of Article 7(14) notwithstanding,
shall be as provided therein. registered firms shall not be entitled to any extension of
(b) Remittance of Earnings. — In the case of foreign this incentive.
investments, the right to remit earnings from the (b) Additional Deduction for Labor Expense. — For the
investment in the currency in which the investment was first five (5) years from registration a registered enterprise
originally made and at the exchange rate prevailing at shall be allowed an additional deduction from the taxable
the time of remittance, subject to the provisions of income of fifty percent (50%) of the wages corresponding
Section 74 of Republic Act No. 265 as amended; to the increment in the number of direct labor for skilled
(c) Foreign Loans and Contracts. — The right to remit at and unskilled workers if the project meets the prescribed
the exchange rate prevailing at the time of remittance ratio of capital equipment to number of workers set by
such sums as may be necessary to meet the payments of the Board: Provided, That this additional deduction shall
interest and principal on foreign loans and foreign be doubled if the activity is located in less developed
obligations arising from technological assistance areas as defined in Article 40.
contracts, subject to the provisions of Section 74 of (c) Tax and Duty Exemption on Imported Capital
Republic Act No. 265 as amended; Equipment and its Accompanying Spare Parts. — New,
(d) Freedom from Expropriation. — There shall be no expanding/modernizing enterprise which have been
expropriation by the government of the property registered with the Board of Investments on or before
represented by investments or of the property of the December 31, 1994 shall be exempt to the extent of one
enterprise except for public use or in the interest of hundred percent (100%) of national internal revenue taxes
national welfare or defense and upon payment of just and customs duties on importations of machinery,
compensation. In such cases, foreign investors or equipment and accompanying spare parts within the
enterprises shall have the right to remit sums received as prescribed period under its law of registration or until
compensation for the expropriated property in the December 31, 1997 whichever comes first: Provided,
currency in which the investment was originally made however, That the enterprise which shall register after
and at the exchange rate at the time of remittance, December 31, 1994 shall be subject to the provisions of
subject to the provisions of Section 74 of Republic Act No. Republic Act No. 7716, and three percent (3%) customs
265 as amended; duties up to December 31, 1997: Provided, finally, That the


importation of machinery, equipment and accompanying If such equipment is sold, transferred or otherwise, Article

spare parts shall comply with the following conditions: 39(c)(3) shall apply. Outward remittance of foreign
(1) They are not manufactured domestically in sufficient exchange covering the proceeds of such sale, transfer or
quantity, or comparable quality, and at reasonable prices; disposition shall be allowed only upon prior Bangko
Sentral ng Pilipinas approval.
(2) They are reasonably needed and will be used
exclusively by the registered enterprise in its registered (g) Employment of Foreign Nationals. — Subject to the
activity, unless prior approval of the Board is secured for provisions of Section 29 of Commonwealth Act No. 613, as
the part-time utilization of said equipment in a amended, a registered enterprise may employ foreign
non-registered activity to maximize usage thereof or the nationals in supervisory, technical or advisory positions for
proportionate taxes and duties are paid on specific a period not exceeding five (5) years from its registration,
equipment and machinery being permanently used for extendible for limited periods at the discretion of the
non-registered activities; and Board: Provided, however, That when the majority of the
capital stock of a registered enterprise is owned by
(3) The approval of the Board was obtained by the foreign investors, the positions of president, treasurer, and
registered enterprise for the importation of such general manager or their equivalents may be retained by
machinery, equipment and accompanying spare parts. foreign nationals beyond the period set forth within.
In granting the approval of the importations under this Foreign nationals under employment contract within the
paragraph, the Board may require international purview of this incentive, their spouses and unmarried
canvassing but if the total cost of the capital equipment children under twenty-one (21) years of age, who are not
or industrial plant exceeds US$5,000,000, the Board shall excluded by Section 29 of Commonwealth Act No. 613, as
apply or adopt the provisions of Presidential Decree No. amended, shall be permitted to enter and reside in the
1764 on international competitive bidding. Philippines during the period of employment of such
If the registered enterprise sells, transfers or disposes of foreign nationals.
these machinery, equipment and spare parts without A registered enterprise shall train Filipinos as
prior approval of the Board within five (5) years from date understudies of foreign nationals in administrative,
of acquisition, the registered enterprise and the vendee, supervisory and technical skills and shall submit annual
transferee, or assignee shall be solidarily liable to pay reports on such training to the Board.
twice the amount of the tax exemptions given it. The
Board shall allow and approve the sale, transfer or (h) Exemption on Breeding Stocks and Genetic Materials.
disposition of the said items until December 31, 1997 or — The importation of breeding stocks and genetic
December 31, 1999 as the case may be if made: materials within ten (10) years from the date of
registration of commercial operation of the enterprise
(aa) To another registered enterprise or registered shall be exempt from all taxes and duties: Provided, That
domestic producer enjoying similar activities; such breeding stocks and genetic materials are: (1) not
(bb) For reasons of proven technical obsolescence; or locally available and/or obtainable locally in comparable
quality and at reasonable prices; (2) reasonably needed in
(cc) For purpose of replacement to improve and/or the registered activity; and (3) approved by the Board.
expand the operations of the registered enterprise.
(i) Tax Credit on Duty Portion of Domestic Breeding
(d) Tax Credit on Domestic Capital Equipment. — A tax Stocks and Genetic Materials. — A tax credit equivalent to
credit equivalent to one hundred percent (100%) of the one hundred percent (100%) of the value of national
value of the national internal revenue taxes and customs internal revenue taxes and customs duties that would
duties that would have been waived on the machinery, have been waived on the breeding stocks and genetic
equipment and spare parts, had these items been materials had these items been imported shall be given
imported shall be given to the new and expanding to the registered enterprise which purchases breeding
enterprise registered with the Board of Investments as of stocks and genetic materials from a domestic producer:
December 31, 1994 which purchases machinery, Provided, (1) That said breeding stocks and genetic
equipment and spare parts from a domestic materials would have qualified for tax and duty-free
manufacturer: Provided, (1) That the said equipment, importation under the preceding paragraph; (2) That the
machinery and spare parts are reasonably needed and breeding stocks and genetic materials are reasonably
will be used exclusively by the registered enterprise in its needed in the registered activity; (3) That approval of the
registered activity, unless prior approval of the Board is Board has been obtained by the registered enterprise;
secured for the part-time utilization of said equipment in and (4) That the purchase is made within ten (10) years
a non-registered activity to maximize usage thereof; (2) from the date of registration of commercial operation of
That the equipment would have qualified for tax and the registered enterprise.
duty exemption under paragraph (c) hereof; (3) That the
approval of the Board was obtained by the registered (j) Tax Credit for Taxes and Duties on Raw Materials. —
enterprise; and (4) That the purchase is made on or Every registered enterprise shall enjoy a tax credit
before December 31, 1997 or December 31, 1999 as the equivalent to the national internal revenue taxes and
case may be. If the registered enterprise sells, transfers, or customs duties paid on the supplies, raw materials and
disposes of these machinery, equipment and spare parts, semi-manufactured products used in the manufacture,
the provision in the preceding paragraph for such processing or production of its export products and
disposition shall apply. forming part thereof; Provided, however, That the taxes
on the supplies, raw materials and semi-manufactured
(e) Simplification of Customs Procedures. — Customs products domestically purchased are indicated as a
procedures for the importation of equipment, spare parts, separate item in the sales invoice.
raw materials and supplies, exports of processed products
by registered enterprises shall be simplified by the Nothing herein shall be construed as to preclude the
Bureau of Customs. Board from setting a fixed percentage of exports sales as
the approximate tax credit for taxes and duties of raw
(f) Unrestricted Use of Consigned Equipment. — materials based on an average or standard usage for such
Provisions of existing laws notwithstanding, machinery, materials in the industry.
equipment and spare parts consigned to any enterprise
shall not be subject to restrictions as to period of use of (k) Access to Bonded Manufacturing/Trading System. —
such machinery, equipment and spare parts: Provided, Registered export-oriented enterprises shall have access
That the appropriate re-export bond is posted unless to the utilization of the bonded warehousing system in all
importation is otherwise covered under subsections (c) areas required by the project subject to such guidelines
and (1) of this Article: Provided, further, That such as may be issued by the Board upon prior consultation
consigned equipment shall be for the exclusive use of the with the Bureau of Customs.
registered enterprise. (l) Exemption from Taxes and Duties on Imported Spare
Parts. — Importation of required supplies and spare parts



for consigned equipment or those imported tax and this Code to registered enterprises and investors therein
duty-free by a registered enterprise with a bonded shall be limited to the portion of the activities of such
manufacturing warehouse shall be exempt from customs registered enterprise as is a preferred area of investment.
duties and national internal revenue taxes payable
thereon: Provided, however, That such spare parts and
supplies are not locally available at reasonable prices, BOOK II Foreign Investments Without Incentives
sufficient quantity and comparable quality: Provided,
finally, That all such spare parts and supplies shall be
used only in the bonded manufacturing warehouse of the TITLE I
registered enterprise under such requirements as the
Bureau of Customs may impose. CHAPTER I Definitions and Scope of this Book
(m) Exemption from Wharfage Dues and Export Tax, ARTICLE 44. Definition of terms. — As used in this Book,
Duty, Imposts and Fee. — The provision of law to the the term "investment" shall mean equity participation in
contrary notwithstanding, exports by a registered any enterprise formed, organized or existing under the
enterprise of its non-traditional export products shall be laws of the Philippines; and the phrase "doing business"
exempted from any wharfage dues, and any export tax, shall include soliciting orders, purchases, service
duty impost and fee. contracts, opening offices, whether called "liaison" offices
(as amended by RA No 7918) or branches; appointing representatives or distributors
who are domiciled in the Philippines or who in any
calendar year stay in the Philippines for a period or
TITLE IV Incentives to Less-Developed-Area periods totalling one hundred eighty (180) days or more;
Registered Enterprise participating in the management, supervision or control
ARTICLE 40. A registered enterprise regardless of of any domestic business firm, entity or corporation in the
nationality located in a less-developed-area included in Philippines, and any other act or acts that imply a
the list prepared by the Board of Investments after continuity of commercial dealings or arrangements and
consultation with the National Economic & Development contemplate to that extent the performance of acts or
Authority and other appropriate government agencies, works, or the exercise of some of the functions normally
taking into consideration the following criteria: low per incident to, and in progressive prosecution of, commercial
capita gross domestic product; low level of investments; gain or of the purpose and object of the business
high rate of unemployment and/or underemployment; organization.
and low level of infrastructure development including its ARTICLE 45. Non-Applicability to Banking Institutions. —
accessibility to developed urban centers, shall be entitled This Book shall not apply to banking institutions which
to the following incentives in addition to those provided are governed and regulated by the General Banking Act
in the preceding article: and other laws which are under the supervision of the
(a) Pioneer Incentives. — An enterprise in a Central Bank.
less-developed-area registered with the Board under
Book I of this Code, whether proposed, or an expansion of CHAPTER II Investments
an existing venture, shall be entitled to the incentives
ARTICLE 46. Permitted Investments. — (1) Without need
provided for a pioneer registered enterprise under its law
of prior authority, anyone not a Philippine national as that
of registration.
term is defined in Article 15 of this Code, and not
(b) Incentives for Necessary and Major Infrastructure and otherwise disqualified by law, may invest:
Public Utilities. — Registered enterprises establishing
(a) In any enterprise registered under Book One hereof, to
their production, processing or manufacturing plants in
the extent that the total investment of non-Philippine
an area that the Board designates as necessary for the
nationals therein would not affect its status as a
proper dispersal of industry or in an area which the Board
registered enterprise under the law;
finds deficient in infrastructure, public utilities, and other
facilities, such as irrigation, drainage or other similar (b) In an enterprise not registered under Book One
waterworks infrastructure may deduct from taxable hereof, to the extent that the total investment of
income an amount equivalent to one hundred percent non-Philippine nationals herein shall not exceed forty
(100%) of necessary and major infrastructure works it may percent (40%) of the outstanding capital of that
have undertaken with the prior approval of the Board in enterprise, unless existing law forbids any non-Philippine
consultation with other government agencies concerned; ownership in the enterprise or limits ownership by
Provided, That the title to all such infrastructure works non-Philippine nationals to a percentage smaller than
shall upon completion, be transferred to the Philippine forty percent (40%).
Government: Provided, further, That any amount not (2) Within thirty (30) days after notice of the investment is
deducted for a particular year may be carried over for received by it, the enterprise in which any investment is
deduction for subsequent years not exceeding ten (10) made by a non-Philippine national shall register the same
years from commercial operation. with the Board of Investments for purposes of record.
Investments made in the form of foreign exchange or
TITLE V General Provisions other assets actually transferred to the Philippines shall
also be registered with the Central Bank. The Board shall
ARTICLE 41. Power of the President to Rationalize assess and appraise the value of such assets other than
Incentives. — The President may, upon recommendation foreign exchange.
of the Board and in the interest of national development,
rationalize the incentives scheme herein provided; extend ARTICLE 47. Permissible Investments. — If an investment
the period of availment of incentives or increase rates of by a non-Philippine national in an enterprise not
tax exemption of any project whose viability or registered under Book One hereof is such that the total
profitability require such modification. participation by non-Philippine nationals in the
outstanding capital thereof shall exceed forty percent
ARTICLE 42. Refund and Penalties. — In case of (40%), the enterprise must obtain prior authority from the
cancellation of the certificate granted under this Code, Board of Investments, which authority shall be granted
the Board may, in appropriate cases, require the refund of unless the proposed investment —
incentives availed of and impose corresponding fines and
penalties. (a) Would conflict with existing constitutional provisions
and laws regulating the degree of required ownership by
ARTICLE 43. Benefits of Multiple Area Enterprises. — Philippine nationals in the enterprise; or
When a registered enterprise engages in activities or
endeavors that have not been declared preferred areas of (b) Would pose a clear and present danger of promoting
investments, the benefits and incentives accruing under monopolies or combinations in restraint of trade; or


(c) Would be made in an enterprise engaged in an area state within a federal country of which applicant is a
adequately being exploited by Philippine nationals; or citizen or in which it is domiciled: Provided, however, That
(d) Would conflict or be inconsistent with the Investment if the state or country of domicile of the applicant
Priorities Plan in force at the time the investment is imposes on, or requires of, Philippine nationals other
sought to be made; or conditions, requirements or restrictions besides those set
forth in this Code, the Board of Investments shall impose
(e) Would not contribute to the sound and balanced the said other conditions, requirements or restrictions on
development of the national economy on a the applicant, if in its judgment, the imposition thereof
self-sustaining basis. shall foster the sound and balanced development of the
Investments made in the form of foreign exchange or national economy on a self-sustaining basis;
other assets actually transferred to the Philippines shall (5) To submit to the Securities and Exchange Commission
also be registered with the Central Bank. The Board shall certified copies of applicant's charter and by-laws and all
assess and appraise the value of such assets other than amendments thereto, if any, with their translation into an
foreign exchange. official language within twenty (20) days after their
adoption or after the grant of the prescribed certificate by
CHAPTER III License to Do Business the Board of Investments and annually of applicant's
financial statements showing all assets, liabilities and net
ARTICLE 48. Authority to Do Business. — No alien, and no worth and results of operations, setting out separately
firm, association, partnership, corporation or any other those pertaining to the branch office;
form of business organization formed, organized,
chartered or existing under any laws other than those of (6) To keep a complete set of accounting records with the
the Philippines, or which is not a Philippine national, or resident agent, which shall fully and faithfully reflect all
more than forty per cent (40%) of the outstanding capital transactions within the Philippines, and to permit
of which is owned or controlled by aliens shall do inspection thereof by the Securities and Exchange
business or engage in any economic activity in the Commission, the Bureau of Internal Revenue and the
Philippines or be registered, licensed, or permitted by the Board of Investments;
Securities and Exchange Commission or by any other (7) To give priority to resident creditors as against
bureau, office, agency, political subdivision or non-resident creditors and owners or stockholders in the
instrumentality of the government, to do business, or distribution of assets within the Philippines upon
engage in any economic activity in the Philippines insolvency, dissolution or revocation of the license;
without first securing a written certificate from the Board
(8) To give the Securities and Exchange Commission at
of Investments to the effect:
least six (6) months advance notice in writing of
(1) That the operation or activity of such alien, firm, applicant's intention to stop doing business within the
association, partnership, corporation or other form of Philippines; and to give such public notice thereof as the
business organization, is not inconsistent with the Securities and Exchange Commission may require for the
Investment Priorities Plan; protection of resident creditors and others dealing with
(2) That such business or economic activity will contribute the protection of resident creditors and others dealing
to the sound and balanced development of the national with the applicant; and
economy on a self-sustaining basis; (9) Not to terminate any franchise, licensing or other
(3) That such business or economic activity by the agreement that applicant may have with a resident of the
applicant would not conflict with the Constitution or laws Philippines authorizing the latter to assemble,
of the Philippines; manufacture or sell within the Philippines the products of
the applicant, except for violation thereof or other just
(4) That the field of business or economic activity is not cause and upon payment of compensation and
one that is being adequately exploited by Philippine reimbursement of investment and other expenses
nationals; and incurred by the licensee in developing a market for the
(5) That the entry of applicant therein will not pose a clear said products: Provided, however, That in case of
and present danger of promoting monopolies or disagreement, the amount of compensation or
combinations in restraint of trade. reimbursement shall be determined by the country
where the licensee is domiciled or has its principal office
ARTICLE 49. Requirements to be Imposed by the Board. who shall require the applicant to file a bond in such
— Upon granting said certificate, the Board shall impose amount as, in its opinion, is sufficient for this purpose.
the following requirements on the alien or the firm,
association, partnership, corporation or other form of The above requirements shall be in addition to those set
business organization that is not organized or existing forth in the Corporation Code of the Philippines for
under the laws of the Philippines — authorizing foreign corporations to transact business in
the Philippines.
(1) To appoint a citizen of the Philippines, of legal age,
good moral character and reputation, and sound ARTICLE 50. Cause for Cancellation of Certificate of
financial standing, as resident agent, who shall be Authority or Payment of Fine. — A violation of any of the
authorized to accept summons and other legal process in requirements set forth in Article 49 or of the terms and
behalf of the applicant; conditions which the Board may impose shall be
sufficient cause to cancel the certificate of authority
(2) To establish an office in the Philippines and to notify issued pursuant to this Book and/or subject firms to the
the Securities and Exchange Commission in writing of payment of fines in accordance with the rules and
the applicant's exact address and of every contemplated regulations issued by the Board: Provided, however, That
transfer thereof or of the opening of new offices, at least aliens or foreign firms, associations, partnerships,
fifteen (15) days before the same are to be effected; and corporations or other forms of business organization not
once effected, not later than ten (10) days afterwards; organized or existing under the laws of the Philippines
(3) To bring assets into the Philippines to constitute the which may have been lawfully licensed to do business in
capital of the office or offices, of such kind and value as the Philippines prior to the effectivity of R.A. 5455, shall,
the Board may deem necessary to protect those who with respect to the activities for which they were licensed
may deal with the applicant, and to maintain that capital and actually engaged in prior to the effectivity of said Act,
unimpaired during the period it does business in the not be subject to the provisions of Articles 48 and 49 but
Philippines; shall be subject to the reporting requirements prescribed
by the Board: Provided, further, That where the issuance
(4) To present prior proof that citizens of the Philippines
of said license has been irregular or contrary to law, any
and corporations or other business organizations
person adversely affected thereby may file an action with
organized or existing under the laws of the Philippines
the Regional Trial Court where said alien or foreign
are allowed to do business in the country or individual
business organization resides or has its principal office to



cancel the said license. In such cases, no injunction shall provided for in the preceding paragraph. If the offender is
issue without notice and hearing; and appeals and other an appointive official or employee, the maximum of the
proceedings for review shall be filed directly with the penalty herein prescribed shall be imposed, and the
Supreme Court. offender shall suffer the additional penalty of perpetual
disqualification from public office, without prejudice to
any administrative action against him.
TITLE II General Provisions
(3) If the offense is committed by a juridical entity, its
ARTICLE 51. Mergers and Consolidations. — The provisions president and/or other officials responsible therefor shall
of this Book Two shall apply to any merger, consolidation, be subject to the penalty prescribed above. If the offender
syndicate or any other combination of firms, associations, or the president/official, in cases where the offense was
partnership or other forms of business organization that committed by a juridical entity, is an alien, he shall be
will result in ownership or control by persons or entities deported without further proceedings on the part of the
that are not Philippine nationals or have foreign equity Deportation Board in addition to the penalty herein
participation, of more than forty per cent (40%) of the prescribed and shall, if naturalized, be automatically
outstanding capital of whatever organization results from denaturalized from the date his sentence becomes final.
the merger, consolidation, syndicate or other
combination. (4) Payment of the tax due after apprehension shall not
constitute a valid defense in any prosecution for violation
ARTICLE 52. Local Government Action. — No agency, of any provision of this Code.
instrumentality or political subdivision of the Government
shall take any action in conflict with or which will nullify
the provisions of Book Two of this Code, or any certificate BOOK III Incentives To Multinational Companies
of authority granted hereunder.
Establishing Regional Or Area Headquarters And
ARTICLE 53. Automatic Registration. — Applications filed
under this Book shall be considered automatically Regional Operating Headquarters In The
approved if not acted upon within ten (10) working days Philippines
from official acceptance thereof.
(as amended by RA No 8756)
ARTICLE 54. Publication and Posting of Notices. —
Immediately after the application has been given due
course by the Board, the Secretary of the Board or any CHAPTER I Licensing Of Regional Or Area Headquarters
official designated by the Board shall require the ARTICLE 58. Qualification of Regional or Area
applicant to publish the notice of the action of the Board Headquarters. — Any foreign business entity formed,
thereon at his expense once in a newspaper of general organized and existing under any laws other than those
circulation in the province or city where the applicant has of the Philippines whose purpose, as expressed in its
its principal office, and post copies of said notice in organizational documents or by resolution of its Board of
conspicuous places, in the office of the Board or in the Directors or its equivalent, is to supervise, superintend,
building where said office is located; setting forth in such inspect or coordinate its own affiliates, subsidiaries or
copies the name of the applicant, the business in which it branches in the Asia-Pacific Region and other foreign
is engaged or proposes to engage or invest, and such markets may establish a regional or area headquarters in
other data and information as may be required by the the Philippines, by securing a license therefor from the
Board. No approval or certificate shall be valid without Securities and Exchange Commission, upon the favorable
the publication and posting of notices as herein provided. recommendation of the Board of Investments.
ARTICLE 55. Limited Authority to do Business. — When The Securities and Exchange Commission shall, within
appropriate, the Board may grant permissible thirty (30) days from the effectivity of this Code, issue the
investments or authority to do business under Book Two implementing rules and regulations. The following
of this Code for a limited period where the need to prove minimum requirements shall, however, be complied with
economic viability of such activity warrants the issuance by the said foreign entity:
of a temporary authorization.
(a) A certification from the Philippine Consulate/Embassy,
ARTICLE 56. Periodic Reports. — The Board shall or a duly authenticated certification from the
periodically check and verify compliance with these Department of Trade and Industry or its equivalent in the
provisions, either by inspection of the books or by foreign firm's home country that said foreign firm is an
requiring regular reports from aliens or foreign firms, entity engaged in international trade with affiliates,
domestic enterprises with foreign investments and new subsidiaries or branch offices in the Asia-Pacific Region
entities licensed to do business under Article 48 of this and other foreign markets.
Code.
(b) A duly authenticated certification from the principal
A summary of said reports shall be periodically submitted officer of the foreign entity to the effect that the said
by the Board to the President. For this purpose, the Board foreign entity has been authorized by its Board of
may require other government agencies licensing and/or Directors or governing body to establish its regional or
regulating foreign enterprises or domestic firms with area headquarters in the Philippines, specifying that:
foreign equity, to furnish the Board with reports on such
(1) The activities of the regional or area headquarters shall
foreign investments.
be limited to acting as a supervisory, communications
ARTICLE 57. Penal Clause. — (1) Without prejudice to the and coordinating center for its subsidiaries, affiliates and
provisions of Articles 42 and 50 hereof a violation of any branches in the region;
provision of Books I and II of this Code, or of the terms
(2) The regional or area headquarters will not derive any
and conditions of registration, or of the rules and
income from sources within the Philippines and will not
regulations promulgated pursuant thereto, or the act of
participate in any manner in the management of any
abetting or aiding in any manner any such violation, shall
subsidiary or branch office it might have in the
be punished by a fine not to exceed one hundred
Philippines nor shall it solicit or market goods and
thousand pesos (P100,000.00) or imprisonment for not
services whether on behalf of its mother company or its
more than ten (10) years, at the discretion of the Court.
branches, affiliates, subsidiaries or any other company;
(2) No official or employee of the government, its and
subdivisions or instrumentalities shall appear as counsel
(3) The regional or area headquarters shall notify the
for or act as agent or representative of, or in any manner
Board of Investments and the Securities and Exchange
intervene or intercede, directly or indirectly, in behalf of
Commission of any decision to close down or suspend
any party in any transaction with the Board regarding any
operations of its headquarters at least fifteen (15) days
application under Books I and II of this Code. The penalty
before the same is effected.
for violation of this prohibition is the same as that


(c) An undertaking that the multinational company will — Corporate finance advisory services;
remit into the country such amount as may be necessary — Marketing control and sales promotion;
to cover its operations in the Philippines but which
amount will not be less than Fifty thousand United States — Training and personnel management;
dollars ($50,000.00) or its equivalent in other foreign — Logistics services;
currencies annually. Within thirty (30) days from receipt
of certificate of registration from the Securities and — Research and development services, and product
Exchange Commission, the multinational company will development;
submit to the Securities and Exchange Commission a — Technical support and maintenance;
certificate of inward remittance from a local bank
showing that it has remitted to the Philippines the — Data processing and communication; and
amount of at least Fifty thousand United States dollars — Business development.
($50,000.00) or its equivalent in other foreign currencies ROHQs are prohibited from offering qualifying services to
and converted the same to Philippine currency. Annually, entities other than their affiliates, branches or
within thirty (30) days from the anniversary date of the subsidiaries, as declared in their registration with the
multinational company's registration as a regional or area Securities and Exchange Commission nor shall they be
headquarters with the Securities and Exchange allowed to directly and indirectly solicit or market goods
Commission, it will submit proof to the Securities and and services whether on behalf of their mother company,
Exchange Commission of inward remittance amounting branches, affiliates, subsidiaries or any other company.
to at least Fifty thousand United States dollars
($50,000.00) or its equivalent in other foreign currencies (2) The regional operating headquarters shall notify the
during the past year. Board of Investments, the Securities and Exchange
Commission and the Bangko Sentral ng Pilipinas, as the
(d) Any violation by the regional or area headquarters of a case may be, of any decision to close down or suspend
multinational company of any of the provisions of this operations of its headquarters at least fifteen (15) days
Code, or its implementing rules and regulations, or other before the same is effected
terms and conditions of its registration, or any provision of
existing laws, shall constitute a sufficient cause for the (c) An undertaking that the multinational company will
cancellation of its license or registration. (as amended by initially remit into the country such amount as may be
RA No 8756) necessary to cover its operations in the Philippines but
which amount will not be less than Two hundred
thousand United States dollars ($200,000.00) or its
CHAPTER II Licensing Of Regional Operating Headquarters equivalent in other foreign currencies.
ARTICLE 59. Qualification of Regional Operating Within thirty (30) days from receipt of certificate of
Headquarters (ROHQs). — Any foreign business entity registration, the multinational company will submit to the
formed, organized and existing under any laws other than Securities and Exchange Commission a certificate of
those of the Philippines may establish a regional inward remittance from a local bank showing that it has
operating headquarters in the Philippines to service its remitted to the Philippines the amount of at least Two
own affiliates, subsidiaries or branches in the Philippines, hundred thousand United States dollars ($200,000.00) or
in the Asia-Pacific Region and other foreign markets. its equivalent in other foreign currencies and converted
ROHQs will be allowed to derive income by performing the same to Philippine currency.
the qualifying services enumerated under paragraph (b)1
hereunder. ROHQs of non-banking and non-financial (d) Any violation by the regional operating headquarters
institutions are required to secure a license from the of a multinational company of the provisions of this Code,
Securities and Exchange Commission, upon the favorable or its implementing rules and regulations, or other terms
recommendation of the Board of Investments. ROHQs of and conditions of its registration, or any provision of
banking and financial institutions, on the other hand, are existing laws, shall constitute a sufficient cause for the
required to secure licenses from the Securities and cancellation of its license or registration.
Exchange Commission and the Bangko Sentral ng (as amended by RA No 8756)
Pilipinas, upon the favorable recommendation of the
Board of Investments.
CHAPTER III Incentives to Expatriates
The Securities and Exchange Commission and the
Bangko Sentral ng Pilipinas shall, within thirty (30) days ARTICLE 60. Multiple Entry Visa. — Foreign personnel of
from the effectivity of this Code, issue the implementing regional or area headquarters and regional operating
rules and regulations. headquarters of multinational companies, their
respective spouses and unmarried children under
The following minimum requirements shall be complied twenty-one (21) years of age, if accompanying them or if
with by the said foreign entity: following to join them after their admission into the
(a) A certification from the Philippine Consulate/Embassy, Philippines as non-immigrant shall be issued a multiple
or a duly authenticated certification from the entry special visa within seventy-two hours upon
Department of Trade and Industry or its equivalent in the submission of all required documents, and which shall be
foreign firm's home country that said foreign firm is an valid for a period of three (3) years to enter the
entity engaged in international trade with affiliates, Philippines: Provided, That a responsible officer of the
subsidiaries or branch offices in the Asia-Pacific Region applicant company submits a duly authenticated
and other foreign markets. certificate to the effect that the person who seeks entry
into the Philippines is an executive of the applicant
(b) A duly authenticated certification from the principal company and will work exclusively for applicant's regional
officer of the foreign entity to the effect that the said or area headquarters or regional operating headquarters
foreign entity has been authorized by its Board of which is duly licensed to operate in the Philippines, and
Directors or governing body to establish its regional that he will receive a salary and will be paid by the
operating headquarters in the Philippines, specifying headquarters in the Philippines an amount equivalent to
that: at least Twelve thousand United States dollars
(1) The regional operating headquarters may engage in ($12,000.00), or the equivalent in other foreign currencies
any of the following qualifying services: per annum.
— General administration and planning; The admission and stay shall be coterminus with the
— Business planning and coordination; validity of the multiple entry special visa. The stay,
however, is extendible for three years upon submission to
— Sourcing/procurement of raw materials and the Bureau of Immigration of a sworn certification by a
components; responsible officer of the regional or area headquarters or
regional operating headquarters: that its license to



operate remains valid and subsisting and that the profit remittances as provided for in Section 28(a)(5) of
regional or area headquarters or regional operating the National Internal Revenue Code.
headquarters has withheld tax due on compensation and ARTICLE 65. Value-Added Tax. — The regional or area
the same has been paid to the Bureau of Internal headquarters established in the Philippines by
Revenue. multinational companies shall be exempted from the
Non-immigrants who have been admitted under the value-added tax. In addition, the sale or lease of goods
multiple entry special visa, as well as their respective and property and the rendition of services to regional or
spouses and dependents, shall be exempt from: the area headquarters shall be subject to zero percent (0%)
payment of all fees due under the immigration and alien VAT rate as provided for in the National Internal Revenue
registration laws; securing alien certificates of Code, as amended.
registration; and obtaining emigration clearance Regional operating headquarters shall be subject to the
certificates, and all types of clearances required by any ten percent (10%) value-added tax as provided for under
government department or agency, except that upon the National Internal Revenue Code, as amended.
final departure from the Philippines the employer of the
said non-immigrants shall so advise in writing the Bureau ARTICLE 66. Exemption From All Kinds of Local Taxes,
of Immigration at least five (5) working days prior to the Fees, or Charges. — The regional or area headquarters
non-immigrant's departure, and the finally departing and regional operating headquarters of multinational
non-immigrant employee shall be required to submit to companies shall be exempt from all kinds of local taxes,
the said office a tax clearance from the Bureau of Internal fees, or charges imposed by a local government unit
Revenue. except real property tax on land improvements and
equipment.
ARTICLE 61. Withholding Tax of 15% on Compensation
Income. — Aliens employed by the regional or area ARTICLE 67. Tax and Duty Free Importation of Training
headquarters and regional operating headquarters of Materials and Equipment; Importation of Motor Vehicles.
multinational companies shall be subject for each taxable — Regional or area headquarters and regional operating
year upon their gross income received as salaries, wages, headquarters shall enjoy tax and duty free importation of
annuities, compensations, remuneration and equipment and materials for training and conferences
emoluments to a tax equal to fifteen percentum (15%) of which are needed and used solely for their functions as
such gross income. The same tax treatment is applicable regional or area headquarters or regional operating
to Filipinos employed and occupying the same positions headquarters and which are not locally available subject
as those aliens employed by multinational companies: to the prior approval of the Board of Investments.
Provided, That said Filipinos shall have the option to be The sale or disposition of equipment within two (2) years
taxed at either 15% of gross income or at the regular tax after importation, entered tax and duty free, shall require
rate on their taxable income in accordance with the prior approval of the Board of Investments and prior
National Internal Revenue Code, as amended by Republic payment of applicable taxes and duties waived in favor of
Act No. 8424. RHQ/ROHQ.
ARTICLE 62. Tax and Duty Free Importation. — An alien Regional or area headquarters and regional operating
executive of the regional or area headquarters and headquarters shall be entitled to the importation of new
regional operating headquarters of a multinational motor vehicles subject to the payment of the
company shall enjoy tax and duty free importation of corresponding taxes and duties.
personal and household effects as provided for under
Section 105(h) of the Tariff and Customs Code, as (as amended by RA 8756)
amended, and Section 109(I) of the National Internal
Revenue Code, as amended: Provided, That the personal
and household effects shall arrive in the Philippines BOOK IV Incentives To Multinational Companies
within ninety (90) days before or after conversion of the Establishing Regional Warehouses To Supply
alien executive's admission category to multiple entry visa Spare Parts, Components, Semi-finished Products
issued under this Act.
And Raw Materials To The Asia-pacific Region
ARTICLE 63. Travel Tax Exemption. — Personnel of
regional or area headquarters and regional operating And Other Foreign Markets
headquarters of multinational companies and the ARTICLE 68. Qualifications. — A multinational company
dependents of such foreign personnel if joining them organized and existing under any laws other than those
during the period of their assignment in the Philippines, of the Philippines which is engaged in international trade
as certified by the Board of Investments, shall be and supplies spare parts, components, semi-finished
exempted from the payment of travel tax imposed under products and raw materials to its distributors or markets
Section 1 of Presidential Decree No. 1183, as amended. in the Asia-Pacific area and other foreign areas and which
(as amended by RA 8756) has established or will simultaneously establish a regional
or area headquarters and/or regional operating
headquarters in the Philippines in accordance with the
CHAPTER IV Incentives To Regional Or Area Headquarters provisions of Book III of this Code and the rules and
And Regional Operating Headquarters regulations implementing the same may also establish a
ARTICLE 64. Corporate Income Tax Incentive to Regional regional warehouse or warehouses in ecozones in the
or Area Headquarters and Regional Operating Philippines, after securing a license therefor from the
Headquarters. — Regional or area headquarters Philippine Economic Zone Authority (PEZA). With respect
established in the Philippines by multinational to regional warehouses located or will locate in ecozones
companies and which headquarters do not earn or derive with special charters, such license shall be secured from
income from the Philippines and which act as the concerned ecozone authorities. For existing regional
supervisory, communications and coordinating centers warehouses, said license shall be secured from the Board
for their affiliates, subsidiaries, or branches in the of Investments unless they choose to relocate inside
Asia-Pacific Region and other foreign markets shall not ecozones: Provided, That:
be subject to income tax. Regional operating (1) The activities of the regional warehouse shall be
headquarters shall be subject to a tax rate of ten percent limited to serving as a supply depot for the storage,
(10%) of their taxable income as provided for under the deposit, safekeeping of its spare parts, components,
National Internal Revenue Code, as amended by Republic semi-finished products and raw materials including the
Act No. 8424: Provided, That any income derived from packing, covering, putting up, marking, labelling and
Philippine sources by the ROHQ when remitted to the cutting or altering to customer's specification, mounting
parent company shall be subject to the tax on branch and/or packaging into kits or marketable lots thereof, to
fill up transactions and sales made by its head offices or


parent companies and to serving as a storage or (3) That they are of such character as to be readily
warehouse of goods purchased locally by the home office identifiable for reexport; and in case of local distribution
of the multinational for export abroad. The regional they shall be subject to Article 68(1), Article 69 paragraph
warehouse shall not directly engage in trade nor directly (b) and the guidelines implementing Book IV of this
solicit business, promote any sale, nor enter into any Code;
contract for the sale or disposition of goods in the (4) That it shall file an ordinary warehousing bond in an
Philippines: Provided, That a regional warehouse may be amount equal to one hundred percent (100%) of the
allowed to withdraw imported goods from said ascertained customs duties on the articles imported
warehouse/s for delivery to an authorized distributor in without prejudice to its filing a general warehousing
the Philippines: Provided, however, That the bond in lieu of the ordinary warehousing bond;
corresponding taxes, customs duties and charges under
the Tariff and Customs Code have been paid by the (5) The percentage of annual allowable withdrawal from
headquarters of the said multinational upon arrival of warehouses located outside ecozones for domestic use
such goods: Provided, further, That the delivery of said shall be subject to the approval of the Board of
goods to the aforesaid distributor in the Philippines shall Investments, or of the PEZA or concerned ecozone
be treated as a sale made by the headquarters rather authorities with respect to warehouses located within the
than that of its head office, and shall be reflected in a ecozones of their jurisdiction: Provided, however, That in
separate book of accounts, any representation as to who the case of existing warehouses, in no case shall their
is the seller to the contrary notwithstanding: Provided, withdrawals exceed thirty percent (30%) of the value of
furthermore, That the aforementioned sale shall be goods they have brought in for any given year and the
governed by the provisions on value-added tax in payment of the corresponding taxes and duties shall have
accordance with the National Internal Revenue Code, as been made upon the arrival of such goods imported:
amended by Republic Act No. 8424: Provided, finally, That Provided, further, That the PEZA or concerned ecozone
the income from the aforementioned sale to said authorities may allow withdrawal exceeding thirty
distributor shall be treated as income derived by the said percent (30%) of the value of goods under such terms and
headquarters from sources within the Philippines and conditions the PEZA or concerned ecozone authorities
shall be subject to the corporate income tax of a resident may impose. (as amended by RA No 8756)
foreign corporation under the National Internal Revenue ARTICLE 69. Tax Treatment of Imported Articles in the
Code, as amended, the provision of any law to the Regional Warehouse. —
contrary notwithstanding.
a) Tax Incentives for Qualified Goods Destined for
(2) The personnel of a regional warehouse will not Reexportation to the Asia-Pacific and Other Foreign
participate in any manner in the management of any Markets. — Except as otherwise provided in this Code,
subsidiary, affiliate or branch office it might have in the imported spare parts, components, semi-finished
Philippines other than the activities allowed under this products, raw materials and other items including any
Act. packages, coverings, brands and labels and warehouse
(3) The personnel of the regional or area headquarters or equipment as may be allowed by the Board of
regional operating headquarters shall be responsible for Investments, the PEZA or concerned ecozone authorities,
the operation of the regional warehouse subject to the as the case may be, for use exclusively on the goods
provisions of this Code. stored, except those prohibited by law, brought into the
regional warehouse from abroad to be kept, stored and/or
(4) The multinational company shall pay the Board of deposited or used therein and reexported directly
Investments, the PEZA or concerned ecozone authorities, therefrom under the supervision of the Collector of
as the case may be, and the appropriate Collector of Customs concerned for distribution to its Asia-Pacific and
Customs concerned the corresponding license fees and other foreign markets in accordance with the guidelines
storage fees to be determined by said offices. implementing Book IV of this Code including to a bonded
(5) An application for the establishment of a regional manufacturing warehouse in the Philippines and
warehouse located outside an ecozone shall be made in eventually reexported shall not be subject to customs
writing to the Board of Investments, to the PEZA, or to duty, internal revenue tax, export tax nor to local taxes,
concerned ecozone authorities in the case of regional the provisions of law to the contrary notwithstanding.
warehouses located in ecozones. The application shall (b) Payment of Applicable Duties and Taxes on Qualified
describe the premises, the location and capacity of the Goods Subject to Laws and Regulations Covering
regional warehouse and the purpose for which the Imported Merchandise if Destined for the Local Market.
building is to be used. — Any spare parts, components, semi-finished products,
The jurisdiction and responsibility of supervising the raw materials and other items sent, delivered, released or
regional warehouses located outside ecozones shall be taken from the regional warehouse to the local market in
vested on the Bureau of Customs, and the Board of accordance with the guidelines implementing Book IV of
Investments, or the PEZA or concerned ecozone this Code shall be subject to the payment of income
authorities for warehouses within ecozones. taxes, customs duties, taxes and other charges provided
The Board of Investments, the PEZA or concerned for under Section 68 hereof and for which purpose, the
ecozone authorities, in consultation with the Regional proper commercial invoice of the head offices or parent
Director of Customs of the district where the warehouse companies shall be submitted to the Collector of Customs
will be situated shall cause an examination of the concerned; and shall be subject to laws and regulations
premises to be made and if found satisfactory, it may governing imported merchandise: Provided, That in case
authorize its establishment without complying with the any of the foregoing items are sold, bartered, hired or
requirements of any other government body, subject to used for purposes other than they were intended for
the following conditions: without prior compliance with the guidelines
implementing Book IV of this Code and without prior
(1) That the articles to be stored in the warehouse are payment of the duty, tax or other charges which would
spare parts, components, semi-finished products and raw have been due and payable at the time of entry if the
materials of the multinational company operator for articles had been entered without the benefit of this
distribution and supply to its Asia-Pacific and other Order, shall be subject to forfeiture and the importation
foreign markets including packaging, coverings, brands, shall constitute a fraudulent practice against customs
labels and warehouse equipment as provided in Article revenue punishable under Section 3602, as amended, of
69(a) hereof; the Tariff and Customs Code of the Philippines: Provided,
(2) That the entry or importation, storage or reexport of further, That a sale pursuant to a judicial order shall not
the goods destined for or to be stored in the regional be subject to the preceding proviso without prejudice to
warehouse will not involve any dollar outlay from the payment of duties, taxes and other charges.
Philippine sources; (as amended by RA No 8756)


ARTICLE 70. Exemption From the Maximum Storage 2. He is not afflicted with any loathsome, dangerous or
Period Under the Tariff and Customs Code; Period of contagious disease;
Storage in the Regional Warehouse. — The provision of 3. He has not been institutionalized for any mental
the law in Section 1908 of the Tariff and Customs Code of disorder or disability;
the Philippines, as amended, to the contrary
notwithstanding, articles duly entered for warehousing 4. He is willing and able to invest the amount of at least
may remain in the regional warehouses for a period of US$75,000.00 in the Philippines; Provided, That the
two (2) years from the time of their transfer to the foregoing invested amount shall be lowered to
regional warehouse, which period may be extended with US$50,000 for aliens availing of Executive Order No. 63
the approval of the Board of Investments for an additional and Executive Order No. 1037 subject to the conditions
period of one (1) year upon payment of the corresponding imposed by said legislations: Provided, further, That for
storage fee on the unexported articles, as provided for purposes of compliance with this particular condition, the
under Article 68(4) for each extension until they are alien-applicant should prove that he has remitted such
reexported in accordance with the guidelines amount in acceptable foreign currency to the Philippines.
implementing Book IV of this Code. Any articles ARTICLE 75. Reportorial Requirements. — As a holder of
withdrawn, released or removed contrary to the the Special Investors Resident Visa, an alien shall be
provisions of said guidelines shall be forfeited pursuant to entitled to reside in the Philippines while his investment
the provisions of Article 69, paragraph (b) hereof. (as subsists. For this purpose, he should submit an annual
amended by RA No 8756) report, in the form duly prescribed for the purpose, to
ARTICLE 71. Rules and Regulations on the Jurisdiction, prove that he has maintained his investment in the
Operation and Control Over Qualified Goods in the country. Should said alien withdraw his said investment
Regional Warehouse. — The Board of Investments, the from the Philippines, then the Special Investors Resident
PEZA, concerned ecozone authorities and the Bureau of Visa issued to him will automatically expire.
Customs shall jointly issue special rules and regulations
on the receiving, handling, custody, entry, examination,
classifications, delivery, storage, warehousing, BOOK VI Incentives of Export Processing Zone
manipulation and packaging, release for reexportation or Enterprises
for importation and delivery to a Philippine distributor
and for the safekeeping, recording, inventory and ARTICLE 76. Employment of Foreign Nationals. — The
liquidation of said qualified goods, any existing law provisions of law to the contrary notwithstanding, Export
notwithstanding. Such rules and regulations shall be Processing Zone Authority, hereinafter referred to as the
formulated in consultation with the applicants/operators "Authority" may authorize an alien or an association,
of regional warehouses. (as amended by RA No 8756) partnership, corporation or any other form of business
organization formed, organized, chartered or existing
ARTICLE 72. Cancellation of License or Registration. — under any law other than those of the Philippines, or
Any willful violation by the regional or area headquarters which is not a Philippine national, or the working capital
or regional operating headquarters of a multinational of which is fully owned or controlled by aliens to do
company which has established a regional warehouse or business or engage in an industry inside the export
warehouses contrary to or in violation of the provisions of processing zone.
existing laws and the implementing guidelines of Book IV
of this Code shall constitute a sufficient cause for the Subject to the provisions of Section 29 of Commonwealth
cancellation of its license or registration in addition to the Act No. 613, as amended, an enterprise, a zone registered
penalties hereinabove provided in Article 69, paragraph enterprise may employ foreign nationals in supervisory,
(b) hereof. technical or advisory positions for a period not exceeding
five (5) years from its registration, extendible for limited
The Board, the PEZA or concerned ecozone authorities, as periods at the discretion of the Authority: Provided,
the case may be, shall have the authority to impose such however, That when the majority of the capital stock of a
fines in amounts that are just and reasonable in cases of zone registered enterprise is owned by foreign nationals,
late submission or non-compliance on the part of the positions of president, treasurer, and general
registered enterprises, with reporting and other manager or their equivalents may be retained by foreign
requirements under this Code and its implementing rules nationals beyond the period set forth herein.
and regulations. (as amended by RA No 8756)
Foreign nationals employed within the purview of this
ARTICLE 73. The regional or area headquarters of Book, their spouses, and unmarried children under
multinational companies establishing regional twenty-one years of age who are not excluded by Sec. 29
warehouses shall be exempt from the provisions of Book of C.A. No. 613, as amended, shall be permitted to enter
II of this Code. (as repealed by RA No 8756) and reside in the Philippines during the period of
ARTICLE 73. Implementing Rules and Regulations. — To employment of such foreign nationals. They shall be
implement the provisions of Books III and IV of this Code, issued a multiple entry visa, valid for a period of three
the Department of Trade and Industry, in coordination years, to enter and leave the Philippines without further
with the Department of Foreign Affairs, the Board of documentary requirements other than valid passports or
Investments, the Philippine Economic Zone Authority, the other travel documents in the nature of passports. The
ecozone authorities with special charters, the Securities validity of the multiple entry special visa shall be
and Exchange Commission, the Bureau of Internal extendible yearly. Foreign nationals who have been
Revenue, the Bureau of Customs, Bangko Sentral ng issued multiple entry special visas under this provision, as
Pilipinas, Philippine Tourism Authority, and the Bureau of well as their respective spouses and dependents, shall be
Immigration shall jointly promulgate such rules and exempt from obtaining alien certificates and all types of
regulations which shall take effect thirty (30) days after clearances required by any government department or
their publication in at least two (2) national newspapers of agency. For this purpose, the Commission on
general circulation in the Philippines. (as created by RA Immigration and Deportation and the Authority shall
No 8756) jointly issue the necessary implementing rules and
regulations.
A registered enterprise shall train Filipinos as
BOOK V Special Investors Resident Visa understudies of foreign nationals in administrative,
ARTICLE 74. Qualifications. — Any alien who possesses supervisory and technical skills and shall submit annual
the following qualifications may be issued a Special reports of such training to the Board.
Investors Resident Visa. ARTICLE 77. Tax Treatment of Merchandise in the Zone.
1. He had not been convicted of a crime involving moral — (1) Except as otherwise provided in this Code, foreign
turpitude; and domestic merchandise, raw materials, supplies,
articles, equipment, machineries, spare parts and wares



of every description, except those prohibited by law, be remitted to the Authority by the
brought into the zone to be sold, stored, broken up, province/city/municipality responsible for the collection of
repacked, assembled, installed, sorted, cleaned, graded, such taxes under the provisions of the Real Property Tax
or otherwise processed, manipulated, manufactured, Code. All real estate taxes accruing to the Authority as
mixed with foreign or domestic merchandise whether herein provided shall be expended for such community
directly or indirectly related in such activity, shall not be facilities, utilities and/or services as the Authority may
subject to customs and internal revenue laws and determine.
regulations nor to local tax ordinances, the provisions of (b) Production equipment or machineries, not attached
law to the contrary notwithstanding. to real estate, used directly or indirectly, in the production,
(2) Merchandise purchased by a registered zone assembly or manufacture of the registered product of the
enterprise from the customs territory and subsequently zone registered enterprise shall be exempt from real
brought into the zone, shall be considered as export sales property taxes.
and the exporter thereof shall be entitled to the benefits
allowed by law for such transaction.
(3) Domestic merchandise sent from the zone to the Final Provisions
customs territory shall, whether or not combined with or ARTICLE 79. Interpretation. — All doubts concerning the
made part of other articles likewise of local origin or benefits and incentives granted enterprises and investors
manufactured in the Philippines while in the export by this Code shall be resolved in favor of investors and
processing zone, be subject to internal revenue laws of registered enterprises.
the Philippines as domestic goods sold, transferred or
ARTICLE 80. Vested Rights. — Existing registered
disposed of for local consumption.
enterprises which are enjoying the incentives under the
(4) Merchandise sent from the export processing zone to laws repealed by Books One and Six of this Code shall
the customs territory shall, whether or not combined with continue to enjoy such incentives for the period therein
or made part of other articles while in the zone, be stated: Provided, however, That firms which made
subject to rules and regulations governing imported investments in new or expansion projects approved or
merchandise. The duties and taxes shall be assessed on registered by the Board or the Authority on or after
the value of imported materials (except when the final December 1, 1986 but before the effectivity of this Code
product is exempt) and the internal revenue taxes on the may opt to be governed by the provisions of this Code.
value added.
ARTICLE 81. Confidentiality of Applications. — All
(5) Domestic merchandise on which all internal revenue applications and their supporting documents filed under
taxes have been paid, if subject thereto, and foreign this Code shall be confidential and shall not be disclosed
merchandise previously imported on which duty or tax to any person, except with the consent of the applicant or
has been paid, or which have been admitted free of duty on orders of a court of competent jurisdiction.
and tax, may be taken into the zone from the customs
ARTICLE 82. Judicial Relief. — All orders or decisions of
territory of the Philippines and be brought back thereto
the Board in cases involving the provisions of this Code
free of quotas, duty or tax.
shall immediately be executory. No appeal from the order
(6) Subject to such regulations respecting identity and or decision of the Board by the party adversely affected
safeguarding of the revenue as the Authority may deem shall stay such order or decision: Provided, That all
necessary when the identity of an article entered into the appeals shall be filed directly with the Supreme Court
export processing zone under the immediately preceding within thirty (30) days from receipt of the order or
paragraph has been lost, such article when removed decision.
from the zone and taken to the customs territory shall be
ARTICLE 83. Effectivity of Implementing Rules and
treated as foreign merchandise entering the country for
Regulations. — The Board shall promulgate rules and
the first time, under the provisions of the Tariff and
regulations to implement the intent and provisions of this
Customs Code.
Code and shall have the authority to impose such fines in
(7) Articles produced or manufactured in the zone and amounts that are just and reasonable in cases of late
exported therefrom shall, on subsequent importation submission or non-compliance on the part of registered
into the customs territory, be subject to the import laws enterprises, with reporting and other requirements under
applicable to like articles manufactured in a foreign this Code and its implementing rules and regulations.
country; Such rules and regulations shall take effect fifteen (15)
(8) Unless the contrary is shown, merchandise taken out days following its publication in newspaper of general
of the zone shall be considered for tax purposes to have circulation in the Philippines.
been sent to customs territory. ARTICLE 84. Separability Clause. — The provisions of this
ARTICLE 78. Additional Incentives. — A zone registered Code are hereby declared to be separable and, in the
enterprise shall also enjoy all the incentive benefits event any such provisions is declared unconstitutional,
provided in Article 39 hereof under the same terms and the other provisions which are not affected thereby shall
conditions stated therein. In addition, zone registered remain in force and effect.
enterprises shall also be entitled to the following: ARTICLE 85. Repealing Clause. — The following provisions
(a) Exemption from Local Taxes and Licenses. — or laws are hereby repealed:
Notwithstanding the provisions of law to the contrary, 1) Batas Pambansa 44
zone registered enterprises shall, to the extent of their
2) Batas Pambansa 391 (1983)
construction, operation or production inside the zone be
exempt from the payment of any and all local 3) Presidential Decree 218
government imposts, fees, licenses or taxes except real 4) Presidential Decree 1419
estate taxes which shall be collected by the
Province/City/Municipality responsible for the collection 5) Presidential Decree 1623, as amended
thereof under the provisions of the Real Property Tax 6) Presidential Decree No. 1789 (1981)
Code: Provided, That machineries owned by zone
registered enterprises which are actually installed and 7) Presidential Decree 2032
operated in the Zone for manufacturing, processing or for 8) Executive Order 815
industrial purposes shall not be subject to the payment of
9) Executive Order 1045 (1985)
real estate taxes for the first three (3) years of operation of
such machineries: Provided, further, That fifty percent All other laws, decrees, executive orders, administrative
(50%) of the proceeds of the real estate taxes collected orders, rules and regulations or parts thereof which are
from all real properties located in the Zone and such
other areas owned or administered by the Authority shall



inconsistent with the provisions of this Code are hereby stockholders own stocks in a Securities and Exchange
repealed, amended or modified accordingly. Commission (SEC) registered enterprise, at least sixty
ARTICLE 86. Effectivity. — This Code shall take effect percent (60%) of the capital stock outstanding and
immediately upon approval. entitled to vote of each of both corporations must be
owned and held by citizens of the Philippines and at least
DONE in the City of Manila, this 16th day of July, in the sixty percent (60%) of the members of the Board of
year of Our Lord, Nineteen Hundred and Eighty-Seven. Directors, in order that the corporation shall be
Published in the Official Gazette, Vol. 83 No. 30, 3422-O-7 considered a Philippine national. (as amended by RA No
Supp., on July 27, 1987. 8179)
(Omnibus Investments Code of 1987, Executive Order No. b) The term investment shall mean equity participation in
226, [July 16, 1987]) any enterprise organized or existing under the laws of the
Philippines;

c) The term foreign investment shall mean as equity
RA No 7042 | Foreign Investments Act of investment made by a non-Philippine national in the
form of foreign exchange and/or other assets actually
1991 transferred to the Philippines and duly registered with
As amended by RA No 8179 the Central Bank which shall assess and appraise the
value of such assets other than foreign exchange;
June 13, 1991 d) The phrase doing business shall include soliciting
REPUBLIC ACT NO. 7042 orders, service contracts, opening offices, whether called
liaison offices or branches; appointing representatives or
As amended by RA No 8179 distributors domiciled in the Philippines or who in any
AN ACT TO PROMOTE FOREIGN INVESTMENTS, calendar year stay in the country for a period or periods
PRESCRIBE THE PROCEDURES FOR REGISTERING totalling one hundred eighty (180) days or more;
ENTERPRISES DOING BUSINESS IN THE PHILIPPINES, participating in the management, supervision or control
AND FOR OTHER PURPOSES of any domestic business, firm, entity or corporation in
the Philippines; and any other act or acts that imply a
SECTION 1. Title. — This Act shall be known as the Foreign continuity of commercial dealings or arrangements, and
Investments Act of 1991. contemplate to that extent the performance of acts or
SECTION 2. Declaration of Policy. — It is the policy of the works, or the exercise of some of the functions normally
State to attract, promote and welcome productive incident to, and in progressive prosecution of, commercial
investments from foreign individuals, partnerships, gain or of the purpose and object of the business
corporations, and governments, including their political organization: Provided, however, That the phrase doing
subdivisions, in activities which significantly contribute to business: shall not be deemed to include mere
national industrialization and socioeconomic investment as a shareholder by a foreign entity in
development to the extent that foreign investment is domestic corporations duly registered to do business,
allowed in such activity by the Constitution and relevant and/or the exercise of rights as such investor; nor having a
laws. Foreign investments shall be encouraged in nominee director or officer to represent its interests in
enterprises that significantly expand livelihood and such corporation; nor appointing a representative or
employment opportunities for Filipinos; enhance distributor domiciled in the Philippines which transacts
economic value of farm products; promote the welfare of business in its own name and for its own account;
Filipino consumers; expand the scope, quality and e) The term export enterprise shall mean an enterprise
volume of exports and their access to foreign markets; wherein a manufacture, processor or service (including
and/or transfer relevant technologies in agriculture, tourism) enterprise exports sixty per cent (60%) or more of
industry and support services. Foreign investments shall its output, or wherein a trader purchases products
be welcome as a supplement to Filipino capital and domestically and exports sixty per cent (60%) or more of
technology in those enterprises serving mainly the such purchases;
domestic market.
f) The term domestic market enterprise shall mean an
As a general rule, there are no restrictions on extent of enterprise which produces goods for sale, or renders
foreign ownership of export enterprises. In domestic services to the domestic market entirely or if exporting a
market enterprises, foreigners can invest as much as one portion of its output fails to consistently export at least
hundred percent (100%) equity except in areas included in sixty percent (60%) thereof; and
the negative list. Foreign owned firms catering mainly to
the domestic market shall be encouraged to undertake g) The term Foreign Investments Negative List or
measures that will gradually increase Filipino Negative List shall mean a list of areas of economic
participation in their businesses by taking in Filipino activity whose foreign ownership is limited to a maximum
partners, electing Filipinos to the board of directors, of forty percent (40%) of the equity capital of the
implementing transfer of technology to Filipinos, enterprises engaged therein.
generating more employment for the economy and SECTION 4. Scope. — This Act shall not apply to banking
enhancing skills of Filipino workers. and other financial institutions which are governed and
SECTION 3. Definitions. — As used in this Act: regulated by the General Banking Act and other laws
under the supervision of the Central Bank.
a) The term Philippine national shall mean a citizen of the
Philippines; or a domestic partnership or association SECTION 5. Registration of Investments of Non-Philippine
wholly owned by citizens of the Philippines; or a Nationals. — Without need of prior approval, a
corporation organized under the laws of the Philippines non-Philippine national, as that term is defined in Section
of which at least sixty percent (60%) of the capital stock 3 (a), and not otherwise disqualified by law may, upon
outstanding and entitled to vote is owned and held by registration with the Securities and Exchange
citizens of the Philippines; or a corporation organized Commission (SEC), or with the Bureau of Trade
abroad and registered as doing business in the Regulation and Consumer Protection (BTRCP) of the
Philippines under the Corporation Code of which one Department of Trade and Industry in the case of single
hundred percent (100%) of the capital stock outstanding proprietorships, do business as defined in Section 3 (d) of
and entitled to vote is wholly owned by Filipinos or a this Act or invest in a domestic enterprise up to one
trustee of funds for pension or other employee retirement hundred percent (100%) of its capital, unless participation
or separation benefits, where the trustee is a Philippine of non-Philippine nationals in the enterprise is prohibited
national and at least sixty percent (60%) of the fund will or limited to a smaller percentage by existing law and/or
accrue to the benefit of Philippine nationals: Provided, under the provisions of this Act. The SEC or BTRCP, as the
That where a corporation and its non-Filipino case may be, shall not impose any limitations on the


extent of foreign ownership in an enterprise additional to involve advanced technology as determined by the
those provided in this Act: Provided, however, That any Department of Science and Technology, or (2) they
enterprise seeking to avail of incentives under the employ at least fifty (50) direct employees, then a
Omnibus Investment Code of 1987 must apply for minimum paid-in capital of One hundred thousand US
registration with the Board of Investments (BOI), which dollars (US$100,000.00) shall be allowed to non-Philippine
shall process such application for registration in nationals.
accordance with the criteria for evaluation prescribed in Amendments to List B may be made upon
said Code: Provided, finally, That a non-Philippine recommendation of the Secretary of National Defense, or
national intending to engage in the same line of business the Secretary of Health, or the Secretary of Education,
as an existing joint venture, in which he or his majority Culture and Sports, indorsed by the NEDA, or upon
shareholder is a substantial partner, must disclose the recommendation motu propio, of NEDA, approved by the
fact and the names and addresses of the partners in the President, and promulgated by a Presidential
existing joint venture in his application for registration Proclamation.
with SEC. During the transitory period as provided in
Section 15 hereof, the SEC shall disallow registration of the The Transitory Foreign Investment Negative List
applying non-Philippine national if the existing joint established in Section 15 hereof shall be replaced at the
venture enterprise, particularly the Filipino partners end of the transitory period by the first Regular Negative
therein, can reasonably prove they are capable to make List to be formulated and recommended by NEDA,
the investment needed for the domestic market activities following the process and criteria, provided in Sections 8
to be undertaken by the competing applicant. Upon and 9 of this Act. The first Regular Negative Lists shall be
effectivity of this Act, SEC shall effect registration of any published not later than sixty (60) days before the end of
enterprise applying under this Act within fifteen (15) days the transitory period provided in said section and shall
upon submission of completed requirements. become immediately effective at the end of the transitory
period. Subsequent Foreign Investment Negative Lists
SECTION 6. Foreign Investments in Export Enterprises. — shall become effective fifteen (15) days after publication in
Foreign investment in export enterprises whose products a newspaper of general circulation in the Philippines:
and services do not fall within Lists A and B of the Foreign Provided, however, That each Foreign Investment
Investment Negative List provided under Section 8 hereof Negative List shall be prospective in operation and shall
is allowed up to one hundred percent (100%) ownership. in no way affect foreign investment existing on the date
Export enterprises which are non-Philippine nationals of its publication.
shall register with BOI and submit the reports that may Amendments to List B after promulgation and
be required to ensure continuing compliance of the publication of the first Regular Foreign Investment
export enterprise with its export requirement. BOI shall Negative List at the end of the transitory period shall not
advise SEC or BTRCP, as the case may be, of any export be made more often than once every two (2) years. (as
enterprise that fails to meet the export ratio requirement. amended by RA No 8179)
The SEC or BTRCP shall thereupon order the
non-complying export enterprise to reduce its sales to the SECTION 9. Investment Rights of Former Natural-born
domestic market to not more than forty percent (40%) of Filipinos. — For purposes of this Act, former natural born
its total production; failure to comply with such SEC or citizens of the Philippines shall have the same investment
BTRCP order, without justifiable reason, shall subject the rights of a Philippine citizen in Cooperatives under
enterprise to cancellation of SEC or BTRCP registration, Republic Act No. 6938. Rural Banks under Republic Act
and/or the penalties provided in Section 14 hereof. No. 7353, Thrift Banks and Private Development Banks
under Republic Act No. 7906, and Financing Companies
SECTION 7. Foreign Investments in Domestic Market under Republic Act No. 5980. These rights shall not
Enterprises. — Non-Philippine nationals may own up to extend to activities reserved by the Constitution,
one hundred percent (100%) of domestic market including (1) the exercise of profession, (2) in
enterprises unless foreign ownership therein is prohibited defense-related activities under Section 8 (b) hereof,
or limited by the Constitution and existing law or the unless specifically authorized by the Secretary of National
Foreign Investment Negative List under Section 8 hereof. Defense, and (3) activities covered by Republic Act No.
(as amended by RA No 8179) 1180 (Retail Trade Act),Republic Act No. 5487 (Security
SECTION 8. List of Investment Areas Reserved to Agency Act). Republic Act No. 7076 (Small Scale Mining
Philippine Nationals (Foreign Investment Negative List). Act). Republic Act No. 3018, as amended (Rice and Corn
— The Foreign Investment Negative List shall have two (2) Industry Act), and P.D. 449 (Cockpits Operation and
component lists: A and B: Management). (as amended by RA No 8179)
a) List A shall enumerate the areas of activities reserved to SECTION. 10. Other Rights of Natural Born Citizen
Philippine nationals by mandate of the Constitution and Pursuant to the Provisions of Article XII, Section 8 of the
specific laws. Constitution. — Any natural born citizen who has lost his
b) List B shall contain the areas of activities and Philippine citizenship and who has the legal capacity to
enterprises regulated pursuant to law: enter into a contract under Philippine laws may be a
transferee of a private land up to a maximum area of five
1) which are defense-related activities, requiring prior thousand (5,000) square meters in the case of urban land
clearance and authorization from Department of or three (3) hectares in the case of rural land to be used by
National Defense (DND) to engage in such activity, such him for business or other purposes. In the case of married
as the manufacture, repair, storage and/or distribution of couples, one of them may avail of the privilege herein
firearms, ammunition, lethal weapons, military ordnance, granted: Provided, That if both shall avail of the same, the
explosives, pyrotechnics and similar materials, unless total area acquired shall not exceed the maximum herein
such manufacturing on repair activity is specifically fixed.
authorized, with a substantial export component, to a
non-Philippine national by the Secretary of National In case the transferee already owns urban or rural land for
Defense; or business or other purposes, he shall still be entitled to be
a transferee of additional urban or rural land for business
2) which have implications on public health and morals, or other purposes which when added to those already
such as the manufacture and distribution of dangerous owned by him shall not exceed the maximum areas
drugs, all forms of gambling, nightclubs, bars, beer herein authorized.
houses, dance halls, sauna and steam bathhouses and
massage clinics. A transferee under this Act may acquire not more than
two (2) lots which should be situated in different
Small and medium-sized domestic market enterprises municipalities or cities anywhere in the Philippines:
with paid-in equity capital less than the equivalent of Two Provided, That the total land area thereof shall not exceed
hundred thousand US dollars (US$200,000.00), are five thousand (5,000) square meters in the case of urban
reserved to Philippine nationals: Provided, That if (1) they land or three (3) hectares in the case of rural land for use



by him for business or other purposes. A transferee who (Sections 9 and 10 repealed OR modified by RA No
has already acquired urban land shall be disqualified 8179)
from acquiring rural land area and vice versa. (as SECTION 11. Compliance with Environmental Standards.
amended by RA No 8179) — All industrial enterprises regardless of nationality of
SECTION 9. Determination of Areas of Investment for ownership shall comply with existing rules and
Inclusion in List C of the Foreign Investment Negative regulations to protect and conserve the environment and
List. — Upon petition by a Philippine national engage meet applicable environmental standards.
therein, an area of investment may be recommended by SECTION 12. Consistent Government Action. — No agency,
NEDA for inclusion in List C of the Foreign Investment instrumentality or political subdivision of the Government
Negative List upon determining that it complies with all shall take any action on conflict with or which will nullify
the following criteria: the provisions of this Act, or any certificate or authority
a) The industry is controlled by firms owned at least sixty granted hereunder.
percent (60%) by Filipinos; SECTION 13. Implementing Rules and Regulations. —
b) Industry capacity is ample to meet domestic demand; NEDA, in consultation with BOI, SEC and other
c) Sufficient competition exists within the industry; government agencies concerned, shall issue the rules
and regulations to implement this Act within one
d) Industry products comply with Philippine standards of hundred and twenty (120) days after its effectivity. A copy
health and safety or, in the absence of such, with of such rules and regulations shall be furnished the
international standards, and are reasonably competitive Congress of the Republic of the Philippines.
in quality with similar products in the same price range
imported into the country; SECTION 14. Administrative Sanctions. — A person who
violates any provision of this Act or of the terms and
e) Quantitative restrictions are not applied on imports of conditions of registration or of the rules and regulations
directly competing products; issued pursuant thereto, or aids or abets in any manner
f) The leading firms of the industry substantially comply any violation shall be subject to a fine not exceeding One
with environmental standards; and hundred thousand pesos (P100,000).
g) The prices of industry products are reasonable. If the offense is committed by a juridical entity, it shall be
subject to a fine in an amount not exceeding ½ of 1% of
The petition shall be subjected to a public hearing at total paid-in capital but not more than Five million pesos
which affected parties will have the opportunity to show (P5,000,000). The president and/or officials responsible
whether the petitioner industry adequately serves the therefor shall also be subject to a fine not exceeding Two
economy and the consumer, in general, and meets the hundred thousand pesos (P200,000).
above stated criteria in particular. NEDA may delegate
evaluation of the petition and conduct of the public In addition to the foregoing, any person, firm or juridical
hearing to any government agency having cognizance of entity involved shall be subject to forfeiture of all benefits
the petitioner industry. The delegated agency shall make granted under this Act.
its evaluation report and recommendations to NEDA SEC shall have the power to impose administrative
which retains the right and sole responsibility to sanctions as provided herein for any violation of this Act
determine whether to recommend to the President to or its implementing rules and regulations.
promulgate the area of investment in List C of the
Negative List. An industry or area of investment included SECTION 15. Transitory Provisions. — Prior to effectivity of
in List C of the Negative List by Presidential Proclamation the implementing rules and regulations of this Act, the
shall remain in the said List C for two (2) years, without provisions of Book II of Executive Order 226 and its
prejudice to re-inclusion upon new petition, and due implementing rules and regulations shall remain in force.
process. During the initial transitory period of thirty-six (36)
SECTION 10. Strategic Industries. — Within eighteen (18) months after issuance of the Rules and Regulations to
months after the effectivity of this Act, the NEDA Board implement this Act, the Transitory Foreign Investment
shall formulate and publish a list of industries strategic to Negative List shall consist of the following:
the development of the economy. The list shall specify, as A. List A:
a matter of policy and not as a legal requirement, the 1. All areas of investment in which foreign ownership is
desired equity participation by Government and/or limited by mandate of Constitution and specific laws.
private Filipino investors in each strategic industry. Said
list of strategic industries, as well as the corresponding B. List B:
desired equity participation of government and/or private 1. Manufacture, repair, storage and/or distribution of
Filipino investors, may be amended by NEDA to reflect firearms, ammunitions, lethal weapons, military
changes in economic needs and policy directions of ordinance, explosives, pyrotechnics and similar materials
Government. The amended list of strategic industries required by law to be licensed by and under the
shall be published concurrently with publication of the continuing regulation of the Department of National
Foreign Investment Negative List. Defense; unless such manufacturing or repair activity is
The term strategic industries shall mean industries that specifically authorized with a substantial export
are characterized by all of the following: component, to a non-Philippine national by the Secretary
of National Defense;
a) Crucial to the accelerated industrialization of the
country, 2. Manufacture and distribution of dangerous drugs; all
forms of gambling; nightclubs, bars, beerhouses, dance
b) Require massive capital investments to achieve halls; sauna and steam bathhouses, massage clinic and
economies of scale for efficient operations; other like activities regulated by law because of risks they
c) Require highly specialized or advanced technology may pose to public health and morals;
which necessitates technology transfer and proven 3. Small and medium-size domestic market enterprises
production techniques in operations; with paid-in equity capital or less than the equivalent of
d) Characterized by strong backward and forward US$500,000, unless they involve advanced technology as
linkages with most industries existing in the country, and determined by the Department of Science and
e) Generate substantial foreign exchange savings Technology, and
through import substitution and collateral foreign 4. Export enterprises which utilize raw materials from
exchange earnings through export of part of the output depleting natural resources, and with paid-in equity
that will result with the establishment, expansion or capital of less than the equivalent US$500,000.
development of the industry. C. List C:


1. Import and wholesale activities not integrated with programs and institutional policy changes, human
production or manufacture of goods; resources for the information age, a labor force skilled in
2. Services requiring a license or specific authorization, the use of ICT and a population capable of operating and
and subject to continuing regulations by national utilizing electronic appliances and computers; its
government agencies other than BOI and SEC which at obligation to facilitate the transfer and promotion of
the time of effectivity of this Act are restricted to technology; to ensure network security, connectivity and
Philippine nationals by existing administrative neutrality of technology for the national benefit; and the
regulations and practice of the regulatory agencies need to marshal, organize and deploy national
concerned: Provided, That after effectivity of this Act, no information infrastructures, comprising in both
other services shall be additionally subjected to such communications network and strategic information
restrictions on nationality of ownership by the services, including their interconnection to the global
corresponding regulatory agencies, and such restrictions information networks, with the necessary and
once removed shall not be reimposed; and appropriate legal, financial, diplomatic and technical
framework, systems and facilities.
3. Enterprises owned in the majority by a foreign licensor
and/or its affiliates for the assembly, processing or
manufacture of goods for the domestic market which are PART II Electronic Commerce in General
being produced by a Philippine national as of the date of
effectivity of this Act under a technology, know-how
and/or brand name license from such licensor during the CHAPTER I General Provisions
term of the license agreement: Provided, That, the license SECTION 3. Objective. — This Act aims to facilitate
is duly registered with the Central Bank and/or the domestic and international dealings, transactions,
Technology Transfer Board and is operatively in force as of arrangements, agreements, contracts and exchanges
the date of effectivity of this Act. and storage of information through the utilization of
NEDA shall make the enumeration as appropriate of the electronic, optical and similar medium, mode,
areas of the investment covered in this Transitory Foreign instrumentality and technology to recognize the
Investment Negative List and publish the Negative List in authenticity and reliability of electronic data messages or
full at the same time as, or prior to, the publication of the electronic documents related to such activities and to
rules and regulations to implement this Act. promote the universal use of electronic transactions in
the government and by the general public.
The areas of investment contained in List C above shall be
reserved to Philippine nationals only during the transitory SECTION 4. Sphere of Application. — This Act shall apply
period. The inclusion of any of them in the regular to any kind of electronic data message and electronic
Negative List will require determination by NEDA after document used in the context of commercial and
due public hearings that such inclusion is warranted non-commercial activities to include domestic and
under the criteria set forth in Section 8 and 9 hereof. international dealings, transactions, arrangements,
agreements, contracts and exchanges and storage of
SECTION 16. Repealing Clause. — Articles forty-four (44) information.
to fifty-six (56) of Book II of Executive Order No. 226 are
hereby repealed. SECTION 5. Definition of Terms. — For the purposes of this
Act, the following terms are defined, as follows:
All other laws or parts of laws inconsistent with the
provisions of this Act are hereby repealed or modified (a) "Addressee" refers to a person who is intended by the
accordingly. originator to receive the electronic data message or
electronic document, but does not include a person
SECTION 17. Separability. — If any part or section of this acting as an intermediary with respect to that electronic
Act is declared unconstitutional for any reason data message or electronic document.
whatsoever, such declaration shall not in any way affect
the other parts or sections of this Act. t (b) "Computer" refers to any device or apparatus singly or
interconnected which, by electronic, electro-mechanical,
SECTION 18. Effectivity. — This Act shall take effect fifteen optical and/or magnetic impulse, or other means with the
(15) days after approval and publication in two (2) same function, can receive, record, transmit, store,
newspapers of general circulation in the Philippines. process, correlate, analyze, project, retrieve and/or
Approved: June 13, 1991 produce information, data, text, graphics, figures, voice,
(Foreign Investments Act of 1991, Republic Act No. 7042, video, symbols or other modes of expression or perform
[June 13, 1991]) any one or more of these functions.
(c) "Electronic data message" refers to information

generated, sent, received or stored by electronic, optical
RA No 8792 | Electronic Commerce Act or similar means.
(d) "Information and Communication System" refers to a
system for generating, sending, receiving, storing or
June 14, 2000 otherwise processing electronic data messages or
REPUBLIC ACT NO. 8792 electronic documents and includes the computer system
AN ACT PROVIDING FOR THE RECOGNITION AND USE or other similar device by or in which data is recorded or
OF ELECTRONIC COMMERCIAL AND stored and any procedures related to the recording or
NON-COMMERCIAL TRANSACTIONS, PENALTIES FOR storage of electronic data message or electronic
UNLAWFUL USE THEREOF, AND OTHER PURPOSES document.
(e) "Electronic signature" refers to any distinctive mark,
characteristic and/or sound in electronic form,
PART I Short Title and Declaration of Policy representing the identity of a person and attached to or
logically associated with the electronic data message or
SECTION 1. Short Title. — This Act shall be known and
electronic document or any methodology or procedures
cited as the "Electronic Commerce Act."
employed or adopted by a person and executed or
SECTION 2. Declaration of Policy. — The State recognizes adopted by such person with the intention of
the vital role of information and communications authenticating or approving an electronic data message
technology (ICT) in nation-building; the need to create an or electronic document.
information-friendly environment which supports and
(f) "Electronic document" refers to information or the
ensures the availability, diversity and affordability of ICT
representation of information, data, figures, symbols or
products and services; the primary responsibility of the
other modes of written expression, described or however
private sector in contributing investments and services in
represented, by which a right is established or an
ICT; the need to develop, with appropriate training



obligation extinguished, or by which a fact may be proved ii) That document is capable of being displayed to the
and affirmed, which is received, recorded, transmitted, person to whom it is to be presented: Provided, That no
stored, processed, retrieved or produced electronically. provision of this Act shall apply to vary any and all
(g) "Electronic key" refers to a secret code which secures requirements of existing laws on formalities required in
and defends sensitive information that crosses over the execution of documents for their validity.
public channels into a form decipherable only with a For evidentiary purposes, an electronic document shall
matching electronic key. be the functional equivalent of a written document under
(h) "Intermediary" refers to a person who in behalf of existing laws.
another person and with respect to a particular electronic This Act does not modify any statutory rule relating to the
data message or electronic document sends, receives admissibility of electronic data messages or electronic
and/or stores or provides other services in respect of that documents, except the rules relating to authentication
electronic data message or electronic document. and best evidence.
(i) "Originator" refers to a person by whom, or on whose SECTION 8. Legal Recognition of Electronic Signatures. —
behalf, the electronic document purports to have been An electronic signature on the electronic document shall
created, generated and/or sent. The term does not be equivalent to the signature of a person on a written
include a person acting as an intermediary with respect document if the signature is an electronic signature and
to that electronic document. proved by showing that a prescribed procedure, not
(j) "Service provider" refers to a provider of — alterable by the parties interested in the electronic
document, existed under which —
i) Online services or network access, or the operator of
facilities therefor, including entities offering the a.) A method is used to identify the party sought to be
transmission, routing, or providing of connections for bound and to indicate said party's access to the electronic
online communications, digital or otherwise, between or document necessary for his consent or approval through
among points specified by a user, of electronic the electronic signature;
documents of the user's choosing; or b.) Said method is reliable and appropriate for the
ii) The necessary technical means by which electronic purpose for which the electronic document was
documents of an originator may be stored and made generated or communicated, in the light of all
accessible to a designated or undesignated third party. circumstances, including any relevant agreement;
Such service providers shall have no authority to modify c.) It is necessary for the party sought to be bound, in
or alter the content of the electronic document received order to proceed further with the transaction, to have
or to make any entry therein on behalf of the originator, executed or provided the electronic signature; and
addressee or any third party unless specifically authorized d.) The other party is authorized and enabled to verify the
to do so, and who shall retain the electronic document in electronic signature and to make the decision to proceed
accordance with the specific request or as necessary for with the transaction authenticated by the same.
the purpose of performing the services it was engaged to SECTION 9. Presumption Relating to Electronic
perform. Signatures. — In any proceedings involving an electronic
signature, it shall be presumed that,
CHAPTER II Legal Recognition of Electronic Data a.) The electronic signature is the signature of the person
Messages and Electronic Documents to whom it correlates; and
SECTION 6. Legal Recognition of Electronic Data b.) The electronic signature was affixed by that person
Message. — Information shall not be denied validity or with the intention of signing or approving the electronic
enforceability solely on the ground that it is in the form of document unless the person relying on the electronically
an electronic data message purporting to give rise to signed electronic document knows or has notice of
such legal effect, or that it is merely incorporated by defects in or unreliability of the signature or reliance on
reference in that electronic data message. the electronic signature is not reasonable under the
SECTION 7. Legal Recognition of Electronic Documents. circumstances.
— Electronic documents shall have the legal effect, SECTION 10. Original Documents. — (1) Where the law
validity or enforceability as any other document or legal requires information to be presented or retained in its
writing, and — original form, that requirement is met by an electronic
(a) Where the law requires a document to be in writing, data message or electronic document if:
that requirement is met by an electronic document if the (a) the integrity of the information from the time when it
said electronic document maintains its integrity and was first generated in its final form, as an electronic data
reliability and can be authenticated so as to be usable for message or electronic document is shown by evidence
subsequent reference, in that — aliunde or otherwise; and
(i) The electronic document has remained complete and (b) where it is required that information be presented,
unaltered, apart from the addition of any endorsement that the information is capable of being displayed to the
and any authorized change, or any change which arises in person to whom it is to be presented.
the normal course of communication, storage and
(2) Paragraph (1) applies whether the requirement therein
display; and
is in the form of an obligation or whether the law simply
(ii) The electronic document is reliable in the light of the provides consequences for the information not being
purpose for which it was generated and in the light of all presented or retained in its original form.
relevant circumstances.
(3) For the purposes of subparagraph (a) of paragraph (1):
(b) Paragraph (a) applies whether the requirement
(a) the criteria for assessing integrity shall be whether the
therein is in the form of an obligation or whether the law
information has remained complete and unaltered, apart
simply provides consequences for the document not
from the addition of any endorsement and any change
being presented or retained in its original form.
which arises in the normal course of communication,
(c) Where the law requires that a document be presented storage and display; and
or retained in its original form, that requirement is met by
(b) the standard of reliability required shall be assessed in
an electronic document if —
the light of the purpose for which the information was
i) There exist a reliable assurance as to the integrity of the generated and in the light of all the relevant
document from the time when it was first generated in circumstances.
its final form; and
SECTION 11. Authentication of Electronic Data Messages
and Electronic Documents. — Until the Supreme Court



by appropriate rules shall have so provided, electronic manner in which it was generated, stored or
documents, electronic data messages and electronic communicated, the reliability of the manner in which its
signatures, shall be authenticated by demonstrating, originator was identified, and other relevant factor shall
substantiating and validating a claimed identity of a user, be given due regard.
device, or another entity in an information or SECTION 13. Retention of Electronic Data Message or
communication system, among other ways, as follows: Electronic Document. — Notwithstanding any provision
(a) The electronic signature shall be authenticated by of law, rule or regulation to the contrary —
proof that a letter, character, number or other symbol in (a) The requirement in any provision of law that certain
electronic form representing the persons named in and documents be retained in their original form is satisfied
attached to or logically associated with an electronic data by retaining them in the form of an electronic data
message, electronic document, or that the appropriate message or electronic document which —
methodology or security procedures, when applicable,
were employed or adopted by a person and executed or i. Remains accessible so as to be usable for subsequent
adopted by such person, with the intention of reference;
authenticating or approving an electronic data message ii. Is retained in the format in which it was generated, sent
or electronic document; or received, or in a format which can be demonstrated to
(b) The electronic data message or electronic document accurately represent the electronic data message or
shall be authenticated by proof that an appropriate electronic document generated, sent or received;
security procedure, when applicable was adopted and iii. Enables the identification of its originator and
employed for the purpose of verifying the originator of an addressee, as well as the determination of the date and
electronic data message or electronic document, or the time it was sent or received.
detecting error or alteration in the communication,
content or storage of an electronic document or (b) The requirement referred to in paragraph (a) is
electronic data message from a specific point, which, satisfied by using the services of a third party, provided
using algorithm or codes, identifying words or numbers, that the conditions set forth in subparagraphs (i), (ii) and
encryptions, answers back or acknowledgment (iii) of paragraph (a) are met.
procedures, or similar security devices. SECTION 14. Proof by Affidavit. — The matters referred to
The Supreme Court may adopt such other authentication in Section 12, on admissibility and Section 9, on the
procedures, including the use of electronic notarization presumption of integrity, may be presumed to have been
systems as necessary and advisable, as well as the established by an affidavit given to the best of the
certificate of authentication on printed or hard copies of deponent's knowledge subject to the rights of parties in
the electronic documents or electronic data messages by interest as defined in the following section.
electronic notaries, service providers and other duly SECTION 15. Cross-Examination. — (1) A deponent of an
recognized or appointed certification authorities. affidavit referred to in Section 14 that has been
The person seeking to introduce an electronic data introduced in evidence may be cross-examined as of right
message or electronic document in any legal proceeding by a party to the proceedings who is adverse in interest to
has the burden of proving its authenticity by evidence the party who has introduced the affidavit or has caused
capable of supporting a finding that the electronic data the affidavit to be introduced.
message or electronic document is what the person (2) Any party to the proceedings has the right to
claims it to be. cross-examine a person referred to in Section 11,
In the absence of evidence to the contrary, the integrity of paragraph 4, sub-paragraph c.
the information and communication system in which an
electronic data message or electronic document is CHAPTER III Communication of Electronic Data
recorded or stored may be established in any legal
Messages or Electronic Documents
proceeding —
SECTION 16. Formation and Validity of Electronic
(a) By evidence that at all material times the information
Contracts. — (1) Except as otherwise agreed by the
and communication system or other similar device was
parties, an offer, the acceptance of an offer and such
operating in a manner that did not affect the integrity of
other elements required under existing laws for the
the electronic data message or electronic document, and
formation of contracts may be expressed in,
there are no other reasonable grounds to doubt the
demonstrated and proved by means of electronic data
integrity of the information and communication system;
messages or electronic documents and no contract shall
(b) By showing that the electronic data message or be denied validity or enforceability on the sole ground
electronic document was recorded or stored by a party to that it is in the form of an electronic data message or
the proceedings who is adverse in interest to the party electronic document, or that any or all of the elements
using it; or required under existing laws for the formation of the
(c) By showing that the electronic data message or contracts is expressed, demonstrated and proved by
electronic document was recorded or stored in the usual means of electronic data messages or electronic
and ordinary course of business by a person who is not a documents.
party to the proceedings and who did not act under the (2) Electronic transactions made through networking
control of the party using the record. among banks, or linkages thereof with other entities or
SECTION 12. Admissibility and Evidential Weight of networks, and vice versa, shall be deemed consummated
Electronic Data Messages or Electronic Documents. — In upon the actual dispensing of cash or the debit of one
any legal proceedings, nothing in the application of the account and the corresponding credit to another,
rules on evidence shall deny the admissibility of an whether such transaction is initiated by the depositor or
electronic data message or electronic document in by an authorized collecting party: Provided, That the
evidence — obligation of one bank, entity, or person similarly situated
to another arising therefrom shall be considered absolute
a. On the sole ground that it is in electronic form; or and shall not be subjected to the process of preference of
b. On the ground that it is not in the standard written credits.
form, and the electronic data message or electronic SECTION 17. Recognition by Parties of Electronic Data
document meeting, and complying with the Message or Electronic Document. — As between the
requirements under Sections 6 or 7 hereof shall be the originator and the addressee of an electronic data
best evidence of the agreement and transaction message or electronic document, a declaration of will or
contained therein. other statement shall not be denied legal effect, validity
In assessing the evidential weight of an electronic data
message or electronic document, the reliability of the



or enforceability solely on the ground that it is in the form (b) That electronic data message or electronic document
of an electronic data message or electronic document. is sent to an information system which is not so
SECTION 18. Attribution of Electronic Data Message. — (1) designated by the addressee for the purpose.
An electronic data message or electronic document is SECTION 20. Agreement on Acknowledgment of Receipt
that of the originator if it was sent by the originator of Electronic Data Messages or Electronic Documents. —
himself. The following rules shall apply where, on or before
(2) As between the originator and the addressee, an sending an electronic data message or electronic
electronic data message or electronic document is document, the originator and the addressee have agreed,
deemed to be that of the originator if it was sent: or in that electronic document or electronic data
message, the originator has requested, that receipt of the
(a) by a person who had the authority to act on behalf of electronic document or electronic data message be
the originator with respect to that electronic data acknowledged:
message or electronic document; or
a.) Where the originator has not agreed with the
(b) by an information system programmed by, or on addressee that the acknowledgment be given in a
behalf of the originator to operate automatically. particular form or by a particular method, an
(3) As between the originator and the addressee, an acknowledgment may be given by or through any
addressee is entitled to regard an electronic data communication by the addressee, automated or
message or electronic document as being that of the otherwise, or any conduct of the addressee, sufficient to
originator, and to act on that assumption, if: indicate to the originator that the electronic data
message or electronic document has been received.
(a) in order to ascertain whether the electronic data
message or electronic document was that of the b.) Where the originator has stated that the effect or
originator, the addressee properly applied a procedure significance of the electronic data message or electronic
previously agreed to by the originator for that purpose; or document is conditional on receipt of the
acknowledgment thereof, the electronic data message or
(b) the electronic data message or electronic document electronic document is treated as though it has never
as received by the addressee resulted from the actions of been sent, until the acknowledgment is received.
a person whose relationship with the originator or with
any agent of the originator enabled that person to gain c.) Where the originator has not stated that the effect or
access to a method used by the originator to identify significance of the electronic data message or electronic
electronic data messages or electronic documents as his document is conditional on receipt of the
own. acknowledgment, and the acknowledgment has not
been received by the originator within the time specified
(4) Paragraph (3) does not apply: or agreed or, if no time has been specified or agreed,
(a) as of the time when the addressee has both received within a reasonable time, the originator may give notice
notice from the originator that the electronic data to the addressee stating that no acknowledgment has
message or electronic document is not that of the been received and specifying a reasonable time by which
originator, and has reasonable time to act accordingly; or the acknowledgment must be received; and if the
acknowledgment is not received within the time
(b) in a case within paragraph (3) sub-paragraph (b), at specified in subparagraph (c), the originator may, upon
any time when the addressee knew or should have notice to the addressee, treat the electronic data
known, had it exercised reasonable care or used any message or electronic document as though it had never
agreed procedure, that the electronic data message or been sent, or exercise any other rights it may have.
electronic document was not that of the originator.
SECTION 21. Time of Dispatch of Electronic Data
(5) Where an electronic data message or electronic Messages or Electronic Documents. — Unless otherwise
document is that of the originator or is deemed to be that agreed between the originator and the addressee, the
of the originator, or the addressee is entitled to act on dispatch of an electronic data message or electronic
that assumption, then, as between the originator and the document occurs when it enters an information system
addressee, the addressee is entitled to regard the outside the control of the originator or of the person who
electronic data message or electronic document as sent the electronic data message or electronic document
received as being what the originator intended to send, on behalf of the originator.
and to act on that assumption. The addressee is not so
entitled when it knew or should have known, had it SECTION 22. Time of Receipt of Electronic Data Messages
exercised reasonable care or used any agreed procedure, or Electronic Documents. — Unless otherwise agreed
that the transmission resulted in any error in the between the originator and the addressee, the time of
electronic data message or electronic document as receipt of an electronic data message or electronic
received. document is as follows:
(6) The addressee is entitled to regard each electronic (a.) If the addressee has designated an information
data message or electronic document received as a system for the purpose of receiving electronic data
separate electronic data message or electronic document messages or electronic documents, receipt occurs at the
and to act on that assumption, except to the extent that it time when the electronic data message or electronic
duplicates another electronic data message or electronic document enters the designated information system:
document and the addressee knew or should have Provided, however, That if the originator and the
known, had it exercised reasonable care or used any addressee are both participants in the designated
agreed procedure, that the electronic data message or information system, receipt occurs at the time when the
electronic document was a duplicate. electronic data message or electronic document is
retrieved by the addressee.
SECTION 19. Error on Electronic Data Message or
Electronic Document. — The addressee is entitled to (b.) If the electronic data message or electronic
regard the electronic data message or electronic document is sent to an information system of the
document received as that which the originator intended addressee that is not the designated information system,
to send, and to act on that assumption, unless the receipt occurs at the time when the electronic data
addressee knew or should have known, had the message or electronic document is retrieved by the
addressee exercised reasonable care or used the addressee;
appropriate procedure — (c.) If the addressee has not designated an information
(a) That the transmission resulted in any error therein or system, receipt occurs when the electronic data message
in the electronic data message or electronic document or electronic document enters an information system of
when the electronic data message or electronic the addressee.
document enters the designated information system, or


These rules apply notwithstanding that the place where action is carried out by using one or more electronic data
the information system is located may be different from messages or electronic documents.
the place where the electronic data message or (2) Paragraph (1) applies whether the requirement therein
electronic document is deemed to be received. is in the form of an obligation or whether the law simply
SECTION 23. Place of Dispatch and Receipt of Electronic provides consequences for failing either to carry out the
Data Message or Electronic Documents. — Unless action in writing or to use a paper document.
otherwise agreed between the originator and the (3) If a right is to be granted to, or an obligation is to be
addressee, an electronic data message or electronic acquired by, one person and no other person, and if the
document is deemed to be dispatched at the place law requires that, in order to effect this, the right or
where the originator has its place of business and obligation must be conveyed to that person by the
received at the place where the addressee has its place of transfer, or use of, a paper document, that requirement is
business. This rule shall apply even if the originator or met if the right or obligation is conveyed by using one or
addressee had used a laptop other portable device to more electronic data messages or electronic documents:
transmit or receive his electronic data message or Provided, That a reliable method is used to render such
electronic document. This rule shall also apply to electronic data messages or electronic documents
determine the tax situs of such transaction. unique.
For the purpose hereof — (4) For the purposes of paragraph (3), the standard of
a. If the originator or the addressee has more than one reliability required shall be assessed in the light of the
place of business, the place of business is that which has purpose for which the right or obligation was conveyed
the closest relationship to the underlying transaction or, and in the light of all the circumstances, including any
where there is no underlying transaction, the principal relevant agreement.
place of business. (5) Where one or more electronic data messages or
b. If the originator or the addressee does not have a place electronic documents are used to effect any action in
of business, reference is to be made to its habitual subparagraphs (f) and (g) of Section 25, no paper
residence; or document used to effect any such action is valid unless
c. The "usual place of residence" in relation to a body the use of electronic data message or electronic
corporate, means the place where it is incorporated or document has been terminated and replaced by the use
otherwise legally constituted. of paper documents. A paper document issued in these
circumstances shall contain a statement of such
SECTION 24. Choice of Security Methods. — Subject to termination. The replacement of electronic data
applicable laws and/or rules and guidelines promulgated messages or electronic documents by paper documents
by the Department of Trade and Industry with other shall not affect the rights or obligations of the parties
appropriate government agencies, parties to any involved.
electronic transaction shall be free to determine the type
and level of electronic data message or electronic (6) If a rule of law is compulsorily applicable to a contract
document security needed, and to select and use or of carriage of goods which is in, or is evidenced by, a
implement appropriate technological methods that suit paper document, that rule shall not be inapplicable to
their needs. such a contract of carriage of goods which is evidenced
by one or more electronic data messages or electronic
documents by reason of the fact that the contract is
PART III Electronic Commerce in Carriage of evidenced by such electronic data message or electronic
documents instead of by a paper document.
Goods
SECTION 25. Actions Related to Contracts of Carriage of
Goods. — Without derogating from the provisions of Part PART IV Electronic Transactions in Government
Two of this Act, this Chapter applies to any action in SECTION 27. Government Use of Electronic Data
connection with, or in pursuance of, a contract of carriage Messages, Electronic Documents and Electronic
of goods, including but not limited to: Signatures. — Notwithstanding any law to the contrary,
(a) (i) furnishing the marks, number, quantity or weight of within two (2) years from the date of the effectivity of this
goods; Act, all departments, bureaus, offices and agencies of the
government, as well as all government-owned and
(ii) stating or declaring the nature or value of goods; -controlled corporations, that pursuant to law require or
(iii) issuing a receipt for goods; accept the filing of documents, require that documents
be created, or retained and/or submitted, issue permits,
(iv) confirming that goods have been loaded; licenses or certificates of registration or approval, or
(b) (i) notifying a person of terms and conditions of the provide for the method and manner of payment or
contract; settlement of fees and other obligations to the
(ii) giving instructions to a carrier; government, shall —
(c) (i) claiming delivery of goods; (a) accept the creation, filing or retention of such
documents in the form or electronic data messages or
(ii) authorizing release of goods; electronic documents;
(iii) giving notice of loss of, or damage to goods; (b) issue permits, licenses, or approval in the form of
(d) giving any other notice or statement in connection electronic data messages or electronic documents;
with the performance of the contract; (c) require and/or accept payments, and issue receipts
(e) undertaking to deliver goods to a named person or a acknowledging such payments, through systems using
person authorized to claim delivery; electronic data messages or electronic documents; or
(f) granting, acquiring, renouncing, surrendering, (d) transact the government business and/or perform
transferring or negotiating rights in goods; governmental functions using electronic data messages
or electronic documents, and for the purpose, are
(g) acquiring or transferring rights and obligations under authorized to adopt and promulgate, after appropriate
the contract. public hearing and with due publication in newspapers of
SECTION 26. Transport Documents. — (1) Subject to general circulation, the appropriate rules, regulations, or
paragraph (3), where the law requires that any action guidelines, to among others, specify —
referred to in Section 25 be carried out in writing or by
using a paper document, that requirement is met if the


1) the manner and format in which such electronic data for the purpose of electronic commerce and to maximize
messages or electronic documents shall be filed, created, the convergence of ICT in the installation of the GII.
retained or issued; SECTION 29. Authority of the Department of Trade and
2) where and when such electronic data messages or Industry and Participating Entities. — The Department of
electronic documents have to be signed, the use of an Trade and Industry (DTI) shall direct and supervise the
electronic signature, the type of electronic signature promotion and development of electronic commerce in
required; the country with relevant government agencies, without
3) the format of an electronic data message or electronic prejudice to the provisions of Republic Act 7653 (Charter
document and the manner the electronic signature shall of Bangko Sentral ng Pilipinas) and Republic Act No. 337,
be affixed to the electronic data message or electronic (General Banking Act) as amended.
document; Among others, the DTI is empowered to promulgate rules
4) the control processes and procedures as appropriate to and regulations, as well as provide quality standards or
ensure adequate integrity, security and confidentiality of issue certifications, as the case may be, and perform such
electronic data messages or electronic documents or other functions as may be necessary for the
records or payments; implementation of this Act in the area of electronic
commerce to include, but not limited to, the installation
5) other attributes required of electronic data messages of an online public information and quality and price
or electronic documents or payments; and monitoring system for goods and services aimed in
6) the full or limited use of the documents and papers for protecting the interests of the consuming public availing
compliance with the government requirements: of the advantages of this Act.
Provided, That this Act shall by itself mandate any
department of the government, organ of state or
statutory corporation to accept or issue any document in PART V Final Provisions
the form of electronic data messages or electronic SECTION 30. Extent of Liability of a Service Provider. —
documents upon the adoption, promulgation and Except as otherwise provided in this Section, no person or
publication of the appropriate rules, regulations, or party shall be subject to any civil or criminal liability in
guidelines. respect of the electronic data message or electronic
SECTION 28. RPWEB to Promote the Use of Electronic document for which the person or party acting as a
Documents or Electronic Data Messages in Government service provider as defined in Section 5, merely provides
and to the General Public. — Within two (2) years from access if such liability is founded on —
the effectivity of this Act, there shall be installed an a.) The obligations and liabilities of the parties under the
electronic online network in accordance with electronic data message or electronic document;
Administrative Order 332 and House of Representatives
Resolution 890, otherwise known as RPWEB, to b.) The making, publication, dissemination or distribution
implement Part IV of this Act to facilitate the open, of such material or any statement made in such material,
speedy and efficient electronic online transmission, including possible infringement of any right subsisting in
conveyance and use of electronic data messages or or in relation to such material: Provided, That
electronic documents amongst all government i. The service provider does not have actual knowledge, or
departments, agencies, bureaus, offices down to the is not aware of the facts or circumstances from which it is
division level and to the regional and provincial offices as apparent, that the making, publication, dissemination or
practicable as possible, government-owned and distribution of such material is unlawful or infringes any
controlled corporations, local government units, other rights subsisting in or in relation to such material;
public instrumentalities, universities, colleges and other
ii. The service provider does not knowingly receive a
schools, and universal access to the general public.
financial benefit directly attributable to the unlawful or
The RPWEB network shall serve as initial platform of the infringing activity; and
government information infrastructure (GII) to facilitate
iii. The service provider does not directly commit any
the electronic online transmission and conveyance of
infringement or other unlawful act and does not induce
government services to evolve and improve by better
or cause another person or party to commit any
technologies or kinds of electronic online wide area
infringement or other unlawful act and/or does not
networks utilizing, but not limited to, fiber optic, satellite,
benefit financially from the infringing activity or unlawful
wireless and other broadband telecommunication
act of another person or party: Provided, further, That
mediums or modes.
nothing in this Section shall affect —
To facilitate the rapid development of the GII, the
a) Any obligation founded on contract;
Department of Transportation and Communications,
National Telecommunications Commission and the b) The obligation of a service provider as such under a
National Computer Center are hereby directed to licensing or other regulatory regime established under
aggressively promote and implement a policy written law; or
environment and regulatory or non-regulatory c) Any obligation imposed under any written law;
framework that shall lead to the substantial reduction of
costs of including, but not limited to, lease lines, land, d) The civil liability of any party to the extent that such
satellite and dial-up telephone access, cheap broadband liability forms the basis for injunctive relief issued by a
and wireless accessibility by government departments, court under any law requiring that the service provider
agencies, bureaus, offices, government-owned and take or refrain from actions necessary to remove, block or
controlled corporations, local government units, other deny access to any material, or to preserve evidence of a
public instrumentalities and the general public, to violation of law.
include the establishment of a government website SECTION 31. Lawful Access. — Access to an electronic file,
portal and a domestic internet exchange system to or an electronic signature of an electronic data message
facilitate strategic access to government and amongst or electronic document shall only be authorized and
agencies thereof and the general public and for the enforced in favor of the individual or entity having a legal
speedier flow of locally generated internet traffic within right to the possession or the use of the plaintext,
the Philippines. electronic signature or file and solely for the authorized
The physical infrastructure of cable and wireless system purposes. The electronic key for identity or integrity shall
for cable TV and broadcast excluding programming and not be made available to any person or party without the
content and the management thereof shall be consent of the individual or entity in lawful possession of
considered as within the activity of telecommunications that electronic key.
SECTION 32. Obligation of Confidentiality. — Except for
the purposes authorized under this Act, any person who



obtained access to any electronic key, electronic data needed for the continued implementation shall be
message or electronic document, book, register, included in the annual General Appropriations Act.
correspondence, information, or other material pursuant SECTION 37. Statutory Interpretation. — Unless otherwise
to any powers conferred under this Act, shall not convey expressly provided for, the interpretation of this Act shall
to or share the same with any other person. give due regard to its international origin and the need to
SECTION 33. Penalties. — The following Acts shall be promote uniformity in its application and the observance
penalized by fine and/or imprisonment, as follows: of good faith in international trade relations. The
a) Hacking or cracking which refers to unauthorized generally accepted principles of international law and
access into or interference in a computer system/server or convention on electronic commerce shall likewise be
information and communication system; or any access in considered.
order to corrupt, alter, steal, or destroy using a computer SECTION 38. Variation by Agreement. — As between
or other similar information and communication devices, parties involved in generating, sending, receiving, storing
without the knowledge and consent of the owner of the or otherwise processing electronic data message or
computer or information and communication system, electronic document, any provision of this Act may be
including the introduction of computer viruses and the varied by agreement between and among them.
like, resulting in the corruption, destruction, alteration, SECTION 39. Reciprocity. — All benefits, privileges,
theft or loss of electronic data messages or electronic advantages or statutory rules established under this Act,
documents shall be punished by a minimum fine of One including those involving practice of profession, shall be
hundred thousand pesos (P100,000.00) and a maximum enjoyed only by parties whose country of origin grants
commensurate to the damage incurred and a mandatory the same benefits and privileges or advantages to Filipino
imprisonment of six (6) months to three (3) years; citizens.
b) Piracy or the unauthorized copying, reproduction, SECTION 40. Separability Clause. — The provisions of this
dissemination, distribution, importation, use, removal, Act are hereby declared separable and in the event of any
alteration, substitution, modification, storage, uploading, such provision is declared unconstitutional, the other
downloading, communication, making available to the provisions to remain in force and effect.
public, or broadcasting of protected material, electronic
signature or copyrighted works including legally SECTION 41. Repealing Clause. — All other laws, decrees,
protected sound recordings or phonograms or rules and regulations or parts thereof which are
information material on protected works, through the use inconsistent with the provisions of this Act are hereby
of telecommunication networks, such as, but not limited repealed, amended or modified accordingly.
to, the internet, in a manner that infringes intellectual SECTION 42. Effectivity. — This Act shall take effect
property rights shall be punished by a minimum fine of immediately after its publication in the Official Gazette or
One hundred thousand pesos (P100,000.00) and a in at least two (2) newspapers of general circulation.
maximum commensurate to the damage incurred and a
mandatory imprisonment of six (6) months to three (3) Approved: June 14, 2000
years; Published in Malaya and Philippine Post on June 19,
c) Violations of the Consumer Act or Republic Act No. 2000. Published in the Official Gazette, Vol. 96 No. 48,
7394 and other relevant or pertinent laws through page 7675 on November 27, 2000.
transactions covered by or using electronic data (Electronic Commerce Act, Republic Act No. 8792, [June
messages or electronic documents, shall be penalized 14, 2000])
with the same penalties as provided in those laws;

d) Other violations of the provisions of this Act, shall be
penalized with a maximum penalty of One million pesos A.M. No. 01-7-01-SC | Rules on Electronic
(P1,000,000.00) or six (6) years imprisonment.
Evidence
SECTION 34. Implementing Rules and Regulations. —
The DTI, Department of Budget and Management and
the Bangko Sentral ng Pilipinas are hereby empowered to July 17, 2001
enforce the provisions of this Act and issue implementing A.M. No. 01-7-01-SC
rules and regulations necessary, in coordination with the
Department of Transportation and Communications, RULES ON ELECTRONIC EVIDENCE
National Telecommunications Commission, National
Computer Center, National Information Technology
Council, Commission on Audit, other concerned agencies RULE 1 Coverage
and the private sector, to implement this Act within sixty SECTION 1. Scope. — Unless otherwise provided herein,
(60) days after its approval. these Rules shall apply whenever an electronic document
Failure to issue rules and regulations shall not in any or electronic data message, as defined in Rule 2 hereof,. is
manner affect the executory nature of the provisions of offered or used in evidence.
this Act. SECTION 2. Cases covered. — These Rules shall apply to all
SECTION 35. Oversight Committee. — There shall be a civil actions and proceedings, as well as quasi-judicial and
Congressional Oversight Committee composed of the administrative cases.
Committees on Trade and Industry/Commerce, Science SECTION 3. Application of other rules on evidence. — In all
and Technology, Finance and Appropriations of both the matters not specifically covered by these Rules, the Rules
Senate and House of Representatives, which shall meet at of Court and pertinent provisions of statutes containing
least every quarter of the first two years and every rules on evidence shall apply.
semester for the third year after the approval of this Act to
oversee its implementation. The DTI, DBM, Bangko
Sentral ng Pilipinas, and other government agencies as RULE 2 Definition of Terms and Construction
may be determined by the Congressional Committee
shall provide a quarterly performance report of their SECTION 1. Definition of Terms. — For purposes of these
actions taken in the implementation of this Act for the Rules, the following terms are defined, as follows:
first three (3) years. (a) "Asymmetric or public cryptosystem" means a system
SECTION 36. Appropriations. — The amount necessary to capable of generating a secure key pair, consisting of a
carry out the provisions of Sections 27 and 28 of this Act private key for creating a digital signature, and a public
shall be charged against any available funds and/or key for verifying the digital signature.
savings under the General Appropriations Act of 2000 in (b) "Business records " include records of any business,
the first year of effectivity of this Act. Thereafter, the funds institution, association, profession, occupation, and



calling of every kind, whether or not conducted for profit, such that the latter can verify the digital signature that
or for legitimate or illegitimate purposes. the former creates.
(c) "Certificate" means an electronic document issued to (n) "Private Key" refers to the key of a key pair used to
support a digital signature which purports to confirm the create a digital signature.
identity or other significant characteristics of the person (o) "Public Key" refers to the key of a key pair used to verify
who holds a particular key pair. a digital signature.
(d) "Computer" refers to any single or interconnected SECTION 2. Construction. — These Rules shall be liberally
device or apparatus, which, by electronic, construed to assist the parties in obtaining a just,
electro-mechanical or magnetic impulse, or by other expeditious, and inexpensive determination of cases.
means with the same function, can receive, record,
transmit, store, process, correlate, analyze, project, retrieve The interpretation of these Rules shall also take into
and/or produce information, data, text, graphics, figures, consideration the international origin of Republic Act No.
voice, video, symbols or other modes of expression or 8792, otherwise known as the Electronic Commerce Act.
perform any one or more of these functions.
(e) "Digital Signature" refers to an electronic signature RULE 3 Electronic Documents
consisting of a transformation of an electronic document
or an electronic data message using an asymmetric or SECTION 1. Electronic Documents as functional
public cryptosystem such that a person having the initial equivalent of paper-based documents. — Whenever a
untransformed electronic document and the signer's rule of evidence refers to the term writing, document,
public key can accurately determine: record, instrument, memorandum or any other form of
writing, such term shall be deemed to include an
(i) whether the transformation was created using the
electronic document as defined in these Rules.
private key that corresponds to the signer's public key;
and, SECTION 2. Admissibility. — An electronic document is
admissible in evidence if it complies with the rules on
(ii) whether the initial electronic document had been
admissibility prescribed by the Rules of Court and related
altered after the transformation was made.
laws and is authenticated in the manner prescribed by
(f) "Digitally signed" refers to an electronic document or these Rules.
electronic data message bearing a digital signature
SECTION 3. Privileged communication. — The
verified by the public key listed in a certificate.
confidential character of a privileged communication is
(g) "Electronic data message" refers to information not lost solely on the ground that it is in the form of an
generated, sent, received or stored by electronic, optical electronic document.
or similar means.
(h) "Electronic document" refers to information or the
representation of information, data, figures, symbols or RULE 4 Best Evidence Rule
other modes of written expression, described or however SECTION 1. Original of an Electronic Document. — An
represented, by which a right is established or an electronic document shall be regarded as the equivalent
obligation extinguished, or by which a fact may be proved of an original document under the Best Evidence Rule if
and affirmed, which is received, recorded, transmitted, it is a printout or output readable by sight or other means,
stored, processed, retrieved or produced electronically. It shown to reflect the data accurately.
includes digitally signed documents and any print-out or
output, readable by sight or other means, which SECTION 2. Copies as equivalent of the originals. — When
accurately reflects the electronic data message or a document is in two or more copies executed at or about
electronic document. For purposes of these Rules, the the same time with identical contents, or is a counterpart
term "electronic document" may be used produced by the same impression as the original, or from
interchangeably with "electronic data message". the same matrix, or by mechanical or electronic
re-recording, or by chemical reproduction, or by other
(i) "Electronic key" refers to a secret code which secures equivalent techniques which accurately reproduces the
and defends sensitive information that crosses over original, such copies or duplicates shall be regarded as
public channels into a form decipherable only with a the equivalent of the original.
matching electronic key.
Notwithstanding the foregoing, copies or duplicates shall
(j) "Electronic signature" refers to any distinctive mark, not be admissible to the same extent as the original if:
characteristic and/or sound in electronic form,
representing the identity of a person and attached to or (a) a genuine question is raised as to the authenticity of
logically associated with the electronic data message or the original; or
electronic document or any methodology or procedure (b) in the circumstances it would be unjust or inequitable
employed or adopted by a person and executed or to admit the copy in lieu of the original.
adopted by such person with the intention of
authenticating, signing or approving an electronic data
message or electronic document. For purposes of these RULE 5 Authentication of Electronic Documents
Rules, an electronic signature includes digital signatures.
SECTION 1. Burden of proving authenticity. — The person
(k) "Ephemeral electronic communication" refers to seeking to introduce an electronic document in any legal
telephone conversations, text messages, chatroom proceeding has the burden of proving its authenticity in
sessions, streaming audio, streaming video, and other the manner provided in this Rule.
electronic forms of communication the evidence of which
SECTION 2. Manner of authentication. — Before any
is not recorded or retained.
private electronic document offered as authentic is
(l) "Information and Communication System" refers to a received in evidence, its authenticity must be proved by
system for generating, sending, receiving, storing or any of the following means:
otherwise processing electronic data messages or
(a) by evidence that it had been digitally signed by the
electronic documents and includes the computer system
person purported to have signed the same;
or other similar devices by or in which data are recorded
or stored and any procedure related to the recording or (b) by evidence that other appropriate security
storage of electronic data messages or electronic procedures or devices as may be authorized by the
documents. Supreme Court or by law for authentication of electronic
documents were applied to the document; or
(m) "Key Pair" in an asymmetric cryptosystem refers to
the private key and its mathematically related public key (c) by other evidence showing its integrity and reliability
to the satisfaction of the Judge.


SECTION 3. Proof of electronically notarized document. — which the electronic data message or electronic
A document electronically notarized in accordance with document was based; or
the rules promulgated by the Supreme Court shall be (f) Other factors which the court may consider as
considered as a public document and proved as a notarial affecting the accuracy or integrity of the electronic
document under the Rules of Court. document or electronic data message.
SECTION 2. Integrity of an information and
RULE 6 Electronic Signatures communication system. — In any dispute involving the
integrity of the information and communication system
SECTION 1. Electronic signature. — An electronic in which an electronic document or electronic data
signature or a digital signature authenticated in the message is recorded or stored, the court may consider,
manner prescribed hereunder is admissible in evidence among others, the following factors:
as the functional equivalent of the signature of a person
on a written document. (a) Whether the information and communication system
or other similar device was operated in a manner that did
SECTION 2. Authentication of electronic signatures. — An not affect the integrity of the electronic document, and
electronic signature may be authenticated in any of the there are no other reasonable grounds to doubt the
following manner: integrity of the information and communication system;
(a) By evidence that a method or process was utilized to (b) Whether the electronic document was recorded or
establish a digital signature and verify the same; stored by a party to the proceedings with interest adverse
(b) By any other means provided by law; or to that of the party using it; or
(c) By any other means satisfactory to the judge as (c) Whether the electronic document was recorded or
establishing the genuineness of the electronic signature. stored in the usual and ordinary course of business by a
person who is not a party to the proceedings and who did
SECTION 3. Disputable presumptions relating to
not act under the control of the party using it.
electronic signatures. — Upon the authentication of an
electronic signature, it shall be presumed that:
(a) The electronic signature is that of the person to whom RULE 8 Business Records as Exception to the
it correlates; Hearsay Rule
(b) The electronic signature was affixed by that person
with the intention of authenticating or approving the SECTION 1. Inapplicability of the hearsay rule. — A
electronic document to which it is related or to indicate memorandum, report, record or data compilation of acts,
such person's consent to the transaction embodied events, conditions, opinions, or diagnoses, made by
therein; and electronic, optical or other similar means at or near the
time of or from transmission or supply of information by a
(c) The methods or processes utilized to affix or verify the person with knowledge thereof, and kept in the regular
electronic signature operated without error or fault. course or conduct of a business activity, and such was the
SECTION 4. Disputable presumptions relating to digital regular practice to make the memorandum, report,
signatures. — Upon the authentication of a digital record, or data compilation by electronic, optical or
signature, it shall be presumed, in addition to those similar means, all of which are shown by the testimony of
mentioned in the immediately preceding section, that: the custodian or other qualified witnesses, is excepted
from the rule on hearsay evidence.
(a) The information contained in a certificate is correct;
SECTION 2. Overcoming the presumption. — The
(b) The digital signature was created during the presumption provided for in Section 1 of this Rule may be
operational period of a certificate; overcome by evidence of the untrustworthiness of the
(c) No cause exists to render a certificate invalid or source of information or the method or circumstances of
revocable; the preparation, transmission or storage thereof.
(d) The message associated with a digital signature has
not been altered from the time it was signed, and, RULE 9 Method of Proof
(e) A certificate had been issued by the certification
SECTION 1. Affidavit evidence. — All matters relating to
authority indicated therein.
the admissibility and evidentiary weight of an electronic
document may be established by an affidavit stating
facts of direct personal knowledge of the affiant or based
RULE 7 Evidentiary Weight of Electronic on authentic records. The affidavit must affirmatively
Documents show the competence of the affiant to testify on the
SECTION 1. Factors for assessing evidentiary weight. — In matters contained therein.
assessing the evidentiary weight of an electronic SECTION 2. Cross-examination of deponent. — The affiant
document, the following factors may be considered: shall be made to affirm the contents of the affidavit in
(a) The reliability of the manner or method in which it was open court and may be cross-examined as a matter of
generated, stored or communicated, including but not right by the adverse party.
limited to input and output procedures, controls, tests
and checks for accuracy and reliability of the electronic
data message or document, in the light of all the RULE 10 Examination of Witnesses
circumstances as well as any relevant agreement; SECTION 1. Electronic testimony. — After summarily
(b) The reliability of the manner in which its originator hearing the parties pursuant to Rule 9 of these Rules, the
was identified; court may authorize the presentation of testimonial
evidence by electronic means. Before so authorizing, the
(c) The integrity of the information and communication court shall determine the necessity for such presentation
system in which it is recorded or stored, including but not and prescribe terms and conditions as may be necessary
limited to the hardware and computer programs or under the circumstances, including the protection of the
software used as well as programming errors; rights of the parties and witnesses concerned.
(d) The familiarity of the witness or the person who made SECTION 2. Transcript of electronic testimony. — When
the entry with the communication and information examination of a witness is done electronically, the entire
system; proceedings, including the questions and answers, shall
(e) The nature and quality of the information which went be transcribed by a stenographer, stenotypist or other
into the communication and information system upon recorder authorized for the purpose, who shall certify as


correct the transcript done by him. The transcript should productivity. Unencumbered market competition also
reflect the fact that the proceedings, either in whole or in serves the interest of consumers by allowing them to
part, had been electronically recorded. exercise their right of choice over goods and services
SECTION 3. Storage of electronic evidence. — The offered in the market.
electronic evidence and recording thereof as well as the Pursuant to the constitutional goals for the national
stenographic notes shall form part of the record of the economy to attain a more equitable distribution of
case. Such transcript and recording shall be deemed opportunities, income, and wealth; a sustained increase
prima facie evidence of such proceedings. 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,
RULE 11 Audio, Photographic, Video, and especially the underprivileged and the constitutional
Ephemeral Evidence mandate that the State shall regulate or prohibit
monopolies when the public interest so requires and that
SECTION 1. Audio, video and similar evidence. — Audio, no combinations in restraint of trade or unfair
photographic and video evidence of events, acts or competition shall be allowed, the State shall:
transactions shall be admissible provided it shall be
(a) Enhance economic efficiency and promote free and
shown, presented or displayed to the court and shall be
fair competition in trade, industry and all commercial
identified, explained or authenticated by the person who
economic activities, as well as establish a National
made the recording or by some other person competent
Competition Policy to be implemented by the
to testify on the accuracy thereof.
Government of the Republic of the Philippines and all of
SECTION 2. Ephemeral electronic communications. — its political agencies as a whole;
Ephemeral electronic communications shall be proven by
(b) Prevent economic concentration which will control
the testimony of a person who was a party to the same or
the production, distribution, trade, or industry that will
has personal knowledge thereof. In the absence or
unduly stifle competition, lessen, manipulate or constrict
unavailability of such witnesses, other competent
the discipline of free markets; and
evidence may be admitted.
(c) Penalize all forms of anti-competitive agreements,
A recording of the telephone conversation or ephemeral
abuse of dominant position and anti-competitive
electronic communication shall be covered by the
mergers and acquisitions, with the objective of protecting
immediately preceding section.
consumer welfare and advancing domestic and
If the foregoing communications are recorded or international trade and economic development.
embodied in an electronic document, then the provisions
Section 3. Scope and Application. — This Act shall be
of Rule 5 shall apply.
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
RULE 12 Effectivity trade having direct, substantial, and reasonably
SECTION 1. Applicability to pending cases. — These Rules foreseeable effects in trade, industry, or commerce in the
shall apply to cases pending after their effectivity. Republic of the Philippines, including those that result
SECTION 2. Effectivity. — These Rules shall take effect on from acts done outside the Republic of the Philippines.
the first day of August, 2001 following their publication This Act shall not apply to the combinations or activities
before the 20th of July, 2001 in two newspapers of general of workers or employees nor to agreements or
circulation in the Philippines. arrangements with their employers when such
(Rules on Electronic Evidence, A.M. No. 01-7-01-SC, [July 17, combinations, activities, agreements, or arrangements
2001]) are designed solely to facilitate collective bargaining in
respect of conditions of employment.

Section 4. Definition of Terms. – As used in this Act:
RA No 10667 | Philippine Competition (a) Acquisition refers to the purchase of securities or
Act assets, through contract or other means, for the purpose
of obtaining control by:
(1) One (1) entity of the whole or part of another;
Republic Act No. 10667
(2) Two (2) or more entities over another; or
AN ACT PROVIDING FOR A NATIONAL COMPETITION
POLICY PROHIBITING ANTI-COMPETITIVE (3) One (1) or more entities over one (1) or more entities;
AGREEMENTS, ABUSE OF DOMINANT POSITION AND (b) Agreement refers to any type or form of contract,
ANTI-COMPETITIVE MERGERS AND ACQUISITIONS, arrangement, understanding, collective
ESTABLISHING THE PHILIPPINE COMPETITION recommendation, or concerted action, whether formal or
COMMISSION AND APPROPRIATING FUNDS THEREFOR informal, explicit or tacit, written or oral;
Be it enacted by the Senate and House of (c) Conduct refers to any type or form of undertaking,
Representatives of the Philippines in Congress collective recommendation, independent or concerted
assembled: action or practice, whether formal or informal;
(d) Commission refers to the Philippine Competition
CHAPTER I GENERAL PROVISIONS Commission created under this Act;
(e) Confidential business information refers to
Section 1. Short Title. – This Act shall be known as the
information which concerns or relates to the operations,
"Philippine Competition Act".
production, sales, shipments, purchases, transfers,
Section 2. Declaration of Policy. – The efficiency of identification of customers, inventories, or amount or
market competition as a mechanism for allocating goods source of any income, profits, losses, expenditures;
and services is a generally accepted precept. The State
(f) Control refers to the ability to substantially influence or
recognizes that past measures undertaken to liberalize
direct the actions or decisions of an entity, whether by
key sectors in the economy need to be reinforced by
contract, agency or otherwise;
measures that safeguard competitive conditions. The
State also recognizes that the provision of equal (g) Dominant position refers to a position of economic
opportunities to all promotes entrepreneurial spirit, strength that an entity or entities hold which makes it
encourages private investments, facilitates technology capable of controlling the relevant market independently
development and transfer and enhances resource


from any or a combination of the following: competitors, term of five (5) years. In case a vacancy occurs before the
customers, suppliers, or consumers; expiration of the term of office, the appointment to such
(h) Entity refers to any person, natural or juridical, sole vacancy shall only be for the unexpired term of the
proprietorship, partnership, combination or association in predecessor.
any form, whether incorporated or not, domestic or The Chairperson and the Commissioners shall enjoy
foreign, including those owned or controlled by the security of tenure and shall not be suspended or removed
government, engaged directly or indirectly in any from office except for just cause as provided by law.
economic activity; Section 8. Prohibitions and Disqualifications. – The
(i) Market refers to the group of goods or services that are Commissioners shall not, during their tenure, hold any
sufficiently interchangeable or substitutable and the other office or employment. They shall not, during their
object of competition, and the geographic area where tenure, directly or indirectly practice any profession,
said goods or services are offered; except in a teaching capacity, participate in any business,
(j) Merger refers to the joining of two (2) or more entities or be financially interested in any contract with, or any
into an existing entity or to form a new entity; franchise, or special privileges granted by the
government or any subdivision, agency, or
(k) Relevant market refers to the market in which a instrumentality thereof, including government-owned
particular good or service is sold and which is a and -controlled corporations or their subsidiaries. They
combination of the relevant product market and the shall strictly avoid conflict of interest in the conduct of
relevant geographic market, defined as follows: their office. They shall not be qualified to run for any
(1) A relevant product market comprises all those goods office in the election immediately succeeding their
and/or services which are regarded as interchangeable or cessation from office: Provided, That the election
substitutable by the consumer or the customer, by reason mentioned hereof is not a Barangay election or a
of the goods and/or services’ characteristics, their prices Sangguniang Kabataan election. Provided, they shall not
and their intended use; and be allowed to personally appear or practice as counsel or
agent on any matter pending before the Commission for
(2) The relevant geographic market comprises the area in two (2) years following their cessation from office.
which the entity concerned is involved in the supply and
demand of goods and services, in which the conditions of No spouse or relative by consanguinity or affinity within
competition are sufficiently homogenous and which can the fourth civil degree of any of the Commissioners, the
be distinguished from neighboring areas because the Chairperson and the Executive Director of the
conditions of competition are different in those areas. Commission may appear as counsel nor agent on any
matter pending before the Commission or transact
business directly or indirectly therein during incumbency
CHAPTER II PHILIPPINE COMPETITION and within two (2) years from cessation of office.
COMMISSION Section 9. Compensation and Other Emoluments for
Members and Personnel of the Commission.— The
Section 5. Philippine Competition Commission. – To compensation and other emoluments for the members
implement the national competition policy and attain the and personnel of the Commission shall be exempted
objectives and purposes of this Act, an independent from the coverage of Republic Act No. 6758, otherwise
quasi-judicial body is hereby created, which shall be known as the "Salary Standardization Act". For this
known as the Philippine Competition Commission (PCC), purpose, the salaries and other emoluments of the
hereinafter referred to as the Commission, and which Chairperson, the Commissioners, and personnel of the
shall be organized within sixty (60) days after the Commission shall be set based on an objective
effectivity of this Act. Upon establishment of the classification system, taking into consideration the
Commission, Executive Order No. 45 designating the importance and responsibilities attached to the
Department of Justice as the Competition Authority is respective positions, and shall be submitted to the
hereby amended. The Office for Competition (OFC) under President of the Philippines for his approval.
the Office of the Secretary of Justice shall however be
retained, with its powers and functions modified Section 10. Quorum. – Three (3) members of the
pursuant to Section 13 of this Chapter. Commission shall constitute a quorum and the
affirmative vote of three (3) members shall be necessary
The Commission shall be an attached agency to the for the adoption of any rule, ruling, order, resolution,
Office of the President. decision or other acts of the Commission.
Section 6. Composition of the Commission. – The Section 11. Staff. – The Commission shall appoint, fix the
Commission shall be composed of a Chairperson and four compensation, and determine the status, qualifications,
(4) Commissioners. The Chairperson and the and duties of an adequate staff, which shall include an
Commissioners shall be citizens and residents of the Executive Director of the Commission. The Executive
Philippines, of good moral character, of recognized Director shall be appointed by the Commission and shall
probity and independence and must have distinguished have relevant experience in any of the fields of law,
themselves professionally in public, civic or academic economics, commerce, management, finance or
service in any of the following fields: economics, law, engineering for at least ten (10) years. The members of
finance, commerce or engineering. They must have been the technical staff, except those performing purely
in the active practice of their professions for at least ten clerical functions, shall possess at least a Bachelor’s
(10) years, and must not have been candidates for any Degree in any of the following lines of specialization:
elective national or local office in the immediately economics, law, finance, commerce, engineering,
preceding elections, whether regular or special: Provided, accounting, or management.
That at least one (1) shall be a member of the Philippine
Bar with at least ten (10) years of experience in the active Section 12. Powers and Functions. — The Commission
practice of law, and at least one (1) shall be an economist. shall have original and primary jurisdiction over the
The Chairperson and the Commissioners who shall have enforcement and implementation of the provisions of
the rank equivalent of cabinet secretary and this Act, and its implementing rules and regulations. The
undersecretary, respectively, shall be appointed by the Commission shall exercise the following powers and
President. functions:
Section 7. Term of Office. – The term of office of the (a) Conduct inquiry, investigate, and hear and decide on
Chairperson and the Commissioners shall be seven (7) cases involving any violation of this Act and other existing
years without reappointment. Of the first set of competition laws motu proprio or upon receipt of a
appointees, the Chairperson shall hold office for seven (7) verified complaint from an interested party or upon
years and of the first four (4) Commissioners, two (2) shall referral by the concerned regulatory agency, and institute
hold office for a term of seven (7) years and two (2) for a the appropriate civil or criminal proceedings;


(b) Review proposed mergers and acquisitions, determine (n) Intervene or participate in administrative and

thresholds for notification, determine the requirements regulatory proceedings requiring consideration of the
and procedures for notification, and upon exercise of its provisions of this Act that are initiated by government
powers to review, prohibit mergers and acquisitions that agencies such as the Securities and Exchange
will substantially prevent, restrict, or lessen competition in Commission, the Energy Regulatory Commission and the
the relevant market; National Telecommunications Commission;
(c) Monitor and undertake consultation with stakeholders (o) Assist the National Economic and Development
and affected agencies for the purpose of understanding Authority, in consultation with relevant agencies and
market behavior; sectors, in the preparation and formulation of a national
(d) Upon finding, based on substantial evidence, that an competition policy;
entity has entered into an anti-competitive agreement or (p) Act as the official representative of the Philippine
has abused its dominant position after due notice and government in international competition matters;
hearing, stop or redress the same, by applying remedies, (q) Promote capacity building and the sharing of best
such as, but not limited to, issuance of injunctions, practices with other competition-related bodies;
requirement of divestment, and disgorgement of excess
profits under such reasonable parameters that shall be (r) Advocate pro-competitive policies of the government
prescribed by the rules and regulations implementing by:
this Act; (1) Reviewing economic and administrative regulations,
(e) Conduct administrative proceedings, impose motu proprio or upon request, as to whether or not they
sanctions, fines or penalties for any noncompliance with adversely affect relevant market competition, and
or breach of this Act and its implementing rules and advising the concerned agencies against such
regulations (IRR) and punish for contempt; regulations; and
(f) Issue subpoena duces tecum and subpoena ad (2) Advising the Executive Branch on the competitive
testificandum to require the production of books, implications of government actions, policies and
records, or other documents or data which relate to any programs; and
matter relevant to the investigation and personal (s) Charging reasonable fees to defray the administrative
appearance before the Commission, summon witnesses, cost of the services rendered.
administer oaths, and issue interim orders such as show
cause orders and cease and desist orders after due notice Section 13. Office for Competition (OFC), Powers and
and hearing in accordance with the rules and regulations Functions. — The OFC under the Department of Justice
implementing this Act; (DOJ-OFC) shall only conduct preliminary investigation
and undertake prosecution of all criminal offenses arising
(g) Upon order of the court, undertake inspections of under this Act and other competition-related laws in
business premises and other offices, land and vehicles, as accordance with Section 31 of Chapter VI of this Act. The
used by the entity, where it reasonably suspects that OFC shall be reorganized and allocated resources as may
relevant books, tax records, or other documents which be required therefor to effectively pursue such mandate.
relate to any matter relevant to the investigation are kept,
in order to prevent the removal, concealment, tampering
with, or destruction of the books, records, or other CHAPTER III PROHIBITED ACTS
documents;
Section 14. Anti-Competitive Agreements. –
(h) Issue adjustment or divestiture orders including
orders for corporate reorganization or divestment in the (a) The following agreements, between or among
manner and under such terms and conditions as may be competitors, are per se prohibited:
prescribed in the rules and regulations implementing this (1) Restricting competition as to price, or components
Act. Adjustment or divestiture orders, which are structural thereof, or other terms of trade;
remedies, should only be imposed:
(2) Fixing price at an auction or in any form of bidding
(1) Where there is no equally effective behavioral remedy; including cover bidding, bid suppression, bid rotation and
or market allocation and other analogous practices of bid
(2) Where any equally effective behavioral remedy would manipulation;
be more burdensome for the enterprise concerned than (b) The following agreements, between or among
the structural remedy. Changes to the structure of an competitors which have the object or effect of
enterprise as it existed before the infringement was substantially preventing, restricting or lessening
committed would only be proportionate to the competition shall be prohibited:
substantial risk of a lasting or repeated infringement that
derives from the very structure of the enterprise; (1) Setting, Kmiting, or controlling production, markets,
technical development, or investment;
(i) Deputize any and all enforcement agencies of the
government or enlist the aid and support of any private (2) Dividing or sharing the market, whether by volume of
institution, corporation, entity or association, in the sales or purchases, territory, type of goods or services,
implementation of its powers and functions; buyers or sellers or any other means;
(j) Monitor compliance by the person or entities (c) Agreements other than those specified in (a) and (b) of

concerned with the cease and desist order or consent this section which have the object or effect of
judgment; substantially preventing, restricting or lessening
competition shall also be prohibited: Provided, Those
(k) Issue advisory opinions and guidelines on competition which contribute to improving the production or
matters for the effective enforcement of this Act and distribution of goods and services or to promoting
submit annual and special reports to Congress, including technical or economic progress, while allowing
proposed legislation for the regulation of commerce, consumers a fair share of the resulting benefits, may not
trade, or industry; necessarily be deemed a violation of this Act.
(l) Monitor and analyze the practice of competition in An entity that controls, is controlled by, or is under
markets that affect the Philippine economy; implement common control with another entity or entities, have
and oversee measures to promote transparency and common economic interests, and are not otherwise able
accountability; and ensure that prohibitions and to decide or act independently of each other, shall not be
requirements of competition laws are adhered to; considered competitors for purposes of this section.
(m) Conduct, publish, and disseminate studies and Section 15. Abuse of Dominant Position. – It shall be
reports on anti-competitive conduct and agreements to prohibited for one or more entities to abuse their
inform and guide the industry and consumers;


dominant position by engaging in conduct that would superior product or process, business acumen or legal
substantially prevent, restrict or lessen competition: rights or laws shall not be a violation of this Act:
(a) Selling goods or services below cost with the object of Provided, That nothing in this Act shall be construed or
driving competition out of the relevant market: Provided, interpreted as a prohibition on having a dominant
That in the Commission’s evaluation of this fact, it shall position in a relevant market or on acquiring, maintaining
consider whether the entity or entities have no such and increasing market share through legitimate means
object and the price established was in good faith to that do not substantially prevent, restrict or lessen
meet or compete with the lower price of a competitor in competition:
the same market selling the same or comparable product Provided, further, That any conduct which contributes to
or service of like quality; improving production or distribution of goods or services
(b) Imposing barriers to entry or committing acts that within the relevant market, or promoting technical and
prevent competitors from growing within the market in economic progress while allowing consumers a fair share
an anti-competitive manner except those that develop in of the resulting benefit may not necessarily be
the market as a result of or arising from a superior considered an abuse of dominant position:
product or process, business acumen, or legal rights or Provided, finally, That the foregoing shall not constrain
laws; the Commission or the relevant regulator from pursuing
(c) Making a transaction subject to acceptance by the measures that would promote fair competition or more
other parties of other obligations which, by their nature or competition as provided in this Act.
according to commercial usage, have no connection with
the transaction;
(d) Setting prices or other terms or conditions that CHAPTER IV MERGERS AND ACQUISITIONS
discriminate unreasonably between customers or sellers Section 16. Review of Mergers and Acquisitions. — The
of the same goods or services, where such customers or Commission shall have the power to review mergers and
sellers are contemporaneously trading on similar terms acquisitions based on factors deemed relevant by the
and conditions, where the effect may be to lessen Commission.
competition substantially: Provided, That the following
Section 17. Compulsory Notification. – Parties to the
shall be considered permissible price differentials:
merger or acquisition agreement referred to in the
(1) Socialized pricing for the less fortunate sector of the preceding section wherein the value of the transaction
economy; exceeds one billion pesos (P1,000,000,000.00) are
(2) Price differential which reasonably or approximately prohibited from consummating their agreement until
reflect differences in the cost of manufacture, sale, or thirty (30) days after providing notification to the
delivery resulting from differing methods, technical Commission in the form and containing the information
conditions, or quantities in which the goods or services specified in the regulations issued by the Commission:
are sold or delivered to the buyers or sellers; Provided, That the Commission shall promulgate other
criteria, such as increased market share in the relevant
(3) Price differential or terms of sale offered in response to market in excess of minimum thresholds, that may be
the competitive price of payments, services or changes in applied specifically to a sector, or across some or all
the facilities furnished by a competitor; and sectors, in determining whether parties to a merger or
(4) Price changes in response to changing market acquisition shall notify the Commission under this
conditions, marketability of goods or services, or volume; Chapter.
(e) Imposing restrictions on the lease or contract for sale An agreement consummated in violation of this
or trade of goods or services concerning where, to whom, requirement to notify the Commission shall be
or in what forms goods or services may be sold or traded, considered void and subject the parties to an
such as fixing prices, giving preferential discounts or administrative fine of one percent (1%) to five percent (5%)
rebate upon such price, or imposing conditions not to of the value of the transaction.
deal with competing entities, where the object or effect Should the Commission deem it necessary, it may
of the restrictions is to prevent, restrict or lessen request further information that are reasonably necessary
competition substantially: Provided, That nothing and directly relevant to the prohibition under Section 20
contained in this Act shall prohibit or render unlawful: hereof from the parties to the agreement before the
(1) Permissible franchising, licensing, exclusive expiration of the thirty (30)-day period referred. The
merchandising or exclusive distributorship agreements issuance of such a request has the effect of extending the
such as those which give each party the right to period within which the agreement may not be
unilaterally terminate the agreement; or consummated for an additional sixty (60) days, beginning
on the day after the request for information is received by
(2) Agreements protecting intellectual property rights, the parties: Provided, That, in no case shall the total
confidential information, or trade secrets; period for review by the Commission of the subject
(f) Making supply of particular goods or services agreement exceed ninety (90) days from initial
dependent upon the purchase of other goods or services notification by the parties.
from the supplier which have no direct connection with When the above periods have expired and no decision
the main goods or services to be supplied; has been promulgated for whatever reason, the merger
(g) Directly or indirectly imposing unfairly low purchase or acquisition shall be deemed approved and the parties
prices for the goods or services of, among others, may proceed to implement or consummate it. All notices,
marginalized agricultural producers, fisherfolk, micro-, documents and information provided to or emanating
small-, medium-scale enterprises, and other marginalized from the Commission under this section shall be subject
service providers and producers; to confidentiality rule under Section 34 of this Act except
when the release of information contained therein is with
(h) Directly or indirectly imposing unfair purchase or
the consent of the notifying entity or is mandatorily
selling price on their competitors, customers, suppliers or
required to be disclosed by law or by a valid order of a
consumers, provided that prices that develop in the
court of competent jurisdiction, or of a government or
market as a result of or due to a superior product or
regulatory agency, including an exchange.
process, business acumen or legal rights or laws shall not
be considered unfair prices; and In the case of the merger or acquisition of banks, banking
institutions, building and loan associations, trust
(i) Limiting production, markets or technical development
companies, insurance companies, public utilities,
to the prejudice of consumers, provided that limitations
educational institutions and other special corporations
that develop in the market as a result of or due to a
governed by special laws, a favorable or no-objection
ruling by the Commission shall not be construed as



dispensing of the requirement for a favorable were not implemented, significant efficiency gains would

recommendation by the appropriate government agency not be realized.
under Section 79 of the Corporation Code of the Section 23. Finality of Ridings on Mergers and
Philippines. Acquisitions. – Merger or acquisition agreements that
A favorable recommendation by a governmental agency have received a favorable ruling from the Commission,
with a competition mandate shall give rise to a except when such ruling was obtained on the basis of
disputable presumption that the proposed merger or fraud or false material information, may not be
acquisition is not violative of this Act. challenged under this Act.
Section 18. Effect of Notification. — If within the relevant
periods stipulated in the preceding section, the
Commission determines that such agreement is CHAPTER V DISPOSITION OF CASES
prohibited under Section 20 and does not qualify for Section 24. Relevant Market. – For purposes of
exemption under Section 21 of this Chapter, the determining the relevant market, the following factors,
Commission may: among others, affecting the substitutability among
(a) Prohibit the implementation of the agreement; goods or services constituting such market and the
geographic area delineating the boundaries of the
(b) Prohibit the implementation of the agreement unless market shall be considered:
and until it is modified by changes specified by the
Commission. (a) The possibilities of substituting the goods or services
in question, with others of domestic or foreign origin,
(c) Prohibit the implementation of the agreement unless considering the technological possibilities, extent to
and until the pertinent party or parties enter into legally which substitutes are available to consumers and time
enforceable agreements specified by the Commission. required for such substitution;
Section 19. Notification Threshold. – The Commission (b) The cost of distribution of the good or service, its raw
shall, from time to time, adopt and publish regulations materials, its supplements and substitutes from other
stipulating: areas and abroad, considering freight, insurance, import
(a) The transaction value threshold and such other criteria duties and non-tariff restrictions; the restrictions imposed
subject to the notification requirement of Section 17 of by economic agents or by their associations; and the time
this Act; required to supply the market from those areas;
(b) The information that must be supplied for notified (c) The cost and probability of users or consumers seeking
merger or acquisition; other markets; and
(c) Exceptions or exemptions from the notification (d) National, local or international restrictions which limit
requirement; and access by users or consumers to alternate sources of
supply or the access of suppliers to alternate consumers.
(d) Other rules relating to the notification procedures.
Section 25. Control of an Entity. – In determining the
Section 20. Prohibited. Mergers and Acquisitions. – control of an entity, the Commission may consider the
Merger or acquisition agreements that substantially following:
prevent, restrict or lessen competition in the relevant
market or in the market for goods or services as may be Control is presumed to exist when the parent owns
determined by the Commission shall be prohibited. directly or indirectly, through subsidiaries, more than one
half (1/2) of the voting power of an entity, unless in
Section 21. Exemptions from Prohibited. Mergers and exceptional circumstances, it can clearly be
Acquisitions. – Merger or acquisition agreement demonstrated that such ownership does not constitute
prohibited under Section 20 of this Chapter may, control. Control also exists even when an entity owns one
nonetheless, be exempt from prohibition by the half (1/2) or less of the voting power of another entity
Commission when the parties establish either of the when:
following:
(a) There is power over more than one half (1/2) of the
(a) The concentration has brought about or is likely to voting rights by virtue of an agreement with investors;
bring about gains in efficiencies that are greater than the
effects of any limitation on competition that result or (b) There is power to direct or govern the financial and
likely to result from the merger or acquisition agreement; operating policies of the entity under a statute or
or agreement;
(b) A party to the merger or acquisition agreement is (c) There is power to appoint or remove the majority of
faced with actual or imminent financial failure, and the the members of the board of directors or equivalent
agreement represents the least anti-competitive governing body;
arrangement among the known alternative uses for the (d) There is power to cast the majority votes at meetings
failing entity’s assets: of the board of directors or equivalent governing body;
Provided, That an entity shall not be prohibited from (e) There exists ownership over or the right to use all or a
continuing to own and hold the stock or other share significant part of the assets of the entity;
capital or assets of another corporation which it acquired
prior to the approval of this Act or acquiring or (f) There exist rights or contracts which confer decisive
maintaining its market share in a relevant market influence on the decisions of the entity.
through such means without violating the provisions of Section 26. Determination of Anti-Competitive
this Act: Agreement or Conduct. – In determining whether
Provided, further, That the acquisition of the stock or anti-competitive agreement or conduct has been
other share capital of one or more corporations solely for committed, the Commission shall:
investment and not used for voting or exercising control (a) Define the relevant market allegedly affected by the
and not to otherwise bring about, or attempt to bring anti-competitive agreement or conduct, following the
about the prevention, restriction, or lessening of principles laid out in Section 24 of this Chapter;
competition in the relevant market shall not be
(b) Determine if there is actual or potential adverse
prohibited.
impact on competition in the relevant market caused by
Section 22. Burden of Proof. – The burden of proof under the alleged agreement or conduct, and if such impact is
Section 21 lies with the parties seeking the exemption. A substantial and outweighs the actual or potential
party seeking to rely on the exemption specified in efficiency gains that result from the agreement or
Section 21(a) must demonstrate that if the agreement conduct;


(c) Adopt a broad and forward-looking perspective, (c) Forbearance is consistent with public interest and the
recognizing future market developments, any overriding benefit and welfare of the consumers.
need to make the goods or services available to A public hearing shall be held to assist the Commission in
consumers, the requirements of large investments in making this determination.
infrastructure, the requirements of law, and the need of
our economy to respond to international competition, but The Commission’s order exempting the relevant entity or
also taking account of past behavior of the parties group of entities under this section shall be made public.
involved and prevailing market conditions; Conditions may be attached to the forbearance if the
Commission deems it appropriate to ensure the
(d) Balance the need to ensure that competition is not long-term interest of consumers.
prevented or substantially restricted and the risk that
competition efficiency, productivity, innovation, or In the event that the basis for the issuance of the
development of priority areas or industries in the general exemption order ceases to be valid, the order may be
interest of the country may be deterred by overzealous or withdrawn by the Commission.
undue intervention; and
(e) Assess the totality of evidence on whether it is more CHAPTER VI FINES AND PENALTIES
likely than not that the entity has engaged in
anti-competitive agreement or conduct including Section 29. Administrative Penalties. –
whether the entity’s conduct was done with a reasonable (a) Administrative Fines. – In any investigation under
commercial purpose such as but not limited to phasing Chapter III, Sections 14 and 15, and Chapter IV, Sections 17
out of a product or closure of a business, or as a and 20 of this Act, after due notice and hearing, the
reasonable commercial response to the market entry or Commission may impose the following schedule of
conduct of a competitor. administrative fines on any entity found to have violated
Section 27. Market Dominant Position. – In determining the said sections:
whether an entity has market dominant position for First offense: Fine of up to one hundred million pesos
purposes of this Act, the Commission shall consider the (P100,000,000.00);
following:
Second offense: Fine of not less than one hundred million
(a) The share of the entity in the relevant market and pesos (P100,000,000.00) but not more than two hundred
whether it is able to fix prices unilaterally or to restrict fifty million pesos (P250,000,000.00).
supply in the relevant market;
In fixing the amount of the fine, the Commission shall
(b) The existence of barriers to entry and the elements have regard to both the gravity and the duration of the
which could foreseeably alter both said barriers and the violation.
supply from competitors;
(b) Failure to Comply With an Order of the Commission. –
(c) The existence and power of its competitors; An entity which fails or refuses to comply with a ruling,
(d) The possibility of access by its competitors or other order or decision issued by the Commission shall pay a
entities to its sources of inputs; penalty of not less than fifty thousand pesos (P50,000.00)
up to two million pesos (P2,000,000.00) for each violation
(e) The power of its customers to switch to other goods or
and a similar amount of penalty for each day thereafter
services;
until the said entity fully complies. Provided that these
(f) Its recent conducts; and fines shall only accrue daily beginning forty-five (45) days
(g) Other criteria established by the regulations of this from the time that the said decision, order or ruling was
Act. received.
There shall be a rebuttable presumption of market (c) Supply of Incorrect or Misleading Information. – The
dominant position if the market share of an entity in the Commission may likewise impose upon any entity fines of
relevant market is at least fifty percent (50%), unless a up to one million pesos (PI,000,000.00) where,
new market share threshold is determined by the intentionally or negligently, they supply incorrect or
Commission for that particular sector. misleading information in any document, application or
other paper filed with or submitted to the Commission or
The Commission shall from time to time determine and supply incorrect or misleading information in an
publish the threshold for dominant position or minimum application for a binding ruling, a proposal for a consent
level of share in the relevant market that could give rise to judgment, proceedings relating to a show cause order, or
a presumption of dominant position. In such application for modification of the Commission’s ruling,
determination, the Commission would consider the order or approval, as the case may be.
structure of the relevant market, degree of integration,
access to end-users, technology and financial resources, (d) Any other violations not specifically penalized under
and other factors affecting the control of a market, as the relevant provisions of this Act shall be penalized by a
provided in subsections (a) to (g) of this section. fine of not less than fifty thousand pesos (P50,000.00) up
to two million pesos (P2,000,000.00).
The Commission shall not consider the acquiring,
maintaining and increasing of market share through Provided that the schedule of fines indicated in this
legitimate means not substantially preventing, section shall be increased by the Commission every five
restricting, or lessening competition in the market such (5) years to maintain their real value from the time it was
as but not limited to having superior skills, rendering set.
superior service, producing or distributing quality Section 30. Criminal Penalties. – An entity that enters
products, having business acumen, and the enjoyment into any anti-competitive agreement as covered by
and use of protected intellectual property rights as Chapter III, Section 14(a) and 14(b) under this Act shall, for
violative of this Act. each and every violation, be penalized by imprisonment
Section 28. Forbearance. – The Commission may forbear from two (2) to seven (7) years, and a fine of not less than
from applying the provisions of this Act, for a limited time, fifty million pesos (P50,000,000.00) but not more than
in whole or in part, in all or specific cases, on an entity or two hundred fifty million pesos (P250,000,000.00). The
group of entities, if in its determination: penalty of imprisonment shall be imposed upon the
responsible officers, and directors of the entity.
(a) Enforcement is not necessary to the attainment of the
policy objectives of this Act; When the entities involved are juridical persons, the
penalty of. imprisonment shall be imposed on its officers,
(b) Forbearance will neither impede competition in the directors, or employees holding managerial positions,
market where the entity or group of entities seeking who are knowingly and willfully responsible for such
exemption operates nor in related markets; and violation.


bulletins, rulings and other documents: Provided., That

the confidentiality rule shall not apply if the notifying
CHAPTER VII ENFORCEMENT entity consents to the disclosure, or the document or
Section 31. Fact Finding; Preliminary Inquiry. – The information is mandatorily required to be disclosed by
Commission, motu proprio, or upon the filing of a verified law or by a valid order of a court of competent jurisdiction
complaint by an interested party or upon referral by a or of a government or regulatory agency, including an
regulatory agency, shall have the sole and exclusive exchange. The identity of the persons who provide
authority to initiate and conduct a fact-finding or information to the Commission under condition of
preliminary inquiry for the enforcement of this Act based anonymity, shall remain confidential, unless such
on reasonable grounds. confidentiality is expressly waived by these persons.
The Commission, after considering the statements made, Any violation of this provision shall be imposed a fine of
or documents or articles produced in the course of the not less than one million pesos (PI,000,000.00) but not
fact-finding or preliminary inquiry, shall terminate the more than five million pesos (P5,000,000.00).
same by: Section 35. Leniency Program. – The Commission shall
(a) Issuing a resolution ordering its closure if no violation develop a Leniency Program to be granted to any entity
or infringement of this Act is found; or in the form of immunity from suit or reduction of any fine
which would otherwise be imposed on a participant in an
(b) Issuing a resolution to proceed, on the basis of
anti-competitive agreement as provided in Section 14(a)
reasonable grounds, to the conduct of a full
and 14(b) of this Act in exchange for the voluntary
administrative investigation.
disclosure of information regarding such an agreement
The Commission, after due notice and hearing, and on which satisfies specific criteria prior to or during the
the basis of facts and evidence presented, may issue an fact-finding or preliminary inquiry stage of the case.
order for the temporary cessation or desistance from the
Immunity from suit will be granted to an entity reporting
performance of certain acts by the respondent entity, the
illegal anti-competitive activity before a fact-finding or
continued performance of which would result in a
preliminary inquiry has begun if the following conditions
material and adverse effect on consumers or competition
are met:
in the relevant market.
(a) At the time the entity comes forward, the Commission
If the evidence so warrants, the Commission may file
has not received information about the activity from any
before the DOJ criminal complaints for violations of this
other source;
Act or relevant laws for preliminary investigation and
prosecution before the proper court. The DOJ shall (b) Upon the entity’s discovery of illegal activity, it took
conduct such preliminary investigation in accordance prompt and effective action to terminate its participation
with the Revised Rules of Criminal Procedure. therein;
The preliminary inquiry shall, in all cases, be completed by (c) The entity reports the wrongdoing with candor and
the Commission within ninety (90) days from submission completeness and provides full, continuing, and
of the verified complaint, referral, or date of initiation by complete cooperation throughout the investigation; and
the Commission, motu proprio, of the same. (d) The entity did not coerce another party to participate
Except as provided in Section 12(i) of Chapter II of this Act, in the activity and clearly was not the leader in, or the
no law enforcement agency shall conduct any kind of originator of, the activity.
fact-finding, inquiry or investigation into any Even after the Commission has received information
competition-related matters. about the illegal activity after a fact-finding or preliminary
Section 32. Relationship With Sector Regulators. – The inquiry has commenced, the reporting entity will be
Commission shall have original and primary jurisdiction in granted leniency, provided preceding conditions (b) and
the enforcement and regulation of all (c) and the following additional requirements are
competition-related issues. complied with:
The Commission shall still have jurisdiction if the issue (1) The entity is the first to come forward and qualify for
involves both competition and noncompetition issues, leniency;
but the concerned sector regulator shall be consulted (2) At the time the entity comes forward, the Commission
and afforded reasonable opportunity to submit its own does not have evidence against the entity that is likely to
opinion and recommendation on the matter before the result in a sustainable conviction; and
Commission makes a decision on any case.
(3) The Commission determines that granting leniency
Where appropriate, the Commission and the sector would not be unfair to others.
regulators shall work together to issue rules and
regulations to promote competition, protect consumers, Such program shall include the immunity from any suit
and prevent abuse of market power by dominant players or charge of affected parties and third parties, exemption,
within their respective sectors. waiver, or gradation of fines and/or penalties giving
precedence to the entity submitting such evidence. An
Section 33. Power to Investigate and Enforce Orders and entity cooperating or furnishing information, document
Resolutions. – The Commission shall conduct inquiries by or data to the Commission in connection to an
administering oaths, issuing subpoena duces tecum and investigation being conducted shall not be subjected to
summoning witnesses, and commissioning consultants any form of reprisal or discrimination. Such reprisal or
or experts. It shall determine if any provision of this Act discrimination shall be considered a violation of this Act
has been violated, enforce its orders and carry out its subject to the sanctions provided in this Act.
resolutions by making use of any available means,
provisional or otherwise, under existing laws and Nothing in this section shall preclude prosecution for
procedures including the power to punish for contempt entities that report to the Commission false, misleading,
and to impose fines. or malicious information, data or documents damaging
to the business or integrity of the entities under inquiry as
Section 34. Confidentiality of Information. – Confidential a violation of said section. An entity found to have
business information submitted by entities, relevant to reported false, misleading or malicious information, data,
any inquiry or investigation being conducted pursuant to or document may be penalized by a fine not less than the
this Act as well as any deliberation in relation thereto, penalty imposed in the section reported to have been
shall not, in any manner, be directly or indirectly violated by the entity complained of.
disclosed, published, transferred, copied, or disseminated.
Likewise, the Commission shall, to the extent possible, The DOJ-OFC may likewise grant leniency or immunity as
subject such information to the confidentiality rule provided in this section in the event that there is already a
provided under this section when it issues notices, preliminary investigation pending before it.


Section 36. Nolo Contendere. – An entity charged in a (d) Monitoring of Compliance. – The Commission shall
criminal proceeding pursuant to Section 14(a) and 14(b) of monitor the compliance by the entity or entities
this Act may enter a plea of Nolo Contendere, in which he concerned, their officers, and employees, with the final
does not accept nor deny responsibility for the charges and executory binding ruling, cease and desist order, or
but agrees to accept punishment as if he had pleaded approval of a consent judgment. Upon motion of an
guilty. The plea cannot be used against the defendant interested party/parties, the Commission shall issue a
entity to prove liability in a civil suit arising from the certification or resolution to the effect that the entity or
criminal action nor in another cause of action: Provided, entities concerned have, or have not, as the case may be,
That a plea of Nolo Contendere may be entered only up to complied with a final and executory ruling, order, or
arraignment and subsequently, only with the permission approval.
of the court which shall accept it only after weighing its (e) Inadmissibility of Evidence in Criminal Proceedings. –
effect on the parties, the public and the administration of The request for a binding ruling, the show cause order, or
justice. the proposal for consent order; the facts, data, and
Section 37. Non-Adversarial Remedies. — As an information therein contained or subsequently supplied
implementing and enforcement policy, the Commission by the entity or entities concerned; admissions, oral or
shall, under such rules and regulations it may prescribe, written, made by them against their interest; all other
encourage voluntary compliance with this Act and other documents filed by them, including their evidence
competition laws by making available to the parties presented in the proceedings before the Commission;
concerned the following and other analogous and the judgment or order rendered thereon; shall not be
non-adversarial administrative remedies, before the admissible as evidence in any criminal proceedings
institution of administrative, civil or criminal action: arising from the same act subject of the binding ruling,
(a) Binding Ruling. — Where no prior complaint or show cause order or consent order against such entity or
investigation has been initiated, any entity that is in entities, their officers, employees, and agents.
doubt as to whether a contemplated act, course of Section 38. Contempt. — The Commission may
conduct, agreement, or decision, is in compliance with, is summarily punish for contempt by imprisonment not
exempt from, or is in violation of any of the provisions of exceeding thirty (30) days or by a fine not exceeding one
this Act, other competition laws, or implementing rules hundred thousand pesos (P 100,000.00), or both, any
and regulations thereof, may request the Commission, in entity guilty of such misconduct in the presence of the
writing, to render a binding ruling thereon: Provided,That Commission in its vicinity as to seriously interrupt any
the ruling is for a specified period, subject to extension as hearing, session or any proceeding before it, including
may be determined by the Commission, and based on cases in which an entity willfully fails or refuses, without
substantial evidence. just cause, to comply with a summons, subpoena or
In the event of an adverse binding ruling on an act, subpoena duces tecum legally issued by the Commission
course or conduct, agreement, or decision, the applicant being present at a hearing, proceeding, session or
shall be provided with a reasonable period, which in no investigation, refused to be sworn as a witness or to
case shall be more than ninety (90) days, to abide by the answer questions or to furnish information when lawfully
ruling of the Commission and shall not be subject to required to do so.
administrative, civil, or criminal action unless the Section 39. Appeals of the Decisions of the Commission.
applicant fails to comply with the provisions of this Act; – Decisions of the Commission shall be appealable to the
(b) Show Cause Order. — Upon preliminary findings motu Court of Appeals in accordance with the Rules of Court.
proprio or on written complaint under oath by an The appeal shall not stay the order, ruling or decision
interested party that any entity is conducting its business, sought to be reviewed, unless the Court of Appeals shall
in whole or in part in a manner that may not be in accord direct otherwise upon such terms and conditions it may
with the provisions of this Act or other competition laws, deem just. In the appeal, the Commission shall be
and it finds that the issuance of a show cause order included as a party respondent to the case.
would be in the interest of the public, the Commission Section 40. ‘Writ of Execution. – Upon the finality of its
shall issue and serve upon such entity or entities a written binding ruling, order, resolution, decision, judgment, or
description of its business conduct complained of, a rule or regulation, collectively, the Commission may issue
statement of the facts, data, and information together a writ of execution to enforce its decision and the
with a summary of the evidence thereof, with an order payment of the administrative fines provided in the
requiring the said entity or entities to show cause, within preceding sections.
the period therein fixed, why no order shall issue Section 41. Basic Necessities and Prime Commodities. – If
requiring such person or persons to cease and desist the violation involves the trade or movement of basic
from continuing with its identified business conduct, or necessities and prime commodities as defined by
pay the administrative fine therein specified, or readjust Republic Act No. 7581, as amended, the fine imposed by
its business conduct or practices; the Commission or the courts, as the case may be, shall
(c) Consent Order. – At any time prior to the conclusion by be tripled.
the Commission of its inquiry, any entity under inquiry Section 42. Immunity from Suit. – The Chairperson,the
may, without in any manner admitting a violation of this Commissioners, officers, employees and agents of the
Act or any other competition laws, submit to the Commission shall not be subject to any action, claim or
Commission a written proposal for the entry of a consent demand in connection with any act done or omitted by
order, specifying therein the terms and conditions of the them in the performance of their duties and exercise of
proposed consent order which shall include among their powers except for those actions and omissions done
others the following: in evident bad faith or gross negligence.
(1) The payment of an amount within the range of fines Section 43. Indemnity. – Unless the actions of the
provided for under this Act; Commission or its Chairperson, any of its Commissioners,
(2) The required compliance report as well as an entity to officers, employees and agents are found to be in willful
submit regular compliance reports; violation of this Act, performed with evident bad faith or
(3) Payment of damages to any private party/parties who gross negligence, the Commission, its Chairperson,
may have suffered injury; and Commissioners, officers, employees and agents are held
free and harmless to the fullest extent permitted by law
(4) Other terms and conditions that the Commission from any liability, and they shall be indemnified for any
deems appropriate and necessary for the effective and all liabilities, losses, claims, demands, damages,
enforcement of this Act or other Competition Laws: deficiencies, costs and expenses of whatsoever kind and
Provided, That a consent order shall not bar any inquiry nature that may arise in connection with the exercise of
for the same or similar acts if continued or repeated;


their powers and performance of their duties and Provided, That, this prohibition shall apply in all cases,
functions. disputes or controversies instituted by a private party,
The Commission shall underwrite or advance litigation including, but not limited to, cases filed by entities or
costs and expenses, including legal fees and other those claiming to have rights through such entities:
expenses of external counsel, or provide legal assistance Provided, however, That, this prohibition shall not apply
to its Chairperson, Commissioners, officers, employees, or when the matter is of extreme urgency involving a
agents in connection with any civil, criminal, constitutional issue, such that the non-issuance of a
administrative or any other action or proceeding, to temporary restraining order will result in grave injustice
which they are made a party by reason of, or in and irreparable injury to the public: Provided, further,
connection with, the exercise of authority or performance That, the applicant shall file a bond, in an amount to be
of duties and functions under this Act: Provided, That fixed by the Court, but in no case shall it exceed twenty
such legal protection shall not apply to any civil, criminal, percent (20%) of the imposable fines provided for under
administrative, or any action or proceeding that may be Chapter VI, Section 29 of this Act: Provided, finally, That in
initiated by the Commission, against such Chairperson, the event that the court finally decides that the applicant
Commissioners, officers, employees, or agents: Provided, was not entitled to the relief applied for, the bond shall
further, That the Chairperson, Commissioners, officers, accrue in favor of the Commission.
employees, or agents, who shall resign, retire, transfer to Any temporary restraining order, preliminary injunction
another agency or be separated from the service, shall or preliminary mandatory injunction issued in violation of
continue to be provided with such legal protection in this section is void and of no force and effect. Any judge
connection with any act done or omitted to be done by who violates this section shall be penalized by suspension
them in good faith during their tenure or employment of at least one (1) year without pay in addition to other
with the Commission: Provided, finally, That in the event criminal, civil or administrative penalties.
of a settlement or compromise, indemnification shall be Section 48. Trade Associations. – Nothing contained in
provided only in connection with such matters covered this Act shall be construed to prohibit the existence and
by the settlement as to which the Commission is advised operation of trade associations organized to promote
by counsel that the persons to be indemnified did not quality standards and safety issues: Provided, That, these
commit any negligence or misconduct. associations shall not in any way be used to justify any
The costs and expenses incurred in defending the violation of this Act: Provided, however, That it shall not be
aforementioned action, suit or proceeding may be paid illegal to use the association as a forum to discuss or
by the Commission in advance of the final disposition of promote quality standards, efficiency, safety, security,
such action, suit or proceeding upon receipt of an productivity, competitiveness and other matters of
undertaking by or on behalf of the Chairperson, common interest involving the industry: Provided, further,
Commissioner, officer, employee, or agent to repay the That such is done without any anti-competitive intent or
amount advanced should it ultimately be determined by effect.
the Commission that one is not entitled to be Section 49. Congressional Oversight Committee. – To
indemnified as provided in this section. oversee the implementation of this Act, there shall be
Section 44. Jurisdiction of the Regional Trial Court. – The created a Congressional Oversight Committee on
Regional Trial Court of the city or province where the Competition (COCC) to be composed of the Chairpersons
entity or any of the entities whose business act or of the Senate Committees on Trade and Commerce,
conduct Constitutes the subject matter of a case, Economic Affairs, and Finance, the Chairpersons of the
conducts its principal place of business, shall have House of Representatives Committees on Economic
original and exclusive jurisdiction, regardless of the Affairs, Trade and Industry, and Appropriations and two
penalties and fines herein imposed, of all criminal and (2) members each from the Senate and the House of
civil cases involving violations of this Act and other Representatives who shall be designated by the Senate
competition-related laws. If the defendant or anyone is President and the Speaker of the House of
charged in the capacity of a director, officer, shareholder, Representatives: Provided, That one (1) of the two (2)
employee, or agent of a corporation or other juridical Senators and one (1) of the two (2) House Members shall
entity who knowingly and willfully authorized the be nominated by the respective Minority Leaders of the
commission of the offense charged, the Regional Trial Senate and the House of Representatives. The
Court of the city or province where such corporation or Congressional Oversight Committee shall be jointly
juridical entity conducts its principal place of business, chaired by the Chairpersons of the Senate Committee on
shall have jurisdiction. Trade and Commerce and the House of Representatives
Section 45. Private Action. – Any person who suffers Committee on Economic Affairs. The Vice Chairperson of
direct injury by reason of any violation of this Act may the Congressional Oversight Committee shall be jointly
institute a separate and independent civil action after the held by the Chairpersons of the Senate Committee on
Commission has completed the preliminary inquiry Economic Affairs and the House of Representatives
provided under Section 31. Committee on Trade and Industry.
The Secretariat of the COCC shall be drawn from the
existing personnel of the Senate and House of
CHAPTER VIII OTHER PROVISIONS Representatives committees comprising the
Congressional Oversight Committee.
Section 46. Statute of Limitations. — Any action arising
from a violation of any provision of this Act shall be
forever barred unless commenced within five (5) years
from:
CHAPTER IX FINAL PROVISIONS
➔ For criminal actions, the time the violation is Section 50. Implementing Rules and Regulations. —
discovered by the offended party, the authorities, or their Within one hundred eighty (180) days from the effectivity
agents; and of this Act, the Commission, in consultation with the
DOJ-OFC and concerned sector regulators shall
➔ For administrative and civil actions, the time the promulgate the necessary implementing rules and
cause of action accrues. regulations for the implementation of this Act: Provided,
Section 47. Prohibition on the Issuance of Temporary That, the Commission may revise such implementing
Restraining Orders, Preliminary Injunctions and rules and regulations as it deems necessary: Provided,
Preliminary Mandatory Injunctions. — Except for the however, That such revised implementing rules and
Court of Appeals and the Supreme Court, no other court regulations shall only take effect fifteen (15) days
shall issue any temporary restraining order, preliminary following its publication in two (2) newspapers of general
injunction or preliminary mandatory injunction against circulation.
the Commission in the exercise of its duties or functions:


Section 51. Appropriations and Use of Fees, Charges and other related issuances, insofar as they are inconsistent
Penalties. – The initial budgetary requirements of the with the provisions of this Act.
Commission of three hundred million pesos Section 56.Effectivity Clause. – This Act shall take effect
(P300,000,000.00) is hereby appropriated. fifteen (15) days following its publication in the Official
All fees, fines, penalties collected by the Commission shall Gazette or at least two (2) national newspapers of general
not be retained by the Commission, but will be remitted circulation. Notwithstanding any provision herein, this Act
to the National Treasury and shall accrue to the general shall have no retroactive effect.
funds.
Such funds necessary for the continuous and effective
operation of the Commission shall be included in the Rules and Regulations Implementing
annual General Appropriations Act.
the Philippine Competition Act
Section 52. Transparency Clause. — Final decisions,
orders and rulings of the Commission shall be published May 31, 2016
on the official website subject to Section 34 of this Act.
Records of public proceedings shall be made available to RULES AND REGULATIONS TO IMPLEMENT THE
the public subject to Section 34 of this Act. PROVISIONS OF REPUBLIC ACT NO. 10667 (PHILIPPINE
COMPETITION ACT)
Section 53. Transitional Clause. — In order to allow
affected parties time to renegotiate agreements or To effectively carry out the provisions of Republic Act No.
restructure their business to comply with the provisions 10667, or the Philippine Competition Act (Act), the
of this Act, an existing business structure, conduct, Philippine Competition Commission, pursuant to the
practice or any act that may be in violation of this Act powers vested in it under said Act, hereby issues, adopts
shall be subject to the administrative, civil and criminal and promulgates the following rules and regulations. The
penalties prescribed herein only if it is not cured or is Commission may revise and supplement these rules and
continuing upon the expiration of two (2) years after the regulations and issue related guidelines, circulars and
effectivity of this Act: Provided, That this section shall not other subsidiary issuances as it deems necessary for the
apply to administrative, civil and criminal proceedings effective implementation of the various provisions of this
against anti-competitive agreement or conduct, abuse of Act.
dominant position, and anti-competitive mergers and
acquisitions, initiated prior to the entry into force of this RULE 1 Title and Scope
Act: Provided, further, That during the said two (2)-year SECTION 1. Title. —
period, the government shall undertake an advocacy
program to inform the general public of the provisions of These rules and regulations shall be referred to as the
this Act. "Implementing Rules and Regulations of Republic Act No.
Section 54. Separability Clause. – If any clause, sentence, 10667" (Rules).
section or part of this Act shall be adjudged by a court of SECTION 2. Scope. —
competent jurisdiction to be invalid, such judgment shall
not affect, impair or invalidate the remainder of this Act, (a) These Rules shall apply to any entity engaged in trade,
but shall be confined in its operation to the clause, industry or commerce in the Republic of the Philippines
sentence, paragraph, section, or part thereof directly or in international trade, industry or commerce having
involved in the controversy. direct, substantial and reasonably foreseeable effects in
the Philippines, including those that result from acts
Section 55. Repealing Clause. – The following laws, and done outside the territory of the Philippines.
all other laws, decrees, executive orders and regulations,
or part or parts thereof inconsistent with any provision of (b) These Rules shall not apply to the combinations or
this Act, are hereby repealed, amended or otherwise activities of workers or employees nor to agreements or
modified accordingly: arrangements with their employers when such
(a) Article 186 of Act No. 3815, otherwise known as the combinations, activities, agreements, or arrangements
Revised Penal Code: Provided, That violations of Article are designed solely to facilitate collective bargaining in
186 of the Revised Penal Code committed before the respect of conditions of employment.
effectivity of this Act may continue to be prosecuted RULE 2 Definition of Terms
unless the same have been barred by prescription, and
subject to the procedure under Section 31 of this Act; The following definition of terms shall apply for purposes
(b) Section 4 of Commonwealth Act No. 138; of these Rules:
(c) Section 43(u) on Functions of the ERC of Republic Act (a) "Acquisition" refers to the purchase or transfer of
No. 9136, entitled "An Act Ordaining Reforms in the securities or assets, through contract or other means, for
Electric Power Industry, Amending for the Purpose the purpose of obtaining control by:
Certain Laws and for Other Purposes", otherwise known
(1) One (1) entity of the whole or part of another;
as the "Electric Power Industry Reform Act of 2001",
insofar as the provision thereof is inconsistent with this (2) Two (2) or more entities over another; or
Act;
(3) One (1) or more entities over one (1) or more entities;
(d) Section 24 on Illegal Acts of Price Manipulation and
Section 25 on Penalty for Illegal Acts of Price (b) "Agreement" refers to any type or form of contract,
Manipulation of Republic Act No. 9502, entitled "An Act arrangement, understanding, collective
Providing for Cheaper and Quality Medicines, Amending recommendation, or concerted action, whether formal or
for the Purpose Republic Act No. 8293 or the Intellectual informal, explicit or tacit, written, or oral;
Property Code, Republic Act No. 6675 or the Generics Act (c) "Conduct" refers to any type or form of undertaking,
of 1988, and Republic Act No. 5921 or the Pharmacy Law,
collective recommendation, independent or concerted
and for Other Purposes", otherwise known as the
action or practice, whether formal or informal;
"Universally Accessible Cheaper and Quality Medicines
Act of 2008". insofar as the provisions thereof are (d) "Commission" refers to the Philippine Competition
inconsistent with this Act; and Commission created under the Act;
(e) Executive Order No. 45, Series of 2011, Designating the (e) "Confidential business information" refers to
Department of Justice as the Competition Authority, information, which concerns or relates to the operations,
Department of Justice Circular 005 Series of 2015, and production, sales, shipments, purchases, transfers,
identification of customers, inventories, or amount or


source of any income, profits, losses, expenditures, which (1) Setting, limiting, or controlling production, markets,
are not generally known to the public or to other persons technical development, or investment;
who can obtain economic value from its disclosure or use,
or is liable to cause serious harm to the person who (2) Dividing or sharing the market, whether by volume of
provided it, or from whom it originates, and is the subject sales or purchases, territory, type of goods or services,
of efforts that are reasonable under the circumstances to buyers or sellers, or any other means.
maintain its secrecy; (c) Agreements other than those specified in (a) and (b) of
(f) "Control" refers to the ability to substantially influence this Section, which have the object or effect of
or direct the actions or decisions of an entity, whether by substantially preventing, restricting, or lessening
contract, agency or otherwise; competition shall also be prohibited. Provided, that those
which contribute to improving the production or
(g) "Dominant position" refers to a position of economic distribution of goods and services or to promoting
strength that an entity or entities hold which makes it technical or economic progress, while allowing
capable of controlling the relevant market independently consumers a fair share of the resulting benefits, may not
from any or a combination of the following: competitors, necessarily be deemed a violation of the Act.
customers, suppliers, or consumers;
(d) For purposes of this Section, entities that control, are
(h) "Entity" refers to any person, natural or juridical, sole controlled by, or are under common control with another
proprietorship, partnership, combination or association in entity or entities, have common economic interests, and
any form, whether incorporated or not, domestic or are not otherwise able to decide or act independently of
foreign, including those owned or controlled by the each other, shall not be considered competitors.
government, engaged directly or indirectly in any
economic activity; SECTION 2. Abuse of Dominant Position. —
(i) "Joint venture" refers to a business arrangement (a) It shall be prohibited for one or more entities to abuse
whereby an entity or group of entities contribute capital, their dominant position by engaging in conduct that
services, assets, or a combination of any or all of the would substantially prevent, restrict, or lessen
foregoing, to undertake an investment activity or a competition, including:
specific project, where each entity shall have the right to (1) Selling goods or services below cost with the object of
direct and govern the policies in connection therewith, driving competition out of the relevant market. Provided,
with the intention to share both profits and risks and that in the Commission's evaluation of this fact, it shall
losses subject to agreement by the entities; consider whether such entity or entities had no such
(j) "Market" refers to the group of goods or services that object and that the price established was in good faith to
are sufficiently interchangeable or substitutable and the meet or compete with the lower price of a competitor in
object of competition, and the geographic area where the same market selling the same or comparable product
said goods or services are offered; or service of like quality.
(k) "Merger" refers to the joining of two (2) or more (2) Imposing barriers to entry or committing acts that
entities into an existing entity or to form a new entity, prevent competitors from growing within the market in
including joint ventures; an anti-competitive manner, except those that develop in
the market as a result of or arising from a superior
(l) "Relevant market" refers to the market in which a product or process, business acumen, or legal rights or
particular good or service is sold and which is a laws;
combination of the relevant product market and the
relevant geographic market, defined as follows: (3) Making a transaction subject to acceptance by the
other parties of other obligations which, by their nature or
(1) a relevant product market comprises all those goods according to commercial usage, have no connection with
and/or services which are regarded as interchangeable or the transaction;
substitutable by the consumer or the customer, by reason
of the goods and/or services' characteristics, their prices, (4) Setting prices or other terms or conditions that
and their intended use; and discriminate unreasonably between customers or sellers
of the same goods or services, where such customers or
(2) the relevant geographic market comprises the area in sellers are contemporaneously trading on similar terms
which the entity concerned is involved in the supply and and conditions, where the effect may be to lessen
demand of goods and services, in which the conditions of competition substantially;Provided, that the following
competition are sufficiently homogenous and which can shall be considered permissible price differentials:
be distinguished from neighboring areas because the
conditions of competition are different in those area; i. Socialized pricing for the less fortunate sector of the
economy;
(m) "Ultimate parent entity" is the juridical entity that,
directly or indirectly, controls a party to the transaction, ii. Price differentials which reasonably or approximately
and is not controlled by any other entity. reflect differences in the cost of manufacture, sale, or
delivery resulting from differing methods, technical
RULE 3 Prohibited Acts conditions, or quantities in which the goods or services
are sold or delivered to the buyers or sellers;
SECTION 1. Anti-Competitive Agreements. —
iii. Price differential or terms of sale offered in response to
(a) The following agreements, between or among the competitive price of payments, services, or changes in
competitors, are per se prohibited: the facilities furnished by a competitor; and
(1) Restricting competition as to price, or components iv. Price changes in response to changing market
thereof, or other terms of trade; conditions, marketability of goods or services, or volume.
(2) Fixing the price at an auction or in any form of bidding, (5) Imposing restrictions on the lease or contract for sale
including cover bidding, bid suppression, bid rotation and or trade of goods or services concerning where, to whom,
market allocation, and other analogous practices of bid or in what forms goods or services may be sold or traded,
manipulation. such as:
(b) The following agreements, between or among i. fixing prices, or
competitors, which have the object or effect of
substantially preventing, restricting, or lessening ii. giving preferential discounts or rebate upon such price,
competition shall be prohibited: or


iii. imposing conditions not to deal with competing goods and services as may be determined by the
entities, Commission; and
where the object or effect of the restrictions is to prevent, (2) Take into account any substantiated efficiencies put

restrict or lessen competition substantially: Provided, that forward by the parties to the proposed merger or
nothing contained in the Act shall prohibit or render acquisition, which are likely to arise from the transaction.
unlawful: (b) In evaluating the competitive effects of a merger or
1) Permissible franchising, licensing, exclusive acquisition, the Commission shall endeavor to compare
merchandising, or exclusive distributorship agreements, the competitive conditions that would likely result from
such as those which give each party the right to the merger or acquisition with the conditions that would
unilaterally terminate the agreement, unless found by the likely have prevailed without the merger or acquisition.
Commission to have substantial anti-competitive effect; (c) In its evaluation, the Commission may consider, on a
2) Agreements protecting intellectual property rights, case-to-case basis, the broad range of possible factual
confidential information, or trade secrets; contexts and the specific competitive effects that may
arise in different transactions, such as:
(6) Making supply of particular goods or services
dependent upon the purchase of other goods or services (1) the structure of the relevant markets concerned;
from the supplier which have no direct connection with (2) the market position of the entities concerned;
the main goods or services to be supplied;
(3) the actual or potential competition from entities
(7) Directly or indirectly imposing unfairly low purchase within or outside of the relevant market;
prices for the goods or services of, among others,
marginalized agricultural producers, fisherfolk, micro-, (4) the alternatives available to suppliers and users, and
small-, medium-scaled enterprises, and other their access to supplies or markets;
marginalized service providers and producers;
(5) any legal or other barriers to entry.
(8) Directly or indirectly imposing unfair purchase or
SECTION 2. Notifying Entities. —
selling price on their competitors, customers, suppliers, or
consumers, Provided that prices that develop in the (a) Parties to a merger or acquisition that satisfy the
market as a result of or due to a superior product or thresholds in Section 3 of this Rule are required to notify
process, business acumen or legal rights or laws shall not the Commission before the execution of the definitive
be considered unfair prices; and agreements relating to the transaction.
(9) Limiting production, markets, or technical (b) If notice to the Commission is required for a merger or
development to the prejudice of consumers, Provided, acquisition, then all acquiring and acquired
that limitations that develop in the market as a result of pre-acquisition ultimate parent entities or any entity
or due to a superior product or process, business acumen, authorized by the ultimate parent entity to file
or legal rights or laws shall not be a violation of this Act. notification on its behalf must each submit a Notification
Form (the "Form") and comply with the procedure set
(b) Nothing in the Act or these Rules shall be construed or
forth in Section 5 of this Rule. The parties shall not
interpreted as a prohibition on having a dominant consummate the transaction before the expiration of the
position in a relevant market, or on acquiring, relevant periods provided in this Rule.
maintaining, and increasing market share through
legitimate means that do not substantially prevent, (c) In the formation of a joint venture (other than in
restrict, or lessen competition. connection with a merger or consolidation), the
contributing entities shall be deemed acquiring entities,
(c) Any conduct which contributes to improving
and the joint venture shall be deemed the acquired
production or distribution of goods or services within the entity.
relevant market, or promoting technical and economic
progress, while allowing consumers a fair share of the SECTION 3. Thresholds for Compulsory Notification. —
resulting benefit may not necessarily be considered an
abuse of dominant position. Parties to a merger or acquisition are required to provide
notification when:
(d) The foregoing shall not constrain the Commission or
the relevant regulator from pursuing measures that (a) The aggregate annual gross revenues in, into or from
would promote fair competition or more competition as the Philippines, or value of the assets in the Philippines of
provided in the Act. the ultimate parent entity of at least one of the acquiring
or acquired entities, including that of all entities that the
SECTION 3. Determination of Exceptions. — ultimate parent entity controls, directly or indirectly,
exceeds One Billion Pesos (PhP1,000,000,000.00); and
In Section 2, par. (a) (2), (8) and (9), the concerned entity or
entities invoking the exception shall clearly establish to (b) The value of the transaction exceeds One Billion Pesos
the Commission's satisfaction, that the barrier to entry or (PhP1,000,000,000.00), as determined in subsections (1),
anti-competitive act is an indispensable and natural (2), (3) or (4), as the case may be.
result of the superior product or process, business
acumen, or legal rights or laws. (1) With respect to a proposed merger or acquisition of
assets in the Philippines if either:
RULE 4 Mergers and Acquisitions i. the aggregate value of the assets in the Philippines
SECTION 1. Review of Mergers and Acquisitions. — being acquired in the proposed transaction exceeds One
Billion Pesos (PhP1,000,000,000.00); or
The Commission, motu proprio or upon notification as
provided under these Rules, shall have the power to ii. the gross revenues generated in the Philippines by
review mergers and acquisitions having a direct, assets acquired in the Philippines exceed One Billion
substantial and reasonably foreseeable effect on trade, Pesos (PhP1,000,000,000.00).
industry, or commerce in the Philippines, based on (2) With respect to a proposed merger or acquisition of
factors deemed relevant by the Commission.
assets outside the Philippines, if
(a) In conducting this review, the Commission shall:
i. the aggregate value of the assets in the Philippines of
(1) Assess whether a proposed merger or acquisition is the acquiring entity exceeds One Billion Pesos
likely to substantially prevent, restrict, or lessen (PhP1,000,000,000.00); and
competition in the relevant market or in the market for


ii. the gross revenues generated in or into the Philippines for which agreements have been secured for the joint
by those assets acquired outside the Philippines exceed venture to obtain at any time, whether or not such entity
One Billion Pesos (PhP1,000,000,000.00). is subject to the requirements of the act; and
(3) With respect to a proposed merger or acquisition of 2) Any amount of credit or any obligations of the joint
assets inside and outside the Philippines, if venture which any entity contributing to the formation
has agreed to extend or guarantee, at any time.
i. the aggregate value of the assets in the Philippines of
the acquiring entity exceeds One Billion Pesos (e) A merger or acquisition consisting of successive
(PhP1,000,000,000.00); and transactions, or acquisition of parts of one or more
entities, which shall take place within a one-year period
ii. the aggregate gross revenues generated in or into the between the same parties, or any entity they control or
Philippines by assets acquired in the Philippines and any are controlled by or are under common control with
assets acquired outside the Philippines collectively another entity or entities, shall be treated as one
exceed One Billion Pesos (PhP1,000,000,000.00). transaction. If a binding preliminary agreement provides
(4) With respect to a proposed acquisition of (i) voting for such successive transactions or acquisition of parts,
the entities shall provide notification on the basis of such
shares of a corporation or of (ii) an interest in a
preliminary agreement. If there is no binding preliminary
non-corporate entity
agreement, notification shall be made when the parties
i. If the aggregate value of the assets in the Philippines execute the agreement relating to the last transaction
that are owned by the corporation or non-corporate which, when taken together with the preceding
entity or by entities it controls, other than assets that are transactions, satisfies the thresholds under this Section.
shares of any of those corporations, exceed One Billion (f) For purposes of calculating notification thresholds:
Pesos (PhP1,000,000,000.00); or
(1) The aggregate value of assets in the Philippines shall
ii. The gross revenues from sales in, into, or from the
be as stated on the last regularly prepared balance sheet
Philippines of the corporation or non-corporate entity or or the most recent audited financial statements in which
by entities it controls, other than assets that are shares of those assets are accounted for.
any of those corporations, exceed One Billion Pesos
(PhP1,000,000,000.00); and (2) The gross revenues from sales of an entity shall be the
amount stated on the last regularly prepared annual
iii. If
statement of income and expense of that entity.
A. as a result of the proposed acquisition of the voting
(g) A transaction that meets the thresholds and does not
shares of a corporation, the entity or entities acquiring
the shares, together with their affiliates, would own comply with the notification requirements and waiting
voting shares of the corporation that, in the aggregate, periods set out in Section 5 shall be considered void and
carry more than the following percentages of the votes will subject the parties to an administrative fine of one
attached to all the corporation's outstanding voting percent (1%) to five percent (5%) of the value of the
shares: transaction.
I. Thirty-five percent (35%), or (h) In the case of a merger or acquisition of banks,
banking institutions, building and loan associations, trust
II. Fifty percent (50%), if the entity or entities already own companies, insurance companies, public utilities,
more than the percentage set out in subsection I above, educational institutions, and other special corporations
as the case may be, before the proposed acquisition; or governed by special laws, a favorable or no-objection
B. as a result of the proposed acquisition of an interest in ruling by the Commission shall not be construed as
a non-corporate entity, the entity or entities acquiring the dispensing with the requirement for a favorable
interest, together with their affiliates, would hold an recommendation by the appropriate government agency
aggregate interest in the non-corporate entity that under Section 79 of the Corporation Code of the
entitles the entity or entities to receive more than the Philippines.
following percentages of the profits of the non-corporate (i) A favorable recommendation by a governmental
entity or assets of that non-corporate entity on its agency with a competition mandate shall give rise to a
dissolution: disputable presumption that the proposed merger or
I. Thirty-five percent (35%), or acquisition is not violative of the Act or these Rules,
Provided, that the recommendation must arise directly
II. Fifty percent (50%), if the entity or entities acquiring the from the exercise of the agency's mandate to determine
interest are already entitled to receive more than the any anti-competitive effect of the proposed merger or
percentage set out in subsection I immediately above acquisition.
before the proposed acquisition.
SECTION 4. Consultations Preceding the Submission of
(c) Where an entity has already exceeded the 35% Notification. —
threshold for an acquisition of voting shares, or the 35%
threshold for an acquisition of an interest in a (a) Prior to filing a notification pursuant to this Rule,
non-corporate entity, another notification will be required parties to a proposed merger or acquisition that are
if the same entity will exceed 50% threshold after making required to notify may inform the Commission of their
a further acquisition of either voting shares or an interest proposed merger or acquisition and request a
in a non-corporate entity. pre-notification consultation with the staff of the
Commission.
(d) In a notifiable joint venture transaction, an acquiring
entity shall be subject to the notification requirements if To request a meeting, the parties must provide the
either (i) the aggregate value of the assets that will be following information in writing:
combined in the Philippines or contributed into the (1) the names and business contact information of the
proposed joint venture exceeds One Billion Pesos entities concerned;
(PhP1,000,000,000.00) or (ii) the gross revenues
generated in the Philippines by assets to be combined in (2) the type of transaction; and
the Philippines or contributed into the proposed joint
venture exceed One Billion Pesos (PhP1,000,000,000.00). (3) the markets covered or lines of businesses by the
In determining the assets of the joint venture, the proposed merger or acquisition.
following shall be included: (b) During such pre-notification consultations, the parties
1) All assets which any entity contributing to the may seek non-binding advice on the specific information
formation of the joint venture has agreed to transfer, or that is required to be in the notification.


SECTION 5. Procedure for Notification and Review. — (i) The issuance of the request under the immediately
preceding paragraph has the effect of extending the
(a) Each party to a merger or acquisition required to give
period within which the agreement may not be
notification to the Commission shall submit the consummated for an additional sixty (60) days. The
Notification Form and pay such applicable fees as may be additional sixty (60) day period shall begin on the day
determined by the Commission. An electronic copy of the after the request for information is received by the
Form and a scanned copy of the certification referred to parties;Provided, that, in no case shall the total period for
in subparagraph (b) of this Section, contained in a secure review by the Commission of the subject agreement
electronic storage device, shall likewise be submitted to exceed ninety (90) days from the time the initial
the Commission, simultaneous with the filing of the notification by the parties is deemed complete as
aforementioned hard copy. provided under paragraph (f) of this Section; Provided
(b) The Form must be signed by a general partner of a further, that should the parties fail to provide the
partnership, an officer or director of a corporation, or in requested information within fifteen (15) days from
the case of a natural person, the natural person or his/her receipt of the said request, the notification shall be
legal representative, and certified that the contents of the deemed expired and the parties must refile their
Form are true and accurate of their own personal notification. Alternatively, should the parties wish to
knowledge and/or based on authentic records. In all submit the requested information beyond the fifteen (15)
cases, the certifying individual must possess actual day period, the parties may request for an extension of
authority to make the certification on behalf of the entity time within which to comply with the request for
filing the notification. additional information, in which case, the period for
review shall be correspondingly extended.
(c) The parties may notify, on the basis of a binding
preliminary agreement in any form, such as a (j) Parties to a proposed transaction under review shall
memorandum of agreement, term sheet, or letter of inform the Commission of any substantial modifications
intent. Each of the acquired and acquiring entities must to the transaction. On the basis of the information
submit an affidavit with their Forms, attesting to the fact provided, the Commission shall determine if a new
that a binding preliminary agreement has been executed notification is required.
and that each party has an intention of completing the (k) Where notification of a transaction is not required,
proposed transaction in good faith. then the periods provided above for the Commission to
(d) Both the certification and the affidavit must be conclude its review shall not apply.
notarized or otherwise authenticated. (l) The Commission, in its discretion, may terminate a
(e) Except as described below, the waiting period begins waiting period prior to its expiration.
after all notifying entities have filed their respective (m) When either waiting period set out ends on a
Forms, together with the corresponding certifications Saturday, Sunday or holiday, the waiting period is
and affidavits, and have been notified by the Commission extended until the next business day.
that the Forms are complete.
(n) When the above periods have expired and no decision
(1) In voting securities acquisitions, such as tender offers,
has been promulgated for whatever reason, the merger
third party and open market transactions, in which the or acquisition shall be deemed approved and the parties
acquiring entity proposes to buy voting securities from may proceed to implement or consummate it.
shareholders of the acquired entity, rather than from the
entity itself: (o) All notices, documents, and information provided to or
emanating from the Commission under Sections 4 and 5
i. the acquiring entity is required to serve notice on the
of this Rule shall be subject to the confidentiality rule
issuer of those shares to ensure the acquired entity is under Section 34 of the Act and Section 13 of this Rule,
aware of its reporting obligation; except for the purpose of enforcing the Act or these
ii. only the acquiring entity must submit an affidavit. The Rules, or when the release of information contained
acquiring entity must state in the affidavit that it has an therein is with the consent of the notifying entity or is
intention of completing the proposed transaction in good mandatorily required to be disclosed by law or by a valid
faith, and that it has served notice on the acquired entity order of a court of competent jurisdiction, or of a
as to its potential reporting obligations (and in tender government or regulatory agency, including an exchange.
offers, the acquiring entity also must affirm that the SECTION 6. Effect of Notification. —
intention to make the tender offer has been publicly
announced); and If within the relevant periods stipulated in the preceding
section, the Commission determines that the merger or
iii. the waiting period begins after the acquiring entity acquisition agreement is prohibited under Section 20 of
files a complete Form. the Act and Section 9 of this Rule, and does not qualify for
(f) Upon submission of the Form, the Commission shall exemption under Section 21 of the Act and Section 10 of
determine within fifteen (15) days whether the Form and this Rule, the Commission may:
other relevant requirements have been completed in (a) Prohibit the implementation of the agreement;
accordance with applicable rules or guidelines, and shall
inform the parties of other information and/or documents (b) Prohibit the implementation of the agreement unless
it may have failed to supply, or issue a notice to the and until it is modified by changes specified by the
parties that the notification is sufficient for purposes of Commission; or
commencing Phase I review of the merger or acquisition.
(c) Prohibit the implementation of the agreement unless
(g) The waiting period under this Section shall commence and until the pertinent party or parties enter into legally
only upon the Commission's determination that the enforceable agreements specified by the Commission.
notification has been completed in accordance with
SECTION 7. Publication of Notification Summary. —
applicable rules and guidelines.
(a) When additional information or documents requested
(h) Within thirty (30) days from commencing Phase I
by the Commission for the purpose of a Phase II review of
review, the Commission shall, if necessary, inform the
a notified merger or acquisition has been submitted by
parties of the need for a more comprehensive and
the parties, the Commission shall publish on its website
detailed analysis of the merger or acquisition under a
the following information related to the notification on
Phase II review, and request other information and/or
the basis of the Form submitted by the parties:
documents that are relevant to its review.
(1) the name of the involved entities;


(2) the type of the transaction; Merger or acquisition agreements that have received a
favorable ruling from the Commission, except when such
(3) the markets covered or lines of businesses by the
ruling was obtained on the basis of fraud or false material
proposed merger or acquisition; and information, may not be challenged under the Act or
(4) the date when the complete notification was received. these Rules.
(b) When publishing this information, the Commission SECTION 13. Treatment of Confidential Information. —
shall take into account the legitimate interest of the (a) Information, including documents, shall not be
entities regarding the protection of their trade secrets communicated or made accessible by the Commission,
and other confidential information. insofar as it contains trade secrets or other confidential
SECTION 8. Modifications to Thresholds on Compulsory information, the disclosure of which is not considered
Notification. — necessary by the Commission for the purpose of the
review.
The Commission shall publish, from time to time,
regulations adopting, modifying, rescinding or otherwise (b) Any entity or party that supplies information,
changing: including documents, to the Commission, shall clearly
identify any material that it considers to be confidential,
(a) The transaction value threshold and such other criteria provide a justification for the request of confidential
subject to compulsory notification; treatment of the information supplied and the time
(b) The information that must be supplied for notified period within which confidentiality is requested, and
provide a separate non-confidential version by the date
mergers or acquisitions;
set by the Commission.
(c) Exceptions or exemptions from the notification
(c) The Commission may require the parties to the
requirement; and
merger or acquisition and other interested parties to
(d) Other rules relating to the notification procedures. identify any part of a decision or case summary adopted
by the Commission, if any, which in their view contains
SECTION 9. Prohibited Mergers and Acquisitions. — trade secrets or other confidential information. Where
Merger or acquisition agreements that substantially trade secrets or other confidential information are
prevent, restrict, or lessen competition in the Philippines identified, the parties to the merger or acquisition and
in the relevant market or in the market for goods or other interested parties shall provide a justification for the
services, as may be determined by the Commission, shall request of confidential treatment and provide a separate
be prohibited. non-confidential version by the date set by the
Commission.
SECTION 10. Exemptions from Prohibited Mergers and
Acquisitions. — (d) Whenever the Commission, pursuant to Section 13 (c)
of this Rule, deems that the justification for confidential
Merger or acquisition agreements prohibited under treatment provided by the party is insufficient or not
Section 20 of the Act and Section 9 of this Rule may, grounded, it shall inform the interested party of its
nonetheless, be exempt from prohibition by the decision to make the information accessible.
Commission when the parties establish either of the
following: (e) If a merger or acquisition is under review in multiple
jurisdictions, parties to the transaction may waive the
(a) The concentration has brought about or is likely to confidentiality protections contained in this Rule, so as to
bring about gains in efficiencies that are greater than the allow the Commission to exchange otherwise protected
effects of any limitation on competition that result or are information with competition authorities in other
likely to result from the merger or acquisition agreement; countries.
or
RULE 5 Determination of the Relevant Market
(b) A party to the merger or acquisition agreement is
faced with actual or imminent financial failure, and the SECTION 1. For purposes of determining the relevant
agreement represents the least anti-competitive market, the following factors, among others, affecting the
arrangement among the known alternative uses for the substitutability among goods or services constituting
failing entity's assets. such market, and the geographic area delineating the
boundaries of the market shall be considered:
Provided, that an entity shall not be prohibited from
continuing to own and hold the stock or other share (a) The possibilities of substituting the goods or services
capital or assets of another corporation, which it acquired in question with others of domestic or foreign origin,
prior to the approval of the Act, or from acquiring or considering the technological possibilities, the extent to
maintaining its market share in a relevant market which substitutes are available to consumers and the
through such means without violating the provisions of time required for such substitution;
the Act and these Rules;
(b) The cost of distribution of the good or service, its raw
Provided, further, that the acquisition of the stock or materials, its supplements and substitutes from other
other share capital of one or more corporations solely for areas and abroad, considering freight, insurance, import
investment and not used for voting or exercising control duties, and non-tariff restrictions; the restrictions
and not to otherwise bring about, or attempt to bring imposed by economic agents or by their associations; and
about the prevention, restriction or lessening of the time required to supply the market from those areas;
competition in the relevant market shall not be
prohibited. (c) The cost and probability of users or consumers seeking
other markets; and
SECTION 11. Burden of Proof. —
(d) National, local or international restrictions which limit
The burden of proof under Section 10 of this Rule lies with the access by users or consumers to alternate sources of
the parties seeking the exemption. A party seeking to rely supply or the access of suppliers to alternate consumers.
on the exemption specified in Section 21 (a) of the Act or
Section 10 (a) of this Rule must demonstrate that if the RULE 6 Determination of Control
agreement were not implemented, significant efficiency
gains would not be realized. SECTION 1. What Constitutes Control of an Entity. —
SECTION 12. Finality of Rulings on Mergers and Control refers to the ability to substantially influence or
Acquisitions. — direct the actions or decisions of an entity, whether by
contract, agency or otherwise.


In determining the control of an entity, the Commission Dominance can exist on the part of one entity (single
may consider the following: dominance) or of two or more entities (collective
dominance).
(a) Control is presumed to exist when the parent owns
directly or indirectly, through subsidiaries, more than one SECTION 2. Assessment of Dominance. —
half (1/2) of the voting power of an entity, unless in
In determining whether an entity has a market dominant
exceptional circumstances, it can clearly be
demonstrated that such ownership does not constitute position for purposes of this Act and these Rules, the
control. Commission shall consider the following illustrative and
non-exhaustive criteria, as may be appropriate:
(b) Control also exists even when an entity owns one half
(a) The share of the entity in the relevant market and the
(1/2) or less of the voting power of another entity when:
ability of the entity to fix prices unilaterally or to restrict
(1) There is power over more than one half (1/2) of the supply in the relevant market;
voting rights by virtue of an agreement with investors;
(b) The share of other market participants in the relevant
(2) There is power to direct or govern the financial and market;
operating policies of the entity under a statute or
(c) The existence of barriers to entry and the elements
agreement;
which could foreseeably alter both the said barriers and
(3) There is power to appoint or remove the majority of the supply from competitors;
the members of the board of directors or equivalent
(d) The existence and power of its competitors;
governing body;
(e) The credible threat of future expansion by its actual
(4) There is power to cast the majority votes at meetings
competitors or entry by potential competitors (expansion
of the board of directors or equivalent governing body;
and entry);
(5) There exists ownership over or the right to use all or a
(f) Market exit of actual competitors;
significant part of the assets of the entity; or
(g) The bargaining strength of its customers
(6) There exist rights or contracts which confer decisive
(countervailing power);
influence on the decisions of the entity.
(h) The possibility of access by its competitors or other
RULE 7 Determination of Anti-Competitive entities to its sources of inputs;
Agreement or Conduct (i) The power of its customers to switch to other goods or
SECTION 1. Determination of an Anti-Competitive services;
Agreement or Conduct. — (j) Its recent conduct;
In determining whether an anti-competitive agreement (k) Its ownership, possession or control of infrastructure
or conduct substantially prevents, restricts, or lessens which are not easily duplicated;
competition, the Commission, in appropriate cases, shall,
inter alia: (l) Its technological advantages or superiority, compared
to other competitors;
(a) Define the relevant market allegedly affected by the
anti-competitive agreement or conduct, following the (m) Its easy or privileged access to capital markets or
principles laid out in Section 24 of the Act and Rule 5 of financial resources;
these Rules;
(n) Its economies of scale and of scope;
(b) Determine if there is actual or potential adverse
(o) Its vertical integration; and
impact on competition in the relevant market caused by
the alleged agreement or conduct, and if such impact is (p) The existence of a highly developed distribution and
substantial and outweighs the actual or potential sales network.
efficiency gains that result from the agreement or
conduct; SECTION 3. Presumption of Dominance. —
(c) Adopt a broad and forward-looking perspective, There shall be a rebuttable presumption of market
recognizing future market developments, any overriding dominant position if the market share of an entity in the
need to make the goods or services available to relevant market is at least fifty percent (50%), unless a
consumers, the requirements of large investments in new market share threshold is determined by the
infrastructure, the requirements of law, and the need of Commission for that particular sector.
our economy to respond to international competition, but SECTION 4. Setting the Thresholds for Dominance. —
also taking account of past behavior of the parties
involved and prevailing market conditions; The Commission shall, from time to time, determine and
publish the threshold for dominant position or the
(d) Balance the need to ensure that competition is not minimum level of share in the relevant market that could
prevented or substantially restricted and the risk that give rise to a presumption of dominant position. In such a
competition efficiency, productivity, innovation, or determination, the Commission would consider:
development of priority areas or industries in the general
interest of the country may be deterred by overzealous or (a) The structure of the relevant market;
undue intervention; and (b) The degree of integration;
(e) Assess the totality of evidence on whether it is more (c) Access to end-users;
likely than not that the entity has engaged in
anti-competitive agreement or conduct, including (d) Technology and financial resources; and
whether the entity's conduct was done with a reasonable (e) Other factors affecting the control of a market, as
commercial purpose, such as but not limited to, phasing
provided in Section 2 of this Rule.
out of a product or closure of a business, or as a
reasonable commercial response to the market entry or SECTION 5. Exceptions. —
conduct of a competitor.
The Commission shall not consider the acquisition,
RULE 8 Determination of Dominance maintenance and increase of market share through
legitimate means that does not substantially prevent,
SECTION 1. Existence of Dominance. — restrict, or lessen competition in the market, such as but
not limited to, having superior skills, rendering superior



service, producing or distributing quality products, having AN ACT PROVIDING FOR THE REHABILITATION OR

business acumen, and enjoying the use of protected LIQUIDATION OF FINANCIALLY DISTRESSED
intellectual property rights as violative of the Act and ENTERPRISES AND INDIVIDUALS
these Rules, Provided, that the concerned entity or
entities invoking the exception shall clearly establish to
the Commission's satisfaction, that the barrier to entry or CHAPTER I General Provisions
anti-competitive act is an indispensable and natural
SECTION 1. Title. — This Act shall be known as the
result of the superior product or process, business
"Financial Rehabilitation and Insolvency Act (FRIA) of
acumen, or legal rights or laws.
2010".
RULE 9 Forbearance SECTION 2. Declaration of Policy. — It is the policy of the
State to encourage debtors, both juridical and natural
SECTION 1. Forbearance of the Commission. — persons, and their creditors to collectively and realistically
The Commission, motu proprio or upon application, prior resolve and adjust competing claims and property rights.
to its initiation of an inquiry, may forbear from applying In furtherance thereof, the State shall ensure a timely, fair,
the provisions of the Act or these Rules, for a limited time, transparent, effective and efficient rehabilitation or
in whole or in part, in all or specific cases, on an entity or liquidation of debtors. The rehabilitation or liquidation
group of entities, if in its determination: shall be made with a view to ensure or maintain certainty
and predictability in commercial affairs, preserve and
(a) Enforcement is not necessary to the attainment of the maximize the value of the assets of these debtors,
policy objectives of this Act; recognize creditor rights and respect priority of claims,
(b) Forbearance will neither impede competition in the and ensure equitable treatment of creditors who are
similarly situated. When rehabilitation is not feasible, it is
market where the entity or group of entities seeking
in the interest of the State to facilitate a speedy and
exemption operates nor in related markets;
orderly liquidation of these debtors' assets and the
(c) Forbearance is consistent with public interest and the settlement of their obligations.
benefit and welfare of the consumers; and SECTION 3. Nature of Proceedings. — The proceedings
(d) Forbearance is justified in economic terms; under this Act shall be in rem. Jurisdiction over all
persons affected by the proceedings shall be considered
Provided, that forbearance will be granted for a as acquired upon publication of the notice of the
maximum period of one year. Any extension to the period commencement of the proceedings in any newspaper of
will have to be expressly approved by the Commission. general circulation in the Philippines in the manner
Any extension of the duration of an exemption shall not prescribed by the rules of procedure to be promulgated
be longer than one year. by the Supreme Court.
SECTION 2. Public Hearing. — The proceedings shall be conducted in a summary and
non-adversarial manner consistent with the declared
(a) A public hearing shall be held to assist the policies of this Act and in accordance with the rules of
Commission in making its determination under Section 1 procedure that the Supreme Court may promulgate.
of this Rule.
SECTION 4. Definition of Terms. — As used in this Act, the
(b) The Commission's order exempting the relevant entity, term:
or group of entities under this Rule shall be made public.
(a) Administrative expenses shall refer to those
Conditions may be attached to the forbearance if the
reasonable and necessary expenses:
Commission deems it appropriate to ensure the
long-term interests of consumers. (1) incurred or arising from the filing of a petition under
the provisions of this Act;
(c) In the event that the basis for the issuance of the
exemption order ceases to be valid, the order may be (2) arising from, or in connection with, the conduct of the
withdrawn by the Commission. proceedings under this Act, including those incurred for
the rehabilitation or liquidation of the debtor;
RULE 10 Final Provisions (3) incurred in the ordinary course of business of the
SECTION 1. Revisions of These Rules. — debtor after the commencement date;
(4) for the payment of new obligations obtained after the
The Commission may revise these Rules whenever it
commencement date to finance the rehabilitation of the
deems necessary and after due consultation with debtor;
affected stakeholders.
(5) incurred for the fees of the rehabilitation receiver or
SECTION 2. Separability Clause. — liquidator and of the professionals engaged by them; and
Should any provision herein be subsequently declared (6) that are otherwise authorized or mandated under this
unconstitutional, the same shall not affect the validity or Act or such other expenses as may be allowed by the
legality of the other provisions. Supreme Court in its rules.
SECTION 3. Effectivity. — (b) Affiliate shall refer to a corporation that directly or
indirectly, through one or more intermediaries, is
These Rules shall take effect fifteen (15) days after the controlled by, or is under the common control of another
date of its publication in at least two (2) newspapers of corporation.
general circulation.
(c) Claim shall refer to all claims or demands of whatever
Approved, this 31st day of May 2016. nature or character against the debtor or its property,
(Implementing Rules and Regulations of Republic Act whether for money or otherwise, liquidated or
No. 10667, IRR of RA 10667, [May 31, 2016]) unliquidated, fixed or contingent, matured or unmatured,
disputed or undisputed, including, but not limited to: (1)
all claims of the government, whether national or local,
including taxes, tariffs and customs duties; and (2) claims
RA No 10142 | Financial Rehabilitation against directors and officers of the debtor arising from
and Insolvency (FRIA) Act of 2010 acts done in the discharge of their functions falling within
the scope of their authority: Provided, That, this inclusion

does not prohibit the creditors or third parties from filing
July 18, 2010 * cases against the directors and officers acting in their
REPUBLIC ACT NO. 10142 personal capacities.


(d) Commencement date shall refer to the date on which bailment, and other property and assets of a third party
the court issues the Commencement Order, which shall that are in the possession of the debtor as of
be retroactive to the date of filing of the petition for commencement date, are excluded therefrom.
voluntary or involuntary proceedings. (r) Involuntary proceedings shall refer to proceedings
(e) Commencement Order shall refer to the order issued initiated by creditors.
by the court under Section 16 of this Act. (s) Liabilities shall refer to monetary claims against the
(f) Control shall refer to the power of a parent corporation debtor, including stockholder's advances that have been
to direct or govern the financial and operating policies of recorded in the debtor's audited financial statements as
an enterprise so as to obtain benefits from its activities. advances for future subscriptions.
Control is presumed to exist when the parent owns, (t) Lien shall refer to a statutory or contractual claim or
directly or indirectly through subsidiaries or affiliates, judicial charge on real or personal property that legally
more than one-half (1/2) of the voting power of an entitles a creditor to resort to said property for payment
enterprise unless, in exceptional circumstances, it can of the claim or debt secured by such lien.
clearly be demonstrated that such ownership does not
constitute control. Control also exists even when the (u) Liquidation shall refer to the proceedings under
parent owns one-half (1/2) or less of the voting power of Chapter V of this Act.
an enterprise when there is power: (v) Liquidation Order shall refer to the Order issued by the
(1) over more than one-half (1/2) of the voting rights by court under Section 112 of this Act.
virtue of an agreement with investors; (w) Liquidator shall refer to the natural person or juridical
(2) to direct or govern the financial and operating policies entity appointed as such by the court and entrusted with
of the enterprise under a statute or an agreement; such powers and duties as set forth in this Act: Provided,
That, if the liquidator is a juridical entity, it must designate
(3) to appoint or remove the majority of the members of a natural person who possesses all the qualifications and
the board of directors or equivalent governing body; or none of the disqualifications as its representative, it being
(4) to cast the majority votes at meetings of the board of understood that the juridical entity and the
directors or equivalent governing body. representative are solidarily liable for all obligations and
(g) Court shall refer to the court designated by the responsibilities of the liquidator.
Supreme Court to hear and determine, at the first (x) Officer shall refer to a natural person holding a
instance, the cases brought under this Act. management position described in or contemplated by a
(h) Creditor shall refer to a natural or juridical person juridical entity's articles of incorporation, bylaws or
which has a claim against the debtor that arose on or equivalent documents, except for the corporate secretary,
before the commencement date. the assistant corporate secretary and the external auditor.
(i) Date of liquidation shall refer to the date on which the (y) Ordinary course of business shall refer to transactions
court issues the Liquidation Order. in the pursuit of the individual debtor's or debtor's
business operations prior to rehabilitation or insolvency
(j) Days shall refer to calendar days unless otherwise proceedings and on ordinary business terms.
specifically stated in this Act.
(z) Ownership interest shall refer to the ownership
(k) Debtor shall refer to, unless specifically excluded by a interest of third parties in property held by the debtor,
provision of this Act, a sole proprietorship duly registered including those covered by trust receipts or assignments
with the Department of Trade and Industry (DTI), a of receivables.
partnership duly registered with the Securities and
Exchange Commission (SEC), a corporation duly (aa) Parent shall refer to a corporation which has control
organized and existing under Philippine laws, or an over another corporation either directly or indirectly
individual debtor who has become insolvent as defined through one or more intermediaries.
herein. (bb) Party to the proceedings shall refer to the debtor, a
(l) Encumbered property shall refer to real or personal creditor, the unsecured creditors' committee, a
property of the debtor upon which a lien attaches. stakeholder, a party with an ownership interest in
property held by the debtor, a secured creditor, the
(m) General unsecured creditor shall refer to a creditor rehabilitation receiver, liquidator or any other juridical or
whose claim or a portion thereof is neither secured, natural person who stands to be benefited or injured by
preferred nor subordinated under this Act. the outcome of the proceedings and whose notice of
(n) Group of debtors shall refer to and can cover only: (1) appearance is accepted by the court.
corporations that are financially related to one another as (cc) Possessory lien shall refer to a lien on property, the
parent corporations, subsidiaries or affiliates; (2) possession of which has been transferred to a creditor or
partnerships that are owned more than fifty percent a representative or agent thereof.
(50%) by the same person; and (3) single proprietorships
that are owned by the same person. When the petition (dd) Proceedings shall refer to judicial proceedings
covers a group of debtors, all reference under these rules commenced by the court's acceptance of a petition filed
to debtor shall include and apply to the group of debtors. under this Act.
(o) Individual debtor shall refer to a natural person who is (ee) Property of others shall refer to property held by the
a resident and citizen of the Philippines that has become debtor in which other persons have an ownership
insolvent as defined herein. interest.
(p) Insolvent shall refer to the financial condition of a (ff) Publication notice shall refer to notice through
debtor that is generally unable to pay its or his liabilities publication in a newspaper of general circulation in the
as they fall due in the ordinary course of business or has Philippines on a business day for two (2) consecutive
liabilities that are greater than its or his assets. weeks.
(q) Insolvent debtor's estate shall refer to the estate of the (gg) Rehabilitation shall refer to the restoration of the
insolvent debtor, which includes all the property and debtor to a condition of successful operation and
assets of the debtor as of commencement date, plus the solvency, if it is shown that its continuance of operation is
property and assets acquired by the rehabilitation economically feasible and its creditors can recover by way
receiver or liquidator after that date, as well as all other of the present value of payments projected in the plan,
property and assets in which the debtor has an more if the debtor continues as a going concern than if it
ownership interest, whether or not these property and is immediately liquidated.
assets are in the debtor's possession as of (hh) Rehabilitation receiver shall refer to the person or
commencement date: Provided,That trust assets and persons, natural or juridical, appointed as such by the


court pursuant to this Act and which shall be entrusted Provided, however, That the commingling or aggregation
with such powers and duties as set forth herein. of assets and liabilities of the debtor with those of a
(ii) Rehabilitation Plan shall refer to a plan by which the related enterprise may only be allowed where:
financial well-being and viability of an insolvent debtor (a) there was commingling in fact of assets and liabilities
can be restored using various means including, but not of the debtor and the related enterprise prior to the
limited to, debt forgiveness, debt rescheduling, commencement of the proceedings;
reorganization or quasi-reorganization, dacion en pago, (b) the debtor and the related enterprise have common
debt-equity conversion and sale of the business (or parts creditors and it will be more convenient to treat them
of it) as a going concern, or setting-up of new business together rather than separately;
entity as prescribed in Section 62 hereof, or other similar
arrangements as may be approved by the court or (c) the related enterprise voluntarily accedes to join the
creditors. debtor as party petitioner and to commingle its assets
and liabilities with the debtor's; and
(jj) Secured claim shall refer to a claim that is secured by a
lien. (d) The consolidation of assets and liabilities of the debtor
and the related enterprise is beneficial to all concerned
(kk) Secured creditor shall refer to a creditor with a and promotes the objectives of rehabilitation.
secured claim.
Provided, finally, That nothing in this section shall prevent
(ll) Secured party shall refer to a secured creditor or the the court from joining other entities affiliated with the
agent or representative of such secured creditor. debtor as parties pursuant to the rules of procedure as
(mm) Securities market participant shall refer to a broker, may be promulgated by the Supreme Court.
dealer, underwriter, transfer agent or other juridical SECTION 8. Decisions of Creditors. — Decisions of
persons transacting securities in the capital market. creditors shall be made according to the relevant
(nn) Stakeholder shall refer, in addition to a holder of provisions of the Corporation Code in the case of stock or
shares of a corporation, to a member of a nonstock nonstock corporations or the Civil Code in the case of
corporation or association or a partner in a partnership. partnerships that are not inconsistent with this Act.
(oo) Subsidiary shall refer to a corporation more than fifty SECTION 9. Creditors' Representatives. — Creditors may
percent (50%) of the voting stock of which is owned or designate representatives to vote or otherwise act on
controlled directly or indirectly through one or more their behalf by filing notice of such representation with
intermediaries by another corporation, which thereby the court and serving a copy on the rehabilitation receiver
becomes its parent corporation. or liquidator.
(pp) Unsecured claim shall refer to a claim that is not SECTION 10. Liability of Individual Debtor, Owner of a Sole
secured by a lien. Proprietorship, Partners in a Partnership, or Directors
(qq) Unsecured creditor shall refer to a creditor with an and Officers. — Individual debtor, owner of a sole
unsecured claim. proprietorship, partners in a partnership, or directors and
officers of a debtor shall be liable for double the value of
(rr) Voluntary proceedings shall refer to proceedings the property sold, embezzled or disposed of or double the
initiated by the debtor. amount of the transaction involved, whichever is higher,
(ss) Voting creditor shall refer to a creditor that is a to be recovered for the benefit of the debtor and the
member of a class of creditors, the consent of which is creditors, if they, having notice of the commencement of
necessary for the approval of a Rehabilitation Plan under the proceedings, or having reason to believe that
this Act. proceedings are about to be commenced, or in
contemplation of the proceedings, willfully commit the
SECTION 5. Exclusions. — The term debtor does not following acts:
include banks, insurance companies, pre-need
companies, and national and local government agencies (a) Dispose or cause to be disposed of any property of the
or units. debtor other than in the ordinary course of business or
authorize or approve any transaction in fraud of creditors
For purposes of this section: or in a manner grossly disadvantageous to the debtor
(a) Bank shall refer to any duly licensed bank or and/or creditors; or
quasi-bank that is potentially or actually subject to (b) Conceal, or authorize or approve the concealment,
conservatorship, receivership or liquidation proceedings from the creditors, or embezzles or misappropriates, any
under the New Central Bank Act (Republic Act No. 7653) property of the debtor.
or successor legislation;
The court shall determine the extent of the liability of an
(b) Insurance company shall refer to those companies owner, partner, director or officer under this section. In
that are potentially or actually subject to insolvency this connection, in case of partnerships and corporations,
proceedings under the Insurance Code(Presidential the court shall consider the amount of the shareholding
Decree No. 1460) or successor legislation; and or partnership or equity interest of such partner, director
(c) Pre-need company shall refer to any corporation or officer, the degree of control of such partner, director
authorized/licensed to sell or offer to sell pre-need plans. or officer over the debtor, and the extent of the
involvement of such partner, director or debtor in the
Provided, That government financial institutions other actual management of the operations of the debtor.
than banks and government-owned or -controlled
corporations shall be covered by this Act, unless their SECTION 11. Authorization to Exchange Debt for Equity. —
specific charter provides otherwise. Notwithstanding applicable banking legislation to the
contrary, any bank, whether universal or not, may acquire
SECTION 6. Designation of Courts and Promulgation of and hold an equity interest or investment in a debtor or
Procedural Rules. — The Supreme Court shall designate its subsidiaries when conveyed to such bank in
the court or courts that will hear and resolve cases satisfaction of debts pursuant to a Rehabilitation or
brought under this Act and shall promulgate the rules of Liquidation Plan approved by the court: Provided, That
pleading, practice and procedure to govern the such ownership shall be subject to the ownership limits
proceedings brought under this Act. applicable to universal banks for equity investments and:
SECTION 7. Substantive and Procedural Consolidation. — Provided, further, That any equity investment or interest
Each juridical entity shall be considered as a separate acquired or held pursuant to this section shall be
entity under the proceedings in this Act. Under these disposed by the bank within a period of five (5) years or as
proceedings, the assets and liabilities of a debtor may not may be prescribed by the Monetary Board.
be commingled or aggregated with those of another,
unless the latter is a related enterprise that is owned or
controlled directly or indirectly by the same interests:



prevent the debtor from paying its debts as they become

due or will render it insolvent.
CHAPTER II Court-Supervised Rehabilitation
SECTION 14. Petition to Initiate Involuntary Proceedings.
— The creditor/s' petition for rehabilitation shall be
(A) Initiation Proceedings. verified to establish the substantial likelihood that the
debtor may be rehabilitated, and include:
(1) Voluntary Proceedings. (a) identification of the debtor, its principal activities and
SECTION 12. Petition to Initiate Voluntary Proceedings by its address;
Debtor. — When approved by the owner in case of a sole (b) the circumstances sufficient to support a petition to
proprietorship, or by a majority of the partners in case of a initiate involuntary rehabilitation proceedings under
partnership, or, in case of a corporation, by a majority vote Section 13 of this Act;
of the board of directors or trustees and authorized by the
(c) the specific relief sought under this Act;
vote of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock, or in case of (d) a Rehabilitation Plan;
nonstock corporation, by the vote of at least two-thirds (e) the names of at least three (3) nominees to the
(2/3) of the members, in a stockholder's or member's position of rehabilitation receiver;
meeting duly called for the purpose, an insolvent debtor
may initiate voluntary proceedings under this Act by (f) other information that may be required under this Act
filing a petition for rehabilitation with the court and on depending on the form of relief requested; and
the grounds hereinafter specifically provided. The petition (g) other documents required to be filed with the petition
shall be verified to establish the insolvency of the debtor pursuant to this Act and the rules of procedure as may be
and the viability of its rehabilitation, and include, whether promulgated by the Supreme Court.
as an attachment or as part of the body of the petition, as
a minimum, the following:
(B) Action on the Petition and Commencement of
(a) Identification of the debtor, its principal activities and
its addresses; Proceedings.
(b) Statement of the fact of and the cause of the debtor's SECTION 15. Action on the Petition. — If the court finds
insolvency or inability to pay its obligations as they the petition for rehabilitation to be sufficient in form and
become due; substance, it shall, within five (5) working days from the
filing of the petition, issue a Commencement Order. If,
(c) The specific relief sought pursuant to this Act; within the same period, the court finds the petition
(d) The grounds upon which the petition is based; deficient in form or substance, the court may, in its
discretion, give the petitioner/s a reasonable period of
(e) Other information that may be required under this Act time within which to amend or supplement the petition,
depending on the form of relief requested; or to submit such documents as may be necessary or
(f) Schedule of the debtor's debts and liabilities including proper to put the petition in proper order. In such case,
a list of creditors with their addresses, amounts of claims the five (5) working days provided above for the issuance
and collaterals, or securities, if any; of the Commencement Order shall be reckoned from the
date of the filing of the amended or supplemental
(g) An inventory of all its assets including receivables and petition or the submission of such documents.
claims against third parties;
SECTION 16. Commencement of Proceedings and
(h) A Rehabilitation Plan; Issuance of a Commencement Order. — The
(i) The names of at least three (3) nominees to the rehabilitation proceedings shall commence upon the
position of rehabilitation receiver; and issuance of the Commencement Order, which shall:
(j) Other documents required to be filed with the petition (a) identify the debtor, its principal business or activity/ies
pursuant to this Act and the rules of procedure as may be and its principal place of business;
promulgated by the Supreme Court. (b) summarize the ground/s for initiating the
A group of debtors may jointly file a petition for proceedings;
rehabilitation under this Act when one or more of its (c) state the relief sought under this Act and any
members foresee the impossibility of meeting debts requirement or procedure particular to the relief sought;
when they respectively fall due, and the financial distress
would likely adversely affect the financial condition (d) state the legal effects of the Commencement Order,
and/or operations of the other members of the group including those mentioned in Section 17 hereof;
and/or the participation of the other members of the (e) declare that the debtor is under rehabilitation;
group is essential under the terms and conditions of the
proposed Rehabilitation Plan. (f) direct the publication of the Commencement Order in
a newspaper of general circulation in the Philippines
once a week for at least two (2) consecutive weeks, with
(2) Involuntary Proceedings. the first publication to be made within seven (7) days
SECTION 13. Circumstances Necessary to Initiate from the time of its issuance;
Involuntary Proceedings. — Any creditor or group of (g) if the petitioner is the debtor, direct the service by
creditors with a claim of, or the aggregate of whose personal delivery of a copy of the petition on each
claims is, at least One million pesos (Php1,000,000.00) or creditor holding at least ten percent (10%) of the total
at least twenty-five percent (25%) of the subscribed liabilities of the debtor as determined from the schedule
capital stock or partners' contributions, whichever is attached to the petition within five (5) days; if the
higher, may initiate involuntary proceedings against the petitioner/s is/are creditor/s, direct the service by personal
debtor by filing a petition for rehabilitation with the court delivery of a copy of the petition on the debtor within five
if: (5) days;
(a) there is no genuine issue of fact or law on the claim/s (h) appoint a rehabilitation receiver who may or may not
of the petitioner/s, and that the due and demandable be from among the nominees of the petitioner/s, and
payments thereon have not been made for at least sixty who shall exercise such powers and duties defined in this
(60) days or that the debtor has failed generally to meet Act as well as the procedural rules that the Supreme
its liabilities as they fall due; or Court will promulgate;
(b) a creditor, other than the petitioner/s, has initiated (i) summarize the requirements and deadlines for
foreclosure proceedings against the debtor that will creditors to establish their claims against the debtor and


direct all creditors to file their claims with the court at Attempts to seek legal or other recourse against the
least five (5) days before the initial hearing; debtor outside these proceedings shall be sufficient to
(j) direct the Bureau of Internal Revenue (BIR) to file and support a finding of indirect contempt of court.
serve on the debtor its comment on or opposition to the SECTION 18. Exceptions to the Stay or Suspension Order.
petition or its claim/s against the debtor under such — The Stay or Suspension Order shall not apply:
procedures as the Supreme Court may hereafter provide; (a) to cases already pending appeal in the Supreme Court
(k) prohibit the debtor's suppliers of goods or services as of commencement date: Provided, That any final and
from withholding the supply of goods and services in the executory judgment arising from such appeal shall be
ordinary course of business for as long as the debtor referred to the court for appropriate action;
makes payments for the services or goods supplied after (b) subject to the discretion of the court, to cases pending
the issuance of the Commencement Order; or filed at a specialized court or quasi-judicial agency
(l) authorize the payment of administrative expenses as which, upon determination by the court, is capable of
they become due; resolving the claim more quickly, fairly and efficiently
(m) set the case for initial hearing, which shall not be than the court: Provided, That any final and executory
more than forty (40) days from the date of filing of the judgment of such court or agency shall be referred to the
petition for the purpose of determining whether there is court and shall be treated as a non-disputed claim;
substantial likelihood for the debtor to be rehabilitated; (c) to the enforcement of claims against sureties and
(n) make available copies of the petition and other persons solidarily liable with the debtor, and third
rehabilitation plan for examination and copying by any party or accommodation mortgagors as well as issuers of
interested party; letters of credit, unless the property subject of the third
party or accommodation mortgage is necessary for the
(o) indicate the location or locations at which documents rehabilitation of the debtor as determined by the court
regarding the debtor and the proceedings under this Act upon recommendation by the rehabilitation receiver;
may be reviewed and copied;
(d) to any form of action of customers or clients of a
(p) state that any creditor or debtor, who is not the securities market participant to recover or otherwise
petitioner, may submit the name or nominate any other claim moneys and securities entrusted to the latter in the
qualified person to the position of rehabilitation receiver ordinary course of the latter's business as well as any
at least five (5) days before the initial hearing; action of such securities market participant or the
(q) include a Stay or Suspension Order which shall: appropriate regulatory agency or self-regulatory
organization to pay or settle such claims or liabilities;
(1) suspend all actions or proceedings, in court or
otherwise, for the enforcement of claims against the (e) to the actions of a licensed broker or dealer to sell
debtor; pledged securities of a debtor pursuant to a securities
pledge or margin agreement for the settlement of
(2) suspend all actions to enforce any judgment, securities transactions in accordance with the provisions
attachment or other provisional remedies against the of the Securities Regulation Code and its implementing
debtor; rules and regulations;
(3) prohibit the debtor from selling, encumbering, (f) the clearing and settlement of financial transactions
transferring or disposing in any manner any of its through the facilities of a clearing agency or similar
properties except in the ordinary course of business; and entities duly authorized, registered and/or recognized by
(4) prohibit the debtor from making any payment of its the appropriate regulatory agency like the Bangko
liabilities outstanding as of the commencement date Sentral ng Pilipinas (BSP) and the SEC as well as any form
except as may be provided herein. of actions of such agencies or entities to reimburse
themselves for any transactions settled for the debtor;
SECTION 17. Effects of the Commencement Order. — and
Unless otherwise provided for in this Act, the court's
issuance of a Commencement Order shall, in addition to (g) any criminal action against the individual debtor or
the effects of a Stay or Suspension Order described in owner, partner, director or officer of a debtor shall not be
Section 16 hereof: affected by any proceeding commenced under this Act.
(a) vest the rehabilitation receiver with all the powers and SECTION 19. Waiver of Taxes and Fees Due to the
functions provided for in this Act, such as the right to National Government and to Local Government Units
review and obtain all records to which the debtor's (LGUs). — Upon issuance of the Commencement Order
management and directors have access, including bank by the court, and until the approval of the Rehabilitation
accounts of whatever nature of the debtor, subject to the Plan or dismissal of the petition, whichever is earlier, the
approval by the court of the performance bond filed by imposition of all taxes and fees, including penalties,
the rehabilitation receiver; interests and charges thereof, due to the national
government or to LGUs shall be considered waived, in
(b) prohibit, or otherwise serve as the legal basis for furtherance of the objectives of rehabilitation.
rendering null and void the results of any extrajudicial
activity or process to seize property, sell encumbered SECTION 20. Application of Stay or Suspension Order to
property, or otherwise attempt to collect on or enforce a Government Financial Institutions. — The provisions of
claim against the debtor after the commencement date this Act concerning the effects of the Commencement
unless otherwise allowed in this Act, subject to the Order and the Stay or Suspension Order on the
provisions of Section 50 hereof; suspension of rights to foreclose or otherwise pursue
legal remedies shall apply to government financial
(c) serve as the legal basis for rendering null and void any institutions, notwithstanding provisions in their charters
set-off after the commencement date of any debt owed or other laws to the contrary.
to the debtor by any of the debtor's creditors;
SECTION 21. Effectivity and Duration of Commencement
(d) serve as the legal basis for rendering null and void the Order. — Unless lifted by the court, the Commencement
perfection of any lien against the debtor's property after Order shall be effective for the duration of the
the commencement date; and rehabilitation proceedings for as long as there is a
(e) consolidate the resolution of all legal proceedings by substantial likelihood that the debtor will be successfully
and against the debtor to the court: Provided, however, rehabilitated. In determining whether there is substantial
That the court may allow the continuation of cases in likelihood for the debtor to be successfully rehabilitated,
other courts where the debtor had initiated the suit. the court shall ensure that the following minimum
requirements are met:


(a) The proposed Rehabilitation Plan submitted complies the owner/s of a sole proprietorship, partners of a
with the minimum contents prescribed by this Act; partnership, or directors or officers of a corporation in
(b) There is sufficient monitoring by the rehabilitation contemplation of the insolvency of the debtor or which
receiver of the debtor's business for the protection of may have contributed to the insolvency of the debtor;
creditors; (b) the underlying assumptions, the financial goals and
(c) The debtor has met with its creditors to the extent the procedures to accomplish such goals as stated in the
reasonably possible in attempts to reach a consensus on petitioner's Rehabilitation Plan are realistic, feasible and
the proposed Rehabilitation Plan; reasonable;
(d) The rehabilitation receiver submits a report, based on (c) there is a substantial likelihood for the debtor to be
preliminary evaluation, stating that the underlying successfully rehabilitated;
assumptions and the financial goals stated in the (d) the petition should be dismissed; and
petitioner's Rehabilitation Plan are realistic, feasible and (e) the debtor should be dissolved and/or liquidated.
reasonable; or, if not, there is, in any case, a substantial
likelihood for the debtor to be successfully rehabilitated SECTION 25. Giving Due Course to or Dismissal of
because, among others: Petition, or Conversion of Proceedings. — Within ten (10)
days from receipt of the report of the rehabilitation
(1) there are sufficient assets with which to rehabilitate receiver mentioned in Section 24 hereof, the court may:
the debtor;
(a) give due course to the petition upon a finding that:
(2) there is sufficient cash flow to maintain the operations
of the debtor; (1) the debtor is insolvent; and
(3) the debtor's owner/s, partners, stockholders, directors (2) there is a substantial likelihood for the debtor to be
and officers have been acting in good faith and with due successfully rehabilitated;
diligence; (b) dismiss the petition upon a finding that:
(4) the petition is not a sham filing intended only to delay (1) debtor is not insolvent;
the enforcement of the rights of the creditor/s or of any
group of creditors; and (2) the petition is a sham filing intended only to delay the
enforcement of the rights of the creditor/s or of any group
(5) the debtor would likely be able to pursue a viable of creditors;
Rehabilitation Plan;
(3) the petition, the Rehabilitation Plan and the
(e) The petition, the Rehabilitation Plan and the attachments thereto contain any materially false or
attachments thereto do not contain any materially false misleading statements; or
or misleading statement;
(4) the debtor has committed acts of misrepresentation
(f) If the petitioner is the debtor, that the debtor has met or in fraud of its creditor/s or a group of creditors;
with its creditor/s representing at least three-fourths (3/4)
of its total obligations to the extent reasonably possible (c) convert the proceedings into one for the liquidation of
and made a good faith effort to reach a consensus on the the debtor upon a finding that:
proposed Rehabilitation Plan; if the petitioner/s is/are a (1) the debtor is insolvent; and
creditor or group of creditors, that the petitioner/s
has/have met with the debtor and made a good faith (2) there is no substantial likelihood for the debtor to be
effort to reach a consensus on the proposed successfully rehabilitated as determined in accordance
Rehabilitation Plan; and with the rules to be promulgated by the Supreme Court.
(g) The debtor has not committed acts of SECTION 26. Petition Given Due Course. — If the petition
misrepresentation or in fraud of its creditor/s or a group of is given due course, the court shall direct the
creditors. rehabilitation receiver to review, revise and/or
recommend action on the Rehabilitation Plan and
SECTION 22. Action at the Initial Hearing. — At the initial submit the same or a new one to the court within a
hearing, the court shall: period of not more than ninety (90) days.
(a) determine the creditors who have made timely and The court may refer any dispute relating to the
proper filing of their notice of claims; Rehabilitation Plan or the rehabilitation proceedings
(b) hear and determine any objection to the qualifications pending before it to arbitration or other modes of dispute
or the appointment of the rehabilitation receiver and, if resolution, as provided for under Republic Act No. 9285, or
necessary, appoint a new one in accordance with this Act; the Alternative Dispute Resolution Act of 2004, should it
determine that such mode will resolve the dispute more
(c) direct the creditors to comment on the petition and quickly, fairly and efficiently than the court.
the Rehabilitation Plan, and to submit the same to the
court and to the rehabilitation receiver within a period of SECTION 27. Dismissal of Petition. — If the petition is
not more than twenty (20) days; and dismissed pursuant to paragraph (b) of Section 25 hereof,
then the court may, in its discretion, order the petitioner
(d) direct the rehabilitation receiver to evaluate the to pay damages to any creditor or to the debtor, as the
financial condition of the debtor and to prepare and case may be, who may have been injured by the filing of
submit to the court within forty (40) days from the initial the petition, to the extent of any such injury.
hearing the report provided in Section 24 hereof.
SECTION 23. Effect of Failure to File Notice of Claim. — A
(C) The Rehabilitation Receiver, Management
creditor whose claim is not listed in the schedule of debts
and liabilities and who fails to file a notice of claim in Committee and Creditors' Committee.
accordance with the Commencement Order but SECTION 28. Who May Serve as a Rehabilitation Receiver.
subsequently files a belated claim shall not be entitled to — Any qualified natural or juridical person may serve as a
participate in the rehabilitation proceedings but shall be rehabilitation receiver: Provided, That if the rehabilitation
entitled to receive distributions arising therefrom. receiver is a juridical entity, it must designate a natural
SECTION 24. Report of the Rehabilitation Receiver. — person/s who possess/es all the qualifications and none of
Within forty (40) days from the initial hearing, and with or the disqualifications as its representative, it being
without the comments of the creditors or any of them, understood that the juridical entity and the
the rehabilitation receiver shall submit a report to the representative/s are solidarily liable for all obligations and
court stating his preliminary findings and responsibilities of the rehabilitation receiver.
recommendations on whether:
(a) the debtor is insolvent and if so, the causes thereof
and any unlawful or irregular act or acts committed by



SECTION 29. Qualifications of a Rehabilitation Receiver. property are made other than in the ordinary course of
— The rehabilitation receiver shall have the following business;
minimum qualifications: (j) With the court's approval, to engage the services of or
(a) A citizen of the Philippines or a resident of the to employ persons or entities to assist him in the
Philippines in the six (6) months immediately preceding discharge of his functions;
his nomination; (k) To determine the manner by which the debtor may be
(b) Of good moral character and with acknowledged best rehabilitated, to review, revise and/or recommend
integrity, impartiality and independence; action on the Rehabilitation Plan and submit the same or
(c) Has the requisite knowledge of insolvency and other a new one to the court for approval;
relevant commercial laws, rules and procedures, as well as (l) To implement the Rehabilitation Plan as approved by
the relevant training and/or experience that may be the court, if so provided under the Rehabilitation Plan;
necessary to enable him to properly discharge the duties (m) To assume and exercise the powers of management
and obligations of a rehabilitation receiver; and of the debtor, if directed by the court pursuant to Section
(d) Has no conflict of interest: Provided, That such conflict 36 hereof;
of interest may be waived, expressly or impliedly, by a (n) To exercise such other powers as may, from time to
party who may be prejudiced thereby. time, be conferred upon him by the court; and
Other qualifications and disqualifications of the (o) To submit a status report on the rehabilitation
rehabilitation receiver shall be set forth in procedural proceedings every quarter or as may be required by the
rules, taking into consideration the nature of the business court motu proprio, or upon motion of any creditor, or as
of the debtor and the need to protect the interest of all may be provided, in the Rehabilitation Plan.
stakeholders concerned.
Unless appointed by the court, pursuant to Section 36
SECTION 30. Initial Appointment of the Rehabilitation hereof, the rehabilitation receiver shall not take over the
Receiver. — The court shall initially appoint the management and control of the debtor but may
rehabilitation receiver, who may or may not be from recommend the appointment of a management
among the nominees of the petitioner. However, at the committee over the debtor in the cases provided by this
initial hearing of the petition, the creditors and the debtor Act.
who are not petitioners may nominate other persons to
the position. The court may retain the rehabilitation SECTION 32. Removal of the Rehabilitation Receiver. —
receiver initially appointed or appoint another who may The rehabilitation receiver may be removed at any time
or may not be from among those nominated. by the court, either motu proprio or upon motion by any
creditor/s holding more than fifty percent (50%) of the
In case the debtor is a securities market participant, the total obligations of the debtor, on such grounds as the
court shall give priority to the nominee of the appropriate rules of procedure may provide which shall include, but
securities or investor protection fund. are not limited to, the following:
If a qualified natural person or entity is nominated by (a) Incompetence, gross negligence, failure to perform or
more than fifty percent (50%) of the secured creditors and failure to exercise the proper degree of care in the
the general unsecured creditors, and satisfactory performance of his duties and powers;
evidence is submitted, the court shall appoint the
creditors' nominee as rehabilitation receiver. (b) Lack of a particular or specialized competency
required by the specific case;
SECTION 31. Powers, Duties and Responsibilities of the
Rehabilitation Receiver. — The rehabilitation receiver (c) Illegal acts or conduct in the performance of his duties
shall be deemed an officer of the court with the principal and powers;
duty of preserving and maximizing the value of the assets (d) Lack of qualification or presence of any
of the debtor during the rehabilitation proceedings, disqualification;
determining the viability of the rehabilitation of the
debtor, preparing and recommending a Rehabilitation (e) Conflict of interest that arises after his appointment;
Plan to the court, and implementing the approved and
Rehabilitation Plan. To this end, and without limiting the (f) Manifest lack of independence that is detrimental to
generality of the foregoing, the rehabilitation receiver the general body of the stakeholders.
shall have the following powers, duties and
responsibilities: SECTION 33. Compensation and Terms of Service. — The
rehabilitation receiver and his direct employees or
(a) To verify the accuracy of the factual allegations in the independent contractors shall be entitled to
petition and its annexes; compensation for reasonable fees and expenses from the
(b) To verify and correct, if necessary, the inventory of all of debtor according to the terms approved by the court
the assets of the debtor, and their valuation; after notice and hearing. Prior to such hearing, the
rehabilitation receiver and his direct employees shall be
(c) To verify and correct, if necessary, the schedule of entitled to reasonable compensation based on quantum
debts and liabilities of the debtor; meruit. Such costs shall be considered administrative
(d) To evaluate the validity, genuineness and true amount expenses.
of all the claims against the debtor; SECTION 34. Oath and Bond of the Rehabilitation
(e) To take possession, custody and control, and to Receiver. — Prior to entering upon his powers, duties and
preserve the value of all the property of the debtor; responsibilities, the rehabilitation receiver shall take an
oath and file a bond, in such amount to be fixed by the
(f) To sue and recover, with the approval of the court, all court, conditioned upon the faithful and proper discharge
amounts owed to, and all properties pertaining to the of his powers, duties and responsibilities.
debtor;
SECTION 35. Vacancy. — In case the position of
(g) To have access to all information necessary, proper or rehabilitation receiver is vacated for any reason
relevant to the operations and business of the debtor and whatsoever, the court shall direct the debtor and the
for its rehabilitation; creditors to submit the name/s of their nominee/s to the
(h) To sue and recover, with the approval of the court, all position. The court may appoint any of the qualified
property or money of the debtor paid, transferred or nominees, or any other person qualified for the position.
disbursed in fraud of the debtor or its creditors, or which SECTION 36. Displacement of Existing Management by
constitute undue preference of creditor/s; the Rehabilitation Receiver or Management Committee.
(i) To monitor the operations and the business of the — Upon motion of any interested party, the court may
debtor to ensure that no payments or transfers of appoint and direct the rehabilitation receiver to assume



the powers of management of the debtor, or appoint a (d) he is, or was, within two (2) years from the filing of the
management committee that will undertake the petition, an underwriter of the outstanding securities of
management of the debtor, upon clear and convincing the debtor;
evidence of any of the following circumstances: (e) he is related by consanguinity or affinity within the
(a) Actual or imminent danger of dissipation, loss, fourth civil degree to any individual creditor, owner/s of a
wastage or destruction of the debtor's assets or other sole proprietorship-debtor, partners of a
properties; partnership-debtor or to any stockholder, director, officer,
(b) Paralyzation of the business operations of the debtor; employee or underwriter of a corporation-debtor; or
or (f) he has any other direct or indirect material interest in
(c) Gross mismanagement of the debtor, or fraud or other the debtor or any of the creditors.
wrongful conduct on the part of, or gross or willful Any rehabilitation receiver, member of the management
violation of this Act by, existing management of the committee or persons employed or contracted by them
debtor or the owner, partner, director, officer or possessing any conflict of interest shall make the
representative/s in management of the debtor. appropriate disclosure either to the court or to the
In case the court appoints the rehabilitation receiver to creditors in case of out-of-court rehabilitation
assume the powers of management of the debtor, the proceedings. Any party to the proceeding adversely
court may: affected by the appointment of any person with a conflict
of interest to any of the positions enumerated above may
(1) require the rehabilitation receiver to post an additional however waive his right to object to such appointment
bond; and, if the waiver is unreasonably withheld, the court may
(2) authorize him to engage the services or to employ disregard the conflict of interest, taking into account the
persons or entities to assist him in the discharge of his general interest of the stakeholders.
managerial functions; and SECTION 41. Immunity. — The rehabilitation receiver and
(3) authorize a commensurate increase in his all persons employed by him, and the members of the
compensation. management committee and all persons employed by it,
shall not be subject to any action, claim or demand in
SECTION 37. Role of the Management Committee. — connection with any act done or omitted to be done by
When appointed pursuant to the foregoing section, the them in good faith in connection with the exercise of
management committee shall take the place of the their powers and functions under this Act or other actions
management and the governing body of the debtor and duly approved by the court.
assume their rights and responsibilities.
SECTION 42. Creditors' Committee. — After the creditors'
The specific powers and duties of the management meeting called pursuant to Section 63 hereof, the
committee, whose members shall be considered as creditors belonging to a class may formally organize a
officers of the court, shall be prescribed by the procedural committee among themselves. In addition, the creditors
rules. may, as a body, agree to form a creditors' committee
SECTION 38. Qualifications of Members of the composed of a representative from each class of
Management Committee. — The qualifications and creditors, such as the following:
disqualifications of the members of the management (a) Secured creditors;
committee shall be set forth in the procedural rules,
taking into consideration the nature of the business of (b) Unsecured creditors;
the debtor and the need to protect the interest of all (c) Trade creditors and suppliers; and
stakeholders concerned.
(d) Employees of the debtor.
SECTION 39. Employment of Professionals. — Upon
approval of the court, and after notice and hearing, the In the election of the creditors' representatives, the
rehabilitation receiver or the management committee rehabilitation receiver or his representative shall attend
may employ specialized professionals and other experts such meeting and extend the appropriate assistance as
to assist each in the performance of their duties. Such may be defined in the procedural rules.
professionals and other experts shall be considered either SECTION 43. Role of Creditors' Committee. — The
employees or independent contractors of the creditors' committee when constituted pursuant to
rehabilitation receiver or the management committee, as Section 42 of this Act shall assist the rehabilitation
the case may be. The qualifications and disqualifications receiver in communicating with the creditors and shall be
of the professionals and experts may be set forth in the primary liaison between the rehabilitation receiver
procedural rules, taking into consideration the nature of and the creditors. The creditors' committee cannot
the business of the debtor and the need to protect the exercise or waive any right or give any consent on behalf
interest of all stakeholders concerned. of any creditor unless specifically authorized in writing by
SECTION 40. Conflict of Interest. — No person may be such creditor. The creditors' committee may be
appointed as a rehabilitation receiver, member of a authorized by the court or by the rehabilitation receiver to
management committee, or be employed by the perform such other tasks and functions as may be
rehabilitation receiver or the management committee if defined by the procedural rules in order to facilitate the
he has a conflict of interest. rehabilitation process.
An individual shall be deemed to have a conflict of

interest if he is so situated as to be materially influenced (D) Determination of Claims.
in the exercise of his judgment for or against any party to SECTION 44. Registry of Claims. — Within twenty (20)
the proceedings. Without limiting the generality of the days from his assumption into office, the rehabilitation
foregoing, an individual shall be deemed to have a receiver shall establish a preliminary registry of claims.
conflict of interest if: The rehabilitation receiver shall make the registry
(a) he is a creditor, owner, partner or stockholder of the available for public inspection and provide publication
debtor; notice to the debtor, creditors and stakeholders on where
and when they may inspect it. All claims included in the
(b) he is engaged in a line of business which competes registry of claims must be duly supported by sufficient
with that of the debtor; evidence.
(c) he is, or was, within five (5) years from the filing of the SECTION 45. Opposition or Challenge of Claims. — Within
petition, a director, officer, owner, partner or employee of thirty (30) days from the expiration of the period stated in
the debtor or any of the creditors, or the auditor or the immediately preceding section, the debtor, creditors,
accountant of the debtor; stakeholders and other interested parties may submit a


challenge to claim/s to the court, serving a certified copy rehabilitation receiver. The rehabilitation receiver may
on the rehabilitation receiver and the creditor holding the also:
challenged claim/s. Upon the expiration of the thirty (a) demand the surrender or the transfer of the
(30)-day period, the rehabilitation receiver shall submit to possession or control of such property to the
the court the registry of claims which shall include rehabilitation receiver or any other person, subject to
undisputed claims that have not been subject to payment of the claims secured by any possessory lien/s
challenge. thereon;
SECTION 46. Appeal. — Any decision of the rehabilitation (b) allow said third parties to retain possession or control,
receiver regarding a claim may be appealed to the court. if such an arrangement would more likely preserve or
increase the value of the property in question or the total
(E) Governance. value of the assets of the debtor; or
SECTION 47. Management. — Unless otherwise provided (c) undertake any other disposition of the said property as
herein, the management of the juridical debtor shall may be beneficial for the rehabilitation of the debtor,
remain with the existing management subject to the after notice and hearing, and approval of the court.
applicable law/s and agreement/s, if any, on the election SECTION 52. Rescission or Nullity of Sale, Payment,
or appointment of directors, managers or managing Transfer or Conveyance of Assets. — The court may
partner. However, all disbursements, payments or sale, rescind or declare as null and void any sale, payment,
disposal, assignment, transfer or encumbrance of transfer or conveyance of the debtor's unencumbered
property, or any other act affecting title or interest in property or any encumbering thereof by the debtor or its
property, shall be subject to the approval of the agents or representatives after the commencement date
rehabilitation receiver and/or the court, as provided in the which are not in the ordinary course of the business of
following subchapter. the debtor: Provided, however, That the unencumbered
property may be sold, encumbered or otherwise disposed
(F) Use, Preservation and Disposal of Assets and of upon order of the court after notice and hearing:
Treatment of Assets and Claims after (a) if such are in the interest of administering the debtor
Commencement Date. and facilitating the preparation and implementation of a
Rehabilitation Plan;
SECTION 48. Use or Disposition of Assets. — Except as
otherwise provided herein, no funds or property of the (b) in order to provide a substitute lien, mortgage or
debtor shall be used or disposed of except in the ordinary pledge of property under this Act;
course of business of the debtor, or unless necessary to (c) for payments made to meet administrative expenses
finance the administrative expenses of the rehabilitation as they arise;
proceedings.
(d) for payments to victims of quasi delicts upon a
SECTION 49. Sale of Assets. — The court, upon application showing that the claim is valid and the debtor has
of the rehabilitation receiver, may authorize the sale of insurance to reimburse the debtor for the payments
unencumbered property of the debtor outside the made;
ordinary course of business upon a showing that the
property, by its nature or because of other circumstance, (e) for payments made to repurchase property of the
is perishable, costly to maintain, susceptible to debtor that is auctioned off in a judicial or extrajudicial
devaluation or otherwise in jeopardy. sale under this Act; or
SECTION 50. Sale or Disposal of Encumbered Property of (f) for payments made to reclaim property of the debtor
the Debtor and Assets of Third Parties Held by Debtor. — held pursuant to a possessory lien.
The court may authorize the sale, transfer, conveyance or SECTION 53. Assets Subject to Rapid Obsolescence,
disposal of encumbered property of the debtor, or Depreciation and Diminution of Value. — Upon the
property of others held by the debtor where there is a application of a secured creditor holding a lien against or
security interest pertaining to third parties under a holder of an ownership interest in property held by the
financial, credit or other similar transactions if, upon debtor that is subject to potentially rapid obsolescence,
application of the rehabilitation receiver and with the depreciation or diminution in value, the court shall, after
consent of the affected owners of the property, or secured notice and hearing, order the debtor or rehabilitation
creditor/s in the case of encumbered property of the receiver to take reasonable steps necessary to prevent the
debtor and, after notice and hearing, the court depreciation. If depreciation cannot be avoided and such
determines that: depreciation is jeopardizing the security or property
(a) such sale, transfer, conveyance or disposal is necessary interest of the secured creditor or owner, the court shall:
for the continued operation of the debtor's business; and (a) allow the encumbered property to be foreclosed upon
(b) the debtor has made arrangements to provide a by the secured creditor according to the relevant
substitute lien or ownership right that provides an equal agreement between the debtor and the secured creditor,
level of security for the counter-party's claim or right. applicable rules of procedure and relevant legislation:
Provided, That the proceeds of the sale will be distributed
Provided, That properties held by the debtor where the in accordance with the order prescribed under the rules
debtor has authority to sell such as trust receipt or of concurrence and preference of credits; or
consignment arrangements may be sold or disposed of
by the debtor, if such sale or disposal is necessary for the (b) upon motion of, or with the consent of the affected
operation of the debtor's business, and the debtor has secured creditor or interest owner, order the conveyance
made arrangements to provide a substitute lien or of a lien against or ownership interest in substitute
ownership right that provides an equal level of security for property of the debtor to the secured creditor:
the counter-party's claim or right. Provided,That other creditors holding liens on such
property, if any, do not object thereto, or, if such property
Sale or disposal of property under this section shall not is not available;
give rise to any criminal liability under applicable laws.
(c) order the conveyance to the secured creditor or holder
SECTION 51. Assets of Debtor Held by Third Parties. — In of an ownership interest of a lien on the residual funds
the case of possessory pledges, mechanic's liens or from the sale of encumbered property during the
similar claims, third parties who have in their possession proceedings; or
or control property of the debtor shall not transfer, convey
or otherwise dispose of the same to persons other than (d) allow the sale or disposition of the property: Provided,
the debtor, unless upon prior approval of the That the sale or disposition will maximize the value of the
property for the benefit of the secured creditor and the
debtor, and the proceeds of the sale will be distributed in


accordance with the order prescribed under the rules of the assets of the debtor, executed at a time when the
concurrence and preference of credits. debtor was insolvent; or
SECTION 54. Post-commencement Interest. — The rate (e) is intended to defeat, delay or hinder the ability of the
and term of interest, if any, on secured and unsecured creditors to collect claims where the effect of the
claims shall be determined and provided for in the transaction is to put assets of the debtor beyond the
approved Rehabilitation Plan. reach of creditors or to otherwise prejudice the interests
SECTION 55. Post-commencement Loans and of creditors.
Obligations. — With the approval of the court upon the Provided, however, That nothing in this section shall
recommendation of the rehabilitation receiver, the prevent the court from rescinding or declaring as null
debtor, in order to enhance its rehabilitation, may: and void a transaction on other grounds provided by
(a) enter into credit arrangements; or relevant legislation and jurisprudence: Provided, further,
That the provisions of the Civil Code on rescission shall in
(b) enter into credit arrangements, secured by mortgages any case apply to these transactions.
of its unencumbered property or secondary mortgages of
encumbered property with the approval of senior secured SECTION 59. Actions for Rescission or Nullity. — (a) The
parties with regard to the encumbered property; or rehabilitation receiver or, with his conformity, any creditor
may initiate and prosecute any action to rescind, or
(c) incur other obligations as may be essential for its declare null and void any transaction described in Section
rehabilitation. 58 hereof. If the rehabilitation receiver does not consent
The payment of the foregoing obligations shall be to the filing or prosecution of such action, any creditor
considered administrative expenses under this Act. may seek leave of the court to commence said action.
SECTION 56. Treatment of Employees, Claims. — (b) If leave of court is granted under subsection (a), the
Compensation of employees required to carry on the rehabilitation receiver shall assign and transfer to the
business shall be considered an administrative expense. creditor all rights, title and interest in the chose in action
Claims of separation pay for months worked prior to the or subject matter of the proceeding, including any
commencement date shall be considered a document in support thereof.
pre-commencement claim. Claims for salary and (c) Any benefit derived from a proceeding taken pursuant
separation pay for work performed after the to subsection (a), to the extent of his claim and the costs,
commencement date shall be an administrative expense. belongs exclusively to the creditor instituting the
SECTION 57. Treatment of Contracts. — Unless cancelled proceeding, and the surplus, if any, belongs to the estate.
by virtue of a final judgment of a court of competent (d) Where, before an order is made under subsection (a),
jurisdiction issued prior to the issuance of the the rehabilitation receiver (or liquidator) signifies to the
Commencement Order, or at anytime thereafter by the court his readiness to institute the proceeding for the
court before which the rehabilitation proceedings are benefit of the creditors, the order shall fix the time within
pending, all valid and subsisting contracts of the debtor which he shall do so and, in that case, the benefit derived
with creditors and other third parties as at the from the proceeding, if instituted within the time limits
commencement date shall continue in force: so fixed, belongs to the estate.
Provided,That within ninety (90) days following the
commencement of proceedings, the debtor, with the
consent of the rehabilitation receiver, shall notify each (H) Treatment of Secured Creditors.
contractual counter-party of whether it is confirming the SECTION 60. No Diminution of Secured Creditor Rights. —
particular contract. Contractual obligations of the debtor The issuance of the Commencement Order and the
arising or performed during this period, and afterwards Suspension or Stay Order, and any other provision of this
for confirmed contracts, shall be considered Act, shall not be deemed in any way to diminish or impair
administrative expenses. Contracts not confirmed within the security or lien of a secured creditor, or the value of
the required deadline shall be considered terminated. his lien or security, except that his right to enforce said
Claims for actual damages, if any, arising as a result of the security or lien may be suspended during the term of the
election to terminate a contract shall be considered a Stay Order.
pre-commencement claim against the debtor. Nothing
contained herein shall prevent the cancellation or The court, upon motion or recommendation of the
termination of any contract of the debtor for any ground rehabilitation receiver, may allow a secured creditor to
provided by law. enforce his security or lien, or foreclose upon property of
the debtor securing his/its claim, if the said property is
not necessary for the rehabilitation of the debtor. The
(G) Avoidance Proceedings. secured creditor and/or the other lien holders shall be
SECTION 58. Rescission or Nullity of Certain admitted to the rehabilitation proceedings only for the
Pre-commencement Transactions. — Any transaction balance of his claim, if any.
occurring prior to commencement date entered into by SECTION 61. Lack of Adequate Protection. — The court, on
the debtor or involving its funds or assets may be motion or motu proprio, may terminate, modify or set
rescinded or declared null and void on the ground that conditions for the continuance of suspension of payment,
the same was executed with intent to defraud a creditor or relieve a claim from the coverage thereof, upon
or creditors or which constitute undue preference of showing that:
creditors. Without limiting the generality of the foregoing, (a) a creditor does not have adequate protection over
a disputable presumption of such design shall arise if the property securing its claim; or
transaction:
(b) the value of a claim secured by a lien on property
(a) provides unreasonably inadequate consideration to which is not necessary for rehabilitation of the debtor
the debtor and is executed within ninety (90) days prior to exceeds the fair market value of the said property.
the commencement date;
For purposes of this section, a creditor shall be deemed to
(b) involves an accelerated payment of a claim to a lack adequate protection if it can be shown that:
creditor within ninety (90) days prior to the
commencement date; (a) the debtor fails or refuses to honor a pre-existing
agreement with the creditor to keep the property
(c) provides security or additional security executed insured;
within ninety (90) days prior to the commencement date;
(b) the debtor fails or refuses to take commercially
(d) involves creditors, where a creditor obtained, or reasonable steps to maintain the property; or
received the benefit of, more than its pro rata share in


(c) the property has depreciated to an extent that the (p) address the treatment of claims arising after the
creditor is under secured. confirmation of the Rehabilitation Plan;
Upon showing of a lack of protection, the court shall (q) require the debtor and its counter-parties to adhere to
order the debtor or the rehabilitation receiver to make the terms of all contracts that the debtor has chosen to
arrangements to provide for the insurance or confirm;
maintenance of the property; or to make payments or (r) arrange for the payment of all outstanding
otherwise provide additional or replacement security administrative expenses as a condition to the Plan's
such that the obligation is fully secured. If such approval unless such condition has been waived in
arrangements are not feasible, the court may modify the writing by the creditors concerned;
Stay Order to allow the secured creditor lacking adequate
protection to enforce its security claim against the debtor: (s) arrange for the payment of all outstanding taxes and
Provided, however, That the court may deny the creditor assessments, or an adjusted amount pursuant to a
the remedies in this paragraph if the property subject of compromise settlement with the BIR or other applicable
the enforcement is required for the rehabilitation of the tax authorities;
debtor. (t) include a certified copy of a certificate of tax clearance
or evidence of a compromise settlement with the BIR;
(I) Administration of Proceedings. (u) include a valid and binding resolution of a meeting of
SECTION 62. Contents of a Rehabilitation Plan. — The the debtor's stockholders to increase the shares by the
Rehabilitation Plan shall, as a minimum: required amount in cases where the Plan contemplates
an additional issuance of shares by the debtor;
(a) specify the underlying assumptions, the financial
goals and the procedures proposed to accomplish such (v) state the compensation and status, if any, of the
goals; rehabilitation receiver after the approval of the Plan; and
(b) compare the amounts expected to be received by the (w) contain provisions for conciliation and/or mediation as

creditors under the Rehabilitation Plan with those that a prerequisite to court assistance or intervention in the
they will receive if liquidation ensues within the next one event of any disagreement in the interpretation or
hundred twenty (120) days; implementation of the Rehabilitation Plan.
(c) contain information sufficient to give the various SECTION 63. Consultation with Debtor and Creditors. — If
classes of creditors a reasonable basis for determining the court gives due course to the petition, the
whether supporting the Plan is in their financial interest rehabilitation receiver shall confer with the debtor and all
when compared to the immediate liquidation of the the classes of creditors, and may consider their views and
debtor, including any reduction of principal interest and proposals in the review, revision or preparation of a new
penalties payable to the creditors; Rehabilitation Plan.
(d) establish classes of voting creditors; SECTION 64. Creditor Approval of Rehabilitation Plan. —
The rehabilitation receiver shall notify the creditors and
(e) establish subclasses of voting creditors if prior stakeholders that the Plan is ready for their examination.
approval has been granted by the court; Within twenty (20) days from the said notification, the
(f) indicate how the insolvent debtor will be rehabilitated rehabilitation receiver shall convene the creditors, either
including, but not limited to, debt forgiveness, debt as a whole or per class, for purposes of voting on the
rescheduling, reorganization or quasi-reorganization, approval of the Plan. The Plan shall be deemed rejected
dacion en pago, debt-equity conversion and sale of the unless approved by all classes of creditors whose rights
business (or parts of it) as a going concern, or setting-up are adversely modified or affected by the Plan. For
of a new business entity or other similar arrangements as purposes of this section, the Plan is deemed to have been
may be necessary to restore the financial well-being and approved by a class of creditors if members of the said
viability of the insolvent debtor; class holding more than fifty percent (50%) of the total
claims of the said class vote in favor of the Plan. The votes
(g) specify the treatment of each class or subclass of the creditors shall be based solely on the amount of
described in subsections (d) and (e); their respective claims based on the registry of claims
(h) provide for equal treatment of all claims within the submitted by the rehabilitation receiver pursuant to
same class or subclass, unless a particular creditor Section 44 hereof.
voluntarily agrees to less favorable treatment; Notwithstanding the rejection of the Rehabilitation Plan,
(i) ensure that the payments made under the plan follow the court may confirm the Rehabilitation Plan if all of the
the priority established under the provisions of the Civil following circumstances are present:
Code on concurrence and preference of credits and other (a) The Rehabilitation Plan complies with the
applicable laws; requirements specified in this Act;
(j) maintain the security interest of secured creditors and (b) The rehabilitation receiver recommends the
preserve the liquidation value of the security unless such confirmation of the Rehabilitation Plan;
has been waived or modified voluntarily;
(c) The shareholders, owners or partners of the juridical
(k) disclose all payments to creditors for debtor lose at least their controlling interest as a result of
pre-commencement debts made during the proceedings the Rehabilitation Plan; and
and the justifications thereof;
(d) The Rehabilitation Plan would likely provide the
(l) describe the disputed claims and the provisioning of objecting class of creditors with compensation which has
funds to account for appropriate payments should the a net present value greater than that which they would
claim be ruled valid or its amount adjusted; have received if the debtor were under liquidation.
(m) identify the debtor's role in the implementation of the SECTION 65. Submission of Rehabilitation Plan to the
Plan; Court. — If the Rehabilitation Plan is approved, the
(n) state any rehabilitation covenants of the debtor, the rehabilitation receiver shall submit the same to the court
breach of which shall be considered a material breach of for confirmation. Within five (5) days from receipt of the
the Plan; Rehabilitation Plan, the court shall notify the creditors
that the Rehabilitation Plan has been submitted for
(o) identify those responsible for the future management
confirmation, that any creditor may obtain copies of the
of the debtor and the supervision and implementation of
Rehabilitation Plan and that any creditor may file an
the Plan, their affiliation with the debtor and their
objection thereto.
remuneration;
SECTION 66. Filing of Objections to Rehabilitation Plan.
— A creditor may file an objection to the Rehabilitation



Plan within twenty (20) days from receipt of notice from to pursue actions against the general partners of a
the court that the Rehabilitation Plan has been partnership to the extent they are liable under relevant
submitted for confirmation. Objections to a legislation for the debts thereof.
Rehabilitation Plan shall be limited to the following: SECTION 71. Treatment of Amounts of Indebtedness or
(a) The creditors' support was induced by fraud; Obligations Forgiven or Reduced. — Amounts of any
(b) The documents or data relied upon in the indebtedness or obligations reduced or forgiven in
Rehabilitation Plan are materially false or misleading; or connection with a Plan's approval shall not be subject to
any tax, in furtherance of the purposes of this Act.
(c) The Rehabilitation Plan is in fact not supported by the
voting creditors. SECTION 72. Period for Confirmation of the
Rehabilitation Plan. — The court shall have a maximum
SECTION 67. Hearing on the Objections. — If objections period of one (1) year from the date of the filing of the
have been submitted during the relevant period, the petition to confirm a Rehabilitation Plan.
court shall issue an order setting the time and date for
the hearing or hearings on the objections. If no Rehabilitation Plan is confirmed within the said
period, the proceedings may, upon motion or motu
If the court finds merit in the objection, it shall order the proprio, be converted into one for the liquidation of the
rehabilitation receiver or other party to cure the defect, debtor.
whenever feasible. If the court determines that the
debtor acted in bad faith, or that it is not feasible to cure SECTION 73. Accounting Discharge of Rehabilitation
the defect, the court shall convert the proceedings into Receiver. — Upon the confirmation of the Rehabilitation
one for the liquidation of the debtor under Chapter V of Plan, the rehabilitation receiver shall provide a final report
this Act. and accounting to the court. Unless the Rehabilitation
Plan specifically requires and describes the role of the
SECTION 68. Confirmation of the Rehabilitation Plan. — If rehabilitation receiver after the approval of the
no objections are filed within the relevant period or, if Rehabilitation Plan, the court shall discharge the
objections are filed, the court finds them lacking in merit, rehabilitation receiver of his duties.
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 (J) Termination of Proceedings.
order confirming the Rehabilitation Plan. SECTION 74. Termination of Proceedings. — The
The court may confirm the Rehabilitation Plan rehabilitation proceedings under Chapter II shall, upon
notwithstanding unresolved disputes over claims if the motion by any stakeholder or the rehabilitation receiver,
Rehabilitation Plan has made adequate provisions for be terminated by order of the court either declaring a
paying such claims. successful implementation of the Rehabilitation Plan or a
failure of rehabilitation.
For the avoidance of doubt, the provisions of other laws to
the contrary notwithstanding, the court shall have the There is failure of rehabilitation in the following cases:
power to approve or implement the Rehabilitation Plan (a) Dismissal of the petition by the court;
despite the lack of approval, or objection from the
owners, partners or stockholders of the insolvent debtor: (b) The debtor fails to submit a Rehabilitation Plan;
Provided, That the terms thereof are necessary to restore (c) Under the Rehabilitation Plan submitted by the
the financial well-being and viability of the insolvent debtor, there is no substantial likelihood that the debtor
debtor. can be rehabilitated within a reasonable period;
SECTION 69. Effect of Confirmation of the Rehabilitation (d) The Rehabilitation Plan or its amendment is approved
Plan. — The confirmation of the Rehabilitation Plan by by the court but in the implementation thereof, the
the court shall result in the following: debtor fails to perform its obligations thereunder, or there
(a) The Rehabilitation Plan and its provisions shall be is a failure to realize the objectives, targets or goals set
binding upon the debtor and all persons who may be forth therein, including the timelines and conditions for
affected by it, including the creditors, whether or not such the settlement of the obligations due to the creditors and
persons have participated in the proceedings or opposed other claimants;
the Rehabilitation Plan or whether or not their claims (e) The commission of fraud in securing the approval of
have been scheduled; the Rehabilitation Plan or its amendment; and
(b) The debtor shall comply with the provisions of the (f) Other analogous circumstances as may be defined by
Rehabilitation Plan and shall take all actions necessary to the rules of procedure.
carry out the Plan;
Upon a breach of, or upon a failure of the Rehabilitation
(c) Payments shall be made to the creditors in accordance Plan, the court, upon motion by an affected party, may:
with the provisions of the Rehabilitation Plan;
(1) issue an order directing that the breach be cured
(d) Contracts and other arrangements between the within a specified period of time, failing which the
debtor and its creditors shall be interpreted as continuing proceedings may be converted to a liquidation;
to apply to the extent that they do not conflict with the
(2) issue an order converting the proceedings to a
provisions of the Rehabilitation Plan;
liquidation;
(e) Any compromises on amounts or rescheduling of
(3) allow the debtor or rehabilitation receiver to submit
timing of payments by the debtor shall be binding on
amendments to the Rehabilitation Plan, the approval of
creditors regardless of whether or not the Plan is
which shall be governed by the same requirements for
successfully implemented; and
the approval of a Rehabilitation Plan under this
(f) Claims arising after approval of the Plan that are subchapter;
otherwise not treated by the Plan are not subject to any
(4) issue any other order to remedy the breach consistent
Suspension Order.
with the present regulation, other applicable law and the
The Order confirming the Plan shall comply with Rule 36 best interests of the creditors; or
of the Rules of Court: Provided, however, That the court
(5) enforce the applicable provisions of the Rehabilitation
may maintain jurisdiction over the case in order to resolve
Plan through a writ of execution.
claims against the debtor that remain contested and
allegations that the debtor has breached the Plan. SECTION 75. Effects of Termination. — Termination of the
proceedings shall result in the following:
SECTION 70. Liability of General Partners of a Partnership
for Unpaid Balances Under an Approved Plan. — The (a) The discharge of the rehabilitation receiver, subject to
approval of the Plan shall not affect the rights of creditors his submission of a final accounting; and


(b) The lifting of the Stay Order and any other court order Section 77 hereof. The objections shall be limited to the
holding in abeyance any action for the enforcement of a following:
claim against the debtor. (a) The allegations in the petition or the Rehabilitation
Provided, however, That if the termination of proceedings Plan, or the attachments thereto, are materially false or
is due to failure of rehabilitation or dismissal of the misleading;
petition for reasons other than technical grounds, the (b) The majority of any class of creditors do not in fact
proceedings shall be immediately converted to support the Rehabilitation Plan;
liquidation as provided in Section 92 of this Act.
(c) The Rehabilitation Plan fails to accurately account for a
claim against the debtor and the claim is not
CHAPTER III Pre-Negotiated Rehabilitation categorically declared as a contested claim; or
SECTION 76. Petition by Debtor. — An insolvent debtor, by (d) The support of the creditors, or any of them, was
itself or jointly with any of its creditors, may file a verified induced by fraud.
petition with the court for the approval of a Copies of any objection to the petition or the
pre-negotiated Rehabilitation Plan which has been Rehabilitation Plan shall be served on the debtor, the
endorsed or approved by creditors holding at least rehabilitation receiver (if applicable), the secured creditor
two-thirds (2/3) of the total liabilities of the debtor, with the largest claim and who supports the
including secured creditors holding more than fifty Rehabilitation Plan, and the unsecured creditor with the
percent (50%) of the total secured claims of the debtor largest claim and who supports the Rehabilitation Plan.
and unsecured creditors holding more than fifty percent
(50%) of the total unsecured claims of the debtor. The SECTION 80. Hearing on the Objections. — After receipt
petition shall include, as a minimum: of an objection, the court shall set the same for hearing.
The date of the hearing shall be no earlier than twenty
(a) a schedule of the debtor's debts and liabilities; (20) days and no later than thirty (30) days from the date
(b) an inventory of the debtor's assets; of the second publication of the Order mentioned in
Section 77 hereof. If the court finds merit in the objection,
(c) the pre-negotiated Rehabilitation Plan, including the it shall direct the debtor, when feasible, to cure the defect
names of at least three (3) qualified nominees for within a reasonable period. If the court determines that
rehabilitation receiver; and the debtor or creditors supporting the Rehabilitation Plan
(d) a summary of disputed claims against the debtor and acted in bad faith, or that the objection is non-curable,
a report on the provisioning of funds to account for the court may order the conversion of the proceedings
appropriate payments should any such claims be ruled into liquidation. A finding by the court that the objection
valid or their amounts adjusted. has no substantial merit, or that the same has been
cured, shall be deemed an approval of the Rehabilitation
SECTION 77. Issuance of Order. — Within five (5) working
Plan.
days, and after determination that the petition is
sufficient in form and substance, the court shall issue an SECTION 81. Period for Approval of Rehabilitation Plan. —
Order which shall: The court shall have a maximum period of one hundred
twenty (120) days from the date of the filing of the
(a) identify the debtor, its principal business or activity/ies
petition to approve the Rehabilitation Plan. If the court
and its principal place of business;
fails to act within the said period, the Rehabilitation Plan
(b) declare that the debtor is under rehabilitation; shall be deemed approved.
(c) summarize the ground/s for the filing of the petition; SECTION 82. Effect of Approval. — Approval of a Plan
(d) direct the publication of the Order in a newspaper of under this chapter shall have the same legal effect as
general circulation in the Philippines once a week for at confirmation of a Plan under Chapter II of this Act.
least two (2) consecutive weeks, with the first publication
to be made within seven (7) days from the time of its
issuance; CHAPTER IV Out-of-Court or Informal
(e) direct the service by personal delivery of a copy of the Restructuring Agreements or Rehabilitation Plans
petition on each creditor who is not a petitioner holding SECTION 83. Out-of-Court or Informal Restructuring
at least ten percent (10%) of the total liabilities of the Agreements and Rehabilitation Plans. — An out-of-court
debtor, as determined in the schedule attached to the or informal restructuring agreement or Rehabilitation
petition, within three (3) days; Plan that meets the minimum requirements prescribed
(f) state that copies of the petition and the Rehabilitation in this chapter is hereby recognized as consistent with
Plan are available for examination and copying by any the objectives of this Act.
interested party; SECTION 84. Minimum Requirements of Out-of-Court or
(g) state that creditors and other interested parties Informal Restructuring Agreements and Rehabilitation
opposing the petition or Rehabilitation Plan may file their Plans. — For an out-of-court or informal
objections or comments thereto within a period of not restructuring/workout agreement or Rehabilitation Plan
later than twenty (20) days from the second publication to qualify under this chapter, it must meet the following
of the Order; minimum requirements:
(h) appoint a rehabilitation receiver, if provided for in the (a) The debtor must agree to the out-of-court or informal
Plan; and restructuring/workout agreement or Rehabilitation Plan;
(i) include a Suspension or Stay Order as described in this (b) It must be approved by creditors representing at least
Act. sixty-seven percent (67%) of the secured obligations of
the debtor;
SECTION 78. Approval of the Plan. — Within ten (10) days
from the date of the second publication of the Order, the (c) It must be approved by creditors representing at least
court shall approve the Rehabilitation Plan unless a seventy-five percent (75%) of the unsecured obligations of
creditor or other interested party submits an objection to the debtor; and
it in accordance with the next succeeding section. (d) It must be approved by creditors holding at least
SECTION 79. Objection to the Petition or Rehabilitation eighty-five percent (85%) of the total liabilities, secured
Plan. — Any creditor or other interested party may submit and unsecured, of the debtor.
to the court a verified objection to the petition or the SECTION 85. Standstill Period. — A standstill period that
Rehabilitation Plan not later than eight (8) days from the may be agreed upon by the parties pending negotiation
date of the second publication of the Order mentioned in and finalization of the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan



contemplated herein shall be effective and enforceable SECTION 91. Involuntary Liquidation. — Three (3) or more
not only against the contracting parties but also against creditors the aggregate of whose claims is at least either
the other creditors: Provided, That (a) such agreement is One million pesos (Php1,000,000.00) or at least
approved by creditors representing more than fifty twenty-five percent (25%) of the subscribed capital stock
percent (50%) of the total liabilities of the debtor; (b) or partner's contributions of the debtor, whichever is
notice thereof is published in a newspaper of general higher, may apply for and seek the liquidation of an
circulation in the Philippines once a week for two (2) insolvent debtor by filing a petition for liquidation of the
consecutive weeks; and (c) the standstill period does not debtor with the court. The petition shall show that:
exceed one hundred twenty (120) days from the date of (a) there is no genuine issue of fact or law on the claim/s
effectivity. The notice must invite creditors to participate of the petitioner/s, and that the due and demandable
in the negotiation for out-of-court rehabilitation or payments thereon have not been made for at least one
restructuring agreement and notify them that said hundred eighty (180) days or that the debtor has failed
agreement will be binding on all creditors if the required generally to meet its liabilities as they fall due; and
majority votes prescribed in Section 84 of this Act are
met. (b) there is no substantial likelihood that the debtor may
be rehabilitated.
SECTION 86. Cram Down Effect. — A
restructuring/workout agreement or Rehabilitation Plan At any time during the pendency of or after a
that is approved pursuant to an informal workout rehabilitation court-supervised or pre-negotiated
framework referred to in this chapter shall have the same rehabilitation proceedings, three (3) or more creditors
legal effect as confirmation of a Plan under Section 69 whose claims is at least either One million pesos
hereof. The notice of the Rehabilitation Plan or (Php1,000,000.00) or at least twenty-five percent (25%) of
restructuring agreement or Plan shall be published once the subscribed capital or partner's contributions of the
a week for at least three (3) consecutive weeks in a debtor, whichever is higher, may also initiate liquidation
newspaper of general circulation in the Philippines. The proceedings by filing a motion in the same court where
Rehabilitation Plan or restructuring agreement shall take the rehabilitation proceedings are pending to convert the
effect upon the lapse of fifteen (15) days from the date of rehabilitation proceedings into liquidation proceedings.
the last publication of the notice thereof. The motion shall be verified, shall contain or set forth the
same matters required in the preceding paragraph, and
SECTION 87. Amendment or Modification. — Any state that the movants are seeking the immediate
amendment of an out-of-court restructuring/workout liquidation of the debtor.
agreement or Rehabilitation Plan must be made in
accordance with the terms of the agreement and with If the petition or motion is sufficient in form and
due notice on all creditors. substance, the court shall issue an Order:
SECTION 88. Effect of Court Action or Other Proceedings. (1) directing the publication of the petition or motion in a
— Any court action or other proceedings arising from, or newspaper of general circulation once a week for two (2)
relating to, the out-of-court or informal consecutive weeks; and
restructuring/workout agreement or Rehabilitation Plan (2) directing the debtor and all creditors who are not the
shall not stay its implementation, unless the relevant petitioners to file their comment on the petition or
party is able to secure a temporary restraining order or motion within fifteen (15) days from the date of last
injunctive relief from the Court of Appeals. publication.
SECTION 89. Court Assistance. — The insolvent debtor If, after considering the comments filed, the court
and/or creditor may seek court assistance for the determines that the petition or motion is meritorious, it
execution or implementation of a Rehabilitation Plan shall issue the Liquidation Order mentioned in Section 112
under this chapter, under such rules of procedure as may hereof.
be promulgated by the Supreme Court.
SECTION 92. Conversion by the Court into Liquidation
Proceedings. — During the pendency of court-supervised
CHAPTER V Liquidation of Insolvent Juridical or pre-negotiated rehabilitation proceedings, the court
may order the conversion of rehabilitation proceedings to
Debtors liquidation proceedings pursuant to: (a) Section 25 (c) of
SECTION 90. Voluntary Liquidation. — An insolvent this Act; or (b) Section 72 of this Act; or (c) Section 75 of
debtor may apply for liquidation by filing a petition for this Act; or (d) Section 90 of this Act; or at any other time
liquidation with the court. The petition shall be verified, upon the recommendation of the rehabilitation receiver
shall establish the insolvency of the debtor and shall that the rehabilitation of the debtor is not feasible.
contain, whether as an attachment or as part of the body Thereupon, the court shall issue the Liquidation Order
of the petition: mentioned in Section 112 hereof.
(a) a schedule of the debtor's debts and liabilities SECTION 93. Powers of the Securities and Exchange
including a list of creditors with their addresses, amounts Commission (SEC).— The provisions of this chapter shall
of claims and collaterals, or securities, if any; not affect the regulatory powers of the SEC under Section
6 of Presidential Decree No. 902-A, as amended, with
(b) an inventory of all its assets including receivables and respect to any dissolution and liquidation proceeding
claims against third parties; and initiated and heard before it.
(c) the names of at least three (3) nominees to the
position of liquidator.
At any time during the pendency of court-supervised or
CHAPTER VI Insolvency of Individual Debtors
pre-negotiated rehabilitation proceedings, the debtor
may also initiate liquidation proceedings by filing a (A) Suspension of Payments.
motion in the same court where the rehabilitation
proceedings are pending to convert the rehabilitation SECTION 94. Petition. — An individual debtor who,
proceedings into liquidation proceedings. The motion possessing sufficient property to cover all his debts but
shall be verified, shall contain or set forth the same foreseeing the impossibility of meeting them when they
matters required in the preceding paragraph, and state respectively fall due, may file a verified petition that he be
that the debtor is seeking immediate dissolution and declared in the state of suspension of payments by the
termination of its corporate existence. court of the province or city in which he has resided for six
(6) months prior to the filing of his petition. He shall
If the petition or the motion, as the case may be, is attach to his petition, as a minimum: (a) a schedule of
sufficient in form and substance, the court shall issue a debts and liabilities; (b) an inventory of assets; and (c) a
Liquidation Order mentioned in Section 112 hereof. proposed agreement with his creditors.


SECTION 95. Action on the Petition. — If the court finds (2) that the claims represented by said majority vote
the petition sufficient in form and substance, it shall, amount to at least three-fifths (3/5) of the total liabilities
within five (5) working days from the filing of the petition, of the debtor mentioned in the petition; and
issue an Order: (e) After the result of the voting has been announced, all
(a) calling a meeting of all the creditors named in the protests made against the majority vote shall be drawn
schedule of debts and liabilities at such time not less than up, and the commissioner and the individual debtor
fifteen (15) days nor more than forty (40) days from the together with all creditors taking part in the voting shall
date of such Order and designating the date, time and sign the affirmed propositions.
place of the meeting; No creditor who incurred his credit within ninety (90)
(b) directing such creditors to prepare and present days prior to the filing of the petition shall be entitled to
written evidence of their claims before the scheduled vote.
creditors' meeting; SECTION 98. Persons Who May Refrain from Voting. —
(c) directing the publication of the said order in a Creditors who are unaffected by the Suspension Order
newspaper of general circulation published in the may refrain from attending the meeting and from voting
province or city in which the petition is filed once a week therein. Such persons shall not be bound by any
for two (2) consecutive weeks, with the first publication to agreement determined upon at such meeting, but if they
be made within seven (7) days from the time of the should join in the voting they shall be bound in the same
issuance of the Order; manner as are the other creditors.
(d) directing the clerk of court to cause the sending of a SECTION 99. Rejection of the Proposed Agreement. —
copy of the Order by registered mail, postage prepaid, to The proposed agreement shall be deemed rejected if the
all creditors named in the schedule of debts and number of creditors required for holding a meeting do
liabilities; not attend thereat, or if the two (2) majorities mentioned
(e) forbidding the individual debtor from selling, in Section 97 hereof are not in favor thereof. In such
transferring, encumbering or disposing in any manner of instances, the proceeding shall be terminated without
his property, except those used in the ordinary operations recourse and the parties concerned shall be at liberty to
of commerce or of industry in which the petitioning enforce the rights which may correspond to them.
individual debtor is engaged, so long as the proceedings SECTION 100. Objections. — If the proposal of the
relative to the suspension of payments are pending; individual debtor, or any amendment thereof made
(f) prohibiting the individual debtor from making any during the creditors' meeting, is approved by the majority
payment outside of the necessary or legitimate expenses of creditors in accordance with Section 97 hereof, any
of his business or industry, so long as the proceedings creditor who attended the meeting and who dissented
relative to the suspension of payments are pending; and from and protested against the vote of the majority may
file an objection with the court within ten (10) days from
(g) appointing a commissioner to preside over the the date of the last creditors' meeting. The causes for
creditors' meeting. which objection may be made to the decision made by
SECTION 96. Actions Suspended. — Upon motion filed by the majority during the meeting shall be: (a) defects in
the individual debtor, the court may issue an order the call for the meeting, in the holding thereof, and in the
suspending any pending execution against the individual deliberations had thereat which prejudice the rights of
debtor: Provided, that properties held as security by the creditors; (b) fraudulent connivance between one or
secured creditors shall not be the subject of such more creditors and the individual debtor to vote in favor
suspension order. The suspension order shall lapse when of the proposed agreement; or (c) fraudulent conveyance
three (3) months shall have passed without the proposed of claims for the purpose of obtaining a majority. The
agreement being accepted by the creditors or as soon as court shall hear and pass upon such objection as soon as
such agreement is denied. possible and in a summary manner.
No creditor shall sue or institute proceedings to collect his In case the decision of the majority of creditors to approve
claim from the debtor from the time of the filing of the the individual debtor's proposal or any amendment
petition for suspension of payments and for as long as thereof made during the creditors' meeting is annulled
proceedings remain pending except: by the court, the court shall declare the proceedings
terminated and the creditors shall be at liberty to exercise
(a) those creditors having claims for personal labor, the rights which may correspond to them.
maintenance, expense of last illness and funeral of the
wife or children of the debtor incurred in the sixty (60) SECTION 101. Effects of Approval of Proposed Agreement.
days immediately prior to the filing of the petition; and — If the decision of the majority of the creditors to
approve the proposed agreement or any amendment
(b) secured creditors. thereof made during the creditors' meeting is upheld by
SECTION 97. Creditors' Meeting. — The presence of the court, or when no opposition or objection to said
creditors holding claims amounting to at least decision has been presented, the court shall order that
three-fifths (3/5) of the liabilities shall be necessary for the agreement be carried out and all parties bound
holding a meeting. The commissioner appointed by the thereby to comply with its terms.
court shall preside over the meeting and the clerk of The court may also issue all orders which may be
court shall act as the secretary thereof, subject to the necessary or proper to enforce the agreement on motion
following rules: of any affected party. The Order confirming the approval
(a) The clerk shall record the creditors present and of the proposed agreement on any amendment thereof
amount of their respective claims; made during the creditors' meeting shall be binding
upon all creditors whose claims are included in the
(b) The commissioner shall examine the written evidence schedule of debts and liabilities submitted by the
of the claims. If the creditors present hold at least individual debtor and who were properly summoned, but
three-fifths (3/5) of the liabilities of the individual debtor, not upon: (a) those creditors having claims for personal
the commissioner shall declare the meeting open for labor, maintenance, expenses of last illness and funeral of
business; the wife or children of the debtor incurred in the sixty (60)
(c) The creditors and individual debtor shall discuss the days immediately prior to the filing of the petition, and (b)
propositions in the proposed agreement and put them to secured creditors who failed to attend the meeting on
a vote; refrained from voting therein.
(d) To form a majority, it is necessary: SECTION 102. Failure of Individual Debtor to Perform
(1) that two-thirds (2/3) of the creditors voting unite upon Agreement. — If the individual debtor fails, wholly or in
the same proposition; and 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 (m) That an execution having been issued against him on
shall revest in them. In such case the individual debtor final judgment for money, he shall have been found to be
may be made subject to the insolvency proceedings in without sufficient property subject to execution to satisfy
the manner established by this Act. the judgment.
The petitioning creditor/s shall post a bond in such sum
(B) Voluntary Liquidation. as the court shall direct, conditioned that if the petition
for liquidation is dismissed by the court, or withdrawn by
SECTION 103. Application. — An individual debtor whose the petitioner, or if the debtor shall not be declared an
properties are not sufficient to cover his liabilities, and insolvent, the petitioners will pay to the debtor all costs,
owing debts exceeding Five hundred thousand pesos expenses, damages occasioned by the proceedings, and
(Php500,000.00), may apply to be discharged from his attorney's fees.
debts and liabilities by filing a verified petition with the
court of the province or city in which he has resided for six SECTION 106. Order to Individual Debtor to Show Cause.
(6) months prior to the filing of such petition. He shall — Upon the filing of such creditors' petition, the court
attach to his petition a schedule of debts and liabilities shall issue an Order requiring the individual debtor to
and an inventory of assets. The filing of such petition shall show cause, at a time and place to be fixed by the said
be an act of insolvency. court, why he should not be adjudged an insolvent. Upon
good cause shown, the court may issue an Order
SECTION 104. Liquidation Order. — If the court finds the forbidding the individual debtor from making payments
petition sufficient in form and substance, it shall, within of any of his debts, and transferring any property
five (5) working days, issue the Liquidation Order belonging to him. However, nothing contained herein
mentioned in Section 112 hereof. shall affect or impair the rights of a secured creditor to
enforce his lien in accordance with its terms.
(C) Involuntary Liquidation. SECTION 107. Default. — If the individual debtor shall
SECTION 105. Petition; Acts of Insolvency. — Any creditor default or if, after trial, the issues are found in favor of the
or group of creditors with a claim of, or with claims petitioning creditors, the court shall issue the Liquidation
aggregating, at least Five hundred thousand pesos Order mentioned in Section 112 hereof.
(Php500,000.00) may file a verified petition for liquidation SECTION 108. Absent Individual Debtor. — In all cases
with the court of the province or city in which the where the individual debtor resides out of the Republic of
individual debtor resides. the Philippines; or has departed therefrom; or cannot,
The following shall be considered acts of insolvency, and after due diligence, be found therein; or conceals himself
the petition for liquidation shall set forth or allege at least to avoid service of the Order to show cause, or any other
one of such acts: preliminary process or orders in the matter, then the
petitioning creditors, upon submitting the affidavits
(a) That such person is about to depart or has departed requisite to procure an Order of publication, and
from the Republic of the Philippines, with intent to presenting a bond in double the amount of the
defraud his creditors; aggregate sum of their claims against the individual
(b) That being absent from the Republic of the debtor, shall be entitled to an Order of the court directing
Philippines, with intent to defraud his creditors, he the sheriff of the province or city in which the matter is
remains absent; pending to take into his custody a sufficient amount of
property of the individual debtor to satisfy the demands
(c) That he conceals himself to avoid the service of legal of the petitioning creditors and the costs of the
process for the purpose of hindering or delaying the proceedings. Upon receiving such Order of the court to
liquidation or of defrauding his creditors; take into custody property of the individual debtor, it shall
(d) That he conceals, or is removing, any of his property to be the duty of the sheriff to take possession of the
avoid its being attached or taken on legal process; property and effects of the individual debtor, not exempt
(e) That he has suffered his property to remain under from execution, to an extent sufficient to cover the
attachment or legal process for three (3) days for the amount provided for, and to prepare, within three (3) days
purpose of hindering or delaying the liquidation or of from the time of taking such possession, a complete
defrauding his creditors; inventory of all the property so taken, and to return it to
the court as soon as completed. The time for taking the
(f) That he has confessed or offered to allow judgment in inventory and making return thereof may be extended for
favor of any creditor or claimant for the purpose of good cause shown to the court. The sheriff shall also
hindering or delaying the liquidation or of defrauding any prepare a schedule of the names and residences of the
creditor or claimant; creditors, and the amount due each, from the books of
(g) That he has willfully suffered judgment to be taken the debtor, or from such other papers or data of the
against him by default for the purpose of hindering or individual debtor available as may come to his possession,
delaying the liquidation or of defrauding his creditors; and shall file such schedule or list of creditors and
inventory with the clerk of court.
(h) That he has suffered or procured his property to be
taken on legal process with intent to give a preference to SECTION 109. All Property Taken to be Held for All
one or more of his creditors and thereby hinder or delay Creditors; Appeal Bonds; Exceptions to Sureties. — In all
the liquidation or defraud any one of his creditors; cases where property is taken into custody by the sheriff,
if it does not embrace all the property and effects of the
(i) That he has made any assignment, gift, sale, debtor not exempt from execution, any other creditor or
conveyance or transfer of his estate, property, rights or creditors of the individual debtor, upon giving bond to be
credits with intent to hinder or delay the liquidation or approved by the court in double the amount of their
defraud his creditors; claims, singly or jointly, shall be entitled to similar orders
(j) That he has, in contemplation of insolvency, made any and to like action, by the sheriff, until all claims be
payment, gift, grant, sale, conveyance or transfer of his provided for, if there be sufficient property or effects. All
estate, property, rights or credits; property taken into custody by the sheriff by virtue of the
giving of any such bonds shall be held by him for the
(k) That being a merchant or tradesman, he has generally benefit of all creditors of the individual debtor whose
defaulted in the payment of his current obligations for a claims shall be duly proved as provided in this Act. The
period of thirty (30) days; bonds provided for in this section and the preceding
(l) That for a period of thirty (30) days, he has failed, after section to procure the order for custody of the property
demand, to pay any moneys deposited with him or and effects of the individual debtor shall be conditioned
received by him in a fiduciary capacity; and that if, upon final hearing of the petition in insolvency, the
court shall find in favor of the petitioners, such bonds and
all of them shall be void; if the decision be in favor of the



individual debtor, the proceedings shall be dismissed, (a) the juridical debtor shall be deemed dissolved and its
and the individual debtor, his heirs, administrators, corporate or juridical existence terminated;
executors or assigns shall be entitled to recover such sum (b) legal title to and control of all the assets of the debtor,
of money as shall be sufficient to cover the damages except those that may be exempt from execution, shall
sustained by him, not to exceed the amount of the be deemed vested in the liquidator or, pending his
respective bonds. Such damages shall be fixed and election or appointment, with the court;
allowed by the court. If either the petitioners or the
debtor shall appeal from the decision of the court, upon (c) all contracts of the debtor shall be deemed terminated
final hearing of the petition, the appellant shall be and/or breached, unless the liquidator, within ninety (90)
required to give bond to the successful party in a sum days from the date of his assumption of office, declares
double the amount of the value of the property in otherwise and the contracting party agrees;
controversy, and for the costs of the proceedings. (d) no separate action for the collection of an unsecured
Any person interested in the estate may take exception to claim shall be allowed. Such actions already pending will
the sufficiency of the sureties on such bond or bonds. be transferred to the Liquidator for him to accept and
When excepted to, the petitioner's sureties, upon notice settle or contest. If the liquidator contests or disputes the
to the person excepting of not less than two (2) nor more claim, the court shall allow, hear and resolve such contest
than five (5) days, must justify as to their sufficiency; and except when the case is already on appeal. In such a case,
upon failure to justify, or if others in their place fail to the suit may proceed to judgment, and any final and
justify at the time and place appointed, the judge shall executory judgment therein for a claim against the
issue an Order vacating the order to take the property of debtor shall be filed and allowed in court; and
the individual debtor into the custody of the sheriff, or (e) no foreclosure proceeding shall be allowed for a period
denying the appeal, as the case may be. of one hundred eighty (180) days.
SECTION 110. Sale Under Execution. — If, in any case, SECTION 114. Rights of Secured Creditors. — The
proper affidavits and bonds are presented to the court or Liquidation Order shall not affect the right of a secured
a judge thereof, asking for and obtaining an Order of creditor to enforce his lien in accordance with the
publication and an Order for the custody of the property applicable contract or law. A secured creditor may:
of the individual debtor and thereafter the petitioners
shall make it appear satisfactorily to the court or a judge (a) waive his rights under the security or lien, prove his
thereof that the interest of the parties to the proceedings claim in the liquidation proceedings and share in the
will be subserved by a sale thereof, the court may order distribution of the assets of the debtor; or
such property to be sold in the same manner as property (b) maintain his rights under his security or lien.
is sold under execution, the proceeds to be deposited in
the court to abide by the result of the proceedings. If the secured creditor maintains his rights under the
security or lien:
(1) the value of the property may be fixed in a manner
CHAPTER VII Provisions Common to Liquidation agreed upon by the creditor and the liquidator. When the
in Insolvency of Individual and Juridical Debtors value of the property is less than the claim it secures, the
liquidator may convey the property to the secured
SECTION 111. Use of Term Debtor. — For purposes of this creditor and the latter will be admitted in the liquidation
chapter, the term debtor shall include both individual proceedings as a creditor for the balance; if its value
debtor as defined in Section 4 (o) and debtor as defined exceeds the claim secured, the liquidator may convey the
in Section 4 (k) of this Act. property to the creditor and waive the debtor's right of
redemption upon receiving the excess from the creditor;
(A) The Liquidation Order. (2) the liquidator may sell the property and satisfy the
secured creditor's entire claim from the proceeds of the
SECTION 112. Liquidation Order. — The Liquidation Order sale; or
shall:
(3) the secured creditor may enforce the lien or foreclose
(a) declare the debtor insolvent; on the property pursuant to applicable laws.
(b) order the liquidation of the debtor and, in the case of a
juridical debtor, declare it as dissolved;
(B) The Liquidator.
(c) order the sheriff to take possession and control of all
the property of the debtor, except those that may be SECTION 115. Election of Liquidator. — Only creditors who
exempt from execution; have filed their claims within the period set by the court,
and whose claims are not barred by the statute of
(d) order the publication of the petition or motion in a limitations, will be allowed to vote in the election of the
newspaper of general circulation once a week for two (2) liquidator. A secured creditor will not be allowed to vote,
consecutive weeks; unless: (a) he waives his security or lien; or (b) has the
(e) direct payments of any claims and conveyance of any value of the property subject of his security or lien fixed
property due the debtor to the liquidator; by agreement with the liquidator, and is admitted for the
balance of his claim.
(f) prohibit payments by the debtor and the transfer of
any property by the debtor; The creditors entitled to vote will elect the liquidator in
open court. The nominee receiving the highest number
(g) direct all creditors to file their claims with the of votes cast in terms of amount of claims, and who is
liquidator within the period set by the rules of procedure; qualified pursuant to Section 118 hereof, shall be
(h) authorize the payment of administrative expenses as appointed as the liquidator.
they become due; SECTION 116. Court-Appointed Liquidator. — The court
(i) state that the debtor and creditors who are not may appoint the liquidator if:
petitioner/s may submit the names of other nominees to (a) on the date set for the election of the liquidator, the
the position of liquidator; and creditors do not attend;
(j) set the case for hearing for the election and (b) the creditors who attend, fail or refuse to elect a
appointment of the liquidator, which date shall not be liquidator;
less than thirty (30) days nor more than forty-five (45)
days from the date of the last publication. (c) after being elected, the liquidator fails to qualify; or
SECTION 113. Effects of the Liquidation Order. — Upon the (d) a vacancy occurs for any reason whatsoever. In any of
issuance of the Liquidation Order: the cases provided herein, the court may instead set
another hearing for the election of the liquidator.


Provided, further, That nothing in this section shall be publication in a newspaper of general circulation or such
construed to prevent a rehabilitation receiver, who was other mode as the court may direct or allow, that he will
administering the debtor prior to the commencement of apply with the court for the settlement of his account and
the liquidation, from being appointed as a liquidator. his discharge from liability as liquidator. The liquidator
SECTION 117. Oath and Bond of the Liquidator. — Prior to will file a final accounting with the court, with proof of
entering upon his powers, duties and responsibilities, the notice to all creditors. The accounting will be set for
liquidator shall take an oath and file a bond, in such hearing. If the court finds the same in order, the court will
amount to be fixed by the court, conditioned upon the discharge the liquidator.
proper and faithful discharge of his powers, duties and
responsibilities. (C) Determination of Claims.
SECTION 118. Qualifications of the Liquidator. — The SECTION 123. Registry of Claims. — Within twenty (20)
liquidator shall have the qualifications enumerated in days from his assumption into office, the liquidator shall
Section 29 hereof. He may be removed at any time by the prepare a preliminary registry of claims of secured and
court for cause, either motu proprio or upon motion of unsecured creditors. Secured creditors who have waived
any creditor entitled to vote for the election of the their security or lien, or have fixed the value of the
liquidator. property subject of their security or lien by agreement
SECTION 119. Powers, Duties and Responsibilities of the with the liquidator and is admitted as a creditor for the
Liquidator. — The liquidator shall be deemed an officer of balance, shall be considered as unsecured creditors. The
the court with the principal duty of preserving and liquidator shall make the registry available for public
maximizing the value and recovering the assets of the inspection and provide publication notice to creditors,
debtor, with the end of liquidating them and discharging individual debtors, owner/s of the sole
to the extent possible all the claims against the debtor. proprietorship-debtor, the partners of the
The powers, duties and responsibilities of the liquidator partnership-debtor and shareholders or members of the
shall include, but not be limited to: corporation-debtor, on where and when they may inspect
it. All claims must be duly proven before being paid.
(a) to sue and recover all the assets, debts and claims,
belonging or due to the debtor; SECTION 124. Right of Set-off. — If the debtor and a
creditor are mutually debtor and creditor of each other,
(b) to take possession of all the property of the debtor one debt shall be set off against the other, and only the
except property exempt by law from execution; balance, if any, shall be allowed in the liquidation
(c) to sell, with the approval of the court, any property of proceedings.
the debtor which has come into his possession or control; SECTION 125. Opposition or Challenge to Claims. —
(d) to redeem all mortgages and pledges, and to satisfy Within thirty (30) days from the expiration of the period
any judgment which may be an encumbrance on any for filing of applications for recognition of claims,
property sold by him; creditors, individual debtors, owner/s of the sole
proprietorship-debtor, partners of the partnership-debtor
(e) to settle all accounts between the debtor and his
and shareholders or members of the corporation-debtor
creditors, subject to the approval of the court;
and other interested parties may submit a challenge to a
(f) to recover any property or its value, fraudulently claim or claims to the court, serving a certified copy on
conveyed by the debtor; the liquidator and the creditor holding the challenged
(g) to recommend to the court the creation of a creditors' claim. Upon the expiration of the thirty (30)-day period,
committee which will assist him in the discharge of his the rehabilitation receiver shall submit to the court the
functions and which shall have powers as the court registry of claims containing the undisputed claims that
deems just, reasonable and necessary; and have not been subject to challenge. Such claims shall
become final upon the filing of the register and may be
(h) upon approval of the court, to engage such subsequently set aside only on grounds of fraud,
professionals as may be necessary and reasonable to accident, mistake or inexcusable neglect.
assist him in the discharge of his duties.
SECTION 126. Submission of Disputed Claims to Court. —
In addition to the rights and duties of a rehabilitation The liquidator shall resolve disputed claims and submit
receiver, the liquidator shall have the right and duty to his findings thereon to the court for final approval. The
take all reasonable steps to manage and dispose of the liquidator may disallow claims.
debtor's assets with a view towards maximizing the
proceedings therefrom, to pay creditors and stockholders,
and to terminate the debtor's legal existence. Other (D) Avoidance Proceedings.
duties of the liquidator in accordance with this section SECTION 127. Rescission or Nullity of Certain Transactions.
may be established by procedural rules. — Any transaction occurring prior to the issuance of the
A liquidator shall be subject to removal pursuant to Liquidation Order or, in case of the conversion of the
procedures for removing a rehabilitation receiver. rehabilitation proceedings to liquidation proceedings
prior to the commencement date, entered into by the
SECTION 120. Compensation of the Liquidator. — The debtor or involving its assets, may be rescinded or
liquidator and the persons and entities engaged or declared null and void on the ground that the same was
employed by him to assist in the discharge of his powers executed with intent to defraud a creditor or creditors or
and duties shall be entitled to such reasonable which constitute undue preference of creditors. The
compensation as may be determined by the liquidation presumptions set forth in Section 58 hereof shall apply.
court, which shall not exceed the maximum amount as
may be prescribed by the Supreme Court. SECTION 128. Actions for Rescission or Nullity. — (a) The
liquidator or, with his conformity, a creditor may initiate
SECTION 121. Reporting Requirements. — The liquidator and prosecute any action to rescind, or declare null and
shall make and keep a record of all moneys received and void any transaction described in the immediately
all disbursements made by him or under his authority as preceding paragraph. If the liquidator does not consent
liquidator. He shall render a quarterly report thereof to to the filing or prosecution of such action, any creditor
the court, which report shall be made available to all may seek leave of the court to commence said action.
interested parties. The liquidator shall also submit such
reports as may be required by the court from time to (b) If leave of court is granted under subsection (a) hereof,
time as well as a final report at the end of the liquidation the liquidator shall assign and transfer to the creditor all
proceedings. rights, title and interest in the chose in action or subject
matter of the proceeding, including any document in
SECTION 122. Discharge of Liquidator. — In preparation support thereof.
for the final settlement of all the claims against the
debtor, the liquidator will notify all the creditors, either by



(c) Any benefit derived from a proceeding taken pursuant from the registry of legal entities at the SEC, the court
to subsection (a) hereof, to the extent of his claim and the shall issue an Order terminating the proceedings.
costs, belongs exclusively to the creditor instituting the
proceeding, and the surplus, if any, belongs to the estate.
(F) Liquidation of a Securities Market Participant.
(d) Where, before an order is made under subsection (a)
hereof, the liquidator signifies to the court his readiness SECTION 136. Liquidation of a Securities Market
to institute the proceeding for the benefit of the creditors, Participant. — The foregoing provisions of this chapter
the order shall fix the time within which he shall do so shall be without prejudice to the power of a regulatory
and, in that case, the benefit derived from the agency or self-regulatory organization to liquidate
proceedings, if instituted within the time limits so fixed, trade-related claims of clients or customers of a securities
belongs to the estate. market participant which, for purposes of investor
protection, are hereby deemed to have absolute priority
over all other claims of whatever nature or kind insofar as
(E) The Liquidation Plan. trade-related assets are concerned.
SECTION 129. The Liquidation Plan. — Within three (3) For purposes of this section, trade-related assets include
months from his assumption into office, the Liquidator cash, securities, trading right and other assets owned and
shall submit a Liquidation Plan to the court. The used by the securities market participant in the ordinary
Liquidation Plan shall, as a minimum, enumerate all the course of its business.
assets of the debtor, all the claims against the debtor and
a schedule of liquidation of the assets and payment of the
claims. CHAPTER VIII Proceedings Ancillary to Other
SECTION 130. Exempt Property to be Set Apart. — It shall Insolvency or Rehabilitation Proceedings
be the duty of the court, upon petition and after hearing,
to exempt and set apart, for the use and benefit of the
said insolvent, such real and personal property as is by (A) Banks and Other Financial Institutions Under
law exempt from execution, and also a homestead; but Rehabilitation Receivership Pursuant to a
no such petition shall be heard as aforesaid until it is first State-funded or State-mandated Insurance
proved that notice of the hearing of the application System.
therefor has been duly given by the clerk, by causing such
notice to be posted in at least three (3) public places in SECTION 137. Provision of Assistance. — The court shall
the province or city at least ten (10) days prior to the time issue orders, adjudicate claims and provide for other relief
of such hearing, which notice shall set forth the name of necessary to assist in the liquidation of a financial
the said insolvent debtor, and the time and place institution under rehabilitation receivership established
appointed for the hearing of such application, and shall by a state-funded or state-mandated insurance system.
briefly indicate the homestead sought to be exempted or SECTION 138. Application of Relevant Legislation. — The
the property sought to be set aside; and the decree must liquidation of banks, financial institutions, insurance
show that such proof was made to the satisfaction of the companies and pre-need companies shall be determined
court, and shall be conclusive evidence of that fact. by relevant legislation. The provisions in this Act shall
SECTION 131. Sale of Assets in Liquidation. — The apply in a suppletory manner.
liquidator may sell the unencumbered assets of the
debtor and convert the same into money. The sale shall (B) Cross-Border Insolvency Proceedings.
be made at public auction. However, a private sale may
be allowed with the approval of the court if: (a) the goods SECTION 139. Adoption of Uncitral Model Law on
to be sold are of a perishable nature, or are liable to Cross-Border Insolvency. — Subject to the provision of
quickly deteriorate in value, or are disproportionately Section 136 hereof and the rules of procedure that may be
expensive to keep or maintain; or (b) the private sale is for adopted by the Supreme Court, the Model Law on
the best interest of the debtor and his creditors. Cross-Border Insolvency of the United Nations Center for
International Trade and Development is hereby adopted
With the approval of the court, unencumbered property as part of this Act.
of the debtor may also be conveyed to a creditor in
satisfaction of his claim or part thereof. SECTION 140. Initiation of Proceedings. — The court shall
set a hearing in connection with an insolvency or
SECTION 132. Manner of Implementing the Liquidation rehabilitation proceeding taking place in a foreign
Plan. — The liquidator shall implement the Liquidation jurisdiction, upon the submission of a petition by the
Plan as approved by the court. Payments shall be made representative of the foreign entity that is the subject of
to the creditors only in accordance with the provisions of the foreign proceeding.
the Plan.
SECTION 141. Provision of Relief. — The court may issue
SECTION 133. Concurrence and Preference of Credits. — orders:
The Liquidation Plan and its implementation shall ensure
that the concurrence and preference of credits as (a) suspending any action to enforce claims against the
enumerated in the Civil Code of the Philippines and other entity or otherwise seize or foreclose on property of the
relevant laws shall be observed, unless a preferred foreign entity located in the Philippines;
creditor voluntarily waives his preferred right. For (b) requiring the surrender of property of the foreign
purposes of this chapter, credits for services rendered by entity to the foreign representative; or
employees or laborers to the debtor shall enjoy first
(c) providing other necessary relief.
preference under Article 2244 of the Civil Code, unless the
claims constitute legal liens under Articles 2241 and 2242 SECTION 142. Factors in Granting Relief. — In determining
thereof. whether to grant relief under this subchapter, the court
shall consider:
SECTION 134. Order Removing the Debtor from the List of
Registered Entities at the Securities and Exchange (a) the protection of creditors in the Philippines and the
Commission. — Upon determining that the liquidation inconvenience in pursuing their claims in a foreign
has been completed according to this Act and applicable proceeding;
law, the court shall issue an Order approving the report (b) the just treatment of all creditors through resort to a
and ordering the SEC to remove the debtor from the unified insolvency or rehabilitation proceeding;
registry of legal entities.
(c) whether other jurisdictions have given recognition to
SECTION 135. Termination of Proceedings. — Upon receipt the foreign proceeding;
of evidence showing that the debtor has been removed


(d) the extent that the foreign proceeding recognizes the SECTION 149. Separability Clause. — If any provision of
rights of creditors and other interested parties in a this Act shall be held invalid, the remainder of this Act not
manner substantially in accordance with the manner otherwise affected shall remain in full force and effect.
prescribed in this Act; and SECTION 150. Effectivity Clause. — This Act shall take
(e) the extent that the foreign proceeding has recognized effect fifteen (15) days after its complete publication in the
and shown deference to proceedings under this Act and Official Gazette or in at least two (2) national newspapers
previous legislation. of general circulation.
(Financial Rehabilitation and Insolvency Act (FRIA) of
2010, Republic Act No. 10142, [July 18, 2010])
CHAPTER IX Funds for Rehabilitation of

Government-Owned and -Controlled Corporations
SECTION 143. Funds for Rehabilitation of RA No 7394 | Consumer Act of the
Government-owned and -Controlled Corporations. —
Public funds for the rehabilitation of government-owned
Philippines
and -controlled corporations shall be released only
pursuant to an appropriation by Congress and shall be April 13, 1992
supported by funds actually available as certified by the
REPUBLIC ACT NO. 7394
National Treasurer.
THE CONSUMER ACT OF THE PHILIPPINES
The Department of Finance, in collaboration with the
Department of Budget and Management, shall
promulgate the rules for the use and release of said
funds.
TITLE I General Provisions
ARTICLE 1. Short Title. — This Act shall be known as the
"Consumer Act of the Philippines."
CHAPTER X Miscellaneous Provisions ARTICLE 2. Declaration of Basic Policy. — It is the policy of
SECTION 144. Applicability of Provisions. — The provisions the State to protect the interests of the consumer,
in Chapter II, insofar as they are applicable, shall likewise promote his general welfare and to establish standards of
apply to proceedings in Chapters III and IV. conduct for business and industry. Towards this end, the
State shall implement measures to achieve the following
SECTION 145. Penalties. — An owner, partner, director,
objectives:
officer or other employee of the debtor who commits any
one of the following acts shall, upon conviction thereof, a) protection against hazards to health and safety;
be punished by a fine of not more than One million pesos b) protection against deceptive, unfair and
(Php1,000,000.00) and imprisonment for not less than unconscionable sales acts and practices;
three (3) months nor more than five (5) years for each
offense: c) provision of information and education to facilitate
sound choice and the proper exercise of rights by the
(a) if he shall, having notice of the commencement of the consumer;
proceedings, or having reason to believe that
proceedings are about to be commenced, or in d) provision of adequate rights and means of redress; and
contemplation of the proceedings, hide or conceal, or e) involvement of consumer representatives in the
destroy or cause to be destroyed or hidden any property formulation of social and economic policies.
belonging to the debtor; or if he shall hide, destroy, alter,
mutilate or falsify, or cause to be hidden, destroyed, ARTICLE 3. Construction. — The best interest of the
altered, mutilated or falsified, any book, deed, document consumer shall be considered in the interpretation and
or writing relating thereto; or if he shall, with intent to implementation of the provisions of this Act, including its
defraud the creditors of the debtor, make any payment, implementing rules and regulations.
sale, assignment, transfer or conveyance of any property ARTICLE 4. Definition of Terms. — For purposes of this
belonging to the debtor; Act, the term:
(b) if he shall, having knowledge or belief of any person a) "Advertisement" means the prepared and through any
having proved a false or fictitious claim against the form of mass medium, subsequently applied,
debtor, fail to disclose the same to the rehabilitation disseminated or circulated advertising matter.
receiver or liquidator within one (1) month after coming to
b) "Advertising" means the business of conceptualizing,
said knowledge or belief; or if he shall attempt to account
presenting or making available to the public, through any
for any of the debtor's property by fictitious losses or
form of mass media, fact, data or information about the
expenses; or
attributes, features, quality or availability of consumer
(c) if he shall knowingly violate a prohibition or knowingly products, services or credit.
fail to undertake an obligation established by this Act.
c) "Advertising agency or Agent" means a service
SECTION 146. Application to Pending Insolvency, organization or enterprise creating, conducting,
Suspension of Payments and Rehabilitation Cases. — producing, implementing or giving counsel on
This Act shall govern all petitions filed after it has taken promotional campaigns or programs through any
effect. All further proceedings in insolvency, suspension of medium for and in behalf of any advertiser.
payments and rehabilitation cases then pending, except
d) "Advertiser" means the client of the advertising agency
to the extent that in the opinion of the court their
or the sponsor of the advertisement on whose account
application would not be feasible or would work injustice,
the advertising is prepared, conceptualized, presented or
in which event the procedures set forth in prior laws and
disseminated.
regulations shall apply.
e) "Agricultural purpose" means a purpose related to the
SECTION 147. Application to Pending Contracts. — This
production, harvest, processing, manufacture,
Act shall apply to all contracts of the debtor regardless of
distribution, storage, transportation, marketing,
the date of perfection.
exhibition or disposition of agricultural, fishery or marine
SECTION 148. Repealing Clause. — The Insolvency Law products.
(Act No. 1956), as amended, is hereby repealed. All other
f) "Amount financed" in a consumer credit sale
laws, orders, rules and regulations or parts thereof
constitutes the cash price plus non-finance charges less
inconsistent with any provision of this Act are hereby
the amount of any downpayment whether made in cash
repealed or modified accordingly.
or in property traded in, or in a consumer loan the


amount paid to, receivable by or paid or payable to the n) "Consumer" means a natural person who is a
buyer or to another person in his behalf. purchaser, lessee, recipient or prospective purchaser,
g) "Banned hazardous substance" means (1) any toy or lessor or recipient of consumer products, services or
other articles intended for use by children, which are credit.
hazardous per se, or which bear or contain substances o) "Consumer credit" means any credit extended by a
harmful to human beings; or (2) any hazardous substance creditor to a consumer for the sale or lease of any
intended or packaged in a form suitable for use in the consumer product or service under which part or all of
household, which the implementing agency by the price or payment therefor is payable at some future
regulation, classifies as "banned hazardous substance" time, whether in full or in installments.
notwithstanding the existence of cautionary labels, to p) "Consumer loan" means a loan made by the lender to a
safeguard public health and safety: Provided, That the person which is payable in installments for which a
implementing agency may, by regulation, exempt from finance charge is or may be imposed. This term includes
this Act, articles which by reason of their functional credit transactions pursuant to an open-end-credit plan
purpose require the inclusion of the hazardous substance other than a seller credit card.
involved and which bear appropriate labels giving
adequate directions and warnings for their safe use. q) "Consumer products and services" means goods,
services and credits, debts or obligations which are
Procedures for the issuance, amendment or repeal of primarily for personal, family, household or agricultural
regulations pursuant to clause (2) or paragraph (g) of this purposes, which shall include but not limited to food,
Article shall be governed by the rules and regulations drugs, cosmetics, and devices.
promulgated by the Department of Health; Provided,
That if the Department of Health finds that the r) "Consumer product safety rule" means a consumer
distribution for household use of the hazardous product safety standard described in Article 78 or a rule
substance involved presents an imminent hazard to the under this Chapter declaring a consumer product
public health, it may publish in a newspaper of general banned hazardous product.
circulation a notice of such finding and such substance s) "Consumer transaction" means (1) (i) a sale, lease,
shall be deemed to be a "banned hazardous substance" assignment, award by chance, or other disposition of
pending the issuance of regulation formally banning consumer products, including chattels that are intended
such substance. to be affixed to land, or of services, or of any right, title, or
h) "Batch" means a quantity of any drug or device interest therein, except securities as defined in the
produced during a given cycle of manufacture. Securities Act and contracts of insurance under the
Insurance Code, or (ii) grant of provision of credit to a
i) "Business name, firm name or style" means any name consumer for purposes that are primarily personal, family,
or designation other than the true name of a person, household or agricultural, or (2) a solicitation or
partnership, corporation or association which is used or promotion by a supplier with respect to a transaction
signed in connection with his/its business or in referred to in clause (1).
1) any written or printed receipt, including receipt for tax t) "Corrosive" means any substance which on contact with
on business; living tissue will cause destruction of tissue by chemical
2) any written or printed contract not verified by a notary action.
public; u) "Cosmetics" means (1) articles intended to be rubbed,
3) any written or printed evidence of any agreement or poured, sprinkled or sprayed on, introduced into or
business transaction; and otherwise applied to the human body or any part thereof
4) any sign or billboard kept conspicuously exhibited in for cleansing, beautifying, promoting attractiveness, or
plain view in or at the place of the business, announcing a altering the appearance, and (2) article intended for uses
firm name or business name or style. as a component of any such article except that such term
shall not include soap.
j) "Cash price or delivered price", in case of trade
transaction, means the amount of money which would v) "Counterfeit product" means any consumer product
constitute full payment upon delivery of the property which, or the container or labeling of which, without
(except money) or service purchased at the creditor's authorization, bears the trademark, trade name, or other
place of business. In the case of financial transactions, identifying mark, imprint, or device, or any likeness
cash price represents the amount received by the debtor thereof, of a consumer product manufacturer, processor,
upon consummation of the credit transaction, net of packer, distributor, other than the person or persons who
finance charges collected at the time the credit is in fact manufactured, processed, packed or distributed
extended, if any. such product and which thereby falsely purports or is
represented to be the product of, or to have been packed
k) "Chain distribution plans" or "pyramid sales schemes" or distributed by such consumer product manufacturer,
means sales devices whereby a person, upon condition processor, packer, or distributor.
that he makes an investment, is granted by the
manufacturer or his representative a right to recruit for w) "Credit card" means any card, plate, coupon book or
profit one or more additional persons who will also be other credit device existing for the purpose of obtaining
granted such right to recruit upon condition of making money, property, labor or services on credit.
similar investments: Provided, That, the profits of the x) "Credit Sale" means a sale of products, services or an
person employing such a plan are derived primarily from interest in land to a person on credit where a debt is
the recruitment of other persons into the plan rather payable in installments or a finance charge is imposed
than from the sale of consumer products, services and and includes any agreement in the form of a bailment of
credit: Provided, further, That the limitation on the products or lease of products or real property if the bailee
number of participants does not change the nature of or lessee pays or agrees to pay compensation for use a
the plan. sum substantially equivalent to or in excess of the
l) "Closing out sale" means a consumer sale wherein the aggregate value of the products or real property involved
seller uses the announcement to create the impression and it is agreed that the bailee or lessee will become, or
that he is willing to give large discounts or merchandise for no other or a nominal consideration has the option to
in order to reduce, dispose or close out his inventory and become, the owner of the products or real property upon
business. full compliance with the terms of the agreement.
m) "Commerce" means the sale, lease, exchange, traffic or y) "Credit transaction" means a transaction between a

distribution of goods, commodities, productions, services natural person and a creditor in which real or personal
or property, tangible or intangible. property, services or money acquired on credit and the
person's obligation is payable in installment.


z) "Creditor" means any person engaged in the business ag) "Food" means any substance, whether processed,
of extending credit and shall include any person who as a semi-processed or raw, intended for human consumption
regular business practice makes loans or sells or rents and includes chewing gum, drinks and beverages and
property or services on a time, credit or installment basis, any substance which has been used as an ingredient or a
either as principal or as agent who requires as an incident component in the manufacture, preparation or treatment
to the extension of credit, the payment of a finance of food.
charge. ah) "Food additive" means any substance, the intended
aa) "Default or delinquency charge" means, with respect use of which results or may reasonably be expected to
to a consumer credit transaction, the penalty charge result, directly or indirectly, in its becoming a component
payable by the consumer-debtor for failure to pay an or otherwise affecting the characteristics of any food
amount or installment in full on the date the same (including any substance intended for use in producing,
becomes due and demandable, or on or before the manufacturing, packing, processing, preparing, treating,
period specified for the purpose in the consumer credit packaging, transporting, or holding food; and including
sale documents. any source of radiation intended for any such use), if such
ab) "Device" means an instrument, apparatus, implement, substance is not generally recognized, among experts
machine, contrivance, implant, in vitro reagent, or other qualified as having been adequately shown through
similar or related article, including any component, part scientific procedures to be safe under the conditions of
or accessory which is (1) recognized in the official United the intended use.
States Pharmacopoeia-National Formulary (USP-NF) or ai) "Generic name" is the identification of drugs and
any supplement to them, (2) intended for use in the medicines by their scientifically and internationally
diagnosis of disease or other condition or in the cure, recognized active ingredients or by their official generic
mitigation, treatment or prevention of disease, in man or name as determined by the Bureau of Food and Drugs of
other animals; or (3) intended to affect the structure or the Department of Health.
any function of the body of man or other animals, and aj) "Guarantee" means an expressed or implied assurance
which does not achieve any of its principal intended of the quality of the consumer products and services
purposes through chemical action within or on the body offered for sale or length of satisfactory use to be
of man or other animals and which is not dependent expected from a product or other similar specified
upon being metabolized for the achievement of any of its assurances.
principal intended purposes.
ak) "Hazardous substance" means: (1) (i) Any substance or
ac) "Distributor" means any person to whom a consumer mixture of substances which is toxic, corrosive, irritant, a
product is delivered or sold for purposes of distribution in strong sensitizer, flammable or combustible, or generates
commerce, except that such term does not include a pressure through decomposition, heat or other means, if
manufacturer or retailer of such product. such substance or mixture or substances may cause
ad) "Drugs" mean (1) articles recognized in the current substantial injury or substantial illness during or as a
official United States Pharmacopoeia-National Formulary, proximate result of any customary or reasonably
official Homeopathic Pharmacopoeia of the United foreseeable ingestion by children;
States, official National Drug Formulary, or any (ii) Any substance which the department finds to be
supplement to any of them; and (2) articles intended for under the categories enumerated in clause (1) (i) of this
use in the diagnosis, cure, mitigation, treatment, or paragraph;
prevention of disease in man or other animals; and (3)
articles (other than food) intended to affect the structure (iii) Any radioactive substance, if, with respect to such
or any function of the body of man or animals; and (4) substance as used in a particular class of article or as
articles intended for use as a component of any articles packaged, the Department, upon approval of the
specified in clauses (1), (2), or (3) but do not include Department determines by regulation that the substance
devices or their components, parts or accessories. is sufficiently hazardous to require labeling in accordance
with this section in order to protect the public health;
The term "drug" when used in this Act shall include
herbal and/or traditional drug. They are defined as articles (iv) Any toy or other articles intended for use by children
from indigenous plant or animal origin used in folk which the director may, by regulation, determine the
medicine which are: (1) recognized in the Philippine presence of an electrical, mechanical or thermal hazard.
National Formulary; (2) intended for use in the treatment (2) This term shall not apply to food, drugs, cosmetics, and
or cure, mitigation of disease symptoms, injury or bodily devices nor to substances intended for use as fuels when
defect for use in man; (3) other than food, intended to stored in containers and used in the heating, cooking or
affect the structure of any function of the body of man; (4) refrigeration system of a house, but such term shall apply
put into finishes, ready to use form by means of to any article which is not in itself a pesticide but which is
formulation, dosage or dosage directions; and (5) a hazardous substance, as construed in clause (a) of
intended for use as a component of any of the articles paragraph (1), by reason of bearing or containing such
specified in clauses (1), (2), (3) and (4) of this paragraph. harmful substances described therein.
ae) "Expiry or expiration date" means the date stated on al) "Highly Toxic" means any substance which has any of
the label of food, drug, cosmetic, device or hazardous the following effects: (1) produces death within fourteen
substance after which they are not expected to retain days to one-half or more than one-half of a group of ten
their claimed safety, efficacy and quality or potency and or more laboratory white rats each weighing between
after which it is no longer permissible to sell them. Two hundred and three hundred grams, at a single dose
af) "Extremely flammable" means any substance which of fifty milligrams or less per kilogram of body weight,
has a flash point at or below negative six and six-tenths when orally administered; or (2) produces death within
degrees centigrade as determined by the Tagliabue Open fourteen days to one-half or more of a group of ten or
Cub Tester; and the term "combustible" shall apply to any more laboratory white rats each weighing between two
substance which has a flash point of above twenty-six and hundred and three hundred grams, when inhaled
six-tenths degrees to and including sixty-five and continuously for a period of one hour or less at an
five-tenths degrees centigrade as determined by the atmospheric concentration of two hundred parts per
Tagliabue Open Cub Tester: Provided, That the million by volume or less of gas or vapor or two
flammability or combustibility of solids and of the milligrams per liter by volume or less of mist or dust,
contents of self-pressurized containers shall be provided such concentration is likely to be encountered
determined through methods found by the by man when the substance is used in any reasonably
implementing agency to be generally applicable to such foreseeable manner; or (3) produces death within
materials or containers, respectively, and established by fourteen days to one-half or more of a group of ten or
regulations issued by it. more rabbits, when tested in a dosage of two hundred
milligrams or less per kilogram of body weight, or when



administered through continuous contact with the bare the word "poison" for any hazardous substance which is
skin for twenty-four hours or less. defined as highly toxic; (viii) instructions for handling and
am) "Home solicitation sale" means consumer sales or storage of packages which require special care in
leases which are personally solicited by any person or handling or storage; and (ix) the statement "keep out of
organization by telephone, person-to-person contact or the reach of children", or its practical equivalent, if the
by written or printed communication other than general article is intended for use by children and is not a banned
advertising or consummated at the buyer's residence or a hazardous substance, with adequate directions for the
place of business, at the seller's transient quarters, or protection of children from the hazard involved. The
away from a seller's regular place of business. aforementioned signal words, affirmative statements,
description of precautionary measures, necessary
an) "Immediate container" means the container or instructions or other words or statements may be in the
package which is immediately after or near the substance English language or its equivalent in Filipino; and
but does not include package liners.
(2) on which any statement required under clause (1) of
ao) "Imminently hazardous product" means a consumer this paragraph are located prominently and in contrast by
product which presents an unreasonable risk of death, typography are located prominently and in contrast by
serious illness or severe personal injury. typography, layout, with other printed matters on the
ap) "Irritant" means any substance not corrosive within label.
the meaning of paragraph (t) of this Article which, on aw) "New Drugs" mean (1) any drug the composition of
immediate, prolonged or repeated contact with normal which is such that said drug is not generally recognized
living tissue will induce a local inflammatory reaction. among experts qualified by scientific training and
aq) "Label, labeling" means the display of written, printed experience to evaluate the safety, efficacy, and quality of
or graphic matter on any consumer product, its drugs as safe, efficacious and of good quality for use
immediate container, tag, literature or other suitable under the conditions prescribed, recommended, or
material affixed thereto for the purpose of giving suggested in the labeling thereof; or (2) any drug the
information as to the identity, components, ingredients, composition of which is such that said drug, as a result of
attributes, directions for use, specifications and such its previous investigations to determine its safety, efficacy
other information as may be required by law or and good quality for use under certain conditions, has
regulations. become so recognized but which has not, otherwise than
in such investigations, been used to a material extent or
ar) "Manufacture" means any and all operations involved for a material time under new conditions.
in the production, including preparation, propagation,
processing, formulating, filling, packing, repacking, "New Drugs" shall include drugs (a) containing a newly
altering, ornamenting, finishing or otherwise changing discovered active ingredient; (b) containing a new fixed
the container, wrapper or labeling of a consumer product combination of drugs, either by molecular or physical
in the furtherance of the distribution of the same from combination; (c) intended for new indications; (d) an
the original place of manufacture to the person who additional new mode of administration; or (e) in an
makes the final delivery or sale to the ultimate consumer. additional dosage or strength of the dosage form, which
meets the conditions as defined under the new drug.
as) "Manufacturer" means any person who manufactures,
assembles or processes consumer products, except that if The definition of "new drugs" covers to the extent
the goods are manufactured, assembled or processed for applicable, "new devices".
another person who attaches his own brand name to the ax) "New Product" means a consumer product which
consumer products, the latter shall be deemed the incorporates a design, material or form of energy
manufacturer. In case of imported products, the exchange which has not previously been used
manufacturer's representative or, in his absence, the substantially in consumer products and as to which there
importer, shall be deemed the manufacturer. exists a lack of adequate information to determine the
at) "Mass media" refers to any means or methods used to quality and safety of such product if used by the
convey advertising messages to the public such as consumers.
television, radio, magazines, cinema, billboards, posters, ay) "Open-end-credit plan" means a consumer credit
streamers, hand bills, leaflets, mails and the like. extended on an account pursuant to a plan under which:
au) "Materially defective product" means a product 1) the creditor may permit the person to make purchases
which, because of the pattern of the defect, the number or obtain loans, from time to time, directly from the
of defective products distributed in commerce and the creditor or indirectly by use of credit card, check or other
severity of the risk or otherwise, creates a substantial risk device;
of injury to the public.
2) the person has the privilege of paying the balance; or
av) "Mislabeled hazardous substance" means any
hazardous substance intended, or packaged in a form 3) a finance charge may be computed by the creditor
suitable, for use in households, especially by children, the from time to time on an outstanding unpaid balance.
packaging or labeling of which is in violation of the az) "Package" or "packaging" means any container or
special packaging regulation issued by the Department wrapping in which any consumer product is enclosed for
of Health under Article 91 or if such substance fails to bear use in the delivery or display of that consumer product to
a label which (1) states conspicuously (i) the name and the retail purchasers, but does not include:
exact address of the manufacturer, packer, distributor or 1) shipping containers or wrappings used solely for the
seller; (ii) the common or usual name of the hazardous transportation of any consumer product in bulk or in big
substance or of each component which contributes quantities by manufacturers, packers, or processors to
substantially to the harmfulness of the substance, unless wholesale retail distributors thereof;
the Department by regulation approved by the
Department permits or requires the use of the 2) shipping containers or outer wrappings used by
recognized generic name; (iii) the signal word "danger" on retailers to ship or deliver any product to retail customers
substances which are extremely flammable, corrosive, or if such containers and wrappings bear no printed matter
highly toxic; (iv) the signal word "warning" or "caution" on pertaining any particular product;
all other hazardous substances; (v) a frank statement of 3) The wrappers or containers of consumer products sold
the principal hazard or hazards involved, as "flammable", in small quantities by small retail stores to the consumer
"vapor harmful", "causes burns", "absorbed through skin", which by tradition are wrapped with ordinary paper.
or similar wording describing the action to be followed or
avoided, except when modified by regulation by the ba) "Person" means any individual, partnership,
Department pursuant to Section 46; (vi) instructions, corporation or association, trust, government or
when necessary or appropriate, for first aid treatment; (vii) governmental subdivision or any other legal entity.


bb) "Poisonous substance" means any substance capable from any kind of personal property, whether tangible or
of destroying life or seriously endangering health when intangible.
applied externally to the body or introduced internally in bq) "Special packaging" means packaging that is
moderate doses. designed or constructed to be significantly difficult for
bc) "Price comparison" means the direct comparison in children five years of age to open or to obtain a toxic or
any advertisement of a seller's current price for consumer harmful amount of the substance contained therein
products or services with any other price or statement of within a reasonable time and not difficult for normal
value for such property or services expressed in pesos, adults to use properly but does not mean packaging
centavos, fractions or percentages. which all such children cannot open or obtain a toxic or
bd) "Price tag" means any device, written, printed, affixed harmful amount within a reasonable time.
or attached to a consumer product or displayed in a br) "Standard" means a set of conditions to be fulfilled to
consumer repair or service establishment for the purpose ensure the quality and safety of a product;
of indicating the retail price per unit or service. bs) "Strong sensitizer" means any substance which will
be) "Principal display panel" means that part of the label cause on normal living tissue, allergy or photodynamic
that is most likely to be displayed, presented, shown or quality of hypersensitivity which becomes evident on
examined under normal and customary conditions of reapplication of the same substance, to be designated as
display for retail or sale. such by the implementing agency. Before designating
bf) "Private labeler" means an owner of a brand or any substance as a strong sensitizer, the implementing
trademark on the label of consumer product other than a agency, upon consideration of the frequency of
manufacturer of the product. occurrence and severity of the reaction, shall find that the
substance has a significant capacity to cause
A consumer product bears a private label if (1) the product hypersensitivity.
or its container is labeled with a brand or trademark of a
person other than its manufacturer; or (2) the brand or bt) "Substandard product" means a product which fails to
trademark of the manufacturer of such product does not comply with an applicable consumer product safety rule
appear on such label. which creates a substantial risk of injury to the public.
bg) "Radioactive substance" means any substance which bu) "Supplier" means a person, other than a consumer,
emits ionizing radiation. who, in the course of his business, solicits, offers,
advertises, or promotes the disposition or supply of a
bh) "Referral selling" means the sales device employed by consumer product or who other than the consumer,
the sellers wherein the buyer is induced to acquire goods engages in, enforces, or otherwise participates in a
or services by representing that after the acquisition of consumer transaction, whether or not any privity of
the goods or services, he will receive a rebate, contract actually exists between that person and the
commission or other benefit in return for the submission consumer, and includes the successor to, or assignee of,
of names of potential customers or otherwise helping the any right or obligation on of the supplier.
seller enter into other sales, if the receipt of such benefit
is contingent on an event occurring after the sale is bv) "Technical personnel of repair and service enterprise"
made. shall mean a machine or technician or any person who
works or renders diagnosis or advice in connection with
bi) "Repair and service firm" means any business repair, service and maintenance of the consumer
establishment, engaged directly or indirectly, in the products in a repair and service firm.
repair, service or maintenance of any consumer product.
bw) "Toxic substance" means any substance other than a
bk) "Retailer" means a person engaged in the business of radioactive substance which can cause injury, illness or
selling consumer products directly to consumers. death to man through ingestion, inhalation or absorption
bl) "Sale or distribution" shall mean an act made by a through any body surface.
manufacturer or seller, or their respective representative bx) "Trade name" or "trademark" means a word or words,
or agent, to make available consumer products, services name, title, symbol, emblem, sign or device or any
or credit to the end consumers under a consumer sale combination thereof used as an advertisement, sign,
transaction. It shall not include sampling or any label, poster or otherwise for the purpose of enabling the
distribution not for sale. public to distinguish the business of the person who
bm) "Sales Promotion" means techniques intended for owns and uses said trade name or trademark.
broad consumer participation which contain promises of
gain such as prizes, in cash or in kind, as reward for the
purchase of a product, security, service or winning in TITLE II
contest, game, tournament and other similar
competitions which involve determination of winner/s CHAPTER I Consumer Product Quality and Safety
and which utilize mass media or other widespread media
of information. It also means techniques purely intended ARTICLE 5. Declaration of Policy. — It shall be the duty of
to increase the sales, patronage and/or goodwill of a the State:
product. a) to develop and provide safety and quality standards for
bn) "Seller" means a person engaged in the business of consumer products, including performance or
selling consumer products directly to consumers. It shall use-oriented standards, codes of practice and methods of
include a supplier or distributor if (1) the seller is a tests;
subsidiary or affiliate of the supplier or distributor; (2) the b) to assist the consumer in evaluating the quality,
seller interchanges personnel or maintains common or including safety, performance and comparative utility of
overlapping officers or directors with the supplier or consumer products;
distributor; or (3) the supplier or distributor provides or
exercises supervision, direction or control over the selling c) to protect the public against unreasonable risks of
practices of the seller. injury associated with consumer products;
bo) "Service" shall mean, with respect to repair and d) to undertake research on quality improvement of
service firms, services supplied in connection with a products and investigation into causes and prevention of
contract for construction, maintenance, repair, product related deaths, illness and injuries;
processing, treatment or cleaning of goods or of fixtures e) to assure the public of the consistency of standardized
on land, or distribution of goods, or transportation of products.
goods.
bp) "Services" means services that are the subject of a
consumer transaction, either together with, or separate



ARTICLE 6. Implementing Agencies. — The provisions of found to be injurious, unsafe or dangerous, it shall, after
this Article and its implementing rules and regulations due notice and hearing, make the appropriate order for
shall be enforced by: its recall, prohibition or seizure from public sale or
a) the Department of Health with respect to food, drugs, distribution: Provided, That, in the sound discretion of the
cosmetics, devices and substances; department it may declare a consumer product to be
imminently injurious, unsafe or dangerous, and order is
b) the Department of Agriculture with respect to immediate recall, ban or seizure from public sale or
products related to agriculture, and; distribution, in which case, the seller, distributor,
c) the Department of Trade and Industry with respect to manufacturer or producer thereof shall be afforded a
other consumer products not specified above. hearing within forty-eight (48) hours from such order.
ARTICLE 7. Promulgation and Adoption of Consumer The ban on the sale and distribution of a consumer
Product Standards. — The concerned department shall product adjudged injurious, unsafe or dangerous, or
establish consumer product quality and safety standards imminently injurious, unsafe or dangerous under the
which shall consist of one or more of the following: preceding paragraph shall stay in force until such time
that its safety can be assured or measures to ensure its
a) requirements as to performance, composition, safety have been established.
contents, design, construction, finish, packaging of a
consumer product; ARTICLE 11. Amendment and Revocation of Declaration
of the Injurious, Unsafe or Dangerous Character of a
b) requirements as to kind, class, grade, dimensions, Consumer Product. — Any interested person may petition
weights, material; the appropriate department to commence a proceeding
c) requirements as to the methods of sampling, tests and for the issuance of an amendment or revocation of a
codes used to check the quality of the product; consumer product safety rule or an order declaring a
consumer product injurious, dangerous and unsafe.
d) requirements as to precautions in storage, transporting
and packaging; In case the department, upon petition by an interested
party or its own initiative and after due notice and
e) requirements that a consumer product be marked hearing, determines a consumer product to be
with or accompanied by clear and adequate safety substandard or materially defective, it shall so notify the
warnings or instructions, or requirements respecting the manufacturer, distributor or seller thereof of such finding
form of warnings or instructions. and order such manufacturer, distributor or seller to:
For this purpose, the concerned department shall adopt a) give notice to the public of the defect or failure to
existing government domestic product quality and safety comply with the product safety standards; and
standards: Provided, That in the absence of such
standards, the concerned department shall form b) give notice to each distributor or retailer of such
specialized technical committees composed of equal product.
number of representatives from each of the Government, The department shall also direct the manufacturer,
business and consumer sectors to formulate, develop and distributor or seller of such product to extend any or all of
purpose consumer product quality and safety standards. the following remedies to the injured person:
The said technical committees shall consult with the
private sector, which may, motu proprio, develop its own a) to bring such product into conformity with the
quality and safety standards that shall be subject to requirements of the applicable consumer product
review and approval of the concerned government standards or to repair the defect in order to conform with
agency or agencies after public hearings have been the same;
conducted for that purpose; and shall likewise consider b) to replace the product with a like or equivalent product
existing international standards recognized by the which complies with the applicable consumer product
Philippine Government. standards which does not contain the defect;
ARTICLE 8. Publication of Consumer Product Standards. c) to refund the purchase price of the product less a
— The concerned department shall, upon promulgation reasonable allowance for use; and
of the above standards, publish or cause the publication
of the same in two (2) newspapers of general circulation d) to pay the consumer reasonable damages as may be
at least once a week for a period of not less than one (1) determined by the department.
month. It may likewise conduct an information campaign The manufacturer, distributor or seller shall not charge a
through other means deemed effective to ensure the consumer who avails himself of the remedy as provided
proper guidance of consumers, businesses, industries and above of any expense and cost that may be incurred.
other sectors concerned. ARTICLE 12. Effectivity of Amendment and Revocation of
ARTICLE 9. Effectivity of Rules. — a) Each consumer Consumer Product Safety Rule. — Any amendment or
product standard or safety rule shall specify the date such revocation of a consumer product safety rule made by
rule is to take effect, which shall not exceed ninety (90) the concerned department shall specify the date on
days from the date promulgated unless the concerned which it shall take effect which shall not exceed ninety
department finds, for good cause shown, that a later days from the date of amendment or revocation is
effective date is in the public interest and publishes its published unless the concerned department finds, for a
reasons for such finding. After which, it shall no longer be good cause shown, that a later effective date is in the
legal to, or cause to, sell or distribute the consumer public interest and publishes its reasons for such finding.
product not complying with the standards or rules. The department shall promulgate the necessary rules for
b) The department may, by regulation, prohibit a the issuance, amendment or revocation of any consumer
manufacturer from stockpiling consumer products so as product safety rule.
to prevent such manufacturer from circumventing the ARTICLE 13. New Products. — The concerned department
purposes of this paragraph. The term "stockpiling" means shall take measures to make a list of new consumer
manufacturing or importing a product between the date products and to cause the publication by the respective
of promulgation of its consumer product safety rule and manufacturers or importers of such products a list
its effective date, at a rate which is significantly greater thereof together with the descriptions in a newspaper of
than the rate at which such product was produced or general circulation.
imported during a base period, as prescribed in the ARTICLE 14. Certification of Conformity to Consumer
regulation under this paragraph, ending before the date Product Standards. — The concerned department shall
of promulgation of consumer product safety rule. aim at having consumer product standards established
ARTICLE 10. Injurious, Dangerous and Unsafe Products. — for every consumer product so that consumer products
Whenever the departments find, by their own initiative or shall be distributed in commerce only after inspection
by petition of a consumer, that a consumer product is and certification of its quality and safety standards by the



department. The manufacturer shall avail of the a) it can be shown that such product is manufactured,
Philippine Standard Certification Mark which the sold or held for sale for export from the Philippines, or
department shall grant after determining the product's that such product was imported for export, unless such
compliance with the relevant standard in accordance consumer product is in fact distributed in commerce for
with the implementing rules and regulations. use in the Philippines; and
ARTICLE 15. Imported Products. — a) Any consumer b) such consumer product or the packaging thereof
product offered for importation into the customs of the bears a stamp or label stating that such consumer
Philippine territory shall be refused admission if such product is intended for export and actually exported.
product: ARTICLE 17. Powers, Functions and Duties. — In addition
1) fails to comply with an applicable consumer product to their powers, functions and duties under existing laws,
quality and safety standard or rule; the concerned department shall have the following
2) is or has been determined to be injurious, unsafe and powers, functions and duties:
dangerous; a) to administer and supervise the implementation of this
3) is substandard; or Article and its implementing rules and regulations;
4) has material defect. b) to undertake researches, develop and establish quality
and safety standards for consumer products in
b) Samples of consumer products being imported into coordination with other government and private
the Philippines in a quantity necessary for purposes of agencies closely associated with these products;
determining the existence of any of the above causes for
non-admission may be obtained by the concerned c) to inspect and analyze consumer products for purposes
department or agency without charge from the owner or of determining conformity to established quality and
consignee thereof. The owner or consignee of the safety standards;
imported consumer product under examination shall be d) to levy, assess, collect and retain fees as are necessary
afforded an opportunity to a hearing with respect to the to cover the cost of inspection, certification, analysis and
importation of such products into the Philippines. If it tests of samples of consumer products and materials
appears from examination of such samples or otherwise submitted in compliance with the provisions of this
that an imported consumer product does not conform to Article;
the consumer product safety rule or its injurious, unsafe e) to investigate the causes of and maintain a record of
and dangerous, is substandard or has a material defect, product-related deaths, illnesses and injuries for use in
such product shall be refused admission unless the researches or studies on the prevention of such
owner or the consignee thereof manifests under bond product-related deaths, illnesses and injuries.
that none of the above ground for non-admission exists
or that measures have been taken to cure them before f) to accredit independent, competent non-government
they are sold, distributed or offered for sale to the general bodies, to assist in (1) monitoring the market for the
public. presence of hazardous or non-certified products and
other forms of violations of Article 18; and (2) other
Any consumer product, the sale or use of which has been appropriate means to expand the monitoring and
banned or withdrawn in the country of manufacture, enforcement outreach of the department in relation to its
shall not be imported into the country. manpower, testing and certification resources at a given
c) If it appears that any consumer product which may not time.
be admitted pursuant to paragraph (a) of this Article can g) to accredit independent competent testing
be so modified that it can already be accepted, the laboratories.
concerned department may defer final determination as
to the admission of such product for a period not Prohibited Acts Penalties
exceeding ten (10) days, and in accordance with such ARTICLE 18. Prohibited Acts. — It shall be unlawful for any
regulations as the department and the Commissioner of person to:
Customs shall jointly promulgate, such product may be
released from customs custody under bond for the a) manufacture for sale, offer for sale, distribute in
purpose of permitting the owner or consignee an commerce, or import into the Philippines any consumer
opportunity to so modify such product. product which is not in conformity with an applicable
consumer product quality or safety standard
d) All modifications taken by an owner or consignee for promulgated in this Act;
the purpose of securing admission of an imported
consumer product under paragraph (c) shall be subject to b) manufacture for sale, offer for sale, distribute in
the supervision of the concerned department. If the commerce, or import into the Philippines any consumer
product cannot be so modified, or if the owner or product which has been declared as banned consumer
consignee is not proceeding to satisfactorily modify such product by a rule in this Act;
product, it shall be refused admission and the c) refuse access to or copying of pertinent records or fail
department may direct redelivery of the product into or refuse to permit entry of or inspection by authorized
customs custody, and to seize the product if not so officers or employees of the department;
redelivered.
d) fail to comply with an order issued under Article 11
e) Imported consumer products not admitted must be relating to notifications of substantial product hazards
exported, except that upon application, the and to recall, repair, replacement or refund of unsafe
Commissioner of Customs may permit the destruction of products;
the product if, within a reasonable time, the owner or
consignee thereof fails to export the same. e) fail to comply with the rule prohibiting stockpiling.
f) All expenses in connection with the destruction ARTICLE 19. Penalties. — a) Any person who shall violate
provided for in this Article, and all expenses in connection any provision of Article 18 shall upon conviction, be
with the storage, cartage or labor with respect to any subject to a fine of not less than One thousand pesos
consumer product refused admission under this Article, (P1,000.00) but not more than Ten thousand pesos
shall be paid by the owner or consignee and, in default of (P10,000.00) or imprisonment of not less than two (2)
such payment, shall constitute a lien against any future months but not more than one (1) year, or both upon the
importation made by such owner or consignee. discretion of the court. If the offender is an alien, he shall
be deported after service of sentence and payment of
ARTICLE 16. Consumer Products for Export. — The fine without further deportation proceedings.
preceding article on safety not apply to any consumer
product if: b) In case the offender is a naturalized citizen, he shall, in
addition to the penalty prescribed herein, suffer the
penalty of cancellation of his naturalization certificate



and its registration in the civil register and immediate 6) if its container is composed, in whole or in part, of any
deportation after service of sentence and payment of poisonous or deleterious substance which may render
fine. the contents injurious to health; or
c) Any director, officer or agent of a corporation who shall 7) if it has passed its expiry date.
authorize, order or perform any of the acts or practices b)1) If any valuable constituent has been, in whole or in
constituting in whole or in part a violation of Article 18, part, omitted or abstracted therefrom and the same has
and who has knowledge or notice of noncompliance not been substituted by any healthful equivalent of such
received by the corporation from the concerned constituent;
department, shall be subject to penalties to which that
corporation may be subject. 2) if any substance, not a valuable constituent, has been
added or substituted or in part therefor;
In case the violation is committed by, or in the interest of
a foreign juridical person duly licensed to engage in 3) if damage or inferiority has been concealed in any
business in the Philippines, such license to engage in manner; or
business in the Philippines shall immediately be revoked. 4) if any substance has been added thereto or packed
therewith so as to increase its bulk or weight, reduce its
CHAPTER II Food, Drugs, Cosmetics and Devices quality or strength, or make it appear better or of greater
value than it is.
ARTICLE 20. Declaration of Policy. — The State shall
ensure safe and good quality of food, drugs, cosmetics c) if it is, or bears or contains a color additive which is
and devices, and regulate their production, sale, unsafe under existing regulations: Provided, That the
distribution and advertisement to protect the health of Department shall promulgate regulations providing for
the consumer. the listing of color additives which are harmless and
suitable for use in food for which tolerances have been
ARTICLE 21. Implementing Agency. — In the established;
implementation of the foregoing policy, the State,
through the Department of Health, hereby referred as the d) if it is confectionary, and it bears or contains any
Department, shall, in accordance with the provisions of alcohol or non-nutritive article or substance except
this Act: harmless coloring, harmless flavoring, harmless resinous
glass not in excess of four-tenths (4/10) of one per centum
a) establish standards and quality measures for foods, (1%) natural gum and pectin: Provided, That this clause
drugs, devices and cosmetics; shall not apply to a safe non-nutritive article or substance
b) adopt measures to ensure pure and safe supply of if, in the judgment of the Department as provided by
foods and cosmetics, and safe, efficacious and good regulations, (1) such article or substance is of practical
quality of drugs and devices in the Country; functional value in the manufacture, packaging or
storage of such confectionery, (2) if the use of the
c) adopt measures to ensure the rational use of drugs and substance does not promote deception of the consumer
devices, such as, but not limited to, banning, recalling or or otherwise results in adulteration or mislabeling in
withdrawing from the market drugs and devices which violation of any provision of this Act, and (3) would not
are unregistered, unsafe, inefficacious or of doubtful render the product injurious or hazardous to health:
therapeutic value, the adoption of an official National Provided, further, That this paragraph shall not apply to
Drug Formulary, and the use of generic names in the any confectionery by reason of its containing less than
labeling of drugs; one-half (1/2) of one per centum (1%) by volume of alcohol,
d) strengthen the Bureau of Food and Drugs. derived solely from the use of flavoring extracts, or to any
chewing gum by reason of its containing harmless
ARTICLE 22. Rules and Regulations on Definitions and
non-nutritive masticatory substance: Provided, finally,
Standards. — Whenever in the judgment of the
That the Department may, for the purposes of avoiding or
Department such action will promote honesty and fair
resolving uncertainty as to the application of this clause,
dealing in the interest of consumers, it shall promulgate
promulgate regulations allowing or prohibiting the use of
rules and regulations fixing and establishing a reasonable
particular non-nutritive substances;
definition and standard of identity, a reasonable standard
of quality and/or reasonable standard of fill of containers e) if it is oleomargarine, margarine or butter and any of
for food, drugs, cosmetics or devices. the raw materials used therein consists in whole or in part
of any filthy, putrid or decomposed substance, or such
ARTICLE 23. Adulterated Food. — A food shall be deemed
oleomargarine, margarine or butter is otherwise unfit for
to be adulterated:
food;
a)1) if it bears or contains any poisonous or deleterious
f) if it has not been prepared in accordance with current
substance which may render it injurious to health; but in
acceptable manufacturing practice established by the
case the substance is not an added substance, such food
Department through regulations.
shall not be considered adulterated under this clause if
the quantity of such substance does not ordinarily render ARTICLE 24. Regulation of Unprocessed Food. — The
it injurious to health; provincial, municipal and city governments shall regulate
the preparation and sale of meat, fresh fruits, poultry,
2) if it bears or contains any added poisonous or
milk, fish, vegetables and other foodstuff for public
deleterious substance other than one which is (i) a
consumption, pursuant to the Local Government Code.
pesticide chemical in or on a raw agricultural commodity,
(ii) a food additive, (iii) a color additive, for which ARTICLE 25. Tolerance for Poisonous Ingredients in Food.
tolerances have been established and it conforms to such — Any poisonous or deleterious substance added to any
tolerances; food shall be deemed to be unsafe, except when such
substance is required or can not be avoided in its
3) if it consists in whole or in part of any filthy, putrid or
production or can not be avoided by good manufacturing
decomposed substance, or if it is otherwise unfit for food;
practice. In such case, the Department shall promulgate
4) if it has been prepared, packed or held under regulations limiting the quantity therein in such extent as
unsanitary conditions whereby it may have become he finds necessary for the protection of public health, and
contaminated with filth, or whereby, it may have been any quantity exceeding the limits so fixed shall be
rendered injurious to health; deemed to be unsafe. In determining the quantity of
5) if it is, in whole or part, the product of a diseased animal such added substance to be tolerated in different articles
or of an animal which has died other than by slaughter; of food, the Department shall take into account the
extent to which the use of such article is required or can
not be avoided in the production or manufacture of such
articles and the other ways in which the consumer may


be affected by the same or other poisonous or deleterious quality or purity therefor set forth in such compendium, if

substance. its difference in strength, safety, efficacy, quality or purity
ARTICLE 26. Unsafe Food Additives, Exceptions for from such standards is plainly stated in its label and
Conformity with Regulation. — A food additive, with approved for registration as such.
respect to any particular use or intended use, shall be c) If it is not subject to the provisions of paragraph (b) and
deemed unsafe unless: its strength differs from, or its efficacy, quality or purity
a) it and its use or intended use conforms to the terms of falls below, that which it purports or is represented to
an exemption for being solely intended for investigational possess.
use by qualified experts; or d) If a drug or device and any substance has been mixed
b) it and its use or intended use is in conformity with a or packed therewith, or any substance has been
regulation issued by the Department prescribing the substituted wholly or in part thereof, so as to reduce its
conditions under which such additives may be safely safety, efficacy, quality, strength or purity.
used. e) If the methods used in, or the facilities or controls used
ARTICLE 27. Petition for Regulation of Food Additive. — for its manufacture or holding do not conform to or are
Any person may, with respect to any intended use of a not operated or administered in conformity with current
food additive, file with the Department a petition good manufacturing practice to assure that such drug
proposing the issuance of a regulation prescribing the meets the requirements of this Act as to safety, quality
conditions under which such additives may be safely and efficacy, and has the identity and strength, and
used. meets the quality and purity characteristics which it
purports or is represented to possess.
The Department shall (1) establish a regulation
prescribing, with respect to one or more proposed uses of ARTICLE 30. Exemption in Case of Drugs and Devices. —
the food additive involved, (i) the conditions under which a) The Department is hereby directed to promulgate
a food additive may be safely used including, but not regulations exempting from any labeling or packaging
limited to, specifications as to the particular food, or requirement of this Act drugs and devices which are, in
classes of food, in which such additive may be used, (ii) accordance with the practice of the trade, to be
the maximum quantity which may be used, or permitted processed, labeled or repacked in substantial quantities
to remain in or on such food; (iii) the manner in which at establishments other than those where originally
such additive may be added to or used in or on such food, processed or packed, on condition that such drugs and
and (iv) any directions or other labeling or packaging devices are not adulterated or mislabeled under the
requirement for such additive deemed necessary to provisions of this Act upon removal from such processing,
assure the safety of such use, and shall notify the labeling or repacking establishment.
petitioner of such order and the reasons for such action; b)1) Drugs intended for use by man which:
or (2) deny the petition and notify the petitioner of and (i) are habit-forming;
the reasons for such action.
(ii) because of their toxicity or other potentiality for
The Department may, at any time upon his own initiative, harmful effect, or method of their use is not safe for use
issue a regulation prescribing, with respect to any except under the supervision of practitioner licensed by
particular food additive, the conditions under which such law to administer such drug;
additive may be safely used and the reasons thereof, and
cause the publication of the same. (iii) are new drugs whose applications are limited to
investigational use; shall be dispensed only (a) upon
ARTICLE 28. Effectivity of Regulations. — The regulations written prescription of a practitioner licensed by law to
promulgated under the preceding articles shall take administer such drug, or (b) upon an oral prescription of
effect fifteen (15) days after its publication in a newspaper such practitioner which is reduced promptly to writing
of general circulation but the Department may stay such and filed by the pharmacist, or (c) by refilling any such
effectivity if, after issuance of such order, a hearing is written or oral prescription if such refilling is authorized
sought by any person adversely affected by such order. by the prescriber either in the original prescription or by
Drugs and Devices oral order which is reduced promptly to writing and filed
ARTICLE 29. Adulterated Drugs and Devices. — A drug or by the pharmacist. The act of dispensing a drug contrary
device shall be deemed to be adulterated: to the provisions of this paragraph shall be deemed to be
an act which results in the drug being mislabeled while
a)1) if it contains in whole or in part of any filthy, putrid, or held for sale.
decomposed substance which may affect its safety,
efficacy or good quality; or (2) if it has been
manufactured, prepared or held under unsanitary 2) Any drug dispensed by filling or refilling a written
conditions whereby it may have been contaminated with prescription of a practitioner licensed by law to
dirt or filth or whereby it may have been rendered administer such drug shall be exempt from the
injurious to health; or (3) if its container is composed, in requirements of Article 89, except paragraphs (a), (h), (2)
whole or in part, of any poisonous or deleterious and (3), and the packaging requirements of paragraphs
substance which may render the contents injurious to (f) and (g), if the drug bears a label containing the name
health; or (4) if it bears or contains any color other than a and address of the dispenser, the serial number and date
permissible one as determined by the Department, of the prescription or its filling, the name of the prescriber
taking into consideration standards of safety, efficacy or and, if stated in the prescription the name of the patient
good quality. and the directions for use and cautionary statements, if
b) If it purports to be or is represented as a drug, the any, contained in such prescription.
name of which is recognized in an official compendium, 3) The Department may, by regulation, remove drugs
and its strength differs from, or its safety, efficacy, quality subject to Article 89(d) and Article 31 from the
or purity falls below the standards set forth in such requirements of sub-article (b)(1) of this Article, when
compendium, except that whenever tests or methods of such requirements are not necessary for the protection of
assay as prescribed are, in the judgment of the the public health.
Department, insufficient for the making of such 4) A drug which is subject to sub-article (b)(1) of this
determination, the Department shall promulgate Article shall be deemed to be mislabeled if at any time
regulations prescribing appropriate tests or methods of prior to dispensing, its label fails to bear the statement
assay in accordance with which such determination as to "Caution: Should not be dispensed without prescription."
strength, safety, efficacy, quality or purity shall be made. A drug to which sub-article (b)(1) of this Article does not
No drug defined in an official compendium shall be apply shall be deemed to be mislabeled if at any time
deemed to be adulterated under this paragraph because
it differs from the standards of strength, safety, efficacy,



prior to dispensing, its label bears the caution statement material fact. The order shall state the findings upon
quoted in the preceding sentence. which it is based.
ARTICLE 31. Licensing and Registration. — a) No person f) The Department shall promulgate regulations for
shall manufacture, sell, offer for sale, import, export, exempting from the operation of this Article drugs and
distribute or transfer any drug or device, unless an devices intended solely for investigational used by experts
application filed pursuant to sub-article (b) hereof is qualified by scientific training and experience to
effective with respect to such drug or device. investigate the safety and effectiveness of drugs and
b) Any person may file with the Department, through the devices.
Department, an application under oath with respect to g) No person shall manufacture, sell, offer for sale, import,
any drug or device subject to the provisions of sub-article export, distribute or transfer any drug or device without
(a) hereof. Such persons shall submit to the Department: first securing a license to operate from the Department
(1) full reports of investigations which have been made to after due compliance with technical requirements in
show whether or not such drug or device is safe, accordance with the rules and regulations promulgated
efficacious and of good quality for use based on clinical by the Department pursuant to this Act.
studies conducted in the Philippines; (2) a full list of the h) No drug or device shall be manufactured, sold, offered
articles used as components of such drug or device; (3) a for sale, imported, exported, distributed or transferred,
full statement of the composition of such drug or device; unless registered by the manufacturer, importer or
(4) a full description of the methods used in and the distributor thereof in accordance with rules and
facilities and controls used for the manufacture of such regulations promulgated by the Department pursuant to
drug or device; (5) such samples of such drug or device this Act. The provisions of Article 31 (b), (d) and (e), to the
and of the articles used as components thereof as the extent applicable, shall govern the registration of such
Department may require; (6) specimens of the labeling drugs and devices.
proposed to be used for such drug or device; and (7) such
other requirements as may be prescribed by regulations i) The Department shall promulgate a schedule of fees for
to ensure safety, efficacy and good quality of such drug or the issuance of the certificate of product registration and
device. license to operate provided for under this Article.
c) Within one hundred eighty (180) days after the filing of ARTICLE 32. Dangerous Drugs. — The importation,
an application under this sub-article, or such additional distribution, manufacture, production, compounding,
period as may be agreed upon by the Department and prescription, dispensing and sale of, and other lawful acts
the applicant, the Department shall either (1) approve the in connection with, dangerous drugs of such kind and
application if he then finds that none of the grounds for quantity as may be deemed necessary according to the
denying approval specified in sub-article (d) applies, or (2) medical and research needs of the country and the
give the applicant notice of an opportunity for a hearing determination of the quantity/quantities to be imported,
before the Department under sub-article (d) on the manufactured and held in stock at any given time by an
question whether such application is approvable. authorized importer, manufacturer or distributor of
dangerous drugs shall be under the jurisdiction and
d) If the Department finds, after due notice to the authority of the Dangerous Drugs Board as provided for
applicant and giving him an opportunity for a hearing, by existing laws and regulations.
that (1) the reports of the investigations which are
required to be submitted to the Department pursuant to ARTICLE 33. Banned or Restricted Drugs. — Banned or
sub-article (b) hereof, do not include adequate tests by all severely restricted drugs for health and safety reasons in
methods reasonably applicable to show whether or not their country of origin shall be banned and confiscated or
such drug or device is safe, efficacious and of good its uses severely restricted, whichever is appropriate, by
quality for use under the conditions prescribed, the Department. The Department shall monitor the
recommended or suggested in the proposed labeling presence in the market of such drugs and cause the
thereof; (2) the results of such test show that such drug or maintenance and regular publications of an updated
device is unsafe, inefficacious or of doubtful therapeutic consolidated list thereof.
value for use under such conditions or do not show that Certification of Drugs Containing Antibiotics
such drug or device is safe, efficacious or of good quality
for use under such conditions; (3) the methods used in, ARTICLE 34. Certification of Certain Drugs. — a) The
and the facilities and controls used for the manufacture Department shall, by regulations, provide for the
of such drug or device are inadequate to preserve its certification of batches of drugs composed wholly or
identity, strength, quality and purity; or (4) upon the basis partially of any kind of antibiotic. A batch of such drug
of the information submitted to him as part of the shall be certified if such drug has such characteristics of
application, or upon the basis of any other information identity, strength, quality and purity, as the Department
before him with respect to such drug or device, he has prescribes in such regulations as necessary to insure
insufficient information to determine whether such drug adequately safety and efficacy of use and good quality,
or device is safe, efficacious or of good equality for use but shall not otherwise be certified. Prior to the effective
under such conditions; or (5) evaluated on the basis of the date of such regulations the Department, in lieu of
information submitted to him as part of the application, certification, shall issue a release for any batch which, in
and any other information before him with respect to his judgment, may be released without risk as to the
such drug or device, there is a lack of substantial evidence safety and efficacy of its use. Such release shall prescribe
that the drug or device will have the effect it purports or the date of its expiration and other conditions under
is represented to have under the conditions of use which it shall cease to be effective as to such batch and as
prescribed, recommended or suggested in the proposed to portions thereof. For purposes of this Article and of
labeling thereof; or (6) based on a fair evaluation of all Article 89 (j), the term "antibiotic drug" means any drug
material facts, such labeling is false or misleading in any intended for use by man containing any quantity of any
way; he shall issue an order disapproving the application. chemical substance which is produced by a
micro-organism and which has the capacity to inhibit or
e) The effectiveness of an application with respect to any destroy micro-organisms in dilute solution (including the
drug or device shall, after due notice and opportunity for chemically synthesized equivalent of any such
hearing to the applicant, by order of the Department be substance).
suspended if it finds (1) that clinical experience, tests by
new methods, or tests by methods not deemed b) Whenever in the judgment of the Department, the
reasonably applicable when such application became requirements of this Article and of Article 89 (j) with
effective show that such drug or device is unsafe or respect to any drug or class of drugs are not necessary to
ineffective for use under the conditions of use upon the insure safety and efficacy of use and good quality, the
basis of which the application became effective, or (2) Department shall promulgate regulations exempting
that the application contains any untrue statement of a such drug or class of drugs from such requirements.


c) The Department shall promulgate regulations substance, or is otherwise unfit for food, a copy of the
exempting from any requirement of this Article and of results of such analysis shall be furnished promptly to the
Article 89(j), (1) drugs which are to be stored, processed, owner, operator or agent in charge.
labeled, or repacked at establishments other than those ARTICLE 37. Provisional Permits. — Whenever the
where manufactured, or condition that such drugs Department finds, after investigation, that the sale or
comply with all such requirements upon removal from distribution in commerce of any class of food, cosmetics,
such establishments; (2) drugs which conform to drugs or devices, may be injurious to health, and that
applicable standards of identity, strength, quality, and such injurious nature cannot be adequately determined
purity prescribed by these regulations and are intended after such articles have entered into domestic commerce,
for use in manufacturing other drugs; and (3) drugs it shall promulgate regulations providing for the issuance,
which are intended for investigational use by experts suspension and revocation of provisional permits, offer for
qualified by scientific training and experience to sale or transfer of such classes of food, cosmetics, drugs or
investigate the safety and efficacy of drugs. devices to manufacturers, processors or packers of the
Cosmetics same in such locality to which shall be attached such
ARTICLE 35. Adulterated Cosmetics. — A cosmetic shall conditions governing the manufacture, processing or
be deemed to be adulterated: packing of such consumer products for such temporary
period of time as may be necessary to protect public
a) if it bears or contains any poisonous or deleterious health; and after the effective date of such regulations,
substance which may render it injurious to users under and during such temporary period, no person shall, offer
the condition of use prescribed in the labeling thereof, or for sale or transfer any such food, cosmetics, drugs or
under the condition of use as are customary or usual: devices unless such manufacturer, processor or packer
Provided, That this provision shall not apply to color holds such permit.
additive hair dye, the label of which bears the following
legend conspicuously displayed thereon: "Caution: this ARTICLE 38. Publicity and Publication. — a) The
product contains ingredients which may cause skin Department may cause to be disseminated information
irritation on certain individuals and a preliminary test regarding food, drugs, devices, or cosmetics in situations
according to accompanying directions should first be involving, in the opinion of the Department, imminent
made. This product must not be used for dyeing the danger to health, or gross deception to the consumer.
eyelashes or eyebrows; to do so may cause blindness" and Nothing in this Article shall be construed to prohibit the
labeling of which bears adequate directions for such Department from collecting, reporting, and illustrating
preliminary testing. For purposes of this paragraph (e) the the results of its investigations.
term "hair dye" shall not include eyelash dyes or eyebrow b) The Department shall publish a Drug Reference
dyes. Manual and Drug Bulletin to serve as reference by
b) if it consists in whole or in part of any filthy, putrid, or manufacturers, distributors, physicians, consumers and
decomposed substance. such other groups as may be deemed necessary. The
Department is hereby authorized to sell the Drug
c) if it has been prepared, packed or held under Reference Manual at cost.
unsanitary conditions whereby it may have become
contaminated with filth, or whereby it may have been ARTICLE 39. Administrative Sanctions. — In addition to
rendered injurious to health. the administrative sanctions provided for under Letter of
Instructions No. 1223, the Department is hereby
d) if its container is composed, in whole or in part, of any authorized to impose, after notice and hearing,
poisonous or deleterious substance which may render administrative fines of not less than One thousand pesos
the contents injurious to health. (P1,000.00) nor more than Five thousand pesos
e) if it is not a hair dye, and it bears or contains color (P5,000.00) for any violation of this Act.
additive other than which is permissible. Prohibited Acts and Penalties
f) if any of its substances has been (1) mixed or packed ARTICLE 40. Prohibited Acts. — The following acts and the
therewith so as to reduce its quality or strength or (2) causing thereof are hereby prohibited:
substituted wholly or in parts therefor.
a) the manufacture, importation, exportation, sale,
ARTICLE 36. Factory Inspection. — a) For purposes of offering for sale, distribution or transfer of any food, drug,
enforcement of this Article, officers or employees duly device or cosmetic that is adulterated or mislabeled;
designated by the Department, upon presenting
appropriate credentials to the owner, operator, or agent b) the adulteration or misbranding of any food, drug,
in charge, are authorized (1) to enter, at reasonable hours, device, or cosmetic;
any factory, warehouse or establishment in which food, c) the refusal to permit entry or inspection as authorized
drugs, devices or cosmetics are manufactured, processed, by Article 36 to allow samples to be collected;
packed or held, for introduction into domestic commerce d) the giving of a guaranty or undertaking referred to in
or are held after such introduction, or to enter any vehicle Article 41(b) hereof which guaranty or undertaking is
being used to transport or hold such food, drugs, devices, false, except by a person who relied upon a guaranty or
or cosmetics in domestic commerce; and (2) to inspect, in undertaking to the same effect signed by, and containing
a reasonable manner, such factory, warehouse, the name and address of, the person residing in the
establishment or vehicle and all pertinent equipment, Philippines from whom he received in good faith the
finished and unfinished materials, containers and food, drug, device, or cosmetic or the giving of a guaranty
labeling therein. or undertaking referred to in Article 41(b) which guaranty
b) If the officer or employee making any such inspection or undertaking is false;
of a factory, warehouse or other establishment has e) forging, counterfeiting, simulating, or falsely
obtained any sample in the course of the inspection, representing or without proper authority using any mark,
upon completion of the inspection and prior to leaving stamp, tag, label, or other identification device authorized
the premises he shall give to the owner, operator, or or required by regulations promulgated under the
agent in charge a receipt describing the samples provisions of this Act;
obtained.
f) the using by any person to his own advantage, or
c) Whenever in the course of any such inspection of a revealing, other than to the Department or to the courts
factory or other establishment where food is when relevant in any judicial proceeding under this Act,
manufactured, processed or packed, the officer or any information concerning any method or process
employee making the inspection obtains a sample of any which as a trade secret is entitled to protection;
such food, and an analysis made of such sample for the
purpose of ascertaining whether such food consists in g) the alteration, mutilation, destruction, obliteration, or
whole or in part of any filthy, putrid or decomposed removal of the whole or any part of the labeling of, or the


doing of any other act with respect to a food, drug, hazardous any substance of mixture of substances which
device, or cosmetic, if such act is done while such product he finds meets the requirements of paragraph (ak),
is held for sale (whether or not the first sale) and results in clause (1)(i) of Article 4.
such product being adulterated or mislabeled; If the Department finds that for good and sufficient
h) the use, on the labeling of any drug or in any reasons, full compliance with the labeling requirements
advertising relating to such drug, of any representation or otherwise applicable under this Chapter is impracticable
suggestion that an application with respect to such drug or is not necessary for the adequate protection of public
is effective under Article 31 hereof, or that such drug health and safety, it shall promulgate regulations
complies with the provisions of such articles; exempting such substances from these requirements to
i) the use, in labeling, advertising or other sales the extent he deems consistent with the objective of
promotion, of any reference to any report or analysis adequately safeguarding public health and safety, and
furnished in compliance with Section 19 ofExecutive any hazardous substance which does not bear a label in
Order 175, series of 1987; accordance with such regulations shall be deemed to be
a mislabeled hazardous substance.
j) the manufacture, importation, exportation, sale, offering
for sale, distribution, or transfer of any drug or device ARTICLE 45. Imports: Regulations on Imported
which is not registered with the Department pursuant to Hazardous Substances. — a) The Commissioner of
this Act; Customs shall deliver to the Department, upon its
request, samples of hazardous substances being
k) the manufacture, importation, exportation, sale, imported or offered for import to the Philippines, giving
offering for sale, distribution, or transfer of any drug or notice thereof to the owner or consignee who may
device by any person without the license from the appear before the Department and exercise the right to
Department required in this Act; make testimony. If it appears from the examination of
l) the sale or offering for sale of any drug or device beyond such samples that such hazardous substance is a
its expiration or expiry date; mislabeled hazardous substance or banned hazardous
substance, then such hazardous substance shall be
m) the release for sale or distribution of a batch of drugs refused admission except as may be provided in an order
without batch certification when required under Article issued by the Department authorizing delivery of the
34 hereof. refused products or substance under the requirements
ARTICLE 41. Penalties. — a) Any person who violates any imposed therein. The Commissioner of Customs shall
of the provisions of Article 40 hereof shall, upon cause the destruction of any hazardous substance
conviction, be subject to imprisonment of not less than refused admission unless such is exported, under
one (1) year but not more than five (5) years, or a fine of regulations issued by the Commissioner within ninety
not less than Five thousand pesos (P5,000.00) but not (90) days from the date of notice of such refusal or within
more than Ten thousand pesos (P10,000.00), or both such such additional time as may be fixed by him.
imprisonment and fine, in the discretion of the Court. b) Pending decision on the admissibility of a hazardous
Should the offense be committed by a juridical person, substance being imported or offered for import, the
the Chairman of the Board of Directors, the President, Commissioner of Customs may authorize delivery of such
General Manager, or the partners and/or the persons hazardous substance to the owner or consignee upon
directly responsible therefor shall be penalized. execution by him of a good and sufficient bond providing
for the payment of such liquidated damages in the event
b) No person shall be subject to the penalties of of default. If it appears to the Department that the
sub-article (a) of this Article for (1) having sold, offered for hazardous substance can by relabeling or other action be
sale or transferred any product and delivered it, if such made to comply with the requirements of this Article
delivery was made in good faith, unless he refuses to final determination as to the admission of such
furnish on request of the Department, the name and hazardous substance may be deferred and upon filing of
address of the person from whom he purchased or a timely written application by the owner or consignee
received such product and copies of all documents, if any and the execution by him of a bond as provided in the
there be, pertaining to the delivery of the product to him; provision of this paragraph. The Department may, in
(2) having violated Article 40(a) if he established a accordance with regulations, authorize the applicant to
guaranty or undertaking signed by, and containing the perform such relabeling or other action specified in such
name and address of, the person residing in the authorization, including destruction or export of such
Philippines from whom he received in good faith the rejected hazardous substance. All such relabeling or other
product, or (3) having violated Article 40(a), where the action pursuant to such authorization shall be in
violation exists because the product is adulterated by accordance with regulations and shall be under the
reason of containing a color other than the permissible supervision of an officer or employee of the Commission
one under regulations promulgated by the Department of Customs and the Department.
in this Act, if such person establishes a guaranty or
undertaking signed by, and containing the name and Prohibited Acts and Penalties
address, of the manufacturer of the color, to the effect ARTICLE 46. Prohibited Acts. — It shall be unlawful for any
that such color is permissible, under applicable person to:
regulations promulgated by the Department in this Act.
a) introduce or deliver for introduction into commerce of
any mislabeled hazardous substance or banned
CHAPTER III Hazardous Substance hazardous substance;
ARTICLE 42. Declaration of Policy. — The State shall adopt b) alter, mutilate, destroy, obliterate or remove the whole
measures designed to protect the consumer against or any part of the label of a mislabeled hazardous
substances other than food, drugs, cosmetics and devices substance, or banned hazardous substance, if such act is
that are hazardous to his health and safety. done while the substance is in commerce or while the
ARTICLE 43. Implementing Agency. — The Department of substance is held for sale, whether or not it is the first
Health, hereby referred to as the Department, shall sale;
enforce the provisions of this Chapter. c) receive in commerce any mislabeled hazardous
ARTICLE 44. Regulations Declaring Hazardous substance or banned hazardous substance and the
Substances and Establishing Variations and Exemptions. delivery or preferred delivery thereof at cost or otherwise;
— The Department shall promulgate the rules and d) give the guaranty or undertaking referred to in
regulations governing the implementation of this Article. paragraph (b) of Article 93 and paragraph (b) of Article 45
To resolve uncertainty as to the coverage of this Article, if such guaranty or undertaking if false, except by a
the Department may, by regulations, declare as


person who relied upon a guaranty or undertaking which e) a consumer product or service has been supplied in
he received in good faith; accordance with the previous representation when in fact
e) introduce or deliver for introduction into commerce or it is not;
receive in commerce and subsequently deliver or f) a consumer product or service can be supplied in a
preferred at cost or otherwise, of a hazardous substance quantity greater than the supplier intends;
in a reused food, drug, cosmetic or device container or in g) a service, or repair of a consumer product is needed
a container which, though not a reused container, is when in fact it is not;
identifiable as a food, drug, cosmetic or device container
by its labeling or by other identification. The use of a used h) a specific price advantage of a consumer product
food, drug, cosmetic or device container for a hazardous exists when in fact it does not;
substance does not diminish the danger posed by the i) the sales act or practice involves or does not involve a
hazardous substance involved, therefore, such substance warranty, a disclaimer of warranties, particular warranty
shall be deemed a mislabeled hazardous substance. terms or other rights, remedies or obligations if the
ARTICLE 47. Penalties, Exception. — a) Any person who indication is false; and
violates any of the provisions of Article 46 shall, upon j) the seller or supplier has a sponsorship, approval, or
conviction, be subject to a fine of not less than One affiliation he does not have.
thousand pesos (P1,000.00) or an imprisonment of not
less than six (6) months but not more than five (5) years or ARTICLE 51. Deceptive Sales Act or Practices By
both upon the discretion of the court. Regulation. — The Department shall, after due notice and
hearing, promulgate regulations declaring as deceptive
b) No person shall be subject to the penalties of any sales act, practice or technique which is a
paragraph (a) of this Article for (1) having violated misrepresentation of facts other than these enumerated
paragraph (c) of Article 46 unless he refuses to furnish, in Article 50.
upon request by the Department or his representative,
the name and address of the person from who he ARTICLE 52. Unfair or Unconscionable Sales Act or
purchased such hazardous substances and (2) having Practice. — An unfair or unconscionable sales act or
violated paragraph (a) of Article 46, if he establishes a practice by a seller or supplier in connection with a
guaranty or undertaking signed by, and containing the consumer transaction violates this Chapter whether it
name and address of, the person from whom he received occurs before, during or after the consumer transaction.
in good faith, the hazardous substance to the effect that An act or practice shall be deemed unfair or
the hazardous substance is not a mislabeled hazardous unconscionable whenever the producer, manufacturer,
substance or banned hazardous within the meaning of distributor, supplier or seller, by taking advantage of the
that term in this Act. consumer's physical or mental infirmity, ignorance,
illiteracy, lack of time or the general conditions of the
environment or surroundings, induces the consumer to
TITLE III Protection Against Deceptive, Unfair and enter into a sales or lease transaction grossly inimical to
the interests of the consumer or grossly one-sided in
Unconscionable Sales Acts or Practices favor of the producer, manufacturer, distributor, supplier
or seller.
CHAPTER I Deceptive, Unfair and In determining whether an act or practice is unfair and
Unconscionable Sales Acts or Practices unconscionable, the following circumstances shall be
considered:
promote and encourage fair, honest and equitable a) that the producer, manufacturer, distributor, supplier
relations among parties in consumer transactions and or seller took advantage of the inability of the consumer
protect the consumer against deceptive, unfair and to reasonably protect his interest because of his inability
unconscionable sales acts or practices. to understand the language of an agreement, or similar
factors;
ARTICLE 49. Implementing Agency. — The Department of
Trade and Industry, hereby referred to as the Department, b) that when the consumer transaction was entered into,
shall enforce the provisions of this Chapter. the price grossly exceeded the price at which similar
products or services were readily obtainable in similar
Regulation of Sales Acts and Practices transaction by like consumers;
ARTICLE 50. Prohibition Against Deceptive Sales Acts or c) that when the consumer transaction was entered into,
Practices. — A deceptive act or practice by a seller or the consumer was unable to receive a substantial benefit
supplier in connection with a consumer transaction from the subject of the transaction;
violates this Act whether it occurs before, during or after
the transaction. An act or practice shall be deemed
deceptive whenever the producer, manufacturer, supplier d) that when the consumer transaction was entered into,
or seller, through concealment, false representation or the seller or supplier was aware that there was no
fraudulent manipulation, induces a consumer to enter reasonable probability or payment of the obligation in full
into a sales or lease transaction of any consumer product by the consumer; and
or service.
e) that the transaction that the seller or supplier induced
Without limiting the scope of the above paragraph, the the consumer to enter into was excessively one-sided in
act or practice of a seller or supplier is deceptive when it favor of the seller or supplier.
represents that:
ARTICLE 53. Chain Distribution Plans or Pyramid Sales
a) a consumer product or service has the sponsorship, Schemes. — Chain distribution plans or pyramid sales
approval, performance, characteristics, ingredients, schemes shall not be employed in the sale of consumer
accessories, uses, or benefits it does not have; products.
b) a consumer product or service is of a particular ARTICLE 54. Home Solicitation Sales. — No business
standard, quality, grade, style, or model when in fact it is entity shall conduct any home solicitation sale of any
not; consumer product or service without first obtaining a
c) a consumer product is new, original or unused, when in permit from the Department. Such permit may be
fact, it is in a deteriorated, altered, reconditioned, denied suspended or revoked upon cause as provided in
reclaimed or second-hand state; the rules and regulations promulgated by the
Department, after due notice and hearing.
d) a consumer product or service is available to the
consumer for a reason that is different from the fact; ARTICLE 55. Home Solicitation Sales; When Conducted. —
Home solicitation sales may be conducted only between


the hours of nine o'clock in the morning and seven
o'clock in the evening of each working day: Provided, That Prohibited Acts
solicitation sales may be made at a time other than the
ARTICLE 64. Fraudulent Practices Relative to Weights
prescribed hours where the person solicited has
and Measures. — The following acts relating to weights
previously agreed to the same.
and measures are prohibited:
ARTICLE 56. Home Solicitation Sales; by Whom
a) for any person other than the official sealer or his duly
Conducted. — Home solicitation sales shall only be
authorized representative to place or attach an official
conducted by a person who has the proper identification
tag, seal, sticker, mark, stamp, brand or other
and authority from his principal to make such
characteristic sign used to indicate that such instrument
solicitations.
of weight and measure has officially been tested,
ARTICLE 57. Receipts for Home Solicitation Sales. — Sales calibrated, sealed or inspected;
generated from home solicitation sales shall be properly
b) for any person to imitate any seal, sticker, mark, stamp,
receipted as per existing laws, rules and regulations on
brand, tag or other characteristic sign used to indicate
sale transactions.
that such instrument of weight or measures has been
ARTICLE 58. Prohibited Representations. — A home officially tested, calibrated, sealed or inspected;
solicitation sale shall not represent that:
c) for any person other than the official sealer or his duly
a) the buyer has been specially selected; authorized representative to alter in any way the
b) a survey, test or research is being conducted; or certificate or receipt given by the official sealer or his duly
authorized representative as an acknowledgment that
c) the seller is making a special offer to a few persons only the instrument for determining weight or measure has
for a limited period of time. been fully tested, calibrated, sealed or inspected;
ARTICLE 59. Referral Sales. — Referral selling plans shall d) for any person to make or knowingly sell or use any
not be used in the sale of consumer products unless the false or counterfeit seal, sticker, brand, stamp, tag,
seller executes in favor of the buyer a written undertaking certificate or license or any dye for printing or making the
that will grant a specified compensation or other benefit same or any characteristic sign used to indicate that such
to said buyer in return for each and every transaction instrument of weight or measure has been officially
consummated by said seller with the persons referred by tested, calibrated, sealed or inspected;
said buyer or for subsequent sales that said buyers has
helped the seller enter into. e) for any person other than the official sealer or his duly
authorized representative to alter the written or printed
ARTICLE 60. Penalties. — a) Any person who shall violate figures, letters or symbols on any official seal, sticker,
the provisions of Title III, Chapter I, shall upon conviction, receipt, stamp, tag, certificate or license used or issued;
be subject to a fine of not less than Five Hundred Pesos
(P500.00) but not more than Ten Thousand Pesos f) for any person to use or reuse any restored, altered,
(P10,000.00) or imprisonment of not less than five (5) expired, damaged stamp, tag certificate or license for the
months but not more than one (1) year or both, upon the purpose of making it appear that the instrument of
discretion of the court. weight of measure has been tested, calibrated, sealed or
inspected;
b) In addition to the penalty provided for in paragraph (1),
the court may grant an injunction restraining the g) for any person engaged in the buying and selling of
conduct constituting the contravention of the provisions consumer products or of furnishing services the value of
of Articles 50 and 51 and/or actual damages and such which is estimated by weight or measure to possess, use
other orders as it thinks fit to redress injury to the person or maintain with intention to use any scale, balance,
caused by such conduct. weight or measure that has not been sealed or if
previously sealed, the license therefor has expired and has
not been renewed in due time;
CHAPTER II Regulation of Practices Relative to h) for any person to fraudulently alter any scale, balance,
Weights and Measures weight or measure after it is officially sealed;
i) for any person to knowingly use any false scale, balance,
General Provision weight or measure, whether sealed or not;
ARTICLE 61. Implementing Agency. — The provincial, city, j) for any person to fraudulently give short weight or
or municipal treasurers shall strictly enforce the measure in the making of a scale;
provisions of this Chapter, and its implementing rules and
regulations: Provided, That, with respect to the use of the k) for any person, assuming to determine truly the weight
Metric System, it shall be enforced by the Department of or measure of any article bought or sold by weight or
Trade and Industry. measure, to fraudulently misrepresent the weight or
measure thereof; or
ARTICLE 62. Sealing and Testing of Instruments of
Weights and Measure. — All instruments for determining l) for any person to procure the commission of any such
weights and measures in all consumer and consumer offense abovementioned by another.
related transactions shall be tested, calibrated and sealed Instruments officially sealed at some previous time which
every six (6) months by the official sealer who shall be the have remained unaltered and accurate and the seal or
provincial or city or municipal treasurer or his authorized tag officially affixed thereto remains intact and in the
representative upon payment of fees required under same position and condition in which it was placed by
existing law: Provided, That all instruments of weights the official sealer or his duly authorized representative
and measures shall continuously be inspected for shall, if presented for sealing, be sealed promptly on
compliance with the provisions of this Chapter. demand by the official sealer or his authorized
ARTICLE 63. Use of Metric System. — The system of representative without penalty except a surcharge fixed
weights and measures to be used for all products, by law or regulation.
commodities, materials, utilities, services and commercial ARTICLE 65. Penalties. — a) Any person who shall violate
transactions, in all contracts, deeds and other official and the provisions of paragraphs (a) to (f) and paragraph (l) of
legal instruments and documents shall be the metric Article 64 or its implementing rules and regulations shall,
system, in accordance with existing laws and their upon conviction, be subject to a fine of not less than Two
implementing rules and regulations. hundred pesos (P200.00) but not more than One
The Department of Trade and Industry shall also adopt thousand pesos (P1,000.00) or by imprisonment of not
standard measurement for garments, shoes and other more than one (1) year or both upon the discretion of the
similar consumer products. court.


b) Any person who shall violate the provisions of retailer from proceeding against the distributor or
paragraph (g) of Article 64 for the first time shall be manufacturer.
subject to a fine of not less than Five hundred pesos 4) Enforcement of warranty or guarantee. — The
(P500.00) or by imprisonment of not less than one (1) warranty rights can be enforced by presentment of a
month but not more than five (5) years or both, upon the claim. To this end, the purchaser needs only to present to
discretion of the court. the immediate seller either the warranty card or the
c) The owner-possessor or user of instrument of weights official receipt along with the product to be serviced or
and measure enumerated in paragraphs (h) to (k) of returned to the immediate seller. No other documentary
Article 64 shall, upon conviction, be subject to a fine of requirement shall be demanded from the purchaser. If
not less than Three hundred pesos (P300.00) or the immediate seller is the manufacturer's factory or
imprisonment not exceeding one (1) year, or both, upon showroom, the warranty shall immediately be honored. If
the discretion of the court. the product was purchased from a distributor, the
distributor shall likewise immediately honor the warranty.
In the case of a retailer other than the distributor, the
CHAPTER III Consumer Product and Service former shall take responsibility without cost to the buyer
Warranties of presenting the warranty claim to the distributor in the
ARTICLE 66. Implementing Agency. — The Department of consumer's behalf.
Trade and Industry, shall strictly enforce the provision of 5) Record of purchases. — Distributors and retailers
this Chapter and its implementing rules and regulations. covered by this Article shall keep a record of all purchases
ARTICLE 67. Applicable Law on Warranties. — The covered by a warranty or guarantee for such period of
provisions of the Civil Code on conditions and warranties time corresponding to the lifetime of the product's
shall govern all contracts of sale with conditions and respective warranties or guarantees.
warranties. 6) Contrary stipulations — null and void. — All covenants,
ARTICLE 68. Additional Provisions on Warranties. — In stipulations or agreements contrary to the provisions of
addition to the Civil Code provisions on sale with this Article shall be without legal effect.
warranties, the following provisions shall govern the sale c) Designation of warranties. — A written warranty shall
of consumer products with warranty: clearly and conspicuously designate such warranty as:
a) Terms of express warranty. — Any seller or 1) "Full warranty" if the written warranty meets the
manufacturer who gives an express warranty shall: minimum requirements set forth in paragraph (d); or
1) set forth the terms of warranty in clear and readily 2) "Limited warranty" if the written warranty does not
understandable language and clearly identify himself as meet such minimum requirements.
the warrantor;
d) Minimum standards for warranties. — For the
2) identify the party to whom the warranty is extended; warrantor of a consumer product to meet the minimum
3) state the products or parts covered; standards for warranty, he shall:
4) state what the warrantor will do in the event of a 1) remedy such consumer product within a reasonable
defect, malfunction of failure to conform to the written time and without charge in case of a defect, malfunction
warranty and at whose expense; or failure to conform to such written warranty;
5) state what the consumer must do to avail of the rights 2) permit the consumer to elect whether to ask for a
which accrue to the warranty; and refund or replacement without charge of such product or
part, as the case may be, where after reasonable number
6) stipulate the period within which, after notice of defect, of attempts to remedy the defect or malfunction, the
malfunction or failure to conform to the warranty, the product continues to have the defect or to malfunction.
warrantor will perform any obligation under the warranty.
The warrantor will not be required to perform the above
b) Express warranty — operative from moment of sale. — duties if he can show that the defect, malfunction or
All written warranties or guarantees issued by a failure to conform to a written warranty was caused by
manufacturer, producer, or importer shall be operative damage due to unreasonable use thereof.
from the moment of sale.
e) Duration of warranty. — The seller and the consumer
1) Sales Report. — All sales made by distributors of may stipulate the period within which the express
products covered by this Article shall be reported to the warranty shall be enforceable. If the implied warranty on
manufacturer, producer, or importer of the product sold merchantability accompanies an express warranty, both
within thirty (30) days from date of purchase, unless will be of equal duration.
otherwise agreed upon. The report shall contain, among
others, the date of purchase, model of the product Any other implied warranty shall endure not less than
bought, its serial number, name and address of the buyer. sixty (60) days nor more than one (1) year following the
The report made in accordance with this provision shall sale of new consumer products.
be equivalent to a warranty registration with the f) Breach of warranties. — 1) In case of breach of express
manufacturer, producer, or importer. Such registration is warranty, the consumer may elect to have the goods
sufficient to hold the manufacturer, producer, or importer repaired or its purchase price refunded by the warrantor.
liable, in appropriate cases, under its warranty. In case the repair of the product in whole or in part is
2) Failure to make or send report. — Failure of the elected, the warranty work must be made to conform to
distributor to make the report or send them the form the express warranty within thirty (30) days by either the
required by the manufacturer, producer, or importer shall warrantor or his representative. The thirty-day period,
relieve the latter of its liability under the warranty: however, may be extended by conditions which are
Provided, however, That the distributor who failed to beyond the control of the warrantor or his representative.
comply with its obligation to send the sales report shall In case the refund of the purchase price is elected, the
be personally liable under the warranty. For this purpose, amount directly attributable to the use of the consumer
the manufacturer shall be obligated to make good the prior to the discovery of the non-conformity shall be
warranty at the expense of the distributor. deducted.
3) Retail. — The retailer shall be subsidiarily liable under 2) In case of breach of implied warranty, the consumer
the warranty in case of failure of both the manufacturer may retain in the goods and recover damages, or reject
and distributor to honor the warranty. In such case, the the goods, cancel and contract and recover from the
retailer shall shoulder the expenses and costs necessary seller so much of the purchase price as has been paid,
to honor the warranty. Nothing therein shall prevent the including damages.


ARTICLE 69. Warranties in Supply of Services. — a) In Provided, That with respect to food, drugs, cosmetics,
every contract for the supply of services to a consumer devices, and hazardous substances, it shall be enforced by
made by a seller in the course of a business, there is an the concerned department.
implied warranty that the service will be rendered with ARTICLE 76. Prohibited Acts on Labeling and Packaging.
due care and skill and that any material supplied in — It shall be unlawful for any person, either as principal or
connection with such services will be reasonably fit for agent, engaged in the labeling or packaging of any
the purpose for which it is supplied. consumer product, to display or distribute or to cause to
b) Where a seller supplies consumer services in the be displayed or distributed in commerce any consumer
course of a business and the consumer, expressly or by product whose package or label does not conform to the
implication, makes known to the seller the particular provisions of this Chapter.
purpose for which the services are required, there is an The prohibition in this Chapter shall not apply to persons
implied warranty that the services supplied under the engaged in the business of wholesale or retail distributors
contract and any material supplied in connection of consumer products except to the extent that such
therewith will be reasonably fit for that purpose or are of persons:
such a nature or quality that they might reasonably be
expected to achieve that result, unless the circumstances a) are engaged in the packaging or labeling of such
show that the consumer does not rely or that it is products;
unreasonable for him to rely, on the seller's skill or b) prescribe or specify by any means the manner in which
judgment. such products are packaged or labeled; or
ARTICLE 70. Professional Services. — The provisions of this c) having knowledge, refuse to disclose the source of the
Act on warranty shall not apply to professional services of mislabeled or mispackaged products.
certified public accountants, architects, engineers,
lawyers, veterinarians, optometrists, pharmacists, nurses, ARTICLE 77. Minimum Labeling Requirements for
nutritionists, dietitians, physical therapists, salesmen, Consumer Products. — All consumer products
medical and dental practitioners and other professionals domestically sold whether manufactured locally or
engaged in their respective professional endeavors. imported shall indicate the following in their respective
labels of packaging:
ARTICLE 71. Guaranty of Service Firms. — Service firms
shall guarantee workmanship and replacement of spare a) its correct and registered trade name or brand name;
parts for a period not less than ninety (90) days which b) its duly registered trademark;
shall be indicated in the pertinent invoices.
c) its duly registered business name;
ARTICLE 72. Prohibited Acts. — The following acts are
prohibited: d) the address of the manufacturer, importer, repacker of
the consumer product in the Philippines;
a) refusal without any valid legal cause by the total
manufacturer or any person obligated under the e) its general make or active ingredients;
warranty or guarantee to honor a warranty or guarantee f) the net quality of contents, in terms of weight, measure
issued; or numerical count rounded of to at least the nearest
b) unreasonable delay by the local manufacturer or any tenths in the metric system;
person obligated under the warranty or guarantee in g) country of manufacture, if imported; and
honoring the warranty; h) if a consumer product is manufactured, refilled or
c) removal by any person of a product's warranty card for repacked under license from a principal, the label shall so
the purpose of evading said warranty obligation; state the fact.
d) any false representation in an advertisement as to the The following may be required by the concerned
existence of a warranty or guarantee. department in accordance with the rules and regulations
ARTICLE 73. Penalties. — a) Any person who shall violate they will promulgate under authority of this Act:
the provisions of Article 67 shall be subject to fine of not a) whether it is flammable or inflammable;
less than Five hundred pesos (P500.00) but not more b) directions for use, if necessary;
than Five thousand pesos (P5,000.00) or an
imprisonment of not less than three (3) months but not c) warning of toxicity;
more than two (2) years or both upon the discretion of the d) wattage, voltage or amperes; or
court. A second conviction under this paragraph shall also
carry with it the penalty or revocation of his business e) process of manufacture used if necessary.
permit and license. Any word, statement or other information required by or
b) Any person, natural or juridical, committing any of the under authority of the preceding paragraph shall appear
illegal acts provided for in Chapter III, except with respect on the label or labeling with such conspicuousness as
to Article 67, shall be liable for a fine of not less than One compared with other words, statements, designs or
thousand pesos (P1,000.00) but not more than Fifty devices therein, and in such terms as to render it likely to
thousand pesos (P50,000.00) or imprisonment for a be read and understood by the ordinary individual under
period of at least one (1) year but not more than five (5) customary conditions of purchase or use.
years, or both, at the discretion of the court. The above requirements shall form an integral part of the
The imposition of any of the penalties herein provided is label without danger of being erased or detached under
without prejudice to any liability incurred under the ordinary handling of the product.
warranty or guarantee. ARTICLE 78. Philippine Product Standard Mark. — The
label may contain the Philippine Product Standard Mark
if it is certified to have passed the consumer product
CHAPTER IV Labeling and Fair Packaging
standard prescribed by the concerned department.
ARTICLE 79. Authority of the Concerned Department to
enforce compulsory labeling, and fair packaging to
Provide for Additional Labeling and Packaging
enable the consumer to obtain accurate information as to
Requirements. — Whenever the concerned department
the nature, quality and quantity of the contents of
determines that regulations containing requirements
consumer products and to facilitate his comparison of the
other than those prescribed in Article 77 hereof are
value of such products.
necessary to prevent the deception of the consumer or to
ARTICLE 75. Implementing Agency. — The Department of facilitate value comparisons as to any consumer product,
Trade and Industry shall enforce the provisions of this it may issue such rules and regulations to:
Chapter and its implementing rules and regulations:


a) establish and define standards for characterization of b) whether the consumer product is semi-processed, fully
the size of a package enclosing any consumer product processed, ready-to-cook, ready-to-eat, prepared food or
which may be used to supplement the label statement of just plain mixture;
net quality, of contents of packages containing such c) nutritive value, if any;
products but this clause shall not be construed as
authorizing any limitation on the size, shape, weight, d) whether the ingredients use are natural or synthetic, as
dimensions, or number of packages which may be used the case may be;
to enclose any product; e) such other labeling requirements as the concerned
b) regulate the placement upon any package containing department may deem necessary and reasonable.
any product or upon any label affixed to such product of ARTICLE 85. Mislabeled Food. — A food shall also be
any printed matter stating or representing by implication deemed mislabeled:
that such product is offered for retail at a price lower than
the ordinary and customary retail price or that a price a) if its labeling or advertising is false or misleading in any
advantage is accorded to purchases thereof by reason of way;
the size of the package or the quantity of its contents; b) if it is offered for sale under the name of another food;
c) prevent the nonfunctional slack-fill of packages c) if it is an imitation of another food, unless its label bears
containing consumer products. in type of uniform size and prominence, the word
For purposes of paragraph (c) of this Article, a package "imitation" and, immediately thereafter, the name of the
shall be deemed to be nonfunctionally slack-filled if it is food imitated;
filled to substantially less than its capacity for reasons d) its containers is so made, formed, or filled as to be
other than (1) protection of the contents of such package, misleading;
(2) the requirements of machines used for enclosing the
contents in such package, or (3) inherent characteristics e) if in package form unless it bears a label conforming to
of package materials or construction being used. the requirements of this Act: Provided, That reasonable
variation on the requirements of labeling shall be
ARTICLE 80. Special Packaging of Consumer Products for permitted and exemptions as to small packages shall be
the Protection of Children. — The concerned department established by the regulations prescribed by the
may establish standards for the special packaging of any concerned department of health;
consumer product if it finds that:
f) if any word, statement or other information required by
a) the degree or nature of the hazard to children in the or under authority of this Act to appear on the principal
availability of such product, by reason of its packaging, is display panel of the label or labeling is not prominently
such that special packaging is required to protect placed thereon with such conspicuousness as compared
children from serious personal injury or serious illness with other words, statements, designs or devices in the
resulting from handling and use of such product; and labeling and in such terms as to render it likely to be read
b) the special packaging to be required by such standard and understood by the ordinary individual under
is technically feasible, practicable and appropriate for customary conditions of purchase and use;
such product. In establishing a standard under this g) if it purports to be or is represented as a food for which
Article, the concerned department shall consider: a definition or standard of identity has been prescribed
1) the reasonableness of such a standard; unless:
2) available scientific, medical and engineering data 1) it conforms to such definition and standard; and
concerning special packaging and concerning accidental, 2) its labels bears the name of the food specified in the
ingestions, illnesses and injuries caused by consumer definition or standards, and insofar as may be required by
product; such regulations, the common names of optional
3) the manufacturing practices of industries affected by ingredients other than spices, flavoring and coloring,
this Article; and present in such food;
4) the nature and use of consumer products. h) if it purports to be or is represented as:
ARTICLE 81. Price Tag Requirement. — It shall be unlawful 1) a food for which a standard of quality has been
to offer any consumer product for retail sale to the public prescribed by regulations as provided in this Act and its
without an appropriate price tag, label or marking quality fall below such standard, unless its label bears in
publicly displayed to indicate the price of each article and such manner and form as such regulations specify, a
said products shall not be sold at a price higher than that statement that it falls below such standard; or
stated therein and without discrimination to all buyers: 2) a food for which a standard or standards or fill of
Provided, That lumber sold, displayed or offered for sale to container have been prescribed by regulations as
the public shall be tagged or labeled by indicating provided by this Act and it falls below the standard of fill
thereon the price and the corresponding official name of of container applicable thereto, unless its label bears, in
the wood: Provided, further, That if consumer products for such manner and form as such regulations specify, a
sale are too small or the nature of which makes it statement that it falls below such standard;
impractical to place a price tag thereon price list placed
at the nearest point where the products are displayed i) if it is not subject to the provisions of paragraph (g) of
indicating the retail price of the same may suffice. this Article unless its label bears:
ARTICLE 82. Manner of Placing Price Tags. — Price tags, 1) the common or usual name of the food, if there be any;
labels or markings must be written clearly, indicating the and
price of the consumer product per unit in pesos and 2) in case it is manufactured or processed from two or
centavos. more ingredients, the common or usual name of such
ARTICLE 83. Regulations for Price Tag Placement. — The ingredient; except the spices, flavorings and colorings
concerned department shall prescribe rules and other than those sold as such, may be designated as
regulations for the visible placement of price tags for spices, flavorings and colorings without naming each:
specific consumer products and services. There shall be Provided, That to the extent that compliance with the
no erasures or alterations of any sort of price tags, labels requirement of clause (2) of this paragraph is
or markings. impracticable or results in deception or unfair
competition, exemptions shall be established by
ARTICLE 84. Additional Labeling Requirements for Food. regulations promulgated by the concerned department
— The following additional labeling requirements shall be of health;
imposed by the concerned department for food:
j) if it purports to be or is represented for special dietary
a) expiry or expiration date, where applicable; uses, unless its label bears such information concerning


its vitamin or mineral or other dietary properties as the therewith the statement "Warning — May be habit
concerned department determines to be, or by forming";
regulations prescribed as necessary in order fully to e) its labeling does not bear:
inform purchasers as its value for such uses;
1) adequate directions for use; and
k) if it bears or contains any artificial flavoring, artificial
coloring, or chemical preservative, unless it bears labeling, 2) such adequate warning against use in those
stating that fact: Provided, That to the extent that pathological conditions or by children where its use may
compliance with the requirements of this paragraph is be dangerous to health, or against unsafe dosage or
impracticable, exemptions shall be established by methods or duration of administration or application, in
regulations promulgated by the concerned department. such manner and form, as are necessary for the
The provisions of this paragraph or paragraphs (g) and (i) protection of users:Provided, That where any requirement
with respect to the artificial coloring shall not apply in the of clause (1) of this paragraph, as applied to any drug or
case of butter, cheese or ice cream. device, is not necessary for the protection of the public
health, the concerned department may promulgate
ARTICLE 86. Labeling of Drugs. — The Generics Act shall regulations exempting such drug or device from such
apply in the labeling of drugs. requirement;
ARTICLE 87. Additional Labeling Requirements for f) if it purports to be a drug the name of which is
Cosmetics. — The following additional requirements may recognized in an official compendium, unless it is
be required for cosmetics: packaged and labeled as prescribed therein:Provided,
a) expiry or expiration date; That the method of packing may be modified with the
b) whether or not it may be an irritant; consent of the concerned department;
c) precautions or contra-indications; and g) if it has been found by the concerned department to
be a drug liable to deterioration, unless it is packaged in
d) such other labeling requirements as the concerned such form and manner, and its label bears a statement of
department may deem necessary and reasonable. such precautions, as the concerned department, shall by
ARTICLE 88. Special Labeling Requirements for regulations, require as necessary for the protection of the
Cosmetics. — A cosmetic shall be deemed mislabeled: public health;
a) if its labeling or advertising is false or misleading in any h)1) if it is a drug and its container is so made, formed or
way; filled as to be misleading; or
b) if in package form unless it bears a label conforming to 2) if it is an imitation of another drug; or
the requirements of labeling provided for in this Act or 3) if it is offered for sale under the name of another drug;
under existing regulations: Provided, That reasonable
variations shall be permitted, and exemptions as to small i) if it is dangerous to health when used in the dosage, or
packages shall be established by regulations prescribed with the frequency of duration prescribed,
by the concerned department; recommended or suggested in the labeling thereof;
c) if any word, statement or other information required by j) if it is, purports to be or is represented as a drug
or under authority of this Act to appear on the label or composed wholly or partly of insulin or of any kind of
labeling is not prominently placed thereon with such penicillin, streptomycin, chlortetracycline,
conspicuousness, as compared with other words, chloramphenicol, bacitracin, or any other antibiotic drug,
statements, designs or devices in the labeling, and in or any derivative thereof, unless:
such terms as to render it likely to be read and 1) it is from a batch with respect to which a certificate of
understood by the ordinary individual under customary release has been issued pursuant to regulations of the
conditions of purchase and use; concerned department; and
d) if its container is so made, formed or filled as to be 2) such certificate of release is in effect with respect to
misleading; or such drug: Provided, That this paragraph shall not apply
e) if its label does not state the common or usual name of to any drug or class of drugs exempted by regulations
its ingredients. promulgated under Authority of this Act.
ARTICLE 89. Mislabeled Drugs and Devices. — A drug or ARTICLE 90. Regulation-making Exemptions. — The
device shall be deemed to be mislabeled: concerned department may promulgate regulations
exempting from any labeling requirements of this Act
a) if its labeling is false or misleading in any way; food, cosmetics, drugs or devices which are, in
b) if it is in package form unless it bears a label accordance with the practice of trade, to be processed,
conforming to the requirements of this Act or the labeled or repacked in substantial quantities at
regulations promulgated therefor: Provided, that establishments other than those where originally
reasonable variations shall be permitted and exemptions processed, labeled or packed on condition that such food,
as to small packages shall be established by regulations cosmetics, drugs or devices are not adulterated or
prescribed by the concerned department. mislabeled under the provisions of this Act and other
applicable laws upon approval from such processing,
c) if any word, statement or other information required by labeling and repacking establishments.
or under authority of this Act to appear on the principal
display panel of the label or labeling is not prominently ARTICLE 91. Mislabeled Hazardous Substances. —
placed thereon with such conspicuousness as compared Hazardous substances shall be deemed mislabeled when:
with other words, statements, designs or devices in the a) having been intended or packaged in a form suitable
labeling and in such terms as to render it likely to be read for use in households, especially for children, the
and understood by the ordinary individual under packaging or labeling of which is in violation of the
customary conditions of purchase and use; special packaging regulations issued by the concerned
d) if it is for use by man and contains any quantity of the department;
narcotic or hypnotic substance alpha-eucaine, barbituric b) such substance fails to bear a label:
acid, beta-eucaine, bromal, cannabis, carbromal, chloral,
coca, cocaine, codeine, heroin, marijuana, morphine, 1) which states conspicuously:
opium, paraldehyde, peyote or sulfonmethane, or any (i) the name and the place of business of the
chemical derivative of such substance, which derivative manufacturer, packer, distributor or seller;
has been designated by the concerned department after (ii) the common or usual name or the chemical name, if
investigation, and by regulations, as habit forming; unless there be no common or usual name, of the hazardous
its label bears the name and quantity or proportion of substance or of each component which contributes
such substance or derivative and in juxtaposition substantially to the harmfulness of the substance, unless



the concerned department by regulation permits or with the provisions of this Act under the supervision of an
requires the use of the recognized generic name; officer or employee duly designated by the concerned
(iii) the signal word "danger" on substances which are department. The expenses for such supervision shall be
extremely flammable, corrosive or highly toxic; paid by the person obtaining release of the hazardous
substance under bond.
(iv) the signal word "warning" or "caution" with a bright
red or orange color with a black symbol on all other c) all expenses in connection with the destruction
hazardous substances; provided for in paragraphs (a) and (b) of this Article and
all expenses in connection with the storage and labor
(v) a clear statement as to the possible injury it may cause with respect to such hazardous substance shall be paid
if used improperly; by the owner or consignee, and default in such payment
(vi) precautionary measures describing the action to be shall constitute a lien against any importation by such
followed or avoided; owner or consignee.
(vii) instructions when necessary or appropriate for ARTICLE 94. Labeling Requirements of Cigarettes. — All
first-aid treatment; cigarettes for sale or distribution within the country shall
be contained in a package which shall bear the following
(viii) the word "poison" for any hazardous substance statement or its equivalent in Filipino: "Warning"
which is defined as highly toxic; Cigarette Smoking is Dangerous to Your Health". Such
(ix) instructions for handling and storage of packages statement shall be located in conspicuous place on every
which require special care in handling and storage; and cigarette package and shall appear in conspicuous and
legible type in contrast by typography, layout or color
(x) the statement "keep out of the reach of children", or its with other printed matter on the package. Any
practical equivalent, if the article is not intended for use advertisement of cigarette shall contain the name
by children and is not a banned hazardous substance, warning as indicated in the label.
with adequate directions for the protection of children
from the hazard involved. The aforementioned signal ARTICLE 95. Penalties. — a) Any person who shall violate
words, affirmative statements, description of the provisions of Title III, Chapter IV of this Act, or its
precautionary measures, necessary instructions or other implementing rules and regulations, except Articles 81 to
words or statements may be in the English language or 83 of the same Chapter, shall be subject to a fine of not
its equivalent in Filipino; and less than Five hundred pesos (P500.00) but not more
than Twenty thousand pesos (P20,000.00) or
2) on which any statement required under clause 1) of this imprisonment of not less than three (3) months but not
paragraph is located prominently in bright red and more than two (2) years or both, at the discretion of the
orange color with a black symbol in contrast typography, court: Provided, That, if the consumer product is one
layout or color with the other printed matters on the which is not a food, cosmetic, drug, device or hazardous
label. substance, the penalty shall be a fine of not less than Two
ARTICLE 92. Exemptions. — If the concerned department hundred pesos (P200.00) but not more than Five
finds that for good or sufficient reasons, full compliance thousand pesos (P5,000.00) or imprisonment of not less
with the labeling requirements otherwise applicable than one (1) month but not more than one (1) year or
under this Act is impracticable or is not necessary for the both, at the discretion of the court.
adequate protection of public health and safety, it shall b) Any person who violates the provisions of Article 81 to
promulgate regulations exempting such substances from 83 for the first time shall be subject to a fine of not less
these requirements to the extent it deems consistent than Two hundred pesos (P200.00) but not more than
with the objective of adequately safeguarding public Five thousand pesos (P5,000.00) or by imprisonment of
health and safety, and any hazardous substance which not less than one (1) month but not more than six (6)
does not bear a label in accordance with such regulations months or both, at the discretion of the court. A second
shall be deemed mislabeled hazardous substance. conviction under this paragraph shall also carry with it
ARTICLE 93. Grounds for Seizure and Condemnation of the penalty of revocation of business permit and license.
Mislabeled Hazardous Substances. — a) Any mislabeled
hazardous substance when introduced into commerce or
while held for sale shall be liable to be proceeded against CHAPTER V Liability for Product and Service
and condemned upon order of the concerned ARTICLE 96. Implementing Agency. — The Department of
department in accordance with existing procedure for Trade and Industry shall enforce the provisions of this
seizure and condemnation of articles in commerce: Chapter and its implementing rules and regulations.
Provided, That this Article shall not apply to a hazardous
ARTICLE 97. Liability for the Defective Products. — Any
substance intended for export to any foreign country if:
Filipino or foreign manufacturer, producer, and any
1) it is in a package labeled in accordance with the importer, shall be liable for redress, independently of
specifications of the foreign purchaser; fault, for damages caused to consumers by defects
2) it is labeled in accordance with the laws of the foreign resulting from design, manufacture, construction,
country; assembly and erection, formulas and handling and
making up, presentation or packing of their products, as
3) it is labeled on the outside of the shipping package to well as for the insufficient or inadequate information on
show that it is intended for export; and the use and hazards thereof.
4) it is so exported, A product is defective when it does not offer the safety
b) any hazardous substance condemned under this rightfully expected of it, taking relevant circumstances
Article shall after entry of order of condemnation be into consideration, including but not limited to:
disposed of by destruction or sale as the concerned a) presentation of product;
department may direct, and the proceeds thereof, if sold,
less the legal cost and charges, shall be paid into the b) use and hazards reasonably expected of it;
treasury of the Philippines; but such hazardous substance c) the time it was put into circulation.
shall not be sold under any order which is contrary to the
A product is not considered defective because another
provisions of this Act: Provided, That, after entry of the
better quality product has been placed in the market.
order and upon the payment of the costs of such
proceedings and the execution of a good and sufficient The manufacturer, builder, producer or importer shall not
bond conditioned that such hazardous substance shall be held liable when it evidences:
not be sold or disposed of contrary to the provisions of a) that it did not place the product on the market;
this Act, the concerned department may direct that such
hazardous substance be delivered to or retained by the b) that although it did place the product on the market
owner thereof for destruction or for alteration to comply such product has no defect;



c) that the consumer or a third party is solely at fault. caused the damage, without prejudice to the provisions
ARTICLE 98. Liability of Tradesman or Seller. — The of the second, third and fourth paragraphs of this Article.
tradesman/seller is likewise liable, pursuant to the ARTICLE 101. Liability for Product Quantity Imperfection.
preceding article when: — Suppliers are jointly liable for imperfections in the
a) it is not possible to identify the manufacturer, builder, quantity of the product when, in due regard for variations
producer or importer; inherent thereto, their net content is less than that
indicated on the container, packaging, labeling or
b) the product is supplied, without clear identification of advertisement, the consumer having powers to demand,
the manufacturer, producer, builder or importer; alternatively, at his own option:
c) he does not adequately preserve perishable goods. The a) the proportionate price
party making payment to the damaged party may
exercise the right to recover a part of the whole of the b) the supplementing of weight or measure differential;
payment made against the other responsible parties, in c) the replacement of the product by another of the same
accordance with their part or responsibility in the cause kind, mark or model, without said imperfections;
of the damage effected. d) the immediate reimbursement of the amount paid,
ARTICLE 99. Liability for Defective Services. — The service with monetary updating without prejudice to losses and
supplier is liable for redress, independently of fault, for damages if any.
damages caused to consumers by defects relating to the The provisions of the fifth paragraph of Article 99 shall
rendering of the services, as well as for insufficient or apply to this Article.
inadequate information on the fruition and hazards
thereof. The immediate supplier shall be liable if the instrument
used for weighing or measuring is not gauged in
The service is defective when it does not provide the accordance with official standards.
safety the consumer may rightfully expect of it, taking the
relevant circumstances into consideration, including but ARTICLE 102. Liability for Service Quality Imperfection. —
not limited to: The service supplier is liable for any quality imperfections
that render the services improper for consumption or
a) the manner in which it is provided; decrease their value, and for those resulting from
b) the result of hazards which may reasonably be inconsistency with the information contained in the offer
expected of it; or advertisement, the consumer being entitled to
c) the time when it was provided. demand alternatively at his option:
A service is not considered defective because of the use a) the performance of the services, without any additional
or introduction of new techniques. cost and when applicable;
The supplier of the services shall not be held liable when b) the immediate reimbursement of the amount paid,
it is proven: with monetary updating without prejudice to losses and
damages, if any;
a) that there is no defect in the service rendered;
c) a proportionate price reduction.
b) that the consumer or third party is solely at fault.
Reperformance of services may be entrusted to duly
ARTICLE 100. Liability for Product and Service qualified third parties, at the supplier's risk and cost.
Imperfection. — The suppliers of durable or non-durable
consumer products are jointly liable for imperfections in Improper services are those which prove to be
quality that render the products unfit or inadequate for inadequate for purposes reasonably expected of them
consumption for which they are designed or decrease and those that fail to meet the provisions of this Act
their value, and for those resulting from inconsistency regulating service rendering.
with the information provided on the container, ARTICLE 103. Repair Service Obligation. — When services
packaging, labels or publicity messages/advertisement, are provided for the repair of any product, the supplier
with due regard to the variations resulting from their shall be considered implicitly bound to use adequate,
nature, the consumer being able to demand replacement new, original replacement parts, or those that maintain
to the imperfect parts. the manufacturer's technical specifications unless,
If the imperfection is not corrected within thirty (30) days, otherwise authorized, as regards to the latter by the
the consumer may alternatively demand at his option: consumer.
a) the replacement of the product by another of the same ARTICLE 104. Ignorance of Quality Imperfection. — The

kind, in a perfect state of use; supplier's ignorance of the quality imperfections due to
inadequacy of the products and services does not exempt
b) the immediate reimbursement of the amount paid, him from any liability.
with monetary updating, without prejudice to any losses
and damages; ARTICLE 105. Legal Guarantee of Adequacy. — The legal
guarantee of product or service adequacy does not
c) a proportionate price reduction. require an express instrument or contractual exoneration
The parties may agree to reduce or increase the term of the supplier being forbidden.
specified in the immediately preceding paragraph; but ARTICLE 106. Prohibition in Contractual Stipulation. —
such shall not be less than seven (7) nor more than one The stipulation in a contract of a clause preventing,
hundred and eighty (180) days. exonerating or reducing the obligation to indemnify for
The consumer may make immediate use of the damages effected, as provided for in this and in the
alternatives under the second paragraph of this Article preceding Articles, is hereby prohibited, if there is more
when by virtue of the extent of the imperfection, the than one person responsible for the cause of the damage,
replacement of the imperfect parts may jeopardize the they shall be jointly liable for the redress established in
product quality or characteristics, thus decreasing its the pertinent provisions of this Act. However, if the
value. damage is caused by a component or part incorporated
in the product or service, its manufacturer, builder or
If the consumer opts for the alternative under importer and the person who incorporated the
sub-paragraph (a) of the second paragraph of this Article, component or part are jointly liable.
and replacement of the product is not possible, it may be
replaced by another of a different kind, mark or model: ARTICLE 107. Penalties. — Any person who shall violate
Provided, That any difference in price may result thereof any provision of this Chapter or its implementing rules
shall be supplemented or reimbursed by the party which and regulations with respect to any consumer product
which is not food, cosmetic, or hazardous substance shall
upon conviction, be subject to a fine of not less than Five



thousand pesos (P5,000.00) and by imprisonment of not b) No person shall advertise any food, drug, cosmetic,
more than one (1) year or both upon the discretion of the device, or hazardous substance in a manner that is false,
court. misleading or deceptive or is likely to create an erroneous
In case of juridical persons, the penalty shall be imposed impression regarding its character, value, quantity,
upon its president, manager or head. If the offender is an composition, merit, or safety.
alien, he shall, after payment of fine and service of c) Where a standard has been prescribed for a food, drug,
sentence, be deported without further deportation cosmetic, or device, no person shall advertise any article
proceedings. or substance in such a manner that it is likely to be
mistaken for such product, unless the article complies
with the prescribed standard or regulation.
CHAPTER VI Advertising and Sales Promotion
d) No person shall, in the advertisement of any food, drug,
ARTICLE 108. Declaration of Policy. — The State shall cosmetic, device, or hazardous substance, make use of
protect the consumer from misleading advertisements any reference to any laboratory report of analysis required
and fraudulent sales promotion practices. to be furnished to the concerned department, unless
ARTICLE 109. Implementing Agency. — The Department such laboratory report is duly approved by such
of Trade and Industry shall enforce the provisions of this department.
Chapter and its implementing rules and regulations: e) Any businessman who is doubtful as to whether his
Provided, That with respect to food, drugs, cosmetics, advertisement relative to food, drug, cosmetic, device, or
devices and hazardous substances, it shall be enforced by hazardous substance will violate or does not conform
the Department of Health. with this Act or the concerned department's pertinent
rules and regulations may apply to the same for
False, Deceptive and Misleading Advertisement consideration and opinion on such matter before such
advertisement is disseminated to the public. In this case,
ARTICLE 110. False, Deceptive or Misleading the concerned department shall give its opinion and
Advertisement. — It shall be unlawful for any person to notify the applicant of its action within thirty (30) days
disseminate or to cause the dissemination of any false, from the date of application; otherwise, the application
deceptive or misleading advertisement by Philippine mail shall be deemed approved.
or in commerce by print, radio, television, outdoor
advertisement or other medium for the purpose of f) No person shall advertise any food, drug, cosmetic,
inducing or which is likely to induce directly or indirectly device, or hazardous substance unless such product is
the purchase of consumer products or services. duly registered and approved by the concerned
department for use in any advertisement.
An advertisement shall be false, deceptive or misleading
if it is not in conformity with the provisions of this Act or if ARTICLE 113. Credit Advertising. — No advertisement to
it is misleading in a material respect. In determining aid, promote, or assist, directly or indirectly, any extension
whether any advertisement is false, deceptive or of consumer credit may:
misleading, there shall be taken into account, among a) state that a specific periodic consumer credit amount
other things, not only representations made or any or installment amount can be arranged, unless the
combination thereof, but also the extent to which the creditor usually and customarily arranges credit payment
advertisement fails to reveal material facts in the light of or installments for that period and in that amount; and
such representations, or materials with respect to
consequences which may result from the use or b) state that a specified down payment is required in any
application of consumer products or services to which extension of consumer credit, unless the creditor usually
the advertisement relates under the conditions or customarily arranges down payment in that amount.
prescribed in said advertisement, or under such ARTICLE 114. Advertising of Open-end Credit Plan. — In
conditions as are customary or usual. case of an open-end credit plan, the rate of interest and
ARTICLE 111. Price Comparisons. — Comparative price other material features of the plan shall be disclosed in
advertising by sellers of consumer products or services the advertisement.
shall conform to the following conditions: a) Where the ARTICLE 115. Special Claims. — Any advertisement which
comparison relates to a former price of the seller, the item makes special claims shall:
compared shall either have been sold at that price within
the ninety (90) days immediately preceding the date of a) substantiate such claims; and
the advertisement, or it shall have been offered for sale b) properly use research result, scientific terms, statistics
for at least four (4) weeks during such ninety-day period. or quotations.
If the comparison does not relate to an item sold or
offered for sale during the ninety-day period, the date, Promotion of Sales of Consumer Products and Services
time or seasonal period of such sale or offer shall be
disclosed in the advertisement. ARTICLE 116. Permit to Conduct Promotion. — No person
shall conduct any sales campaigns, including beauty
b) Where the comparison relates to a seller's future price,
contest, national in character, sponsored and promoted
the future price shall take effect on the date disclosed in
by manufacturing enterprises without first securing a
the advertisement or within ninety (90) days after the
permit from the concerned department at least thirty
price comparison is stated in the advertisement. The
(30) calendar days prior to the commencement thereof.
stated future price shall be maintained by the seller for a
Unless an objection or denial is received within fifteen (15)
period of at least four (4) weeks after its effective date:
days from filing of the application, the same shall be
Provided, That compliance thereof may be dispensed
deemed approved and the promotion campaign or
with in case of circumstances beyond the seller's control.
activity may be conducted: Provided, That any sales
c) Where the comparison relates to a competitor's price, promotion campaign using medical prescriptions or any
the competitor's price shall relate to the consumer part thereof or attachment thereto for raffles or a promise
products or services advertised or sold in the ninety-day of reward shall not be allowed, nor a permit be issued
period and shall be representative of the prices similar thereof.
consumer products or services are sold or advertised in
ARTICLE 117. Suspension of Publication or Dissemination
the locality where the price comparison was made.
of Information. — The concerned department may, after
ARTICLE 112. Special Advertising Requirements for Food, due notice and hearing, suspend the publication and
Drug, Cosmetic, Device, or Hazardous Substance. — a) No dissemination of any information accompanying a sales
claim in the advertisement may be made which is not promotion campaign, if it finds the campaign to be in
contained in the label or approved by the concerned violation of the provisions of this Chapter or its
department. implementing rules and regulations.


ARTICLE 118. Conduct of Sales Promotion. — A sales after service of sentence and payment of the fine without
promotion which is intended for broad consumer need for further deportation proceedings.
participation and utilizes mass media shall indicate the ARTICLE 124. Exemption from Penalties. — No publisher,
duration, commencement and termination of the radio broadcast, television licensee or medium for the
promotion, the deadline for submission of entries and the dissemination of advertising shall be liable, under this
governing criteria or procedure to be followed therein. Chapter, by reason of dissemination by him of any false
ARTICLE 119. Packaging of Products Under Promotion. — advertisement unless he refuses, on the request of
The packaging of the products covered by the sales appropriate authorities, to furnish the name and post
promotion shall not be tampered, neither shall any office address of the manufacturer, packer, distributor
change in the product's package be affected without the seller or advertising agency. This exemption shall not
authority of the sponsoring agency or the owner or apply however, to the manufacturer, packer, distributor or
manufacturer of the product. seller of the consumer product or service and the
ARTICLE 120. Change in Starting and Termination Dates advertising agency responsible for the false and
of Promotion. — The concerned department shall be misleading advertising.
advised of any delay of starting dates or termination
dates and details of any change in the conduct of a sales CHAPTER VII Regulation of Repair and Service
promotion. Any change in the termination dates shall be Firms
published in a newspaper of general circulation before
the expiration of the original schedule or the termination ARTICLE 125. Declaration of Policy. — The State shall
date, whichever comes first. cause the accreditation of repair and service firms or
establishments and their technical personnel in order to
ARTICLE 121. Determination of Winners. — The winners in protect the interest of the consumers availing of their
any sales promotion shall be determined at a definite services.
time and place and shall be verified by a representative of
the concerned department and the sponsor. Immediately ARTICLE 126. Implementing Agency. — The Department
after the winners are selected or determined, a list with of Trade and Industry, hereby referred to as the
their addresses and corresponding prizes shall be Department, shall enforce the provisions of this Chapter.
submitted to the concerned department. All winners ARTICLE 127. Minimum Requirements for Accreditation.
shall be announced or published in the same manner — The following shall be the minimum requirements for
that the sales promotion was announced or published: accreditation or repair and service firms:
Provided, That publication in a newspaper of general
circulation shall be done in a legible manner at least a) the duly registered business name, firm name or style
once, if the sales promotion is national in scope: Provided, of the firm;
further, That such announcement and publication shall b) date of issue and effectivity of the certificate of
be done not later than two (2) weeks after the accreditation;
determination of winners. In all cases where the amount
c) number and skills of technical personnel; and
of the price is Five hundred pesos (P500.00) or more, the
winners shall also be notified in writing by registered mail d) required license for the repair or servicing of any
or any communication wherein proof of notice or service consumer product as required by special laws.
can be verified. ARTICLE 128. Accreditation of Repair and Service Firm. —
ARTICLE 122. Injunctive Relief . — a) Whenever the No person shall operate a repair and service firm or act as
concerned department has the reason to believe (1) that technical personnel therein without first being accredited
any person, partnership or corporation is engaged in or is by the Department.
about to engage in the dissemination or the causing of ARTICLE 129. Certification of Accreditation. — Upon
dissemination of any advertisement in violation of Articles compliance with the requirements for accreditation, the
110 to 115, and (2) that the enjoining thereof would be to Department shall issue the corresponding certificate of
the interest of the public, the concerned department accreditation. A separate certificate shall be required for
shall direct the filing of a complaint in the court of each branch of an enterprise located in areas outside of
competent jurisdiction, to enjoin the dissemination or the the main office. However, with respect to repair and
causing of the dissemination of such advertisement. service centers of factory authorized representatives or
Upon proper showing, a temporary injunction or franchised dealers, such centers may display a certified
restraining order shall be granted without bond. Any such true copy of the certificate of accreditation of the parent
complaint shall be filed in the locality in which the company.
person, partnership or corporation resides or transacts
business. ARTICLE 130. Suspension, Revocation or Cancellation of
Certification of Accreditation. — Any certificate of
b) Any person who may suffer loss, damage or injury due accreditation may be suspended, revoked or cancelled by
to a false, misleading or deceptive advertisement as the Department, for cause, after due notice and hearing.
defined in Article 4 may file a complaint with injunction
in his own name with any court of competent jurisdiction
to recover damages, cost of suit and reasonable attorney's TITLE IV Consumer Credit Transaction
fees.
ARTICLE 123. Penalties. — a) any person, association, simplify, clarify and modernize the laws governing credit
partnership or corporation who shall violate any of the transactions and encourage the development of fair and
provisions of Articles 110 to 115 shall, upon conviction, be economically sound consumer credit practices. To protect
subject to a fine of not less than Five Hundred Pesos the consumer from lack of awareness of the true cost of
(P500.00) but not more than Five thousand pesos credit to the user, the State shall assure the full disclosure
(P5,000.00) or an imprisonment of not less than one (1) of the true cost of credit.
month but not more than (6) months or both upon the
discretion of the court. ARTICLE 132. Determination of Finance Charges. —
Except as otherwise provided, the amount of the finance
b) Any violation of the provisions of Articles 116 to 121 shall, charges in connection with any consumer credit
upon conviction, subject the offenders to a fine of not less transaction shall be determined as the sum of all charges,
than Two hundred pesos (P200.00) but not more than Six payable directly or indirectly by the person to whom the
hundred pesos (P600.00) or an imprisonment of not less credit is extended and imposed directly or indirectly by
than one (1) month but not more than six (6) months or the creditor as an accident to the extension of credit,
both upon the discretion of the court. If the violation was including any of the following type of charges which are
committed by a juridical person, the manager, applicable:
representative, director, agent or employee of said
juridical person responsible for the act shall be deported



a) interest or time price differential and any amount person to whom consumer credit is extended, the
payable under point or other system of additional disclosures required by this Act.
charges; If there is more than one obligor, a creditor need not
b) collection fees which include finder's fees or similar furnish a statement of information required under this
charges; Act to more than one of them.
c) credit investigation fees; ARTICLE 140. Credit Sale, Required Disclosures. — Any
d) notarial fees, if any; creditor extending a consumer credit sale other than one
pursuant to an open-end credit plan shall disclose in a
e) premium or other charges for any guarantee or statement to the extent applicable, the following
insurance protecting the creditor against the obligor's information:
default or other credit loss. The implementing agency
shall determine what items shall be exempted from the a) the cash price or delivered price of the property or
computation of the finance charges. service to be acquired;
ARTICLE 133. Determination of Simple Annual Rate. — b) the amounts, if any, to be credited as down payment
The simple annual rate applicable to any extension of and/or trade in;
consumer credit shall be determined in accordance with c) the total amount to be financed or the difference
the rules and regulations promulgated by the between the amounts set forth under paragraphs (1) and
implementing agency. (2);
ARTICLE 134. Delinquency Charges. — With respect to a d) the charges, individually itemized, which are paid or to
consumer credit transaction other than one pursuant to be paid by such person in connection with the
an open-end credit plan, the parties may agree to a transaction but which are not incident to the extension of
delinquency charge on any installment not pain in full on credit;
or before the tenth day after its scheduled or deferred e) the finance charge expressed in terms of pesos and
due date. centavos;
ARTICLE 135. Deferral Charges. — The parties in a f) the percentage that the finance charge bears to the
consumer credit transaction may at any time agree in total amount to be financed expressed as a simple annual
writing to a deferral of all or part of one or more unpaid rate on the outstanding balance of the obligation;
installments and the creditor may make and collect a
charge which shall not exceed the rate previously g) the effective interest rate;
disclosed pursuant to the provisions on disclosure. A h) the number, amount and due dates or periods of
deferral charge may be collected at the time it is payments scheduled to repay the indebtedness; and
assessed.
i) the default, delinquency or similar charges payable in
ARTICLE 136. Finance Charge on Refinancing. — The the event of late payments.
parties may agree on a finance charge in an open-end
credit plan based on the amount financed resulting from ARTICLE 141. Required Disclosure on Open-end Credit
the refinancing or consolidation at a rate not exceeding Plan. — Before opening any account under an open-end
that permitted by the rules promulgated by the consumer credit plan, the creditor shall disclose, to the
implementing agency. extent applicable, the following information:
ARTICLE 137. Right to Prepay. — The person to whom a) the conditions under which a finance charge may be
credit is extended may prepay in full or in part, at any imposed, including the time period, if any, within which
time without penalty, the unpaid balance of any any credit extended may be repaid without incurring a
consumer credit transaction. finance charge;
ARTICLE 138. Rebate on Prepayment. — Upon b) the method of determining the balance upon which a
prepayment in full of the unpaid balance of a finance charge may be imposed;
precomputed consumer credit transaction, refinancing or c) the method of determining the amount of the finance
consolidation, an amount not less than the unearned charges, including any minimum or fixed amount
portion of the finance charge calculated according to this imposed as a finance charge;
Article shall be rebated to the person to whom credit is
extended. d) where one or more periodic rates may be used to
compute a finance charge, each such rate, the range of
The unearned portion of the precomputed finance balances to which it is applicable, and the corresponding
charge on consumer transactions repayable in simple annual rate;
substantially equal successive installments shall be equal
to at least that portion of finance charge which the sums e) the conditions under which the creditor may impose a
of the installment balances of the obligation scheduled to security lien and a description of the goods to which such
be outstanding after the installment date nearest the lien may attach.
date of prepayment bears to the sum of all installment The implementing agency shall prescribe regulations
balances originally scheduled to be outstanding under consistent with commonly accepted accounting
the obligation. standards to carry out the requirements of this Article.
For the purpose of determining the installment date ARTICLE 142. Required Disclosures on Consumer Loans
nearest the date of prepayment when payments are Not Under Open-End Credit Plan. — Any creditor
monthly, any payment made on or before the fifteenth extending a consumer loan or in a transaction which is
day following an installment due date shall be deemed to neither a consumer credit sale nor under an open-end
have been made as of the installment due date, and if consumer credit plan shall disclose, to the extent
prepayment occurs after the fifteenth day, it shall be applicable, the following information:
deemed to have been made on the succeeding a) the amount of credit of which the debtor will have the
installment due date. This method of calculating rebates actual use, or which is or will be paid to him or for his
may be referred to as the "rule of 78" or "sum of the digits" account or to another person on his behalf;
method.
b) all charges, individually itemized, which are included in
The implementing agency may promulgate and adopt the amount of credit extended but which are not part of
rules and regulations with respect to other precomputed the finance charge;
consumer credit transactions.
c) the total amount to be financed or the sum of the
ARTICLE 139. General Requirement on Credit Cost amounts referred to in paragraphs (a) and (b);
Disclosure. — Each creditor shall disclose, in accordance
with the regulations of the implementing agency, to each


d) the finance charge expressed in terms or pesos and connection with such transaction, whichever is greater,
centavos; except that such liability shall not exceed Three thousand
e) the effective interest rate; pesos (P3,000.00) for any credit transaction and actual
damages with the non-disclosure of the required
f) the percentage that the finance charge bears to the information. Action to recover such penalty may be
total amount to be financed expressed as a simple annual brought by such person within one (1) year from the date
rate on the outstanding unpaid balance of the obligation; of the occurrence of the violation in any court of
g) the default, delinquency or similar charges payable in competent jurisdiction.
the event of late payments;
h) a description of any security interest held or to be held TITLE V The National Consumer Affairs Council
or to be retained or acquired by the creditor in
connection with the extension of credit and a clear
identification of the property to which the security CHAPTER I Establishment and Composition
interest relates. ARTICLE 148. National Consumer Affairs Council. — To
ARTICLE 143. Form and Timing of Disclosure. — All improve the management, coordination and
disclosures required under this Act shall be made clearly effectiveness of consumer programs, a National
and conspicuously in writing before the transaction is Consumer Affairs Council is hereby created, hereinafter
consummated. referred to as the "Council".
ARTICLE 144. Periodic Statement of Charges. — The ARTICLE 149. Composition. — The Council shall be
periodic statement transmitted by the creditor in composed of representatives from the following
connection with any extension of consumer credit other government agencies and non-government agencies:
than under an open-end consumer credit plan, shall set a) Department of Trade and Industry;
forth the following information:
b) Department of Education, Culture and Sports;
a) the simple annual rate;
c) Department of Health;
b) the effective interest rate;
d) Department of Agriculture;
c) the date by which, or the period (if any) within which
payment must be made in order to avoid additional e) four (4) representatives from consumer organizations
finance charges; of nationwide base to be chosen by the President from
among the nominees submitted by the various consumer
d) method of determining the balance upon which the groups in the Philippines;
finance charge may be imposed.
f) two (2) representatives from business/industry sector to
ARTICLE 145. Exempted Transaction. — The foregoing be chosen by the President from among the nominees
requirements on consumer credit transactions shall not submitted by the various business organizations.
apply to the following credit transactions:
ARTICLE 150. Chairman; Functions. — The Council shall be
a) those involving extension of credits for business or headed and presided by a Chairman who shall be elected
commercial purposes, or to the Government and by the members from among themselves. He shall
governmental agencies and instrumentalities, juridical establish, with the concurrence of the Council, the
entities or to organizations; policies, procedures and standards to govern the
b) those in which the debtor is the one specifying the implementation and interpretation of the functions and
definite set of credit terms such as bank deposits, duties of the Council.
insurance contracts, sale of bonds or analogous ARTICLE 151. Per Diems of Members. — The members of
transactions. the Council shall be entitled to an allowance of Five
ARTICLE 146. Sale of Consumer Products On Installment hundred pesos (P500.00) per meeting actually attended
Payment. — In a consumer credit sale other than one but not more than Two thousand pesos (P2,000.00) a
pursuant to an open-end credit plan, the obligation of the month.
consumer to whom credit is being extended shall be ARTICLE 152. The Secretariat. — The Council shall appoint
evidenced by a single instrument which shall include, in an Executive Director who shall assist the Chairman and
addition to the disclosures required by this act, the act as Secretary of the Council. The Department of Trade
signature of the seller and the person to whom credit is and Industry shall provide the Secretariat which shall
extended, the date it was signed, a description of the assist the Council in the effective performance of its
property sold and a description of any property functions.
transferred as a trade-in. The instrument evidencing the
credit shall contain a clear and conspicuous typewritten
notice to the person to whom credit is being extended CHAPTER II Powers and Functions
that:
ARTICLE 153. Powers and Functions. — The Council shall
a) he should not sign the instrument if it contains any have the following powers and functions:
blank space;
a) to rationalize and coordinate the functions of the
b) he is entitled to a reasonable return of the agencies charged with consumer programs and
precomputed finance charge if the balance is prepaid; enforcement of consumer related laws to the end that an
and effective, coordinated and integrated system of consumer
c) he is entitled to an exact, true copy of the agreement. protection, research and implementation and
enforcement of such laws shall be achieved;
In cases where the instrument will be sold at a discount
to a bank, financing company or other lender, the said b) to recommend new policies and legislation or
transferee shall be subject to all claims and defenses amendments to existing ones;
which the debtor could assert against the seller of c) to monitor and evaluate implementation of consumer
consumer products obtained hereto or with the proceeds programs and projects and to take appropriate steps to
thereof. ensure that concerned agencies take appropriate steps to
ARTICLE 147. Penalties. — Any creditor who in connection comply with the established priorities, standards and
with any credit transaction fails to disclose to any person guidelines;
any information in violation of this Chapter or the d) to seek the assistance of government instrumentalities
Implementing rules and regulations issued thereunder in the form of augmenting the need for personnel,
shall be liable to such person in the amount of One facilities and other resources;
thousand pesos (P1,000.00) or in amount equal to twice
the finance charge required by such creditor in



e) to undertake a continuing education and information After the close of the fiscal year, the Council shall submit
campaign to provide the consumer with, among others: to Congress and the Office of the President, a full report
1) facts about consumer products and services; on the progress of the implementation of consumer
programs.
2) consumer rights and the mechanism for redress
available to him;
CHAPTER III Consumer Complaints
3) information on new concepts and developments on
consumer protection; and ARTICLE 159. Consumer Complaints. — The concerned
department may commerce an investigation upon
4) general knowledge and awareness necessary for a petition or upon letter-complaint from any consumer:
critical and better judgment on consumption; Provided, That, upon a finding by the department of a
5) such other matters of importance to the consumer's prima facie violation of any provisions of this Act or any
general well-being. rule or regulation promulgated under its authority, it may
motu proprio or upon verified complaint commerce
ARTICLE 154. Consumer Education in Schools. — The
formal administrative action against any person who
Department of Education, Culture and Sports, with the
appears responsible therefor. The department shall
cooperation and advice of the Council, shall develop and
establish procedures for systematically logging in,
adopt a consumer education program which shall be
investigating and responding to consumer complaints
integrated into existing curricula of all public and private
into the development of consumer policies, rules and
schools from primary to secondary levels.
regulations, assuring as far as practicable simple and easy
A continuing consumer education program for access on the part of the consumer to seek redress for his
out-of-school youth and adults shall likewise be grievances.
developed and undertaken.
ARTICLE 160. Consumer Arbitration Officers. — The
The consumer education program shall include concerned Department Secretaries shall appoint as many
information regarding: qualified consumer arbitration officers as may be
a) the consumer as a responsible member of society and necessary for the effective and efficient protection of
his responsibility to develop: consumer rights: Provided, however, That there shall be
not more than ten (10) consumer arbitration officers per
1) critical awareness which is the responsibility to be alert province, including the National Capital Region.
and questioning about the use of and the price and
quality of goods he uses; ARTICLE 161. Consumer Arbitration Officers;
Qualifications. — The consumer arbitration officer must
2) assertiveness which is the responsibility to assert be a college graduate with at least three (3) years
himself and act so he is assured of a fair deal, aware that experience in the field of consumer protection and shall
for as long as he remains to be a passive consumer he will be of good moral character.
continue to be exploited;
ARTICLE 162. Arbitration Officers; Jurisdiction. — The
3) social concern which is the responsibility to be aware of consumer arbitration officers shall have original and
the impact of his consumption on other citizens, exclusive jurisdiction to mediate, conciliate, hear and
especially the disadvantaged; and adjudicate all consumer complaints, Provided, however,
4) environmental awareness which is the responsibility to That this does not preclude the parties from pursuing the
understand the environmental consequences of his proper judicial action.
consumption, recognizing his individual and social ARTICLE 163. Investigation Procedure. — a) The consumer
responsibility to conserve natural resources for future arbitration officer shall conduct hearings on any
generations; complaint received by him or referred by the Council.
b) consumer rights; and b) Parties to the case shall be entitled to notice of the
c) practical problems the consumer faces in daily life. hearing, and shall be informed of the date, time and place
of the same. A copy of the complaint shall be attached to
ARTICLE 155. Concerned Departments, Powers and the notice.
Duties Under Existing Laws. — The concerned
departments shall continue to exercise the powers and c) The department shall afford all interested parties the
duties provided to them under existing laws, unless opportunity to submit a statement of facts, arguments,
repealed or modified accordingly. offers of settlement or proposals of adjustments.
ARTICLE 156. Consumer Participation. — The d) The Consumer arbitration officer shall first and
Departments shall establish procedures for meaningful foremost ensure that the contending parties come to a
participation by consumers or consumer organizations in settlement of the case.
the development and review of department rules, policies e) In the event that a settlement has not been effected,
and programs. Such procedures shall include provisions the Mediation officer may now proceed to formally
for a forum, where consumers can express their concerns investigate, hear and decide the case.
and recommendations to decision makers. The
departments shall exert efforts to inform consumers of f) The Consumer arbitration officer may summon
pending proceedings where their participation is witnesses, administer oaths and affirmations, issue
important. subpoena and subpoena duces tecum, rule upon offers
of proof and receive relevant evidence, take or cause
deposition to be taken whenever the ends of justice
ARTICLE 157. Advisory Services. — The departments shall would be served thereby, regulate the course of the
render advisory services upon request. Technical and hearing, rule on any procedural request or similar matter
legal assistance shall be made available to consumers and decide the complaint.
and their organizations and to the general public. In hearing the complaint, the mediation officer shall use
ARTICLE 158. Consumer Program Reforms. — Each every and all reasonable means to ascertain the facts in
concerned Department shall formulate and develop a each complaint speedily and objectively without regard
consumer program consonant with the objectives of its to strict rules of evidence prevailing in suits before courts.
charter or the applicable laws which program shall The complaints shall be decided within fifteen (15) days
embody the standards set forth in Sections 156 and 157 of from the time the investigation was terminated.
this Act. Copies of these program shall be furnished the ARTICLE 164. Sanctions. — After investigation, any of the
Council. The Executive Director shall, among his other following administrative penalties may be imposed even
functions, monitor and coordinate the implementation by if not prayed for in the complaint:
the concerned agencies of their respective consumer
programs.


a) the issuance of a cease and desist order, Provided, unconscionable act or practice was committed and in
however, That such order shall specify the acts that case of hidden defects, from discovery thereof.
respondent shall cease and desist from and shall require ARTICLE 170. Repealing Clause. — All laws, executive
him to submit a report of compliance therewith within a orders, rules and regulations or parts thereof which are
reasonable time; inconsistent with this Act are hereby repealed or
b) the acceptance of a voluntary assurance of compliance amended accordingly.
or discontinuance from the respondent which may ARTICLE 171. Appropriations. — For the initial operating
include any or all of the following terms and conditions: expenses of the National Consumer Affairs Council, the
1) an assurance to comply with the provisions of this Act sum of Two million pesos (P2,000,000.00) is hereby
and its implementing rules and regulations; appropriated out of funds of the National Treasury not
2) an assurance to refrain from engaging in unlawful acts otherwise appropriated. Thereafter, such sums as may be
and practices or unfair or unethical trade practices necessary to carry out its purpose shall be included in the
subject of the formal investigation; General Appropriations Act.
3) an assurance to comply with the terms and conditions ARTICLE 172. Separability Clause. — If for any reason any
specified in the consumer transaction subject of the article or provision of this Act or any portion thereof or the
complaint; application of such article, provision or portion thereof to
any person, group or circumstance is declared invalid or
4) an assurance to recall, replace, repair, or refund the unconstitutional, the remainder of this Act shall not be
money value of defective products distributed in affected by such decision.
commerce;
ARTICLE 173. Effectivity. — This Act shall take effect thirty
5) an assurance to reimburse the complaint out of any (30) days from the date of its publication in the Official
money or property in connection with the complaint, Gazette.
including expenses in making or pursuing the complaint,
if any, and to file a bond to guarantee compliance Approved: April 13, 1992
therewith. Published in the Official Gazette, Vol. 88 No. 24 page 3639
c) restitution or rescission of the contract without on June 15, 1992.
damages; (Consumer Act of the Philippines, Republic Act No. 7394,
d) condemnation and seizure of the consumer product [April 13, 1992])
found to be hazardous to health and safety unless the
respondent files a bond to answer for any damage or
injury that may arise from the continued use of the RA No 7581 | Price Act
product; As amended by RA No 10623
e) the imposition of administrative fines in such amount
as deemed reasonable by the Secretary, which shall in no May 27, 1992
case be less than Five hundred pesos (P500.00) nor more
than Three hundred thousand pesos (P300,000.00) REPUBLIC ACT NO. 7581
depending on the gravity of the offense, and an AN ACT PROVIDING PROTECTION TO CONSUMERS BY
additional fine of not more than One thousand pesos STABILIZING THE PRICES OF BASIC NECESSITIES AND
(P1,000.00) or each day of continuing violation. PRIME COMMODITIES AND BY PRESCRIBING
ARTICLE 165. Appeal from Orders. — Any order, not MEASURES AGAINST UNDUE PRICE INCREASES
interlocutory, of the Consumer arbitration officer, DURING EMERGENCY SITUATIONS AND LIKE
becomes final and executory unless appealed to the OCCASIONS
Department Secretary concerned within fifteen (15) days SECTION 1. Short Title. — This Act shall be referred to as
from receipt of such order. An appeal may be entertained the "Price Act."
only on any of the following grounds: SECTION 2. Declaration of Basic Policy. — It is the policy
a) grave abuse of discretion; of the State to ensure the availability of basic necessities
b) the order is in excess of the jurisdiction or authority of and prime commodities at reasonable prices at all times
the consumer arbitration officer; without denying legitimate business a fair return on
investment. It is also a declared policy of the State to
c) the order is not supported by the evidence or there is provide effective and sufficient protection to consumers
serious error in the findings of facts. against hoarding, profiteering and cartels with respect to
ARTICLE 166. Decision on Appeal. — The Secretary shall the supply, distribution, marketing and pricing of said
decide the appeal within thirty (30) days from receipt goods, especially during periods of calamity, emergency,
thereof. The decision becomes final after fifteen (15) days widespread illegal price manipulation and other similar
from receipt thereof unless a petition for certiorari is filed situations. To these ends, the State shall:
with the proper court. (1) Develop, adopt and promulgate measures to promote
productivity in basic necessities and prime commodities;
TITLE VI Transitory and Final Provisions (2) Develop an improved and efficient transport and
distribution system;
ARTICLE 167. Relation of the Act to Other Rights. — The
(3) Develop, adopt and promulgate measures to stabilize
provisions of this Act shall apply notwithstanding any
prices at reasonable levels;
agreement to the contrary but shall not restrict, limit or
derogate from any other rights or remedies of a (4) Institute appropriate penalties for illegal price
consumer under any other law. manipulation and other violations of this Act; and
ARTICLE 168. Application of Laws Enacted Prior to the (5) Establish a mechanism that will readily protect
Act. — All actions or claims accruing prior to the consumers from inadequate supply and unreasonable
effectivity of this Act shall be determined in accordance price increase on occasions of calamities, emergencies
with the acts, laws, decrees and regulations in force at the and like occurrences.
time of the accrual. SECTION 3. Definition of Terms. — For purposes of this
ARTICLE 169. Prescription. — All actions or claims accruing Act, the term:
under the provisions of this Act and the rules and (1) "Basic necessities" are goods vital to the needs of
regulations issued pursuant thereto shall prescribe within consumers for their sustenance and existence in times of
two (2) years from the time the consumer transaction was any of the cases provided under Section 6 or 7 of this Act
consummated or the deceptive or unfair and such as, but not limited to, rice, corn, root crops, bread;



fresh, dried or canned fish and other marine products; covered by this Act, it shall be unlawful for any person
fresh pork, beef and poultry meat; fresh eggs; potable habitually engaged in the production, manufacture,
water in bottles and containers; fresh and processed milk; importation, storage, transport, distribution, sale or other
fresh vegetables and fruits; locally manufactured instant methods of disposition of goods to engage in the
noodles; coffee; sugar; cooking oil; salt; laundry soap and following acts of price manipulation of the price of any
detergents; firewood; charcoal; household liquefied basic necessity or prime commodity.
petroleum gas (LPG) and kerosene; candles; drugs (1) Hoarding, which is the undue accumulation by a
classified as essential by the Department of Health and person or combination of persons of any basic or prime
such other goods as may be included under Section 4 of commodity beyond his or their normal inventory levels or
this Act; (as amended by RA No 10623) the unreasonable limitation or refusal to dispose of, sell or
(2) "Buffer fund" means a contingent fund in the budget distribute the stocks of any basic necessity of prime
of the implementing agency which shall not be used in commodity to the general public or the unjustified taking
its normal or regular operations but only for purposes out of any basic necessity or prime commodity from the
provided for in this Act; channels of reproduction, trade, commerce and industry.
(3) "Implementing agency" means the department, There shall be prima facie evidence of hoarding when a
agency or office of the Government which has jurisdiction person has stocks of any basic necessity or prime
over a basic necessity or prime commodity as defined in commodity fifty percent (50%) higher than his usual
this Act, which shall be: inventory and unreasonably limits, refuses or fails to sell
the same to the general public at the time of discovery of
(a) The Department of Agriculture, with reference to the stocks. The determination of a person's usual
agricultural crops, fish and other marine products, fresh inventory shall be reckoned from the third month
meat, fresh poultry and dairy products, fertilizers, and immediately preceding before the discovery of the stocks
other farm inputs; in case the person has been engaged in the business for
(b) The Department of Health, with reference to drugs; at least three (3) months; otherwise, it shall be reckoned
from the time he started his business.
(c) The Department of Environment and Natural
Resources, with reference to wood and other forest (2) Profiteering, which is the sale or offering for sale of any
products; and basic necessity or prime commodity at a price grossly in
excess of its true worth. There shall be prima facie
(d) The Department of Trade and Industry, with reference evidence of profiteering whenever a basic necessity or
to all other basic necessities and prime commodities. prime commodity being sold: (a) has no price tag; (b) is
(4) "Panic-buying" is the abnormal phenomenon where misrepresented as to its weight or measurement; (c) is
consumers buy basic necessities and prime commodities adulterated or diluted; or (d) whenever a person raises the
grossly in excess of their normal requirement resulting in price of any basic necessity or prime commodity he sells
undue shortages of such goods to the prejudice of less or offers for sale to the general public by more than ten
privileged consumers; percent (10%) of its price in the immediately preceding
month: Provided, That, in the case of agricultural crops,
(5) "Person" means a natural person or juridical person; fresh fish, fresh marine products, and other seasonal
(6) "Prevailing price" means the average price at which products covered by this Act and as determined by the
any basic necessity has been sold in a given time within a implementing agency, the prima facie provisions shall
month from the occurrence of any of the conditions not apply; and
enumerated under Section 6 of this Act; (3) Cartel, which is any combination of or agreement
(7) "Price ceiling" means the maximum price at which any between two (2) or more persons engaged in the
basic necessity or prime commodity may be sold to the production, manufacture, processing, storage, supply,
general public; and distribution, marketing, sale or disposition of any basic
(8) "Prime commodities" are goods not considered as necessity or prime commodity designed to artificially and
basic necessities but are essential to consumers in times unreasonably increase or manipulate its price. There shall
of any of the cases provided under Section 7 of this Act be prima facie evidence of engaging in a cartel whenever
such as, but not limited to, flour; dried, processed or two (2) or more persons or business enterprises
canned pork, beef and poultry meat; dairy products not competing for the same market and dealing in the same
falling under basic necessities; onions, garlic, vinegar, basic necessity or prime commodity, perform uniform or
patis, soy sauce; toilet soap; fertilizer, pesticides and complementary acts among themselves which tend to
herbicides; poultry, livestock and fishery feeds and bring about artificial and unreasonable increase in the
veterinary products; paper; school supplies; nipa shingles; price of any basic necessity or prime commodity or when
sawali; cement; clinker; GI sheets; hollow blocks; plywood; they simultaneously and unreasonably increase prices on
plyboard; construction nails; batteries; electrical supplies; their competing products thereby lessening competition
light bulbs; steel wire; all drugs not classified as essential among themselves.
drugs by the Department of Health and such other goods SECTION 6. Automatic Price Control. — Unless otherwise
as may be included under Section 4 of this Act. (as declared by the President, prices of basic necessities in an
amended by RA No 10623) area shall automatically be frozen at their prevailing
SECTION 4. Inclusion or Exclusion from the Coverage of prices or placed under automatic price control whenever:
this Act. — Upon petition of the concerned parties or (1) That area is proclaimed or declared a disaster area or
motu proprio action from the concerned agency of the under a state of calamity;
Price Coordinating Council and after public hearing, the (2) That area is declared under an emergency;
implementing agency, with the approval of the President,
may include in the definition of basic necessities or prime (3) The privilege of the writ of habeas corpus is
commodities types and brands of the goods or may suspended in that area;
exclude from the coverage of this Act, types or brands of (4) That area is placed under martial law;
the goods included in the definition of basic necessities
and prime commodities, which may be deemed as (5) That area is declared to be in a state of rebellion; or
nonessential goods or luxury goods: Provided, That, any (6) A state of war is declared in that area.
type or brand so excluded may be reinstated by the
implementing agency during occasions of acute If the prevailing price of any basic necessity is excessive or
shortage in the supply of the basic necessity or prime unreasonable, the implementing agency may
commodity to which the excluded type or brand used to recommend to the President the imposition of a price
belong. (as amended by RA No 10623) ceiling for the sale of the basic necessity at a price other
than its prevailing price.
SECTION 5. Illegal Acts of Price Manipulation. — Without
prejudice to the provisions of existing laws on goods not Unless sooner lifted by the President, price control of
basic necessities under this section shall remain effective



for the duration of the condition that brought it about, (3) He shall promote and facilitate the establishment of
but not for more than sixty (60) days: Provided, That, in an effective procurement, storage, marketing and
the case of basic necessities that are wholly imported and distribution system of basic necessities and prime
deregulated under existing laws such as, but not limited commodities to ensure their availability in all areas of the
to, household LPG and kerosene, price control thereon country where they are needed;
shall remain effective for a period of not more than fifteen (4) During instances of panic-buying, he may, with the
(15) days, taking into consideration the current inventory approval of the President, institute temporary measures
or supply levels thereof. (as amended by RA No 10623) to ensure orderly and equitable distribution to consumers
The terms "disaster" and "calamity" shall include those of basic necessities and prime commodities in the
brought about by natural or man-made causes, whether affected area;
local or foreign. (5) Form time to time, he may issue suggested reasonable
SECTION 7. Mandated Price Ceiling. — The President, retail prices for any or all basic necessities and prime
upon the recommendation of the implementing agency, commodities under his jurisdiction for the information
or the Price Coordinating Council, may impose a price and guidance of producers, manufacturers, traders,
ceiling on any basic necessity or prime commodity if any dealers, sellers, retailers, and consumers;
of the following conditions so warrants: (6) He shall cause the immediate dissemination of any
(1) The impendency, existence, or effects of a calamity; mandated price ceiling for any basic necessity or prime
(2) The threat, existence, or effect of an emergency; commodity under his agency's jurisdiction through
publication in a newspaper of general circulation in the
(3) The prevalence or widespread acts of illegal price area affected, and through broadcast by radio, or
manipulation: whenever deemed to materially make dissemination of
(4) The impendency, existence, or effect of any event that the information more effective, by television. He may also
causes artificial and unreasonable increase in the price of cause the information to be disseminated through
the basic necessity or prime-commodity; and posting in public markets, supermarkets or other public
places;
(5) Whenever the prevailing price of any basic necessity or
prime commodity has risen to unreasonable levels. (7) He may, upon approval of the President, and subject to
existing laws, rules and regulations on bidding, enter into
SECTION 8. Determination of Price Ceilings. — In any agreement with any local or foreign producer,
determining the reasonable price ceiling, the following manufacturer, supplier, distributor, or seller for the
factors may be taken into consideration: procurement of supplies of stocks of any basic necessity
(1) The average price, in the last three (3) months or prime commodity for purposes of buffer stocking:
immediately preceding the proclamation of the price Provided, That, in areas where there are shortages or
ceiling, of the basic necessity or prime commodity under rampant illegal manipulation of prices, he may order their
consideration; immediate sale;
(2) The supply available in the market; (8) He may, subject to existing laws, rules and regulations
on bidding, enter into any agreement with owners or
(3) The cost to the producer, manufacturer, distributor or operators of warehouses or storage houses or with
seller including but not limited to: owners, operators of franchise holders of vehicles or
(a) The exchange rate of the peso to the foreign currency public utilities for the storage, transport, or distribution of
with which a basic necessity or prime commodity or any any basic necessity or prime commodity;
component, ingredient or raw material thereof was paid (9) He may conduct investigations of any violation of this
for; Act and, after due notice and hearing, impose
(b) Any change in the amortization cost of machinery administrative fines in such amount as he may deem
brought about by any change in the exchange rate of the reasonable which shall in no case be less than One
peso to the foreign currency with which the machinery thousand pesos (P1,000) nor more than One million pesos
was bought through credit facilities; (P1,000,000). In the imposition of administrative fines the
(c) Any change in the cost of labor brought about by a following factors shall be taken into consideration:
change in the minimum wage; and (a) Whether the subject of the violation is a basic
(d) Any increase in the cost of transporting or distributing necessity or a prime commodity; violations involving
the basic necessity or prime commodity to the area of basic necessities shall be deemed more serious;
destination. (b) Whether the subject of the violation is under price
(4) Such other factors or conditions which will aid in control under Sections 6 and 7 of this Act; violations
arriving at a just and reasonable price ceiling. involving basic necessities and prime commodities under
price control shall be deemed more serious;
SECTION 9. Allocation of a Buffer Fund to the
Implementing Agency. — The implementing agency may (c) The number of violations committed; respondents
procure, purchase, import, or stockpile any basic who had previously been found to have violated any of
necessity or prime commodity, devise ways and means of the provisions of this Act shall be imposed a higher fine;
distributing them for sale at reasonable prices in areas and
where there is shortage of supply or a need to effect (d) Such other considerations as may be deemed
changes in its prevailing price. For any or all of these necessary to carry out the intents and purposes and
purposes, a buffer fund shall be allocated in the annual provisions of this Act.
appropriations of the implementing agencies. (10) He may require the attendance and testimony of
SECTION 10. Powers and Responsibilities of witnesses or the production of goods, objects, books,
Implementing Agencies. — To carry out the intents and papers, documents, contracts, records, financial
purposes of this Act, the head of the implementing statements, accounts, agreements and such other
agency shall have the following additional powers and evidences material in the determination of any violation
responsibilities: of this Act;
(1) He shall, with the approval of the President, (11) Without prejudice to the power to issue temporary
promulgate rules, regulations, and procedure for the closure or temporary restraining order for a period which
implementation of this Act; shall not be more than ten (10) days, he may, after due
(2) He shall develop, promulgate and implement all notice and hearing issue cease and desist orders;
programs, projects or measures to promote productivity reprimand; censure; suspend, revoke or cancel any
in all basic necessities and prime commodities under his permit, license, authority or registration issued by his
agency's jurisdiction;


office; or order the permanent closure of any (2) It shall report at least semi-annually to the President
establishment violating the provisions of this Act; and to the Congress of the Philippines the status and
(12) He may initiate summary proceedings to cause the progress of the programs, projects, and measures
seizure by the Government of basic necessities and prime undertaken by each implementing department, agency
commodities subject of a violation of this Act and order or office as well as the comprehensive strategies
their sale to the public at reasonable prices whenever the developed by the Council to stabilize the prices of basic
nature of or the demand for such goods so requires: necessities and prime commodities. The report shall
Provided, That, pending litigation, the proceeds of the include goods that have been included or excluded from
sale shall be held in trust or escrow by the implementing the list of basic necessities and prime commodities as
agency: Provided, further, That, should the owner of the provided for under Section 4 of this Act; (as amended by
basic necessity or prime commodity seized and sold be RA No 10623)
found not liable for the violation which was the basis of (3) It shall advise the President on general policy matters
the seizure, the proceeds from their sale shall be paid to for promotion and improvement in productivity,
him, otherwise, they shall accrue to the general fund of distribution and stabilization of prices of basic necessities
the Government and: Provided, finally, That, the head of and prime commodities;
the implementing agency shall cause the broadcast in (4) It may require from its members or any other
radio or television and the publication in at least two (2) government agency such information as it may deem
newspapers of general circulation of the fact of sale or necessary, and conduct public hearings for purposes of
disposition of such seized goods at least three (3) days assessing the supply, distribution and price situation of
before the date of sale or disposition; any basic necessity or prime commodity;
(13) He may initiate action and cause the prosecution (5) It shall publicize from time to time developments in
before the proper court of law of violations of this Act; productivity, supply, distribution and prices of basic
(14) He may deputize and enlist the assistance of any necessities and prime commodities; and
government official or agency in carrying out the (6) Whenever automatic price control of basic necessities
provisions of this Act; and is imposed under Section 6 of this Act, it shall cause the
(15) Such other functions and ancillary powers as may be immediate dissemination of their prevailing prices or the
necessary to effectively implement this Act. price ceilings imposed in lieu thereof, as the case may be,
SECTION 11. Price Coordinating Council. — There is hereby through publication in a newspaper of general circulation
created a Price Coordinating Council, hereinafter referred in the area affected, and through broadcast by radio and,
to as the Council, to be composed of the following whenever the same is deemed to materially make
members: dissemination of the information more effective, by
television. It may also disseminate the information
(1) The Secretary of Trade and Industry, as chairman; through posting in public markets, supermarkets and
(2) The Secretary of Agriculture; other public places.
(3) The Secretary of Health;
(4) The Secretary of Environment and Natural Resources; SECTION 13. The Price Action Officer: Powers and
Functions. — Whenever the President deems it necessary,
(5) The Secretary of Local Government; he may appoint any of the members of the Price
(6) The Secretary of Transportation and Communications; Coordinating Council as Price Action Officer for the
duration of the automatic price control under Section 6 of
(7) The Secretary of Justice; this Act who shall have the following powers and
(8) The Secretary of Energy; functions:
(9) The Director General of the National Economic and (1) He shall carry out, implement and enforce the policies
Development Authority; and decisions of the Council;
(10) One (1) representative from the consumers' sector; (2) He shall coordinate the actions of all implementing
(11) One (1) representative from the agricultural producers' agencies involved in the monitoring and investigation of
sector; abnormal price movements and shortages of basic
necessities and prime commodities;
(12) One (1) representative from the trading sector; and
(3) He may call upon any official, agent, employee, agency
(13) One (1) representative from the manufacturers' sector. or instrumentality of the national or local government for
(as amended by RA No 10623) any other assistance that he may deem necessary to
carry out the purposes of this Act;
The sectoral representatives of the Price Coordinating
Council shall be appointed by the President for a term of (4) He shall establish linkage and coordinate with
one (1) year, without prejudice to reappointment for nongovernment or private organizations in the affected
another term. are to assist in the monitoring and implementation of
price control therein; and
The Council shall meet every quarter and whenever the
President or the Chairman shall convene the same. Each (5) He shall exercise such other functions and duties as
member shall receive reasonable reimbursements for may be given to him by the President.
transportation. SECTION 14. Role of the National Statistics Office. — The
Members from the government sector may designate National Statistics Office shall conduct independent
their representative to the Council; periodic surveys and studies of the selling prices of all
basic necessities and prime commodities all over the
The Department of Trade and Industry shall provide the country as well as their share or effect on the family
secretariat to the Council from its existing organizational income of the different economic groups in the country
structure. for purposes of serving as database for government
SECTION 12. Functions of the Price Coordinating Council. efforts to stabilize prices, as well as evaluating the
— The Price Coordinating Council shall have the following effectivity of the same.
functions; SECTION 15. Penalty for Acts of Illegal Price Manipulation.
(1) It shall coordinate the productivity, distribution and — Any person who commits any act of illegal price
price stabilization programs, project and measures of the manipulation of any basic necessity or prime commodity
Government and develop comprehensive strategies to under Section 5 hereof shall suffer the penalty of
effect a general stabilization of prices of basic necessities imprisonment for a period of not less than five (5) years
and prime commodities at affordable levels; nor more than Fifteen (15) years, and shall be imposed a


fine of not less than Five thousand pesos (P5,000) nor Published in Malaya and the Philippine Times Journal on
more than Two million pesos (P2,000,000) June 4, 1992. Published in the Official Gazette, Vol. 88 No.
SECTION 16. Penalty for Violation of Price Ceiling. — Any 27 page 4312 on July 6, 1992.
person who violates Section 6 or 7 of this Act shall suffer (Price Act, Republic Act No. 7581, [May 27, 1992])
the penalty of imprisonment for a period of not less than
one (1) year nor more than ten (10) years or a fine of not
less than Five thousand pesos (P5,000) nor more than
One million pesos (P1,000,000), or both, at the discretion
PD No 856 | Code on Sanitation of the
of the court. Philippines
SECTION 17. Violation by Juridical Persons. — Whenever
any violation of the provisions of this Act is committed by December 23, 1975
a juridical persons, its officials or employees, or in case of
a foreign corporation or association, its agent or PRESIDENTIAL DECREE NO. 856
representative in the Philippines who are responsible for CODE ON SANITATION
the violation shall be held liable therefor. WHEREAS, the health of the people, being of paramount
SECTION 18. Violation by Aliens. — In case of aliens, in importance, all efforts of public services should be
addition to the penalty provided in Section 15 or 16 of this directed towards the protection and promotion of health;
Act, the offender shall, upon conviction and after service and
of sentence, be immediately deported without need of WHEREAS, with the advance in the field of sanitation in
any further proceedings. recent years, there arises the need for updating and
SECTION 19. Violation by Government Officials or codifying our scattered sanitary laws to ensure that they
Employees. — Any public official or employee who, by are in keeping with modern standards of sanitation and
reason of his office, with or without consideration, provide a handy reference and guide for their
conspires in the commission or knowingly conceals enforcement;
violations of any of the provisions of this Act shall likewise NOW, THEREFORE, I, FERDINAND E. MARCOS, President
be principally responsible for the violation and shall suffer of the Philippines, by virtue of the powers vested in me by
the additional penalty of permanent disqualification to the Constitution, do hereby order and decree the
hold public office. following Code on Sanitation:
SECTION 20. Criminal Penalties Without Prejudice to CODE ON SANITATION OF THE PHILIPPINES
Administrative Sanctions. — The foregoing criminal
penalties shall be without prejudice to the administrative
sanctions which the implementing agency may impose CHAPTER I General Provisions
under this Act or under any other law.
SECTION 1. Title. — The title of this Code is "Code on
SECTION 21. Relations of the Price Act to Other Laws,
Sanitation of the Philippines".
Presidential Issuances. — Nothing in this Act shall be
constructed as removing or diminishing the jurisdiction SECTION 2. Definition of Terms. — Whenever any of the
of any agency of Government on certain goods or following words or terms is used herein or in any rule or
products conferred by other laws or presidential regulation issued under this Code, it shall have the
issuances. meaning given it in this section, as follows:
SECTION 22. Separability Clause. — If, for any reason, any a. Code — Code on Sanitation of the Philippines.
provision of this Act or the application of such provision to b. Department — The Department of Health.
any person group or circumstance is declared invalid or
unconstitutional, the remainder of this Act shall not be c. Secretary — The Secretary of Health.
affected by such declaration. d. Regional Director — an official who heads a Regional
SECTION 23. Repealing Clause. — To the extent Health Office.
inconsistent with this Act, the following laws and letters e. Local Health Authority — an official or employee
of instruction are hereby repealed: responsible for the application of a prescribed health
(1) Republic Act No. 4164, entitled "An Act to Prevent the measure in a local political subdivision.
Excessive Increase in the Price of Certain Prime f. Health Officer — Provincial, City or Municipal Health
Necessities of life on the Occasion of a Public Calamity, Officer.
Penalizing the Violation Thereof, and for other Purposes."
g. Engineer — A Sanitary Engineer.
(2) Presidential Decree No. 1674, entitled "Providing a
Mechanism for Price Regulation, Creating a Price h. Section — any section of this code unless the term
Stabilization Council, Prescribing its Powers and refers to other statutes which are specifically mentioned.
Responsibilities and for other Purposes; SECTION 3. Functions of the Department of Health. —
(3) Letter of Instruction No. 1305, entitled "Directing The Department shall have the following powers and
Measures to Prevent Cement Hoarding, Price functions:
Manipulation and Profiteering." a. Undertake the promotion and preservation of the
(4) Letter on Instruction No. 1342, entitled "Ordering health of the people and raise the health standards of
Immediate Measures to Prevent Price Manipulation and individuals and communities throughout the Philippines;
to Protect Consumers; and b. Extend maximum health services to the people in rural
(5) Letter of Instruction No. 1359, entitled "Directing areas and provide medical care to those who cannot
Measures to Prevent Hoarding, Profiteering and Price afford it by reason of poverty;
Manipulation. c. Develop, administer and coordinate various health
All laws, and rules and regulations inconsistent herewith activities and services which shall include public health,
are hereby likewise repealed or modified accordingly. preventive, curative and rehabilitative programs, medical
care, health and medical education services;
SECTION 24. Effectivity Clause. — This Act shall take effect
three (3) days after its publication in two (2) national d. Upgrade the standards of medical practice, the quality
newspapers of general circulation. of health services and programs to assure the people of
better health services;
Approved: May 27, 1992
e. Assist local health agencies in developing public health
programs including medical care, and promote medical
and public health research;


f. Issue permits to establish and operate government and render it safe for drinking, and the disinfection of
private hospitals, clinics, dispensaries, schools of nursing, contaminated water sources together with their
midwifery, and other paramedical courses, puericulture distribution systems shall be in accordance with
centers, clinical laboratories and blood banks; procedures prescribed by the Department.
g. Prescribe standard rates of fees for health, medical, SECTION 10. Jurisdiction of the Department. —
laboratory, and other public health services; and The approval of the Secretary or that of his duly
h. Performs such other functions as may be provided by authorized representative is required in the following
law. cases:
SECTION 4. Authority of the Secretary. — In addition to a. Sites of water sources before their construction;
the powers and authority of the Secretary which are b. Delivery of water to consumers from new or recently
provided by law, he is likewise empowered to promulgate repaired water systems;
rules and regulations for the proper implementation and
enforcement of the provisions of this Code. c. Operation of a water system after an order of closure
was issued by the Department;
SECTION 5. Authority of the Bureau of Directors. — The
Bureau Directors shall be responsible for staff activities d. Plans and specifications of water systems of
involving the development of plans, programs, operating subdivisions and projects prior to the construction of
standards and management techniques in their housing units thereat; and
respective field of assignment. e. Certification of potability of drinking water.
SECTION 6. Authority of the Regional Directors. — The SECTION 11. Types of Water Examinations Required. —
Regional Directors shall administer health functions in
their regions, implement policies, standards and The following examinations are required for drinking
programs involving health services; and enforce the water:
provisions of this Code and the rules and regulations a. Initial examination. — The physical, chemical and
promulgated by the Secretary under this Code. bacteriological examinations of water from newly
SECTION 7. Authority of the Health Officers. — The health constructed systems or sources are required before they
officers shall administer health functions in areas under are operated and opened for public use. Examination of
their jurisdiction and enforce the provisions of this Code water for possible radio-active contamination should also
and the rules and regulations promulgated by the be done initially.
Secretary under this Code. b. Periodic examination — Water from existing sources is
SECTION 8. Miscellaneous Provisions. — subject to bacteriological examination as often as
possible but the interval shall not be longer than six
a. International treaties, agreements and conventions — months, while general systematic chemical examination
The Republic of the Philippines recognizes international shall be conducted every 12 months or oftener.
treaties, agreements and conventions on public health. Examination of water sources shall be conducted yearly
Their provisions may be considered parts of this Code for possible radioactive contamination.
provided they do not contravene the Constitution,
existing laws or any provision of this Code. SECTION 12. Examining Laboratories and Submission of
Water Samples. —
b. Rights and proceedings — Any proceeding which has
commenced or any right which has accrued upon the The examination of drinking water shall be performed
effectivity of this Code shall not be affected by any of its only in private or government laboratories duly
provisions. However, matters of procedure and rights accredited by the Department. It is the responsibility of
arising after the date of effectivity of this Code shall operators of water systems to submit to accredited
conform to the provisions hereof. laboratories water samples for examination in a manner
and at such intervals prescribed by the Department.
c. Delegation of power and assignment of duty —
Whenever a power is granted or a duty is assigned to any SECTION 13. Other Protective Measures. —
public health officer in this Code, the power may be To protect drinking water from contamination, the
exercised by a deputy or agent of the official pursuant to following measures shall be observed:
law, unless it is expressly provided otherwise in this Code.
a. Washing clothes or bathing within a radius of 25
d. Language required — Any notice, report, statement or meters from any well or other source of drinking water is
record required or authorized by this Code, shall be prohibited.
written in English or Pilipino.
b. No artesians, deep or shallow well shall be constructed
e. Mailing of notices — Unless otherwise expressly within 25 meters from any source of pollution.
provided, any notice required to be sent to any person by
any provision of this Code, shall be sent through the c. No radioactive sources or materials shall be stored
postal service. The affidavit of the official or employee within a radius of 25 meters from any well or source of
who mailed the notice is prima facie evidence that the drinking water unless the radioactive source is
notice was sent as prescribed herein. adequately and safely enclosed by proper shielding.
f. Condemnation and seizure of property — When any d. No person charged with the management of a public
property is officially condemned or seized by government water supply system shall permit any physical connection
authorities in the interest of public health, the owner between its distribution system and that of any other
thereof shall not be entitled to compensation. water supply, unless the latter is regularly examined as to
its quality by those incharge of the public supply to which
g. Command responsibility — When a duty is expressly the connection is made and found to be safe and potable.
vested in a health officer as provided in this Code, it shall
be understood that it shall likewise be the concern of the e. The installation of booster pump to boost water direct
superiors of the health office under the principle of from the water distribution line of a water supply system,
command responsibility. where low-water pressure prevails is prohibited.
CHAPTER II Water Supply CHAPTER III Food Establishment

SECTION 9. Prescribed Standards and procedures. — SECTION 14. Sanitary Permit. —
Standards for drinking water and their bacteriological a. No person or entity shall operate a food establishment
and chemical examinations, together with the evaluation for public patronage without securing a permit from the
of results, shall conform to the criteria set by the National local health office. The term "food establishment" as used
Drinking Water Standards. The treatment of water to in this chapter means an establishment where food or


drinks are manufactured, processed, stored, sold or SECTION 17. Structural Requirements. — Food
served. establishments shall be constructed in accordance with
b. Every Sanitary Permit shall be posted in a conspicuous the following requirements:
place of the establishment. 1. No person shall use any room or place for or in
c. Fees — The fees payable on applications for permits connection with the preparation, storage, handling or
and upon the issuances, renewal and noting of such sale of any article of food —
certificates shall be in such amounts as the City or a. Which is at anytime used or in direct communication
Municipal Authority may by resolution impose. with a sleeping apartment or toilet;
d. Noting of Permit — Within 14 days after any change in b. In which any animal is kept; or
the ownership or occupancy of any establishment, the c. Which is or has been used for any purpose which
new occupant shall apply to the City or Municipal Health would be likely to contaminate the food or to affect
Officer to have such change noted in the records and on injuriously its wholesomeness or cleanliness; or
the permit certificate which he shall produce for the
purpose and shall pay the corresponding fee in respect of d. Which is not used exclusively for the purpose;
such noting. Provided, That in department stores or multi-purpose
business establishments, food may be manufactured,
prepared, cooked, stored, or sold only in the area set aside
e. Record of Permit Certificates exclusively for said purpose and for which a sanitary
1) Every City or Municipality shall keep a record of all permit has been issued.
establishments in respect of which permits have been 2. No sanitary permit shall be issued for any premises to
issued and of all permit certificates and renewals thereof. be used for the preparation, handling and sale of food
f. The record shall in every case show the following: unless it is constructed in accordance with the following
requirements:
i. The name and address of the holder of the permit who
in every case shall be the actual occupier of the a. Floors. — The Floors shall be —
establishment; i. Constructed of concrete or other impervious and easily
ii. The location of the establishment; cleaned material that is resistant to wear and corrosion
and shall be adequately graded and drained; all angles
iii. The purpose or purposes for which the permit has between the floors and walls shall be rounded off to a
been issued; height of not less than 3 inches (7.62 cm.) from the floor;
iv. The date the first permit was issued and the dates of or
any renewal thereof; ii. Constructed of wood with dovetailed or tongue and
v. Every change of occupation and management of the grooved floor boards laid on a firm foundation and tightly
establishment since the first permit was issued; and clamped together with all angles between the floor and
walls rounded off to a height of 3 inches (7.62 cm.); or
vi. Conditions under which the permit was issued or any
renewal thereof granted. iii. Constructed in accordance with the requirements of
sub-clause (i) and (ii) of this clause and covered with
The record shall be available at all reasonable times for linoleum, smooth surfaced rubber or similar material
inspection by any officer of the Department of Health. fixed to the floor with cement or suitable adhesive:
SECTION 15. Health Certificates. — Provided, That with the approval in writing of the local
authority, floors may be covered with carpets or other
No person shall be employed in any food establishment floor covering in those parts of the premises where such
without a Health Certificate issued by the local health carpets or coverings can be satisfactorily cleaned and
authority. This certificate shall be issued only after the maintained.
required physical and medical examinations are
performed and immunizations are administered at b. Walls
prescribed intervals. i. The internal surface of walls shall have a smooth, even,
SECTION 16. Quality and Protection of Food. — All food non-absorbent surface capable of being readily cleaned
must be obtained from sources approved by the local without damage to the surface and constructed of
health authority. In this regard, the following dust-proof materials;
requirements are applicable: ii. The walls, where subject to wetting or splashing, shall
a. Meats, meat products and fish shall be procured from be constructed of impervious, non-absorbent materials to
sources under sanitary or veterinary supervision. a height of not less than 79 inches (2 meters) from the
floor;
b. All meat and fish shall be properly cooked before
serving. iii. The internal walls shall be painted in light colors or
treated with such other wall finish as the health authority
c. No meat products, fish, vegetables and other food may prescribe.
sources shall be procured from sources or areas known to
have been affected by radioactivity as for example, areas c. Ceilings
contaminated with a very large amount of radioactive i. All ceilings or, if no ceiling is provided, the entire
fallout. under-surface of the roof shall be dust-proof and
d. Milk and fluid milk products shall be obtained from washable.
sources approved by the local health authority. Milk ii. The ceiling or undersurface of the roof of rooms in
obtained from other sources must be sterilized, which food is prepared or packed or in which utensils or
pasteurized or otherwise heated. hands are washed shall be smooth, non-absorbent and
e. Milk shall be stored in a refrigerator. Canned or light coloured.
package milk, other than dry milk powders, shall be d. Lighting
refrigerated after the container has been opened.
i. The general standards of illumination provided shall
f. All perishable and potentially hazardous foods shall be permit effective inspection and cleaning and shall be of
stored at 45ºF (7ºC) or below. sufficient intensity appropriate to the purpose for which
g. Cooked food intended to be served hot shall be kept at any room or place is used;
a temperature not lower than 140ºF (60ºC). ii. In rooms where food is prepared or packed or in which
h. Raw fruits and vegetables shall be thoroughly washed utensils or hands are washed there shall be a minimum
before they are used. illumination intensity of 20 foot-candles; in premises
where food is consumed, there shall be a minimum


illumination intensity of 5 foot-candles. Intensities of a. Food-service spaces shall not be used as living or
illumination shall be measured at a point 30 inches (76.20 sleeping quarters.
cm.) above the floor; b. Clothing or personal effects shall be kept in lockers or
iii. All lighting shall be reasonably free from glare and in designated places away from food service spaces.
distributed so as to avoid shadows; c. No animal or live fowls shall be allowed in such spaces.
iv. At other areas or working surfaces, the illumination d. Persons not directly connected with food preparation
shall be of such intensity as may be required by the and serving shall not be allowed to stay in food-serving
health authority. spaces.
e. Ventilation e. Foods in storage or in preparation must not be
i. Ventilation shall be provided which shall be effective handled by anyone other than the preparation and
and suitable to maintain comfortable condition; serving staff.
ii. The ventilation shall be adequate to prevent the air SECTION 19. Food Handlers. —
from becoming excessively heated, prevent condensation a. No person shall be employed in any food
and the formation of excess moisture on walls, ceilings establishment without a health certificate issued by the
and for the removal of objectionable odours, fumes and local health authority.
impurities;
b. Food handlers shall at all times:
iii. In the absence of effective natural ventilation,
mechanical ventilation with airflow from a clean area, and i. Wear clean working garments. The Cook shall wear
discharging in such a manner as not to create a nuisance, prescribed caps and female employees caps or hairnets.
shall be provided; ii. Observe good personal hygiene.
iv. Canopies, air ducts, fans or other appliances shall be iii. Wash their hands thoroughly with soap and water and
provided as required by the health authority in particular dry them with a clean or disposable towel or a suitable
circumstances; hand-drying device immediately before working, or after
v. Effective provision shall be made for securing and visiting the toilet.
maintaining a reasonable temperature; SECTION 20. Vermin Control. —
f. Overcrowding — There shall be sufficient floor space to Vermin — A group of insects or small animals such as
enable every person working thereon to carry out his flies, mosquitoes, cockroaches, fleas, lice, bedbugs, mice,
duties efficiently and to permit easy access for cleaning. and rats which are vectors of diseases.
Working spaces, aisles or passageways and areas to which
customers have access shall be unobstructed and a. Spaces where food and drinks are stored, prepared and
sufficient to permit movement of employees and served shall be so constructed and maintained as to
customers without contamination of food by clothing or exclude vermin.
personal contact. b. All opening which connects spaces to the outer air
g. Changerooms shall be effectively protected with screen of non-corrosive
wire 16-mesh or finer. Door screens shall be tight-fitting.
1. There shall be provided adequate and suitable lockers
or other facilities for the orderly storage of clothing and c. A vermin abatement program shall be maintained in
personal belongings of employees or persons engaged or the establishments by their owners, operators, or
employed in the premises. Such facilities shall be so administrators. If they fail, neglect or refuse to maintain a
situated and arranged so that there is no contamination vermin abatement programs, the local health agency will
of food by contact with clothing, and where the number undertake the work at their expense.
of persons engaged or employed is four or more of either d. During deratting or disinfecting operations, all
sex, there shall be provided separate changing rooms for foodstuffs, utensils, food preparation and cleaning
each sex. equipment shall be covered to protect them from toxic
h. Wash-Hand Basins chemical substances.
i. Wash-hand basins shall be installed in convenient e. Vermin control in public places shall be the
places and as near as practicable to where the person for responsibility of the provincial, city or municipal
whose use they are provided are working while handling governments which have jurisdiction over them.
food for sale or in such locations as may be otherwise f. The procedure and frequency of vermin abatement
prescribed in any particular case. program shall be determined and approved by the local
ii. If required in writing by the local health authority an health authority.
additional wash-hand basin shall be installed as near as SECTION 21. Toilet and Washing Facilities. —
practicable to the toilet facilities: Provided, that the
wash-hand basins specified in this Code need not be a. Adequate and clean toilet facilities for male and female
installed in premises where only food in sealed containers customers and personnel shall be provided in properly
is sold: and, Provided, further, that wash-hand basins located areas.
specified in this regulation shall be installed under b. Toilet rooms shall not open directly into spaces where
specifications of the National Plumbing Code of the food is prepared, stored or served. Where such toilets
Philippines. exist, the doors shall be tight fitting and self-closing.
i. Wash-Hand Basins Maintenance c. Adequate hand-washing facilities shall be provided
i. An adequate supply of soap, clean towels, roller towels within or adjacent to toilet room.
presenting a clean surface to each user from a d. Facilities shall include hot and cold running water,
continuous roller towel dispenser or other hand drying single-service paper or cloth towel dispenser or drying
services approved by health authorities. device and soap or detergent.
ii. The wash-hand basin and all hand washing facilities SECTION 22. Disposal of Refuse. —
shall, at all times, be maintained in good repair and in a a. Refuse cans may be used in food-preparation areas for
clean condition. immediate use only.
iii. All wash-hand basins shall, at all times, while the b. Storage refuse cans, filled and empty, shall be in a
premises are being used, be supplied with hot and cold designated space separate from food-handling
or tempered running water at a minimum temperature operations.
of 100ºF (37.8ºC).
c. These cans shall be constructed and maintained as to
SECTION 18. Use of Food-Service Spaces. — be vermin-proof and easily cleaned.


d. Cans containing refuse shall be tightly covered at all e. Drawers shall be made of the same materials and kept
times, except during actual use in food-handling areas. clean. Felt-line drawers are not acceptable, but the use of
e. Holding bins may likewise be used, provided they are clean and removable towels for lining drawers is
constructed of impervious, readily-cleaned materials, and acceptable.
fitted with tight-fitting covers. SECTION 28. Dry Storage of Non-Perishable Foods. —
f. Where refuse cans are used, a space separate from the Non-perishable foods shall be stored in the following
food-handling spaces and adjacent to the refuse-can manner:
storage space shall be provided for cleaning them. This a. Designated spaces, lockers, cupboards, racks, shelves
space shall be equipped with scrubbing-brushes, and containers shall be used for storage.
cleansing agents, steam or hot water under pressure, and
a hose fitted with adjustable nozzle. b. All spaces, lockers and cupboard shall be constructed
of materials of the same quality as used for
SECTION 23. Equipment and Utensils. — food-preparation and food-serving operations. Containers
a. They shall be so designed, fabricated and installed so shall be made of metal fitted with tight covers.
that cleaning is easy and they do not pose health hazards. c. The recommended temperature range for dry stores is
b. Lead-soldered containers and cadium-lined piping 50-60ºC (10-15ºC) except where dry foods for immediate
and fixtures shall not be used. use are stored in the preparation and servicing spaces.
c. Surfaces that come into contact with food or drinks SECTION 29. Refrigerated Storage of Perishable Foods. —
shall be constructed of materials that are impervious, Perishable foods shall be stored in the following manner:
corrosion-resistant, non-toxic, easily cleanable, durable
and resistant to chipping. a. They shall be kept at or below 45ºF (7ºC) except during
preparation or when held for immediate serving after
d. Sliding doors on cabinets shall be easily cleanable and preparation.
removable. Runners shall be allotted at the ends to
permit removal of dust and debris. The bottom shelves of b. When such foods are to be stored for extended
open-based fixtures shall be removable to facilitate periods, a temperature of 40ºF (40ºC) is recommended.
inspection, cleaning and maintenance. c. Fruits and vegetables shall be stored in cool rooms.
SECTION 24. Washing of Utensils. — d. Recommended temperatures for perishable food
a. They shall be scraped and pre-rinsed to remove food storage are:
articles. 1) Frozen foods; not more than 10ºF (2ºC)
b. They shall be thoroughly cleansed in warm water at 2) Meat and fish: 32-38ºF (0-3ºC)
120ºF (49ºC) with soap or detergent.
3) Milk and milk products: 40-45ºF (5-7ºC)
c. If running water is not used, the wash-water shall be
changed frequently. 4) Fruits and vegetables: 44-50ºF (7-10ºC)
SECTION 25. Bactericidal Treatment. — e. All refrigerating compartments and refrigerators must
be kept clean, in good repair and free from odours. They
Eating and drinking utensils and equipment, after shall be provided with thermometers with scale divisions
thoroughly cleaned, shall be subjected to one of the not larger than 2ºF (1ºC). Sufficient shelving shall be
following bactericidal treatments: provided to prevent stocking and to permit adequate
a. Immersion for at least half a minute in clean hot water ventilation and cleaning.
at a temperature of at least 170ºF (77ºC); SECTION 30. Food Servicing Operations. —
b. Immersion for at least one minute in a lukewarm These operations should be in accordance with the
chlorine solution 50 ppm; following requirements:
c. Exposure in a steam cabinet at a temperature of at a. Hand contacts with food or drink shall be avoided;
least 170ºF (77ºC) for at least 15 minutes at a temperature fingers shall not be used to serve butter, ice, or similar
of 200ºF (90ºC) for at least 5 minutes; items of food. Sugar shall be served in covered dispensers
d. Exposure in an oven or hot-air cabinet at a or containers, or in packages wrapped for single service.
temperature of at least 180ºF (82ºC) for at least 20 b. The surfaces of containers and utensils, including
minutes; or glasses and tablewares, which come in contact with food
e. Any other method approved by the local health and drink shall not be handled.
authority. c. Disposable cups, plates, spoons and other
SECTION 26. Handling of Washed Utensils. — single-service containers and utensils shall be purchased
in sanitary cartons and stored in a clean, dry place until
a. Washed utensils shall be allowed to drain dry in wire used. These articles shall be so handled on removal from
racks without use of drying cloths, or shall be stored in a the carton that the hand does not touch the surface
self-draining position to permit ready air-drying. which will be in contact with food or drink.
b. The drying cloth on which to store dishes and utensils d. Clean cloths, napkins, spoons, towels, and other cloth
temporarily after bactericidal treatment should be clean equipment shall be stored in clean places designated
and changed frequently. specifically for them. Soiled linens, including towels,
SECTION 27. Storage of Washed Utensils. — aprons, and coats, shall be stored in a closed bin or locker,
a. They shall be stored in a clean and dry place suitably marked.
adequately protected against vermin and other sources e. Spoons, spatulas, dippers and scoops used
of contamination. intermittently for dispensing frozen desserts shall be kept
b. Cups, bowls, and glasses, shall be inverted for storage. in running water or in water maintained at 170ºF (77ºC)
and frequently changed, or they may be washed and
c. When not stored in closed cupboards or lockers, stored in a dry place after each use.
utensils and containers shall be covered or inverted Constant-temperature bottles and other containers used
whenever practicable. Utensils shall not be stored on the for potable water and other beverages shall be kept clean
bottom shelves of open cabinets below the working top and given effective bactericidal treatment before and
level. after subsequent use.
d. Racks, trays and shelves shall be made of materials SECTION 31. Evaluation of Food Establishment. — It shall
that are impervious, corrosion-resistant, non-toxic, be the duty of the Provincial, Municipal or City Health
smooth, durable and resistant to chipping. Officer to cause an inspection and evaluation of every


food establishment requiring a permit for its operations, a. Groceries or "Sari-Sari" Stores
at least every six months and shall cause as many 1. No grocery or sari-sari store shall be established within a
additional inspections and re-inspections and evaluation distance of 25 meters from any source of contamination.
to be made as are necessary for the enforcement of the
provision of this Chapter. 2. All foods which require no further cooking before they
are eaten shall be protected from contamination while in
During the inspection or evaluation carried out at least countries or showcases.
every six months, the inspector shall record his findings
on an inspection form provided for the purpose and shall b. Bakeries
furnish the original of such report to the holder of sanitary 1. Delivery trucks and carts of bakery products shall
permit, the manager or occupier of the premises. always be kept clean and sanitary.
Demerits entered in the appropriate column inspection
forms shall indicate that the item does not, in the opinion c. Dairies
of the inspector, comply with the requirements of this 1. No dairy shall keep unhealthy or infected cows,
regulation. Within 48 hours of the inspection or carabaos or goats for the production of milk, or feed them
evaluation, the original of the inspection report shall be unwholesome food which produces impure or
furnished the holder of the permit certificate, the unwholesome milk.
manager or occupier of the food establishment.
Whenever an inspection form issued indicates 2. No animals used for the production of milk shall be
non-compliance items relating to any particular type of allowed to graze on land which has been contaminated
premises, the inspector shall notify the holder of the by radioactivity.
sanitary permit, the manager or occupier of the 3. No dairy shall sell unwholesome milk that has not been
correction to be made and indicate a reasonable period previously pasteurized or otherwise sterilized.
for its compliance. If upon re-inspection after the d. Ice Plants
deadline the inspector finds the correction has not been
effected he shall forthwith report to the Health Officer 1. Only potable water shall be used in the manufacture of
and the Health Officer shall revoke the sanitary permit. A ice.
copy of the inspection form and any notices served shall, 2. In storing and transporting ice intended for public
in all cases, be filed and kept by the local health authority consumption, precautionary measures shall be taken to
and be available at all reasonable time for inspection by protect the ice from sources of contamination.
an officer of the Department of Health.
e. Ambulant Food Vendors
a. Service of Notice — Whenever an inspection or
evaluation report form indicates non-complying items, 1. These vendors shall sell only bottled food drinks,
the Health Officer of the Province, Municipality or City biscuits and confectionaries.
may cause to be served on the holder of the permit, the 2. It is prohibited for food vendors to sell food that
manager or occupier a notice requiring him, within the requires the use of utensils.
time stated in the notice, to take such remedial action as
may be specified therein. In the event within the time f. Oyster Beds
stated in the notice, hereinafter called the first notice, the 1. Oysters shall be planted and grown only in areas
terms of the first notice are not complied with, the Health approved by the Secretary or his duly authorized
Officer may cause to be served on the holder of the representatives and in places duly licensed by the Bureau
permit, the manager or occupier a second notice calling of Fisheries and Aquatic Resources.
on him to show cause, at a time and place stated in the 2. Oysters offered for sale, if not originating from
notice, why the permit issued in respect of the food approved areas, shall be confiscated and destroyed by the
establishment should not be revoked. local health authority.
b. Revocation of Permits — After prior notice and hearing g. Fish Marketing Areas
as provided above, the Health Officer, if satisfied that the
terms of the two notices have not been complied with or 1. Only fresh and wholesome fish products shall be sold.
that the failure to comply therewith is not excusable, shall 2. Fish caught in radioactive zones as well as in areas
revoke the said permit. contaminated by toxic substances or high in mercury
c. Summary Suspension of Permits — Whenever the count as determined by the health authorities shall be
Provincial, Municipal or City Health Officer finds condemned and not be allowed for public consumption.
unsanitary or unhealthy conditions in the operation of a 3. The selling, distribution and buying of fish caught
food establishment which in his judgement constitute a through the use of explosives and chemicals are
substantial hazard to the public health, the Health Officer prohibited.
may order the immediate suspension of the permit. Any
person to whom such an order is issued written petition SECTION 33. Responsibility of the Local Health Authority.
shall be afforded a hearing as soon as possible. — The local health authority shall:
d. Appeals — The person or panel conducting the hearing a. Make periodic inspections to enforce the maintenance
may confirm, modify or reverse the decision appealed of adequate sanitation in food establishments and their
from, which decision shall be final. premises;
e. Protection of Food — Notwithstanding the other b. Take samples of food and drink from any
provisions of this regulation relating to the issuance of establishments or vendor as often as necessary to
permits, every person who is engaged in the sale of food determine if there are unwholesome, adulterated, or
or in the manufacture, preparation, storage, packing or contaminated by radioactivity;
delivery of food for sale shall protect such food from c. Prevent the sale or condemn and destroy food and
contamination. drinks if these are found unfit for human consumption;
f. Power of Entry — Any Sanitary Inspector or duly d. Seal and prohibit the use of devices, utensils,
authorized officer of the Department of Health or of the containers, vehicles, machines, piping and appurtenances
Provincial, Municipal or City Health Officer, upon if in his opinion they are unsanitary; and
presentation of proper credentials may at all reasonable
times enter any premises engaged in the manufacture, e. Enforce the provisions of this Chapter and the rules
preparation or packing of any article of food for sale or and regulations promulgated by the Secretary.
any premises used for any of the purposes referred to in
this Code for the purpose of inspection or any other
action necessary for administration of this Code. CHAPTER IV Markets and Abattoirs
SECTION 32. Special Provisions. — SECTION 34. Prescribed Standards of Construction. —
The construction of markets and abattoirs shall conform



to standards prescribed by the Department. These 1. Laundry supplies in both liquid and solid state shall be
standards shall be set along the following guidelines: properly stored, prepared and handled. Containers of
1. Suitability of site insofar as elimination of nuisance chemical shall be properly labeled.
condition and prevention of contamination are 2. Employees shall be provided with potable drinking
concerned; water, toilets, bathing and washing facilities.
2. Availability of ample water supply for cleaning; 3. Employees shall be provided with lockers for their
3. Accessibility of adequate drainage facilities; working garments and street cloths.
4. Durability of construction to protect vendors and 4. The plant and its premises and equipment shall be
customers from any hazard and exposure to the maintained clean and sanitary at all times.
elements; and SECTION 39. Special Requirements. — The following
5. Facilities for sanitation maintenance, such as cleaning requirements shall be enforced:
and elimination of harborages of vermin. a. All articles to be laundered coming from hospitals and
SECTION 35. Responsibility of the Local Health Authority. infected sources shall be treated by exposure to a
— sufficient quantity of hot water detergents or by other
effective means of disinfection.
a. On Markets —
b. All linen, bed clothes, pajamas, towels, bedsheets,
1. Make periodic inspections to ascertain the pillow cases, etc. that have come in contact with any form
maintenance of adequate sanitary conditions of markets of radioactivity should be isolated in a certain area and
and their premises; monitored by Radiation Safety personnel before sending
2. Supervise and control the proper care and use of these articles for laundry. If any amount of radioactive
market stalls; contamination is found, the affected article should be set
aside and the radioactivity allowed to completely decay
3. Prohibit the construction of living quarters within any before said article is sent for laundry.
market and its premises;
c. All articles for delivery to the laundry shall be kept in
4. Enforce the ban on construction of partitions, sheds or containers which shall be kept closed until the articles are
booths within the market area. removed at the laundry.
b. On Abattoirs — d. Laundry vehicles shall be kept clean and sanitary at all
1. Supervise the maintenance of adequate sanitation in times.
abattoirs and their premises; e. A separate room shall be used solely for receiving,
2. Enforce the requirements on the examination of meat sorting, marking or handling unwashed articles.
as provided in existing laws; f. Diapers must be protected from pathogenic organisms
3. Permit the slaughter of animals for public and from chemical substances which are irritating to the
consumption in other designated areas in certain skin of the infant. Laundered diapers for delivery shall be
exigencies, provided public health is adequately pack in sealed sanitary containers.
protected;
4. Supervise the sanitary disposal of all abattoir wastes; CHAPTER VI School Sanitation and Health
and
Services
5. Ensure that only healthy animals shall be slaughtered,
and that the method of slaughtering, the techniques of SECTION 40. Definition of Terms. — As used in this
dressing and the storing, handling and transporting Chapter, the following terms shall mean:
procedures are in accordance with prescribed standards. a. School — An institution of learning which may be
SECTION 36. Responsibility of Local Governments and public, private or parochial.
Private Operators. — Local governments and private b. Special School — A school which utilizes cadavers,
operators in charge of public or private markets and plants, animals, bacterial and viral cultures for studies and
abattoirs shall employ an adequate number of personnel research.
to ensure their efficient operation and hygienic
maintenance. These employees shall be under the direct c. Physical Environments — The school plant, grounds
supervision of the local health authority. and facilities.
d. Emotional Environment — Factors which affect the
emotional health of students and members of the faculty.
CHAPTER V Public Laundry
SECTION 41. The Physical Environment — In the design
SECTION 37. Sanitary Permit. — No public laundry shall and construction of the school plant, the following factors
operate without a sanitary permit from the Secretary or shall be considered:
his duly authorized representative. As used in this
Chapter, a public laundry is a laundry established and a. Site — Traffic hazards are to be avoided but not to the
operated for commercial purposes, open to the public, point of sacrificing accessibility to public transportation. It
and not to an exclusive clientele. shall be distant from sources of nuisances.
SECTION 38. General Requirements. — The construction b. Grounds — The acreage shall be large enough to
and operation of a public laundry shall be governed by permit playgrounds, athletic fields and school gardens.
the following requirements: c. Building — Preferably it shall be constructed of strong
a. Structural Requirements — and durable materials and designed along functional
lines. For the prevention of fire hazards, the requirements
1. The site should be distant from sources of nuisance. of the local fire department shall be observed. Sufficient
2. Only durable construction materials shall be used. ventilation shall be provided. Wall and ceiling finishes
should be chosen so as to give optimum lighting with
3. Smooth and water-tight materials shall be used for minimum glare. Artificial lighting with louvered
flooring. fluorescent or incandescent fixture shall be used to
4. All work rooms shall be properly ventilated and supply a minimum lighting of 25 foot-candles in the
provided with 10 foot-candles of lighting. darkest corner. For flooring, suitable materials shall be
used which will give maximum durability without
5. Adequate drying facilities shall be provided and articles creating a slippery surface.
for drying protected from sources of contamination.
d. Sanitary Facilities — The school population shall be
b. Sanitary Requirements — provided with potable water, sewage and waste disposal



systems shall likewise conform to the requirements h. All places of employment and all workrooms, including

prescribed in this Code. machinery and equipment, shall be kept clean and
SECTION 42. The Emotional Environment. — For the sanitary.
promotion of emotional health of the school population SECTION 46. Responsibility of the Secretary. — The
the following requirements shall be observed: Secretary shall:
a. Suitable Location — The school site shall be located a. Issue a list of maximum concentration of atmospheric
away from disturbances and places which give contaminants as a guide in appraising health hazards
undesirable influence. and in evaluating control measures. The term maximum
b. Recreational Facilities — The school must have safe concentration as used in this Chapter means the amount
and attractive playgrounds and adequate facilities for of atmospheric contaminant which can be tolerated by
suitable sports and games. man for continuous daily exposure with no impairment of
health or well-being either immediate or after a long
c. Rest Rooms — Facilities shall be provided where period of exposure.
faculty members can rest and get short respite from
teaching chores. b. Review the concentration values at regular intervals to
amend or alter the list where indicated.
SECTION 43. Health Services. — Trained personnel and
adequate facilities should be available so that students c. Specify other concentrations of short intermittent
may be afforded the following health services: duration capable of causing acute impairment of health.
a. Periodic physical and medical examination; d. Require control of other contaminants known or
believed to be capable of causing impairment of health
b. Periodic immunization; but not included in the list already issued by the
c. Medical and dental treatment; Department.
d. Treatment for common emergencies; and e. Prescribe control measures to eliminate transmission
of infection disease through processing or handling of
e. Counselling and guidance. industrial products or wastes.
SECTION 44. Requirements for Special Schools. — f. Prescribe illumination standard values and order their
a. Cadavers shall be stored in morgues and dissected in review at regular intervals to alter or amend values when
dissecting rooms, all of which shall be constructed and indicated.
maintained in accordance with standards prescribed by g. Promulgate measures to effectively and adequately
the Department. control any possible radioactivity to which workers may
b. Poisonous or harmful plants and animals shall be kept be exposed while on their job.
in adequate and a secured areas. h. Promulgate control measures to reduce noise and
c. Viral and bacterial cultures shall be kept in laboratories pollution.
under standard security laboratory measures. SECTION 47. Responsibilities of the Employer and
d. Schools utilizing radioactive materials or sources for Employees. — The following are the responsibilities of the
study or research should closely conform to the employer and employees in industrial establishments:
requirements and guidelines given by the Radiation a. Employer responsibility —
Health Office and the Philippine Atomic Energy
Commission concerning radiation protection. 1. Provide, install and maintain in good repair all control
measures and protective equipment;
2. Inform affected employees regarding the nature of the
CHAPTER VII Industrial Hygiene hazards and the reasons for, and methods of control
SECTION 45. Sanitary Requirements for Operating an measures and protective equipment;
Industrial Establishment. — The following sanitary 3. Make periodical testing of the hearing of all employees
requirements shall be applicable to industrial in noisy areas of operation;
establishments:
4. Adopt measures so that the noise produced is within
a. No person, firm, corporation, or entity shall operate any allowable limits so as not to affect neighboring offices,
industrial establishment without first obtaining a sanitary buildings or establishments;
permit from the Secretary or his duly authorized
5. Request the Department a permit for variation from
representatives.
the requirements when other means of equivalent
b. Industrial establishments shall be allowed to operate protection are provided; and
only in places or zones assigned for the kind of industry
6. Provide personal protective equipment and/or
by existing zoning laws, ordinances, or policies. The local
protective barriers when they are necessary.
health authority shall determine the suitability of location
where no zoning law, ordinance or policy exists. b. Employee responsibility —
c. Adequate potable water supply shall be provided to 1. Observe strictly protective control measures which are
employees. prescribed; and
d. Sewage disposal shall be by means of a municipal or 2. Use equipment provided them properly.
city sewerage system whenever possible. If no municipal SECTION 48. Environmental Provisions. — The
or city sewerage system exists it shall be done in environmental provisions enumerated hereunder for the
accordance with the provisions of this Code. Adequate protection of the health of workers are applicable to all
and conveniently located toilet and bath facilities shall be industrial establishments:
provided for each sex.
a. Control of atmospheric contaminants —
e. All wastes incident to the operation of the industrial
plant shall be collected, stored, or disposed of in a 1. Workers shall not be exposed to atmospheric
manner to prevent health hazards, nuisances, and contaminants hazardous to health.
pollution. Where a city or municipal collection and 2. Control of atmospheric contaminants shall be
disposal system exists, it should be utilized. accomplished by methods approved by the Secretary or
f. An abatement program for the control of vermin shall his duly authorized representatives or other government
be maintained. authority.
g. Adequate restrooms and mass halls shall be provided b. Control of infectious agents —
for employees.


1. Control measures shall be provided to eliminate or 1. Correct sanitary practices for persons swimming or
control the transmission of infectious diseases through bathing to prevent the transmission of communicable
processing or handling of industrial products or wastes. diseases;
c. Control of possible sources of radiation hazards should 2. Correct sanitary procedures for personnel working in
be carried out under the supervision of the Radiation those places to maintain their adequate sanitation and
Health Officer or his authorized representative. cleanliness of accessories used by customers;
d. Noise — 3. Adequate number of trained personnel and necessary
Control measures shall be provided to reduce intensity of equipment needed for life-saving and rescue work;
noise sufficiently to render it harmless to workers and to 4. Post conspicuous signs to warn the public of the
eliminate it at its source as a nuisance by following the presence of artificial or natural hazards; and
recommendations of the local health or other b. Standards and criteria concerning:
government authority.
1. Sanitary structural requisites for swimming pools and
e. Illumination — bath houses to prevent pollution of their waters and to
1. Adequate lighting shall be provided and distributed in facilitate sanitation maintenance;
all work areas in amount required for the type of work or 2. Sanitary structural standards for appurtenances, such
seeing tasks measured by a light-meter with a minimum as toilets, shower baths and dressing rooms to eliminate
of glare and contrasting intensities between work and the risk of infection;
workroom.
3. Methods of determining the sanitary quality of water,
2. Where the specific task requires more light than particularly that which is used in swimming pools; and
provided by general illumination, supplementary lighting
shall be supplied. 4. Criteria to be used in the limitation of swimming or
bathing loads of swimming pools in accordance with the
f. Ventilation — type of water treatment applied.
1. Natural or artificial ventilation shall be provided in all SECTION 53. Responsibility of the Local Health Authority.
work areas at a rate to insure a safe and healthful working — The local health authority concerned shall:
atmosphere, free from injurious amounts of toxic
materials and reasonably free from offensive odours and a. Inspect the state of sanitation of public swimming or
dust throughout the establishment. bathing places;
2. Proper control measures shall be used to reduce b. Ascertain if their personnel are examined regularly for
concentration of toxic contaminants to allowable limits. the presence of any infections or contagious disease;
3. Air inlets shall be arranged, located and equipped to c. Enforce rules and regulations of the Department under
insure sufficient air velocity and an exhaust system which this Chapter; and
shall be located so that discharged materials shall not d. Recommend to the Department the revocation of
re-enter places of employment or habitations nor create their permits when it is deemed necessary for the
any hazard of nuisance. protection of public health.
SECTION 49. Personal Protective Equipment. — The
following requirements shall be applicable for personal
protective equipment. CHAPTER IX Rest Areas, Bus Terminals, Bus
a. Personal protective equipment and/or protective Stops, and Service Stations
barriers shall be provided whenever substances, SECTION 54. Rest areas, bus terminals, bus stops and
radiations or mechanical irritants are encountered in a service station areas with one or more permanent sheds,
manner capable of causing any pathological change or buildings and service facilities for motor vehicles shall be
injury or impairment in functions of any part of the body provided with sanitary facilities for the convenience and
through skin and/or mucous membrane absorption. personal necessities of the travelling public.
b. Personal protection equipment which shall include a. Rest areas, bus terminals, bus stops and service
respiratory protectors and other accessories shall be stations shall be established with ample area to prevent
fitted to each exposed worker when necessary. overcrowding of motor vehicles and travellers.
c. X-ray film badges or pocket decimeters should be b. They shall be provided with adequate ventilation and
worn by workers who, during their course of work are lighting and away from sources of nuisance.
unavoidably exposed to even a small amount of radiation.
c. Safe and adequate water supply shall be provided in
d. Supervisors and employees shall familiarize themselves accordance with the provisions of Chapter II of this Code.
with the use, proper sanitary care and storage of this
equipment. d. Excreta and sewage collection and disposal shall be
provided in accordance with the provisions of Chapter
SECTION 50. Health Services. — Medical services shall be XVII of this Code.
provided to all employees in accordance with existing
laws and the rules and regulations prescribed by the e. Refuse collection and disposal shall be in accordance
Department. with the provisions of Chapter XVIII of this Code.
f. Comfort rooms — Adequate number of comfort rooms
shall be provided as well as auxiliary facilities therein in
CHAPTER VIII Public Swimming or Bathing accordance with the provisions on Chapter XVII of this
Places Code.
SECTION 51. Sanitary Permit. — No public swimming and g. Waiting sheds for commuters shall be of adequate size
bathing places shall be operated for public use without a to comfortably accommodate a minimum of thirty (30)
sanitary permit issued by the Secretary or his duly persons. Floors shall be of smooth concrete finish and
authorized representative. adequate sitting facilities provided for.
SECTION 52. Protection of Customers. — To protect the h. Sale of foodstuffs in those establishments shall be
health and safety of persons who use them, the done in conformity with the provisions of Chapter III of
Department shall promulgate: this Code.
a. Rules and regulations concerning:


include barber shops, beauty parlors, hairdressing and

manicuring establishments and figure slendering salons.
CHAPTER X Camps and Picnic Grounds
a. Requirements — These establishments are subject to
SECTION 55. No camps and picnic grounds shall be open the following requirements:
for public patronage without a sanitary permit issued by
Secretary or his duly authorized representative. 1. A sanitary permit shall be procured from the local
health authority before their operation.
a. Camps and picnic ground sites shall not be subject to
flooding, must be well drained, distant from any source of 2. They shall be maintained clean and sanitary at all
nuisance and will not endanger sources of any public times.
water supply. 3. No person shall be employed to service customers
b. Camp and picnic houses shall be provided with without a health certificate issued by the local health
adequate lighting and ventilation. Where tents are used authority.
flooring shall be at least 4 inches above the ground. b. Correct Sanitary Practices. — The following sanitary
c. Adequate and safe drinking water shall be available at practices shall be observed.
all times in accordance with the provisions of Chapter II of 1. Working personnel shall wash their hands with soap
this Code. and water before servicing customers.
d. Adequate number of sanitary facilities shall be 2. They shall wear clean working garments.
provided.
3. They shall not smoke nor eat while working.
e. Sewage disposal shall be in accordance with the
provisions on Chapter XVII of this Code. 4. Implements of their trade shall be cleaned and
disinfected before and after their use.
f. The storage, preparation and serving of food shall be in
accordance with Chapter III of this Code. 5. Customers shall be supplied with clean and fresh
towels, drapes and other linen necessary.
g. Refuse cans shall be provided at strategic points in the
ground area provided with tight fitting cover. A regular 6. Precautionary measures to prevent disease
collection service shall be maintained. Refuse disposal transmission shall be observed when serving customers
shall be in accordance with the provisions of Chapter XVIII showing any form of dermatoses.
of this Code.
h. Camps and picnic grounds shall at all times be CHAPTER XIII Massage Clinics and Sauna Bath
maintained clean, free from litter and accumulated
rubbish. Establishments
i. A program on Vermin Control shall be made in SECTION 59. Definition of Terms. — As used in this
accordance with Chapter XVI of this Code. Chapter the following terms shall mean:
a. Massage — A method wherein the superficial soft
parts of the body are rubbed or stroked or kneaded for
CHAPTER XI Dancing Schools, Dance Halls and remedial or aesthetic or hygienic purposes.
Night Clubs b. Massage Clinic — An establishment where massage is
SECTION 56. General Provisions. — The following administered to customers.
provisions are applicable to dancing schools, dance halls c. Masseur — A trained person duly licensed by the
and night clubs: Secretary or his authorized representative to perform
a. These establishments shall be operated and opened massage and to supervise massage clinic attendants.
for public patronage only when a sanitary permit is issued d. Massage Clinic Attendant — A trained person duly
by the local health authority. permitted by the Secretary or his authorized
b. These establishments and their premises shall be kept representative to massage customers under the
clean and sanitary at all times. guidance and supervision of a masseur.
c. Patrons shall be provided with adequate potable water e. Sauna Bath Establishment — An establishment where

and toilet facilities in accordance with standards customers are exposed to steam which is generated by
prescribed by this Code. sprinkling water on hot stones or by some other means.
d. There shall be no private rooms or separate f. Sauna Bath Attendant — A person who applies the
compartments for public use except those used for proper technique of giving steam bath to customers.
lavatories, dressing rooms, bars and kitchens. SECTION 60. Sanitary Permit. — No person or entity shall
SECTION 57. Special Provisions. — The following operate a massage clinic and/or a sauna bath
provisions are applicable in cases herein specified: establishment without first securing a sanitary permit
from the local health authority.
a. For dancing schools —
SECTION 61. Sanitary Requirements. — The following
No person shall be employed as a dancing instructor or requirements shall be enforced:
instructress without first securing a health certificate
from the local authority. a. Massage Clinic —
b. For dance halls and night clubs — 1. The reception and office rooms shall be properly
lighted and ventilated.
1. No person shall employed as hostess or cook or
bartender or waiter without first securing a health 2. Every massage room shall be adequately ventilated,
certificate from the local health authority. provided with a sliding curtain at the entrance and
equipped with a suitable and clean massage table.
2. The storage, preparation and serving of food and
drinks shall be in accordance with the provisions 3. Sanitary and adequate handwashing, bath and toilet
prescribed in Chapter III of this Code. facilities shall be available.
4. Customers shall be provided with soap, clean towels,
sanitized rubber or plastic slippers. They shall be required
CHAPTER XII Tonsorial and Beauty to take a thorough bath before massage.
Establishments 5. Masseur and masseur attendant shall wash their hands
SECTION 58. Definition of Terms. — As used in this with soap and water before and after massaging a
Chapter, the term "Tonsorial and Beauty Establishments" customer.


6. The establishment and its premises shall be f. Apartment House — A building containing a number
maintained clean and sanitary at all times. of separate residential suites.
b. Sauna Bath Establishment — g. Condominium — A building with one or more storeys
1. The reception and office rooms shall be properly composed of multi-unit residential suites under joint
lighted and adequately ventilated. ownership of occupants, each unit provided with
complete sanitary facilities, utilities and other amenities.
2. The sauna bath room shall be properly lighted,
provided with thermometers, and maintained clean and h. Establishments — A collective term construed to
sanitary at all times. include items (a) to (g).
3. Sanitary and adequate handwashing, bath and toilet SECTION 64. General Provisions. — The following are
facilities shall be available. required for the establishments defined in the preceding
Section:
4. Customers shall be provided with soap, clean towels
and sanitized rubber or plastic slippers. a. No establishment shall be operated and opened for
public patronage without a sanitary permit issued by the
Secretary or his duly authorized representative.
SECTION 62. Personnel. — The following requirements b. Any extension or additional construction in an
shall be enforced: establishment shall require a sanitary permit before it
a. Masseur — could be operated.
1. The person must have a certificate as a registered c. All establishments shall provide their patrons with
masseur, issued by the Committee on Examiners for adequate water supply, toilet and bath facilities in
Masseur of the Department. accordance with standards prescribed in this Code.
2. He must possess an up-to-date health certificate d. Establishments and their premises shall be kept clean
issued by the local health authority. and sanitary at all times.
3. The person shall wear a clean working garment when e. Periodic insect and vermin control measures shall be
attending to customers or when supervising massage undertaken to eradicate vectors of diseases.
clinic attendants. f. Animals, fowls and pets shall be housed in appropriate
b. Massage Clinic Attendant — kennels or cages separate from living quarters.
1. The person shall be properly registered and authorized g. No person shall be employed in establishments
by the local health authority to work as massage clinic without first procuring a health certificate from the local
attendant after compliance with the following health authority.
requirements: SECTION 65. Special Provisions. — The following
a. Satisfactory completion of a training course or study provisions are applicable.
given by a government office, school or hospital, which is a. Hotels and Motels —
duly authorized and recognized by the Department; and
1. The storage, preparation and serving of food to
b. Up-to-date health certificate issued by the local health customers shall be in accordance with the standards
authority to include VD clearance secured from any prescribed in Chapter III of this Code.
government clinic or hospital.
2. Customers shall be provided with clean linen such as
2. The person must clean working garments when bedsheets, pillow cases, towels and napkins.
attending to customers.
3. When rooms or cabins are vacated, their toilets or
c. Sauna Bath Attendant — baths shall be sanitized and clean and fresh linen shall be
1. Attendant must possess an up-to-date health provided before the room or cabin is rented for
certificate issued by the local health authority. occupancy.
2. The person must wear clean working garments when b. Condominium — The following conditions are
attending to customers. applicable:
1. The choice for sites should consider availability of bus
and taxi transportation services.
CHAPTER XIV Hotels, Motels and Apartments, 2. Nearness to place of work, schools, police stations and
Lodging, Boarding, or Tenement Houses, and clinics.
Condominiums 3. Availability of low-cost goods.
SECTION 63. Definition of Terms. — As used in this 4. Parking facilities and playgrounds for children.
Chapter, the following terms shall mean:
5. Facilities for refuse disposal and cleanliness of
a. Hotel — A building where transient guests are received buildings, and
and are supplied with and charged for meals, lodging and
other services. 6. Efficiency of lifts.
b. Motel — A roadside hotel for motorists, usually

consisting of private cabins. CHAPTER XV Port, Airport, Vessel and Aircraft
c. Boarding House — A building where selected persons Sanitation
for fixed periods of time are supplied with, and charged
for sleeping accommodations and meals. SECTION 66. Port and Airport Sanitation. — In ports and
airports, the following sanitary requirements shall be
d. Lodging House — A building where persons are applied:
supplied with and charged for sleeping accommodations
only. a. Every port and airport shall be provided with potable
drinking water and wholesome food supplied from
e. Tenement House — A building or portion thereof sources approved by the Secretary or his duly authorized
which is leased or sold to an occupied as residence by representative.
four or more families doing their cooking within the
premises but living independently of one another b. The drinking water and food shall be stored and
although having a common right in the use of halls, handled in a manner to ensure their protection against
stairways, terraces, verandas, toilets, and baths. contamination. The local health authority shall conduct
periodic inspections of equipment, installations and
premises, and collect regularly samples of water and food


for laboratory examination to determine if they are fit for e. Effective capacity of a septic tank — The actual liquid
human consumption. capacity of a septic tank as contained below the liquid
c. There shall be available to as many ports and airports level line of the tank.
as practicable organized medical and health services with f. Effective depth of a septic tank — The actual liquid
adequate staff, equipment and facilities for the prompt depth of a septic tank as measured from the inside
isolation and care of infected persons, disinfection, bottom of the septic tank to the liquid level line.
disinsecting, deratting, laboratory examination, collection g. Freeboard or air space of a septic tank — The distance
and examination of rodents for plague infection, as measured from the liquid level line to the inside top of
collection of water and food samples for examination. the septic tank.
d. The local health authority for each port and airport h. Distribution box — A small concrete receptacle
shall take all practicable measures to keep port and between the septic tank and the drain field from which
airport installation free of rodents. lines of drain tile extends and which acts as surge tank to
e. In ports and airports of entry, facilities shall be provided distribute the flow of sewage equally to each line of drain
for immunizations required in international travel. tile.
f. Every port of entry and the area within the perimeter of i. Approved excreta disposal facilities shall mean any of
an airport of entry shall be kept free from mosquito the following:
vectors of yellow fever, malaria and other diseases of 1. Flush toilets properly connected to a community sewer;
epidemiological significance.
2. Flush toilets connected to a septic tank constructed in
SECTION 67. Vessel Sanitation. — For the purpose of this accordance with this Chapter;
Section, the provisions of Art. II of the Quarantine
Regulations promulgated under Section 5 of Republic Act 3. Any approved type pit privy built in accordance with
No. 123 shall be applied and enforced. this Chapter; and
SECTION 68. Aircraft Sanitation. — For the purpose of 4. Any disposal device approved by the Secretary or his
this Section, the requirements in the Guide to Hygiene duly authorized representative.
and Sanitation in Aviation of the World Health j. Privy — A structure which is not connected to a
Organization are adopted as part of this Code. sewerage system and is used for the reception,
disposition and storage of feces or other excreta from the
human body.
CHAPTER XVI Vermin Control
k. Septic privy where the fecal matter is placed in a septic
SECTION 69. Definition of Terms. — As used in this tank containing water and connected to a drain field but
Chapter, the following terms shall mean: which is not served by a water supply under pressure.
a. Place — Land, building, residence, pier, watercraft, l. Box and can privy — A privy where fecal matter is
aircraft or any means of conveyance. deposited in a can bucket which is removed for emptying
b. Vermin — A group of insects or small animals such as and cleaning.
flies, mosquitoes, cockroaches, fleas, lice, budbugs, mice m. Concrete vault privy — A pity privy with the pit line
and rats which are vectors of diseases. with concrete in such manner as to make it water tight.
SECTION 70. General Requirements. — n. Chemical privy — A privy where fecal matter is
a. A vermin abatement program shall be maintained in deposited into a tank containing a caustic chemical
places by their owners, operators or administrators. If they solution to prevent septic action while the organic matter
fail, neglect or refuse to maintain a vermin abatement is decomposed.
program, the local health agency will undertake the work SECTION 72. Scope of Supervision of the Department. —
at their expense. The approval of the Secretary or his duly authorized
b. Vermin control in public places shall be the representative is required in the following matters:
responsibility of the provincial, city or municipal a. Construction of any approved type of toilet for every
governments which have jurisdiction over them. house including community toilet which may be allowed
c. The procedure and frequency of vermin abatement for a group of small houses of light materials or
program shall be determined and approved by the local temporary in nature;
health authority. b. Plans of individual sewage disposal system and the
sub-surface absorption system, or other treatment device;
CHAPTER XVII Sewage Collection and Disposal, c. Location of any toilet or sewage disposal system in
relation to a source of water supply;
Excreta Disposal and Drainage
d. Plans, design data and specifications of a new or
SECTION 71. Definition of Terms. — As used in this existing sewerage system or sewage treatment plant;
Chapter, the following terms shall mean:
e. The discharge of untreated effluent of septic tanks
a. Public sewerage system — A system serving and/or sewage treatment plants to bodies of water;
twenty-five persons or more.
f. Manufacture of septic tanks; and
b. Septic tank — A water tight receptacle which receives
the discharge of a plumbing system or part thereof, and g. Method of disposal of sludge from septic tanks or
is designed to accomplish the partial removal and other treatment plants.
digestion of the suspended solid matter in the sewage SECTION 73. Operation of Sewage Treatment Works. —
through a period of detention. Its construction shall be in Private or public sewerage systems shall:
accordance with specifications prescribed in this Chapter. a. Provide laboratory facilities for control tests and other
c. House sewer — The pipeline conveying sewage from examinations needed;
the house or building to the septic tank or to any point of b. Forward to the local health authority operating data,
discharge. control tests and such other records and information as
d. Septic tank absorption bed or drain field — An may be required;
underground system of pipes leading from the outlet of c. Inform the local health authority in case of break-down
the septic tank, consisting of open-jointed or perforated or improper functioning of the sewage treatment works;
pipes so distributed that the effluent from a septic tank is and
oxidized and absorbed by the soil.


d. Provide for the treatment of all sewage entering the where waste water from buildings and premises could
treatment plant. empty without causing nuisance to the community and
SECTION 74. Requirements in the Operation of danger to public health.
Sewerage Works and Sewage Treatment Plants. — The b. Connection to the municipal drainage system —
following are required for sewerage works and sewage Buildings or premises producing wastewater shall be
treatment plants. connected to the municipal drainage system in all areas
a. All houses covered by the system shall be connected to where it exists.
the sewer in areas where a sewerage system is available. SECTION 80. Special Precaution for Radioactive Excreta
b. Outfalls discharging effluent from a treatment plant and Urine of Hospitalized Patient. —
shall be carried to the channel of the stream or to deep a. Patients given high doses of radioactive isotope for
water where the outlet is discharged. therapy should be given toilet facilities separate from
c. Storm water shall be discharged to a storm sewer, those used by "non-radioactive" patients.
sanitary sewage shall be discharged to a sewerage b. Radioactive patients should be instructed to use the
system carrying sanitary sewage only; but this should not same toilet bowl at all times and to flush it at least 3 times
prevent the installation of a combined system. after its use.
d. Properly designed grease traps shall be provided for
sewers from restaurants or other establishments where
the sewage carries a large amount of grease. CHAPTER XVIII Refuse Disposal
SECTION 75. Septic tanks. — Where a public sewerage SECTION 81. Definition of Terms. — As used in this
system is not available, sewer outfalls from residences, Chapter, refuse is an inclusive term for all solid waste
schools, and other buildings shall be discharged into a products consisting of garbage, rubbish, ashes, night soil,
septic tank to be constructed in accordance with the manure, dead animals, street sweepings and industrial
following minimum requirements: wastes.
a. It shall be generally rectangular in shape. When a SECTION 82. Responsibility of Cities and Municipalities.
number of compartments are used, the first — Cities and municipalities shall provide an adequate and
compartment shall have the capacity from one-half to efficient system of collecting, transporting and disposing
two-thirds of the total volume of the tank. refuse in their areas of jurisdiction in a manner approved
by the local health authority.
b. It shall be built of concrete, whether pre-cast or poured
in place. Brick, concrete blocks or adobe may be used. SECTION 83. Additional Requirements. —
c. It shall not be constructed under any building and a. Occupants of buildings and residences shall; provide a
within 25 meters from any source of water supply. sufficient number of receptacles for refuse. Refuse in
receptacles shall be protected against vermin and other
SECTION 76. Disposal of Septic Tank Effluent. — The animals.
effluent from septic tanks shall be discharged into a
sub-surface soil, absorption field where applicable or shall b. Refuse shall be disposed through a municipal
be treated with some type of a purification device. The collection service. If this service is not available, disposal
treated effluent may be discharged into a stream or body shall be by incineration, burying, sanitary landfill or any
of water if it conforms to the quality standards prescribe method approved by the local health authority.
by the National Water and Air Pollution Control c. Refuse shall not be thrown in any street, sidewalk, yard,
Commission. park or any body of water. It shall be stored in a suitable
SECTION 77. Determination of Septic Tank Capacity. — container while awaiting its final disposal.
The septic tank capacity may be determined from the d. Streets shall be kept clean by occupants or owners of
estimated unit flow contained in Table I "Quantities of properties lining the street from the line of the property
Sewage Flow," based on adequate detention time interval to the middle of the street and from one property to the
resulting in efficient sedimentation. Daily flow from other.
mattered results, may be used as estimated flow when
e. Parks, plazas and streets adjacent to public buildings
available. For edifices with occupants, the number of
shall be kept clean by the local government concerned.
persons to be served shall be computed on the number
of rooms with each room considered as occupied by two
persons or on the basis of the actual number of persons
served by the tank, whichever is greater.
CHAPTER XIX Nuisances and Offensive Trades
SECTION 78. Sanitary Privies. — The privy recommended
and Occupations
for use is the sanitary privy. It shall conform with the SECTION 84. Definition of Terms — As used in this
following minimum requirements: Chapter, the following terms shall mean and include:
a. It shall consist of an earthen pit, a floor covering the pit, a. Nuisance — Anything that injures health, endangers
and a water-sealed bowl. It shall be so constructed in life, offends the senses or produces discomfort to the
order that fecal matter and urine will be deposited into community.
the earthen pit which shall be completely fly-proof. b. Offensive trades or occupations — These are the
b. The pit shall be at least one meter square. following:
c. The floor should cover the pit tightly to prevent the 1. Soap boiling;
entrance of flies. It shall be constructed of concrete or 2. Guts cleaning;
other impervious material.
3. Boiling of offal, bones, fat or lard;
d. The water-sealed bowl shall be joined to the floor so as
to form a water-tight and insect proof joint. *Permissible if process is performed in a public
slaughterhouse under prescribed regulations.
e. A suitable building, shall be constructed to provide
comfort and privacy for the users of the privy. 4. Manufacturing of glue or fertilizer;
f. Wooden floors and seat risers shall not be used. 5. Skin curing;
SECTION 79. Drainage. — 6. Scrap processing;
a. Responsibility of cities and municipalities — It shall be 7. Manure storing;
the responsibility of all cities and municipalities to provide 8. Lime burning;
and maintain in a sanitary state and in good repair a
satisfactory system of drainage in all inhabited areas 9. Lye making; and


10. Any manufacturing process in which lead, arsenic,

mercury, phosphorous, or other poisonous substance is
used. CHAPTER XXI Disposal of Dead Persons
SECTION 85. Types of Nuisances — For the purpose of SECTION 89. Definition. — As used in this Chapter, the
this Chapter, the following shall be considered nuisances: following terms shall mean:
a. Public or private premises maintained and used in a a. Burial grounds — cemetery, memorial park of any
manner injurious to health; place duly authorized by law for permanent disposal of
the dead.
b. Breeding places and harborages of vermin;
b. Embalming — preparing, disinfecting and preserving a
c. Animals and their carcasses which are injurious to dead body for its final disposal.
health;
c. Embalmer — a person who practices embalming.
d. Accumulation of refuse;
d. Undertaking — the care, transport and disposal of the
e. Noxious matter or waste water discharged improperly body of a deceased person by any means other than
in streets; embalming.
f. Animals stockage maintained in a manner injurious to e. Undertaker — person who practices undertaking.
health;
f. Funeral establishment — any place used in the
g. Excessive noise; and preparation and care of the body of a deceased person for
h. Illegal shanties in public or private properties. burial.
SECTION 86. Responsibilities of Owners, Managers or g. Remains — the body of a dead person.
Operators. — The Owners, managers or operators of h. Burial — Interment of remains in a grave, tomb or the
establishments shall: sea.
a. Secure a sanitary permit from the local health i. Disinterment — the removal or exhumation of remains
authority before establishing and operating their from places of interment.
business or trade;
SECTION 90. Burial Grounds Requirements. — the
b. Remove daily all injurious by-products and wastes; following requirements shall be applied and enforced:
c. Prevent the escape of industrial impurities and adopt a. It shall be unlawful for any person to bury remains in
methods to render them innocuous; places other than those legally authorized in conformity
d. Maintain working establishments and their premises with the provisions of this Chapter.
clean and sanitary at all times; b. A burial ground shall at least be 25 meters distant from
e. Store all materials properly to prevent emission of any dwelling house and no house shall be constructed
noxious or injurious effluvia. within the same distance from any burial ground.
c. No burial ground shall be located within 50 meters
from either side of a river or within 50 meters from any
CHAPTER XX Pollution of the Environment source of water supply.
SECTION 87. General Provisions. — For the purpose of SECTION 91. Burial Requirements. — The burial of
this Chapter, the provisions of Republic Act No. 3931, the remains is subject to the following requirements:
rules and regulations of the National Water and Air
Pollution Control Commission promulgated in a. No remains shall be buried without a death certificate.
accordance with the provisions of Section 6(a) 2 of the This certificate shall be issued by the attending physician.
said Act, the provisions of Presidential Decree No. 480, If there has been no physician in attendance, it shall be
and the rules and regulations of the Radiation Health issued by the mayor, the secretary of the municipal
Office of the Department of Health shall be applied and board, or a councilor of the municipality where the death
enforced. occurred. The death certificate shall be forwarded to the
local civil register within 48 hours after death.
SECTION 88. Authority of the Secretary. — The Secretary
is authorized to promulgate rules and regulations for the b. Shipment of remains abroad shall be governed by the
control and prevention of the following types of pollution: rules and regulations of the Bureau of Quarantine.
a. Pollution of pesticides and heavy metals; c. Graves where remains are buried shall be at least one
and one-half meters deep and filled well and firmly.
b. Pollution of food caused by chemicals, biological
agents, radioactive materials, and excessive or improper d. The cost of burial of a dead person shall be borne by
use of food additives; the nearest kin. If the kin is not financially capable of
defraying the expenses or if the deceased had no kin, the
c. Non-ionizing radiation caused by electronic products cost shall be borne by the city or municipal government.
such as laser beams or microwaves;
e. The burial of remains in city or municipal burial
d. Noise pollution caused by industry, land and air grounds shall not be prohibited on account of race,
transport and building construction; nationality, religion or political persuasion.
e. Biological pollutants including the causative agents of f. If the person who issues a death certificate has reasons
intestinal infections; to believe or suspect that the cause of death was due to
f. Pollution of agricultural products through the use of violence or crime, he shall notify immediately the local
chemical fertilizers and plant pesticides containing toxic authorities concerned. In this case the deceased shall not
chemical substances and unsanitary agricultural be buried until a permission is obtained from the
practices; and provincial or city fiscal. If these officials are not available
the permission shall be obtained from any government
g. Any other type of pollution which is not covered by the official authorized by law.
provisions of Republic Act 3931, the Rules and Regulations
of the National Water and Air Pollution Control g. Except when required by legal investigation or when
Commission, the provisions of Presidential Decree No. permitted by the local health authority, no unembalmed
480 and the rules and regulations of the Radiation Health remains shall remain unburied longer than 48 hours after
Office of the Department of Health which is likely to death.
affect community Health adversely. h. When the cause of death is a dangerous
communicable disease, the remains shall be buried
within 12 hours after death. They shall not be taken to any
place of public assembly. Only the adult members of the


family of the deceased may be permitted to attend the 1. Any person who desires to practice undertaking or
funeral. embalming shall be licensed to practice only after
SECTION 92. Disinterment Requirements. — passing an examination conducted by the Department.
Disinterment of remains is subject to the following 2. Licensed undertakers or embalmers shall practice
requirements: undertaking or embalming in accordance with
a. Permission to disinter remains of persons who died of requirements prescribed by the Department.
non-dangerous communicable diseases may be granted 3. Licensed undertakers or embalmers shall display their
after a burial period of three years. licenses conspicuously in the establishments where they
b. Permission to disinter remains of person who died of work.
dangerous communicable diseases may be granted after b. Issuance of certificates of registration —
a burial period of five years. 1. An undertaker or embalmer shall apply annually for a
c. Disinterment of remains covered in paragraphs "a" and registration certificates and pay an annual registration
"b" of this Section may be permitted within a shorter time fee of twenty-five pesos to the Regional Health Office
than that prescribed in special cases, subject to the concerned.
approval of the Regional Director concerned or his duly 2. The first registration certificate issued shall cover the
authorized representative. period from the date of issuance to the last day of the
d. In all cases of disinterment, the remains shall be current year. Subsequent certificates shall bear the date
disinfected and places in a durable and sealed container of January 1 of the year of issue and shall expire
prior to their final disposal. December 31 of the same year.
SECTION 93. Funeral and Embalming Establishments. — 3. Certificates of registration shall be posed
These establishments are subject to the following conspicuously in establishments concerned.
requirements: c. Exemption — Government and private physicians may
a. Scope of inclusion — for the purposes of this Section, perform embalming without license and registration
requirements prescribed herein shall be applied and certificates as exigencies require.
enforced to funeral chapels, embalming establishments SECTION 95. Autopsy and Dissection of Remains. — The
and morgues. autopsy and dissection of remains are subject to the
b. Sanitary permit — No establishment mentioned in the following requirements:
preceding paragraph shall be operated without a sanitary a. Person authorized to perform these are:
permit issued by the Secretary or his duly authorized
representative. This permit shall be revoked in case of any 1. Health officers;
violation of the provisions of this Chapter and the rules 2. Medical officers of law enforcement agencies; and
and regulations promulgated by the Secretary.
3. Members of the medical staff of accredited hospitals.
c. Classification — Funeral establishment shall be
classified in three (3) categories which are described as b. Autopsies shall be performed in the following cases:
follows: 1. Whenever required by special laws;
1. Category I — Establishments with chapels, and 2. Upon orders of a competent court, a mayor and a
embalming facilities and offering funeral services. provincial or city fiscal;
2. Category II — Establishments with chapels and 3. Upon written request of police authorities;
offering funeral services but without embalming facilities.
4. Whenever the Solicitor General, provincial or city fiscal
3. Category III — Establishments offering only funeral as authorized by existing laws, shall deem it necessary to
services from the house of the deceased to the burial disinter and take possession of remains for examination
ground. to determine the cause of death; and
d. Sanitary requirements — 5. Whenever the nearest kin shall request in writing the
For funeral chapels — The requirements prescribed for authorities concerned to ascertain the cause of death.
places of public assembly in this Code shall be applied. c. Autopsies may be performed on patients who die in
For embalming and dressing rooms — accredited hospitals subject to the following
requirements:
1. They should be constructed of concrete or
semi-concrete materials with sufficient space to 1. The Director of the hospital shall notify the next of kin
accommodate five bodies at one time. of the death of the deceased and request permission to
perform an autopsy.
2. The floors and walls shall be made of concrete or other
durable impervious materials. 2. Autopsy can be performed when the permission is
granted or no objection is raised to such autopsy within
3. Ventilation and lighting should be adequately 48 hours after death.
provided.
3. In cases where the deceased has no next of kin, the
4. Embalming shall be performed on a table made of a permission shall be secured from the local health
single marble slab or other equally impervious materials. authority.
It shall be so constructed that all washings and body
fluids shall flow to a drain connected to the waste piping 4. Burial of remains after autopsy — After an autopsy, the
system of the building. remains shall be interred in accordance with the
provisions in this Chapter.
5. Embalming and assistants shall use rubber gloves
when working. SECTION 96. Donation of Human Organs for Medical,
Surgical and Scientific purposes. — Any person may
6. Washing facilities with soaps, detergents and donate an organ or any part of his body to a person, a
germicidal solutions shall be provided for use of the physician, a scientist, a hospital or a scientific institution
following personnel. upon his death for transplant, medical, or research
SECTION 94. Licensing and Registration Procedures. — purposes subject to the following requirements:
The licensing and registration of undertakers and
embalmers are subject to the following requirements:
a. The donation shall be authorized in writing by the
a. Issuance of license to practice — donor specifying the recipient, the organ or part of his
body to be donated and the specific purpose for which it
will be utilized.


b. A married person may make such donation without SECTION 101. Responsibility of Local Government. —
the consent of his spouse. Local governments shall:
c. After the death of a person the next of kin may a. Reserve appropriate tracts of land under their
authorize the donation of an organ or any part of the jurisdiction, for cemeteries subject to approval of
body of the deceased for similar purposes in accordance Regional Directors concerned;
with the prescribed procedure. b. Utilize judiciously grants, gifts, bequests of property or
d. If the deceased has no next of kin and his remains are financial donations for the establishment or
in the custody of an accredited hospital, the Director of improvement of cemeteries; and
the hospital may donate an organ or any part of the body c. Close cemeteries under their jurisdiction subject to
of the deceased in accordance with the requirement approval of the Regional Director.
prescribed in this Section.
SECTION 102. Penal Provisions. —
e. A simple written authorization signed by the donor in
the presence of two witnesses shall be deemed sufficient a. The Secretary or his duly authorized representative
for the donation of organs or parts of the human body may revoke or suspend the license of an undertaker or
required in this Section, notwithstanding the provisions of embalmer who violates any provisions of this Chapter or
the Civil Code of the Philippines on matters of donation. A the rules and regulations promulgated by the Secretary
copy of the written authorization shall be forwarded to under this Chapter.
the Secretary. b. Any person who shall engage in the business of
f. Any authorization granted in accordance with the undertaking or embalming in violation of any provision of
requirements of this Section is binding to the executors, this Chapter shall be liable to a penalty of not more than
administrators, and members of the family of the one thousand pesos for each violation.
deceased. c. Each day or any part thereof during which any
SECTION 97. Use of Remains for Medical Studies and prohibited business or practice is continued shall be
Scientific Research. — Unclaimed remains may be used deemed a separate violation and subject to the same
by medical schools and scientific institutions for studies penalty prescribed in the preceding paragraph.
and research subject to the rules and regulations
prescribed by the Department.
SECTION 98. Special Precautions for Safe Handling of
CHAPTER XXII Final Provisions
Cadavers Containing Radioactive Isotopes. — SECTION 103. Penal Provision. —
a. Cadavers containing only traces (very small dose) of a. Unless otherwise provided in any Chapter or section in
radioactive isotope do not require any special handling this Code, any person who shall violate, disobey, refuse,
precautions. omit or neglect to comply with any of the rules and
regulations promulgated under this Code shall be guilty
b. Cadavers containing large amounts of radioactive
of misdemeanor and upon conviction shall be punished
isotopes should be labelled properly identifying the type
by imprisonment for a period not exceeding six months
and amount or radioactive isotopes present and the date
or by a fine of not exceeding one thousand pesos or both
of its administration.
depending upon the discretion of the court.
c. Before autopsy is performed, the Radiation Health
b. Any person who shall interfere with or hinder, or
Officer or his duly authorized representative should be
oppose any officer, agent or member of the Department
notified for proper advice. The pathologist and/or
or of the bureaus and offices under it, in the performance
embalmer should be warned accordingly of the
of his duty as such under this Code, or shall tear down,
radioactivity of the cadaver so that radiation precautions
mutilate, deface or alter any placard, or notice, affixed to
can be properly enforced.
the premises in the enforcement of the Code, shall be
d. Normal burial procedures, rules and regulations may guilty of a misdemeanor and punishable upon conviction
be carried out on the above mentioned cadavers by imprisonment for a period not exceeding six months
provided that their amount of radioactivity has decayed or by a fine of not exceeding one thousand pesos or both
to a safe level which will be determined by the Radiation depending upon the discretion of the Court.
Health Officer or his authorized representative.
SECTION 104. Separability Clause. — In the event that
e. Cremation — If cremation is performed without any section, paragraph, sentence, clause, or word of this
autopsy, there is no handling problem; otherwise, autopsy Code is declared invalid for any reason, other provisions
precautions should be strictly enforced. Precautions thereof shall not be affected thereby.
should be taken to prevent any possible concentration of
SECTION 105. Repealing Clause. — All laws, as well as
radioactivity at the base of the stack of the crematorium.
pertinent rules and regulations thereof which are
SECTION 99. Responsibility of the Regional Director. — inconsistent with the provisions of this Code are hereby
The Regional Director shall: repealed or amended accordingly.
a. Act on applications for the establishment of burial SECTION 106. Effectivity. — This Code is hereby made part
grounds; and of the law of the land and shall take effect immediately.
b. Close any burial ground which is a menace to public DONE in the City of Manila, this 23rd day of December, in
health. the year of Our Lord, Nineteen Hundred and Seventy-Five.
SECTION 100. Responsibility of the Local Health (Code on Sanitation of the Philippines, Presidential
Authority. — The local health authority shall: Decree No. 856, [December 23, 1975])
a. Administer city or municipal cemeteries;
b. Issue permits to inter, disinter or transfer remains;
PD No 1096 | National Building Code of
c. Apply prescribed measures when cause of death is due
to a dangerous communicable disease; the Philippines
d. Keep records of death occurring within his area of
jurisdiction; and February 19, 1977
e. Authorize the deliver of unclaimed remains to medical PRESIDENTIAL DECREE NO. 1096
schools and scientific institutions for purposes specified ADOPTING A NATIONAL BUILDING CODE OF THE
in this Chapter and in accordance with the rules and PHILIPPINES THEREBY REVISING REPUBLIC ACT
regulations of the Department. NUMBERED SIXTY-FIVE HUNDRED FORTY-ONE


WHEREAS, the country's accelerating economic and SECTION 106. Definitions. — As used in this Code, the
physical development, coupled with urbanization and words, terms and phrases enumerated in Annex "A"
population growth, makes imperative the formulation hereof shall have the meaning or definition,
and adoption of a uniform building code which shall correspondingly provided therein.
embody up-to-date and modern technical knowledge on
building design, construction, use, occupancy and
maintenance; CHAPTER 2 Administration and Enforcement
WHEREAS, while there is Republic Act No. 6541, entitled SECTION 201. Responsibility for Administration and
"An Act to Ordain and Institute a National Building Code Enforcement. — The administration and enforcement of
of the Philippines", the same does not conform with the the provisions of this Code including the imposition of
developmental goals and infrastructure program of the penalties for administrative violations thereof is hereby
Government and does not adequately provide for all the vested in the Secretary of Public Works, Transportation
technological requirements of buildings and structures, and Communications, hereinafter referred to as the
in terms of up-to-date design and construction standards "Secretary".
and criteria;
SECTION 202. Technical Staff . — The Secretary is hereby
WHEREAS, in the formulation of a new national building authorized to constitute and provide in his Department a
code, it is desire and policy of the Government to avail of professional staff composed of highly qualified architects,
and harness the technical expertise and professional engineers and technicians who possess diversified and
know-how to men not only in the public but in the private professional experience in the field of building design
sectors as well. and construction.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President SECTION 203. General Powers and Functions of the
of the Philippines, by virtue of the powers vested in me by Secretary under this Code. — For purposes of carrying out
the Constitution, do hereby order and decree the revision the provisions of this Code, the Secretary shall exercise
of Republic Act. No. 6541 to read as follows: the following general powers and functions:
(1) Formulate policies, plans, standards and guidelines on
building design, construction, use occupancy and
CHAPTER 1 General Provisions maintenance, in accordance with this Code.
SECTION 101. Title. — This Decree shall be known as the (2) Issue and promulgate rules and regulations to
"National Building Code of the Philippines" and shall implement the provisions of this Code and ensure
hereinafter be referred to as the "Code". compliance with policies, plans, standards and guidelines
SECTION 102. Declaration of Policy. — It is hereby formulated under paragraph 1 of this Section.
declared to be the policy of the State to safeguard life, (3) Evaluate, review, approve and/or take final action on
health, property, and public welfare, consistent with the changes and/or amendments to existing Referral Codes
principles of sound environmental management and as well as on the incorporation of other referral codes
control; and to this end, make it the purpose of this Code which are not yet expressly made part of this Code.
to provide for all buildings and structures, a framework of
minimum standards and requirements to regulate and (4) Prescribe and fix the amount of fees and other
control their location, site, design quality of materials, charges that the Building Official shall collect in
construction, use, occupancy, and maintenance. connection with the performance of regulatory functions.
SECTION 103. Scope and Application. — (a) The provisions SECTION 204. Professional and Technical Assistance. —
of this Code shall apply to the design, location, siting, The Secretary with the assistance of his technical staff
construction, alteration, repair, conversion, use, shall provide such professional, technical, scientific and
occupancy, maintenance, moving, demolition of, and other services including testing laboratories and facilities
addition to public and private buildings and structures, as may be required to carry out the provisions of this
except traditional indigenous family dwellings as defined Code; Provided that the Secretary may secure such
herein. services as he may deem necessary from other agencies
of the National Government and may make arrangement
(b) Building and/or structures constructed before the for the compensation of such services. He may also
approval of this Code shall not be affected thereby except engage and compensate within appropriations available
when alterations, additions, conversions or repairs are to therefor, the services of such number of consultants,
be made therein in which case, this Code shall apply only experts and advisers on full or part-time basis, as may be
to portions to be altered, added, converted or repaired. necessary, coming from the government or private
SECTION 104. General Building Requirements. — (a) All businesses, entities or associations to carry out the
buildings or structures as well as accessory facilities provisions of this Code.
thereto shall conform in all respects to the principles of SECTION 205. Building Officials. — Except as otherwise
the safe construction and must be suited to the purpose provided herein, the Building Official shall be responsible
for which they are designed. for carrying out the provisions of this Code in the field as
(b) Buildings or structures intended to be used for the well as the enforcement of orders and decisions made
manufacture and/or production of any kind of article or pursuant thereto.
product shall observe adequate environmental Due to the exigencies of the service, the Secretary may
safeguards. designate incumbent Public Works District Engineers,
(c) Buildings or structures and all parts thereof as well as City Engineers and Municipal Engineers act as Building
all facilities found therein shall be maintained in safe, Officials in their respective areas of jurisdiction.
sanitary and good working condition. The designation made by the Secretary under this
SECTION 105. Site Requirements. — The land or site upon Section shall continue until regular positions of Building
which will be constructed any building or structure, or Official are provided or unless sooner terminated for
any ancillary or auxiliary facility thereto, shall be sanitary, causes provided by law or decree.
hygienic or safe. In the case of sites or buildings intended SECTION 206. Qualifications of Building Officials. — No
for use as human habitation or abode, the same shall be person shall be appointed as a Building Official unless he
at a safe distance, as determined by competent possesses the following qualifications:
authorities, from streams or bodies of water and/or
sources of air considered to be polluted; from a volcano or 1. A Filipino citizen and of good moral character.
volcanic site and/or any other building considered to be a 2. A duly registered architect or civil engineer.
potential source of fire or explosion.
3. A member of good standing of a duly accredited
organization of his profession for not less than two years.


4. Has at least five years of diversified and professional Any person, firm or corporation who shall violate any of
experience in building design and construction. the provisions of this Code and/or commit any act hereby
SECTION 207. Duties of a Building Official. — In his declared to be unlawful shall upon conviction, be
respective territorial jurisdiction, the Building Official shall punished by a fine of not more than twenty thousand
be primarily responsible for the enforcement of the pesos or by imprisonment of not more than two years or
provisions of this Code as well as of the implementing by both such fine and imprisonment: Provided, that in
rules and regulations issued therefor. He is the official the case of a corporation firm, partnership or association,
charged with the duties of issuing building permits. the penalty shall be imposed upon its officials responsible
for such violation and in case the guilty party is an alien,
In the performance of his duties, a Building Official may he shall immediately be deported after payment of the
enter any building or its premises at all reasonable times fine and/or service of his sentence.
to inspect and determine compliance with the
requirements of this Code, and the terms and conditions SECTION 214. Dangerous and Ruinous Buildings or
provided for in the building permit as issued. Structures. — Dangerous buildings are those which are
herein declared as such or are structurally unsafe or not
When any building work is found to be contrary to the provided with safe egress, or which constitute a fire
provisions of this Code, the Building Official may order hazard, or are otherwise dangerous to human life, or
the work stopped and prescribe the terms and/or which in relation to existing use, constitute a hazard to
conditions when the work will be allowed to resume. safety or health or public welfare because of inadequate
Likewise, the Building Official is authorized to order the maintenance, dilapidation, obsolescence, or
discontinuance of the occupancy or use of any building or abandonment; or which otherwise contribute to the
structure or portion thereof found to be occupied or used pollution of the site or the community to an intolerable
contrary to the provisions of this Code. degree.
SECTION 208. Fees. — Every Building Official shall keep a SECTION 215. Abatement of Dangerous Buildings. —
permanent record and accurate account of all fees and When any building or structure is found or declared to be
other charges fixed and authorized by the Secretary to be dangerous or ruinous, the Building Official shall order its
collected and received under this Code. repair, vacation or demolition depending upon the
Subject to existing budgetary, accounting and auditing degree of danger to life, health, or safety. This is without
rules and regulations, the Building Official is hereby prejudice to further action that may be taken under the
authorized to retain not more than twenty percent of his provisions of Articles 482 and 694 to 707 of the Civil Code
collection for the operating expenses of his office. of the Philippines.
The remaining eighty percent shall be deposited with the SECTION 216. Other Remedies. — The rights, actions and
provincial, city or municipal treasurer and shall accrue to remedies provided in this Code shall be in addition to any
the General Fund of the province, city or municipality and all other rights of action and remedies that may be
concerned. available under existing laws.
SECTION 209. Exemption. —Public buildings and
traditional indigenous family dwelling shall be exempt CHAPTER 3 Permits and Inspection
from payment of building permit fees.
SECTION 301. Building Permits. — No person, firm or
As used in this Code, the term "additional indigenous corporation, including any agency or instrumentality of
family dwelling" means a dwelling intended for the use the government shall erect, construct, alter, repair, move,
and occupancy by the family of the owner only and convert or demolish any building or structure or cause
constructed of native materials such as bamboo, nipa, the same to be done without first obtaining a building
logs, or lumber, the total cost of which does not exceed permit therefor from the Building Official assigned in the
fifteen thousand pesos. place where the subject building is located or the
SECTION 210. Use of Income from Fees. — Any provision building work is to be done.
of law to the contrary notwithstanding, the Secretary is SECTION 302. Application for permits. — In order to
hereby authorized to prescribe the procedures for the use obtain a building permit, the applicant shall file an
of all net income realized by the office of the Building application therefor in writing and on the prescribed form
Official from the collection of fees and charges not from the office of the Building Official. Every application
exceeding twenty percent thereof in accordance with shall provide at least the following information:
Section 208.
(1) A description of the work to be covered by the permit
Such income may be used to cover necessary operating applied for;
expenses including the purchase of equipment, supplies
and materials, travelling expenses, obligation expenses (2) Certified true copy of the TCT covering the lot on
and sheriff's fees and payment of other prior years' which the proposed work is to be done. If the applicant is
obligations not adequately funded, subject to existing not the registered owner, in addition to the TCT, a copy of
budgetary and auditing rules and regulations. the contract of lease shall be submitted;
SECTION 211. Implementing Rules and Regulations. — In (3) The use or occupancy for which the proposal work is
the implementation of the provisions of this Code, the intended;
Secretary shall formulate necessary rules and regulations (4) Estimated cost of the proposed work.
and adopt design and construction standards and criteria
for buildings and other structures. Such standards, rules To be submitted together with such application are at
and regulations shall take effect after their publication least five sets of corresponding plans and specifications
once a week for three consecutive weeks in a newspaper prepared, signed and sealed by a duly mechanical
of general circulation. engineer in case of mechanical plans, and by a registered
electrical engineer in case of electrical plans, except in
SECTION 212. Administrative Fines. — For the violation of those cases exempted or not required by the Building
any of the provisions of this Code or any of the rules or Official under this Code.
regulations issued thereunder the Secretary is hereby
empowered to prescribe and impose fines not exceeding SECTION 303. Processing of Building Permits. — The
ten thousand pesos. processing of building permits shall be under the overall
administrative control and supervision of the Building
SECTION 213. Penal Provisions. — It shall be unlawful for Official and his technical staff of qualified professionals.
any person, firm or corporation, to erect, construct,
enlarge, alter, repair, move, improve, remove, convert, In processing an application for a building permit, the
demolish, equip, use, occupy, or maintain any building or Building Official shall see to it that the applicant satisfies
structure or cause the same to be done contrary to or in and conforms with approved standard requirements on
violation of any provision of this Code. zonings and land use, lines and grades, structural design,


sanitary and sewerage, environmental health, electrical There shall be kept at the jobsite at all times a logbook
and mechanical safety as well as with other rules and wherein the actual progress of construction including
regulations promulgated in accordance with the tests conducted, weather conditions and other pertinent
provisions of this Code. data are to be recorded.
SECTION 304. Issuance of Building Permits. — When Upon completion of the construction, the said licensed
satisfied that the work described in an application for architect or civil engineer shall submit the logbook, duly
building permit and the plans and specifications signed and sealed, to the Building Official. He shall also
submitted therewith, conform to the requirements of this prepare and submit a Certificate of Completion of the
Code and other pertinent rules and regulations, the project stating that the construction of building conforms
Building Official shall, within fifteen days from payment to the provisions of this Code as well as with the approved
of the required fees by the applicant, issue the building plans and specifications.
permit applied for. SECTION 309. Certificate of Occupancy. — No building or
The Building Official may issue a permit for the structure shall be used or occupied and no change in the
construction of only a part or portion of a building or existing use or occupancy classification of a building or
structure whenever the plans and specifications structure or portion thereof shall be made until the
submitted together with the application do not cover the Building Official has issued a Certificate of Occupancy
entire building or structure. therefor as provided in this Code.
Approved plans and specifications shall not be changed, A certificate of Occupancy shall be issued by the Building
modified or altered without the approval of the Building Official within thirty (30) days if after final inspection and
Official and the work shall be done strictly in accordance submittal of a Certificate of Completion referred to in the
thereto. preceding section, it is found that the building or
SECTION 305. Validity of Building Permits. — The issuance structure complies with the provisions of this Code.
of a building permit shall not be construed as an approval The Certificate of Occupancy shall be posted or displayed
or authorization to the permittee to disregard or violate in a conspicuous place on the premises and shall not be
any of the provisions of this Code. removed except upon order of the Building Official.
Whenever the issuance of a permit is based on approved The non-issuance, suspension and revocation of
plans and specifications which are subsequently found Certificates of Occupancy and the procedure for appeal
defective, the Building Official is not precluded from therefrom shall be governed in so far as applicable, by the
requiring permittee to effect the necessary corrections in provisions of Section 306 and 307 of this Code.
said plans and specifications or from preventing or
ordering the stoppage of any or all building operations
being carried on thereunder which are in violation of this CHAPTER 4 Types of Construction
Code.
SECTION 401. Types of Construction. — For purposes of
A building permit issued under the provisions of this this Code, all buildings proposed for construction shall be
Code shall expire and become null and void if the classified or identified according to the following types:
building or work authorized therein is not commenced
(1) Type I — Type I buildings shall be a wood construction.
within a period of one year from the date of such permit,
The structural elements may be any of the materials
or if the building or work so authorized is suspended or
permitted by this Code.
abandoned at any time after it has been commenced, for
a period of 120 days. (2) Type II — Type II buildings shall be of wood
construction with protective fire-resistant materials and
SECTION 306. Non-Issuance, Suspension or Revocation of
one-hour fire-resistive throughout: Except, that
Building Permits. — The Building Official may order or
permanent non-bearing partitions may use fire-retardant
cause the non-issuance, suspension or revocation of
treated wood within the framing assembly.
building permits on any or all of the following reasons or
grounds: (3) Type III — Type III buildings shall be of masonry and
wood construction. Structural elements may be any of
(a) Errors found in the plans and specifications;
the materials permitted by this Code:Provided, that the
(b) Incorrect or inaccurate data or information supplied; building shall be one-hour fire-resistive throughout.
(c) Non-compliance with the provisions of this Code or of Exterior walls shall be of incombustible fire-resistive
any rule or regulation. construction.
Notice of non-issuance, suspension or revocation of (4) Type IV — Type IV buildings shall be of steel, iron,
building permits shall always be made in writing, stating concrete, or masonry construction. Walls, ceiling, and
the reason or grounds therefor. permanent partitions shall be of incombustible
fire-resistive construction: Except, that permanent
SECTION 307. Appeal. — Within fifteen (15) days from the non-bearing partitions of one-hour fire-resistive
date of receipt of advice of the non-issuance, suspension construction may use fire-retardant treated wood within
or revocation of permits, the applicant/permittee may file the framing assembly.
an appeal with the Secretary who shall render his
decision within fifteen days from date of receipt of notice (5) Type V — Type V buildings shall be fire-resistive. The
of appeal. The decision of the Secretary shall be final structural elements shall be of steel, iron, concrete, or
subject only to review by the Office of the President. masonry construction. Walls, ceilings, and permanent
partitions shall be of incombustible fire-resistive
SECTION 308. Inspection and Supervision of Work. — The construction.
owner of the Building who is issued or granted a building
permit under this Code shall engage the services of a SECTION 402. Changes in Types. — No change shall be
duly licensed architect or civil engineer to undertake the made in the type of construction of any building which
full time inspection and supervision of the construction would place the building in a different sub-type or type of
work. construction unless such building is made to comply with
the requirements for such sub-type of construction:
Such architect or civil engineer may or may not be the Except, when the changes is approved by the Building
same architect or civil engineer who is responsible for the Official upon showing that the new or proposed
design of the building. construction is less hazardous, based on life and fire risk,
It is understood however that in either case, the than the existing construction.
designing architect or civil engineer is not precluded SECTION 403. Requirements on Type of Construction. —
from conducting inspection of the construction work to Subject to the provisions of this Chapter, the Secretary
check and determine compliance with the plans and shall prescribe standards for each type of construction,
specifications of the building as submitted. and promulgate rules and regulations therefor, relating to



structural framework, exterior walls and openings, interior material can withstand being burned which may be

walls and enclosures, floors, exists, and stairs construction, one-hour, two-hours, three-hours, four-hours, etc.
and roofs. SECTION 603. Fire-Resistive Standards. — All materials of
construction, and assemblies or combinations thereof
shall be classified according to their fire-retardant or
CHAPTER 5 Requirements for Fire Zones flame-spread ratings as determined by general accepted
SECTION 501. Fire Zones Defined. — Fire zones are areas testing methods and/or by the Secretary.
within which only certain types of buildings are permitted SECTION 604. Fire-Resistive Regulations. — The Secretary
to be constructed based on their use or occupancy, type shall prescribe standards and promulgate rules and
of construction, and resistance to fire. regulations on the testing of construction materials for
SECTION 502. Buildings located in more than One Fire flame-spread characteristics, tests on fire damages, fire
Zone. — A building or structure which is located partly in tests of building construction and materials, door
one fire zone and partly in another shall be considered to assemblies and tinclad fire doors and window assemblies,
be in the more highly restrictive fire zone, when more the installation of fire doors and windows and smoke and
than one-third of its total floor area is located in such fire detectors for fire protective signaling system,
zone. application and use of controlled interior finish,
fire-resistive protection for structural members,
SECTION 503. Moved Building. — Any building or
fire-resistive walls and partitions, fire-resistive floor or roof
structure moved within or into any fire zone shall be
ceiling, fire-resistive assemblies for protection of
made to comply with all the requirements for buildings in
openings and fire-retardant roof coverings.
that fire zone.
SECTION 504. Temporary Buildings. — Temporary
building such as reviewing stands and other CHAPTER 7 Classification and General
miscellaneous structures conforming to the Requirement of all Buildings by Use of Occupancy
requirements of this Code, and sheds, canopies and
fences used for the protection of the public around and in SECTION 701. Occupancy classified. — (a) Buildings
conjunction with construction work, may be erected in proposed for construction shall be identified according to
the fire zones by special permit from the Building Official their use or the character of its occupancy and shall be
for a limited period of time, and such buildings or classified as follows:
structures shall be-completely removed upon the (1) Group A — Residential Dwellings
expiration of the time limit stated in such permits.
Group A — Occupancies shall be dwellings.
SECTION 505. Center Lines of Streets. —For the purpose of
this Chapter, the center line of an adjoining street or alley (2) Group B — Residentials, Hotels and Apartments
may be considered an adjacent property line. Distances —Group B Occupancies shall be multiple dwelling units
shall be measured at right angles to the street or alley. including boarding or lodging houses, hotels, apartment
buildings, row houses, convents, monasteries, and other
SECTION 506. Restrictions on Existing Buildings. — similar building each of which accommodates more than
Existing buildings or structures in fire zones that do not ten persons.
comply with the requirements for a new building erected
therein shall not hereafter be enlarged, altered, (3) Group C — Education and Recreation — Group C
remodeled, repaired or moved except as follows: Occupancies shall be buildings used for school or
day-care purposes, involving assemblage for instruction,
(a) Such building is entirely demolished; education, or recreation, and not classified in Group I or in
(b) Such building is to be moved outside the limits of the Division 1 and 2 or Group H Occupancies.
more highly restrictive Fire Zone to a zone where the (4) Group D — Institutional — Group D Occupancies shall
building meets the minimum standards; include:
(c) Changes, alterations and repairs may be made Division 1 — Mental hospitals, mental sanitaria, jails,
provided that in any 12-month period, the value of the prisons, reformatories, and buildings where personal
work does not exceed twenty percent of the value of the liberties of inmates are similarly restrained.
existing building, and provided that, such changes do not
add additional combustible material, and do not, in the Division 2 — Nurseries for full-time care of children under
opinion of the Building Official, increase the fire hazard; kindergarten age, hospitals, sanitaria, nursing homes with
non-ambulatory patients, and similar buildings each
(d) Additions thereto are separated from the existing accommodating more than five persons.
building by fire walls, as set forth in Sub-section 604 (b);
Division 3 — Nursing homes for ambulatory patients,
(e) Damage from fire or earthquake, typhoons or any homes for children of kindergarten age or over, each
fortuitous event may be repaired, using the same kind of accommodating more than five persons: Provided, that
materials of which the building or structure was originally Group D Occupancies shall not include buildings used
constructed, Provided, That, the cost of such repair shall only for private or family group dwelling purposes.
not exceed twenty percent of the replacement cost of the
building or structure. (5) Group E — Business and Mercantile — Group E
Occupancies shall include:
SECTION 507. Designation of Fire Zones. — The Secretary
shall promulgate specific restriction for each type of Fire Division 1 — Gasoline filling and service stations, storage
Zone. Cities and municipalities shall be divided into such garages and boot storage structures where no work is
Fire Zones in accordance with local, physical, and spatial done except exchange of parts and maintenance
framework plans submitted by city or municipal planning requiring no open flame, welding, or the use of highly
and/or development bodies. flammable liquids.
Division 2 — Wholesale and retail stores, office buildings,
drinking and dining establishments having an occupant
CHAPTER 6 Fire-Resistive Requirements in load of less than one hundred persons, printing plants,
Construction police and fire stations, factories and workshops using
not highly flammable or combustible materials and paint
SECTION 601. Fire-Resistive Rating Defined. — stores without bulk handlings.
Fire-resistive rating means the degree to which a material
can withstand fire as determined by generally recognized Division 3 — Aircraft hangars and open parking garage
and accepted testing methods. with no repair work is done except exchange of parts and
maintenance requiring no open flame, welding or the use
SECTION 602. Fire-Resistive Time Period Rating. — of highly flammable liquids.
Fire-resistive time period rating is the length of time a


(6) Group F — Industrial — Group F Occupancies shall (2) Where minor accessory uses do not occupy more than

include: ice plants, power plants, pumping plants, cold ten percent of the area of any floor or a building, nor more
storage, and creameries, factories and workshops using than ten percent of the basic area permitted in the
incombustible and non-explosive materials, and storage occupancy requirements, in which case, the major use of
and sale rooms for incombustible and non-explosive the building determine the occupancy classification.
materials. (b) Forms of Occupancy Separation — Occupancy
(7) Group G — Storage and Hazardous — Group G separations shall be vertical or horizontal or both, or when
Occupancies shall include: necessary, of such other forms as may be required to
Division 1 — Storage and handling of hazardous and afford a complete separation between the various
highly flammable material. occupancy divisions in the building.
Division 2 — Storage and handling of flammable (c) Types of Occupancy Separation — Occupancy
materials, dry cleaning plants using flammable liquids; separation shall be classified as "One-Hour Fire-Resistive",
paint stores with bulk handling, paint shops and spray "Two-Hour Fire Resistive", "Three-Hour Fire-Resistive" and
painting rooms. "Four-Hour Fire-Resistive:
Division 3 — Wood working establishments, planning (1) A "One-Hour Fire-Resistive Occupancy Separation"
mills and box factories, shops, factories where loose shall be of not less than one-hour fire-resistive
combustible fibers or dust are manufactured, processed construction. All openings in such separation shall be
or generated; warehouses where highly combustible protected by a fire-assembly having a one-hour
material is store. fire-resistive rating.
Division 4 — Repair garages. (2) A "Two-Hour Fire-Resistive Occupancy Separation"

shall be of not less than two-hour fire-resistive
Division 5 — Aircraft repair hangers. construction. All openings in such separation shall be
(8) Group H — Assembly Other Than Group I — Group H protected by a fire-assembly having a two-hour
Occupancies shall include: fire-resistive rating.
Division 1 — Any assembly building with a stage and an (3) A "Three-Hour Fire-Resistive Occupancy Separation"
occupant load of less than 1000 in the building. shall be of not less than three-hour fire-resistive
construction. All openings in walls forming such
Division 2 — Any assembly building without stage and separation shall be protected by a fire assembly having a
having an occupant load of 300 or more in the building. three-hour fire-resistive rating. The total width of all
Division 3 — Any assembly building without a stage and openings in any three-hour fire-resistive occupancy
having an occupant load of less than 300 in the building. separation wall in any one-storey shall not exceed 25 per
cent of the length of the wall in that storey and no single
Division 4 — Stadia, reviewing stands, amusement park opening shall have an area greater than 10.00 square
structures not included within Group I or in Division 1, 2, meters. All openings in floors forming a "Three-Hour
and 3 of this Group. Fire-Resistive Occupancy Separation" shall be protected
(9) Group I — Assembly Occupant Load 1000 or More — by vertical enclosures extending above and below such
Group I Occupancies shall be any assembly building with openings. The walls of such vertical enclosures shall be of
an age and an occupant load of 1000 or more in the not less than two-hour fire-resistive construction, and all
building. openings therein shall be protected by a fire-assembly
(10) Group J — Accessory. — Group J Occupancies shall having a three-hour fire-resistive rating.
include: (4) A "Four-Hour Fire-Resistive Occupancy Separation"
Division 1. — Private garage, carports, sheds and shall have no openings therein and shall be of not less
agriculture buildings. than four-hour fire resistive construction.
Division 2. — Fences over 1.80 meters high, tanks, and (d) Fire-Rating for Occupancy Separation — Occupancy
towers. Separations shall be provided between groups,
subgroupings, or divisions of occupancies. The Secretary
(b) Other subgroupings or divisions within Groups A to J shall promulgate rules and regulations for appropriate
may be determined by the Secretary. Any other occupancy separations in buildings of mixed occupancy:
occupancy not mentioned specifically in this Section, or Provided, that, where any occupancy separation is
about which there is any question shall be included in the required, the minimum shall be a "One-Hour
Group which it most nearly resembles based on the Fire-Resistive Occupancy Separation"; and where the
existing or proposed life and fire hazard. occupancy separation is horizontal, structural member
SECTION 702. Change in Use. — No change shall be made supporting the separation shall be protected by an
in the character of occupancy or use of any building equivalent fire-resistive construction.
which would place the building in a different division of SECTION 704. Location of Property. — (a) General — No
the same group of occupancy or in a different group of Building shall be constructed unless it adjoins or has
occupancies, unless such building is made to comply direct access to a public space yard or street on at least
with the requirements of this code for such division or one of its sides.
group of occupancy. The character of occupancy of
existing buildings may be changed subject to the For the purpose of this Section, the center line of an
approval of the Building Official and the building may be adjoining street or alley shall be considered an adjacent
occupied or purposes set forth in other Groups: Provided, property line.
the new or proposed use is less hazardous, based on life Eaves over required windows shall not be less than 750
and fire risk, than the existing use. millimeters from the side and rear property lines.
SECTION 703. Mixed Occupancy. — (a) General (b) Fire Resistance of Walls.— Exterior walls shall have fire
Requirements.— When a building is of mixed occupancy resistance and opening protection in accordance with the
or used for more than one occupancy, the whole building requirements set forth by the Secretary. Projections
shall be subject to the most restrictive requirement beyond the exterior wall shall not exceed beyond a point
pertaining to any of the type of occupancy found therein one-third the distance from an assumed vertical plane
except in the following: located where the fire-resistive protection of openings is
(1) When a one-storey building houses more than one first required to the location on property whichever is the
occupancy, each portion of the building shall conform to least restrictive. Distance shall be measured at right
the requirement of the particular occupancy housed angles from the property line. When openings in exterior
therein and; walls are required to be protected due to distance from
property line, the sum of the areas of such openings in


any storey shall not exceed 50 percent of the total area of (f) Floor. — The live load of the first floor shall be at least
the wall in that storey. 200 kilograms per square meter and for the second floor,
(c) Buildings on Same Property and Buildings Containing at least 150 kilograms per square meter.
Courts— For the purpose of determining the required (g) Roof. — The wind load for roofs shall be at least 120
wall and opening protection, buildings on the same kilograms per square meter for vertical projection.
property and court walls shall be assumed to have a (h) Stairs. — Stairs shall be at least 750 millimeters in clear
property line between them. When a new building is to width, with a rise of 200 millimeters and a minimum run
be erected on the same property with an existing of 200 millimeters.
building, the assume property line from the existing
building shall be the distance to the property line for each (i) Entrance and Exit. — There shall be at least one
occupancy as set forth by the Secretary. Provided, that entrance and another one for exit.
two or more buildings on the same property may be (j) Electrical Requirements. — All electrical installation
considered as one building if the aggregate area of such shall conform to the requirements of the Philippine
building is within the limits of allowable floor areas for a Electrical Code.
single building, and when the buildings so considered,
house different occupancies or are of different types of (k) Mechanical Requirements. — Mechanical systems
construction, the area shall be that allowed for the most and/or equipment installation shall be subject to the
restrictive occupancy or construction. requirement of the Philippine Mechanical Engineering
Code.
SECTION 705. Allowable Floor Areas. — The allowable
floor areas for one-storey building and buildings over SECTION 709. Requirements for Other Group
one-storey shall not exceed the limits prescribed by the Occupancies. — Subject to the provisions of this Code,
Secretary for each occupancy groups and/or types of the Secretary shall promulgate rules and regulations for
construction. each of the other Group Occupancies covering: allowable
construction, height, and area; location on property, exit
For purposes of this Section, each portion of a building facilities, light, ventilation, and sanitation; enclosures of
separation by one or more area separation walls may be vertical openings; fire extinguishing systems; and special
considered a separate building provided the area hazards.
separation walls meet the requirements prescribed
therefor by the Secretary.
SECTION 706. Allowable Floor Area Increases. — The floor CHAPTER 8 Light and Ventilation
areas hereinabove provided may be increased in certain SECTION 801. General Requirements of Light and
specific instances and under appropriate conditions, Ventilation. — (a) Subject to the provisions of the Civil
based on the existence of public space, streets or yards Code of the Philippines on Easement of Light and View
extending along and adjoining two or more sides of the and to the provisions of this part of the Code, every
building or structure subject to the approval of the building shall be designed, constructed, and equipped to
Building Official. provide adequate light and ventilation.
SECTION 707. Maximum Height of Buildings. — The (a) Subject to the provisions of the Civil Code of the
maximum height and number of storeys of every Philippines on Basement of Light and View and to the
building shall be dependent upon the character of provisions of this part of the Code, every building shall be
occupancy and the type of construction as determined by designed, constructed, and equipped to provide
the Secretary considering population density, building adequate light and ventilation.
bulk, widths of streets and car parking requirements. The
height shall be measured from the highest adjoining (b) All buildings shall face a street or public alley or a
sidewalk or ground surface: Provided, that the height private street which has been duly approved.
measured from the lowest adjoining surface shall not (c) No building shall be altered nor arranged so as to
exceed such maximum height by more than 3.00 meters: reduce the size of any room or the relative area of
Except, that towers, spires, and steeples, erected as part windows to less than that provided for buildings under
of a building and not used for habitation or storage are this Code, or to create an additional room, unless such
limited as to height only by structural design if additional room conforms to the requirements of this
completely of incombustible materials, or may extend not Code.
to exceed 6.00 meters above the height limits for each
occupancy group if of combustible materials. (d) No building shall be enlarged so that the dimensions
of the required court or yard would be less than that
SECTION 708. Minimum Requirements for Group A prescribed for such building.
Dwellings. — (a) Dwelling Location and Lot Occupancy.—
The dwelling shall occupy not more than ninety percent SECTION 802. Measurement of Site Occupancy. — (a) The
of a corner lot and eighty percent of an inside lot, and measurement of site occupancy or lot occupancy shall be
subject to the provisions on Easement on Light and View taken at the ground level and shall be exclusive of courts,
of the Civil Code of the Philippines , shall be at least 2 yards, and light wells.
meters from the property line. (b) Courts, yards, and light wells shall be measured clear
(b) Light and Ventilation.— Every dwelling shall be so of all projections from the walls enclosing such wells or
constructed and arranged as to provide adequate light yards with the exception of roof leaders, wall copings, sills,
and ventilation as provided under Section 805, of this or steel fire escapes not exceeding 1.20 meters in width.
Code. SECTION 803. Percentage of Site Occupancy. — a)
(c) Sanitation.— Every dwelling shall be provided with at Maximum site occupancy shall be governed by the use,
least one sanitary toilet and adequate washing and type of construction, and height of the building and the
drainage facilities. use, area, nature, and location of the site; and subject to
the provisions of the local zoning requirements and in
(d) Foundation.— Footing shall be of sufficient size and accordance with the rules and regulations promulgated
strength to support the load of the dwelling and shall be by the Secretary.
at least 250 millimeters thick and 600 millimeters below
the surface of the ground. SECTION 804. Size and Dimensions of Courts. — (a)
Minimum size of courts and their least dimensions shall
(e) Post.— The dimensions of wooden post shall be those be governed by the use, type of construction, and height
found in Table 708-A: Dimensions of Wooden Posts of the building as provided in the rules and regulations
(Annex B-1). Each post shall be anchored to such footing promulgated by the Secretary, provided that the
by strap and bolts of adequate size. minimum horizontal dimension of court shall be not less
than 2.00 meters.


(b) All inner courts shall be connected to a street or yard, (b) Whenever artificial ventilation is required, the
either by a passageway with a minimum width of 1.20 equipment shall be designed and constructed to meet
meters or by a door through a room or rooms. the following minimum requirements in air changes:
SECTION 805. Ceiling Heights. — (a) Habitable rooms 1. For rooms entirely above grade and used for office,
provided with artificial ventilation have ceiling heights clerical, or administrative purposes, or as stores, sales
not less than 2.40 meters measured from the floor to the rooms, restaurants, markets, factories, workshops, or
ceiling; Provided, that for buildings of more than machinery rooms, not less than three changes of air per
one-storey, the minimum ceiling height of the first storey hour shall be provided.
shall be 2.70 meters and that for the second storey 2.40 2. For rooms entirely above grade and used as bakeries,
meters and succeeding storeys shall have an hotel or restaurant kitchens, laundries other than
unobstructed typical head-room clearance of not less accessory to dwellings, and boiler rooms — not less than
than 2.10 meters above the finished floor. Above stated ten changes of air per hour shall be provided.
rooms with a natural ventilation shall have ceiling height
not less than 2.70 meters. 3. For auditorium and other rooms used for assembly
purposes, with seats or other accommodations — not less
(b) Mezzanine floors shall have a clear ceiling height not than 0.03 cubic meter of air per minute shall be supplied
less than 1.80 meters above and below it. for each person.
SECTION 806. Size and Dimensions of Rooms.— (a) 4. For wards and dormitories of institutional buildings —
Minimum sizes of rooms and their least horizontal not less than 0.45 cubic meter of air per minute shall be
dimensions shall be as follows: supplied for each person accommodated.
1. Rooms for Human Habitations — 6.00 square meters 5. For other rooms or spaces not specifically covered
with at least dimensions of 2.00 under this Section of the Code, applicable provisions of
2. Kitchens — 3.00 square meters with at least dimension the Philippine Mechanical Engineering Code, shall be
of 1.50 meters; followed.
3. Bath and toilet — 1.20 square meters with at least
dimension of 0.90 meters.
CHAPTER 9 Sanitation
SECTION 807. Air Space Requirements in Determining
the Size of Rooms. — (a) Minimum air space shall be SECTION 901. General. — Subject to the provisions of
provided as follows: Book II of the Civil Code of the Philippines on Property,
Ownership, and its Modification, all buildings hereafter
1. School Rooms — 3.00 cubic meters with 1.00 square erected, altered, remodeled, relocated or repaired for
meter of floor area per person; human habitation shall be provided with adequate and
2. Workshops, Factories, and Offices — 12.00 cubic meters potable water supply, plumbing installation, and suitable
of air space per person; wastewater treatment or disposal system, storm water
drainage, pest and vermin control, noise abatement
3. Habitable rooms — 14.00 cubic meters of air space per device, and such other measures required for the
person. protection and promotion of health of persons occupying
SECTION 808. Window Openings. — (a) Every room the premises and other living nearby.
intended for any use, not provided with artificial SECTION 902. Water Supply System. — (a) Whenever
ventilation system as herein specified in this Code, shall available, the potable water requirements for a building
be provided with a window or windows with a total free used for human habitation shall be supplied from
area of openings equal to at least ten percent of the floor existing municipal or city waterworks system.
area of room, and such window shall open directly to a
court, yard, public street or alley, or open water courses. (b) The quality of drinking water from meteoric, surface or
underground sources shall conform to the criteria set in
SECTION 809. Vent Shafts. — (a) Ventilation or vent shafts the latest approved National Standards for Drinking
shall have a horizontal cross-sectional area of not less Water.
than 0.10 square meter for every meter of height of shaft
but in no case shall the area be less than 1.00 square (c) The design, construction and operation of deepwells
meter. No vent shaft shall have its least dimension less for the abstraction of groundwater shall be subject to the
than 600 millimeters. provisions of the Water Code of the Philippines.
(b) Skylights — Unless open to the outer air at the top for (d) The design, construction and operation of
its full area, vent shaft shall be covered by a skylight independent waterworks, systems of private housing
having a net free area or fixed louver openings equal to subdivisions or industrial estates shall be governed by
the maximum required shaft area. existing laws relating to local waterworks system.
(c) Air ducts shall open to a street or court by a horizontal (e) The water piping installations inside buildings and
duct or intake at a point below the lowest window premises shall conform to the provisions of the National
opening. Such duct or intake shall have a minimum Plumbing Code of the Philippines.
unobstructed cross-sectional area of not less than 0.30 SECTION 903. Wastewater Disposal System. — (a)
square meter with a minimum dimension of 300 Sanitary sewage from buildings and neutralized or
millimeters. The openings to the duct or intake shall not pre-treated industrial wastewater shall be discharged
be less than 300 millimeters above the bottom of the directly into the nearest street sanitary sewer main of
shaft and the street surface or level of court at the existing municipal or city sanitary sewerage system in
respective ends of the duct or intake. accordance with the criteria set by the Code on Sanitation
SECTION 810. Ventilation Skylights. — (a) Skylights shall and the National Pollution Control Commission.
have glass area not less than that required for the (b) All buildings located in areas where there are no
windows that are replaced. They shall be equipped with available sanitary sewerage system shall dispose their
movable sashes or louvers with an aggregate net free sewage "Imhoff" or septic tank and subsurface absorption
area not less than that required for openable parts in the filled.
window that are replaced or provided with approved
artificial ventilation of equivalent effectiveness. (c) Sanitary and industrial plumbing installations inside
buildings and premises shall conform to the provisions of
SECTION 811. Artificial Ventilation. — (a) Rooms or spaces the National Plumbing Code.
housing industrial or heating equipment shall be
provided with artificial means of ventilation to prevent SECTION 904. Storm Drainage System. — (a) Rain water
excessive accumulation of hot and/or polluted air; drainage shall not discharge to the sanitary sewer system.


(b) Adequate provisions shall be made to drain low areas (c) Construction. — A marquee shall be constructed of
in buildings and their premises. incombustible material or materials of not less than
SECTION 905. Pest and Vermin Control. — (a) All buildings two-hours fire-resistive construction. It shall be provided
with hollow and/or wood construction shall be provided with necessary drainage facility.
with rat proofing. (d) Location. — Every marquee shall be so located as not
(b) Garbage bins and receptacles shall be provided with to interfere with the operation of any exterior standpipe
ready means for cleaning and with positive protection connection or to obstruct the clear passage from stairway
against entry of pest and vermins. exits from the building or the installation or maintenance
of electroliers.
(c) Dining rooms for public use without artificial
ventilation shall be properly screened. SECTION 1006. Movable Awnings or Hoods. — (a)
Definition. — An awning is a movable shelter supported
SECTION 906. Noise Pollution Control. — Industrial entirely from the exterior wall of a building and of a type
establishments shall be provided with positive noise which can be retracted, folded, or collapsed against the
abatement devices to tone down the noise level of face of a supporting building.
equipment and machineries to acceptable limits set
down by the Department of Labor and the National (b) Clearance. — The horizontal clearance between the
Pollution Control Commission. awning and the curb line shall not be less than 300
millimeters. The vertical clearance between the
SECTION 907. Pipe Materials. — All pipe materials to be undermost surface of the awning and the pavement or
used in buildings shall conform to the Standard ground line shall be not less than 2.40 meters. Collapsible
Specifications of the Philippine Standard Council. awnings shall be so designated that they shall not block a
required exit when collapsed or folded.
CHAPTER 10 Building Projection Over Public SECTION 1007. Doors, Windows, and the like. — Doors,
windows and the like less than 2.40 meters above the
Streets pavement or ground line shall not, when fully opened or
SECTION 1001. General Requirements. — (a) No part of upon opening, project beyond the property line except
any building or structure or any of its appendages shall fire exit doors.
project beyond the property line of the building site, SECTION 1008. Corner Buildings with chaflans. —(a) Every
except as provided in this Code. corner building or solid fence on a public street or alley
(b) The projection of any structure or appendage over a less than 3.60 meter in width shall be truncated at the
public property shall be the distance measured corner. The face of the triangle so formed shall be at right
horizontally from the property line to the outermost point angles to the bisector of the angle of the intersection of
of the projection. the street lines; provided, that in no case, the Secretary
shall determine the size and form of the chaflan.
SECTION 1002. Projection into Alleys or Streets. — (a) No
part of any structure or its appendage shall project into (b) If the building is arcaded, no chaflan is required
any alley or street, national road or public highway except notwithstanding the width of the public street or alley,
as provided in this Code. less than 12.00 meters.
(b) Footings located at least 2.40 meters below grade

along national roads or public highway may project not CHAPTER 11 Protection of Pedestrians During
more than 300 millimeters beyond the property line.
Construction or Demolition
(c) Foundations may be permitted to encroach into public
sidewalk areas to a width not exceeding 500 millimeters; SECTION 1101. General Requirement. —(a) No person shall
provided, that the top of the said foundations is not less use or occupy a street, alley or public sidewalk for the
than 600 millimeters below the established grade; And performance of work covered by a building permit except
provided, further, that said projections does not obstruct in accordance with the provisions of this Chapter.
any existing utility such as power, communication, gas, (b) No person shall perform any work on any building or
water, or sewer lines, unless the owner concerned shall structure adjacent to a public way in general use for
pay the corresponding entities for the rerouting of the pedestrian travel, unless the pedestrians are protected as
parts of the affected utilities. specified in this Chapter.
SECTION 1003. Projection of Balconies and Appendages (c) Any material or structure temporarily occupying public
Over Streets. — (a) The extent of any projection over an property, including fence, canopies, and walkways, shall
alley or street shall be uniform within a block and shall be adequately lighted, between sunset and sunrise.
conform to the limitations set forth in Table 1003-A;
Projection of Balconies and Appendages (Annex B-2); SECTION 1102. Storage in Public Property. — Materials and
equipment necessary for work to be done under a permit
(b) The clearance between the established grade of the when placed or stored on public property shall not
street and/or sidewalk and the lowest under surface of obstruct free and convenient approach to and used of
any part of the balcony shall not be less than 3.00 meters. any fire hydrant, fire or police alarm box, utility box, catch
SECTION 1004. Arcades. —(a) Whenever required by basin, or manhole and shall not interfere with any
existing building and zoning regulations, arcades shall be drainage of any street or alley gutter.
constructed on sidewalks of streets. The width of the SECTION 1103. Mixing Mortar or Public Property. —The
arcade and its height shall be uniform throughout the mixing of mortar, concrete, or similar materials on public
street provided, that in no case, shall an arcade be less streets shall not be allowed.
than 3.00 meters above the established sidewalk grade.
SECTION 1104. Protection of Utilities. — All public or
SECTION 1005. Canopies (Marquees). —(a) Definition. — A private utilities above or below the ground shall be
canopy or marquee is a permanent roofed structure protected from any damage by any work being done
above a door attached to and supported by the building under the permit. The protection shall be maintained
and projecting over a wall or sidewalk. This includes any while such work is being done and shall not obstruct the
object or decoration attached thereto. normal functioning of any such utility.
(b) Projection and Clearance. — The horizontal clearance SECTION 1105. Walkway. — (a) When the Building Official
between the outermost edge of the marquee and the authorizes a sidewalk to be fenced or closed, or in case
carb line shall be not less than 300 millimeters. The there is no sidewalk in front of the building site during
vertical clearance between the pavement or ground line construction or demolition, a temporary walkway of not
and the under surface of any part of the marquee shall less than 1.20 meters wide shall be provided.
not be less than 3.00 meters.


(b) The walkway shall be capable of supporting a uniform (2) Whenever the depth of excavation for any
live load of 650 kilograms per square meter. A durable construction is such that the lateral and subjacent
wearing surface shall be provided throughout the support of the adjoining property or existing structure
construction period. thereon would be affected in a manner that the stability
SECTION 1106. Pedestrian Protection. — (a) Protection or safety of the same is endangered, the person
Required. — Pedestrian traffic shall be protected by a undertaking or causing the excavation to be undertaken
railing on the street side when the walkway extends into shall be responsible for the expense of underpinning or
the roadway, by a railing when adjacent to excavations, extending the foundation or footings of the
and by such as set forth in Table 1106-A: Type of Projection aforementioned property or structure.
Required for Pedestrians (Annex B-2) (3) Excavation and other similar disturbances made on
(b) Railings. — Adequate railings when required shall be public property shall, unless otherwise excluded by the
built substantially strong and should be at least 1.00 Building Official, be restored immediately to its former
meter in height. condition within 48 hours from the start of such
excavation and disturbances by whosoever caused such
(c) Fences. — Fences shall be built of an approved excavation or disturbance.
material, not less than 2.40 meters in height above grade,
and be placed on the side of the walkway nearest to the (c) Footings, Foundations, and Retaining Walls — (1)
building site. Fences shall enclose entirely the building Footings and foundations shall be of the appropriate
site. Openings in such fences shall be provided with doors type, of adequate size, and capacity in order to safely
which shall be keep closed at all times. sustain the superimposed loads under seismic or any
conditions of external forces that may affect the safety or
(d) Canopies. — The protective canopy shall have a clear stability of the structure. It shall be the responsibility of
height of 2.40 meters above the railway, and shall be the architect and/or engineer to adopt the type and
structurally safe. Every canopy shall have a solid fence design of the same in accordance with the standards set
built along its entire length on the construction side. If forth by the Secretary.
materials are stored or work is done on top of the canopy,
the edge along the street shall be protected by a tight (2) Whenever or wherever there exists in the site of the
curb board not less than 300 millimeters high and an construction an abrupt change in the ground levels or
railing not less than 1.00 meter high shall be provided. level of the foundation such that instability of the soil
The entire structure shall be designed to carry the loads could result, retaining walls shall be provided and such
imposed upon it: Provided, that the live load shall be not shall be of adequate design and type of construction as
less than 600 kilograms per square meter. prescribed by the Secretary.
SECTION 1107. Maintenance and Removal of Protective SECTION 1203. Veneer. — (a) Definition. — Veneer is a
Devices. — (a) Maintenance. — All protective devices shall non-structural facing of brick, concrete, tile, metal, plastic,
be properly maintained in place and kept in good order glass, or other similar approved materials attached to a
for the entire length of time pedestrians may be backing or structural components of the building for the
endangered. purpose of ornamentation, protection, or enclosure that
may be adhered, integrated, or anchored either on the
(b) Removal. — Every protective fence or canopy shall be interior or exterior of the building or structure.
removed within 30 days after such protection is no longer
required as determined by the Building Official. (b) Design Requirements. — The design of all veneer shall
comply with the following:
SECTION 1108. Demolition. — (a) The work of demolishing
any building shall not be commended until all the (1) Veneer shall support no load other than its own weight
necessary pedestrian protective structures are in place. and the vertical dead load of veneer immediately above.
(b) The Building Official may require the permittee to (2) Surfaces to which veneer is attached shall be designed
submit plans, specifications and complete schedule of to support the additional vertical and lateral loads
demolition. When so required, no work shall be done until imposed by the veneer.
such plans, specifications and schedule are approved by (3) Consideration shall be given to differential movements
the Building Official. of the supports including those caused by temperature
changes, shrinkage, creep, and deflection.
(4) Adhered veneer and its backing shall be designed to
CHAPTER 12 General Design and Construction have a bond to the supporting elements sufficient
Requirements seismic effects on the total assemblage.
SECTION 1201. General Requirement. — Buildings (5) Anchored veneer and its attachment shall be designed
proposed for construction shall comply with all the to resist horizontal forces equal to twice the weight of the
regulations and specifications herein set forth governing veneer.
quality, characteristics and properties of materials, (6) Anchors supports and ties shall be non-combustible
methods of design and construction, type of occupancy and corrosion-resistant.
and classification.
SECTION 1204. Enclosure of Vertical Openings. — (a)
All other matters relative to the structural design of all General. — Vertical openings shall be enclosed
buildings and other structures not provided for in this depending upon the fire-resistive requirements of a
Chapter shall conform with the provisions of the National particular type of construction as set forth in this Code.
Structural Code of Buildings, as adopted and
promulgated by the Board of Civil Engineering pursuant (b) Elevator Enclosures. — Walls and partitions enclosing
to the Republic Act Number 544, as amended, other wise elevators and escalators shall be of not less than the
known as the "Civil Engineering Law". fire-resistive construction required under the Types of
Construction. Enclosing Walls of elevator shafts may
SECTION 1202 Excavation, Foundation and Retaining consist of wire glass set in metal frames on the entrance
Wall. — (a) Subject to the provisions of Articles 684 to 686 side only. Elevator shafts extending through more than
of the Civil Code of the Philippines on lateral and two storeys shall be equipped with an approved means of
subjacent support, the design and quality of materials adequate ventilation to and through the main roof of the
used structurally in excavation, footings, and in building: Provided, that in those buildings housing
foundations shall conform to accepted engineering Groups F and G Occupancies equipped with automatic
practice. fire-extinguishing systems throughout, enclosures shall
(b) Excavation and Fills — (1) Excavation or fills for not be required for escalators:Provided, further, that the
buildings or structures shall be so constructed or top of the escalator opening at each storey shall be
protected that they do not endanger life or property. provided with a draft curtain. Such draft curtain shall
enclose the perimeter of the unenclosed opening and


shall extend from the ceiling downward at least 300 (4) Ventilation. — Enclosed attics including rafter spaces
millimeters on all sides. Automatic sprinkles shall be formed where ceilings are applied direct to the underside
provided around the perimeter of the opening and within or roof rafters, shall be provided with adequate ventilation
a 600 millimeters of the draft curtain. The distance protected against the entrance of rain.
between the sprinkles shall not exceed 1.80 meters (d) Roof Drainage System.— (1) Roof Drains. — Roof drains
center-to-center. shall be installed at low points of the roof and shall be
(c) Other Vertical Openings. — All shafts, ducts, chutes, adequate in size to discharge all tributary waters.
and other vertical openings not covered in paragraph (b) (2) Overflow Drains and Scuppers. — Where roof drains
above shall have enclosing walls conforming to the are required, adequate overflow drains shall be provided.
requirements specified under the type of construction of
the building in which they are located. In other than (3) Concealed Piping. — Roof drains and overflow drains,
Group A Occupancies rubbish and linen chutes shall when concealed within the construction of the building,
terminate in rooms separated from the remainder of the shall be installed in accordance with the provisions of the
building by a One-Hour Fire-Resistive Occupancy National Plumbing Code.
Separation. Openings into the chutes shall not be located (4) Over Public Property. — Roof drainage water from a
in required exit corridors or stairways. building shall not be permitted to flow over public
(d) Air Ducts. — Air ducts passing through a floor shall be property, except for Group A and J Occupancies.
enclosed in a shaft. The shaft shall be as required in this (e) Flashing. — Flashing and counterflashing shall be
Code for vertical openings. Dampers shall be installed provided at the juncture of the roof and vertical surfaces.
where ducts pierce the shaft enclosure walls. Air ducts in
Group A Occupancies need not be enclosed in a shaft if SECTION 1207. Stairs, Exits and Occupant Loads. — (a)
conforming to the mechanical provisions of this Code. General. — The construction of stairs and exits shall
conform to the occupant load requirements of buildings,
SECTION 1205. Floor Construction. — (a) Floors shall be of reviewing stands, bleachers and grandstands:
such materials and construction as specified under
Chapter 5 — Fire Zones and Fire-Resistive Standards and (1) Determinations of Occupant Loads. — The occupant
under Chapter 6 — Types of Construction. load permitted in any building or portion thereof shall be
determined by dividing the floor area assigned to that
(b) All floors shall be so framed and secure into the use by the unit area allowed per occupant as determined
framework and supporting walls as to form an integral by the Secretary.
part of the whole building.
(2) Exit Requirements. — Exit requirements of a building
(c) The types of floor construction used shall provide or portion thereof used for different purposes shall be
means to keep the beam and girders from lateral determined by the occupant load which gives the largest
buckling. number of persons. No obstruction shall be placed in the
SECTION 1206. Roof Construction and Covering. — (a) required width of an exit except projections permitted by
Roof Covering. — Roof covering for all buildings shall be this Code.
either fire-retardant or ordinary depending upon the (3) Posting of Room Capacity. — Any room having an
fire-resistive requirements of the particular type of occupant load of more than 50 where fixed seats are not
construction. The use of combustible roof insulation shall installed, and which is used for classroom, assembly, or
be permitted in all types of construction provided it is similar purpose shall have the capacity of the room
covered with approved roof covering applied directly posted in a conspicuous place near the main exit from
thereto. the room.
(b) Roof Trusses. — All roofs shall be so framed and tied (4) Changes in Elevation. — Except in Groups A
into the framework and supporting walls so as to form an Occupancies, changes in floor elevations of less than 300
integral part of the whole building. Roof trusses shall have millimeters along any exit serving a tributary occupant
all joints well fitted and shall have all tension members load of 10 or more shall be by means of ramps.
well tightened before any load is placed in the truss.
Diagonal and sway bracing shall be used to brace all roof (b) Exits— (1) Number of Exits. — Every building or usable
trusses. The allowable working stresses of materials in portion thereof shall have at least one exit. In all
trusses shall conform to this Code. Camber shall be occupancies, floors above the first storey having an
provided to prevent sagging. occupant load of more than 10 shall not have less than
two exits. Each mezzanine floor used for other than
(c) Attics — (1) Access. — An attic access opening shall be storage purposes, if greater in area than 185 square
provided in the ceiling of the top floor of buildings with a meters or more than 18.00 meters in any dimension, shall
combustible ceiling or roof construction. The opening have at least than two stairways to an adjacent floor.
shall be located in a corridor or hallway of buildings of Every storey or portion thereof, having an occupant load
three or more storeys in height, and readily accessible in of 500 to 999 shall have at least three exits. Every storey or
buildings of any height. An opening shall not be less than portion thereof having an occupant load of 1000 or more
600 millimeters square or 600 millimeters in diameter. shall have at least four (4) exits. The number of exits
The minimum clear headroom of 800 millimeters shall be required from any storey of a building shall be
provided above the access opening. For ladder determined by using the occupant loads of floors which
requirements, refer to the Philippine Mechanical exit through by using the occupant loads of floors which
Engineering Code. exit through the level under consideration as follows: 50
(2) Area Separation. — Enclosed attic spaces of percent of the occupant load in the first adjacent storey
combustible construction shall be divided into horizontal above (and the first adjacent storey below, when a storey
areas not exceeding 250 square meters by fire-resistive below exits through the level under consideration) and 25
partitions extending from the ceiling to the roof. Except, percent of the occupant load in the storey immediately
That where the entire attic is equipped with an approved beyond the first adjacent storey. The maximum number
automatic fire-extinguishing system, the attic space may of exits required for any storey shall be maintained until
be divided into areas not to exceed 750 square meters. egress is provided from the structures. For purposes of
Openings in the partitions shall be protected by this Section basement or cellars and occupied roofs shall
self-closing doors. be provided with exits as required for storeys. Floors
above the second storey, basements and cellars used for
(3) Draft Stops. — Regardless of the type of construction, other than service of the building shall have not less than
draft stops shall be installed in trusses roofs, between roof two exits.
and bottom chords or trusses, in all buildings exceeding
2000 square meters. Draft stops shall be constructed as (2) Width. — The total width of exits in meters shall not be
for attic area separations. less than the total occupant load served divided by 165.
Such width of exits shall be divided approximately equally
among the separate exits. The total exit width required



from any storey of a building shall be determined by marked that they are already distinguishable from the
using the occupant load of that storey plus the adjacent construction.
percentage of the occupant loads of floors which exits (9) Additional Doors. — When additional doors are
through the level under consideration as follows: fifty (50) provided for egress purposes, they shall conform to all
per cent of the occupant load in the first adjacent storey provisions in the following cases: Approved revolving
above (and the first adjacent storey below when a storey doors having leaves which will collapse under opposing
below exits through the level under consideration) and pressures may be used in exit situations: Provided, That
twenty five per cent of the occupant load in the storey such doors have a minimum width of 2.00 meters or they
immediately beyond the first adjacent storey. The are not used in occupancies where exits are required to
maximum exit width from any storey of a building shall be equipped with panic hardware or at least one
be maintained. conforming exit door is located adjacent to each revolving
(3) Arrangement of Exits. — If only two exits are required doors installed in a building and the revolving door shall
they shall be placed a distance apart to not less than not be considered to provide any exit width.
one-fifth of the perimeter of the area served measured in (d) Corridors and Exterior Exit Balconies. — The provisions
a straight line between exits. Where three or more exits herein shall apply to every corridor and exterior exit
are required they shall be arranged a reasonable distance balcony serving as required exit for an occupant load of
apart so that if one becomes blocked, the others will be more than ten.
available.
(1) Width. — Every corridor or exit balcony shall not be less
(4) Distance to Exits. — No point in a building without a than 1.10 meters in width.
sprinkle system shall be more than 45.00 meters from an
exterior exit door, a horizontal exit, exit passageway, or an (2) Projections. — The required width of corridors and
enclosed stairway, measured along the line of travel. In a exterior exit balconies shall be an obstructed: Except that
building equipped with a complete automatic fire trim handrails, and doors when fully opened shall not
extinguishing system the distance from exits may be reduce the required width by more than 200 millimeters.
increased to 60.00 meters. Doors in any position shall not reduce the required width
of the corridor by more than one-half.
(c) Doors. — The provisions herein shall apply to every exit
door serving an area having an occupant load of more (3) Access to Exits. — When more than one exit is
than 10 or serving hazardous rooms or areas. required, they shall be arranged to allow going to either
direction from any point dead ends permitted by this
(1) Swing. — Exit door shall swing in the direction of exit Code.
travel when serving any hazardous areas or when serving
an occupant load of 50 or more. Double acting doors shall (4) Dead Ends. — Corridors and exterior exit balconies
not be used as exits serving a tributary occupant load of with dead ends are permitted when the dead end does
more than 100; nor shall they be used as a part of fire not exceed 6.00 meters in length.
assembly, nor equipped with public hardware. A double (5) Construction. — Walls and ceilings of corridors shall
acting door shall be provided with a view panel of not less not be less than one-hour fire-resistive construction.
than 1,300 square centimeters. Provided, that this requirement shall not apply to exterior
(2) Type of Lock or Latch. — Exit door shall be openable exit balconies, railings, and corridors of one-storey
from the inside without the use of a key or any special building housing a Group E and F Occupancy occupied
knowledge or effort: Except, that this requirement shall by one tenant only and which serves an occupant load of
not apply to exterior exit doors in a Group E or F 30 or less, nor to corridors, formed by temporary
Occupancy if there is a conspicuous, readily visible and partitions. Exterior exit balconies cannot project into an
durable sign on or adjacent to the door, stating that the area where protected openings are required.
door is to remain unlocked during business hours. The (6) Openings. — Where corridor wall are required to be
locking device must be of a type that will readily be one-hour fire-resistive construction, every interior door
distinguishable as locked. Flush bolts or surface bolts are opening shall be protected as set forth in generally
prohibited. recognized and accepted requirements for dual purpose
(3) Width and Height. — Every required exit doorway shall fire exit doors. Other interior openings except ventilation
be of a size as to permit the installation of a door not less louvers equipped with approved automatic fire shutter
than 900 millimeters in width and not less than 2.00 shall be 7 millimeters thick fixed wire glass set in steel
meters in height. When installation in exit doorways, exit frames. The total area of all openings other than doors, in
doors shall be capable of openings at least 90 decrees any portion of an interior corridor wall shall not exceed
and shall be so mounted that the clear width of the exit twenty-five percent of the area of the corridor wall of the
way is not less than 700 millimeters. In computing the room being separated from the corridor.
required exit width the net dimension of the exitway shall (e) Stairways. — Except stairs or ladders used only to
be used. access, equipment, every stairway serving any building or
(4) Door Leaf Width. — No leaf of an exit door shall exceed portion thereof shall conform to the following
1.20 meters in width. requirements:
(5) Special Doors. — Revolving, sliding, and overhead (1) Width. — Stairways serving an occupant load of more
doors shall not be used as required exits. than 50 shall not be less than 1.10 meters. Stairways
serving an occupant load of 50 or less may be 900
(6) Egress from Door. — Every required exit door shall give millimeters wide. Private stairways serving an occupant
immediate access to an approved means of egress from load of less than 10 may be 750 millimeters. Trim and
the building. handrails shall not reduce the required width by more
(7) Change in Floor Level at Doors. — Regardless of the than 100 millimeters.
occupant load there shall be a floor or landing on each (2) Rise and Run. — The rise of every step in a stairway
side of an exit door. The floor or landing shall be leveled shall not exceed 200 millimeters and the run shall not less
with, or not more than 50 millimeters lower than the than 250 millimeters. The maximum variations in the
threshold of the doorway: Except, that in Group A and B height of risers and the width of treads in any one flight
occupancies, a door may open on the top step of a flight shall be 5 millimeters: Except, in case of private stairways
of stairs or an exterior landing provided the door does not serving an occupant load of less than 10, the rise may be
swing over the top step or exterior landing and the 200 millimeters and the run may be 250 millimeters,
landing is not more than 200 millimeters below the floor except as provided in sub-paragraph (3) below.
level.
(3) Winding Stairways. — In Group A Occupancy and in
(8) Door Identification. — Glass doors shall conform to the private stairways in Group B Occupancies, winders may
requirements in Section 1005. Other exit doors shall be so be used if the required width of run is provided at a point
not more than 300 millimeters from the side of the



stairway where the treads are narrower but in no case protected by a fire assembly having a fire-resistive rating
shall any width of run be less than 150 millimeters at any not less than the occupant load served by such exit. The
point. capacity shall be determined by allowing 0.30 square
(4) Circular Stairways. — Circular stairs may be used as an meter of net floor area per ambulatory occupant and 1.90
exit provided the minimum width of run is not less than square meters per non-ambulatory occupant. The
250 millimeters. All treads in any one flight between dispersal area into which the horizontal exit loads shall be
landings shall have identical dimensions within a 5 provided with exits as required by this Code.
millimeter tolerance. (h) Exit Enclosures. — Every interior stairway, ramp, or
(5) Landings. — Every landing shall have a dimension escalator shall be enclosed as specified in this Code:
measured in the direction of travel equal to the width of Except, that in other than Group D Occupancies, as an
the stairway. Such dimension need not exceed 1.20 enclosure will not be required for stairway, ramp, or
meters when the stairs has a straight run. Landings when escalator serving only one adjacent floor and not
provided shall not be reduced in width by more than 100 connected with corridors or stairways serving other floors.
millimeters by a door when fully open. Stairs in Group A Occupancies need not be enclosed.
(6) Basement Stairways. — Where a basement stairway (1) Enclosure walls shall not be less than two-hour
and a stairway to an upper storey terminate in the same fire-resistive construction. There shall be no openings into
exit enclosure, an approved barrier shall be provided to exit enclosures except exit doorways and openings in
prevent persons from continuing on to the basements. exterior walls. All exit doors in an exit enclosure shall be
Directional exit signs shall be provided as specified in this appropriately protected.
Code. (2) Stairway and ramp enclosures shall include landings
(7) Distance Between Landings. — There shall be not and parts of floors connecting stairway flights and shall
more than 3.60 meters vertical distance between include a corridor on the ground floor leading from the
landings. stairway to the exterior of the building. Enclosed corridors
of passageways are not required from unenclosed
(8) Handrails. — Stairways shall have handrails on each stairways.
side and every stairway required to be more than 3.00
meters in width shall be provided with not less than one (3) A stairway in an exit enclosure shall not continue
intermediate handrail for each 3.00 meters of required below the grade level exit unless an approved barrier is
width. Intermediate handrail shall be spaced provided at the ground floor level to prevent persons
approximately equal within the entire width of the from accidentally continuing into the basement.
stairway. Handrails shall be placed not less than 800 (4) There shall be no enclosed usable space under
millimeters nor more than 900 millimeters above the stairways in an exit enclosure, nor shall the open space
nosing of treads and ends of handrails shall be returned under such stairways be used for any purpose.
or shall terminate in nowel posts or safety terminals: (i) Smokeproof Enclosures — A smokeproof enclosure
Except, in the following cases: Stairways 1.10 meters or less shall consist of a vestibule and a continuous stairway
in width and stairway serving one individual dwelling unit enclosed from the highest point to the lowest point by
in Group A or B Occupancies may have one handrail, walls of two-hour fire-resistive construction. In building
except that such stairway open on one or both sides shall five storeys or more height, one of the required exits shall
have handrails provided on the open side or sides: or be a smokeproof enclosure.
stairway having less than four risers need not have
handrails. (1) Stairs in smokeproof enclosures shall be of
incombustible construction.
(9) Exterior Stairway Protection. — All openings in the
exterior wall below or within 3.00 meters, measured (2) There shall be no openings in smokeproof enclosures,
horizontally of an exterior exit stairway serving a building except exit doorways and openings in exterior walls. There
over two storeys in height shall be protected by a shall be no openings directly into the interior of the
self-closing fire assembly having a three-fourths hour building. Access shall be through a vestibule with one
fire-resistive rating: Except,that opening may be wall at least fifty percent open to the exterior and having
unprotected when two separated exterior stairways serve an exit door from the interior of the building and exit
an exterior exit balcony. door leading to the smokeproof enclosure. In lieu of a
vestibule, access may be by way of an open exterior
(10) Stairway Construction-Exterior. — Exterior stairway balcony of incombustible materials.
shall be of incombustible material: Except, that on Type III
buildings which do not exceed two storeys in height, (3) The opening from the building to the vestibule or
which are located in less fire-restrictive Fire Zones, as well balcony shall be protected with a self-closing fire
as on Type I buildings may be of wood not less than 50 assembly having one-hour fire-resistive rating. The
millimeters in nominal thickness. Exterior stairs shall be opening from the vestibule or balcony to the stair tower
protected as required for exterior walls due to location on shall be protected by a self-closing fire assembly having a
property as specified in this Code. Exterior stairways shall one-hour fire-resistive rating.
not project into an area where openings are required to (4) A smokeproof enclosure shall exit into a public way or
be protected. Where there is enclosed usable space into an exit passageway leading to a public way. The exit
under stairs, the walls and soffits of the enclosed space passageway shall be without other openings and shall
shall be protected on the enclosed side as required for have walls, floors, and ceilings of two-hour fire-resistance.
one-hour fire-resistive construction.
(5) A stairway in a smokeproof enclosure shall not
(11) Stairway to Roof . — In every building four or more continue below the grade level exit unless an approved
storeys in height, one stairway shall extend to the roof barrier is provided at a ground floor level to prevent
unless the roof has C slope greater than 1 in 3. persons from accidentally walking into the basement.
(12) Headroom. — Every required stairway shall have a (j) Exit Outlets, Courts, and Passageways — Every exit
headroom clearance of not less than 2.00 meters. Such shall discharge into a public way, exit court, or exit
clearance shall be established by measuring vertically passageway. Every exit court shall discharge into a public
from a plane parallel and tangent to the stairway tread way or an exit passageway. Passageways shall be without
nosing to the soffit above all points. openings other than required exits and shall have walls,
(f) Ramps. — A ramp conforming to the provisions of this floors, and ceilings of the same period of fire-resistance as
Code may be used as an exit. The width of ramps shall be the walls, floors and ceilings of the building but shall not
as required for corridors. be less than one-hour fire-resistive construction.
(g) Horizontal Exit. — If conforming to the provisions of (1) Width — Every exit court and exit passageway shall be
this Code, a horizontal exit may be considered as the at least as wide as the required total width of the tributary
required exit. All openings in a separation wall shall be exits, such required width being based on the occupant


load served. The required width of exit courts or exit (n) Reviewing Stands, Grandstands, and Bleachers.— (1)
passageway shall be unobstructed except as permitted in Height of Stands — Stands made of combustible framing
corridors. At any point where the width of an exit court is shall be limited to 11 rows or 2.70 meters in height.
reduced from any cause, the reduction in width shall be (2) Design Requirements — the minimum unit live load
affected gradually by a guardrail at least 900 millimeters for reviewing stands, grandstands, and bleachers shall be
in height. The guardrail shall make an angle of not more 500 kilograms per square meter of horizontal projection
than 30 degrees with the axis of the exit court. for the structure as a whole. Seat and footboards shall be
(2) Slope — The slope of exit courts shall not exceed 1 in 10. 180 kilograms per linear meter. The sway force, applied to
The slope of exit passageway shall not exceed 1 in 8. seats, shall be 35 kilograms per linear meter parallel to the
(3) Number of Exits — Every exit court shall be provided seats and 15 kilograms per linear meter perpendicular to
with exits as required in this Code. the seats. Sway forces need not to be applied
simultaneously with other lateral forces.
(4) Openings — All openings into an exit court less than
3.00 meters wide shall be protected by fire assemblies (3) Spacing Seats— (3.1) Row spacing— The minimum
having not less than three-fourth hour fire-resistive spacing of rows of seats measured from back-to-back
rating. Except, that openings more than 3.00 meters shall be: 600 millimeters for seats without backrests in
above the floor of the exit court may be unprotected. open air stands; 750 millimeters for seats with backrests,
and 850 millimeters for chair seating.
(k) Exit Signs and Illuminations — Exits shall be
illuminated at any time the building is occupied with There shall be a space of not less than 300 millimeters
light having an intensity of not less than 10.7 lux at floor between the back of each seat and the front of the seat
level: Except, that for Group A Occupancies, the exit immediately behind it.
illumination shall be provided with separate circuits or (3.2) Rise Between Rows — The maximum rise from one
separated sources of power (but not necessarily separate row of seats to the next shall not exceed 400 millimeters.
from exit signs when these are required for exit signs (3.3) Seating Capacity — For determining the seating
illumination). capacity of a stand the width of any seat shall not be less
(1) Aisles — Every portion of every building in which are than 450 millimeters nor more than 480 millimeters.
installed seats, tables, merchandise, equipment, or similar (3.4) Number of Seats Between Aisles— the number of
materials shall be provided with aisles leading to an exit. seats between any seat and an aisle shall not be greater
(1) Width — Every aisles shall be not less than 800 than 15 for open air stands with seats without backrests in
millimeters wide if serving only one side, and not less buildings.
than 1 meter wide if serving both sides. Such minimum (4) Aisles— (4.1) Aisles Required — Aisles shall be provided
width shall be measured at the point farthest from an in all stands: except, that aisles may be omitted when all
exit, cross aisle, or foyer and shall be increased by 30 the following conditions exists; Seats are without
millimeters for every meters in length towards the exit, backrests; the rise from row to row does not exceed 300
cross aisle or foyer. millimeters per row; the number of rows does not exceed
(2) Exit Distance — In areas occupied by seats and in 11 in height; the top seating board is not over 3.00 meters
Groups H and I Occupancies without seats, the line travel above grade; and the first seating board is not more than
to an exit door by an aisle shall be not more than 45.00 500 millimeters above grade.
meters. With standard spacing, as specified in this Code, (4.2) Obstructions — obstruction shall be placed in the
aisles shall be so located that there will be not more than required width of any aisle or exitway.
seven seats between the wall and an aisle and not more
than fourteen seats between aisles. The number of seats (4.3) Stairs Required — When an aisle is elevated more
between aisle may be increased to 30 where exit doors than 200 millimeters above grade, the aisle shall be
are provided along each side aisle of the row of seats at provided with a stairway or ramp whose width is not less
the rate of one pair of exit doors for every five rows of than the width of the aisle.
seats, provided further that the distance between seats (4.4) Dead End — No vertical aisle shall have a dead end
back to back is at least one meter. Such exit doors shall more than 16 rows in depth regardless of the number of
provide a minimum clear width of 1.70 meters. exits required.
(3) Cross Aisles — Aisles shall terminate in a cross aisle, (4.5) Width — Aisles shall have a minimum width of 1.10
foyer, or exit. The width of the cross aisle shall be not less meters.
than the sum of the required width of the widest aisle
plus fifty percent of the total required width of the (5) Stairs and Ramps — The requirements in this Code
remaining aisle leading thereto. In Groups C, H and E shall apply to all stairs and ramps except for portions that
Occupancies, aisle shall not be provided a dead end pass through the seating area.
greater than 6.00 meters in length. (5.1) Stair Rise and Run — The maximum rise of treads
(4) Vomitories —Vomitories connecting the foyer or main shall not exceed 200 millimeters and the minimum width
exit with the cross aisles shall have a total width not less of the run shall be 280 millimeters. The maximum
than the sum of the required width of the widest aisles variation in the width of treads in any one flight shall not
leading thereto plus fifty percent of the total required be more than 5 millimeters and the maximum variation
width of the remaining aisles leading thereto. in one height of two adjacent rises shall not exceed 5
millimeters.
(5) Slope — The slope portion of aisle shall not exceed a
fall 1 in 8. (5.2) Ramp Slope — The slope of a ramp shall not exceed 1
in 8. Ramps shall be roughened or shall be of approved
(m) Seats— (1) Seat Spacing — With standard seating, the nonslip material.
spacing of rows of seats from back-to-back shall not less
than 840 millimeters. With continental seating, the (5.3) Handrails — A ramp with a slope exceeding 1 in 10
spacing of rows of unoccupied seat shall provide a clear shall have handrails. Stairs for stands shall have handrails.
width measured horizontally, as follows: 450 millimeters Handrails shall conform to the requirements of this Code.
clear for rows of 18 seats or less; 500 millimeters clear for (6) Guardrails— (6.1) Guardrails shall be required in all
rows of 35 seats or less; 525 millimeters clear for rows of 45 locations where the top of a seat plank is more than 1.20
seats or less; and 550 millimeters clear for rows of 46 seats meters above the grade and at the front of stands
or more. elevated more than 600 millimeters above grade. Where
(2) Width — The width if any seat be not less than 450 only sections of stands are used, guardrails shall be
millimeters. provided as required in this Code.
(6.2) Railings shall be 1.10 meters above the rear of a seat
plank or 1.10 meters above the rear of the steps in the aisle


when the guardrail is parallel and adjacent to the aisle: determined on the bases of not less than one exit unit of
Except, that the height may be reduced to 900 600 millimeters for each 500 persons to be
millimeters for guardrails located in front of the accommodated and not exit shall be less than 1.10 meters
grandstand. in width, a reasonable distance apart that shall be spaced
(6.3) A midrail shall be placed adjacent to any seat to limit not less than one-fifth of the perimeter of the area apart
the open distance above the top of any part of a seat to from each other.
250 millimeters where the seat is at the extreme end or at (o) Special Hazards — (1) Boiler Rooms — Except in Group
the extreme rear of the bleachers or grandstand. The A Occupancies, every boiler room and every room
intervening space shall have one additional rail midway in containing an incinerator or liquefied petroleum gas or
the opening: Except, that railings may be omitted when liquid fuel-fired equipment shall be provided with at least
stands are placed directly against a wall or fence giving two means of egress, one of which may be a ladder. All
equivalent protection; stairs and ramps shall be provided interior openings shall be protected as provided for in this
with guardrails. Handrails at the front of stands and Code.
adjacent to an aisle shall be designed to resist a load of 75 (2) Cellulose Nitrate Handling — Film laboratories,
kilograms per linear meter applied at the top rail. Other projection rooms, and nitro-cellulose processing rooms
handrails shall be designed to resist a load of 40 shall have not less than two exits.
kilograms per linear meter.
SECTION 1208. Skylights. — (a) All skylights shall be
(7) Foot Boards — Footboards shall be provided for all constructed with metal frames except those for Groups A
rows of seats above the third row or beginning at such and J Occupancies. Frames of skylights shall be designed
point where the seating plank is more than 600 to carry loads required for roofs. All skylights, the glass of
millimeters above grade. which is set at an angle of less than 45 degrees from the
(8) Exits — (8.1) Distance to Exit — The line of travel to an horizontal, if located above the first storey, shall be set at
exit shall not be more than 45.00 meters. For stands with least 100 millimeters above the roof. Curbs on which the
seats without backseats this distance may be measured skylights rest shall be constructed of incombustible
by direct line from a seat to the exit from the stand. materials except for Types 1 or 11 Construction.
(8.2) Aisle Used as Exit — An aisle may be considered as (b) Spacing between supports in one direction for flat
only one exit unless it is continuous at both ends to a wired glass in skylights shall not exceed 625 millimeters.
legal building exit or to a safe dispersal area. Corrugated wired glass may have supports 1.50 meters
(8.3) Two Exits Required — A stand with the first seating apart in the direction of the corrugation. All glass in
board not more than 500 millimeters above grade of floor skylights shall be wired glass: Except, that skylights over
may be considered to have two exits when the bottom of vertical shafts extending through two or more storeys
the stand is open at both ends. Every stand or section of a shall be glazed with plain glass as specified in this Code:
stand within a building shall have at least two means of Provided, that wire glass may be used in ventilation equal
egress when the stand accommodates more than 50 to not less than one-eight the cross-sectional area of the
persons. Every open air stand having seats without shaft but never less than 1.20 meters is provided at the
backrest shall have at least two means of egress when the top of such shaft. Any glass not wire glass shall be
stand accommodates more than 300 persons. protected above and below with a screen constructed of
wire not smaller than 2.5 millimeters in diameter with a
(8.4) Three Exits Required — Three exits shall be required mesh not larger than 25 millimeters. The screen shall be
for stands within a building when there are more than substantially supported below the glass.
300 occupants within a stand and for open air stands
with seats without backrests where a stand or section of a (c) Skylights installed for the use of photographers may
stand accommodates more than 1000 occupants. be constructed of metal frames and plate glass without
wire netting.
(8.5) Four Exits Required — Four exits shall be required
when a stand or section of a stand accommodates more (d) Ordinary glass may be used in the roof and skylights
than 1000 occupants: Except, that for an open air stand for greenhouses, Provided, That height of the
with seats without backrests four exits need not be greenhouses at the ridge does not exceed 6.00 meters
provided unless there are accommodations for more than above the grade. The use of wood in the frames of
3000 occupants. skylights will be permitted in greenhouses outside of
highly restrictive Fire Zones if the height of the skylight
(8.6) Width— The total width of exits in meters shall not does not exceed 6.00 meters above the grade, but in
be less than the total occupant load served divided by 165: other cases metal frames and metal sash bars shall be
Except, that for open air stands with seats without used.
backrests the total width of exits in meter shall not be less
than the total occupant load served divided by 500 when (e) Glass used for the transmission of light, if placed in
existing by stairs, and divided by 650 when existing by floors or sidewalks, shall be supported by metal or
ramps or horizontally. When both horizontal and stair reinforced concrete frames, and such glass shall not be
exits are used, the total width of exits shall be determined less than 12.5 millimeters in thickness. Any such glass over
by using both figures as applicable. No exit shall be less 100 square centimeters in area shall have wire mesh
than 1.10 meters in width. Exits shall be located at a embedded in the same or shall be provided with a wire
reasonable distance apart. When only two exits are screen underneath as specified for skylights in this Code.
provided, they shall be spaced not less than one-fifth of All portions of the floor lights or sidewalk lights shall be of
the perimeter apart. the same strength as required for floor is surrounded by a
railing not less than 1.10 meters in height, in which case
(9) Securing of Chairs — Chairs and benches used on the construction shall be calculated for not less than roof
raised stands shall be secured to the platforms upon loads.
which they are placed: Except, That when less than 25
chairs are used upon single raised platform the fastening SECTION 1209. Bays, Porches, and Balconies. — (a) Walls
of seat to the platform may be omitted. When more than and floors in bay and oriel windows shall conform to the
500 loose chairs are used in connection with athletic construction allowed for exterior walls and floors of the
events, chairs shall be fastened together in groups of not type of construction of the building to which they are
less than three, and shall be tied or staked to the ground. attached. The roof covering of a bay or oriel window shall
conform to the requirements of the roofing of the main
(10) Safe Dispersal Area — Each safe dispersal area shall roof. Exterior balconies attached to or supported by wall
have at least two exits. If more than 6000 persons are to required to be of masonry, shall have brackets or beams
be accommodated within such an area, there shall be a constructed of incombustible materials. Railings shall be
minimum of three exits, and for more than 9000 persons provided for balconies, landings, or porches which are
there shall be a minimum of four exits. The aggregate more than 750 millimeters above grade.
clear width of exits from a safe dispersal area shall be


SECTION 1210. Penthouses and Roof Structures. — (a) (2.1) Masonry Chimneys for Residential Type Appliances—
Height — No penthouse or other projection above the Masonry chimneys shall be constructed of masonry units
roof in structures of other than Type V construction shall or reinforced concrete with walls not less than 100
exceed 8.40 meters above the roof when used as an millimeters thick; or of rubble stone masonry not less
enclosure for tanks or for elevators which run to the roof than 300 millimeters thick. The chimney liner shall be in
and in all other cases shall not extend more than 3.60 accordance with this Code.
meters in height with the roof. (2.2) Masonry Chimneys for Low Heat Appliances —
(b) Area — The aggregate area of all penthouses and Masonry chimneys shall be constructed of masonry units
other roof structures shall not exceed one third of the or reinforced concrete with walls not less than 200
area of the supporting roof. millimeters thick: Except, that rubble stone masonry shall
(c) Prohibited Uses — No penthouse, bulkhead, or any be not less than 300 millimeters thick. The chimney liner
other similar projection above the roof shall be used for shall be in accordance with this Code.
purposes other than shelter of mechanical equipment or (2.3) Masonry Chimneys for Medium-Heat Appliances —
shelter of vertical shaft openings in the roof. A penthouse Masonry chimneys for medium-heat appliances shall be
or bulkhead used for purposes other than that allowed by constructed of solid masonry units of reinforced concrete
this Section shall conform to the requirements of this not less than 200 millimeters thick, Except, that stone
Code for an additional storey. masonry shall be not less than 300 millimeters thick and,
(d) Construction — Roof structures shall be constructed in addition shall be lined with not less than 100
with walls, floors, and roof as required for the main millimeters of firebrick laid in a solid bed of fire clay
portion of the building except in the following cases: mortar with solidly filled head, bed, and wall joints,
starting not less than 600 millimeters below the chimney
(1) On Types III and IV constructions, the exterior walls and connector entrance. Chimneys extending 7.50 meters or
roofs of penthouses which are 1.50 meters or more from less above the chimney connector shall be lined to the
an adjacent property line may be of one-hour top.
fire-resistive non combustible construction.
(2.4) Masonry Chimneys for High-Heat Appliances—
(2) Walls not less than 1.50 meters from an exterior wall of Masonry chimneys for high-heat appliances shall be
a type iv construction may be of one-hour fire-resistive constructed with double walls of solid masonry units or
non combustible construction. reinforced concrete not less than 200 millimeters in
The above restriction shall not prohibit the placing of thickness, with an air space of not less than 50
wood flagpoles or similar structures on the roof of any millimeters between walls. The inside of the interior walls
building. shall be of fire-brick not less than 100 millimeters in
thickness laid in a solid bed of fire clay mortar with solidly
(e) Towers and Spires — Towers and spires when enclosed filled head, bed, and wall joints.
shall have exterior walls as required for the building to
which they attached. Towers not enclosed and which (2.5) Masonry Chimneys for Incinerators Installed in
extend more than 20.00 meters above the grade shall Multi-Storey Buildings (Apartment-Type Incinerators) —
have their framework constructed of iron, steel, or Chimneys for incinerators installed in multi-storey
reinforced concrete. No tower or spire shall occupy more building using the chimney passageway as a refuse chute
than one-fourth of the street frontage of any building to where the horizontal grate area of combustion chamber
which it is attached and in no case shall the base area does not exceed 0.80 square meter shall have walls of
exceed 150 square meters unless it conforms entirely to solid masonry or reinforced concrete, not less than 100
the type of construction requirements of the building to millimeters thick with a chimney lining as specified in
which it is attached and is limited in height as main part this Code. If the grate area of such an incinerator exceeds
of the building. If the area of the tower and spire exceeds 0.80 square meter, the walls shall not be less than 100
10.00 square meters any horizontal cross section, its millimeters of firebrick except that higher than 9.00
supporting frames shall extend directly to the ground. meters above the roof of the combustion chamber,
The roof covering of the spires shall be as required for the common brick alone 200 millimeters in thickness, may be
main room of the rest of the structure. Skeleton towers used.
used as radio masts, neon signs, or advertisement frames (2.6) Masonry Chimneys for Commercial and Industrial
and placed on the roof of any building shall be Type Incinerators — Masonry chimneys for commercial
constructed entirely of incombustible materials when and industrial type incinerators of a size designed for not
more than 7.50 meters in height, and shall be directly more than 110 kilograms of refuse per hour and having a
supported on an incombustible framework to the horizontal grate area not exceeding 0.50 square meter
ground. No such skeleton towers shall be supported on shall have walls of solid masonry or reinforced concrete
roofs of combustible framings. They shall be designed to not less than 100 millimeters thick with lining of not less
withstand a wind load from any direction in addition to than 100 millimeters of firebrick, which lining shall extend
any other loads. for not less than 12.00 meters above the roof of the
SECTION 1211. Chimneys, Fireplaces, and Barbecues. — (a) combustion chamber. If the design capacity of grate area
Chimneys — (1)Structural Design. — Chimneys shall be of such an incinerator exceeds 110 kilograms per hour and
designed, anchored, supported, reinforced, constructed, 0.80 square meter respectively, walls shall not be less
and installed in accordance with generally accepted than 200 millimeters thick, lined with not less than 100
principles of engineering. Every chimney shall be capable millimeters of firebrick extending the full height of the
of producing a draft at the appliance not less than that chimney.
required for the safe operation of the appliance (3) Linings — Fire clay chimney lining shall not be less
connected thereto. No Chimney shall support any than 15 millimeters thick. The lining shall extend from 200
structural load other than its own weight unless it is millimeters below the lowest inlet, or, in the case of
designed to act as a supporting member. Chimneys in a fireplace, from the throat of the fireplace to a point above
wood-framed building shall be anchored laterally at the enclosing masonry walls. Fire clay chimney linings shall
ceiling line and at each floor line which is more than 1.80 be installed ahead of the construction of the chimney as
meters above grade, except when entirely within the it is carried up, carefully bedded one on the other in fire
framework or when designed to be free standing. clay mortar, with close-fitting joints left smooth on the
(2) Walls — Every masonry chimney shall have walls of inside. Firebrick not less than 500 millimeters thick may
masonry units, bricks, stones, listed masonry chimney be used in place of fire clay chimney.
units, reinforced concrete or equivalent solid thickness of (4) Area — No chimney passageway shall be smaller in
hollow masonry and lined with suitable liners in area than the vent connection of the appliance attached
accordance with the following requirements: thereto.


(5) Height — Every masonry chimney shall extend at least Combustible materials shall not be placed within 150
600 millimeters above the part of the roof through which millimeters of the fireplace opening. No such
it passes and at least 600 millimeters above the highest combustible material within 300 millimeters of the
elevation of any part of a building within 3.00 meters to fireplace opening shall project more than 3 millimeters
the chimney. for each 25 millimeters clearance from such opening. No
(6) Corbeling — No masonry chimney shall be corbeled part of metal hoods used as part of a fireplace, barbecue
from a wall more than 150 millimeters nor shall a masonry or heating stoves shall be less than 400 millimeters from
chimney be corbeled from a wall which is less than 300 combustible material. This clearance may be reduced to
millimeters in thickness unless it projects equally on each the minimum requirements set forth in this Code.
side of the wall. In the second storey of a two-storey (7) Area of Flues, Throats, and Dampers — The net
building of Group A Occupancy, corbeling of masonry cross-sectional area of the flue and of the throat between
chimneys on the exterior of the enclosing walls may equal the firebox and the smoke chamber of a fireplace shall
the wall thickness. In every case the corbeling shall not not be less than the requirements to be set forth by the
exceed 25 millimeters protection for each course of brick. Board. Where dampers are used, they shall be of not less
(7) Change in Size or Shape — No change in the size or than No. 12 gauge metal. When fully opened, damper
shape of a masonry chimney shall be made within a opening shall be not less than ninety percent of the
distance of 150 millimeters above or below the roof joints required flue area. When fully open, damper blades shall
or rafters where the chimney passes through the roof. not extend beyond the line of the inner face of the flue.
(8) Separation — When more than one passageway is (8) Linte — Masonry over the fireplace opening shall be
contained in the same chimney, masonry separation at supported by a non-combustible lintel.
least 100 millimeters thick bonded into the masonry wall (9) Hearth — Every fireplace shall be provided with a
of the chimney shall be provided to separate brick, concrete, stone, or other approved
passageways. non-combustible hearth slab at least 300 millimeters
(9) Inlets— Every inlet to any masonry chimney shall enter wider on each side than the fireplace opening and
the side thereof and shall be of not less than 3 millimeters projecting at least 450 millimeters therefrom. This slab
thick metal or 16 millimeters refractory material. shall not be less than 100 millimeters thick and shall be
supported by a non-combustible material or reinforced to
(10) Clearance — Combustible materials shall not be carry its own weight and all imposed loads.
placed within 50 millimeters of smoke chamber or
masonry chimney walls when built within a structure, or SECTION 1212. Fire-Extinguishing Systems. — (a)
within 25 millimeters when the chimney is built entirely Fire-Extinguishing Systems — When required, standard
outside the structure. automatic fire-extinguishing systems shall be installed in
the following places, and in the manner provided in this
(11) Termination — All incinerator chimneys shall Code.
terminate in a substantially constructed spark arrester
having a mesh not exceeding 20 millimeters. (1) In every storey, basement or cellar with an area of 200
square meters or more which is used for habitation,
(12) Cleanouts— Cleanout openings shall be provided at recreation, dining, study, or work, and which has an
the base of every masonry chimney. occupant load of more than 20.
(b) Fireplaces and Barbecues — Fireplaces, barbecues, (2) In all dressing rooms, rehearsal rooms, workshops or
smoke chambers and fireplace Chimneys shall be of solid factories, and other rooms with an occupant load of more
masonry or reinforced concrete and shall conform to the than 10 or assembly halls under Group H and I
minimum requirements specified in this Code. occupancies with occupant load of more than 500, and if
(1) Fireplace Walls — Walls of fireplaces shall not be less the next doors of said rooms are more than 30.00 meters
than 200 millimeters in thickness. Walls of fireboxes shall from the nearest safe fire dispersal area of the building or
not be less than 250 millimeters in thickness: Except, that opening to an exit court or street.
where a lining of firebrick is used, such walls shall not be (3) In all rooms used for storage or handling of
less than 200 millimeters in thickness. The firebox shall photographic x-ray nitrocellulose films and other
not be less than 200 millimeters in thickness. The firebox inflammable articles.
shall not be less than 500 millimeters in depth. The
maximum thickness of joints in firebrick shall be 10 (b) Dry Standpipes — Every building four or more storeys
millimeters. in height shall be equipped with one or more dry
standpipes.
(2) Hoods— Metal hoods used as part of a fireplace or
barbecue shall not be less than No. 18 gauge copper, (1) Construction and Tests — Dry standpipes shall be of
galvanized iron, or other equivalent corrosion-resistant wrought iron or galvanized steel and together with
ferrous metal with all swams and connections of fittings and connections shall be of sufficient strength to
smokeproof unsoldered construction. The goods shall be withstand 20 kilograms per square centimeter of water
sloped at an angle of 45 degrees or less from the vertical pressure when ready for service, without leaking at the
and shall extend horizontally at least 150 millimeters joints, valves, or fittings. Tests shall be conducted by the
beyond the limits of the firebox. Metal hoods shall be kept owner of the building contractor in the presence of a
a minimum from combustible materials. representative of the Building Official whenever deemed
necessary for the purpose of certification of its proper
(3) Circulators— Approved metal heat circulators may be function.
installed in fireplaces.
(2) Size — Dry standpipes shall be of such size as to be
(4) Smoke Chamber — Front and side walls shall not be capable of delivering 900 liters of water per minute from
less than 200 millimeters in thickness. Smoke chamber each of any three outlets simultaneously under the
back walls shall not be less than 150 millimeters in pressure created by one fire engine or pumper based on
thickness. the standard equipment available.
(5) Fireplace Chimneys — Walls of chimneys without flue (3) Number Required — Every building four or more
lining shall not be less than 200 millimeters in thickness. storeys in height where the area of any floor above the
Walls of chimneys with flue lining shall not be less than third floor is 950 square meters or less, shall be equipped
100 millimeters in thickness and shall be constructed in with at least one dry standpipes and an additional
accordance with the requirements of this Code. standpipe shall be installed for each additional 950
(6) Clearance of Combustible Materials— Combustible square meters or fraction thereof.
materials shall not be placed within 50 millimeters of (4) Location — Standpipes shall be located within
fireplace, smoke chamber, or chimney walls when built enclosed stairway landings or near such stairways as
entirely within a structure, or within 25 millimeters when possible or immediately inside of an exterior wall and
the chimney is built entirely outside the structure. within 300 millimeters of an opening in a stairway



enclosure of the balcony or vestibule of a smokeproof including the basement or cellar of the building, and
tower or an outside exit stairway. located not less than 300 millimeters nor more than 1.20
(5) Siamese Connections — Subject to the provisions of meters above the floor.
subparagraph (2) all 100 millimeters dry standpipes shall (6) Threads — All those threads used in connection with
be equipped with a two-way Siamese fire department the installation of such standpipes, including valves and
connection. All 125 millimeter dry standpipes shall be reducing fittings shall be uniform with that prescribed by
equipped with a three-way Siamese fire department the Secretary.
connection and 150 millimeters dry standpipes shall be (7) Water Supply — All interior wet standpipes shall be
equipped with a four-way Siamese fire department connected to a street main not less than 100 millimeters
connections. All Siamese inlet connections shall be in diameter, or when the water pressure is insufficient, to
located on a street-front of the building and not less than a water tank or sufficient size as provided in
300 millimeters nor more than 1.20 meters above the subparagraph (8). When more than one interior wet
grade and shall be equipped with a clapper-checks and standpipe is required in the building, such standpipe
substantial plugs. All Siamese inlet connections shall be shall be connected at their bases or at their tops by pipes
recessed in the wall or otherwise substantially protected. of equal size.
(6) Outlets — All dry standpipes shall extend from the (8) Pressure and Gravity Tanks — Tanks shall have a
ground floor to and over the roof and shall be equipped capacity sufficient to furnish at least 1,500 liters per
with a 63 millimeters outlet nor more than 1.20 meters minute for period of not less than 10 minutes. Such tanks
above the floor level at each storey. All dry standpipes shall be located so as to provide not less than 2 kilograms
shall be equipped with a two-way 63 millimeters outlet per sq. cm. pressure at the topmost base outlet for its
above the roof. All outlets shall be equipped with gate entire supply. Discharge pipes from pressure tanks
valves. extend 50 millimeters into and above the bottom of such
(7) Signs — An iron or bronze sign with raised letters at tanks. All tanks shall be tested in place after installation
least 25 millimeters high shall be rigidly attached to the and proved tight at a hydrostatic pressure fifty percent in
building adjacent to all Siamese connections and such excess of the working pressure required. Where such
signs shall read "CONNECTION TO DRY STANDPIPE". tanks are used for domestic purposes the supply pipe for
(c) Wet Standpipes — Every Group H and I Occupancy of such purposes shall be located at or above the center line
any height, and every Group C Occupancy of two more of such tanks. Incombustible supports shall be provided
storeys in height and every Group D, D, E, F, and G for all such supply tanks and not less than a 900
Occupancy of three or more storeys in height and every millimeters clearance shall be maintained over the top
Group G and E Occupancy over 1800 square meters in and under the bottom of all pressure tanks.
area shall be equipped with one or more interior wet (9) Fire pumps — Fire pumps shall have a capacity of not
standpipes extending from the cellar or basement into less than 1,000 liters per minute with a pressure of not
the topmost storey: Provided, That Group H buildings less than 2 kilograms per sq. cm. at the topmost hose
having no stage and having a seating capacity of less outlet. The source of supply for such pump shall be a
than 500 need to be equipped with interior wet street water main of not less than 100 mm, diameter or a
standpipes. well or cistern containing a one-hour supply. Such pumps
(1) Construction — Interior wet standpipes shall be shall be supplied with an adequate source of power and
constructed of the same materials as those required for shall be automatic in operation.
dry standpipes. (10) Hose and Hose Reels — Each hose outlet of all interior
(2) Size — (2.1) Interior wet standpipes shall have an wet standpipe shall be supplied with a hose not less than
internal diameter sufficient to deliver 190 liters of water 38 millimeters in diameter. Such hose shall be equipped
per minute under 2.0 kilograms per square centimeter with a suitable brass or bronze nozzle and shall be not
pressure at the hose connections. Buildings of Group over 23.00 meters in length. An approved standard form
Hand I Occupancy shall have wet standpipes systems of wall hose reel or rack shall be provided for the hose and
capable of delivering the required quantity and pressure shall be located so as to make the hose readily accessible
from any two outlets simultaneously; for all other at all times and shall be recessed in the walls or protected
occupancies only one outlet need be figured to be by suitable cabinets.
opened at one time. In no case shall the internal diameter (d) Basement Pipe Inlets — Basement pipe inlets shall be
of a wet standpipe be less than 50 millimeters, except installed in the first floor of every store, warehouse, or
when the standpipe is attached to an automatic factory where there are cellars or basements under same:
fire-extinguishing system. Except, wherein such cellars or basements there is
(2.2) Any approved formula which determined pipe sizes installed a fire-extinguishing system as specified in this
on a pressure drop basis may be used to determine pipe Code or where such cellars or basement are used for
size for wet standpipe systems. The Building Official may banking purposes, safe deposit vaults, or similar uses.
require discharge capacity and pressure tests on (1) Material — All basement pipe inlets shall be of cast
completed wet standpipe systems. iron, steel, brass, or bronze with lids of cast brass or
(3) Number required — The number of wet standpipe bronze and shall consist of a sleeve not less than 200
when required in this Code shall be so determined that all millimeters in diameter through the floor extending to
portions of the building are within 6.00 meters of a nozzle and flush with the ceiling below and with a top flange,
attached to a hose 23.00 meters in length. recessed with an inside shoulder, to receive the lid and
flush with the finished floor surface. The lid shall be a
(4) Location — In Group H and I Occupancies, outlets shall solid casting and shall have a ring lift recessed on the top
be located as follows: one on each side of the stage, one thereof, so as to flushed. The lid shall have the words "FOR
at the rear of the auditorium and one at the rear of the FIRE DEPARTMENT ONLY, DO NOT COVER UP" cast on
balcony. Where occupant loads are less than 500 the the top thereof. The lid shall be installed in such a manner
above requirements may be waived: Provided, That as to permit its removal readily from the inlet.
portable fire-extinguishers of appropriate capacity and
type are installed within easy access from the said (2) Location — Basement pipe inlets shall be strategically
locations. In Group B, C, D, E, F, and G Occupancies located and kept readily accessible at all times to the Fire
location of all interior wet standpipes shall be in Department.
accordance with the requirement for dry standpipes: (e) Approval — All fire-extinguishing systems, including
Provided, that at least one standpipe is installed to cover automatic sprinklers, wet and dry standpipes, automatic
not more than 650 square meters. chemical extinguishers, basement pipe inlets, and the
(5) Outlets — All interior wet standpipes shall be appurtenances thereto shall meet the approval of the fire
equipped with a 38 millimeter valve in each storey,


Department as to installation and location and shall be fire assembly having a one and one-half fire-resistive
subject to such periodic test as it may require. rating. The proscenium opening, which shall be the main
SECTION 1213. Stages and Platform. — (a) Stage opening for viewing performances, shall be provided with
Ventilators — There shall be one or more ventilators a self closing fire-resistive curtain as specified in this
constructed of metal or other incombustible material Code.
near the center and above the highest part of any (e) Stage Floor — The type of construction for storage
working stage raised above the stage roof and having a floors shall depend upon the requirements based on the
total ventilation area equal to at least five percent of the type of Occupancy and the corresponding fire-resistive
floor area within the stage walls. The entire equipment requirements. All parts of the stage floor shall be
shall conform to the following requirements: designed to support not less than 620 kilograms per
(1) Opening Action — Ventilators shall open by spring square meters. Openings through stage floor shall be
action or force of gravity sufficient to overcome the equipped with tight-fitting trap doors of wood of not less
effects of neglect, rust, dirt, or expansion by heat or than 5 millimeters nominal thickness.
wrapping of the framework. (f) Platforms — The type of construction for platforms
(2) Glass — Glass, if used in ventilators must be protected shall depend upon the requirements based on the type of
against falling on the stage. A wire screen, if used under Occupancy and corresponding fire-resistive
the glass, must be so placed that if clogged it cannot requirements. Enclosed platforms shall be provided with
reduce the required ventilating area or interfere with the one or more ventilators conforming to the requirements
operating mechanism or obstruct the distribution of of stage ventilators: Except, that the total area shall be
water from the automatic fire extinguishing systems. equal to five percent of the area of the platform. When
more than one ventilator is provided, they shall be so
(3) Design — Ventilators, penthouses, and supporting spaced as to provide proper exhaust ventilation.
framework shall be designed in accordance with this Ventilators shall not be required for enclosed platform
Code. having a floor area of 45.00 square meters or less.
(4) Spring Actuation — Springs, when employed to (g) Stage Exits — At least one exit not less than 900
actuate ventilator doors, shall be capable of maintaining millimeters wide shall be provided from each side of the
full required tension indefinitely. Springs shall be not stage opening directly or by means of a passageway not
stressed more than fifty percent of their rated capacity less than 900 millimeters in width to a street or exit court.
and shall not be located directly in the air stream, nor An exit stair not less than 750 millimeters wide shall be
exposed to elements. provided for egress from each fly gallery. Each tier of
(5) Location of Fusible Links — A fusible link shall be dressing rooms shall be provided with at least two means
placed in the cable control system on the underside of of egress each not less than 750 millimeters wide and all
the ventilator at or above the roof line or as approved by such stairs shall be constructed in accordance with the
the Building Official, and shall be so located as not to be requirement specified in this Code. The stairs required in
affected by the operation of fire-extinguishing systems. this subsection need not be enclosed.
(6) Control — Remote, manual, or electrical control shall SECTION 1214. Motion Picture Projection Rooms. — (a)
provide for both opening and closing of the ventilator General — The provisions of this Section shall apply only
doors for periodic testing and shall be located at a point where ribbon type motion picture films in excess of
on the stage designated by the Building Official. When 22-millimeters width and electric projection equipment
remote control of ventilator is electrical, power failure are used. Every motion picture machine using ribbon
shall not affect its instant operation in the event of fire. type film in excess of 22 millimeter width and electric arc
Hand winches may be employed to facilitate operation of projections equipment, together with all electrical
manually controlled ventilators. devices, rheostats, machines, and all such films present in
any Group C, I, or H Occupancy, shall be enclosed in a
(b) Gridirons — (1) Gridirons, fly galleries, and pin-rails shall projection room large enough to permit the operator to
be constructed of incombustible materials and fire walk freely on either side and back of the machine.
protection of steel and iron may be omitted. Gridirons
and fly galleries shall be designed to support a live load of (b) Construction— Every projection room shall be of not
not less than 367 kilograms per square meter. Each loft less than one-hour fire-resistive construction throughout
block well shall be designed to support 373 kilograms per and the walls and ceiling shall be finished with
linear meter and the head block well shall be designed to incombustible materials. The ceiling shall not be less than
support the aggregate weight of all the loft block wells 2.40 meters from the finished floor. The room shall have a
served. The head block well must be provided with an floor area of not less than 7.00 square meters and 3.50
adequate strengback or lateral brace to offset torque. square meters for each additional machine.
(2) The main counterweight sheave beam shall be (c) Exit — Every projection room shall have at least two
designed to support a horizontal and vertical uniformly doorways separated by not less than one-thirds the
distributed live load sufficient to accommodate the perimeter of the room, each at least 750 millimeters wide
weight imposed by the total number of loft blocks in the and 2.00 meters high. All entrances to a projection room
gridiron. The sheave blocks shall be designed to shall be protected by a self-closing fire assembly having a
accommodate the maximum load for the loft or head three-fourths hour fire-resistive rating. Such doors shall
blocks served with a safety factor of five. open outward and lead to proper exits as required in this
Code and shall not be equipped with any latch. The
(c) Rooms Accessory to Stage — In a building having a maximum width of such door shall be 750 millimeters.
stage, the dressing room sections, workshops, and store
rooms shall be located on the stage side of the (d) Ports and Openings — Ports in projection room walls
proscenium wall and shall be separated from each other shall be of three kinds: projection ports; observation ports;
and from the stage by not less than a One-hour Fire and combination ports used for both observation and for
Resistive Occupancy Separation. stereopticon, spot or floodlight machines.
(d) Proscenium Walls — A stage shall be completely (1) Ports Required — There shall be provided for each
separated from the auditorium by a proscenium wall or motion picture projector not more than one projection
not less than two-hour incombustible construction. The port, which shall be limited in area to 750 square
proscenium wall shall extend not less than 1.20 meters centimeters, and not more than one observation port,
above the roof over the auditorium. Proscenium walls which shall be limited in area to 1,300 square centimeters.
may have the addition to the main proscenium openings, There shall be not more than three combination ports,
one opening at the orchestra pit level and not more than each of which shall not exceed 750 millimeters by 600
two openings at the stage floor level, each of which shall millimeters. Each port opening shall be completely
be not more than 2.00 square meters in area. All openings covered with a pane of glass; Except, that when acetate
in the proscenium walls of stage shall be protected by a



safety film is used, projection ports may be increased in
size to an area not to exceed 4,500 square centimeters.
CHAPTER 14 Photography and X-ray Films
(2) Shutters — Each port and every other opening in
projection room walls, including, any fresh-air inlets but SECTION 1401. Storage and Handling. —(a) Storage rooms
excluding exit doors and exhaust ducts, shall be provided of unexposed photographic and x-ray films shall be
with a shutter of not less than 2.4 millimeters thick sheet provided with automatic fire extinguishing systems in the
metal or its equivalent large enough to overlap at least 25 following cases:
millimeters on all sides of such openings. Shutters shall (1) When unexposed films in generally accepted safety
be arranged to slide without binding in gudes shipping containers exceed the aggregate 14.00 cubic
constructed or material equal to the shutters in strength meters.
and fire-resistance. Each shutter shall be equipped with a
(2) Where shelving used for storage of individual
74º fusible link, which when fused by heat will cause
packages not in said shipping containers exceed 1.40
closure of the shutter by gravity. Shutters of a size greater
cubic meters in capacity; and
than 1,300 square centimeters shall be equipped with a
counter-balance. There shall also be a fusible link located (3) Storage is not in generally accepted safety shipping
over the upper magazine of each projector, which upon containers in any section exceeding 14.00 cubic meters.
operating, will close all the shutters. In addition, there (b) Film negatives in storage or in process of handling
shall be provided suitable means for manually closing all shall be kept in heavy manila envelopes, not exceeding 12
shutters simultaneously from any projector head and films to an envelope. Expanding envelopes shall not be
from a point within the projection room near each exit used.
door. Shutters may be omitted when only acetate safety
film is used. (c) Film negatives shall be kept in properly insulated
vented cabinets, vented storage vaults or outside storage
(e) Ventilation — (1) Inlet — A fresh-air inlet from the houses. Not more than 110 kilograms shall be stored in
exterior of the building not less than 900 square any single cabinet. Where the film stored exceeds 450
centimeters and protected with wire netting, shall be kilograms, it shall be in vented storage vault or in a
installed within 50 millimeters of the floor in every detached structure or roof vault. Door openings in vault
projection room, the source of which shall be remote shall be of four-hour fire-resistive construction and shall
from other outside vents or flues. be kept closed except when in use.
(2) Outlets — Ventilation shall be provided by one or more (d) Only incandescent electric light shall be permitted:
mechanical exhaust systems which shall draw air from protected with substantial wire guards or vapor roof
each are lamps housing to outdoors either directly or globes or both. Portable lights on extension cords are
through an incombustible flue used for no other purpose. prohibited. Conspicuous "NO SMOKING" signs shall be
Exhaust capacity shall not be less than 0.50 cubic meter posted.
nor more than 1.40 cubic meter per minute for each arc
lamp plus 5.60 cubic meters for the room itself. Systems (e) No films shall be stored within 600 millimeters of
shall be controlled from within the enclosure and shall steam pipes, chimneys, or other sources of heat.
have pilot lights to indicate operation. The exhaust (f) There shall be first aid provisions of types using water
systems serving the projection room may be extended to or water solutions. Discarded films shall be stored and
cover rooms associated therewith such as rewind rooms. handled in the same manner as other films until removed
No dampers shall be installed in such exhaust systems. from the premises.
Ventilation of these rooms, shall not connected in any
way with ventilating or air-conditioning systems serving SECTION 1402. Classes of Film Exempted. — (a) The
other portions of the building. Exhaust ducts shall be of provisions of this Section do not apply to the following:
incombustible material and shall either be kept 25 film for amateur photographic use in original packages or
millimeters from combustible material or covered with 10 "roll" and "film pack" films in quantities of less than 1.40
millimeters of incombustible heat-insulating material. cubic meters; safety film; dental X-ray film;
establishments manufacturing photographic films and
(f) Regulation of Equipment — All shelves, fixtures, and their storage incidental thereto and films stored or being
fixed equipment in a projection room shall be used in standard motion picture booths.
constructed of incombustible materials. All films not in
actual use shall be stored in metal cabinets having (b) Safety photographic X-ray film may be identified by
individual compartments for reels or shall be in generally the marking on the edge of the film.
accepted shipping containers. No solders shall be used in SECTION 1403. Fire Extinguishing System. — Unless
the construction of such cabinets. otherwise provided in this Code, all fire extinguishing
SECTION 1215. Lathing, Plastering, and Installation of Wall system when so required shall be of a type, specifications,
Boards. — The installation of lath, plaster and gypsum and methods of installation as prescribed in accordance
wall board shall conform to the fire-resistive rating with the requirements of the Secretary.
requirements and the type of construction of building.
CHAPTER 15 Pre-Fabricated Construction
CHAPTER 13 Electrical and Mechanical SECTION 1501. Prefabricated Assembly. —(a) Prefabricated
Regulations assembly is a structural unit, the integral parts of which
have built up or assembled prior to incorporation in the
SECTION 1301. Electrical Regulations. —All electrical building.
systems equipment and installation mentioned in this
Code shall conform to the provisions of the Philippine (b) The Secretary shall prescribe special tests to
Electrical Code, as adopted by the board of Electrical determine the structural adequacy, durability, soundness,
Engineering pursuant to Republic Act No. 184 otherwise weather and fire resistance of the prefabricated
known as the Electrical Engineering Law. assemblies.
SECTION 1302. Mechanical Regulations. — All mechanical (c) Every device or system to connect prefabricated
systems, equipment and installations mentioned in this assemblies shall be capable of developing the strength of
Code shall conform to the provisions of the Philippine the different members as an integral structure, Except, in
Mechanical Engineering Code, as adopted by the Board the case of members forming part of a structural frame
of Mechanical Engineering pursuant to Commonwealth as specified in this Code. Anchorages and connections
Act No. 294 as amended, otherwise known as the between members and the supporting elements of the
Mechanical Engineering Law. structure or walls shall be capable of withstanding all
probable external and internal forces or other conditions
for structurally adequate construction. In structural
design, proper allowances shall be made for any material



to be displaced or removed for the installation of pipes, (d) Curb Requirements — Plastic skylights in roofs having
conduits, or other equipment. a slope of less than 1 in 3 shall have a 100 millimeters high
(d) Placement of prefabricated assemblies shall be curb. The curb may be omitted where a wire screen not
inspected to determine compliance with this Code. smaller than No. 12 U.S. gauge with a mesh not larger
than 25 millimeters is provided immediately below the
skylight. The screen shall be substantially mounted below
CHAPTER 16 Plastics the skylight.
SECTION 1605. Light-Transmitting Panels in Monitors and
SECTION 1601. Approved Plastics. — Approved plastic
Sawtooth Roofs. — (a) General — Where a fire-resistive
materials shall be those which have a flame-spread rating
rating is not required for the roof structure, and in all
of 225 or less and a smoke density not greater than that
buildings provided with an approved automatic
obtained from the burning of untreated wood under
fire-extinguishing system, approved plastics may be used
similar conditions when tested in accordance with
with or without such as the light-transmitting medium in
generally accepted engineering practices. The products
monitors and sawtooth: Except, that plastics used in
of combustion shall be no more toxic than the burning of
monitors or sawtooth roofs of Type II Construction shall
untreated wood under similar conditions.
be of materials appropriate to be used according to
SECTION 1602. Installation. — (a) Structural Requirements flame-spread characteristics.
— All plastic materials shall be of adequate strength and
(b) Allowable Area — The area of individual plastic glazing
durability to withstand the prescribed design loads.
used in monitors and sawtooth glazing shall not exceed
Sufficient and substantial technical data shall be
15.00 square meters. The total aggregate area of plastics
submitted to establish stresses, maximum unsupported
used in skylights, monitors, and sawtooth glazing shall
spans, and such other information as may be deemed
not exceed twenty percent of the floor area of the room or
necessary for the various thicknesses and forms used.
occupancy sheltered.
(b) Fastenings — Fastenings shall be adequate to
(c) Area Separation — The area of such plastic panels
withstand design loads and internal and external stresses
shall be separated from each other by a section of
required of the assembly. Proper allowances of plastic
incombustible material or by a section of the roofing
materials in conjunction with other materials with which
material of the structure not less than 1.50 meters in
it is assembled or integrated shall be provided.
length. The lower edge of the plastic material shall be at
SECTION 1603. Glazing of Openings. — (a) Doors, sashes least 150 millimeters above the surface of the adjoining
and framed openings in exterior walls of all buildings roof surface.
except Types IV and V Constructions may be glazed or
SECTION 1606. Plastic Light Diffusers in Ceilings. — (a)
equipped with approved plastics: Provided, that:
General — Ceiling light diffusers having an area greater
(1) The wall in which such glazing is installed is so located than ten percent of any 10.00 square meters of room area
that openings are not required to be fire-protected. shall be of approved plastics conforming to the
(2) Except for Type I Construction, the location size, and requirements specified in this Code.
spacing of such glazed openings do not exceed the (b) Installation— Plastic light diffusers shall be installed in
values set forth by the Secretary. such a manner that they will not readily become
(3) Plastic used in glazed openings for Type II detached when subjected to room temperature of 80ºC
Construction shall be materials appropriate for use for 15 minutes, Except, for the plastic light diffusers which
according to flame-spread characteristics and the are installed in the first floor area of Group C Occupancies
location, size, and spacing of the openings do not exceed having egress directly to the exterior of the building; and
the values set forth by the Secretary. plastic light diffusers which are located between an
approved automatic fire-extinguishing system and the
SECTION 1604. Skylights. — (a) General — Approved area to be protected other than public corridors for Group
plastics may be used in skylights installed on roofs of A, B, C, D, E, G, H and I Occupancies if tests required by
Types I, II, or III constructions and all buildings in these the Secretary have established that such installation will
categories shall be equipped with an approved automatic not interfere with the efficient operation of such
fire-extinguishing system in Groups A, B, C, E, F, J, H-3 and automatic fire-extinguishing systems.
H-4 Occupancies: Except, that:
SECTION 1607. Partitions. — Where partitions are not
(1) Approved plastics may be used in any type of required to be of fire-resistive or incombustible
construction or occupancy as a fire venting system when construction, approved plastics conforming to the
approved by the Building Official. requirements specified in this Code may be used.
(2) Plastic may be used in approved skylights in Type II SECTION 1608. Exterior Veneer. — (a) General — Exterior
one-hour fire-resistive construction which are located 300 veneer may be of approved plastic materials, and shall
millimeters or more above the lower place of the ceiling. conform to the provisions of this Section.
The walls of the skylight well shall be no less fire-resistive
than the adjacent ceiling. (b) Height— Plastic veneer shall not be attached to any
exterior wall above the first storey: Provided, that plastic
(3) Where fire-resistive ceiling is not required in veneer may be attached to exterior walls above the first
one-storey buildings, approved plastics may be used in storey of buildings located outside of highly restrictive
skylights. Fire Zones: Provided, further that the height of the veneer
(b) Installation Requirements. — (1) Except in Group A is not in excess of 10.00 meters above the adjacent of
Occupancies, no skylight shall be installed within 3.00 elevation.
meters of a property line. (c) Area — Sections of plastic veneer shall not exceed
(2) The edges of dome-type skylights shall be properly 15.00 square meters in area, Except, that in less restrictive
flashed. Fire Zones, the area may be increased by fifty percent.
(3) Plastic skylights shall be separated from each other by (d) Separation — Sections of plastic veneer shall be
at least 2.50 meters laterally and 3.00 meters along the separated by a minimum of 1.20 meters vertically and 600
slope of the roof. millimeters horizontally.
(c) Allowable Areas — The area of individual plastic SECTION 1609. Awnings and Canopies. — (a) Plastic
skylights shall not exceed 10.00 square meters. The total materials appropriate for use according to Flame Spread
aggregate area of plastics used in skylights, monitors, and characteristics may be utilized in awnings and canopies,
sawtooth glazing shall not exceed twenty percent of the provided such awnings and canopies are constructed in
floor area of the room or occupancy sheltered. accordance with provisions governing projections and
appendages as specified in this Code.


(b) Approved plastics may be used in awnings where ground acting inward or outward. The area of individual
untreated canvass is permitted. lights shall not be more than the maximum allowable
(c) Approved plastics may be used in lieu of plain glass in area of glass according to the wind load multiplied by the
green-houses in less restrictive Fire Zones. appropriate adjustment factor.
SECTION 1803. Glazing. — Glass firmly supported on all
four edges shall be glazed with minimum laps and edge
CHAPTER 17 Sheet Metal Paint Spray Booths clearances in accordance with Section 1801 paragraph (b),
Provided, that glass edge clearance in fixed openings
SECTION 1701. Sheet Metal Paint Spray Booths. — (a)
shall be not less than what is required for wind and
General — Paint spray booths shall be constructed of
earthquake drift. For glass not firmly supported on all four
steel of not less than No. 18 U.S. gauge in thickness and
edges and design shall be submitted for approval of the
shall be designed in accordance with this Code.
Building Official. Glass supports shall be considered firm
(b) Area — The area of a paint spray booth shall not when deflection of the support at design load does not
exceed 150 square meters not ten percent of the basic exceed 1/175 of the span.
area permitted for the major of the building according to
SECTION 1804. Louvered Windows. — Regular plate,
its Occupancy Group.
sheet, or patterned glass in jalousies and louvered
(c) Floor Construction — The floor shall be constructed of windows shall not be thinner than 5.6 millimeters
incombustible material. minimal and not longer than 1.20 meters. Exposed glass
(d) Interior Surface.— Paint spray booths shall be edges shall be smooth.
designed to permit the free passage of the exhaust air SECTION 1805. Impact. — Frameless glass doors, glass in
from all parts of the interior and all interior surface shall doors, fixed glass panels, and similar glazed openings
be smooth and continuous without outstanding edges. which may be subject to accidental human impact shall
SECTION 1702. Fire Protection. — Every spray booth conform with the requirements set forth by the Secretary
having an open front elevation larger than 1.00 square on impact loads of glass: Except in the following cases:
meter and which is not equipped with doors, shall have a (1) Bathtub and shower enclosures shall be constructed
fire curtain or metal deflector not less than 100 from approved shatter-resistant materials, such as: wire
millimeters deep installed at the upper outer edge of the reinforced glass not less than 5.6 millimeters thick; fully
booth opening. tempered glass not less than 4.8 millimeters thick: or
SECTION 1703. Light. — Paint spray booths shall be laminated safety glass not less than 6.4 millimeters thick.
illuminated through hammered wire or heat-treated (2) Glass lights located not less than 450 millimeters
glass panels. The glass panels shall be located in such a above the adjacent finished floor or walking surface.
manner as to reduce the hazard of ignition caused by
(3) Glass lights when the least dimension is not greater
paint spray deposit.
than 450 millimeters.
SECTION 1704. Ventilation. — (a) General — Mechanical
(4) Glass lights 1.50 square meters or less in area.
ventilation shall be provided direct to the exterior of the
building. The mechanical exhaust system shall be
designed to move the air through any portion of the paint
spray area at the rate of not less than 30.00 lineal meters
CHAPTER 19 The Use of Computers
per minute. The blades of exhaust fans shall be SECTION 1901. General Rule. — The use of computers for
constructed of non-ferrous material and shall be all or any part of the design of buildings under this Code
mounted in such a manner as to prevent contact with the is permitted provided that all programs to be used are
exhaust duct. The motor shall not be mounted in the documented.
spray booth or the duct system and belts shall be SECTION 1902. Program Documentation. —
enclosed where they enter the booth or duct system. Documenting a program under this Code consists of
(b) Exhaust Ducts. — Exhaust ducts shall be constructed filing with the Building Official a reference to a
of steel having a thickness not less than the values set by publication or publications accessible to him were the
the Secretary. The discharge point for ducts in a paint detailed description of the program or a brief statement
spray booth shall be not less than 2.00 meters from the of the theoretical background of the program including a
adjoining combustible construction nor less than 8.00 description of the algorithms used are found.
meters from adjoining exterior wall openings: Except, SECTION 1903. Submission of Computer-Generated
that the discharge point for exhaust ducts is not Computations. — A copy of the output sheets for
regulated in a waterwash spray booth. computer-generated computations shall be submitted as
a part of the design computations. The out sheets shall
be accompanied by a certification of a designer and/or
CHAPTER 18 Glass and Glazing consultant that the output sheets are the results
SECTION 1801. General Requirements —(a) This Chapter obtained through the use of documented programs. The
shall apply to exterior glass and glazing in all Occupancies certification should include the identification of the
except Groups A, B, and J Occupancies not over three specific program used for each portion of the
storeys in height, and to interior and exterior glass and computer-generated computations being submitted.
glazing in all occupancies subject to human impact as
specified in this Code.
(b) Standards for materials shall conform to the provisions
CHAPTER 20 Signs
set by the Secretary on glass dimensional tolerances, SECTION 2001. General Requirements. — (a) No sign or
breaking stress levels, and design safety factors. signboard shall be erected in such manner as to confuse
(c) Each light shall bear the manufacturer's label or obstruct the view or interpretation of any official traffic
designating the type and thickness of glass. Each light sign, signal, or device.
with special performance characteristics such as (b) No sign or signboard shall be constructed as to
laminated, heat strengthened fully tempered or unduly obstruct the natural view of the landscape,
insulated, shall bear the manufacturer's identification distract or obstruct the view of the public as to constitute
showing the special characteristics and thickness by a traffic hazard, or otherwise defile, debase or offend
etching or other permanent identification that shall be aesthetic and cultural values and traditions.
visible after the glass is glazed. SECTION 2002. Maintenance. — All signs, together with
SECTION 1802. Area Limitation. — Exterior glass and all of their supports, braces, guys and anchors, shall be
glazing shall be capable of safely withstanding the load kept in repair and in proper state of preservation. The
due to wind pressures for various height zones above



display of all signs shall be kept nearly painted and SECTION 2102. Interim Rules and Regulations. — Interim
secured at all times. rules and regulations on buildings promulgated by the
SECTION 2003. Design and Construction. —Sign Secretary before the adoption of this Code pursuant to
structures shall be designed and constructed to resist all existing laws or decrees shall continue to have binding
forces in accordance with the National Structural Code for force and effect, when not in conflict with the provisions
Buildings. For signs on buildings, the dead and lateral of this Code.
loads shall be transmitted through structural frame of the SECTION 2103. Separability Clause. — If any provision of
building to the ground in such a manner as not to this Decree or the application thereof is to any person or
overstress any of the elements of the building. The weight circumstance declared unconstitutional or invalid for any
of earth superimposed over footings may be used in reason, the same shall not affect the validity of the other
determining the dead load resisting moment. Such earth provisions.
shall be carefully placed and thoroughly compacted. SECTION 2104. Repealing Clause. — All laws, decrees,
SECTION 2004. Supports and Anchorages. — (a) provisions of charters, executive orders, ordinances, rules
General.— The supports and anchorage of all signs or and regulations or parts thereof contrary to or
sign structures shall be placed in or upon private property inconsistent with the provision of this Decree are hereby
and shall be constructed in conformity with the repealed, amended, or modified accordingly.
requirements of this Code. SECTION 2105. Effectivity. — This Decree shall take effect
(b) Materials — Materials for construction of signs or sign upon its promulgation.
structures shall be of the quality and grade as specified in DONE in the City of Manila, this 19th of February, in the
this Code. year of Our Lord, Nineteen Hundred and Seventy-Seven.
(c) Restrictions on Combustible Materials — All signs or
sign structures erected in highly restrictive Fire Zones
shall have structural members of incombustible ANNEX "A" WORDS, TERMS AND PHRASES
materials. Ground signs may be constructed of any
(Definitions)
material meeting the requirements of this Code.
Combinations signs, roof signs, wall signs, projecting ACCESSORIA OR ROW HOUSE — A house of not more
signs, and signs on marquees shall be constructed of than two storeys, composed of a row or dwelling units
incombustible materials. No combustible material other entirely separated from one another by partly wall or
than approved plastics shall be used in the construction walls and with an independent entrance for each
of electrical signs. dwelling units.
(d) Non-Structural Trim — Non-structural trim and ACCESSORY BUILDING — A building subordinate to the
portable display surfaces may be of wood, metal, main building on the same lot and used for purposes
approved plastics, or any combination thereof. customarily incidental to those of the main building such
as servants quarters, garage, pump house, laundry, etc.
(e) Display Surfaces — Display surfaces in all types of
signs may be made of metal, glass, or approved plastics. AGRICULTURAL BUILDING — A building designed and
constructed to house farm implements, hay, grain,
SECTION 2005. Projections and Clearances. — (a)
poultry, livestock or other horticultural products. This
Clearances from High Voltage Power Lines — Clearances
structure shall not be a place of human habitation or a
of signs from high voltage power lines shall be in
place of employment where agricultural products are
accordance with the Philippine Electrical Code.
processed, treated or packaged; nor shall it be placed
(b) Clearances from Fire Escapes, Exits, or Standpipes — used by the public.
No signs or sign structures shall be erected in such a
ALLEY — Any building space or thoroughfare which has
manner than any portion to its surface or supports will
been dedicated or deeded to the public or for public use
interfere in any way with the free use of any fire escape,
as a passageway with a width of not more than three
exit, or standpipe.
meters.
(c) Obstruction of Openings — No sign shall obstruct any
ALTER OR ALTERATION — Any change, addition, or
opening to such an extent that light ventilation is
modification in construction of occupancy.
reduced to a point below that required by this Code.
Signs erected within 1.50 meters of an exterior wall in APARTMENT — A room or suite of two or more rooms,
which there are openings within the area of the sign shall designed and intended for, or occupied by one family for
be constructed of incombustible material or approved living, sleeping, and cooking purposes.
plastics. APARTMENT HOUSE — Any building or portion thereof,
(d) Projection Over Alleys — No sign or sign structure shall which is designed, built, rented, leased, let or hired out to
project into any public alley below a height of 3.00 meters be occupied, or which is occupied as the home or
above established sidewalk grade, nor project more than residence of three or more families living independently
300 millimeters where the sign structure is located 3.00 of each other and doing their own cooking in the
meters to 4.5 meters above established sidewalk grade. building, and shall include flats and apartments.
The sign or sign structure must not project more than ARCADE — Any portion of a building above the first floor
1.00 meter into the public alley where the sign or sign projecting over the sidewalk beyond the first storey wall
structure is located more than 4.50 meters above used as protection for pedestrians against rain or sun.
established sidewalk grade.
ASSEMBLY BUILDING OR HALL — A building or a portion
SECTION 2006. Lighting. — Signs shall be illuminated only of a building used for the gathering together of fifty or
by electrical means in accordance with the Philippine more persons for such purposes as deliberation,
Electrical Code. workshop, entertainment, amusement, or awaiting
transportation or of a hundred or more persons in
drinking and dining establishments.
CHAPTER 21 Transitory and Final Provisions
ATTIC STOREY — Any storey situated wholly or partly in a
SECTION 2101. Existing Buildings and Structures. — All roof, so designed, arranged, or built as to be used for
buildings or structures constructed under R.A. 6541 or business, storage, or habitation.
existing city or municipal building codes or ordinances, if
legally done in accordance therewith, shall be respected AWNING — A movable shelter supported entirely from
subject to such limitations established in this Code. the exterior wall of a building and of a type which can be
retracted, folded, or collapsed against the face of a
However, alterations, additions, conversions, and/or supporting building.
repairs to be made in such building or structures shall be
subject to the provisions of this Code.



BACKING — The surface or assembly to which veneer is CHIMNEY LINEAR — The lining materials of fire clay or
attached. other approved material.
BALCONY — A portion of the seating space of an CHIMNEY MASONRY — The chimney of solid masonry
assembly room, the lowest part of which is raise 1.20 units bricks, stones, listed hollow unit masonry units, or
meters or more above the level of the main floor. reinforced concrete.
BALCONY EXTERIOR EXIT — A landing or porch CONCRETE BLOCK — A hollow or solid concrete masonry
projecting from the wall of a building, and which serves unit made from portland cement and suitable
as a required means of egress. The long size shall be at aggregates such as sand, gravel, crushed stone,
least fifty percent open, and the open area above the bituminous or anthracite cinders, burned clay, pumice,
guardrail shall be so distributed as to prevent the volcanic scoria, air cooled or expanded blast furnace slags.
accumulation of smoke or toxic gases. COPING — The material or units used to form a cap of
BARBECUE — A stationary open hearth or brazier, either finish on top of a wall, pier, or pilaster.
fuel-fired or electric, used for floor preparation. CORROSION-RESISTANT — The non-ferrous metal, or any
BASEMENT — A portion of a building between floor and metal having an unbroken surface of non-ferrous metal,
ceiling which is partly below and partly above grade but or steel with not less than 10 percent chromium or with
so located that the vertical distance from grade to the less than 0.20 percent copper.
floor is less than the vertical distance from grade to CORROSION-RESISTANT MATERIAL — Materials that are
ceiling. inherently rust-resistant or materials to which an
BAY OR PANEL — One of the intervals or spaces into approved rust-resistive coating has been applied either
which the building front is divided by columns, before or after forming or fabrication.
buttresses, or division walls. COURSE — A continuous horizontal layer of masonry
BOARDING HOUSE — A house with five or more sleeping units.
rooms where the boarders are provided with lodging, and COURT — An occupied space between building lines and
meals for fixed sum paid by the month, or week, in lot lines other than a yard; free, open, and unobstructed
accordance with previous arrangement. by appendages from the ground upward.
BOILER ROOM — Any room containing a stream or DISPERSAL AREA (SAFE) — An area which will
hotwater boiler. accommodate a number of persons equal to the total
BUILDABLE AREA — The remaining space in a lot after capacity of the stand and building it serves, in such a
deducting the required minimum open spaces. manner that no person within the area need be closer
BUILDING — Any structure built for the support, shelter, than 15.00 meters from the stand or building. Dispersal
or enclosure of persons, animals, chattels, or property of areas shall be based upon the area of not less than 0.28
any kind. square meter per person.
BUILDING HEIGHT — The vertical distance from the DWELLING — Any building or any portion thereof which
established grade elevation to the highest point of the is not an "apartment house", "lodging house", or a "hotel"
coping of a flat roof, to the average height of the highest as defined in this Code which contained one or two
gable or a pitch or hip roof, or to the top of the parapet if "dwelling units" or "guest rooms", used, intended or
the roof is provided with a parapet. In case of sloping designed to be built, used, rented, leased, let or hired out
ground, the average ground level of the buildable area to be occupied, or which are occupied for living purposes.
shall be considered the established grade elevation. DWELLING, INDIGENOUS FAMILY — A dwelling intended
BUILDING LENGTH — Its general lineal dimensions for the use and occupancy by the family of the owner
usually measured in the direction of the bearing wall for only. It is one constructed of native materials such as
girders. bamboo, nipa, logs, or lumber, the total cost of which
does not exceed fifteen thousand pesos.
BUILDING WIDTH — Its shortest linear dimensions
usually measured in the direction of the floor, beams, or DWELLING, MULTIPLE — A building used as a home or
joints. residence of three or more families living independently
from one another, each occupying one or more rooms as
CELLAR — The portion of a building between floor and a single housekeeping unit.
ceiling which is wholly or partly below grade and so
located that the vertical distance from grade to the floor DWELLING, ONE-FAMILY — A detached building
below is equal to or greater than the vertical distance designated for, or occupied exclusively by one family.
from grade to ceiling. DWELLING UNIT — One or more habitable rooms which
CHIMNEY CLASSIFICATIONS: are occupied or which are intended or designated to be
occupied by one family with facilities for living, sleeping,
(a) RESIDENTIAL APPLIANCE TYPE — A factory-built or cooking, and eating.
masonry chimney suitable for removing products of
combustion from residential type appliance producing EXIT — A continuous and unobstructed means of egress
combustion gases not in excess of 538ºC measured at the to a public way, and shall include intervening doors,
appliance flue outlet. doorways, corridors, exterior exit balconies, ramps,
stairways, smokeproof, enclosures, horizontal exits, exit
(b) LOW-HEAT APPLIANCE TYPE — A factory-built passageways, exit courts, and yards. An exit shall be
masonry or metal chimney suitable for removing the deemed to be that point which open directly into a safe
product of combustion from fuel-burning low-heat dispersal area or public way. All measurement are to be
appliances producing combustion gases not in excess of made to that point when determining the permissible
538ºC under normal operating conditions but capable of distance of the travel.
producing combustible gases of 760ºC during
intermittent forced firing for periods up to one hour. All EXIT COURTS — A yard or court providing egress to a
temperatures are measured at the appliance flue outlet. public way for one or more required exits.
(c) MEDIUM-HEAT APPLIANCE TYPE — A factory built EXIT HORIZONTAL — A means of passage from one
masonry or metal chimney suitable for removing the building into another building occupied by the same
products of combustion from fuel-burning medium-heat tenant through a separation wall having a minimum fire
appliances producing combustion gases not in excess of resistance of one-hour.
1093ºC measured at the appliance flue outlet. EXIT PASSAGEWAY— An enclosed means of egress
CHIMNEY CONNECTOR — The pipe which connects a flue connecting a required exit or exit court with a public way.
burning appliance to a chimney.


FACING — Any masonry, forming an integral part of a wall square meters of superficial floor area in a dormitory shall

used as a finished surface. (as contrasted to veneer, see be considered to be a guest room.
definition). HABITABLE ROOM — Any room meeting the
FIREBRICK — A refractory brick. requirements of this Code for sleeping, living, cooking, or
FIRECLAY — A finely ground clay used as a plasticizer for dining purposes, excluding such enclosed spaces as
masonry mortars; varies widely in physical properties. closets, pantries, bath or toilet room, service rooms,
connecting corridors, laundries, unfinished attics, storage,
FIREPLACE — A hearth and fire chamber or similarly space cellars, utility rooms, and similar spaces.
prepared place in which a fire may be made and which is
built in conjunction with a chimney. HALL, COMMON — A corridor or passageway used in
common by all the occupants within a building.
FIRE RETARDANT TREATED WOOD — Lumber of
plywood impregnated with chemicals and when tested in HALL, STAIRS — A hall which includes the stair, stair
accordance with accepted fire standards for a period of landings, and those portions of the common halls
30 minutes shall have a flame-spread of not over 25 and through which it is necessary to pass in going between
show no evidence of progressive combustion. The the entrance floor and the room.
Fire-retardant properties shall not be considered HELIPORT — An area of land or water or a structural
permanent when exposed to the weather. surface which is used, or intended for use, the landing
FIRST STOREY — The floor of which is at or above the level and take off helicopters and any appurtenant areas which
of the sidewalk or adjoining ground, the remaining are used, or intended for use, for heliport buildings and
storeys being numbered in regular succession upward. other heliport facilities.
FLOOR AREA — The area included within the HELISTOP — The same as heliport except that no
surrounding exterior walls of a building or portion thereof, refueling, maintenance repairs, or storage of helicopters is
exclusive of vent shafts and courts. The floor area of a permitted.
building or portion thereof not provided with HOTEL — A building or a part thereof with rooms
surrounding exterior walls shall be the usable area under occupied or intended to be occupied for hire as
the horizontal projection of the roof or floor above. temporary aboding place of individuals with a general
FOOTING — That portion of the foundation of a structure kitchen and public dining room service, but no provision
which spreads and transmits loads directly to the soil or for cooking in any individual suite or room.
the pile. HOTEL APARTMENT — An apartment house which may
FOUNDATION — All the portions of the building or furnish dining room service and other services for the
structure below the footing, the earth upon which the exclusive use of its tenants.
structure rests. INCOMBUSTIBLE — As applied to building construction
GARAGE — A building or portion thereof in which a motor material, as material which, in the form it is used, is either
vehicle containing gasoline, distillate, or other volative, one of the following:
flammable liquid in its tank, is stored, repaired, or kept. (a) Material having an structural base of incombustible
GARAGE COMMERCIAL— A garage where automobiles material as defined in Item (2), above, with a surfacing
and other motor vehicle are housed, cared for, equipped, material not over 3.2 millimeters thick which has a
repaired or kept for remuneration, hire, or sale. flame-spread rating of 50 or less.
GARAGE, OPEN PARKING — A structure of one or more (b) "Incombustible" does not apply to surface finish
tiers in height which is at least 50 percent open on two or materials. Material required to be incombustible for
more sides and is used exclusively for the parking or reduced clearance to flues, heating appliances, or other
storage of passenger motor vehicles having a capacity of materials shall refer to material conforming to the
not more than nine persons per vehicle. Open parking provisions of this Code. No material shall be classed as
garages are further classified as either ramp-access or incombustible which is subject to increase in
mechanical-access. Ramp-access, open parking garages combustibility or flame-spread rating beyond the limits
are those employing a series of continuously rising floors herein established, through the effects of age, moisture,
permitting the movement of vehicles under their own or other atmospheric condition.
power from and to the street level. Mechanical access INCOMBUSTIBLE MATERIAL — When referred to as
parking garages are those employing parking machines, structural material, means brick, stone, terracotta,
lifts, elevators, or other mechanical services for vehicles concrete, iron, steel, sheet, metal, or tiles, used either
moving from and to street level and in which public singly or in combination.
occupancy is prohibited above the street level. INCOMBUSTIBLE ROOFING— A covering of not less than
GARAGE PRIVATE — A building or portion of a building in two thickness of roofing felt and a good coat of tar and
which only motor vehicles used by the tenants of the gravel or tin, corrugated iron or other approved
building or buildings on the premises are stored or kept. fire-resisting material with standing seam of lap joint.
GIRDER — A horizontal structural piece which supports in INCOMBUSTIBLE STUD PARTITION — A partition
end of the floor beams or joists or walls over opening. plastered on both sides upon metal lath or wire cloth for
GRADE (ADJACENT GROUND ELEVATION) — The lowest the full height, and fire-topped between the studs with
point of elevation of the finished surface of the ground incombustible material 20 centimeters above the floor
between the exterior wall of a building and a point 1.50 and at the ceiling.
meters distant from said wall, or the lowest point of LINE, BUILDING — The line formed by the intersection of
elevation of the finished surface of the ground between the outer surface of the enclosing wall of the building and
the exterior wall of a building and a property line if it is the surface of the ground.
less than 1.50 meters distant from sidewall. In case walls LINTEL — The beam or girder placed over an opening in a
are parallel to and within 1.50 meters of a public sidewalk, wall, which supports the wall construction above.
alley, or other public way, the grade shall be the elevation
of the sidewalk, alley, or public way. LOAD, DEAD — The weight of the permanent portions of
a building or structure; it includes the weight of the walls
GROUND FLOOR — The storey at or near the level of the permanent partitions, framing floors, roofs, and all other
grade, the other storeys, beginning with second for the permanent and stationary fixtures mechanism, and other
first next above, shall be designated by the successive construction entering into and becoming a part of a
floor numbers counting upward. building or structure.
GUEST ROOM — Any room or rooms used, or intended to LOAD, LATERAL — That load cased by winds,
be used by a guest for sleeping purposes. Every 9.30 earthquakes, or other dynamic forces.


LOAD, LIVE — The weight of the contents of a building or PLASTER, PORTLAND, CEMENT — A mixture of portland
structure; it includes all loads except dead and lateral, and cement, or portland cement and lime, and aggregate and
weight of temporary partitions, cases, counters, and other approved material as specified in this Code.
similar equipment, and all loads imposed due to the PLASTICS, APPROVED — Plastic materials which have a
occupancy of the building or structure. flame spread rating of 225 or less.
LOAD, OCCUPANT— The total number of persons that PLATFORM, ENCLOSED — A partially enclosed portion of
may occupy a building or portion thereof at any one time. an assembly room the ceiling of which is not more than
LODGING HOUSE — Any building or portion thereof, 1.50 meters above the prossenium opening and which is
containing not more than five guest rooms which are designed or used for the presentation of plays,
used by not more than five guests where rent is paid in demonstrations, or other entertainment wherein scenery,
money, goods, labor or otherwise. drops, decorations, of the effects may be installed or used.
LOT — A parcel of land on which a principal building and PUBLIC WAY — A parcel of land unobstructed from the
its accessories are placed or may be placed together with ground to the sky, more than 3.00 meters in width,
the required open spaces. A lot may or may not be the appropriated to the free passage of the general public.
land designated as lot or recorded plot. REPAIR — The construction or renewal of any part of an
LOT, CORNER — A lot situated at the junction of two or existing building for the purpose of its maintenance. The
more streets forming an angle of not more than one word "repair" shall not apply to any change of
hundred thirty-five degrees (135º). construction.
LOT, DEPTH OF— The average horizontal distance SHAFT — A vertical opening through a building for
between the front and the rear lot lines. elevators, dumbwaiters, mechanical equipment, or similar
LOT, FRONT— The front boundary line of a lot bordering purposes.
on the street and in the case of a corner lot, it may be SHOW WINDOW — A store window in which goods are
either frontage. display.
LOT, INSIDE — A lot fronting on but one street of public SLUM — Blighted Area: Eyesore; An area where the values
alley and the remaining sides bounded by lot lines. of real estate tend to deteriorate because of the
LOT LINE — The line of demarcation between either dilapidated, obsolescent, and insanitary condition of the
public and private property. building within the area. Any eyesore is a building or area
which is markedly unpleasant to look at.
LOT, OPEN — A lot bounded on all sides street lines.
SOCALO, MASONRY — The wall between the bottom of
LOT, WIDTH OF — The average horizontal distance the window sill and the ground.
between the side lot lines.
SOFFIT — The underside of a beam. lintel, or revear.
MASONRY — A form of construction composed of stone,
brick, concrete, gypsum, hollow clay tile, concrete block or STABLE — Any structure designed and intended for the
tile, or other similar building units of material or enclosure, shelter, or protection of any horse, carabao, or
combination of these material laid up unit and set in other cattle.
mortar. STABLE, COMMERCIAL — A stable wherein the animals
MASONRY SOLID — Masonry of solid units built without kept are for business, racing or breeding purposes.
hollow spaces. STAGE — A partially enclosed portion of an assembly
MASONRY UNIT— Brick, block, tile, stone or other similar building which is designed or used for the representation
building unit or combination thereof, made to be of plays, demonstrations, or other entertainment wherein
bounded together by a cementation agent. scenery, drops or other effects may be installed or used,
and where the distance between the top of the
MEZZANINE OR MEZZANINE FLOOR — A partial prosecenium openings and the ceiling above the stage is
intermediate floor in any storey or room of a building more than 1.50 meters.
having an area not more than one-half of the area of the
room or space in which it is constructed. STAIRWAY — Two or more risers shall constitute a
stairway.
NON-CONFORMING BUILDING — A building which does
not conform with the regulations of the district where it is STAIRWAY, PRIVATE— A stairway serving one tenant only.
situated as to height, yard requirement, lot area, and STOREY — That portion of a building included between
percentage of occupancy. the upper surface of any floor and the upper surface of
NON-CONFORMING USE — The use of a building or land the floor next above, except that the topmost storey shall
or any portion of such building or land which does not be that portion of a building included between the upper
conform with the use and regulation of the zone where it surface of the topmost floor and the ceiling or roof above.
is situated. If the finished floor level directly above a basement, cellar
or unused underfloor space is more than 3.60 meters
OCCUPANCY — The purpose for which a building is used above grade as defined herein at any point. Such
or intended to be used. The term shall also include the basement, cellar or unused underfloor space shall be
building or room housing such use. Change of occupancy considered as a storey.
is not intended to include change of tenants or
proprietors. STOREY, HEIGHT OF — The perpendicular distance from
top to top of two successive of floors, floor beams, or joists.
OWNER— Any person, company, or corporation owning The clear height of a storey or a room is the distance from
the property or properties under consideration or the the floor to the ceiling. The clear height of balconies is
receiver or trustee thereof. measured from the highest point of the sidewall grade to
PANIC HARDWARE — A bar which extends across at least the underside of the balcony floor joists. If these joists are
one-half the width of each door leaf, which will open the sealed, this clear height is measured to the underside of
door if subjected to pressure. the ceiling.
PARTITION — An interior subdividing walls. STREET — Any thoroughfare of public space which has
been dedicated or deeded to the public for public use.
PIER — An insulated mass of masonry forming support
for arches, columns, girders, lintels, trusses, and similar STRUCTURE — That which is built or constructed, an
structural parts. edifice or building of any kind or any piece of work
artificially built up or composed of parts joined together
PLASTER — A portion of the wall which projects on one or in some definite manner.
both sides and acts as a vertical beam, a column, or both.
STRUCTURAL FRAME — The framing system including
the columns and the girders, beams, trusses, and



spandrels having direct connections to the columns and WALL, PARAPET — That part of any entirely above the
all other members which are essential to the stability of roof line.
the building as a whole. The members of floor or roof WALL, PARTY — A wall separating two or more buildings,
which have no connection to the column shall be and used in common by the said buildings.
considered secondary and not a part of the structural
frame. WALL, RETAINING — Any wall used to resist the lateral
displacement of any material; a subsurface wall built to
SUPORTALES — The vertical supports, such as posts or resist the lateral pressure of internal loads.
stanchions, as used in indigenous or traditional type of
construction. These may be freestanding as stilts or WALL, THICKNESS OF — The minimum thickness
integrated into the wall structure. In the case of former, measured on the bed.
pie de gallos (knee braces) or crosettas (cross bracing) are WINDOW — An opening through a wall of a building to
sometimes used. the outside air for the purpose of admitting natural light
SURFACE, EXTERIOR — Weather-exposed surface. and air.
SURFACE, INTERIOR — Surfaces other than WINDOW, ORIEL — A projecting window similar to a bay
weather-exposed surfaces. window, cut curried on brackets or corbels. The term "bay
window" may also be applied to an oriel window
SURFACE, WEATHER-EXPOSED — All surfaces of walls, projecting over the street line.
ceilings, floors, roofs, soffits, and similar surfaces exposed
to the weather except the following: WIRE BACKING — Horizontal strands of tautened wire
attached to surfaces of vertical wood supports which,
(a) Ceiling and roof soffits by walls, or by beams extend a when covered with building paper, provide a backing for
minimum of 300 millimeters below such ceiling or roof portland cement plaster.
soffit;
YARD OR PATIO — The vacant space left in a lot between
(b) Walls or portions of walls within an unenclosed roof the building and the property line.
area, when located a horizontal distance from an exterior
opening equal to twice the height of the opening; and YARD, REAR — The yard lying between the side lot lines
and the nearest lot line and the nearest building line.
(c) Ceiling and roof soffits beyond a horizontal distance of
3.00 meters from the outer edge of the ceilings or roof YARD, SIDE — The yard lying between the side line and
soffits. the nearest building and between the front and the rear
yards.
VALUE OR VALUATION OF A BUILDING — The estimated
cost to replace the building in kind, based on current
replacement costs. ANNEX "B-1"Tables
VAULT — Any surface or underground construction
TABLE 708-A. Dimension of Wooden Posts or Suportales
covered on top, or any fire-roof construction intended for
the storage of valuables. Required
VENEER ADHERED — Veneer secured and supported by Maximum
Type Maximum Maximum Maximum
Finished
approved mechanical fasteners attached to an approved Building Height of Height Spacing Size
backing supported through adhesion to an approved 1st Floor Total of Post
of
bonding material applied over an approved backing. Suportales
VENEER, EXTERIOR — Veneer applied to
weather-exposed surfaces. 1-Storey 4.00 M 3.50 M 10 cms. x 10
Shed cms.
VENEER, INTERIOR — Veneer applied to surfaces other
than weather-exposed surfaces. 1-Storey 3.00 M 4.00 M 10 cms. x 10
Shed cms.
WALL BEARING — A wall which supports any load other
than its own weight. 1-Storey 5.00 M 4.00 M 12.5 cms. x
WALL, CROSS — A term which may be used Shed 12.5 cms.
synonymously with a partition. 1-Storey 5.50 M 3.50 M 12.5 cms. x
WALL, CURTAIN — The enclosing wall of an iron or steel House 12.5 cms.
framework or the nonbearing portion of an enclosing wall or Chalet
between pier.
2-Storey 1.00 to 6.00 M 3.00 M 12.5 cms. x
WALL, DEAD — A wall without openings. House 12.5 cms.
WALL, EXTERIOR — Any wall or element of a wall or any 2-Storey 3.00 M 7.00 M 4.00 M 12 cms. x 15
number or group of members, which defines the exterior House cms.
boundary or courts of a building.
2-Storey 4.50 M 8.00 M 4.50 M 17.5 cms. x
WALL, FACED — A wall in which the facing and backing
House 17.5 cms.
are so bonded together that they act as a composite
element, and exert a common action under load. 2-Storey 5.00 M 9.00 M 4.50 M 20 cms. x
WALL, FIRE — Any wall which subdivided a building so as House 20 cms.
to resist the spread of fire, by starting at the foundation
and extending continuously through all storeys to, or
Logs or tree suportales may be used as post in
above the roof. Extension above the roof is 1.00 meters.
indigenous traditional type of construction, provided that
WALL, FOUNDATION — That portion of an enclosing wall these are of such sizes and spacing as to sustain vertical
below the first tier of floor-joists. loading equivalent at least to the loading capacities of the
WALL, HEIGHT OF — The perpendicular distance posts and spacing in this Tables.
measured from its base line either at the grade or at the TABLE 1003-A. Projections of Balconies and Appendages
top of the girder to the top of the coping thereof.
Foundation and retaining walls are measured from the Width of Streets Balconies Total
grade downward to the base of the footing. Projections
WALL, NONBEARING — A wall which supports no load Over 3.00 m. but less than With .60 m.
other than its own weight. 6.00 Balcony


6.00 m. to less than 10.00 m. With .90 m. adherence to standard fire prevention and safety
Balcony measures, and promote accountability in the fire
protection and prevention service.
10.00 m. up to 11.00 m. With 1.00 m. SECTION 3. Definition of Terms. — As used in this Fire
Balcony Code, the following words and phrases shall mean and be
10.00 m. to less than 11.00 m. With 1.10 m. construed as indicated:
Balcony Abatement — Any act that would remove or neutralize a
12.00 m. to less than 13.00 m. With 1.30 m. fire hazard.
Balcony Administrator — Any person who acts as agent of the
owner and manages the use of a building for him.
13.00 m. to less than 14.00 With 1.40 m.
m. Balcony Blasting Agent — Any material or mixture consisting of a
fuel and oxidizer used to set off explosives.
14.00 m. or over With 1.50 m.
Balcony Cellulose Nitrate or Nitro Cellulose — A highly
combustible and explosive compound produced by the
reaction of nitric acid with a cellulose material.
TABLE 1106-A. Type of Protection Required for Pedestrian Cellulose Nitrate Plastic (Pyroxylin) — Any plastic
substance, materials or compound having cellulose
HEIGHT OF
DISTANCE FROM PROTECTION nitrate (nitro cellulose) as base.
CONSTRUCTION CONSTRUCTION REQUIRED Combustible Flammable or Inflammable — Descriptive of
materials that are easily set on fire.
Eight feet or Less than six feet Rating
Combustible Fiber — Any readily ignitable and free
less burning fiber such as cotton, oakum, rags, waste cloth,
Six feet or more None
waste paper, kapok, hay, straw, spanish moss, excelsior
Less than six feet Fence and and other similar materials commonly used in commerce.

Canopy Combustible Liquid — Any liquid having a flash point at

or above 37.8ºC (100ºF).

Six feet or more Fence and Corrosive Liquid — Any liquid which causes fire when in
but not more contact with organic matter or with certain chemicals.
Canopy
than one-fourth Curtain Board — A vertical panel of non-combustible or
the height of fire resistive materials attached to and extending below
construction the bottom chord of the roof trusses, to divide the
underside of the roof into separate compartments so that
heat and smoke will be directed upwards to a roof vent.
More than Six feet or more, None
but between Cryogenic — Descriptive of any material which by its
eight feet
nature or as a result of its reaction with other elements
one-fourth to one
produces a rapid drop in temperature of the immediate
half the height
surroundings.
of construction
Damper — A normally open device installed inside air
duct system which automatically closes to restrict the
Six feet or more Fence passage of smoke or fire.
but exceeding
Distillation — The process of first raising the temperature
one-half the in separate the more volatile from the less volatile parts
construction and then cooling and condensing the resulting vapor so
height as to produce a nearly purified substance.
Duct System — A continuous passageway for the
Note: All protective devices shall include appropriate transmission of air.
lights and warning signs Dust — A finely powdered substance which, when mixed
Published in the Official Gazette, Vol. 73 No. 22 Page 4441 with air in the proper proportion and ignited will cause an
on May 23, 1977. explosion.
(National Building Code of the Philippines, Presidential Electrical Arc — An extremely hot luminous bridge
Decree No. 1096, [February 19, 1977]) formed by passage of an electric current across a space
between two conductors or terminals due to the
incandescence of the conducting vapor.
RA No 9514 | Fire Code of the Philippines Ember — A hot piece or lump that remains after a
material has partially burned, and is still oxidizing without
of 2008 the manifestation of flames.
Finishes — Materials used as final coating of a surface for
December 19, 2008 ornamental or protective purposes.
REPUBLIC ACT NO. 9514 Fire — The active principle of burning, characterized by
the heat and light of combustion.
AN ACT ESTABLISHING A COMPREHENSIVE FIRE CODE
OF THE PHILIPPINES, REPEALING PRESIDENTIAL Fire Trap — A building unsafe in case of fire because it will
DECREE NO. 1185 AND FOR OTHER PURPOSES burn easily or because it lacks adequate exits or fire
escapes.
SECTION 1. This Act shall be known as the "Fire Code of
the Philippines of 2008". Fire Alarm — Any visual or audible signal produced by a
device or system to warn the occupants of the building or
SECTION 2. It is the policy of the State to ensure public
fire fighting elements of the presence or danger of fire to
safety, promote economic development through the
enable them to undertake immediate action to save life
prevention and suppression of all kinds, of destructive
and property and to suppress the fire.
fires, and promote the professionalization of the fire
service as a profession. Towards this end, the State shall
enforce all laws, rules and regulations to ensure



Fire Door — A fire resistive door prescribed for openings when in contact with combustible materials especially
in fire separation walls or partitions. under conditions of high temperature.
Fire Hazard — Any condition or act which increases or Overloading — The use of one or more electrical
may cause an increase in the probability of the appliances or devices which draw or consume electrical
occurrence of fire, or which may obstruct, delay, hinder or current beyond the designed capacity of the existing
interfere with fire fighting operations and the electrical system.
safeguarding of life and property. Owner — The person who holds the legal right of
Fire Lane — The portion of a roadway or public-way that possession or title to a building or real property.
should be kept opened and unobstructed at all times for Oxidizing Material — A material that readily yields oxygen
the expedient operation of fire fighting units. in quantities sufficient to stimulate or support
Fire Protective and Fire Safety Device — Any device combustion.
intended for the protection of buildings or persons to Pressurized or Forced Draft Burning Equipment — Type
include, but not limited to, built-in protection system of burner where the fuel is subjected to pressure prior to
such as sprinklers and other automatic extinguishing discharge into the combustion chamber and/or which
system, detectors for heat, smoke and combustion includes fans or other provisions for the introduction of air
products and other warning system components, at above normal atmospheric pressure into the same
personal protective equipment such as fire blankets, combustion chamber.
helmets, fire suits, gloves and other garments that may
be put on or worn by persons to protect themselves Public Assembly Building — Any building or structure
during fire. where fifty (50) or more people congregate, gather, or
assemble for any purpose.
Fire Safety Constructions — Refers to design and
installation of walls, barriers, doors, windows, vents, Public Way — Any street, alley or other strip of land
means of egress etc. integral to and incorporated into a unobstructed from the ground to the sky, deeded,
building or structure in order to minimize danger to life dedicated or otherwise permanently appropriated for
from fire, smoke, fumes or panic before the building is public use.
evacuated. These features are also designed to achieve, Pyrophoric — Descriptive of any substance that ignites
among others, safe and rapid evacuation of people spontaneously when exposed to air.
through means of egress on construction which are
sealed from smoke or fire, the confinement of fire or Refining — A process where impurities and/or deleterious
smoke in the room or floor of origin and delay their materials are removed from a mixture in order to produce
spread to other parts of the building by means of smoke a pure element or compound. It shall also refer to partial
sealed and fire resistant doors, walls and floors. It shall distillation and electrolysis.
also mean to include the treatment of buildings Self-closing Doors — Automatic closing doors that are
components or contents with flame retardant chemicals. designed to confine smoke and heat and delay the
Flash Point — The minimum temperature at which any spread of fire.
material gives off vapor in sufficient concentration to Smelting — Melting or fusing of metallic ores or
form an ignitable mixture with air. compounds so as to separate impurities from pure
Forcing — A process where a piece of metal is heated metals.
prior to changing its shape or dimensions. Sprinkler System — An integrated network of
Fulminate — A kind of stable explosive compound which hydraulically designed piping installed in a building,
explodes by percussion. structure or area with outlets arranged in a systematic
pattern which automatically discharges water when
Hazardous Operation/Process — Any act of activated by heat or combustion products from a fire.
manufacturing, fabrication, conversion, etc., that uses or
produces materials which are likely to cause fires or Standpipe System — A system of vertical pipes in a
explosions. building to which fire hoses can be attached on each
floor, including a system by which water is made available
Horizontal Exit — Passageway from one building to to the outlets as needed.
another or through or around a wall in approximately the
same floor level. Vestibule — A passage hall or antechamber between the
outer doors and the interior parts of a house or building.
Hose Box — A box or cabinet where fire hoses, valves and
other equipment are stored and arranged for fire Vertical Shaft — An enclosed vertical space of passage
fighting. that extends from floor to floor, as well as from the base
to the top of the building.
Hose Reel — A cylindrical device turning on an axis
around which a fire hose is wound and connected. SECTION 4. Applicability of the Code. — The provisions of
the Fire Code shall apply to all persons and all private and
Hypergolic Fuel — A rocket or liquid propellant which public buildings, facilities or structures erected or
consist of combinations of fuels and oxidizers which constructed before and after its effectivity.
ignite spontaneously on contact with each other.
SECTION 5. Responsibility for the Enforcement of this
Industrial Baking and Drying — The industrial process of Code. — This Code shall be administered and enforced by
subjecting materials to heat for the purpose of removing the Bureau of Fire Protection (BFP), under the direct
solvents or moisture from the same, and/or to fuse supervision and control of the Chief of the Bureau of Fire
certain chemical salts to form a uniform glazing on the Protection, through the hierarchy of organization as
surface of materials being treated. provided for in Chapter VI of Republic Act No. 6975. With
Jumper — A piece of metal or an electrical conductor the approval of the Secretary of the Department of the
used to bypass a safety device in an electrical system. Interior and Local Government (DILG), the Chief, BFP, is
hereby authorized to:
Occupancy — The purpose for which a building or portion
thereof is used or intended to be used. a. Issue implementing rules and regulations, and
prescribe standards, schedules of fees/fire service charges
Occupant — Any person actually occupying and using a and administrative penalties therefor as provided in the
building or portions thereof by virtue of a lease contract pertinent provisions of this Code;
with the owner or administrator or by permission or
sufferance of the latter. b. Reorganize the BFP as may be necessary and
appropriate;
Organic Peroxide — A strong oxidizing organic
compound which releases oxygen readily. It causes fire c. Support and assist fire volunteers, practitioners and fire
volunteer organizations in the country who shall undergo
mandatory fire suppression, inspection, rescue,



emergency medical services and related emergency organic members of the BFP and other government
response trainings and competency evaluations to be offices and agencies, but also from other sources in the
conducted by the BFP. In the case of the fire latter case, they will either be appointed into the service
practitioners, they shall undergo mandatory continuous or hired as consultants in accordance with law. The
professional education and competency evaluation of technical staff shall study, review and evaluate latest
their expertise, knowledge and skills in the area of fire developments and standards on fire technology; prepare
science, engineering and technology to be conducted by plans/programs, on fire safety, prevention and
the BFP. suppression and evaluate implementation thereof;
The BFP may enter into external party agreements for develop programs on the professionalization of the fire
the conduct of trainings, education and evaluation of fire service; coordinate with appropriate government and
volunteers, practitioners and fire volunteer organizations, private institutions for the offering of college courses on
which shall be under the full control and supervision of fire technology and fire protection engineering; propose
the BFP: Provided, however, That during firefighting amendments to the fire Code; advise the Chief, BFP on
operations, fire volunteer organizations shall be under the any matter brought to his attention; and perform such
direct operational control of the fire ground commanders other functions as directed on any matter brought to his
of the BFP; attention and perform such other functions as directed
by higher authorities.
d. Enter into long term agreement, either through public
biddings or negotiations in accordance with the SECTION 7. Inspections, Safety Measures, Fire Safety,
provisions of Republic Act No. 9184, otherwise known as Constructions and Protective and/or Warning Systems. —
the Government Procurement Reform Act of 2003, for the As may be defined and provided in the rules and
acquisition of fire prevention, fire protection and fire regulations, owners, administrators or occupants of
fighting investigation, rescue, paramedics, hazardous buildings, structures and their premises or facilities and
material handling equipment, supplies, materials and other responsible persons shall be required to comply
related technical services necessary for the fire service; with the following, as may be appropriate:
e. Enter into Memoranda of Agreement with other a) Inspection Requirement — A fire safety inspection shall
departments, bureaus, agencies, offices and corporations be conducted by the Chief, BFP or his duly authorized
of the government, as well as private institutions, in order representative as prerequisite to the grants of permits
to define areas of cooperation and coordination and and/or licenses by local governments and other
delineate responsibility on fire prevention education, fire government agencies concerned, for the:
safety, fire prevention, fire suppression and other matters (1) Use or occupancy of buildings, structures, facilities or
of common concern; their premises including the installation or fire protection
f. Call on the police, other law enforcement agencies, and and fire safety equipment, and electrical system in any
local government assistance to render necessary building structure or facility; and
assistance in the enforcement of this Code; (2) Storage, handling and/or use of explosives or of
g. Designate a fire safety inspector through his/her duly combustible, flammable, toxic and other hazardous
authorized representative, who shall conduct an materials;
inspection of every building or structure within his area of b) Safety Measures for Hazardous Materials — Fire safety
responsibility at least once a year and every time the measures shall be required for the manufacture, storage,
owner, administrator or occupant shall renew his/her handling and/or use of hazardous materials involving:
business permit or permit to operate; (1) cellulose nitrate plastic of any kind;
No occupancy permit, business or permit to operate shall (2) combustible fibers;
be issued without securing a Fire Safety Inspection
Certificate (FSIC) from the Chief, BFP, or his/her duly (3) cellular materials such as foam, rubber, sponge rubber
authorized representative; and plastic foam;
h. Inspect at reasonable time, any building, structure, (4) flammable and combustible liquids or gases of any
installation or premises for dangerous or hazardous classification;
conditions or materials as set forth in this Code, provided (5) flammable paints, varnishes, stains and organic
that in case of single family dwelling, an inspection must coatings;
be upon the consent of the occupant or upon lawful
order from the proper court. The Chief, BFP or his/her (6) high-piled or widely spread combustible stock;
duly authorized representative shall order the (7) metallic magnesium in any form;
owner/occupant to remove hazardous materials and/or
stop hazardous operation/process in accordance with the (8) corrosive liquids, oxidizing materials, organic peroxide,
standards set by this Code or its implementing rules or nitromethane, ammonium nitrate, or any amount of
regulations or other pertinent laws; highly toxic, pyrophoric, hypergolic, or cryogenic
materials or poisonous gases as well as material
i. Where conditions exist and are deemed hazardous to compounds which when exposed to heat or flame
life and property, to order the owner/occupant of any become a fire conductor, or generate excessive smoke or
building or structure to summarily abate such hazardous toxic gases;
conditions;
(9) blasting agents, explosives and special industrial
j. Require the building owner/occupant to submit plans explosive materials, blasting caps, black powder, liquid
and specifications, and other pertinent documents of nitro-glycerine, dynamite, nitro cellulose, fulminates of
said building to ensure compliance with applicable codes any kind, and plastic explosives containing ammonium
and standards; and salt or chlorate;
k. Issue a written notice to the owner and/or contractor to (10) firework materials of any kind or form;
stop work on portion of any work due to absence, or in
violation of approved plans and specifications, permit (11) matches in commercial quantities;
and/or clearance or certification as approved by the Chief, (12) hot ashes, live coals and embers;
BFP or his/her duly authorized representative. The notice (13) mineral, vegetable or animal oils and other
shall state the nature of the violation and no work shall be derivatives/by-products;
continued on that portion until the violation had been
corrected. (14) combustible waste materials for recycling or resale;
SECTION 6. Technical Staff. — The Chief, BFP shall (15) explosive dusts and vapors; and
constitute a technical staff of highly qualified persons (16) agriculture, forest, marine or mineral products which
who are knowledgeable on fire prevention, fire safety, and may undergo spontaneous combustion;
fire suppression. They may be drawn not only from the



(17) any other substance with potential to cause harm to d. Obstructing designated fire lanes or access to fire
persons, property or the environment because of one or hydrants;
more of the following: a) The chemical properties of the e. Overcrowding or admission of persons beyond the
substance; b) The physical properties of the substance; c) authorized capacity in movie houses, theaters, coliseums,
The biological properties of the substance. Without auditoriums or other public assembly buildings, except in
limiting the definition of hazardous material, all other assembly areas on the ground floor with open sides
dangerous goods, combustible liquids and chemicals are or open doors sufficient to provide safe exits;
hazardous materials.
f. Locking fire exits during period when people are inside
c) Safety Measures for Hazardous Operation/Processes — the building;
Fire safety measures shall be required for the following
hazardous operation/processes: g. Prevention or obstruction of the automatic closure of
fire doors or smoke partitions or dampers;
(1) welding or soldering;
h. Use of fire protective or fire fighting equipment of the
(2) industrial baking and drying; fire service other than for fire fighting except in other
(3) waste disposal; emergencies where their use are justified;
(4) pressurized/forced-draft burning equipment; i. Giving false or malicious fire alarms;
(5) smelting and forging; j. Smoking in prohibited areas as may be determined by
(6) motion picture projection using electrical arc lamps; fire service, or throwing of cigars, cigarettes, burning
objects in places which may start or cause fire;
(7) refining, distillation and solvent extraction; and
k. Abandoning or leaving a building or structure by the
(8) such other operations or processes as may hereafter occupant or owner without appropriate safety measures;
be prescribed in the rules and regulations.
l. Removing, destroying, tampering or obliterating any
d) Provision on Fire Safety Construction, Protective and authorized mark, seal, sign or tag posted or required by
Warning System — Owners, occupants or administrator the fire service for fire safety in any building, structure or
or buildings, structures and their premises or facilities, processing equipment; and
except such other buildings or structures as may be
exempted in the rules and regulations to be promulgated m. Use of jumpers or tampering with electrical wiring or
under Section 5 hereof, shall incorporate and provide overloading the electrical system beyond its designated
therein fire safety construction, protective and warning capacity or such other practices that would tend to
system, and shall develop and implement fire safety undermine the fire safety features of the electrical
programs, to wit: system.
(1) Fire protection features such as sprinkler systems, hose SECTION 9. Violations, Penalties and Abatement of Fire
boxes, hose reels or standpipe systems and other fire Hazards. — Fire hazards shall be abated immediately. The
fighting equipment; Chief, BFP or his/her duly authorized representative, upon
the report that a violation of this Code or other pertinent
(2) Fire alarm systems; laws, rules and regulations is being committed, shall issue
(3) Fire walls to separate adjoining buildings, or notice/order to comply to the owner, administrator,
warehouses and storage areas from other occupancies in occupant or other person responsible for the condition of
the same building; the building or structure, indicating among other things,
the period within which compliance shall be effected,
(4) Provisions for confining the fire at its source such as which shall be within ten (10) to fifteen (15) days after the
fire resistive floors and walls extending up to the next receipt of the notice/order, depending on the
floor slab or roof, curtain boards and other fire containing reasonableness to adequately comply with the same.
or stopping components;
If after the lapse of the aforesaid period, the owner,
(5) Termination of all exits in an area affording safe administrator, occupant or other responsible persons
passage to a public way or safe dispersal area; failed to comply, the Chief, BFP or his/her duly authorized
(6) Stairway, vertical shafts, horizontal exits and other representative shall put up a sign in front of the building
means of egress sealed from smoke and heat; or structure that it is a fire hazard. Specifically, the notice
shall bear the words "WARNING: THIS
(7) A fire exit plan for each floor of the building showing BUILDING/STRUCTURE IS A FIRE HAZARD", which shall
the routes from each other room to appropriate exits, remain posted until such time that the owner,
displayed prominently on the door of such room; administrator, occupant or other persons responsible for
(8) Self-closing fire resistive doors leading to corridors; the condition of the building, structure and their
(9) Fire dampers in centralized airconditioning ducts; premises or facilities abate the same, but such period
shall not exceed fifteen (15) days from the lapse of the
(10) Roof vents for use by fire fighters; and initial period given in the notice/order to comply.
(11) Properly marked and lighted exits with provision for Finally, with the failure of the owner, administrator,
emergency lights to adequately illuminate exit ways in occupant or other persons responsible for the condition
case of power failure. of the building, structure and their premises or facilities
SECTION 8. Prohibited Acts. — The following are declared to comply within the period specified above, the Chief,
as prohibited act and omission: BFP may issue order for such abatement. If the owner,
administrator or occupant of buildings, structure and
a. Obstructing or blocking the exit ways or across to their premises or facilities does not abate the same within
buildings clearly marked for fire safety purposes, such as the period fixed in said order, the building, structure,
but not limited to aisles in interior rooms, any part of premises or facilities shall be ordered closed by the Chief,
stairways, hallways, corridors, vestibules, balconies or BFP or his/her duly authorized representative
bridges leading to a stairway or exit of any kind, or notwithstanding any permit clearance or certificate
tolerating or allowing said violations; earlier issued by the local authorities.
b. Constructing gates, entrances and walkways to Any building or structure assessed and declared by the
building components and yards, and temporary or Chief, BFP or his/her duly authorized representative as a
permanent structures on public ways, which obstruct the
orderly and easy passage of fire fighting vehicles and firetrap on account of the gravity or palpability of the
equipment; violation or is causing clear and present imminent fire
danger to
c. Prevention, interference or obstruction of any operation
of the fire service, or of duly organized and authorized fire
brigades;



adjoining establishments and habitations shall be of the Interior and Local Government shall be final and
declared a public nuisance, as defined in the Civil Code of executory.
the Philippines b) Punitive — In case of willful failure to correct the
in a notice to be issued to the owner, administrator, deficiency or abate the fire hazard as provided in the
occupant or other person responsible for the condition of preceding subsection, the violator shall, upon conviction,
the building, structure and their premises or facilities. If be punished by imprisonment of not less than six (6)
the assessed value of the nuisance or the amount to be months nor more than six (6) years, or by a fine of not
spent in abating the more than One hundred thousand pesos (P100,000.00) or
same is not more than One hundred thousand pesos both such fine and imprisonment: Provided, however,
(P100,000.00), the owner, administrator or occupant That in the case of a corporation, firm, partnership or
thereof shall association, the fine and/or imprisonment shall be
imposed upon its officials responsible for such violation,
abate the hazard within Fifteen (15) days, or if the and in case the guilty party is an alien, in addition to the
assessed value is more than One hundred thousand penalties herein prescribed, he shall immediately be
pesos (P100,000.00), deported: Provided, finally, That where the violation is
within thirty (30) days from receipt of the order declaring attended by injury, loss of life and/or damage to property,
said building or structure a public nuisance; otherwise, the violator shall be proceeded against under the
the applicable provisions of the Revised Penal Code.
Chief, BFP or his/her duly authorized representative shall Any person who, without authority, maliciously removes
forthwith cause its summary abatement. Failure to the sign that a building or structure is a fire
comply hazard/firetrap placed by the authorized person in this
Code shall be liable for imprisonment for thirty (30) days
within five (5) days from the receipt of the notice shall or a fine not exceeding One hundred thousand pesos
cause the Chief, BFP or his/her duly authorized (P100,000.00) or both in the discretion of the court.
representative to
Any person, who disobeys the lawful order of the fire
put up a sign in front of the building or structure, at or ground commander during a firefighting operation shall
near the entrance of such premises, notifying the public be penalized with imprisonment of one (1) day to thirty
that such (30) days and a fine of Five thousand pesos (P5,000.00).
building or structure is a "FIRE TRAP", which shall remain 2. Against the public officer/employee
until the owner, administrator, occupant or other person
responsible a) Administrative — The following acts or omissions shall
render the public officer/employee in charge of the
for the condition of the building, structure and their enforcement of this Code, its implementing rules and
premises or facilities abate the same within the specified regulation and other pertinent laws, administratively
period. liable, and shall be punished by reprimand, suspension or
Summary abatement as used herein shall mean all removal in the discretion of the disciplining authority,
corrective measures undertaken to abate hazards which depending on the gravity of the offense and without
shall include, but not limited to remodeling, repairing, prejudice to the provisions of other applicable laws:
strengthening, reconstructing, removal and demolition, (1) Unjustified failure of the public officer/employee to
either partial or total, of the building or structure. The conduct inspection of buildings or structures at least
expenses incurred by the government for such summary once a year;
abatement shall be borne by the owner, administrator or
occupant. These expenses shall constitute a prior lien (2) Deliberate failure to put up a sign in front of the
upon such property. building or structure within his/her area of responsibility
found to be violating this Code, its implementing rules
SECTION 10. Enforcement of the Lien. — If the owner, and regulations and other pertinent laws, that the same
administrator or occupant fails to reimburse the is a "FIRE HAZARD" or a "FIRE TRAP";
government of the expenses incurred in the summary
abatement within ninety (90) days from the completion (3) Endorsing to the Chief, BFP or his/her duly authorized
of such abatement, the building or structure shall be sold representative for the certification, or submitting a report
at public auction in accordance with existing laws and that the building or structure complies with the
rules. No property subject of lien under Section 9 hereof, standards set by this Code, its implementing rules or
may be sold at a price lower than the abatement regulations or other pertinent laws when the same is
expenses incurred by the government. The property shall contrary to fact;
be forfeited in favor of the government if the highest bid (4) Issuance or renewal of occupancy or business permit
is not at least equal to the abatement expenses. without the fire safety inspection certificate issued by the
SECTION 11. Penalties. — Chief, BFP or his/her duly authorized representative;
1. Against the private individual: (5) Failure to cancel the occupancy or business permit
after the owner, administrator, occupant or other person
a) Administrative fine — Any person who violates any responsible for the condition of the building, structure
provision of the Fire Code or any of the rules and and other premises failed to comply with the notice/order
regulations promulgated under this Act shall be for compliance with the standards set by this Code, its
penalized by an administrative fine of not exceeding Fifty implementing rules and regulations and other pertinent
thousand pesos (P50,000.00) or in the proper case, by laws, within the specified period;
stoppage of operations or by closure of such buildings,
structures and their premises or facilities which do not (6) Failure to abate a public nuisance within fifteen (15)
comply with the requirements or by both such days after the owner, administrator, occupant or other
administrative fine and closure/stoppage of operation to responsible person failed to abate the same within the
be imposed by the Chief, BFP: Provided, That the period contained in the notice to abate;
payment of the fine, stoppage of operations and/or (7) Abusing his/her authority in the performance of
closure of such buildings, structures, and their premises his/her duty through acts of corruption and other
or facilities shall not absolve the violator from correcting unethical practices; or
the deficiency or abating the fire hazard. The decision of
the Chief, BFP, under this subsection, may be appealed to (8) Other willful impropriety or gross negligence in the
the Secretary of the Interior and Local Government. performance of his/her duty as provided in this Act or its
Unless ordered by the Secretary of the Interior and Local implementing rules and regulations.
Government the appeal shall not stay the execution of b) Punitive — In case of willful violation involving the
the order of the Chief, BFP. The decision of the Secretary abovementioned acts or omissions enumerated under
Section 11 subparagraph 2(A), the public officer/employee



shall, upon conviction, be punished by imprisonment of services necessary for the fire service and the
not less than six (6) months nor more than six (6) years, or improvement of facilities of the Bureau of Fire Protection
by a fine of not more than One hundred thousand pesos and abatement of fire hazards.
(P100,000.00) or both such fine and imprisonment: The BFP shall determine the optimal number of
Provided, That where the violation is attended by injury, equipment, including, but not limited to, fire trucks and
loss of life and/or property, the violator shall be proceeded fire hydrants, required by every local government unit for
against under the applicable provisions of the Revised the proper delivery of fire protection services in its
Penal Code. jurisdiction.
SECTION 12. Appropriation and Sources of Income. — In the procurement of firefighting and investigation
a. To support the manpower; infrastructure and supplies and materials, the Bureau of Product Standards
equipment needs of the fire service of the BFP, such of the Department of Trade and Industry shall evaluate,
amount as may be necessary to attain the objectives of determine and certify if the supply so procured conforms
the Fire Code shall be appropriated and included in the to the product standards fixed by the BFP. For this
annual appropriation of the BFP. purpose, the BFP shall submit to the Bureau of Product
b. To partially provide for the funding of the fire service Standards a detailed set of product standards that must
the following taxes and fees which shall accrue to the be complied with in the procurement of fire fighting and
general fund of the National Government, are hereby investigation supplies and materials within six (6) months
imposed: from the effectivity of this Act.
(1) Fees to be charged for the issuance of certificates, SECTION 13-D. Monitoring the Implementation of the Fire
permits and licenses as provided for in Section 7 (a) Code and the Amount of the Fees Collected. — The Chief,
hereof; BFP shall, within six (6) months from the effectivity of this
Code, submit to the Secretary of the Interior and Local
(2) One-tenth of one per centum (0.1%) of the verified Government for his/her approval, a management tool or
estimated value of buildings or structures to be erected, mechanism that would ensure effective monitoring of
from the owner thereof, but not to exceed Fifty thousand the enforcement of the Fire Code to include the amount
(P50,000.00) pesos, one half to be paid prior to the of Fire Code fees collected.
issuance of the building permit, and the balance, after
final inspection and prior to the issuance of the use and SECTION 14. Within sixty (60) days from the effectivity of
occupancy permit; this Act, the Secretary of the Interior and Local
Government shall issue the rules and regulations for its
(3) One-hundredth of one per centum (0.10%) of the effective implementation.
assessed value of buildings or structures annually payable
upon payment of the real estate tax, except on structures SECTION 15. Presidential Decree No. 1185 is hereby
used as single family dwellings; repealed. All laws, presidential decrees, letters of
instructions, executive orders, rules and regulations
(4) Two per centum (2%) of all premiums, excluding insofar as they are inconsistent with this Act, are hereby
re-insurance premiums for the sale of fire, earthquake repealed or amended as the case may be.
and explosion hazard insurance collected by companies,
persons or agents licensed to sell such insurances in the SECTION 16. In case any provision of this Act or any
Philippines; portion thereof is declared unconstitutional by a
competent court, other provisions shall not be affected
(5) Two per centum (2%) of gross sales of companies, thereby.
persons or agents selling fire fighting equipment,
appliances or devices, including hazard detection and SECTION 17. This Act shall take effect fifteen (15) days after
warning systems; and its publication in the Official Gazette or in two (2) national
newspapers of general circulation.
(6) Two per centum (2%) of the service fees received from
fire, earthquake, and explosion hazard reinsurance Approved: December 19, 2008
surveys and post loss service of insurance adjustment Published in The Manila Times on January 5, 2009.
companies doing business in the Philippines directly (Fire Code of the Philippines of 2008, Republic Act No.
through agents. 9514, [December 19, 2008])
SECTION 13. Collection of Taxes, Fees and Fines. — All
taxes, fees and fines provided in this Code shall be
collected by the BFP: Provided, That twenty percent (20%)
of all such collections shall be set aside and retained for
RA No 9510 | Credit Information System
use by the city or municipal government concerned, Act
which shall appropriate the same exclusively for the use
of the operation and maintenance of its local fire station,
including the construction and repair of fire station: October 31, 2008
Provided, further, That the remaining eighty (80%) shall AN ACT ESTABLISHING THE CREDIT INFORMATION
be remitted to the National Treasury under a trust fund SYSTEM AND FOR OTHER PURPOSES
assigned for the modernization of the BFP.
Be it enacted by the Senate and House of
SECTION 13-A. Assessment of Fire Code Taxes, Fees and Representatives of the Philippines in Congress
Fines. — The assessment of fire code taxes, fees and fines assembled::
is vested upon the BFP. The BFP shall, subject to the
Section 1. Title. - This Act shall be known as the "Credit
approval of the DILG, prescribe the procedural rules for
Information System Act".
such purpose.
Section 2. Declaration of Policy. - The State recognizes
SECTION 13-B. Collection and Assessment of Local Taxes,
the need to establish a comprehensive and centralized
Fees and Fines. — The collection and assessment of taxes,
credit information system for the collection and
fees and fines as prescribed in the Local Government
dissemination of fair and accurate information relevant to,
Code, except those contained in this Code, shall be the
or arising from, credit and credit-related activities of all
function of the concerned local government units.
entities participating in the financial system. A credit
SECTION 13-C. Use of Income Generated from the information system will directly address the need for
Enforcement of the Fire Code. — The Chief, BFP is reliable credit information concerning the credit standing
authorized, subject to the approval of the Secretary of the and track record of borrowers.
Interior and Local Government, to use the income
The operations and services of a credit information
generated under the Fire Code for procurement of fire
system can be expected to: greatly improve the overall
protection and fire fighting investigation, rescue,
availability of credit especially to micro, small and
paramedics, supplies and materials, and related technical
medium-scale enterprises; provide mechanisms to make



credit more cost-effective; and reduce the excessive (m) "Positive credit information" refers to
dependence on collateral to secure credit facilities. information/data concerning the credit performance of a
The State shall endeavor to have credit information borrower such as, but not limited to, information on
provided at the least cost to all participants and shall timely repayments or non-delinquency.
ensure the protection of consumer rights and the (n) "Relevant Government Agencies" refers to the
existence of fair competition in the industry at all times. Department of Finance, Department of Trade and
An efficient credit information system will also enable Industry, Bangko Sentral ng Pilipinas, Insurance
financial institutions to reduce their over-all credit risk, Commission and the Cooperative Development Authority.
contributing to a healthier and more stable financial (o) "SEC" refers to the Securities and Exchange
system. Commission.
Section 3. Definition of Terms. - For purposes of this Act: (p) "Special Accessing Entity" refers to a duly accredited
(a) "Accessing Entity" refers to any submitting entity or private corporation engaged primarily in the business of
any other entity authorized by the Corporation to access providing credit reports, ratings and other similar credit
basic credit data from the Corporation. information products and services.
(b) "Basic Credit Data" refers to positive and negative (q) "Submitting Entity" refers to any entity that provides
information provided by a borrower to a submitting entity credit facilities such as, but not limited to, banks,
in connection with the application for and availment of a quasi-banks, trust entities, investment houses, financing
credit facility and any information on the borrower’s companies, cooperatives, nongovernmental,
creditworthiness in the possession of the submitting micro-financing organizations, credit card companies,
entity and other factual and objective information related insurance companies and government lending
or relevant thereto in the submitting entity’s data files or institutions.
that of other sources of information: Provided, that in the Section 4. Establishment of the Credit Information
absence of a written waiver duly accomplished by the System. - In furtherance of the policy set forth in Section
borrower, basic credit data shall exclude confidential 2 of this Act, a credit information system is hereby
information on bank deposits and/or clients funds under established.
Republic Act No. 1405 (Law on Secrecy of Bank Deposits), (a) Banks, quasi-banks, their subsidiaries and affiliates, life
Republic Act No. 6426 (The Foreign Currency Deposit insurance companies, credit card companies and other
Act), Republic Act No. 8791 (The General Banking Law of entities that provide credit facilities are required to
2000), Republic Act No. 9160 (Anti-Money Laundering submit basic credit data and updates thereon on a
Law) and their amendatory laws. regular basis to the Corporation.
(c) "Borrower" refers to a natural or juridical person, (b) The Corporation may include other credit providers to
including any local government unit (LGU), its be subject to compulsory participation: Provided, That all
subsidiaries and affiliates, that applies for and/or avails of other entities qualified to be submitting entities may
a credit facility. participate subject to their acceptance by the
(d) "BSP" refers to the Bangko Sentral ng Pilipinas, Corporation: Provided, further, That, in all cases,
created under Republic Act No.7653. participation under the system shall be in accordance
(e) "Corporation" refers to the Credit Information with such standards and rules that the SEC in
Corporation established under Section 5 of this Act. coordination with the relevant government agencies my
prescribe.
(f) "Credit facility" refers to any loan, credit line, guarantee
or any other form of financial accommodation from a (c) Participating submitting entities are required to
submitting entity: Provided, That for purposes of this Act, submit to the Corporation any negative and positive
deposits in banks shall not be considered a credit facility credit information that tends to update and/or correct the
extended by the depositor in favor of the bank. credit status of borrowers. The Corporation shall fix the
time interval for such submission: Provided, That such
(g) "Credit Rating" refers to an opinion regarding the interval shall not be less than fifteen (15) working days but
creditworthiness of a borrower or of an issuer of debt not more than thirty (30) working days.
security, using an established and defined ranking
system. (d) The Corporation should regularly collect basic credit
data of borrowers at least on a quarterly basis to
(h) "Credit Report" refers to a summary of consolidated correct/update the basic credit data of said borrowers.
and evaluated information on creditworthiness, credit
standing, credit capacity, character and general (e) The Corporation may also access credit and other
reputation of a borrower. relevant information from government offices, judicial
and administrative tribunals, prosecutorial agencies and
(i) "Government Lending Institutions" refers to existing other related offices, as well as pension plans
and future government (GFIs), government-owned and administered by the government.
controlled corporations (GOCCs) primarilly engaged in
lending activities. (f) Each submitting entity shall notify its borrowers of the
former’s obligation to submit basic credit data to the
(j) "Negative Credit Information" refers to Corporation and the disclosure thereof to the
information/data concerning the poor credit performance Corporation, subject to the provisions of this Act and the
of borrowers such as, but not limited to, defaults on loans, implementing rules and regulations.
adverse court judgments relating to debts and reports on
bankruptcy, insolvency, petitions or orders on suspension (g) The Corporation is in turn authorized to release
of payments and corporate rehabilitation. consolidated basic credit data on the borrower, subject to
the provisions of Section 6 of this Act.
(k) "Non-Accessing Entity" refers to an entity other than a
Submitting Entity, Special Accessing Entity or Borrower (h) The negative information on the borrower as
that is authorized by the Corporation to access credit contained in the credit history files of borrowers should
information from a Special Accessing Entity. stay in the database of the Corporation unless sooner
corrected, for not more than three (3) years from and after
(l) "Outsource entity" refers to any accredited third party the date when the negative credit information was
provider to whom the Corporation may outsource the rectified through payment or liquidation of the debt, or
processing and consolidation of basic credit data through settlement of debts through compromise
pertaining to a borrower or issuer of debt or convertible agreements or court decisions that exculpate the
securities under such qualifications, criteria and strict borrower from liability. Negative information shall be
confidentiality guidelines that the Corporation shall corrected and updated within fifteen (15) days from the
prescribe and duly publish. time of payment, liquidation or settlement of debts.


(i) Special Accessing Entities shall be accredited by the (PhP75,000,000.00) shall be appropriated in the General
Corporation in accordance with such standards and rules Appropriations Act for the subscription of common
as the SEC in coordination with the relevant government shares by the National Government to represent its sixty
agencies, may prescribe. percent (60%) equity share and the amount of Fifty
(j) Special accessing entities shall be entitled access to million pesos (PhP50,000,000.00) shall be subscribed and
the Corporation’s pool of consolidated basic credit data, paid up by such qualified investors in accordance with
subject to the provisions of Section s 6 and 7 of this Act Section 5(d) hereof.
and related implementing rules and regulations. (c) The National Government may subscribe or purchase
(k) Special accessing entities are prohibited from securities or financial instrument that may be issued by
releasing basic credit data received from the Corporation the Corporation as a supplement to capital.
or credit reports and credit ratings derived from the basic (d) Equal equity participation in the Corporation shall be
credit data received from the Corporation, to offered and held by qualified private sector investors but
non-accessing entities unless the written consent or in no case shall each of the qualified investor represented
authorization has been obtained from the Borrower: by an association of banks, quasi-banks and other
Provided, however, That in case the borrower is a local credit-related associations including the associations of
government unit (LGU) or its subsidiary or affiliate, the consumers have more than ten percent (10%) each of the
special accessing entity may release credit information on total common shares issued by the Corporation.
the LGU, its subsidiary or affiliate upon written request (e) The SEC in coordination with relevant government
and payment of reasonable fees by a constituent of the agencies, shall prescribe additional requirements for the
concerned LGU. establishment of the Corporation, such as industry
(l) Outsource Entities, which may process and consolidate representation, capital structure, number of independent
basic credit data, are absolutely prohibited from releasing directors, and the process for nominating directors, and
such data received from the Corporation other than to such other requirements to ensure consumer protection
the Corporation itself. and free, fair and healthy competition in the industry.
(m) Accessing Entities shall hold strictly confidential any (f) The Chairman of the SEC shall be the Chairman of the
credit information they receive from the Corporation. Board of Directors of the Corporation. Whenever the
(n) The borrower has the right to know the causes of Chairman of the SEC is unable to attend a meeting of the
refusal of the application for credit facilities or services Board, he/she shall designate an Associate Commissioner
from a financial institution that uses basic credit data as of the SEC to act as his/her alternate.
basis or ground for such a refusal. The powers and functions of the Corporation shall be
(o) The borrower, for a reasonable fee, shall have, as a exercised by a board of directors composed of fifteen (15)
matter of right, ready and immediate access to the credit members. The directors representing the government
information pertinent to the borrower. In case of shares shall be appointed by the President of the
erroneous, incomplete or misleading credit information, Philippines.
the subject borrower shall have the right to dispute the (g) The directors and principal officers of the Corporation,
erroneous, incomplete, outdated or misleading credit shall be qualified by the "fit and proper" rule for bank
information before the Corporation. The Corporation shall directors and officers. To maintain the quality of
investigate and verify the disputed information within management of the Corporation and afford better
five (5) working days from receipt of the complaint. If its protection to the system and the public in general, the
accuracy cannot be verified and cannot be proven, the SEC in coordination with the relevant government
disputed information shall be deleted. The borrower and agencies, shall prescribe, pass upon and review the
the accessing entities and special accessing entities who qualifications and disqualifications of individuals elected
have received such information shall be informed of the or appointed directors of the Corporation and disqualify
corresponding correction or removal within five (5) those found unfit. After due notice to the board of
working days. The Corporation should use a simplified directors of the Corporation, the SEC may disqualify,
dispute resolution process to fast track the suspend or remove any director who commits or omits an
settlement/resolution of disputed credit information. act which render him unfit for the position. In
Denial of these borrowers’ rights, without justifiable determining whether an individual is fit and proper to
reason, shall entitle the borrower to indemnity. hold the position of a director of the Corporation, due
Section 5. Establishment of the Central Credit regard shall be given to his integrity, experience,
Information Corporation. - There is hereby created a education, training and competence.
Corporation which shall be known as the Credit The members of the Board of Directors must be Filipino
Information Corporation, whose primary purpose shall be citizens and at least thirty (30) years of age. In addition,
to receive and consolidate basic credit data, to act as a they shall be persons of good moral character, of
central registry or central repository of credit information, unquestionable integrity, of known probity, and have
and to provide access to reliable, standardized attained competence in the fields of law, finance,
information on credit history and financial condition of economics, computer science or information technology.
borrowers. In addition to the disqualifications imposed by the
(a) The Corporation is hereby authorized to adopt, alter, Corporation Code, as amended, no person shall be
and use a corporate seal which shall be judicially noticed; nominated by the national government if he has been
to enter into contracts; to incur liabilities; to lease or own connected directly with a banking or financial institution
real or personal property, and to sell or otherwise dispose as a director or officer, or has substantial interest therein
of the same; to sue and be sued; to compromise, condone within three (3) years prior to his appointment.
or release any liability and otherwise to do and perform (h) The Board of Directors may appoint such officers and
any and all things that may be necessary or proper to employees as are not otherwise provided for in this Act,
carry out the purposes of this Act. define their duties, fix their compensations and impose
(b) The authorized capital stock of the Corporation shall disciplinary sanctions upon such officers and employees,
be Five hundred million pesos (P500,000,000.00) which for cause. The salaries and other compensation of the
shall be divided into common and preferred shares which officers and employees of the Corporation shall be
shall be non-voting. The National Government shall own exempt from the Salary Standardization Law.
and hold sixty percent (60%) of the common shares while Appointments in the Corporation, except to those which
the balance of forty percent (40%) shall be owned by and are policy-determining, primarily confidential or highly
held by qualified investors which shall be limited to technical in nature, shall be made only according to the
industry associations of banks, quasi-banks and other Civil Service Law.
credit related associations including associations of (i) The Corporation shall acquire and use state-of-the-art
consumers. The amount of Seventy-five million pesos technology and facilities in its operations to ensure its



continuing competence and capability to provide file of the Corporation; to familiarize consumers of the
updated negative and positive credit information; to procedure in collecting, storing and disseminating credit
enable the Corporation to relay credit information information of borrowers by the Corporation; and to brief
electronically as well as in writing to those authorized to consumers of other related information.
have access to the credit information system; and to Section 8. Rules and Regulations. - For purposes of
insure accuracy of collected, stored and disseminated creating a healthy balance between the need for reliable
credit information. The Corporation shall implement a credit information and safeguarding consumer
borrower’s identification system for the purpose of protection, ensuring free and healthy competition in the
consolidating credit information. industry, the SEC, in coordination with relevant
(j) The provisions of any general or special law to the government agencies and existing industry stakeholders,
contrary notwithstanding, the importation by the shall issue the implementing rules and regulations (IRRs),
Corporation of all equipment, hardware or software, as which shall be reviewed, revised and approved by the
well as all other equipment needed for its operations shall Oversight Committee to ensure consistency and
be fully exempt from all customs duties and from all compliance with the provisions of this Act, embodying
other taxes, assessments and charges related to such among others:
importation. (a) The basic credit data shall be limited or confined in
(k) The Corporation shall have its principal place of form and content to an objective and factual information
business in Metro Manila, but may maintain branches in and shall exclude any subjective information or opinion;
such other places as the proper conduct of its business (b) Restrictions on the use and transfer of credit
may require. information;
(l) Any and all acquisition of goods and services by the (c) Rights of the borrowers to access their respective
Corporation shall be subject to Procurement Laws. credit information and to dispute the factual accuracy of
(m) The national government shall continue to hold sixty such credit information;
percent (60%) of the common shares for a period not to (d) Requirements and standards for the establishment of
exceed five (5) years from the date of commencement of the Corporation including, but not limited to, ownership,
operations of the Corporation. After the said period, the industry representation, independent directors and
national government shall dispose of at least twenty process of nomination of directors;
percent (20%) of its stockholdings in the Corporation to
qualified investors which shall be limited to industry (e) Accreditation standards for submitting entities and
associations of banks, quasi-banks and other special accessing entities and non-accessing entities;
credit-related associations, including associations of (f) Sanctions to be imposed by the Corporation on:
consumers. The national government shall offer equal
equity participation in the Corporation to all qualified (i) The submitting entities for non-submission of reports
investors. When the ownership of the majority of the and for delayed and/or erroneous reporting;
common voting shares of the Corporation passes to (ii) Accessing entities, special accessing entities,
private investors, the stockholders shall cause the outsource entities and duly authorized non-accessing
adoption and registration with the SEC of the amended entities, for breaches of the confidentiality of misuse of,
articles of incorporation within three (3) months from the credit information obtained from the credit
such transfer of ownership. information system; and
Section 6. Confidentiality of Credit Information. - The (iii) Violations of other applicable rules and regulations:
Corporation, the submitting entities, the accessing Provided, That these administrative sanctions shall be in
entities, the outsource entities, the special accessing the form of fines in amounts as may be determined by
entities and the duly authorized non-accessing entities the Corporation but in no case to exceed Thirty thousand
shall hold the credit information under strict pesos (PhP30,000.00) a day for each violation, taking into
confidentiality and shall use the same only for the consideration the attendant circumstances, such as the
declared purpose of establishing the creditworthiness of nature and gravity of the violation or irregularity.
the borrower. Outsource entities which may process and Imposition of administrative sanctions shall be without
consolidate basic credit data are absolutely prohibited prejudice to any criminal and other sanctions as may be
from releasing such data received from the Corporation applicable under this Act and relevant laws;
other than to the Corporation.
(g) Suspension or cancellation of the rights of any
The accreditation of an accessing entity, a special entity Accessing Entity or Special Accessing Entity to access
and/or an outsource entity which violates the Credit Information from the Corporation; Provided, That
confidentiality of, or which misuses, the credit the SEC in coordination with relevant government
information accessed from the Corporation, may be agencies and existing industry stakeholders, may issue
suspended or revoked. Any entity which violates this subsequent regulations consistent with the IRR as
section may be barred access to the credit information approved by the Congressional Oversight Committee.
system and penalized pursuant to Section 11 of this Act.
In addition, the SEC may regulate access to the credit
The Corporation shall be authorized to release and information system as well as the fees that shall be
disclose consolidated basic credit data only to the collected by the Corporation from the Accessing and
Accessing Entities, the Special Accessing Entities, the Special Accessing Entities, taking into consideration the
Outsource Entities and Borrowers. Basic Consolidated policy of lowering the cost of credit, promoting fair
basic credit data released to Accessing Entities shall be competition, and the need of the Corporation to employ
limited to those pertaining to existing Borrowers or state-of-the-art technology; and
Borrowers with pending credit applications. Credit
information shall not be released to entities other than (h) The basic credit data about a borrower shall be limited
those enumerated under this Section except upon order to credit information existing on the date of the
of the court. enactment of this Act and thereafter.
Section 7. Educational Campaign. - A continuing Section 9. Congressional Oversight Committee. - There
nationwide educational campaign shall be developed is hereby created a congressional oversight committee,
and undertaken by the Corporation to promote the composed of seven (7) members from the Senate and
benefits of a credit information system to the economy; seven (7) members from the House of Representatives.
to create awareness on the rights of The Members from the Senate shall be appointed by the
consumers/borrowers to access their credit reports Senate President with at least three (3) Senators
collected, stored and disseminated by the Corporation; to representing the minority. The Members of the House of
disseminate the rights of the borrowers to dispute any Representatives shall be appointed by the Speaker with
incorrect/inaccurate credit information in the database at least three (3) members representing the minority.


After the Oversight Committee approved the their operations on a sound, competitive, stable and
implementing rules and regulations, it shall thereafter efficient basis as other financial institutions, to recognize
become functus officio, and therefore cease to exist: and strengthen their critical role in providing medium
Provided, That the Congress may revive the Congressional and long-term credit for investments in capital goods and
Oversight Committee in case of a need for any major equipment especially by small and medium enterprises
revision/s in the implementing rules and regulations. particularly in the countryside and to curtail and prevent
Section 10. Indemnity in Favor of the Corporation, its acts or practices prejudicial to the public interest so that
Officers and Employees. - Unless the Corporation or any they may be in a better position to extend efficient
of its officers and employees is found liable for any willful service in a fair manner to the general public and to
violation of this Act, bad faith, malice and/or gross industry, commerce and agriculture and thereby more
negligence, the Submitting Entities, Accessing Entities, fully contribute to the sound development of the national
Special Accessing Entities, Outsource Entities and duly economy. (Financing Company Act of 1998, Republic Act
authorized non-accessing entities shall hold the No. 8556, [February 26, 1998])
Corporation, its directors, officers and employees free and Section 3. Definition of Terms. As used in this Act, the
harmless to the fullest extent permitted by law and shall term:
indemnify them from any and all liabilities, losses, claims, (a) 'Financing companies' hereinafter called companies,
demands, damages, deficiencies, costs and expenses of are corporations, except banks, investments houses,
whatsoever kind and nature that may arise in connection savings and loan associations, insurance companies,
with the performance of their functions without prejudice cooperatives, and other financial institutions organized or
to any criminal liability under existing laws. operating under other special laws, which are primarily
Section 11. Penalties. - Any person who willfully violates organized for the purpose of extending credit facilities to
any of the provisions of this Act or the rules and consumers and to industrial, commercial, or agricultural
regulations promulgated by the SEC in coordination with enterprises, by direct lending or by discounting or
the relevant government agencies shall, upon conviction, factoring commercial papers or accounts receivable, or by
suffer a fine of not less than Fifty thousand pesos buying and selling contracts, leases, chattel mortgages, or
(PhP50,000.00). nor more than One million pesos other evidences of indebtedness, or by financial leasing of
(PhP1,000,000.00) or imprisonment of not less than one movable as well as immovable property;
(1) year nor more than five (5) years, or both, at the (b) 'Securities and Exchange Commission' shall mean the
discretion of the court. office of the Securities and Exchange Commission of the
Section 12. Inviolable Nature of the Secrecy of Bank Philippines;
Deposits and/or Client Funds. -Pursuant to Republic Act (c) 'Credit' shall mean any loan, mortgage, financial lease,
No. 1405 (Law on Secrecy of Bank Deposits), Republic Act deed of trust, advance or discount, any conditional sales
No. 6426 (The Foreign Currency Deposit Act), Republic contract, contract to sell, or sale or contract of sale of
Act No. 8791 (The General Banking Law of 2000), Republic property or service, either for present or future delivery,
Act No. 9160 (Anti-Money Laundering Law) and their under which, part of all or the price is payable subsequent
amendatory laws, nothing in this Act shall impair the to the making of such sale or contract; any contract, any
secrecy of bank deposits and and/or client funds and option, demand, lien or pledge, or to the other claims
investments in government securities or funds. against, or for the delivery of, property or money, any
Section 13. Annual Report. - The SEC shall submit an purchase, or other acquisition of or any credit upon the
annual report to Congress on the status of the security of, any obligation or claim arising out of the
implementation of this Act. foregoing, and any transaction or series of transactions
Sec. 14. Principal Government Agency. - The SEC shall having similar purpose or effect; and
be the lead government agency to implement and (d) 'Financial leasing' is a mode of extending credit
enforce this Act. As lead agency, the SEC shall consult and through a non-cancelable lease contract under which the
coordinate with other relevant government agencies in lessor purchases or acquires, at the instance of the lessee,
the adoption of all rules and regulations for the full and machinery, equipment, motor vehicles, appliances,
effective implementation and enforecement of this Act, business and office machines, and other movable or
taking into account the policy objectives contained in immovable property in consideration of the periodic
Section 2 hereof. payment by the lessee of a fixed amount of money
Section 15. Separability Clause. - Should any provision of sufficient to amortize at least seventy (70%) of the
this Act or the application thereof to any person or purchase price or acquisition cost, including any
circumstance be held invalid, the other provisions or incidental expenses and a margin of profit over an
sections of this Act shall not be affected thereby. obligatory period of not less than two (2) years during
which the lessee has the right to hold and use the leased
Section 16. Repealing Clause. - This Act repeals property with the right to expense the lease rentals paid
Presidential Decree No. 1941 in its entirety. All laws, to the lessor and bears the cost of repairs, maintenance,
decrees, executive orders, rules and regulations or parts insurance and preservation thereof, but with no
thereof which are inconsistent with this Act are hereby obligation or option on his part to purchase the leased
repealed, amended or modified accordingly. property from the owner-lessor at the end of the lease
Section 17. Effectivity Clause. - This Act shall take effect contract.
fifteen (15) days following its publication in the Official (e) 'Purchase discount' is the difference between the
Gazette or in at least two (2) newspapers of general value of the receivable purchased or credit assigned, and
circulation. the net amount paid by the finance company for such
purchases or assignment, exclusive of fees, services,
RA No 5980 | Financing Company Act of charges, interest and other charges incident to the
extension of credit.
1998 (f) 'Lease rentals' shall refer to the periodic payments
As amended by RA No 8556, 10881
made by the lessee to the lessor under Section 3(d),
above.
AN ACT REGULATING THE ORGANIZATION AND (Financing Company Act of 1998, Republic Act No. 8556,
OPERATION OF FINANCING COMPANIES. [February 26, 1998])
Section 1. This Act shall be known as the "Financing Section 4. Grant of Authority to the Securities and
Company Act of 1998." Exchange Commission. The Securities and Exchange
Section 2. Declaration of Policy. It is hereby declared to Commission is hereby empowered to enforce the
be the policy of the State to regulate and promote the provisions implementing regulations except insofar as
activities of financing and leasing companies to place the Bangko Sentral may have supervisory authority under



the provisions of Republic Act No. 7653 with respect to said financing company or complaint by any person, it
financing companies licensed to perform quasi-banking shall appear that:
functions, and insofar as the Monetary Board has (a) it is insolvent; or
authority to prescribe financing company rates and
charges under section 5 hereof. (Financing Company Act (b) it has violated any provision of this Act. (9a)
of 1998, Republic Act No. 8556, [February 26, 1998]) Section 9. Rights and Powers. — Financing companies
Section 5. Limitation on Purchase Discount, Lease shall have the following powers, in addition to those
Rentals, Fees, Service and Other Charges. The Monetary granted by this Act and by other laws:
Board of the Bangko Sentral ng Pilipinas is hereby (a) Engage in quasi-banking and money market
empowered to prescribe, in consultation with financing operations with the prior approval of the Bangko Sentral
companies and the Securities and Exchange ng Pilipinas;
Commission, the maximum rate or rates of purchase
discounts, lease rentals, fees, service and other charges of (b) Engage in trust operations subject to the provisions of
financing companies, and to change, eliminate or grant the General Banking Act upon prior approval by the
exemptions from or suspend the effectivity of such rules Bangko Sentral ng Pilipinas;
whenever warranted by prevailing economic and social (c) Issue bonds and other capital instruments subject to
conditions. (Financing Company Act of 1998, Republic Act pertinent rules and regulations of the Bangko Sentral ng
No. 8556, [February 26, 1998]) Pilipinas;
Section 6. Form of Organization and Capital (d) Rediscount their paper with government financial
Requirements. Financing companies shall be organized institutions subject to relevant laws, rules and regulation;
in the form of stock corporations, may be owned up to
one hundred percent (100%) by foreign nationals, and (e) Participate in special loan or credit programs
shall have a paid-up capital of not less than ten million sponsored by or made available through government
pesos (P10,000,000.00) in case the financing company is financial institutions; and
located in Metro Manila and other first class cities, five (f) Provide foreign currency loans and leases to
million pesos (P5,000,000.00) in other classes of cities and enterprises who earn foreign currency by exports or other
two million five hundred thousand pesos (P2,500,000.00) means, subject to existing laws and rules and regulations
in municipalities: Provided, That the Securities and promulgated by the Bangko Sentral ng Pilipinas.
Exchange Commission may adjust said minimum Nothing in this section shall be construed as precluding a
paid-up levels as it deems warranted by its prudential financing company from performing such services or
oversight requirements and consistent with the exercising such powers as may be granted by the Bangko
objectives of this Act: Provided, however, That financing Sentral ng Pilipinas or the Securities and Exchange
companies duly existing and in operation before the Commission or as may be incidental to its activities as a
effectivity of this Act shall comply with the minimum corporation.
capital requirement within one (1) year from the date of
the said effectivity: and Provided, further, That where land Section 10. Applicability of Incentives and Exemptions to
is concerned, the financing company shall comply with Financial Leases. — Any incentive, exemption or benefit,
the constitutional provision on foreign ownership of land. including tax credits and investment incentives granted
(as amended by RA Nos 8556, 10881) by law or regulation to any purchaser, importer, borrower
or other eligible person in connection with any purchase,
Section 7. Requirement for Registration. Aside from importation, acquisition, or other transaction shall not be
requiring compliance with the provisions of the lost, diminished or impaired when the associated
Corporation Code, the Securities and Exchange financing is through a financial lease rather than through
Commission shall not register the articles of incorporation borrowing or other conventional method of financing.
of any financing company unless its office is satisfied on Financing companies providing the financial lease in
the evidence submitted to it, that: prcd such cases shall be entitled to any incentive, exemption,
(a) All the requirements of existing laws to engage in the benefit or privilege available to lenders, importers,
business for which the applicant is proposed to be purchasers or other eligible person in such transactions
incorporated or organized have been complied with; under the applicable law or regulation.
(b) The organization, direction and administration, as well Section 11. Parity Clause. — When providing medium and
as the integrity and responsibility of the organizers and long-term credit to small and medium enterprises,
administrators reasonably assure the protection of the financing companies shall enjoy such other rights,
interest of the general public; powers, benefits and privileges as may be granted by the
(c) All the requirements of this Act have been complied law or regulation to other non-bank financial institutions
with: Provided, That financing companies duly when they provide similar credit to such enterprises.
incorporated or registered prior to the approval of this Section 12. Liability of Lessors. — Financing companies
Act, and which are actually existing and operating as shall not be liable for loss, damage or injury caused by a
such, shall file an information sheet with the Securities motor vehicle, aircraft, vessel, equipment, machinery or
and Exchange Commission in the form to be prescribed other property leased to a third person or entity except
by the Securities and Exchange Commission within sixty when the motor vehicle, aircraft, vessel, equipment or
(60) days after notice from the said Commission. No other property is operated by the financing company, its
person, association, partnership, or corporation shall hold employees or agents at the time of the loss, damage or
itself out as doing business as a 'financing company' or injury.
'finance and investment company' or any other title or Section 13. Registry of Financial Lease. — The Register of
name tending to give the public the impression that it is Deeds shall open and maintain a register of financial
engaged in the operations and activities of a financing leases, as an adjunct to the chattel mortgage registry.
company, unless so authorized under this Act.
Said lease register shall contain the following particulars:
(Financing Company Act of 1998, Republic Act No. 8556,
[February 26, 1998]) (1) Name or description of property, including:
Section 8. Citizenship Requirement of the Board of (a) Brand name or name of manufacturer;
Directors. (b) Name of model, if any;
Section 8. Revocation and Suspension of Registration. (c) Year of model, or manufacture, if available; and
The Securities and Exchange Commission may revoke or
suspend the registration of any financing company by (d) Serial number, if any.
entering an order to this effect together with its findings (2) Acquisition cost;
in respect thereto, if upon investigation into the affairs of
(3) Name of owner or finance company lessor;


(4) Name of lessee; Be it enacted by the Senate and the House of
(5) Date of lease agreement or schedule; Representatives of the Philippines in Congress
assembled:
(6) Date of expiry of lease; and
SECTION 1. Title. - This Act shall be known as the
(7) Date of entry in lease registry. ""Lending Company Regulation Act of 2007"".
(Financing Company Act of 1998, Republic Act No. 8556, SEC. 2. Declaration of Policy. - It is hereby declared the
[February 26, 1998]) policy of the State to regulate the establishment of
Section 14. Penalty. A fine of not less than Ten thousand lending companies and to place their operation on a
pesos (P10,000.00) and not more than One hundred sound, efficient and stable condition to derive the
thousand pesos (P100,000.00) or imprisonment for not optimum advantages from them as an additional source
more than six (6) months or both, at the discretion of the of credit; to prevent and mitigate, as far as practicable,
court, shall be imposed upon: practices prejudicial to public interest; and to lay down
the minimum requirements and standards under which
(1) Persons, associations, partnerships or corporations, they may be established and do business.
including the managing officer thereof, that shall:
SEC. 3. Definition of Terms. - For purposes of
(a) Engage in the business of a financing company implementing this Act, the following definitions shall
without authority from the Securities and Exchange apply:
Commission;
(a) Lending Company shall refer to a corporation engaged
(b) Hold themselves out to be financing companies, in granting loans from its own capital funds or from
either through advertisement in whatever form, whether funds sourced from not more than nineteen (19) persons.
in its stationery, commercial paper or other document, or It shall not be deemed to include banking institutions,
through other representations without authority; investment houses, savings and loan associations,
(c) Make use of trade or firm name containing the words financing companies, pawnshops, insurance companies,
'Financing Company' or 'Leasing Company' or 'Finance cooperatives and other credit institutions already
and Leasing Company or 'Finance and Investment regulated by law. The term shall be synonymous with
Company' or any other designation that would give the lending investors.
public the impression that it is engaged in the business of (b) Debtor shall refer to a borrower or person granted a
a financing company or leasing company as defined in loan by the lending company.
this Act without authority; and
(c) Quasi-Bank shall refer to a non-bank financial
(d) Violate the provisions of this Act. institution authorized by the BSP to engage in
(2) Any officer, employee, or agent of a financing quasi-banking functions and to borrow funds from more
company who shall: than nineteen (19) lenders through the issuance,
endorsement or assignment with recourse or acceptance
(a) Knowingly and willingly make any statement in any of deposit substitutes as defined in Section 95 of Republic
application, report or document required to be filed Act No. 7653 (the ":New Central Bank Act":) for purposes of
under this Act, which statement is false or misleading relending or purchasing of receivables and other
with respect to any material fact; or obligations.
(b) Overvalue or aid in overvaluing any securities for the (d) Subsidiary shall refer to a corporation more than fifty
purpose of influencing in any way the action of the percent (50%) of the voting stock of which is owned by a
company on any loan, or discounting line. bank or quasi-bank.
(3) Any officer, employee or examiner of the Securities (e) Affiliate shall refer to a corporation, the voting stock of
and Exchange Commission directly charged with the which, to the extent of fifty percent (50%) or less, is owned
implementation of this Act who shall commit, connive, by a bank or quasi-bank which is related or linked to such
aid or assist in the commission of acts enumerated under institution through common stockholders or such other
subsections 1 and 2 of this section. factors as may be determined by the Monetary Board of
(Financing Company Act of 1998, Republic Act No. 8556, the BSP.
[February 26, 1998]) (10a) (f) SEC shall refer to the Securities and Exchange
Section 15. Separability of Clause. If any provision or Commission.
section of this Act or the application thereof to any (g) BSP shall refer to the Bangko Sentral ng Pilipinas.
person or circumstances is held invalid, the other
provisions or sections hereof and the application of such SEC. 4. Form of Organization. - A lending company shall
provisions or sections to other persons or circumstances be established only as a corporation: Provided That
shall not be affected thereby. (11a) existing lending investors organized as single
proprietorships or partnerships shall be disallowed from
Section 16. Repealing Clause. All Acts inconsistent with engaging in the business of granting loans to the public
this Act are hereby repealed. (12a) one year after the date of effectivity of this Act.
Section 13. Effectivity. This Act shall take effect upon its No lending company shall conduct business unless
approval. granted an authority to operate by the SEC.
SECTION 13. Effectivity. — This Act shall take effect fifteen SEC. 5. Capital. - The minimum paid in capital of any
(15) days following the completion of its publication in the lending company which may be established after the
Official Gazette or in two newspapers of general effectivity of this Act shall be One million pesos
circulation. (P1,000,000.00): Provided, however, That lending
Approved: August 4, 1969 companies established and in operation prior thereto
shall comply with the minimum capitalization required
under the provisions of this Section within such time as
RA No 9474 | Lending Company may be prescribed by the SEC which time shall, in no
case, be less than three years from the date of effectivity
Regulation Act of 2007 of this Act and: Provided, further, That the SEC may
prescribe a higher minimum capitalization if warranted
by circumstances.
May 22, 2007
SEC. 6. Citizenship Requirements. - A lending company
AN ACT GOVERNING THE ESTABLISHMENT, OPERATION may be owned up to one hundred percent (100%) by
AND REGULATION OF LENDING COMPANIES foreign nationals: Provided, however, That where the loan
is secured by land, a lending company, more than forty
percent (40%) of whose capital is owned by foreign



nationals, may bid and take part in any sale of such land order an examination of the lending company's books
as a consequence of such mortgage, avail of enforcement and accounts.
proceedings, take possession, and transfer their rights to SEC. 12. Penalty. - A fine of not less than Ten Thousand
qualified Philippine nationals for a period not exceeding Pesos (P10,000.00) and not more than Fifty thousand
five (5) years from actual possession: Provided, further, pesos(P50,000.00) or imprisonment of not less than six
That title to said land shall not be transferred to such months but not more than ten (10) years or both, at the
lending companies: Provided, finally, That investments of discretion of the court, shall be imposed upon:
a lending company shall be in accordance with the
provisions of the Constitution. (as amended by RA No 1. Any person who shall engage in the business of a
10881) lending company without a validly subsisting authority to
operate from the SEC.
SEC. 7. Amount and Charges on Loans. - A lending
company may grant loans in such amounts and 2. The president, treasurer and other officers of the
reasonable interest rates and charges as may be agreed corporation, including the managing officer thereof, who
upon between the lending company and the debtor: shall knowingly and willingly:
Provided, That the agreement shall be in compliance with a. Engage in the business of a lending company without a
the provisions of Republic Act No. 3765, otherwise known validly subsisting authority to operate from the SEC;
as the "Truth in Lending Act" and Republic Act 7394,
otherwise known as the "Consumer Act of the b. Hold themselves out to be a lending company, either
Philippines": Provided, further, That the Monetary Board, through advertisement in whatever form, whether in its
in consultation with the SEC and the industry, may stationery, commercial paper, or other document, or
prescribe such interest rate as may be warranted by through other representations without authority;
prevailing economic and social conditions. c. Make use of a trade or firm name containing the words
SEC. 8. Maintenance of Books of Accounts and "lending company" or "lending investor" or any other
Records. - Every lending company shall maintain books designation that would give the public the impression
of accounts and records as may be required by the SEC that it is engaged in the business of a lending company
and prescribed by the Bureau of Internal Revenue and as defined in this Act without authority; and
other government agencies. In case a lending company d. Violate the provisions of this Act.
engages in other businesses, it shall maintain separate
books of accounts for these businesses. 3. Any officer, employee, or agent of a lending company
who shall:
The Manual of Accounts prescribed by the BSP for
lending investors shall continue to be adopted by lending a. Knowingly and willingly make any statement in any
companies for uniform recording and reporting of their application, report, or document required to be filed
operations, until a new Manual of Accounts shall have under this Act, which statement is false or misleading
been prescribed by the SEC. with respect to any material fact; and
It shall issue the appropriate instruments and documents b. Overvalue or aid in overvaluing any security for the
to the parties concerned to evidence its lending and purpose of influencing in any way the action of the
borrowing transactions. company in any loan, or discounting line.
SEC. 9. Authority of the SEC. - The SEC is hereby 4. Any officer, employee or examiner of the SEC directly
authorized to: charged with the implementation of this Act or of other
government agencies who shall commit, connive, aid, or
(a) Create a new division or bureau within its control to assist in the commission of acts enumerated under
regulate and supervise the operations and activities of Subsections 1 and 2 of this Section.
lending companies in the country;
SEC. 13. Matters not Covered by this Act. – The
(b) Issue rules and regulations to implement the provisions of Republic Act No. 3765, otherwise known as
provisions contained herein; the "Truth in Lending Act", Republic Act No. 7394 or the
(c) Issue rules and regulations on, among other things, "Consumer Act of the Philippines" and other existing
minimum capitalization, uses of funds received, method laws, insofar as they are not in conflict with any provision
of marketing and distribution, maturity of funds received, of this Act, shall apply in matters not otherwise
restrictions or outright prohibition of purchases or sales of specifically provided in this Act.
receivables with or without recourse basis; SEC. 14. Repealing Clause. - All laws, executive orders,
(d) Require from lending companies reports of condition letters of instruction, rules and regulations, or provisions
and such other reports necessary to determine thereof which are inconsistent with the provisions of this
compliance with the provisions of this Act; Act are hereby repealed, amended or modified
accordingly.
(e) Exercise visitorial powers whenever deemed
necessary; and SEC. 15. Separability Clause. - If any portion hereof shall
be held invalid or unconstitutional, such invalidity or
(f) Impose such administrative sanctions including unconstitutionality shall not affect the other provisions
suspension or revocation of the lending company's which shall remain in full force and effect.
authority to operate and the imposition of fines for
violations of this Act and regulations issued by the SEC in SEC. 16. Effectivity. - This Act shall take effect fifteen (15)
pursuance thereto. days after its publication in at least two national
newspapers of general circulation.
SEC. 10. Implementing Rules and Regulations. – Within
three months after the approval of this Act, the SEC shall
promulgate the necessary rules and regulations RA No 9505 | Personal Equity and
implementing the provisions of this Act. Retirement Account (PERA) Act of 2008
SEC. 11. Delineation of Authority between SEC and the
BSP. - Lending companies shall be under the supervision
August 22, 2008
and regulation of the SEC: Provided, however, That
lending companies which are subsidiaries and affiliates of AN ACT ESTABLISHING A PROVIDENT PERSONAL
banks and quasi-banks shall be subject to BSP SAVINGS PLAN, KNOWN AS THE PERSONAL EQUITY
supervision and examination in accordance with Republic AND RETIREMENT ACCOUNT (PERA)
Act No. 7653: Provider further, That the Monetary Board, Be it enacted by the Senate and House of
after being satisfied that there is reasonable ground to Representatives of the Philippines in Congress
believe that a lending company is being used as a assembled::
conduit by a bank, quasi-bank or their subsidiary/affiliate
to circumvent or violate BSP rules and regulations, may


SECTION 1. Title. - This Act shall be known as the approve the product before being granted tax-exempt
"Personal Equity and Retirement Account (PERA) Act privileges by the BIR.
of 2008". (h) "Regulatory Authority" refers to the Bangko Sentral ng
SEC. 2. Declaration of Policy. - It is declared the policy of Pilipinas (BSP) as regards banks, other supervised
the State to promote capital market development and financial institutions and trust entities, the Securities and
savings mobilization by establishing a legal and Exchange Commission (SEC) for investment companies,
regulatory framework of retirement plans for persons, investment houses stockbrokerages and pre-need plan
comprised of voluntary personal savings and companies, and the Office of the Insurance Commission
investments. The State recognizes the potential (OIC) for insurance companies.
contribution of PERA to long-term fiscal sustainability (i) "Oveseas Filipino" refers to (1) an individual citizen of
through the, provision of long-term financing and the Philippines who is working or deriving income from
reduction of social pension benefits. abroad, including one who retained or reacquired his
SEC. 3. Definition of Terms. -Unless the context requires Philippine citizenship under Republic Act No. 9225,
otherwise, the following terms shall have the following otherwise known as the "Citizenship Retention and
significance as used in this Act: Reacquisition Act of 2003"; or (2) the legitimate spouse,
(a) "Administrator" is an entity accredited by the Bureau whether or not said spouse is of Filipino ancestry, and the
of Internal Revenue (BIR), after pre qualification by the children of the Filipino citizen mentioned in item (1)
concerned Regulatory Authority. The Administrator shall hereof.
be responsible for overseeing the PERA, whose core SEC. 4. Establishment of a PERA. - A Contributor may
functions shall include, but not limited to: reporting on create and maintain a maximum of five (5) PERA, at any
contributions made to the account, computing the values one time: Provided, That the Contributor shall designate
of investments, educating the Contributor, enforcing and maintain only one (1) Administrator for all his PERA.
PERA contributions and withdrawal limits, collecting The Contributor shall make all investment decisions
appropriate taxes and penalties for the government, pertaining to his PERA. However, he has the option of
securing BIR Income Tax Credit Certificates for the appointing an Investment Manager, either in writing or in
Contributor, consolidating reports on all investments, electronic form, to make investment decisions on his
income, expenses and withdrawals on the account and behalf without prior consultation.
ensuring that PERA contributions are invested in SEC. 5. Maximum Annual PERA Contributions. - A
accordance with the prudential guidelines set by the Contributor may make an aggregate maximum
Regulatory Authorities. contribution of One hundred thousand pesos (P
(b) "Contributor" is any person with the capacity to l00,000.00) or its equivalent in any convertible foreign
contract and possesses a tax identification number. The currency at the prevailing rate at the time of the actual
Contributor establishes and makes contributions to a contribution, to his her PERA per year: Provided, That if
PERA. the Contributor is married, each of the spouses shall be
(c) "Custodian" is a separate and distinct entity unrelated entitled to make a maximum contribution of One
to the Administrator, accredited by the Bangko Sentral ng hundred thousand pesos (P l00,000.00) or its equivalent
Pilipinas, providing services in connection with the in any convertible foreign currency per year to his her
custodianship of funds and securities comprising the respective PERA: Provided, further, That if the Contributor
PERA investments. The Custodian shall be responsible for is an overseas Filipino, he shall be allowed to make
receiving all funds in connection with the PERA, maximum contributions double the allowable maximum
maintaining custody of all original securities, evidence of amount. A Contributor has the option to contribute more
deposits or other evidence of investment. The Custodian than the maximum amount prescribed herein: Provided,
shall operate independently from the Administrator. The That the excess shall no longer be entitled to a tax credit
Custodian is required to report to the Contributor and the of five percent (5%). The Secretary of Finance may adjust
concerned Regulatory Authority at regular intervals all the maximum contribution from time to time, taking into
financial transactions and all documents in its custody consideration the present value of the said maximum
under a PERA. contribution using the Consumer Price Index as
published by the National Statistics Office, fiscal position
(d) "Early withdrawal" shall pertain to any withdrawal prior of the government and other pertinent factors.
to the period of distribution as set forth under Section 12
hereof. SEC. 6. Employer's Contribution. - A private employer
may contribute to its employee's PERA to the extent of
(e) "Investment Manager" is a regulated person or entity the amount allowable to the Contributor: Provided,
authorized by a Contributor to make investment however: That the employer complies with the
decisions for his PERA. As such, it shall assume fiduciary mandatory Social Security System (SSS) contribution and
duty and responsibility for PERA investments. An retirement pay under the Labor Code of the Philippines.
Investment Manager shall act with utmost fidelity by Such contribution shall be allowed as a deduction from
observing policies directed towards confidentiality, the employer's gross income. The Contributor, however,
scrupulous care, safety and prudent management of retains the prerogative to make investment decisions
PERA funds. pertaining to his PERA.
(f) "Personal Equity and Retirement Account (PERA)" SEC. 7. Separate Asset. -The PERA shall be kept separate
refers to the voluntary retirement account established by from the other assets of an Administrator/Custodian and
and for the exclusive use and benefit of the Contributor shall not be part of the general assets of the
for the purpose of being invested solely in PERA Administrator/Custodian for purposes of insolvency.
investment products in the Philippines. The Contributor
shall retain the ownership, whether legal or beneficial, of SEC. 8. Tax Treatment of Contributions. - The
funds placed therein, including all earnings of such funds. Contributor shall be given an income tax credit
equivalent to five percent (5%) of the total PERA
(g) "PERA Investment Product" refers to a unit investment contribution: Provided, however: That in no instance can
bust fund, mutual fund, annuity contract, insurance there be any refund of the said tax credit arising from the
pension products, pre-need pension plan, shares of stock PERA contributions. If the Contributor is an overseas
and other securities listed and traded in a local exchange, Filipino, he shall be entitled to claim tax credit from any
exchange-traded bonds or any other investment product tax payable to the national government under the
or outlet which the concerned Regulatory Authority may National Internal Revenue Code of 1997, as amended.
allow for PERA purposes: Provided, however, That to
qualify as a PERA investment product under this Act, the SEC. 9. Tax Treatment of Investment Income. - All
product must be non-speculative, readily marketable, income earned from the investments and reinvestments
and with a track record of regular income payments to of the maximum amount allowed herein is tax exempt.
investors. The concerned Regulatory Authority must first



SEC. 10. Tax Treatment of Distributions. - All shall coordinate the qualification standards of the
distributions in accordance with Section 12 hereof are tax Administrator with the Regulatory Authorities.
exempt. SEC. 17. Penalty. - A fine of not less than Fifty thousand
SEC. 11. Termination. -Any premature termination shall pesos (P 50,000.00) nor more than Two hundred
be treated as an early withdrawal under Section 13 hereof: thousand pesos (P 200,000.00) or imprisonment of not
Provided, That the penalties thereunder shall not apply if less than six (6) years and one (1) day to not more than
the entire proceeds there from are immediately twelve (12) years or both such fine and imprisonment, at
transferred to another PERA investment and/or another the discretion of the court, shall be imposed upon any
Administrator. person, association, partnership or corporation, its officer,
SEC. 12. Distributions Upon Retirement/Death. - employee or agent, who, acting alone or in connivance
Distributions may be made upon reaching the age of with others, shall:
fifty-five (55) years: Provided, That the Contributor has (a) Act as Administrator, Custodian or Investment
made contributions to the PERA for at least five (5) years. Manager without being properly qualified or without
The distribution shall be made in either lump sum or being granted prior accreditation by the concerned
pension for a definite period or lifetime pension, the Regulatory Authority;
choice of which shall be at the option of the Contributor. (b) Invest the contribution without written or
The Contributor, however, has the option to continue the electronically authenticated authority from the
PERA. Complete distribution shall be made upon the Contributor, or invest the contribution in contravention of
death of the Contributor, irrespective of the age of the the instructions of the Contributor;
Contributor at the time of his death.
(c) Knowingly and willfully make any statement in any
SEC. 13. Penalty on Early Withdrawal. - Any early application, report, or document required to be filed
withdrawal shall be subject to a penalty, the amount of under this Act, which statement is false or misleading
which would be determined by the Secretary of Finance with respect to any material fact;
and payable to the government: Provided, That the
amount of the penalty shall in no case be less than the (d) Misappropriate or convert, to the prejudice of the
tax incentives enjoyed by the Contributor. Contributor, contributions to and investments or income
from the PERA;
No early withdrawal penalty shall be imposed on any
withdrawal of any funds for the following purposes: (e) By gross negligence, cause any loss, conversion, or
misappropriation of the contributions to, or investments
(a) For payment of accident or illness-related from, the PERA or
hospitalization in excess of thirty (30) days; and
(f) Violate any provision of this Act or rules and regulations
(b) For payment to a Contributor who has been issued pursuant to this Act. Notwithstanding the
subsequently rendered permanently totally disabled as foregoing, any willful violation by the accredited
defined under the Employees Compensation Law, Social Administrator, Custodian or Investment Manager of any
Security Law and Government Service Insurance System of the provisions of this Act, or its implementing rules and
Law. regulations, or other terms and conditions of the
SEC. 14. Non-Assignability. - No portion of the assets of a authority to act as Administrator, Custodian or
PERA may be assigned, alienated, pledged, encumbered, Investment Manager may be subject to the
attached, garnished, seized or levied upon. PERA assets administrative sanctions provided for in applicable laws.
shall not be considered assets of the Contributor for The above penalties shall be without prejudice to
purposes of insolvency and estate taxes. whatever civil and criminal liability provided for under
SEC. 15. Rules and Regulations. - Consistent with the applicable laws for the same act or omission.
policy of promoting transparency in PERA investment SEC. 18. Abuse of the Tax Exemption and Privileges. -
and thereby affording protection to the Contributor, the Any person, natural or juridical, who unduly avails of the
Department of Finance, the Bureau of Internal Revenue tax exemption privileges herein granted, possibly by
and the concerned Regulatory Authorities, with the co-mingling PERA accounts in an investment with other
Bangko Sentral ng Pilipinas as lead agency, shall investments, when such person is not entitled hereto,
coordinate to establish uniform rules and regulations shall be subject to the penalties provided in Section 17
pertaining to the following subject matters: hereof. In addition, the offender shall refund to the
(a) Qualification and disqualification standards for government double the amount of the tax exemptions
Administrators, Custodians and Investment Managers, and privileges enjoyed under this Act, plus interest of
including directors and officers thereof; twelve percent (12%) per year from the date of enjoyment
of the tax exemptions and privileges to the date of actual
(b) Qualified and/or eligible PERA investment products; payment.
(c) Valuation standards for PERA investments; SEC. 19. Separability Clause. - If any provision or part
(d) Disclosure requirements on the terms and conditions hereof is held invalid or unconstitutional, the remainder
of the PERA investments; of the law or the provision not otherwise affected shall
remain valid and subsisting.
(e) Minimum requirements imposed on the
Administrators as regards inculcating financial literacy in SEC. 20. Repealing Clause. - All laws, decrees, orders,
investors; rules and regulations or parts thereof inconsistent with
this Act are hereby amended or modified accordingly.
(f) Ascertainment of client suitability for PERA products;
SEC. 21. Effectivity. -This Act shall take effect fifteen (15)
(g) Fees to be charged by the Administrator, Custodian or days following its publication in a newspaper of general
Investment Manager shall always be reasonable and circulation: Provided, That the tax incentives granted
approved by the concerned Regulatory Authority; hereunder shall take effect on January 1, 2009.
(h) Record-keeping, reporting and audit requirement of
Administrators and Custodians pertaining to records for RA No 9267 | The Securitization Act of
all contributions, earnings and total account balances;
and 2004
(i) Other pertinent matters to be determined by the
Regulatory Authorities. March 19, 2004
SEC. 16. Administration of Tax Incentives. - The BIR shall AN ACT PROVIDING THE REGULATORY FRAMEWORK
issue the implementing rules and regulations regarding FOR SECURITIZATION AND GRANTING FOR THE
all aspects of tax administration relating to PERA. The BIR


PURPOSE EXEMPTIONS FROM THE OPERATION OF with the Plan. In most instances, the Seller may itself be
CERTAIN LAWS the Originator.
Be it enacted by the Senate and House of (k) "Servicer" refers to the entity designated by the SPE to
Representatives of the Philippines in Congress collect and record payments received on the assets, to
assembled: remit such collections to the SPE, and perform such other
services as may be specifically required by the SPE,
excluding asset management or administration.
ARTICLE 1 GENERAL PROVISIONS (l) "Special Purpose Entity (SPE)" means either a Special
SECTION 1. Short Title. - This Act shall be known as "The Purpose Corporation (SPC) or a Special Purpose Trust
Securitization Act of 2004". (SPT).
SECTION 2. Declaration of Policy. - It is the policy of the (m) "Special Purpose Corporation (SPC)" refers to a
State to promote the development of the capital market juridical person created in accordance with the
by supporting securitizaiton, by providing a legal and Corporation Code of the Philippine solely for the purpose
regulatory framework for securitization and by creating a of securitization and to which the Seller makes a true and
favorable market environment for a range of absolute sale of assets.
asset-backed securities. For this purpose, the State shall (n) "Special Purpose Trust (SPT)" means a trust
rationalize the rules, regulations, and laws that impact administered by an entity duly licensed to perform trust
upon the securitization process, particularly on matters of functions under the General Banking Law, and created
taxation and sale of real estate on installment. solely for the purpose of securities and to which the Seller
Furthermore, the State shall pursue the development of a makes a true and absolute sale of assets
secondary market, particularly for residential
mortgage-backed securities and other housing-related SECTION 4. Declaration of Principles. - The
financial instruments, as essential to its goal of Commissions shall exercise the powers provided for in
generating investment and accelerating the growth of this Act in consonance with the principle of full disclosure,
the housing finance sector, especially for socialized and transparency and accountability. The Commission shall
low-income housing. The State shall likewise pursue the include in its annual report the list of SPEs with the
development of a secondary market for other types of corresponding types and amounts of assets scrutinized.
asset-backed securities (ABS).
SECTION 3. Definition of Terms. - For purpose of this Act, ARTICLE II SPECIAL PURPOSE ENTITY
the term:
SECTION 5. Special Purpose Entity (SPE). - The SPE in
(a) "Securitization" means the process by which assets are the form of an SPC shall be a stock corporation
sold on a without recourse basis by the Seller to a Special established in accordance with the Corporation Code of
Purpose Entity (SPE) and the issuance of asset-backed the Philippines and the rules promulgated by the
securities (ABS) by the SPE which depend, for their Commission solely for the purpose of securitization and
payment, on the cash flow from the assets so sold and in registered as such with the Commission. An SPE
accordance with the Plan. constituted as an SPT shall be a trust administered by an
(b) Asset-backed securities (ABS)" refer to the certificates entity duly licensed to perform trust functions under the
issued by an SPE, the repayment of which shall be General Banking Law and need not be registered as such
derived from the cash flow of the assets in accordance with the Commission. In any event, the SPE, whether in
with the Plan. the form of an SPT or SPC, shall be solely organized and
(c) "Assets", whether used alone or in the term operated for purposes of securitization in accordance
"Asset-backed securities," refer to loans or receivables or with this Act. The Commission and the BSP shall, from
other similar financial assets with an expected cash time to time, determine the required capitalization for
payment stream. The term "Assets" shall include, but shall the SPCs and SPTs, respectively.
not be limited to, receivables, mortgage loans and other SECTION 6. Approval of the Plan. - After the
debt instruments: Provided, That receivables that are to establishment of an SPE pursuant to Section 5 hereof, the
arise in the future and other receivables of similar nature proposed Plan shall be submitted to the Commission for
shall be subject to approval by the Securities and approval, which shall include the following:
Exchange Commission (SEC) or the Bangko Sentral ng (a) The nature and mechanics of the sale of assets from
Pilipinas (BSP), as the case may be: Provided, further, That the Seller to the SPE, including the terms, conditions and
the term "Assets" shall exclude receivables from future circumstances specified in the Plan wherein the assets
expectation of revenues by government, national or local, may be reverted to the Seller:
arising from royalties, fees or imposts.
(b) The credit enhancements or liquidity supports for the
(d) "Asset Pool" means the group of identified, ABS which may be provided in the following manner:
homogeneous assets underlying the ABS.
(i) standby letter of credit issued by a commercial bank or
(e) "Commission" refers to the Securities and Exchange universal bank other than the trustee bank or the
Commission (SEC). Originator or Seller or its subsidiary/affiliate, its parent
(f) "Credit Enhancement" means any legally enforceable company or the parent company's subsidiary/affiliate;
scheme intended to improve the marketability of the ABS (ii) surety bond issued by any insurance company other
and increase the probability that the holders of the ABS than the Originator or Seller or its subsidiary or affiliate,
receive payment of amounts due them under the ABS in its parent company or the parent company's subsidiary or
accordance with the Plan. affiliate, or the parent or subsidiary of the trustee bank;
(g) "Originator" means the person or entity which was the (iii) guarantee issued by any entity other than the
original obligee of the Assets, such as financial institution Originator or Seller or its subsidiary/affiliate, its parent
that grants a loan or a corporation in the books of which company or the parent company's subsidiary/affiliate, or
the Assets were created in accordance with the Plan. the trustee bank or its parent or subsidiary;
(h) "Plan" means the plan for securitizations as approved (iv) over-collateralization provided by the Seller wherein
by the Commission the assets conveyed to the SPC or SPT exceed the
(i) "Secondary Mortgage Institution (SMI)" means an amount of ABS to be issued;
entity created for the purpose of enhancing a secondary (v) subordinated securities issued by an SPE to any entity
market for residential mortgages and housing-related including those issued to the Seller that are lower
ABS. ranking, or junior to other obligation, and are paid after
(j) "Seller" means the person or entity which conveys to claims to holders of senior are satisfied; and
the SPE the Assets forming the Asset Pool in accordance



(vi) other credit enhancements as may be approved by SECTION 11. Restriction. - the SPE shall not undertake
the Commission. any activity other than that contained in the approved
(c) The identities and qualifications of the Originator, Plan except upon a written approval of the Commission
Seller, Servicer, underwriter an dealer of the ABS, and and the written consent of the holders of the ABS
description of any compensation the issuer, seller or any representing at least two-thirds (2/3) of the outstanding
underwriter has received or will receive in the future in amount of the ABS: Provided, That in case the originator
connection with the ABS; of the assets is a bank or nay other financial intermediary
which under special laws is subject to the supervision of
(d) The identity, qualifications and compensation of the the BSP, or an entity directly or indirectly related to said
trustee that will administer the assets conveyed to the bank or other financial intermediary, or in the event the
SPE for the benefit of the ABS holders of the ABS holders SPE is constituted in the form of an SPT, prior
which trustee shall not be related directly or indirectly to endorsement by the BSP is necessary.
the Originator or Sellers;
SECTION 12. Transfer of Assets and Security. - The
(e) The aggregate principal amount of the value of ABS to transfer of the assets from the Originator or Seller to the
be issued, the principal amount of each class within the SPE shall be deemed to be a "true sale" when it results in
ABS, and the denominations which shall not be lower the following:
than Five thousand pesos (P5,000.00) in which the ABS
will be issued; (a) The transferred Assets are legally isolated and put
beyond the reach of the Originator or Seller and its
(f) The structure of the ABS to be registered, including the Creditors;
structure and payment priorities of each class of
certificates within the ABS, anticipated payments and (b) The transferee SPE has the right to pledge, mortgage
yields for each class, and the circumstances under which or exchange those transferred Assets;
the ABS may be redeemed or retired; (c) The transferor relinquishes effective control over the
(g) A full description of the assets contained, or to be transferred assets;
contained, in the asset pool supporting the ABS; (d) The transfer shall be effected by either a sale,
(h) The rating agency/agencies for the ABS, the criteria assignment or exchange, in any event on a without
used or to be used to rate the ABS, and any limitation, recourse basis to the Originator or Seller;
qualifications or material risks not addressed by the (e) The transferee shall have the right to profits and
rating agency/agencies; disposition with respect to the assets;
(i) A full description of how the issuer will collect and (f) The transferor shall have the right to recover the assets
maintain remittances from the assets pending and the transferee shall not have the right to
distribution to holders of the ABS, including the issuer's reimbursement of the price or other consideration paid
investment policies and the identity of the issuer's for the assets; and
investment advisor, if any; (g) The transferee shall undertake the risks associated
(j) The plan for the management and administration of with the assets. This shall not, however, prevent the
the assets, asset pool and the ABS, including the transferor from giving normal representations or
disposition of the foreclosed properties, if any; and warranties of the assets sold.
(k) The manner of disposal of any residual value or asset SECTION 13. Withdrawal of Registration. - If the
with the SPE after all obligations to holders of ABS shall Commission finds that the Originator or Seller has
have been settled. undertaken the securitization so as to seek the benefits of
SECTION 7. Registration of Asset-Backed Securities this Act without a true intention to carry it out, the
(ABS). - All ABS shall be registered with the Commission Commission shall withdraw or cancel the registration of
in accordance with Sections 8 and 12 of the Securities the ABS and the registration of the SPE as issuer, and
Regulation Code and its implementing rules and cause the dissolution of the SPC or termination of the
regulations: Provided, however, That issuers of ABS falling SPT. The Originator or Seller and as the case may be, the
under Sections 9 and 10 thereof shall be required to file trustees, shall pay as fine an amount equal to the taxes
with the Commission, a notice, with a disclosure from which the SPE has been exempted plus a surcharge
statement. of twenty-five percent (25%) of the face value of the ABS
issued, without prejudice to the penalties under this law
SECTION 8. Approval. - The commission shall issue to an and the National Internal Revenue Code of 1997.
SPC or SPT the corresponding order and permit to sell
ABS only after compliance with all the registration SECTION 14. Inheritance and Donor's Tax Evasion. - It
requirements and the approval of the Plan by the shall be unlawful for any person, whether or not it
Commission. contemplation of death, to cause directly, the issuance,
for the benefit of another or others, of ABS and avail of
SECTION 9. Originator is a Bank; Special Purpose Trust. the tax incentives granted by this Act for the purpose of
- In case the originator of the assets is a bank or any other evading the payment of donor's or estate taxes.
financial intermediary which under special laws is subject
to the supervision of the BSP, or an entity directly related SECTION 15. Dissolution of the Special Purpose Entity
to said bank or other financial intermediary, or in the (SPE). - The SPE shall be dissolved in the following cases:
event the SPE is constituted in the form of an SPT, an (a) It fail to accept the transfer of assets or issue ABS to
endorsement by the BSP of the Plan shall be required investors within six (6) months from the date of approval
before it s approval by the Commission. of the Plan unless extended by the Commission;
SECTION 10. Powers of the SPE. - Each SPE shall have (b) Holders of at least two third (2/3) of the total amount
the power to: of its ABS still outstanding have resolved to dissolve the
(a) Accept the sale or transfer of assets; SPE and the approval of the Commission has been
obtained; in case the Originator of the assets is a bank or
(b) Issue and offer the ABS for sale to investors; any other financial intermediary which under special
(c) Undertake on its own or through contracts with any laws, is subject to supervision of the BSP, or an entity
person, such activities as contained in the approved Plan; directly or indirectly related to said bank or other financial
intermediary, or in the event the SPE is constituted in the
(d) Create any indebtedness or encumbrances to defray form of an SPT, an endorsement by the BSP shall be
administrative or other necessary expenses as specified required prior to approval of the Commission;
in the Plan; and
(c) Conditions for dissolution that are specified in the Plan
(e) Pay out or invest its funds in accordance with the Plan occur; or
or as approved by the Commission.


(d) The Commission orders dissolution in accordance with trustees. The Originator or Seller may act as the Servicer
Section 13 and 19. as may be approved by the Commission or the BSP, as
SECTION 16. Effects of Dissolution of SPE. - The SPE and the case may be.
the registration of the ABS shall be terminated, cancelled SECTION 25. Standard of Conduct. - The Servicer shall
withdrawn in any of the cases provided for under the last act with utmost good faith and shall perform its
preceding section. obligations under the servicing agreement with the due
SECTION 17. Appointment of an Interim diligence of a good father of a family.
Representative. - If the Commission finds that an SPE SECTION 26. Penalties. - Breach by the Servicer of its
has no authorized representative to act on its behalf or obligations arising from the failure to abide by the
such persons cannot act for any reason resulting in the standard of conduct set forth in the preceding section
interruption of its activities pursuant to the approved shall subject the Servicer to the penalty of revocation of
Plan, the Commission shall have the power to appoint its corporate registration and a fine of not less than One
any person or persons to act as interim representative for Million pesos (P1,000,000.00) and shall subject its officers
the SPE. The interim representative shall have the full and and employees responsible for such noncompliance with
exclusive authority to implement the approved Plan. the standard of conduct referred to above, to a penalty of
In the event of an appointment of replacement of an imprisonment for not more than five (5) years and a fine
interim representative, the Commission shall post the of not less than One Hundred Thousand pesos
notice at the Commission's office and other its (100,000.00). Breach arising from bad faith or gross
publication in at least two (2) newspapers of national negligence shall subject the Servicer to revocation of its
circulation. corporate registration and a fine of not less than Five
million pesos (P5,000,000.00) and shall subject the
SECTION 18. Delivery of Property and Records it officers and employees responsible for such breach to a
Interim Representative. - Where an interim penalty of imprisonment for not more than six (6) years
representative has been appointed in accordance with and one (1) day up to a maximum of twenty (20) years and
Section 17. a fine of not less than Five hundred thousand pesos
(a) The directors, officers, or any employees of the SPE (P500,000.00).
shall take all appropriate steps to safeguard the property
and the benefits of the holders of the ABS of the SPE and
shall deliver the property accounts, documents, and seals ARTICLE IV TAX AND OTHER RELATED ISSUES
of the SPE to the interim representative; and SECTION 27. income Taxation of Special Purpose
(b) Any person who possesses property or documents of Entity. - The SPE in the form of an SPC shall be subject to
the SPE shall notify the representative of such possession. income tax under Section 27(a), Chapter IV of the
National Internal Revenue Code of 1997. An SPE
SECTION 19. Failure to Continue Business. - The constituted as an SPT shall be subject to income tax in
Commission shall order the dissolution of an SPE upon accordance with the provisions of Section 61, Chapter X of
finding that the SPE cannot continue to undertake its the same Code.
business, and shall proceed to liquidate the SPE in
accordance with the Corporation Code. SECTION 28. Transfer of Assets. - The sale or transfer of
assets to the SPE, which includes sale or transfer of any
SECTION 20. Power of Inspection. - The Commission and all security interest thereto, it made in accordance
shall have the power to inspect or order the Production of with the Plan shall be exempted from value-added tax
the records of the SPE. (VAT) and documentary stamp tax (DST), or any other
taxes imposed in lieu thereof. Except for registration fees
with the Commission, all applicable registration and
ARTICLE III THE SERVICER annotation fees to be paid, related or incidental to the
SECTION 21. Duties. - The Service shall perform its duties transfer of assets, or the security interest thereto, shall be
pursuant to the terms and conditions of the servicing fifty percent (50%) of the applicable registration and
agreement and such other written instructions as the annotation fees.
SPE, the trustees or its interim representative may issue The transfer of assets by dation in payment (dacion en
or in case-to-case basis. Collections made by the Servicer pago) by the obligor in favor of an SPE shall not be
shall be remitted promptly to the SPE or as may be subject to capital gains tax as provided under Section 27
agreed upon the parties in the servicing agreement, but (d)(5) of the National Internal Revenue Code of 1997.
in no case shall be remittance period be longer than one
(1) month. SECTION 29. Issuance and Transfer of Securities. - The
original issuance of ABS and other securities related
SECTION 22. Reports. - The Servicer shall prepare solely to such securitization transaction, such as, but not
periodic reports as may be required by the SPE, the limited to, seller's equity, subordinated debt instruments
trustee or its interim representative within thirty (30) days, purchased by the originator, and other related forms of
including reports of any borrower or obligator which fails credit enhancement shall be exempt from VAT, or any
to pay its debt or obligation at maturity date or any other taxes imposed in lieu thereof, but subject to DST. All
adverse development that may be affect the collectibility secondary trades and subsequent transfers of ABS,
of any loan account or receivable comprising the asset including all forms of credit enhancement in such
pool. instruments, shall be exempt from DST and VAT, or any
SECTION 23. Extent of Authority. - The Servicer shall other taxes imposed in lieu thereof.
have such authority as is expressly stated in the servicing SECTION 30. Non-Classification of SPE as a Bank,
agreement and unless otherwise specifically provided Quasi-Bank or Financial Intermediary. - The SPE,
therein, such authority shall encompass the general created pursuant to a Plan, shall not be classified as a
powers of administration. The Servicer shall have no ban, quasi-bank or financial intermediary under the
authority to waive penalties and charges except with the provisions of the New Central Bank Act, the General
written authority from the Board of SPE, the trustee or Banking Law and the National Internet Revenue Code of
the interim representative, should one be appointed 1997, and shall not be subject to the gross receipts tax
SECTION 24. Qualifications. - The Servicer shall be a (GRT) or any other tax imposed in lieu thereof.
corporation duly incorporated under Philippine law, with SECTION 31. Securities not to be Categorized as
a minimum authorized capitalization of Ten million pesos Deposit Substitutes. - The ABS issued by an SPE
(P10,000,00.00) or such higher amounts as the pursuant to the Plan approved by the Commission shall
Commission may prescribe. It shall be independent of the not be considered as deposit substitutes under the laws
SPC or the trustee and shall not share common mentioned in Section 30 hereof: Provided, however, That
ownership, officers, or directors with the SPC or the for purposes of taxation, the yield for the ABS shall be


subject to a twenty percent (20%) final withholding tax, Provided, furthermore, That the ratios indicated herein
except those held by tax-exempt investors. may be adjusted by the Commission with approval of the
SECTION 32. Re-transfer of Assets. - Where the DOF and BSP upon a showing that the conditions of the
implementation of the Plan or the provision of this Act secondary and primary markets and the financial viability
requires or provides a transfer of the assets and collateral of the SMI warrant such adjustment: Provided, Finally,
back to the Originator or Seller, then the provisions of That the investment of financial entities in the SMI shall
Section 28 shall apply to such transfer. be subjected to and be made to comply with rules and
regulations of the appropriate regulatory agency.
SECTION 33. Incentives for Securitization. - In order to
promote the securitization of the mortgage and housing Government financial institutions and
related receivables of the government housing agencies government-owned or-controlled corporations, may
as may be determined by the Housing and Urban collectively hold and own up to a maximum of thirty
Development Coordinating Council (HUDCC) and the percent (30%) of the SMI's capital: Provided, That such
Department of Finance (DOF), the yield or income of the investment does not conflict with their existing charters
investor from any low-cost or socialized housing-related A government financial institution may invest up to a
ABS shall be exempt from income tax. maximum of ten percent (10%) of its total investible funds
SECTION 34. Waiver of Rights. - For purposes of in housing-related assets or five percent (5%) in
securitization pursuant to this Act, the buyer of real estate non-housing related assets: Provided, That such
on installment payments may agree to waive his rights investment does not exceed five percent (5%) of the total
under Republic Act No. 6552, the provision of Section 7 of amount of each ABS issue.
the said notwithstanding. Within ten (10) years of its incorporation, the SMI shall
offer and list at least twenty percent (20%) of its common
shares in the stock exchange, which period shall be
ARTICLE V SECONDARY MORTGAGE extendible only upon approval of the Commission in
INSTITUTION instances where the lace of financial viability of the SMI
warrants such extension.
SECTION 35. Registration of Secondary Mortgage
SECTION 40. Prohibited Activities of the SMI. - The SMI
Institution (SMI). - An SMI, which shall be primarily
shall be prohibited from:
responsible in providing liquidity mechanism to primary
mortgage lenders/holders as well as in developing a (a) Originating or financing individual mortgage loans;
secondary market for mortgage and housing-related (b) Providing loans to other parties engaged in a business
ABS, shall also be registered with the Commission. other than that approved in the Plan submitted to the
SECTION 36. Registration of Business and Operational Commission: and
Plan. - The SMI shall also register its business and (c) Providing capital equity to other companies.
operational plan with the Commission and shall, as a
minimum, be subject to the same disclosure SECTION 41. Extension of Benefits to the SMI. - The
requirements as SPCs. benefits provided to the transactions entered into by the
SPCs under Sections 28 to 33 of this Act shall also be
SECTION 37. Promulgation of Rules. - The Commission, granted to the same transactions entered into by the
in consultation with the BSP and the Insurance SMIs for purposes of securitization in accordance with the
Commission (IC), shall promulgate rule regarding the provisions of this Act.
ownership, organization, capitalization and operation of
the SMI. SECTION 42. Dissolution of the SMI. - The Commission
shall order the dissolution and liquidation of the SMI
In promulgating such rules, the Commission shall upon a finding that it;
consider the size of the asset pools to be held by the SMI,
the amount of debt to be issued by it, the extent of its (a) Cannot continue to undertake its business; or
operation and the powers of the SMI specified under this (b) Is not operation actively; or
Act.
(c) Is engaging in activities that conflict with its objectives
SECTION 38. Powers of the SMI. - For purposes of as an SMI; or
securitization under this Act and pursuant to the Plan
submitted to the Commission, the SMI may perform any (d) Has fulfilled a condition for dissolution specified in its
or all of the following: Articles of Incorporation.
(a) Wholesale purchase of residential mortgages and

housing-related contract receivables; ARTICLE VI RATING SYSTEM
(b) Buy and sell residential mortgage and housing-related SECTION 43. Rating ABS. - No ABS shall be issued unless
ABS; such ABS has been rated by a duly accredited credit
(c) Provide loans to primary lending institutions against rating agency.
residential mortgages; SECTION 44. Credit Rating Agency. - Every credit rating
(d) Issue housing-related ABS through an SPE, and issue agency which now exists or which may hereafter be
bonds and other debt instruments; formed shall be subject to the provisions of this Act.
(e) Perform ancillary functions including, but not limited SECTION 45. Accreditation of Credit Rating Agency. -
to, title insurance, through a subsidiary, wholly or partially No credit rating agency shall commence rate-making
owned by an SMI, and loan servicing; and operations pursuant to this Act until it shall have
obtained an accreditation from the Commission under
(f) Perform such other functions as the Commission may such rules and regulations as the Commission may deem
determine necessary to mobilize and channel funds from appropriate.
the capital markets to the mortgage and housing finance
sector. SECTION 46. Examination of Credit Rating Agencies. -
Credit rating agencies shall be subject to examination by
SECTION 39. SMI Capitalization and Organizational the Commission as the latter may deem warranted:
Requirements. - Any SMI established for the housing Provided, That the Commission shall conduct an
sector shall be a stock corporation and shall have a examination of the credit rating agencies at least once
minimum initial paid-up capital of Two billion pesos every three (3) years.
(P2,000,000,000.00): Provided, That the total obligation of
the SMI, including both actual and contingent SECTION 47. Noncompliance of Accredited Rating
obligations, shall not exceed fifteen (15) times its paid-up Agencies. - The Commission may suspend or revoke the
capital: Provided, further, That the actual obligations of accreditation given to any credit rating agency which fails
the SMI shall not exceed ten (10) times its paid-up capital: to comply with the Commission's lawful order within the



time limited by such order, or any extension thereof Be it enacted by the Senate and House of
which the Commission may grant. Representatives of the Philippines in Congress
assembled:
ARTICLE VII PENAL PROVISIONS

SECTION 48. Penalties. - Any person who violates any of
ARTICLE I GENERAL PROVISIONS
the provisions of this Act, or the rules and regulations Section 1. Short Title. - This Act shall be known as "The
promulgated by the Commission under authority hereof, Agri-Agra Reform Credit Act of 2009".
or any person who, in a registration statement, notice, or Section 2. Declaration of Policy. - It is hereby declared the
Plan filed under this Act, makes any untrue statement of policy of the State to promote equal access to
a material fact or omits to state any material fact required opportunities under an environment of sustained growth
to be stated therein or necessary to make the statements and expanding productivity as the key to raising the
therein not misleading, shall, upon conviction, suffer a quality of life for all. Towards this end, the State shall
fine of not less than Fifty thousand pesos (P50,000.00) promote rural development by enhancing access of the
nor more than Five million pesos (P5,000.00) or rural agricultural sector to financial services and
imprisonment of not less than six (6) years and one (1) day programs that increase market efficiency and promote
nor more than twenty-one (21) years, or both in the modernization in the rural agricultural sector.
discretion of the court. If the offender is corporation,
partnership or association or other juridical entity, the Section 3. Definition of Terms. - As used in this Act, the
penalty may in the discretion of the court be imposed term:
upon such juridical entity upon the officer or officers of (a) Accredited Rural Financial Institution refers to any
the corporation, partnership, association or entity financial institution accredited by the Bangko Sentral ng
responsible for the violation, and if such officer is an alien, Pilipinas (BSP) whose portfolios are substantially
he shall in addition to the penalties prescription agri-agra related as defined by the implementing rules
prescribed, be deported without further proceedings and regulations.
after service of sentence.
(b) Agrarian Reform Beneficiary refers to farmers who
were granted lands under Presidential Decree No. 27, the
ARTICLE VIII MISCELLANEOUS PROVISIONS Comprehensive Agrarian Reform Law and Republic Act
No. 9700 or the "Comprehensive Agrarian Reform
SECTION 49. Implementing Rules and Regulations Extension with Reforms" and regular farm workers who
(IRR). - The Commission, in coordination with the BSP, are landless, irrespective of tenurial arrangement, who
DOF and the IC, shall promulgate the implementing rules benefited from the redistribution of lands, regardless of
and regulations which shall be submitted to the crops or fruits produced, to include the totality of factors
Congressional Oversight Committee which shall review, and support services designed to lift the economic status
revise and approve the same: Provided, That the of the beneficiaries and all other alternative
Commission BSP, DOF and the IC may continue to issue arrangements to the physical distribution of lands, such
separate regulations that will apply exclusively to the as production or profit sharing, labor administration, and
institutions under their respective jurisdiction, consistent the distribution of shares of stock which will allow
with the IRR as approved by the Congressional Oversight beneficiaries to receive a just share of the fruits of the
Committee. lands they work.
SECTION 50. Congressional Oversight Committee. - (c) Agricultural Guarantee Fund Pool (AGFP) refers to the
There is hereby created a Congressional Oversight five percent (5%) of the 2007 surplus of the
Committee composed of seven (7) members from the government-owned and/or controlled corporations and
Senate and seven (7) members from the House of the government financial institutions including the
Representatives. The members from the Senate shall be Philippine Amusement and Gaming Corporation
appointed by the Senate President with at least two (2) (PAGCOR), the Philippine Charity Sweepstakes Office
Senators representing the Minority. The members from (PCSO), the Social Security System (SSS), and the
the House of Representatives shall also appointed by the Government Service Insurance System (GSIS) as
Speaker with at least two (2) members representing the mandated by Administrative Order No. 225-A, series of
Minority. After the Oversight Committee has approved 2008, and the penalties collected from banking
the IRR, it shall thereafter become functus officio, and institutions for noncompliance and under compliance as
therefore cease to exist. provided under this Act.
SECTION 51. Repeating Clause. - All laws, executive (d) Agricultural Lessee refers to any person who, with or
orders, rules and regulations, and parts thereof which are without help from his/her immediate farm household,
inconsistent with this Act are hereby repealed or cultivates the land owned by another for a certain price in
amended accordingly. money, in produce, or in both.
SECTION 52. Separability Clause. - If for any reason any (e) Agro-Industry Modernization Credit and Financing
article or provision of this Act or any portion therefore or Program (AMCFP) refers to the umbrella credit/financing
application of such article, provision, or portion thereof to program of the government for the agriculture and
any person, group, or circumstance is declared invalid or fisheries sector created under Republic Act No. 8435,
unconstitutional, the remainder of this Act shall not be otherwise known as the "Agriculture and Fisheries
affected by such decision. Modernization Act of 1997". By design, AMCFP funds are
SECTION 53. Effectivity Clause. - This Act shall take provided as loans to government financial institutions
effect fifteen (15) days after its complete publication in the (GIFs) called 'credit wholesalers', which in turn relend
Official Gazette or in at least two (2) newspapers of them to qualified 'credit retailers' that include rural banks,
general circulation, whichever comes earlier. thrift banks, cooperative banks, nongovernment
organizations (NGOs), National Food Authority (NFA) and
other associations/people's organizations engaged in
RA No 10000 | The Agri-Agra Reform lending to small farmers and fisherfolk.
(f) Amortizing Owners refer to landowners who still
Credit Act of 2009 amortize payment for the land to a private individual or to
the State.
AN ACT PROVIDING FOR AN AGRICULTURE AND (g) Compact Farmers refer to those farmers with
AGRARIAN REFORM CREDIT AND FINANCING SYSTEM adjoining farms operating as a single unit under one
THROUGH BANKING INSTITUTIONS management, farm plan and budget.


(h) Farmer refers to a natural person whose primary (r) Settlers refer to persons who range from the
livelihood is cultivation of land or the production of forest-clearing pioneers, including indigenous people,
agricultural crops, agroforest products, livestock and/or with a subsistence economy to the better equipped and
fisheries, either by himself/herself, or primarily with the more experienced farmers.
assistance of his/her immediate farm household, whether (s) Tenant Farmer refers to one who cultivates another's
the land is owned by him/her or by another person under land under a sharing or leasehold agreement.
a leasehold or share tenancy agreement or arrangement
with the owner thereof.
(i) Farmworker refers to a natural person who renders ARTICLE II AGRICULTURAL CREDIT, INSURANCE
service for value as an employee or laborer in an AND FINANCING SYSTEM
agricultural enterprise or farm regardless of whether
his/her compensation is paid on daily, weekly, monthly or Section 4. Agriculture, Fisheries and Agrarian Reform
"pakyaw" basis. The term includes an individual whose Credit, Insurance and Financing System. - There shall be
work has ceased as a consequence of, or in connection evolved an agriculture, fisheries and agrarian reform
with, a pending agrarian dispute who has not obtained a credit, insurance and financing system to improve the
substantially equivalent and regular farm employment. productivity of the agriculture and fisheries sectors,
particularly the farmers, fisherfolk and agrarian reform
(j) Farmer's Cooperatives refer to organizations
beneficiaries, settlers, agricultural lessees, amortizing
composed primarily of small agricultural producers,
owners, farmworkers, fishworkers, owner-cultivators,
farmers, farmworkers, or other agrarian reform
compact farmers, farmer's and fisherfolk's cooperatives,
beneficiaries who voluntarily organize themselves for the
organizations and associations, through government and
purpose of pooling land, manpower, technological,
private banking institutions.
financial or other economic resources, and operate on the
principle of one member, one vote. A juridical person may Agriculture and agrarian reform credit, as used herein,
be a member of a cooperative, with the same rights and shall consist of loans activities and purposes including,
duties as a natural person. but not limited to, agricultural production, promotion of
agribusiness and exports, acquisition of work animals,
(k) Farmer's and Fisherfolk's Organization or Associations
farm and fishery equipment and machinery, seeds,
refers to farmer's and fisherfolk's cooperatives,
fertilizers, poultry, livestock, feeds and other similar items,
associations or corporations duly registered with
acquisition of lands authorized under the Agrarian
appropriate government agencies and which are
Reform Code of the Philippines and its amendments;
composed primarily of small agricultural producers,
construction, acquisition and repair of facilities for
farmers, farmworkers, agrarian reform beneficiaries,
production, processing, storage and marketing and such
fisherfolk who voluntarily join together to form business
other facilities in support of agriculture and fisheries; and
enterprises or non-business organizations which they
efficient and effective merchandising of agricultural and
themselves own, control and patronize.
fishery commodities stored and/or processed by the
(l) Financial Services refer to services extended by facilities aforecited in domestic and foreign commerce.
banks/financial institutions such as, but not limited to,
Section 5. Agriculture and Agrarian Reform Credit
credit/lending, deposits and rediscounting.
Beneficiaries. - The credit mentioned in the preceding
(m) Fisherfolk refers to people directly or personally and section shall be extended to the beneficiaries named
physically engaged in taking and/or culturing and therein or to cooperatives and associations in good
processing fishery and/or aquatic resources. standing of such beneficiaries regardless of capitalization
(n) Fishworker refers to a person whether or not regularly based on the feasibility of the project and their paying
employed in commercial fishing and related industries, capacity, their estimated production, and/or securities
whose income is either from wages, profit sharing or they can provide from the proceeds of the loan.
stratified sharing basis, including those working in Section 6. Credit Quota. - All banking institutions,
fishpens, fish corral/traps, fishponds, prawn farms, sea whether government or private, shall set aside at least
farms, salt beds, fish ports, fishing boat or trawlers, or fish twenty-five percent (25%) of their total loanable funds for
processing and/or packing plants, but excluding agriculture and fisheries credit in general, of which at
administrators, security guards and overseers. least ten percent (10%) of the loanable funds shall be
(o) Owner-Cultivators refer to natural persons who own made available for agrarian reform beneficiaries
lands by purchase, inheritance, or land distribution by the mentioned in Section 5 hereof:Provided, however, That
State. Owner-Cultivators can operate the farm total loanable funds as used in the section shall refer to
themselves, supervise wage labor or delegate operations funds generated from the date of effectivity of this Act:
to farmers. Provided, further, That the twenty -five percent (25%)
credit quota is subject to a joint review by the
(p) Philippine Crop Insurance Corporation (PCIC) refers to Department of Agriculture (DA), the Department of
a government-owned and -controlled corporation which Agriculture Reform (DAR) and the Bangko Sentral ng
provides insurance protection to the country's Pilipinas (BSP) after three (3) years of implementation to
agricultural producers, particularly the subsistence determine whether the law has been effective in
farmers against crop losses Arising from natural accomplishing its goals. The findings shall be submitted
calamities such as typhoons, rising sea levels, floods, to Congress.
drought, earthquakes, volcanic eruptions, plant diseases
and pest infestation, and non-crop agricultural asset Section 7. Modes of Compliance. - The BSP, the DA and
losses due to perils for which the asset has been insured the DAR, in consultation with concerned agencies and
against. sectors, shall promulgate such rules and regulations as
may be necessary to implement the provisions of this Act
(q) Quedan and Rural Credit Guarantee Corporation within ninety (90) days after the approval of this Act. Such
(QUEDANCOR) refers to a non-bank government rules and regulations shall take effect fifteen (15) days
financing institution (GFI) under the policy supervision of after its publication in a newspaper of general circulation
the Department of Agriculture (DA) created under in the Philippines. Subject to such rules and regulations,
Republic Act No. 7393 geared towards the establishment banking institutions may be allowed to:
of an effective credit delivery system and a guarantee
facility that would promote inventory financing of (a) Invest in bonds issued by the Development Bank of
agri-aqua commodities, production and post-harvest the Philippines (DBP) and the Land Bank of the
production facilities, farm and fishery machineries and Philippines (LBP) and/or open special deposit accounts
equipment, investment in production inputs and labor (SDAs) with accredited rural financial institutions defined
and the development of rural livelihood enterprise. by the implementing rules and regulations: Provided,
That the proceeds from said bonds and SDAs shall be
used exclusively for on-lending to the agriculture and


agrarian reform sector: Provided, further, That proceeds inconsistent with the provisions of this Act are hereby
from said bonds and SDAs shall be separately accounted repealed or modified accordingly.
for by the DBP, the LBP and the depository thrift banks, Section 12. Separability Clause. - If any part, section or
cooperative banks and rural banks and shall not be provision of this Act is held invalid or unconstitutional,
considered for purposes of computing the loanable funds other provisions not affected thereby shall remain in force
under Section 6 hereof of the said banks: Provided, and effect.
furthermore, That loanable funds channelled as
compliance under subsections (b), (c), (d), (e) and (f) even Section 13. Transitory Provision. - Prior to the effectivity of
if said funds are later used by conduit banks in activities the implementing rules and regulations of this Act, the
similar to those provided for in subsections (b), (c), (d), (e) provisions of Presidential Decree No. 717 shall remain in
and (f); force.
(b) Rediscount with the universal banks and commercial Section 14. Effectivity. - This Act shall take effect fifteen
banks, including local branches of foreign banks eligible (15) days after its publication in the Official Gazette or in a
paper covering agriculture, fisheries and agrarian reform newspaper of general circulation.
credits, including loans covered by guarantees of the
QUEDANCOR, and the PCTC: Provided, That rediscounted
paper shall no longer be eligible as compliance on the RA No 7353 | The Rural Bank Act of 1992
part of the originating bank; As amended by RA No 10574
(c) Lend for the construction and upgrading of
infrastructure including, but not limited to, farm-to
market roads, as well as the provision of post harvest AN ACT PROVIDING FOR THE CREATION,
facilities and other public infrastructure that will benefit ORGANIZATION AND OPERATION OF RURAL BANKS,
the agriculture, fisheries and agrarian reform sector. AND FOR OTHER PURPOSES
(d) Invest directly in preferred shares of stock in rural Be it enacted by the Senate and House of
financial institutions like rural banks, cooperative banks, Representatives of the Philippines in Congress
farmer's cooperatives and farmer's cooperatives and assembled:
farmer's cooperative insurance or mutual benefit Section 1. This Act shall be known and cited as the "Rural
associations or lend wholesale to rural financial Act of 1992."
institutions accredited by the BSP: Provided, That credit
facility shall be exclusively used for on-lending to the Section 2. The State hereby recognizes the need to
agriculture, fisheries and agrarian reform sector: promote comprehensive rural development with the end
Provided, further, That the wholesale loans shall be in view of attaining acquitable distribution of
credited as compliance of the wholesale lender alone: opportunities, income and wealth; a sustained increase in
Provided, finally, That allowable alternative modes of the amount of goods and services produced by the
compliance should directly target the agriculture, nation of the benefit of the people; and in expanding
fisheries and agrarian reform sector; productivity as a key raising the quality of life for all,
especially the underprivileged.
(e) Invest in shares of stock of the QUEDANCOR and the
PCIC; and Towards these ends, the State hereby encourages and
assists in the establishment of rural banking system
(f) Loans or investments in the activities identified under designed to make needed credit available and readily
the AMCFP as enumerated under Chapter 3 Credit accessible in the rural areas on reasonable terms.
Section 23 of Republic Act No. 8435 or the Agriculture and
Fisheries Modernization Act (AFMA). Section 3. In furtherance of this policy, the Monetary
Board of the Central Bank of the Philippines shall
Section 8. The alternative compliance enumerated in the formulate the necessary rules and regulations governing
preceding section shall also be subject to joint review by the establishment and operation of rural banks for the
the DA, the DAR and the BSP after three (3) years of the purpose of providing adequate credit facilities to farmers
implementation to determine whether the modes of and merchants, or to cooperatives of such farmers and
compliance directly target the agriculture, fisheries and merchants and in general, the people of the rural
agrarian reform sector. The Findings shall be submitted communities, and to supervise the operation of such
to Congress. banks.
Section 4. No rural bank shall be operated without a
ARTICLE III MISCELLANEOUS PROVISIONS Certificate of Authority from the Monetary Board of the
Bangko Sentral ng Pilipinas. Rural banks shall be
Section 9. Annual Reports. - The BSP shall furnish reports organized in the form of stock corporations. No less than
on the compliance with the mandatory credit allocation forty percent (40%) of the voting stocks of a rural bank
to the DA, the DAR and Congress on a yearly basis. shall be owned by citizens of the Philippines or
Section 10. Penalty Clause. - The BSP shall impose corporations or associations organized under the laws of
administrative sanctions and other penalties on the the Philippines at least sixty percent (60%) of whose
lending institutions for noncompliance with the capital is owned by such citizens. Non-Filipino citizens
provisions of this Act. Penalties on noncompliance shall may own, acquire or purchase up to sixty percent (60%) of
be computed at one-half of one percent (0.5%) of the voting stocks in a rural bank. The percentage of
noncompliance and under compliance and shall be foreign-owned voting stocks shall be determined by the
directed to the development of the agri-agra sector. citizenship of the individual or corporate stockholders of
Ninety percent(90%) of the penalties collected shall be the rural bank. Upon consultation with the rural banks in
allocated between the AGFP and PCIC according to the the area, duly established cooperatives and corporations
needs of the agri-agra sector as provided for in primarily organized to hold equities in rural banks may
implementing rules and regulations of this Act and the organize a rural bank and/or subscribe to the shares of
remaining ten percent (10%) shall be given to the BSP to stock of any rural bank: Provided, That a cooperative or
cover administrative expenses. corporation owning or controlling the whole or majority
of the voting stock of the rural bank shall be subject to
Section 11. Repealing Clause. - Presidential Decree 717, special examination and to such rules and regulations as
the second paragraph under Section 8 of Republic Act the Monetary Board may prescribe. If subscription of
No. 7900, otherwise known as High-Value Crops private shareholders to the capital stock of a rural bank
Development Act of 1995, and Section 9 of Republic Act cannot be secured or is not available, or insufficient to
No. 7721, otherwise known as liberalizing the Entry and meet the normal credit needs of the locality, the Land
Scope of Operations of Foreign Banks in the Philippines, Bank of the Philippines, the Development Bank of the
are all hereby repealed. Other laws, presidential decrees, Philippines, or any government-owned or -controlled
executive orders, rules and regulations, or parts thereof bank or financial institution, on representation of the said



private shareholders but subject to the investment or free patent lands pending the issuance of titles but
guidelines, policies and procedures of the bank or already approved, the provisions of any law or regulations
financial institution and upon approval of the Monetary to the contrary notwithstanding: Provided, That when the
Board of the Bangko Sentral ng Pilipinas, shall subscribe corresponding titles are issued, the same shall be
to the capital stock of such rural bank, which shall be paid delivered to the Register of Deeds of the province where
in full at the time of subscription, in an amount equal to such lands are situated for the annotation of the
the fully paid subscribed and unimpaired capital of the encumbrance: Provided, further, That in the case of lands
private stockholders or such amount as the Monetary pending homestead or free patent titles, copies of notices
Board may prescribe as may be necessary to promote for the presentation of the final proof shall also be
and expand rural economic development: Provided, furnished the creditor rural bank and, if the borrower
however, That such shares of stock subscribed by the applicants fail to present the final proof within thirty (30)
Land Bank of the Philippines, the Development Bank of days from date of notice, the creditor rural bank may do
the Philippines or any government-owned or -controlled so for them at their expense: Provided, furthermore, That
bank or financial institution may be sold at any time at the applicant for homestead or free patent has already
adjusted book value: Provided, finally, That in the sale of made improvements on the land and the loan applied for
shares of stock subscribed by the Land Bank of the is to be used for further development of the same or for
Philippines, the Development Bank of the Philippines or other productive economic activities: Provided, finally,
any government-owned or -controlled bank or financial That the appraisal and verification of the status of a land
institution, the registered stockholders shall have the is a full responsibility of the rural bank and any loan
right of preemption within one (1) year from the date of granted on any land which shall be found later to be
offer in proportion to their respective holdings, but in the within the forest zone shall be for the sole account of the
absence of such buyer, preference, however, shall be rural bank.
given to residents of the locality or province where the The foreclosure of mortgages covering loans granted by
rural bank is located. (as amended by RA No 10574) rural banks and executions of judgment thereon
Section 5. Non-Filipino citizens may become members of involving real properties levied upon by a sheriff shall be
the Board of Directors of a rural bank but their exempt from the publications in newspapers now
participation in the Board shall be limited to their required by law where the total amount of loan, excluding
proportionate share in the equity of the rural bank: interest due and unpaid, does not exceed One hundred
Provided, however, That at least one (1) independent thousand pesos (P100,000) or such amount as the
director shall be elected to the Board of Directors. Monetary Board may prescribe as may be warranted by
No director or officer of any rural bank shall, either prevailing economic conditions. It shall be sufficient
directly or indirectly, for himself or as the representative publication in such cases if the notices of foreclosure and
or agent of another, borrow any of the deposits or funds execution of judgment are posted in the most
of such banks, nor shall he become a guarantor, indorser, conspicuous area of the municipal building, the
or surety for loans from such bank to others, or in any municipal public market, the rural bank, the barangay
manner be an obligor for money borrowed from the bank hall, and the barangay public market, if any, where the
or loaned by it except with the written approval of the land mortgaged is situated during the period of sixty (60)
majority of the directors of the bank, excluding the days immediately preceding the public auction or
director concerned. Any such approval shall be entered execution of judgment. Proof of publication as required
upon the records of the corporation and a copy of such herein shall be accomplished by an affidavit of the sheriff
entry shall be transmitted forthwith to the appropriate or officer conducting the foreclosure sale or execution of
supervising department. The director/officer of the bank judgment and shall be attached with the records of the
who violates the provisions of this section shall be case: Provided, That when a homestead or free patent is
immediately dismissed from his office and shall be foreclosed, the homesteader or free patent holder, as well
penalized in accordance with Section 26 of this Act. as his heirs shall have the right to redeem the same
within one (1) year from the date of foreclosure in the case
The Monetary Board may regulate the amount of credit of land not covered by a Torrens Title or one (1) year from
accommodations that may be extended directly to the the date of the registration of the foreclosure in the case
directors, officers or stockholders of rural banks of of land covered by a Torrens Title: Provided, finally, That in
banking institutions. However, the outstanding credit any case, borrowers, especially those who are mere
accommodations which a rural bank may extend to each tenants, need only to secure their loans with the produce
of its stockholders owning two percent (2%) or more of corresponding to their share.
the subscribed capital stock, its directors, or officers shall
be limited to an amount equivalent to the respective A rural bank shall be allowed to foreclose lands
outstanding deposits and book value of the paid-in mortgaged to it including lands covered by Republic Act
capital contributions in the bank. (as amended by RA No No. 6657 (Comprehensive Agrarian Reform Law of 1988),
10574) as amended: Provided, That said lands shall be subject to
the retention limits provided under Republic Act No. 6657.
Section 6. Loans or advances extended by rural banks
organized and operated under this Act shall be primarily Rural banks which are not qualified to acquire or hold
for the purpose of meeting the normal credit needs of land in the Philippines shall be allowed to bid and take
farmers, fishermen or farm families owning or cultivating part in foreclosure sales of real property mortgaged to
land dedicated to agricultural production as well as the them, as well as to avail of enforcement and other
normal credit needs of cooperatives and merchants. proceedings, and accordingly to take possession of the
mortgaged property, for a period not exceeding five
Loans may be granted by rural banks on the security of (5)-years from actual possession: Provided, That in no
lands without Torrens Title where the owner of private event shall title to the property be transferred to such
property can show five (5) years or more of peaceful, rural bank. In case the rural bank is the winning bidder, it
continuous and uninterrupted possession in concept of shall, during the said five (5)-year period, transfer its rights
owner; or of portions of friar land estates or other lands to a qualified Philippine national, without prejudice to a
administered by the Bureau of Lands that are covered by borrower’s rights under applicable laws. Should a rural
sales contracts and the purchasers have paid at least five bank be not able to transfer such property within the five
(5) years installment thereon, without the necessity of (5)-year period, the rural bank shall be penalized one-half
prior approval and consent by the Director of Lands; or of (1/2) of one percent (1%) per annum of the price at which
portions of other estates under the administration of the the property was foreclosed until the rural bank is able to
Department of Agrarian Reform or other governmental transfer the property to a qualified Philippine national. (as
agency which are likewise covered by sales contracts and amended by RA No 10574)
the purchasers have paid at least five (5) years installment
thereon, without the necessity of prior approval and Section 7. With the view to ensuring the balanced rural
consent of the Department of Agrarian Reform or economic growth and expansion, rural banks may, within
corresponding governmental agency; or of homesteads limits and conditions fixed by the Monetary Board, devote



a portion of their loanable funds to meeting the normal Bank of the Philippines, the Development Bank of the
credit needs of small business enterprises: provided, That Philippines or any government-owned or –controlled
loans shall not exceed fifteen percent (15%) of the net bank or financial institution: Provided, That penalties
worth of a rural bank of such amount as the Monetary thereon are hereby warned except accrued interest on
Board may prescribe as may be warranted by prevailing arrearages: Provided, further, That rural banks that prefer
economic conditions, and of essential enterprises or to settle their arrearages under a plan or payment or a
industries, other than those which are strictly agricultural combination of both plan of payment and conversion
in nature. may do so in accordance with existing regulations and
Section 8. To provide supplemental capital to any rural provisions of this Act: Provided, furthermore, That rural
bank until it has accumulated enough capital of its own banks shall match these preferred stocks with private
or stimulate private investments in rural banks, the Land equity in equal annual installments over a period of
Bank of the Philippines, the Development Bank of the fifteen (15) years to begin three (3) years after conversion:
Philippines or any government-owned or -controlled Provided, finally, That the Central Bank, the Land Bank of
bank or financial institution shall subscribe within thirty the Philippines, the Development Bank of the Philippines
(30) days to the capital stock of any rural bank from time and any government-owned and –controlled bank or
to time in an amount equal to the total equity investment financial institution shall continue to rediscount subject
of the private shareholders which shall be paid in full at to their respective programs, policies and guidelines
the time of the subscription or such amount as may be against papers evidencing a loan granted by a rural bank
necessary to promote and expand rural economic in order to achieve the declared policy and promote the
development: Provided, however, That shares of stock objectives of this Act.
issued to the Land Bank of the Philippines, the Section 9. The Land Bank of the Philippines, the
Development Bank of the Philippines or any Development Bank of the Philippines, or any
government-owned or -controlled bank or financial government-owned or –controlled bank or financial
institution, may, pursuant to this section, at any time, be institution may obtain from any source as may be
bought at adjusted book value. authorized under existing laws and regulations such
Stocks held by the Land Bank of the Philippines, the amount as it may require for the purpose of subscribing
Development Bank of the Philippines or by any to the shares of stock of rural bank: as provided in Section
government-owned or -controlled bank or financial 13 of this Act.
institution, under the terms of this section, shall be made Section 10. Stock certificates shall be issued to represent
preferred only as to assets upon liquidation and without the contributions to capital stock of the rural bank by the
the power to vote and shall share in dividend Government through the Land Bank of the Philippines,
distributions from the date of issuance in an amount the Development Bank of the Philippines or through any
based on the lending benchmark approved by the government-owned or –controlled bank or financial
Bangko Sentral ng Pilipinas plus the prevailing non-prime institutions, and by qualified persons under such terms
spread of the government financial institution: Provided, and conditions as the Monetary Board mat prescribe. The
however, That if such stock of the Land Bank of the powers of the Monetary Board over rural banks shall
Philippines, the Development Bank of the Philippines or extend to prescribing the amount, value and class of
any government-owned or -controlled bank or financial stock issued by any rural bank, organized under this Act.
institution is sold to private shareholders, the same may Section 11. The power to supervise the operation of any
be converted into common stock of the class provided for rural bank by the Monetary Board as herein indicated
in Section 10 hereof: Provided, further, That pending the shall consists in placing limits to the maximum credit
amendment of the Articles of Incorporation of the rural allowed to any individual borrower; in prescribing the
bank, if necessary, for the purpose of reflecting the interest rate; in determining the loan period and loan
conversion into common stock of preferred stock sold to procedures; in indicating the manner in which technical
private shareholders, the transfer shall be recorded by the assistance shall be extended to rural banks; in imposing a
rural bank in the stock and transfer book and such uniform accounting system and manner of keeping the
shareholders shall thereafter enjoy all the rights and accounts and records of rural banks; in instituting
privileges of common stockholders. The preferred stocks periodic surveys of loan and lending procedures, audits,
so transferred shall be surrendered and cancelled and the test-check of cash and other transactions of the rural
corresponding common stocks shall be issued. (as banks; and, in general in supervising the business
amended by RA No 10574) operations of the rural banks.
The corporate secretary of the rural bank shall submit to The Central bank shall have the power to enforce the
the Central Bank and the Securities and Exchange laws, orders, instructions, rules and regulations
Commission a report on every transfer of preferred stock promulgated by the Monetary Board applicable to rural
to private shareholders, and such report received by the banks; to require rural banks, their directors, officers and
Securities and Exchange Commission shall form part of agents to conduct and manage the affairs of the rural
the corporate records of rural bank. When all the banks in a lawful and orderly manner, and, upon proof
prepared shares of stock of a rural bank have been sold to that the rural bank of its Board of Directors, or officers are
private shareholders, the Articles of Incorporation of the conducting and managing the affairs of the banking in a
rural bank shall be amended to reflect the conversion of manner contrary to the laws, orders, instructions, rules
the preferred shares of stock into common stock. For this and regulations promulgated by the Monetary Board or
purpose, the President, the corporate secretary, and a in a manner substantially prejudicial in the interest of the
majority of the Board of Directors, shall be filed with the Government, depositors or creditors, to take over the
Securities and Exchange Commission, which shall attach management of such bank when specifically authorized
the same to the original Articles of Incorporation on file to do so by the Monetary Board after due hearing process
with said office. until a new board of directors and officers are elected and
The Securities and Exchange Commission shall not qualified without prejudice to the prosecution of the
register and amended Articles of Incorporation unless persons for such violations under the provisions of
accompanied by the Certificate of Authority required Sections 32, 33 and 34 of Republic Act No. 265, as
under Section 9 of Republic Act No. 337, as amended. amended.
All supervised past due and restructured past due loans, The management of the rural bank by the Central Bank
including those covered under existing rehabilitation shall be without expense to the rural bank, except such as
programs of the Central Bank, and fifty percent (50%) of is actually necessary for its operation, pending the
non-supervised past due and restructured past due loans election and qualification of a new board of directors and
including accrued interest thereon on rural banks officers to take place of those responsible for the
organized under Republic Act No. 720, as amended, as of violations or acts contrary to the interest of the
December 31, 1986, shall be converted into preferred Government, depositors or creditors.
stocks, of the rural bank and issued in favor of the Land



The director and the examiners of the department of the (10) years, with concessional rates of interest, against
Central Bank charged with the supervision of rural banks security which may be offered by any stockholders or
are hereby authorized to administer oaths to any director, stockholders of the rural bank: Provided:
officer or employee of any rural bank or to any voluntary a. That the Monetary Board is convinced that the
witness and to compel the presentation of all books, resources of the rural bank are inadequate to meet the
documents, papers or records necessary in his or their legitimate credit requirements of the locality wherein the
judgment to ascertain the facts relative to the true rural bank is established.;
condition of any rural bank or to any loan
b. That there is a dearth of private capital in the said
Section 12. In addition to the operations especially locality; and
authorized in this Act, any rural bank may:
c. That it is not possible for the stockholders of the rural
a. Accept saving and time deposit; bank to increase the paid-up capital thereof.
b. Open current or checking accounts, provided the rural Section 15. All rural banks created and organized under
bank has net assets of at least Five million (P5,000,000) the provisions of this Act shall be exempt from the
subject to such guidelines as may be established by the payment of all taxes, fees and charges of whatever nature
Monetary Board: and description, except the corporate income tax and
c. Act as correspondent for other financial institutions; local taxes, fees and charges, for a period of five (5) years
d. Act as a collection agent; from the date of commencement of operations.
e. Act as official depositary of municipal, city or provincial All rural banks in operation as of the date of approval of
funds in the municipality, city or province where it is this Act shall be exempt from the payment of all taxes,
located, subject to such guidelines as may be established fees and charges of whatsoever nature and description,
by the Monetary Board; except the corporate income tax and local taxes, fees and
charges, for a period of five (5) years from the approval of
f. Rediscount paper with the Philippine National Bank, this Act.
the Land Bank of the Philippines, the Development Bank
of the Philippines, or any other banking institution, Section 16. In an emergency or when a financial crisis is
including its branches and agencies. Said institution shall imminent, the Central Bank may give a loan to any rural
specify the nature of paper deemed acceptable for bank against assets of the rural bank which may be
rediscount, as well as the rediscount rate to be charged considered acceptable by a concurrent vote of at least
by any of these institutions; four (4) members of the Monetary Board.
g. Offer other banking service as provided in Section 72 of In normal times the Central bank may rediscount against

Republic Act No. 337, as amended, and paper evidencing a loan granted by a rural bank to any of
its customers which can be liquefied for a period of three
h. Extend financial assistance to public and private hundred sixty (360) days: Provided, however, That for the
employees in accordance with the provisions of Section 5 purpose of implementing a nationwide program of
of Republic Act No. 3779, as amended. agricultural and industrial development, rural banks are
With written permission of the Monetary Board of the hereby authorized, under such terms and conditions as
Central bank, any rural bank may act as trustee over the Central bank shall prescribe, to borrow, on a medium
estates or properties of farmer and merchants. – or long-term basis, funds that the Central Bank or any
other government financing institution shall borrow from
Nothing in this section shall be construed as precluding a the Development Bank of the Philippines or other
rural bank from performing, with prior approval of the international or foreign-lending institutions for the
Monetary Board, all the services authorized and specific purpose of financing the abovestated agricultural
mortgage banks, of for commercial banks, under an and industrial program. Repayment of loans obtained by
expanded banking authority as provided in Section 21-B the Central Bank of the Philippines or any other
of the same Act. government financing institutions from said
Section 13. Subject to such guidelines as may be foreign-lending institutions under this section shall be
established by the Monetary, rural banks may invest in guaranteed by the Republic of the Philippines.
equities of the allied undertakings are hereinafter Section 17. Deposits of rural banks with
enumerated: Provided, That: (a) the total investment in government-owned or –controlled financial institutions
equities shall not exceed twenty- five percent (25%) of the like the Land Bank of the Philippines, the Development
net worth of the rural bank; (b) the equity investment in Bank of the Philippines, and the Philippine national Bank
any single enterprise shall be limited to fifteen percent are exempted from the Single Borrower’s Limit imposed
(15%) of the net worth of the rural bank; and (c) the equity by the General Banking Act.
investment of the rural bank in any single enterprise shall
remain a minority holding in that enterprise: Provided, In areas where there are no government banks, rural
further, That equity investment shall not be permitted in banks may deposit in private banks more than the
non-related activities. amount prescribed by the Single Borrower’s Limit subject
to Monetary Board regulations.
Allied undertaking shall include:
Section 18. To encourage consolidation and mergers of
a. banks, financial institutions and non-bank financial rural banks, if there are five (5) or more rural banks within
intermediaries; the region that merge and consolidate within three (3)
b. Warehousing and other post-harvested facilities; years from the enactment of this Act, the merged or
consolidated entity will be given the following incentives
c. Fertilizer and agricultural chemical and pesticides for a period of seven (7) years:
distribution;
a. Its deposit liabilities shall be subjected to only one-third
d. Farm equipment distribution; (1/3) of reserves normally required for rural banks;
e. Trucking an transportation of agricultural products; b. Its reserve requirement can all be maintained under
f. Marketing and agricultural products; interest-bearing government securities but kept
g. Leasing; and Other undertakings as may be unencumbered with government financial institutions or
determined by the Monetary Board. the Central Bank; and
Section 14. The Land Bank of the Philippines, the c. It shall have unrestricted branching right within the
Development Bank of the Philippines or any region, free from any assessment or surcharge required
government-owned or –controlled bank or financial in setting up a branch but under coordination with the
institution shall, within sixty (60) days of certification of Central bank which will have to assess that there are
the Monetary Board, which shall be final, extend to a rural qualified personnel, control and procedures to operate
bank a loan or loans from time to time repayable in ten the branch.


Section 19. The Central Bank of the Philippines shall 1. Make fake entries in any bank report or statement
extend technical assistance to any rural bank in the thereby affecting the financial interest of or causing
process of organization or during the course of operations damage to, the bank or any person;
whenever it is requested to do so or whenever the 2. Without order of a court of competent jurisdiction,
Monetary Board deems it necessary to preserve, protect disclose any information relative to the funds or
and promote the objectives of this Act: Provided, properties in the custody of the bank belonging to private
however, That said assistance shall be without cost or individuals, corporations, or any other entity;
obligation on the part of the rural bank.
3. Accept gifts, fees or commission or any other form of
Section 20. Any city or municipal trial court in his remuneration in connection with the approval of a loan
capacity as notary public ex officio shall administer the from said bank; or
oath to or acknowledgement the instruments of any rural
bank and to borrowers or mortgagors, fee from all 4. Overvalue or aid in overvaluing any security for the
charges, fees and documentary stamp tax, collectible purpose of influencing in any way the action of the bank
under existing laws, relative to any loan or transaction not on any loan; or
exceeding Fifty thousand pesos (P50,000), or such 5. Appear and sign as guarantor, indorser, or surety for
amount as the Secretary of Finance, upon loans granted; or
recommendation of the Monetary Board may prescribe
as may be necessary to promote and expand the rural 6. Violate any of the provisions of this Act.
economy. b. Any applicant for a loan from, or borrower of a rural
Section 21. Any Register of Deeds shall accept from any bank who shall:
rural bank and its borrowers and mortgagors for 1. Misuse, misapply, or divert the proceeds of the loan
registration, free from all charges, fees and documentary obtained by him from its declared purpose; or
stamp tax, collectible under existing laws, any instrument,
whether voluntary or involuntary, relating to loans or 2. Fraudulently overvalue property offered as security for
transaction extended by a rural bank in an amount not loan from said bank; or
exceeding Fifty thousand pesos (P50,000): Provided, 3. Give out or furnish false misrepresentation of material
however, That charges, if any, shall be collectible on the facts for the purpose of obtaining, renewing, or increasing
amount in excess of Fifty thousand pesos (P50,000); and a loan or extending the period thereof; or
that in instruments related to assignments of several 4. Attempt to defraud the said bank in the event of court
mortgage consolidated in a single deed, if any, shall be action to recover a loan; or
levied only on the amount in excess of Fifty thousand
pesos (P50,000) of the consideration in the assignments 5. Offer any officer, employee, or agent of a rural bank as a
of each mortgage, of such amount as the Secretary of gift, fee, commission, or other form of compensation in
Finance, upon recommendation of the Monetary Board order to influence such bank personality in approving an
may prescribe as may be necessary to promote and application; or
expand the rural economy. 6. Dispose or encumber the property or the crops offered
Section 22. Any rural bank organized under this Act may, as security for the loan.
pursuant to regulations promulgated for the purpose by c. Any examiner, or officer or employee of the Central
the Monetary Board, be required to contribute to the Bank of the Philippines or other department, bureau,
Central Bank an annual fee to help defray the cost of office, branch or agency of the Government who is
maintaining the appropriate supervising department assigned to examine, supervise, assist or render technical
within the central bank in an amount to be determined services to rural banks and who shall connive or aid in the
by the Monetary Board but in no case to exceed commission of the same.
one-fortieth of one percent (1/40 of 1%) of its average total
assets during the preceding year, as shown on its Section 27. Any municipal trial court judge or register of
end-of-month balance sheets, after deducting its cash on deeds who shall demand or accept, directly or indirectly,
hand and amounts due from banks, including the Central any gift, fee, commission or other form of compensation
Bank. in connection with the service, or the registration of
documents required to be as provided in Section 20 and
Section 23. Every individual acting as officer or employee by said register of deeds as proposed in Section 21 of this
of a rural bank and handling funds or securities Act, shall be punished by One thousand pesos (P1,000) or
amounting to Five thousand pesos (P5,000) or more than by imprisonment for not more than one (1) year, or both,
one (1) year, shall be covered by an adequate bond as at the discretion of the court.
determined by the Monetary Board; and the bylaws of the
rural bank may also provide for the bonding of other Section 28. Any bank not organized under this Act and
employees or officers of rural banks. any person, association, or corporation doing the business
of banking, not authorized under this Act which shall use
Section 24. For the purpose of carrying out the objectives the words "Rural Bank" as part of the name or title of such
of this Act, the Central Bank is authorized to require the bank or of such person, association, or corporations, shall
services and facilities of any department or be punished by a fine of not less than Fifty pesos (P50) for
instrumentality of the Government or any officer or each day during which said words are so used.
employee of any such department or government
instrumentality. Section 29. The Monetary Board of the Central Bank shall
submit a report to the Congress of the Philippines as the
Section 25. Rural banks organized and operated under end of each calendar year of all the rules and regulations
the provisions of this Act shall act as agents of the promulgated by it in accordance with the provisions of
Philippine National Bank, the Land Bank of the this Act, as well as its other actuations in connection with
Philippines and the Development Bank of the Philippines rural banks, together with an explanation of its reasons
in places where these banks have no offices, subject to therefor.
accreditation guidelines.
Section 30. If any provision or section of this Act or the
Section 26. Without prejudice to any prosecution under application thereof to any person or circumstances is held
any law which may have been violated a fine of not more invalid, the other provisions or sections of this Act, and
than ten thousand pesos (P10,000) or imprisonment of the application of such provision or section to other
not less than six (6) months but not more than ten (10) persons or circumstances, shall not be affected thereby.
years, or both, at the discretion of the court, shall imposed
upon: Section 31. Republic Act No. _____, as amended, is hereby
repealed. The provisions of Republic Act No. 265, as
a. Any officer, employee, or agent of a rural bank who amended, and Republic Act No. 337, as amended, insofar
shall: as they are applicable and not in conflict with any
provision of this Act, are hereby made a part of this Act.



Section 32. This Act shall take effect upon its approval. (ii) For Foreign Bank Branches – Foreign banks that shall
be authorized to establish branches pursuant to Section
2(hi) of this Act shah permanently assign capital of an
RA No 7721 | An Act Liberalizing the amount not less than the minimum capital required for
domestic banks of the same category. The permanently
Entry and Scope of Foreign Banks in the assigned capital shall be inwardly remitted and converted
Philippines and for other purposes into Philippine currency.
As amended by RA No 10641 The foreign bank branch may open up to five (5)
sub-branches as may be approved by the Monetary
May 18, 1994 Board. Locally incorporated subsidiaries of foreign banks
pursuant to Section 2(h) of this Act shall have the same
REPUBLIC ACT NO. 7721 branching privileges as domestic banks of the same
category. (as amended by RA No 10641)
AN ACT LIBERALIZING THE ENTRY AND SCOPE OF
OPERATIONS OF FOREIGN BANKS IN THE PHILIPPINES SECTION 5. Head Office Guarantee. — The head office of
AND FOR OTHER PURPOSES foreign bank branches shall guarantee prompt payment
of all liabilities of its Philippine branches.
SECTION 1. Declaration of Policy. — The State shall
develop a self-reliant and independent national economy SECTION 6. Entrants under Section 2 (iii). — Foreign
effectively controlled by Filipinos and encourage, banks shall be allowed entry under Section 2 (iii) within
promote, and maintain a stable, competitive, efficient, five (5) years from the effectivity of this Act. During this
and dynamic banking and financial system that will period, six (6) new foreign banks shall be allowed entry
stimulate economic growth, attract foreign investments, under Section 2(iii) upon the approval of the Monetary
provide a wider variety of financial services to Philippine Board. An additional four (4) foreign banks may be
enterprises, households and individuals, strengthen allowed entry on recommendation of the Monetary
linkages with global financial centers, enhance the Board, subject to compliance with Sections 2, 3, 4, and 5
country's competitiveness in the international market of this Act, upon approval of the President as the national
and serve as a channel for the flow of funds and interest may require. (as repealed by RA No 10641)
investments into the economy to promote SECTION 7. Board of Directors. — Non-Filipino citizens
industrialization. may become members of the Board of Directors of a
Pursuant to this policy, the Philippine banking and bank to the extent of the foreign participation in the
financial system is hereby liberalized to create a more equity of said bank.
competitive environment and encourage greater foreign SECTION 8. Equal Treatment. — Foreign banks
participation through increase in ownership in domestic authorized to operate under Section 2 of this Act, shall
banks by foreign banks and the entry of new foreign bank perform the same functions, enjoy the same privileges,
branches. and be subject to the same limitations imposed upon a
In allowing increased foreign participation in the financial Philippine bank of the same category. The single
system, it shall be the policy of the State that the financial borrower’s limit of a foreign bank branch shall be aligned
system shall remain effectively controlled by Filipinos. with that of a domestic bank.
SECTION 2. Modes of Entry. — The Monetary Board may The foreign banks shall guarantee the observance of the
authorize foreign banks to operate in the Philippine rights of their employees under the Constitution.
banking system through any one of the following" modes Any right, privilege or incentive granted to foreign banks
of entry: (i) by acquiring, purchasing or owning up to one or their subsidiaries or affiliates under this Act, shall be
hundred percent (100%) of the voting stock of an existing equally enjoyed by and extended under the same
bank; (ii) by investing in up to one hundred percent conditions to Philippine banks. (as amended by RA No
(100%) of the voting stockof a new banking subsidiary 10641)
incorporated under the laws of the Philippines; or (iii) by SECTION 9. Participation in Foreclosure
establishing branches with full banking authority. (as Proceedings.—Foreign banks which are authorized to do
amended by RA No 10641) banking business in the Philippines through any of the
SECTION 3. Guidelines for Approval. — In approving entry modes of entry under Section 2 hereof shall be allowed to
applications of foreign banks, the Monetary Board shall: (i) bid and take part in foreclosure sales of real property
ensure geographic representation and complementation; mortgaged to them, as well as to avail of enforcement
(ii) consider strategic trade and investment relationships and other proceedings, and accordingly take possession
between the Philippines and the country of incorporation of the mortgaged property, for a period not exceeding
of the foreign bank; (iii) study the demonstrated capacity, five (5) years from actual possession: Provided, That in no
global reputation for financial innovations and stability in event shall title to the property be transferred to such
a competitive environment of the applicant; (iv) see to it foreign bank. In case said bank is the winning bidder, it
that reciprocity rights are enjoyed by Philippine banks in shall, during the said five (5)-year period, transfer its rights
the applicant’s country; and (v) consider willingness to to a qualified Philippine national, without prejudice to a
fully share their technology. borrower’s rights under applicable laws. Should the bank
Only established, reputable and financially sound foreign fail to transfer such property within the five (5)-year
banks shall be allowed entry in accordance with Section 2 period, it shall be penalized one half (1/2) of one percent
of this Act. The foreign bank applicant must be (1%) per annum of the price at which the property was
widely-owned and publicly-listed in its country of origin, foreclosed until it is able to transfer the property to a
unless the foreign bank applicant is owned and qualified Philippine national. (as amended by RA No
controlled by the government of its country of origin. 10641)
In the exercise of this authority, the Monetary Board shall RA No 10641 Section 7. Transitory Provisions. –Foreign
adopt such measures as may be necessary to ensure that banks which are already authorized to do banking
the control of at least sixty percent(60%) of the resources business in the Philippines through any of the modes of
or assets of the entire banking system is held by domestic entry under Section 2 hereof may apply to change their
banks which are majority-owned by Filipinos. (as original mode of entry.
amended by RA No 10641)
Foreign banks operating through branches in the
SECTION 4. Capital Requirements. — (i) For Locally
Incorporated Subsidiaries – The minimum capital Philippines upon the effectivity of this Act shall retain
required for locally incorporated subsidiaries of foreign their original privilege upon entry to establish a limited
banks shall be equal to that prescribed by the Monetary number of sub-branches. However, the previous
Board for domestic banks of the same category.



restriction on the locations of such additional branches is PROVIDING INCENTIVES AND BENEFITS THEREFOR,
hereby lifted. AND FOR OTHER PURPOSES.
The existing Philippine branches of foreign banks shall Be it enacted by the Senate and House of
Representatives of the Philippines in Congress
comply within one (1) year from the effectivity of this Act
assembled.
with the minimum capital requirements as prescribed
under Section 4(ii) of this Act, unless otherwise extended
by the Monetary Board.
PRELIMINARY PROVISIONS
SECTION 10. Transitory Provisions. — Foreign banks
operating through branches in the Philippines upon the Section 1. Short Title – This Act shall be known as the
effectivity of this Act, shall be eligible for the privilege of "Barangay Micro Business Enterprises (BMBE's) Act of
establishing up to six (6) additional branches under the 2002."
same terms and conditions required by Section 4 (n) Section 2. Declaration of Policy – It is hereby declared to
hereof: Provided, That for any branch additional to what is be the policy of the State to hasten the country's
existing at the time of the effectivity of this Act, the economic development by encouraging the formation
prescribed permanently assigned capital shall be and growth of barangay micro business enterprises
complied with immediately: Provided, further, That a which effectively serve as seedbeds of Filipino
foreign bank may open three (3) branches in the location entrepreneurial talents, and intergranting those in the
of its choice and the next three (3) branches in locations informal sector with the mainstream economy, through
designated by the Monetary Board to insure balanced the rationalization of bureaucratic restrictions, the active
economic development in all the regions. granting of incentives and benefits to generate
The existing Philippine branches of foreign banks shall be much-needed employment and alleviate poverty.
given one-and-a-half (1 1/2) years from the effectivity of Section 3. Definition of Terms – As used in this Act, the
this Act to comply with the minimum capital following terms shall mean:
requirements as prescribed under Section 4 (ii) of this Act. (a) "Barangay Micro Business Enterprise," hereinafter
SECTION 11. Separability Clause. — If any provision of this referred to as BMBE, refers to any business entity or
Act is declared unconstitutional, the same shall not affect enterprise engaged in the production, processing or
the validity of the other provisions not affected thereby. manufacturing of products or commodities, including
SECTION 12. Applicability of Other Banking Laws. — The agro-processing, trading and services, whose total assets
provisions of Republic Act No. 7653, otherwise known as including those arising from loans but exclusive of the
the New Central Bank Act and the provisions of Republic land on which the particular business entity's office, plant
Act No. 8791, otherwise known as The General Banking and equipment are situated, shall not be more than
Law of 2000′, insofar as they are applicable and not in Three Million Pesos (P3,000,000.00) The Above definition
conflict with any provision of this Act, shall apply to banks shall be subjected to review and upward adjustment by
authorized pursuant to this Act. (as amended by RA No the SMED Council, as mandated under Republic Act No.
10641) 6977, as amended by Republic Act No. 8289.
SECTION 13. Rule-Making Powers of the Monetary Board For the purpose of this Act, "service" shall exclude those
of the Bangko Sentral ng Pilipinas and Compliance rendered by any one, who is duly licensed government
Reports. – The Monetary Board is hereby authorized to after having passed a government licensure examination,
issue such rules and regulations as may be needed to in connection with the exercise of one's profession.
implement "the provisions of this Act. On or before May (b) "Certificate of Authority" is the certificate issued
30 of each year, the Monetary Board shall file a written granting the authority to the registered BMBE to operate
report to Congress and its respective Banks Committees, and be entitled to the benefits and privileges accorded
on the developments in the implementation of this Act. thereto.
The implementing rules and regulations of this Act shall (c) "Assets" refers to all kinds of properties, real or
be published in at least two (2) newspapers of general personal, owned by the BMBE and used for the conduct
circulation. (as amended by RA No 10641) of its business as defined by the SMED Council: Provided,
SECTION 14. Amendment and Repeal of Inconsistent That for the purpose of exemption from taxes and fees
Laws. — Sections 11, 12, 12-A, 12-B, 13, 14-A, 21-B, and 68 of under this Act, this term shall mean all kinds of
Republic Act No. 337, as amended, otherwise known as properties, real or personal, owned and/or used by the
the General Banking Act; Sections 4 and 5 of Republic Act BMBE for the conduct of its business as defined by the
No. 7353, otherwise known as the Rural Banks Act; SMED Council.
Sections 4 and 14 of Republic Act No. 3779, as amended, (d) "Registration" refers to the inclusion of BMBE in the
otherwise known as the Savings and Loan Association BMBE Registry of a city or municipality.
Act; and Section 4 of Republic Act No. 4093, as amended,
otherwise known as the Private Development Banks Act (e) "Financing" refers to all borrowings of the BMBE from
insofar as they are inconsistent with this Act, are hereby all sources after registration.
repealed or modified accordingly.
SECTION 15. Effectivity Clause. — This Act shall take effect REGISTRATION AND OPERATION OF BMBE
fifteen (15) days following its publication in the Official
Gazette or in two (2) national newspapers of general Section 4. Registration and Fees - The Office of the
circulation. Treasurer of each city or municipality shall register the
BMBE's and issue a Certificate of Authority to enable the
Approved: May 18, 1994
BMBE to avail of the benefits under this Act. Any such
Published in Malaya and the Philippine Times Journal on applications shall be processed within fifteen (15) working
May 21, 1994. days upon submission of complete documents.
Otherwise, the BMBEs shall be deemed registered. The
RA No 9178 | Barangay Micro Business Municipal or City Mayor may appoint a BMBE
Registration Officer who shall be under the Office of the
Enterprises (BMBE's) Act of 2002 Treasurer. Local government units (LGU's) are
encouraged to establish a One-Stop-business
Registration Center to handle the efficient registration
November 13, 2002 and processing of permits/licenses of BMBEs. Likewise,
AN ACT TO PROMOTE THE ESTABLISHMENT OF LGUs shall make a periodic evaluation of the BMBE's
BARANGAY MICRO BUSINESS ENTERPRISES (BMBEs), financial status for monitoring and reporting purposes.


The LGUs shall issue the Certificate of Authority promptly The BSP shall formulate the rules for the implementation
and free of charge. However, to defray the administrative of this provision and shall likewise establish incentive
costs of registering and monitoring the BMBEs, the LGUs programs to encourage and improve credit delivery to
may charge a fee renewal. the BMBEs.
The Certificate of Authority shall be effective for a period Section 10. Technology Transfer, Production and
of two (2) years, renewable for a period of two (2) years for Management Training, and marketing Assistance – A
every renewal. BMBE Development Fund shall be set up with an
As much as possible, BMBEs shall be subject to minimal endowment of Three Hundred Million pesos
bureaucratic requirements and reasonable fees and (P300,000,000.00) from the Philippine Amusement and
charges. Gaming Corporation (PAGCOR) and shall be administered
by the SMED Council.
Section 5. Who are Eligible to Register – Any person,
natural or juridical, or cooperative, or association, having The Department of Trade and Industry (DTI), the
the qualifications as defined in Section 3(a) hereof may Department of Science and Technology (DOST), the
apply for registration as BMBE. university of the Philippines Institute for Small Scale
Industries (UP ISSI), Cooperative Development Authority
Section 6. Transfer of Ownership - The BMBE shall report (CDA), Technical Education and Skills Development
to the city or municipality of any changer in the status of Authority (TESDA), and Technology and Livelihood
its ownership structure, and shall surrender the original Resource Center (TLRC) may avail of the said Fund for
copy of the BMBE Certificate of Authority for notation of technology transfer, production and management
the transfer. training and marketing assistance to BMBEs.
The DTI, in coordination with the private sector and
INCENTIVES AND BENEFITS non-government organization (NGOs), shall explore the
possibilities of linking or matching-up BMBEs with small,
Section 7. Exemption from Taxes and Fees – All BMBEs medium and large enterprises and likewise establish
shall be exempt from tax for income arising from the incentives therefor.
operations of the enterprise.
The DTI, in behalf of the DOST, UP ISSI, CDA. TESDA and
The LGUs are encouraged either to reduce the amount of TLRC shall be required to furnish the appropriate
local taxes, fees and charges imposed or to exempt Committees of both Houses of Congress a yearly report
BMBEs from local taxes, fees and charges. on the development and accomplishments of their
Section 8. Exemption from the Coverage of the projects and programs in relation to technology transfer,
Minimum Wage Law – The BMBEs shall be exempt from production and management training and marketing
the coverage of the Minimum Wage Law: Provided, That assistance extended to BMBEs.
all employees covered under this Act shall be entitled to Section 11. Trade and Investment Promotions – The data
the same benefits given to any regular employee such as gathered from business registration shall be made
social security and healthcare benefits. accessible to and shall be utilized by private sector
Section 9. Credit Delivery – upon the approval of this Act, organizations and non-government organizations for
the land Bank of the Philippines (LBP), the Development purposes of business matching, trade and investment
Bank of the Philippines (DBP), the Small Business promotion.
Guarantee and Finance Corporation (SBGFC), and the
People's Credit and Finance Corporation (PCFC) shall set
up a special credit window that will service the financing INFORMATION DISSEMINATION
needs of BMBEs registered under this Act consistent with Section 12. Information Dissemination - The Philippine
the Banko Sentral ng Pilipinas (BSP) policies; rules and Information Agency (PIA), in accordance with the
regulations. The Government Service Insurance System Department of Labor and Employment (DOLE), the DILG
(GSIS) and Social Security System (SSS) shall likewise set and the DTI, shall ensure the proper and adequate
up a special credit window that will serve the financing information dissemination of the contents and benefits of
needs of their respective members who wish to establish this Act to the general public especially to its intended
a BMBE. The concerned financial institutions (FIs) beneficiaries specifically in the barangay level.
encouraged to wholesale the funds to accredited private
financial institutions including community-based
organizations such as credit, cooperatives, PENALTY
non-government organizations (NGOs) and people's
organizations, which will in turn, directly provide credit Section 13. Penalty - Any person who shall willfully
support to BMBEs. violates any provision of this Act or who shall in any
manner commit any act to defeat any provisions of this
All loans from whatever sources granted to BMBEs under Act shall, upon conviction, be punished by a fine of not
this Act shall be considered as part of alternative less than twenty-five Thousand Pesos (P25,000.00) but
compliance to Presidential Decree no, 717,, otherwise not more than Fifty Thousand Pesos (P50,000.00) and
known as the Agri-Agra Law, or to Republic Act. No. 6977, suffer imprisonment of not less than six (6) months but
known as the Magna Carta for Small and Medium not more than two (2) years.
Enterprises, as amended. For purposes of compliance
with presidential Decree no. 717 and Republic Act No. In case of non-compliance with the provisions of Section
6977, as amended, loans granted to BMBEs under this Act 9 of this Act, the BSP shall impose administrative
shall be computed at twice the amount of the face value sanctions and other penalties on the concerned
of the loans. government financial institutions, including a fine of not
less than Five Hundred Thousand Pesos (P500,000.00)
To minimize the risks in lending to the BMBEs, the SBGFC
and the Quedan and Rural Credit Guarantee Corporation
(QUEDANCOR) under the Department of Agriculture, in MISCELLANEOUS PROVISIONS
case of agribusiness activities, shall set up a special
guarantee window to provide the necessary credit Section 14. Annual Report – The DILG, DTI, and BSP shall
guarantee to BMBEs under their respective guarantee submit an annual report to the Congress on the status of
programs. the implementation of this Act.
The LBP, DBP. PCFC, SBGFC, SSS, GSIS, and QUEDANCOR Section 15. Implementing Rules and Regulations – The
shall annually report to the appropriate Committee of Secretary of the Department of Trade and Industry, in
Both Houses of Congress on the status of the consultation with the Secretaries of the DILG, DOF, and
implementation of this provision. the BSP Governor shall formulate the necessary ruled and
regulations to implement the provisions of this Act within


ninety (90) days after its approval. The rules and Monetary Board and register with the Securities and
regulations issued pursuant to this section shall take Exchange Commission (SEC). The application for a
effect fifteen (15) days after its publication in a newspaper license, signed by a majority of the incorporators and
of general circulation. verified by one of the trustees, shall include:
Section 16. Separably Clause - If any provision or part a) the proposed articles of incorporation and bylaws
hereof, is held invalid or unconstitutional, the remainder together with names and addresses of the incorporators,
of the law or the provision not otherwise affected shall trustees and officers, with a statement of their character,
remain valid and subsisting. experience and general fitness to engage in the
Section 17. Repealing Clause – Existing laws, presidential non-stock savings and loan business;
decrees, executive orders, proclamations or b) an itemized statement of the estimated receipts and
administrative regulations that are inconsistent with the expenditures of the proposed Association for the first
provisions of this Act are hereby amended, modified, year;
superseded or repealed accordingly. c) a filing fee in such amount as may be determined by
Section 18. Effectivity – This Act shall take effect fifteen the Monetary Board; and
(15) days after its publication in the Office Gazette or in at d) such other information as the Monetary Board may
least two (2) newspaper of general circulation. require.
RA No 8367 | Revised Non-Stock Savings The SEC shall not register the articles of incorporation
and bylaws of a proposed Association unless the
and Loan Association Act of 1997 application is accompanied by a certificate of the
Monetary Board approving the same. The Monetary
Board may deny the application to organize an
October 21, 1997 Association under this Act if it finds that the Association is
AN ACT PROVIDING FOR THE REGULATION OF THE being organized for any purpose other than to engage in
ORGANIZATION AND OPERATION OF NON-STOCK the business of a legitimate non-stock savings and loan
SAVINGS AND LOAN ASSOCIATIONS association or that the Association's financial program is
unsound, or that the proposed members are adequately
Be it enacted by the Senate and House of served by one or more existing Associations.
Representatives of the Philippines in Congress
assembled:: The Association shall confine its membership to a
well-defined group of persons and shall not transact
Section 1. Title. – The short title of this Act shall be the business with the general public. A "well-defined group"
"Revised Non-Stock Savings and Loan Association Act shall be defined by the Monetary Board, and shall consist
of 1997". of, but not be limited to, any of the following:
Section 2. Declaration of policy. – It is hereby declared 1) employees, officers, and directors of one company,
the policy of the State to: including member-retirees;
a) encourage industry, frugality and the accumulation of 2) government employees belonging to the same
savings, and judicious utilization of credit among the department/branch/office, including member-retirees;
members of non-stock savings and loan associations; and
b) regulate and supervise the activities of non-stock 3) immediate members of the families (up to second
savings and loan associations in order to place their degree of consanguinity or affinity) of those falling under
operations on a sound, stable, and efficient basis to the paragraphs 1 and 2 above.
end that they may be able to better provide for the
establishment of additional savings and credit facilities in Associations whose articles of incorporation and bylaws
a fair manner to their members and to curtail or prevent were approved and registered prior to the effectivity of
acts or practices of these Associations which are this Act and which allow membership coverage broader
prejudicial to their members' interest; than the foregoing definition, shall be allowed to
continue as such, unless otherwise required by the
c) lay down the minimum requirements and the Monetary Board.
standards under which non-stock savings and loan
Associations may organize and operate; and The Monetary Board may, as circumstances warrant,
require Associations mentioned in the immediately
d) maximize the protection of members of non-stock preceding paragraph to amend their bylaws to comply
savings and loan associations against misfeasance and with the concept of a "well-defined group."
malfeasance of the trustees and officers thereof.
In no case shall the total amount of entrance fees exceed
Section 3. Definition of terms. – For the purposes of one percent (1%) of the amount to be contributed or
implementing this Act, the following definitions shall otherwise paid in by the particular member: Provided,
apply: That for new members, the said fee shall be based on the
a) Non-stock savings and loan association shall mean a amount of contribution computed in accordance with
non-stock, non-profit corporation engaged in the the revaluation of the assets of the Association.
business of accumulating the savings of its members and No person, association, partnership or corporation shall
using such accumulations for loans to members to do business, or hold itself out as doing business, as an
service the needs of households by providing long term Association, or shall use the term "Savings and Loan
financing for home building and development and for Association" or any other title or name tending to give
personal finance; the public the impression that it is engaged in the
b) Association shall refer only to non-stock savings and operations and activities of an Association, unless so
loan associations organized under this Act and the authorized under this Act.
Corporation Code of the Philippines; Section 5. Tax exemption. – An Association shall be
c) Monetary Board shall mean the Monetary Board of the exempt from payment of tax in respect to income it
Bangko Sentral ng Pilipinas; and receives, including interest on its deposits with any bank:
Provided, however, That income derived from any of its
d) Bangko Sentral shall mean the Bangko Sentral ng
properties, real or personal, or any activity conducted for
Pilipinas.
profit, regardless of the disposition thereof, is subject to
Section 4. Organization of an Association. – At least five the corresponding internal revenue taxes imposed under
(5) but not more than fifteen (15) members of a the National Internal Revenue Code.
well-defined group as provided herein may form an
Interest earnings on deposits of members with
Association under this Act. An Association, prior to
Associations as well as the shares of its members from
transacting any business, shall secure a license from the



the net income of the Associations shall be exempt from e) maintain deposits with banks: Provided, That the
income tax. amount of such deposits shall be subject to the loan limit
Section 6. Prohibition against inquiry into or disclosure to a single borrower as prescribed herein or by other
of deposits. – All deposits of whatever nature with an special laws or regulations;
Association in the Philippines are hereby considered as of f) require the employer-entity or corporation to provide it
an absolutely confidential nature and may not be with adequate office space within which it can conduct
examined, inquired or looked into by any person, its business; and
government official, bureau or office, except upon written g) engage in death benefit program meant exclusively for
permission of the depositor, or in cases of impeachment, the mutual benefit of its members.
or upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases where the Section 8. Restrictions on Associations. – a) No
money deposited or invested is the subject matter of Association shall have or carry upon its books for any
litigation. person any demand, commercial or checking account, or
any credit to be withdrawn upon the presentation of any
It shall be unlawful for any official or employee of an negotiable check or draft.
Association to disclose to any person any information
concerning said deposits, except in the cases mentioned b) No Association shall advertise or represent itself to the
in the preceding paragraph of this Sec.. Any official or public as a bank.
employee of an Association who violates this Sec. shall be c) No Association shall issue, publish or cause or permit to
punished under Republic Act No. 1405, as amended. be issued or published, any advertisement that it is doing
Section 7. Powers of Associations. – The Association or permitted to do any business which is prohibited by
shall accept deposits from and grant loans only to its law for an Association.
members, subject to such rules and regulations as the Section 9. Service units. – An Association shall open,
Monetary Board may promulgate to ensure sound, stable maintain and operate service units as may be necessary
and efficient operation: Provided, That no deposits shall in order to deliver services to its members subject to
be sourced or deducted from the loans granted to a approval of the Monetary Board.
member without his or her written consent.
Section 10. Agents and salesmen. – No person shall act
as an agent or sales representative of an Association or
The loans shall not exceed the members' deposits and operate an agency without obtaining a license from the
contributions in the Association, plus twelve (12) months Monetary Board. No license is required for a collector of
of his regular salary as the Association may allow or an Association but no person shall hold himself out or act
seventy percent (70%) of the fair market value of any as collector unless he is authorized as a collector in
property acceptable as collateral on first mortgage that writing by such Association.
he may offer as security: Provided, That no loan shall have Section 11. Merger or consolidation of Associations. – To
the maturity date of more than five (5) years, except loans achieve simplicity, economy and efficiency, different
on the security of unencumbered real estate for the associations of one company or department or office may
purpose of home building and home development, merge or consolidate upon approval of the Monetary
which may be granted with maturities not exceeding Board.
twenty-five (25) years, and medium and long-term loans
to finance agricultural projects, subject to regulations Section 12. Trustees. – Only members are eligible as
prescribed by the Monetary Board: Provided, further, That trustees of an Association: Provided, That in the case of a
the treasurer, cashier, or paymaster of the office merger or consolidation of Associations duly approved by
employing a member is required, notwithstanding the the Monetary Board, the limitation on the maximum
provision of any existing law, rule and regulation to the number of trustees in a corporation, as provided for in the
contrary, to make deductions from his salary, wage, Corporation Code, shall not be applied for a maximum
income or retirement pension pursuant to the terms of period of three (3) years so that membership in the new
his loan, and all other deductions authorized by the board may include up to the total number of trustees
member, to remit such deductions to the Association provided for in the respective articles of incorporation of
concerned, and to collect such reasonable fee for his the merging or consolidating Associations.
services as may be authorized by rules promulgated by Section 13. Bond of officers and employees. – All officers
the Monetary Board. and employees of an Association who, in the regular
In addition to the powers granted it by this Act and discharge of their duties have access to money or
existing laws, any Association may: negotiable securities shall, before entering upon such
duties, furnish to the employing Association a good and
a) charge reasonable interest and collect such necessary sufficient bond, the form and amount of which shall be
fees and charges incidental to the grant of loans; prescribed by the Monetary Board, and providing for
b) invest its funds in any sound non-speculative indemnity to the Association against the loss of money or
enterprises as well as in bonds, security, and other securities, by reason of their dishonesty.
obligations issued by the Government of the Philippines, Section 14. Compensation of trustees, officers and
or any of its political subdivisions, instrumentalities, or employees. – No trustee, officer, or employee of an
corporations including government-owned or -controlled Association shall receive from such Association, and no
corporations, subject to the rules and regulations of the Association shall pay to any trustee, officer, or employee
Monetary Board; of such Association, any commission, emolument,
c) allow members to participate in the profits of the gratuity or reward based on the volume or number of
Association; loans made, or based on the interest or fees collected
thereon. Nothing in this Sec. prohibits or limits any of the
d) borrow money or incur such obligations not exceeding following:
twenty percent (20%) of the total assets of the
Association, from any lending institution. The Monetary a) receipt or payment of salaries of trustees, officers and
Board, may, in meritorious cases, raise the ceiling on the employees;
borrowing capacity of an Association to an amount not b) receipt of payment of commissions to agents whether
exceeding thirty percent (30%) of its total assets: Provided, or not based on the volume or number of loans or on the
That any such Association organized by employees of an interest or fees collected thereon; and
entity or corporation may borrow funds from said entity
or corporation but not vice-versa: Provided, further, That c) receipt or payment of bonuses to trustees, officers or
the number of the Association's creditors shall not exceed employees if such bonuses are based on the performance
nineteen (19) at any one time; and not on the volume or number of loans made or on
the interest or fees collected thereon.


All increase in the compensation, in any form, of all distribution of assets for withdrawing members, an
trustees and trustee-officers in excess of ten percent (10%) Association shall, upon the effectivity of this Act, impute
thereof per annum shall require the approval of the revalued surplus to be added to the withdrawn capital,
Bangko Sentral. subject to such rules as the Monetary Board may
Section 15. Limitations on lending authority. – a) An prescribe. Such rules shall allow a reasonable period
Association shall not commit itself to make any loans for between withdrawal of capital and payment of the share
amounts in excess of the total of the following amounts: of the member from the revalued surplus.
1) amount of cash available for loan purposes; Section 21. Annual reports by the Association. – Every
Association shall, within one hundred twenty (120)
2) amount of cash which can be readily realized upon the calendar days after the close of its fiscal year furnish the
sale or redemption of permissible investments made by Monetary Board and post in any of the Association's
the Association; and bulletin board or in any other conspicuous place a copy of
3) amount of credit available for loan purposes from its financial statement showing, in such form and detail
government or private financing institutions. as the Monetary Board shall require, the amount and
character of the assets and liabilities of the Association at
b) No Association shall directly or indirectly make any the end of the preceding fiscal year. The Monetary Board
loans to any trustee or officer of such Association, either may, in addition to the foregoing, require the disclosure of
for himself or as agent or as partner of another, except such other information as it shall deem necessary for the
with the written approval of the majority of the trustees of protection of the members of the Association.
the Association, excluding the trustee concerned:
Provided, That the total loans, direct or indirect, granted Section 22. Regulatory powers over Associations. –
at any one time to such trustees and officers shall not Notwithstanding the provisions of Sec. 130 of Republic
exceed twenty percent (20%) of the total capital Act No. 7653, the power to regulate the operations of any
contributions of the Association; in all cases of the credit Association by the Monetary Board shall continue and
accommodations granted to trustees and officers under consist of the following:
this subSec., the written approval of the majority of the a) in seeing to it that the capital, financing, direction and
trustees of the Association, excluding the trustee administration, as well as the integrity, responsibility, and
concerned, shall be entered upon the records of the ability of organizers, administrators, trustees, and officers
Association and a copy of such entry shall be transmitted of all Associations organized and operated under this Act,
forthwith to the Bangko Sentral. shall reasonably assure the safety of the interests which
The transactions of all trustee-officers with the its members entrust to them;
Association shall not be under terms more favorable than b) in regulating the operation and activities of
those transacted with other members. The office of any Associations, which include, among others: 1) in placing
trustee or trustee-officer of an Association who violates limits to the maximum credit allowed any individual
the provisions of this subSec. shall immediately become borrower; 2) in determining the loan repayment period
vacant and the trustees or officers shall be punished by and loan procedures; 3) in imposing a uniform
imprisonment of not less than one (1) year nor more than accounting system and manner of keeping the accounts
ten (10) years and by a fine of not less than Five thousand and records of Associations; 4) in instituting periodic
pesos (P5,000) nor more than Fifty thousand pesos surveys of loan and lending procedures, audits, test check
(P50,000). of each and other transactions of Associations; and 5)
Section 16. Execution of loan agreement. – For each whenever necessary, in conducting training courses for
loan made by an Association, a written note or other personnel of Associations;
obligation expressing a rate of interest must be executed c) in requiring all accountable officers and employees of
by the borrower. every Association to post bonds for the faithful
Section 17. Liability of officers for loans contrary to performance of their duties in reasonable sums and with
law. – No Association shall make or purchase any loan or such sureties as the Monetary Board may require;
investment not authorized or permitted under this Act, d) in fixing, by rules or by orders, in specific cases, after
and any trustee, officer or employee, who on behalf of any notice and hearing, the limits of loanable funds, amounts
such Association, knowingly makes or purchases any for investment and reserves for withdrawals and other
such loan or investment or who knowingly consents contingencies;
thereto shall be personally liable to the Association for the
full amount of any such loan or investment. e) in issuing rules and regulations for the proper
implementation of this Act, effective administration of
Section 18. Limitations on investment. – a) No the Associations, and to render advisory assistance to all
Association at any one time shall invest in bonds and interested parties in order to carry out the intents and
securities in a total amount in excess of ten percent (10%) purposes of this Act; and
of the total assets of such Association without prior
written approval of the Bangko Sentral. f) in conducting such investigations, taking such remedial
measures and exercising all powers under Republic Act
b) No Association at any one time shall invest in real No. 7653, insofar as they are applicable in the
property in a total amount in excess of five percent (5%) of enforcement of this Act.
the total assets of such Association.
The Bangko Sentral shall have the power to enforce the
c) No Association at any one time shall invest in furniture, laws, orders, instructions, rules and regulations
fixture, furnishings and equipment and leasehold promulgated by the Monetary Board applicable to
improvements for its offices, in an amount more than ten Associations; to require Associations, their trustees,
percent (10%) of its total capital contribution. officers and agents to conduct and manage the affairs of
Section 19. Reserves. – Every Association shall create a the Association in a lawful and orderly manner. After due
withdrawable share reserve which shall consist of two notice and hearing, the Monetary Board may revoke or
percent (2%) of the total capital contributions of the suspend the license of any Association, for such period as
members which the Monetary Board may increase to a it determines necessary, particularly when the solvency of
maximum of three percent (3%), as the situation warrants. an Association is imperiled by losses or irregularities,
and/or when an Association willfully violates any
No Association shall distribute to its members any portion provisions of this Act or any rule or regulations
of its net income if its withdrawable share reserve is less promulgated hereunder.
than the minimum requirement, or if by such payment or
distribution, such reserve will be reduced to an amount The director and examiners of the department of the
below the minimum requirement provided herein. Bangko Sentral charged with the regulation of
Associations are hereby authorized to administer oaths to
Section 20. Withdrawal by a member. – For the sole any trustee, officer or employee of any Association or to
purpose of allowing an equitable valuation and



any voluntary witness and to compel the presentation of accordance with the provisions of this Act, together with
all books, documents, papers or records necessary in his the explanations of its reasons therefor.
judgment to ascertain the facts relative to the true Section 27. Industry Association. – Membership in an
condition of any Association or to any loan. existing association of Associations duly accredited and
Section 23. Penalties. – a) The provisions of Sec. 34 of recognized by the Bangko Sentral, is hereby encouraged.
Republic Act No. 7653 shall apply to any agent, manager, Section 28. Applicability of other laws. – The provisions
or other officer-in-charge of any Association who willfully of Republic Act No. 7653 and Republic Act No. 337, as
refuses any lawful examination into the affairs of such amended, insofar as they are applicable and not in
Association. conflict with any provision of this Act, shall apply to
b) The willful making of a false statement or misleading Associations organized hereunder.
statement on a material fact to the Monetary Board or to Section 29. Separability clause. – If any provision of this
the director of the department of the Bangko Sentral Act or the application thereof to any persons or
charged with the regulation of Associations or to his circumstances is held invalid, the other provisions of this
examiners shall be punished in accordance with Sec. 35 of Act and the application of such provisions to other
Republic Act No. 7653. persons and circumstances, shall not be affected thereby.
c) Whenever any Association, person or entity willfully Section 30. Repealing clause. – Republic Act No. 3779, as
violates this Act or any order, instruction, rule or amended, is hereby repealed. Any law or parts of law
regulation issued by the Monetary Board applicable to inconsistent with the provisions of this Act are hereby
Associations, the persons responsible for such violation repealed. In all matters affecting the price stability of the
shall be punished in accordance with Sec. 36 of Republic peso, the provisions of Republic Act No. 7653 shall prevail.
Act No. 7653.
Section 31. Effectivity. – This Act shall take effect fifteen
d) Whenever any officer, employee, or agent of an (15) days following the completion of its publication in the
Association accepts gifts, fees or commissions or any Official Gazette or in two (2) national newspapers of
other form of remuneration in connection with the general circulation.
approval of a loan from said Association; or overvalues or
aids in overvaluing any security for the purpose of Approved: October 21, 1997.
influencing in any way the action of the Association on
any loan, such officer, employee or agent shall be
punished by a fine of not more than Ten thousand pesos RA No 7906 | Thrift Banks Act of 1995
(P10,000) or three times the loan amount involved,
whichever is higher, or imprisonment for not more than February 23, 1995
one (1) year, at the discretion of the court.
e) Whenever any applicant for a loan, or borrower of an REPUBLIC ACT NO. 7906
Association fraudulently overvalues property offered as AN ACT PROVIDING FOR THE REGULATION OF THE
security for loan from the said Association; or furnishes ORGANIZATION AND OPERATIONS OF THRIFT BANKS,
false, or makes willful misrepresentation of material facts AND FOR OTHER PURPOSES
for the purpose of obtaining, renewing, or increasing a
loan or extending the period thereof; or attempts to
defraud the said Association in the event of a court action CHAPTER I Declaration of Policy and Definitions
to recover a loan; or offers any officer, of a court action to
recover a loan; or offers any officer, employee or agent of SECTION 1. Title. — This Act shall be known and cited as
an Association any gift, fee, commission, or other form of the "Thrift Banks Act of 1995."
compensation in order to influence such Association SECTION 2. Declaration of Policy. — It is hereby declared
personnel into approving a loan application; such the policy of the State to:
applicant or borrower shall be punished by a fine of not
more than Five thousand pesos (P5,000) or three times
the loan amount involved, whichever is higher, or (a) Recognize the indispensable role of the private sector,
imprisonment for not more than one (1) year, at the to encourage private enterprise, and to provide incentives
discretion of the court. to needed investments;
f) Whenever any examiner, officer or employee of the (b) Promote economic development pursuant to the
Bangko Sentral, who is assigned to examine, assist or socio-economic program of the government, to expand
render technical service to an Association, overvalues or industrial and agricultural growth, to encourage the
aids in overvaluing any security for the purpose of establishment of more private thrift banks in order to
influencing in any way the action of the Association on meet the needs for capital, personal and investment
any loan or connives or aids in the commission of the credit or medium- and long-term loans for Filipino
same, he shall be punished by a fine of not more than Ten entrepreneurs;
thousand pesos (P10,000) or three times the loan amount (c) Encourage and assist the establishment of thrift bank
involved, whichever is higher, or imprisonment for not system which will promote agriculture and industry and
more than one (1) year, at the discretion of the court. at the same time place within easy reach of the people
Section 24. Annual fees. – Consistent with the provisions the medium- and long-term credit facilities at reasonable
of Sec. 28 of Republic Act No. 7653, any Association cost;
organized under this Act may, pursuant to regulations (d) Encourage industry, frugality and the accumulation of
promulgated for the purpose by the Monetary Board, be savings among the public, and the members and
required to contribute to the Bangko Sentral an annual stockholders of thrift banks; and
fee to be determined by the Monetary Board.
(e) Regulate and supervise the activities of thrift banks in
Section 25. Implementation. – For the purpose of order to place their operations on a sound, stable and
carrying the objectives of this Act, the Bangko Sentral is efficient basis and to curtail or prevent acts or practices
authorized to require the services and facilities of any which are prejudicial to the public interest.
department or instrumentality of the government or any
officer or employee of any such department or
instrumentality. SECTION 3. Definition of Terms. — For purposes of
implementing this Act, the following definitions shall
Section 26. Annual report of the Monetary Board. – The apply:
Monetary Board shall submit a report to the Congress of
the Philippines as of the end of each calendar year of all
the rules and regulations promulgated by it in (a) "Thrift banks" shall include savings and mortgage
banks, private development banks, and stock savings and



loans associations organized under existing laws, and any shall be citizens of the Philippines: Provided, however,
banking corporation that may be organized for the That no appointive or elective official, whether full-time or
following purposes: part-time, shall at the same time serve as officer of any
thrift bank, except in cases where such service is incident
to financial assistance provided by the government or a
(1) Accumulating the savings of depositors and investing
government-owned or -controlled corporation to the
them, together with capital loans secured by bonds,
bank: Provided, further, That in the case of merger or
mortgages in real estate and insured improvements
consolidation duly approved by the Monetary Board, the
thereon, chattel mortgage, bonds and other forms of
limitation on the number of directors in a corporation, as
security or in loans for personal or household finance,
provided in Section 14 of the Corporation Code of the
whether secured or unsecured, or in financing for home
Philippines, shall not be applied so that membership in
building and home development; in readily marketable
the new board may include up to the total number of
and debt securities; in commercial papers and accounts
directors provided for in the respective articles of
receivables, drafts, bills of exchange, acceptances or notes
incorporation of the merging or consolidating banks.
arising out of commercial transactions; and in such other
investments and loans which the Monetary Board may
determine as necessary in the furtherance of national
economic objectives;
CHAPTER III Ownership and Capital
(2) Providing short-term working capital, medium-and
Requirements
long-term financing, to businesses engaged in SECTION 8. Ownership. — At least forty percent (40%) of
agriculture, services, industry and housing; and the voting stock of a thrift bank which may be
(3) Providing diversified financial and allied services for its established after the approval of this Act shall be owned
chosen market and constituencies specially for small and by citizens of the Philippines, except where a new bank
medium enterprises and individuals. may be established as a result of a merger or
consolidation of existing thrift banks with foreign
holdings in which case, the resulting foreign holdings
(b) "Monetary Board" shall mean the Monetary Board of shall not be increased but may be reduced and, once
the Bangko Sentral ng Pilipinas. reduced, shall not be increased thereafter beyond sixty
(c) "Bangko Sentral" shall refer to the Bangko Sentral ng percent (60%) of the voting stock of thrift banks. The
Pilipinas created under Republic Act No. 7653. percentage of the foreign-owned voting stocks shall be
determined by the citizenship of individual stockholders
and in case of corporations owning shares, by the
citizenship of each stockholder in the said corporations.
CHAPTER II Organization Any provision of existing laws to the contrary
notwithstanding, stockholdings in a thrift bank shall be
SECTION 4. Organization. — A thrift bank shall be
exempt from any ownership ceiling for a period of ten (10)
organized in the form of stock corporation. The Monetary
years from the effectivity of this Act.
Board shall fix the minimum paid-up capital of thrift
banks in such amount as the Board may consider SECTION 9. Combined Capital Accounts of Thrift Banks.
necessary for the safe and sound operation of thrift banks — The combined capital accounts of each thrift bank
taking into account the development thrusts of this Act shall not be less than an amount equal to ten percent
and due protection of the general public. No thrift bank (10%) of its risk assets which is defined as its total assets
shall be organized without a certificate of authority from minus the following assets:
the Monetary Board.
SECTION 5. Establishment of Thrift Banks. — The articles (a) Cash on hand;
of incorporation of any bank, or any amendment thereto, (b) Amounts from the Bangko Sentral;
shall not be registered by the Securities and Exchange
Commission unless accompanied by a certificate of (c) Evidences of indebtedness of the Republic of the
authority issued by the Monetary Board, under its official Philippines and of the Bangko Sentral, and any other
seal. Such certificate shall not be issued unless the evidences of indebtedness or obligations the servicing
Monetary Board is satisfied from the evidence submitted and repayment of which are fully guaranteed by the
to it: (a) that all the requirements of the existing laws and Republic of the Philippines;
regulations to engage in business for which the applicant (d) Loans to the extent covered by hold-out on, or
is proposed to be incorporated have been complied with; assignment of deposits maintained in the lending bank
(b) that public interest and the economic conditions, both and held in the Philippines; and
general and local, justify the authorization; and (c) that
the amount of capital, the financing organization, (e) Other non-risk items as the Monetary Board may, from
direction and administration, as well as the integrity and time to time authorize to be deducted from total assets.
the responsibility of the organizers and administrators
reasonably assure the safety of the interest which the The Monetary Board shall prescribe the manner of
public may entrust to them. determining the total assets of banking institutions for
The by-laws of any thrift bank, or any amendment purposes of this Section.
thereto, shall not be registered by the Securities and Whenever the capital accounts of a bank are deficient
Exchange Commission unless accompanied by a with respect to the requirements of the preceding
certificate of the Monetary Board to the effect that such paragraph, the Monetary Board, after considering the
by-laws or amendments thereto are in accordance with report of the appropriate supervising department on the
law. state of solvency of the institution, shall limit or prohibit
SECTION 6. Bank Management. — In order to maintain the distribution of net profits and shall require that part
the quality of bank management and afford better or all of net profits be used to increase the capital
protection to depositors and the public in general, the accounts of the institution until the minimum
Monetary Board may pass upon and review the requirement has been met. The Monetary Board may,
qualifications of persons who are elected or appointed after considering the aforesaid report of the appropriate
bank directors and officers and disqualify those unfit. The supervising department and if the amount of the
Monetary Board shall prescribe the qualifications of bank deficiency justifies it, restrict or prohibit the making of
directors and officers for purposes of this Section. new investments of any sort by the bank, with the
exception of purchases of evidences of indebtedness
SECTION 7. Directors and Officers. — At least a majority of included under subsection (c) of this Section, until the
the members of the board of directors of any thrift bank minimum required capital ratio has been restored.
which may be established after the effectivity of this Act


Where in the process of a bank merger or consolidation, is a permanent employee or wage earner, the treasurer,
the merged or constituent bank may not be able to cashier or paymaster of the office employing him is
comply fully with the net worth to risk asset ratio herein authorized, notwithstanding the provisions of any
prescribed, the Monetary Board may, at its discretion, existing law, rules and regulations to the contrary, to
temporarily relieve the bank from full compliance with make deductions from his salary, wage or income
this requirement under such conditions it may pursuant to the terms of his loan, to remit deductions to
prescribed. the thrift bank concerned, and collect such reasonable
fee for his services;
(l) Extend credit against the security of jewelry, precious
CHAPTER IV Powers stones and articles of similar nature, subject to such rules
SECTION 10. Powers of Thrift Banks. — In addition to and regulations as the Monetary Board may prescribe;
powers granted it by this Act and existing laws, any thrift and
bank may: (m) Offer other banking services as provided in Section 72
of Republic Act No. 337 and Republic Act No. 6426, as
(a) Accept savings and time deposits; amended.
(b) Open current or checking accounts: Provided, That the
thrift bank has net assets of at least Twenty million pesos Thrift banks may perform the services under subsections
(P20,000,000) subject to such guidelines as may be (b), (d), (e), (g) and (i) only upon prior approval of the
established by the Monetary Board; and shall be allowed Monetary Board.
to directly clear its demand deposit operations with the Nothing in this Section shall be construed as precluding a
Bangko Sentral and the Philippine Clearing House thrift bank from performing, with prior approval of the
Corporation; Monetary Board, commercial banking services, or from
(c) Act as correspondent for other financial institutions; operating under an expanded banking authority, nor
from exercising, whenever applicable and not
(d) Act as collection agent for government entities,
inconsistent with the provisions of this Act and Bangko
including but not limited to, the Bureau of Internal
Sentral regulations, and such other powers incident to a
Revenue, Social Security System, and the Bureau of
corporation.
Customs;
SECTION 11. Limitations on Lending Authority. — Except
(e) Act as official depository of national agencies and of
as the Monetary Board may otherwise prescribe, the
municipal, city or provincial funds in the municipality, city
direct indebtedness to thrift banks of any person,
or province where the thrift bank is located, subject to
company, corporation, or firm, including the
such guidelines as may be established by the Monetary
indebtedness of members of a partnership and
Board;
association, for money borrowed, excluding: (a) loans
(f) Rediscount paper with the Philippine National Bank, secured by obligations of the Bangko Sentral; (b) loans
the Land Bank of the Philippines, the Development Bank fully guaranteed by the government as to the payment of
of the Philippines, and other government-owned or principal and interest; (c) loans to the extent covered by
-controlled corporations. Said institutions shall specify the the hold-out on, or assignment of, deposits maintained in
nature of paper deemed acceptable for rediscount, as the lending bank and held in the Philippines; and (d)
well as rediscounting rate to be charged by any of these other loans or credits as the Monetary Board may, from
institutions; and time to time, specify as non-risk assets, which shall in no
(g) Issue mortgage and chattel mortgage certificates, buy time exceed fifteen percent (15%) of unimpaired capital
and sell them for its own account or for the account of and surplus of the bank.
others, or accept and receive them in payment or as Notwithstanding the provisions of the preceding
amortization of its loan. paragraph and subject to such regulations as the
Monetary Board may prescribe, the total indebtedness of
Such mortgage and chattel mortgage certificates shall any borrower to the bank may amount to a further fifteen
be issued exclusively in national currency and exclusively percent (15%) of the unimpaired capital and surplus of
for the financing of equipment loans, mortgage loans for such bank provided the additional indebtedness is for the
the acquisition of machinery and other fixed installations, purpose of financing subdivision or housing
conservation, enlargement or improvement of productive development, medium- and low-income borrowers and
properties and real estate mortgage loans for: (1) the agriculture on a fully secured basis.
construction, acquisition, expansion or improvement of The term "indebtedness" as used herein, shall mean the
rural and urban properties; (2) the refinancing of similar direct liability of the maker or acceptor of paper
loans and mortgages; and (3) such other purposes as may discounted with or sold to such bank and liability of the
be authorized by the Monetary Board. indorser, drawer or guarantor who obtains a loan from or
A thrift bank shall coordinate the amounts and maturities discounts paper with or sells paper under his guaranty to
of its certificates with those of its loans, so as to ensure such bank; and shall include in the case of liabilities of a
adequate cash receipts for the payment of principal and partnership or association the liabilities of the several
interest at the time they become due. The bank shall members thereof; and shall include in the case of
accept its own certificates at least at the actual price of liabilities of a corporation, all liabilities of all the
issue, in any prepayment of loans which mortgage or subsidiaries thereof in which such corporation owns or
chattel mortgage debtors may wish to make: Provided, controls a majority interest: Provided, That even if the
That the date of maturity of the certificates is not later parent corporation, partnership or association has no
than the date on which the payment would otherwise liability to the bank, the Monetary Board may prescribe
become due, in the absence of the aforesaid prepayment; the combination of liabilities of subsidiary corporations or
members of the partnership or association under certain
circumstances, including but need not be limited to any
(h) Purchase, hold and convey real estate under the same of the following situations: (a) the parent corporation,
conditions as those governing commercial banks as partnership or association guarantees the repayment of
specified under Section 25 of Republic Act No. 337; liabilities; (b) the liabilities were incurred for the
(i) Engage in quasi-banking and money market accommodation of the parent corporation or another
operations; subsidiary or of the partnership or association; or (c) the
subsidiaries through separate entities operate merely as
(j) Open domestic letters of credit; departments or divisions of a single entity: Provided,
(k) Extend credit facilities to private and government further, That the discount of bills of exchange drawn in
employees: Provided, That in the case of a borrower who good faith against actually existing values, and the
discount of commercial and business paper actually



owned by the person negotiating the same, shall not be prosecution of persons responsible for such violations
considered as money borrowed for the purpose of this under the provisions of Sections 36 and 37 of Republic Act
Section: Provided, finally, That certain types of contingent No. 7653.
liabilities of borrowers may be included among the total The director and examiners of the department of Bangko
liabilities as may be determined by the Monetary Board. Sentral charged with the supervision of thrift banks are
Loan accommodations granted by thrift banks to any hereby authorized to administer oaths to any director,
other bank, as well as deposits maintained by them in officer or employee of any thrift bank or to any voluntary
any bank licensed to do business in the Philippines, shall witness and to compel the presentation of all books,
be subject to the loan limit of any single borrower as documents, papers or records necessary in his or their
herein prescribed. judgment to ascertain the facts relative to the true
SECTION 12. Investment in Allied Undertakings. — Subject conditions of any thrift bank or to any loan.
to such guidelines as may be established by the Monetary
Board, thrift banks may invest in equities of allied
undertakings as hereinafter enumerated: Provided, That: CHAPTER VI Incentives
(a) the total investments in equities shall not exceed SECTION 14. Reserve Requirement Differential. — Reserve
twenty-five percent (25%) of the net worth of the thrift requirement imposed on thrift banks by the Monetary
bank; (b) the equity investment in any single enterprise Board shall enjoy equitable preferential terms over those
shall be limited to fifteen percent (15%) of the net worth of imposed on commercial banks: Provided, That the
the thrift bank; (c) the equity investment of the thrift bank Monetary Board may change reserve differentials for the
in any single enterprise shall remain a minority holding in purpose of stimulating economic growth in the
that enterprise; and (d) the equity investment in other countryside, thereby promoting national economic
banks shall be subject to the same provisions governing development.
similar investments of commercial banks and shall be
SECTION 15. Liberalized Branching Rules. — Thrift banks
deducted from the investing bank's net worth for the
shall have unrestricted branching right within the region,
purpose of computing of the prescribed ratio as provided
free from any assessment or surcharges required in
in Section 9 hereof: Provided, further, That equity
setting up a branch, but under coordination with the
investments shall not be permitted in non-related
Bangko Sentral which will have to assess that there are
activities. Where the allied activity is a wholly- or
qualified personnel, control and procedures to operate
majority-owned subsidiary of the thrift bank, the Bangko
the branch.
Sentral may subject it to examination.
SECTION 16. Notices of Statement of Condition. — Subject
Investment in allied undertaking shall include institutions
to Monetary Board approval, a thrift bank may publish its
engaged in the following activities:
statement of condition in a newspaper of general
circulation, or post it in the most conspicuous area of its
(a) Banking and financing; premises, municipal building, municipal public market,
(b) Warehousing and other post-harvesting activities; barangay hall and barangay public market if there be any,
where the thrift bank concerned is located.
(c) Fertilizer and agricultural chemical and pesticides
distribution;
(d) Farm equipment distribution; CHAPTER VII Exemptions
(e) Trucking and transportation of agricultural products; SECTION 17. Tax Exemptions. — All thrift banks, whether
created or organized under this Act or in operation as of
(f) Marketing of agricultural products; the date of effectivity of this Act, shall be exempt from
(g) Leasing; and payment of all taxes, fees and charges of whatever nature
and description, except the corporate income taxes and
(h) Other undertakings as may be determined by the
local taxes, fees and charges for a period of five (5) years,
Monetary Board.
counted from the date of commencement of operations
for thrift banks created under this Act and from the date
of the effectivity of this Act for existing thrift banks.
CHAPTER V Supervision SECTION 18. Exemption from Publication Requirement.
— The foreclosure of mortgage covering loans granted by
SECTION 13. Supervisory Powers of the Monetary Board. thrift banks and executions of judgments thereon
— The power to supervise the operation of any thrift bank involving real properties and levied upon by a sheriff shall
by the Monetary Board shall consist in placing limits to be exempt from publication requirements where the
the maximum credit allowed to any individual borrower; total amount of the loan, excluding interest due and
in indicating the manner in which technical assistance unpaid, does not exceed One hundred thousand pesos
shall be extended to thrift banks; in imposing a uniform (P100,000) or such amount as the Monetary Board may
accounting system and manner of keeping the accounts prescribe, as may be warranted by the prevailing
and records of thrift banks; in instituting periodic surveys economic conditions and by the nature of service of
of loans and lending procedures, audits, test-check of customers served by each category of the thrift bank. It
cash and other transactions of the thrift banks; in shall be sufficient publication in such cases if the notice
conducting training courses for personnel of thrift banks; of foreclosure and execution of judgment are posted in
and, in general, in supervising the business operations of the conspicuous area of a thrift bank's premises,
the thrift banks. municipal building, the municipal public market, the
The Bangko Sentral shall have the power to enforce the barangay hall, and the barangay public market, if there
laws, orders, instructions, rules and regulations be any, where the land mortgaged is situated within a
promulgated by the Monetary Board applicable to thrift period of sixty (60) days immediately preceding the
banks; to require thrift banks, their directors, officers and public auction of the execution of judgment. Proof of
agents to conduct and manage the affairs of the thrift publication as required herein shall be accomplished by
bank in a lawful and orderly manner; and upon proof that an affidavit of the sheriff or officer conducting the
the thrift bank or its board of directors or officers are foreclosure sale or execution of judgment and shall be
conducting and managing the affairs of the bank in a attached with the records of the case.
manner contrary to laws, orders, instructions, rules and A thrift bank shall be allowed to foreclose lands
regulations promulgated by the Monetary Board or in a mortgaged to it: Provided, That said lands shall be
manner substantially prejudicial to the interest of the covered under Republic Act No. 6657.
government, depositors, creditors, or the general public,
to appoint a conservator pursuant to Section 29 of SECTION 19. Exemption from Notarial Charges. — Any
Republic Act No. 7653 without prejudice to the metropolitan, municipal, or municipal circuit trial court


judge in his capacity as notary public ex officio shall order to influence such bank personnel into approving a
administer the oath to or acknowledge the instrument of loan application; or
any thrift bank and its borrowers or mortgagor free from (6) Dispose or encumber the property offered as security
all charges, fees and documentary stamp tax, collectible for the loan.
under existing laws, relative to any loan or transaction not
exceeding Fifty thousand pesos (P50,000) or such
amount as the Secretary of Finance, upon (c) Any examiner, or officer or employee of the Bangko
recommendation of the Monetary Board, may prescribe Sentral or of any department, bureau, office, branch, or
as may be necessary to promote and expand the agency of the government who is assigned to examine,
economy. supervise, assist or render technical service to thrift banks
and who shall connive or aid in the commission of the
SECTION 20. Exemption from Registration Fees. — Any
same.
register of deeds shall accept from any thrift bank and its
borrowers and mortgagors for registration, free from all (d) Any metropolitan, municipal, or municipal circuit trial
charges, fees and documentary stamp tax, collectible court judge or register of deeds who shall demand or
under existing laws, any instrument, whether voluntary or accept, directly or indirectly, any gift, fee, commission, or
involuntary, relating to loans or transactions extended by any other form of compensation in connection with the
any thrift bank in an amount not exceeding Fifty service, or shall arbitrarily and without reasonable cause
thousand pesos (P50,000): Provided, however, That delay the acknowledgment or administration of oath or
charges, if any, shall be collectible on the amount in the registration of documents required to be performed
excess of Fifty thousand pesos (P50,000); and that an by said judge or by said register of deeds shall be
instrument related to assignments of several mortgages punished with a fine of not more than One thousand
consolidated in a single deed, if any, shall be levied only pesos (P1,000) or by imprisonment of not more than one
on the amount in excess of Fifty thousand pesos (1) year, or both, at the discretion of the court.
(P50,000) of the consideration in the assignment of each (e) Any bank not organized under this Act and any
mortgage, or such amount as the Secretary of Finance, person, association, or corporation doing the business of
upon recommendation of the Monetary Board, may banking, not authorized under this Act or existing laws
prescribe as may be necessary to promote and expand which shall use the words "Development Bank," "Savings
the economy. Bank," "Mortgage Bank," "Savings and Mortgage Bank," or
"Savings and Loan Association," as part of the name or
title of such bank or of such person, association, or
CHAPTER VIII Prohibitions corporation, shall be punished by a fine of not less than
SECTION 21. Prohibited Acts. — Without prejudice to any One hundred pesos (P100), but in no case to exceed Thirty
prosecution under any law which may have been thousand pesos (P30,000), for each day during which the
violated, a fine of not more than Ten thousand pesos said words are so used.
(P10,000) or imprisonment for not less than six (6) months
but not more than ten (10) years, or both, at the discretion
of the court, shall be imposed upon:
CHAPTER IX General Provisions
(a) Any officer, employee, or agent of a thrift bank who SECTION 22. Minors as Depositors. — Minors in their own
shall: rights and in their own names may make deposits and
withdraw the same, and may receive dividends and
interest: Provided, however, That, if any guardian shall
(1) Make false entries in any bank report or statement give notice in writing to any thrift bank not to make
thereby affecting the financial interest of, or causing payments of deposits, dividends, or interest to the minor
damage to, the bank or any person; or of whom he is the guardian, then such payment shall be
(2) Without order of a court of competent jurisdiction, made only to the guardian.
disclose any information relative to the funds or SECTION 23. Return of Deposits. — Deposits shall be
properties in the custody of the bank belonging to private returned to the depositors or to their legal
individuals, corporations, or any other entity; or representatives in the manner and at the time and under
(3) Accept gifts, fees or commissions or any other form of the conditions which shall be determined by the board of
remuneration in connection with the approval of a loan directors and stipulated in regulations which shall be in
from said bank; or conformity with laws and with such regulations as the
(4) Overvalue or aid in the overvaluing any security for the Monetary Board may prescribe.
purpose of influencing in any way the action of the bank SECTION 24. Deposit Insurance. — Deposit in thrift banks
on any loan; or shall be eligible for insurance coverage under Republic
(5) Appear and sign as guarantor, indorser, or surety for Act No. 3591, as amended.
loans granted; or SECTION 25. Annual Fees. — Consistent with the
(6) Violate any provision of this Act. provisions of Section 28 of Republic Act No. 7653, any
thrift bank organized under this Act may, pursuant to
regulations promulgated for the purpose by the
(b) Any applicant for a loan from, or borrower of a thrift Monetary Board, be required to contribute to the Bangko
bank who shall: Sentral an annual fee in an amount to be determined by
the Monetary Board.
(1) Misuse, misapply or divert the proceeds of the loan SECTION 26. Implementation. — For the purpose of
obtained by him from its declared purpose; or carrying the objectives of this Act, the Bangko Sentral is
(2) Fraudulently overvalue property offered as security for authorized to require the services and facilities of any
a loan from said bank; or department or instrumentality of the government or any
officer or employee of any such department or
(3) Give out or furnish false or willful misinterpretation of government instrumentality.
material facts for the purpose of obtaining, renewing, or
increasing a loan extending the period thereof; or SECTION 27. Annual Report. — The Monetary Board shall
submit a report to the Congress of the Philippines at the
(4) Attempt to defraud the said bank in the event of court end of each calendar year of all the rules and regulations
action to recover the loan; or promulgated by it in accordance with the provisions of
(5) Offer any officer, employee or agent of a thrift bank a this Act, as well as its other actuations in connection with
gift, fee, commission or other forms of compensation in thrift banks together with an explanation of its reasons
therefor and recommendations on legislative actions.


SECTION 28. Parity Clause Under the Same and in helping develop a sound and stable banking
Circumstances. — The incentives granted shall be system.
enjoyed by financial institutions giving the same services In view of the crucial role and the nature of its functions
for countryside lending and development under such and responsibilities, the Corporation, while being a
terms as may be equitable and as may be defined by the government instrumentality with corporate powers, shall
Monetary Board. enjoy fiscal and administrative autonomy.
SECTION 29. Separability Clause. — If any provision of this
Act or the application thereof to any person or
circumstances is held invalid, the other provisions of this BOARD OF DIRECTORS: COMPOSITION AND
Act and the application of such provisions to other AUTHORITY
persons and circumstances, shall not be affected thereby.
SECTION 3. (a) The powers and functions of the
SECTION 30. Repealing Clause. — Republic Act No. 4093,
Corporation shall be vested in and exercised by a Board of
Republic Act No. 3779 to the extent that it applies to thrift
Directors which shall be composed of seven (7) members
banks, and Chapter 5 of Republic Act No. 337 are hereby
as follows:
repealed. Any law or parts of any law inconsistent with
the provisions of this Act are hereby repealed. In all (1) The Secretary of Finance who shall be the ex officio
matters affecting the price stability of the peso, the Chairman of the Board without compensation;
provisions of Republic Act No. 7653 shall prevail. (2) The Governor of the Bangko Sentral ng Pilipinas who
SECTION 31. Applicability of Other Laws. — The provisions shall be ex officio member of the Board without
of Republic Act No. 7653 and Republic Act No. 337, as compensation;
amended, insofar as they are applicable and not in (3) The President of the Corporation, who shall be
conflict with any provision of this Act, shall apply to thrift appointed by the President of the Philippines from a
banks organized hereunder. shortlist prepared by the Governance Commission for
SECTION 32. Effectivity. — This Act shall take effect fifteen Government-Owned or -Controlled Corporations
(15) days following the completion of its publication in the pursuant to Republic Act No. 10149 to serve on a full-time
Official Gazette or in two (2) national newspapers of basis for a term of six (6) years. The President of the
general circulation. Corporation shall also serve as Vice Chairman of the
Board;
Approved: February 23, 1995
(4) Four (4) members from the private sector to be
Published in Malaya and the Philippine Times Journal on
appointed by the President of the Philippines from a
March 2, 1995.
shortlist prepared by the Governance Commission for
Government-Owned or -Controlled Corporations
RA No 10846 | An Act Enhancing the pursuant to Republic Act No. 10149. The appointive
Resolution and Liquidation Framework directors shall serve for a term of six (6) years unless
sooner removed for cause and shall be subject to only
for Banks one (1) reappointment: Provided, That of those first
amending for the purpose Republic Act No. 3591, as appointed, the first two (2) appointees shall serve for a
amended, and other related laws period of three (3) years: Provided, however, That the
appointive director shall continue to hold office until the
successor is appointed. An appointive director may be
AN ACT ENHANCING THE RESOLUTION AND nominated by the Governance Commission for
LIQUIDATION FRAMEWORK FOR BANKS, AMENDING Government-Owned or -Controlled Corporations for
FOR THE PURPOSE REPUBLIC ACT NO. 3591, AS reappointment by the President only if one obtains a
AMENDED, AND OTHER RELATED LAWS performance score of above average or its equivalent or
higher in the immediately preceding year of tenure as
Be it enacted by the Senate and House of appointive director based on the performance criteria for
Representatives of the Philippines in Congress appointive directors of the Corporation.
assembled:
Appointment to any vacancy shall be only for the
unexpired term of the predecessor pursuant to Republic
THE CREATION OF THE PHILIPPINE DEPOSIT Act No. 10149.
INSURANCE CORPORATION No person shall be appointed as member of the Board
unless he or she be of good moral character, of
SECTION 1. — There is hereby created a Philippine unquestionable integrity and responsibility, of known
Deposit Insurance Corporation hereinafter referred to as probity and patriotism, and who is of recognized
the ‘Corporation’ which shall insure as herein provided, competence in economics, banking and finance, law,
the deposits of all banks which are entitled to the management administration or insurance, and shall be at
benefits of insurance under this Act, and which shall have least thirty-five (35) years of age. For the duration of their
the powers hereinafter granted. tenure or term of office and for a period of one (1) year
The Corporation shall, as a basic policy, promote and thereafter, the appointive members of the Board shall be
safeguard the interests of the depositing public by disqualified from holding any office, position or
providing insurance coverage on all insured deposits and employment in any insured bank.
helping maintain a sound and stable banking system. The Secretary of Finance and the Governor of the Bangko
Sentral ng Pilipinas may each designate an alternate, who
shall be an official with a rank not lower than assistant
STATE POLICY secretary or its equivalent with written authority from the
SECTION 2. — It is hereby declared to be the policy of the Secretary of Finance or the Governor of the Bangko
State to strengthen the mandatory deposit insurance Sentral ng Pilipinas to attend such meetings and to vote
coverage system to generate, preserve, maintain faith on behalf of their respective principals. Whenever the
and confidence in the country’s banking system, and Chairman of the Board is unable to attend a meeting of
protect it from illegal schemes and machinations. the Board, or in the event of a vacancy in the office of the
Secretary of Finance, and in the absence of the Vice
Towards this end, the government must extend all means Chairman, the members of the Board shall designate
and mechanisms necessary for the Corporation to from among themselves who shall act as Chairman.
effectively fulfill its vital task of promoting and
safeguarding the interests of the depositing public by
way of providing insurance coverage on bank deposits


The President of the Philippines may remove any guidelines: Provided, further, That in no case shall there
appointive member of the Board of Directors for any of be any diminution of existing salaries, benefits and other
the following reasons: emoluments;
(i) If the member is physically or mentally incapacitated (6) To approve policy on local and foreign travel, and the
that he or she cannot properly discharge his or her duties corresponding expenses, allowances and per diems, of
and responsibilities, and such incapacity has lasted for officers, employees, agents of the Corporation, which
more than six (6) months; or shall be comparable with the expenses, allowances and
(ii) If the member is guilty of acts or operations which are per diems of personnel of other financial institutions
of fraudulent or illegal character or which are manifestly based on prevailing market standards, notwithstanding
opposed to the aims and interests of the Corporation; or the provisions of Presidential Decree No. 1177, Executive
Order No. 292, Executive Order No. 248, as amended,
(iii) If the member no longer possesses the qualifications Executive Order No. 298, and similar laws;
specified in this Act; or
(7) To adopt an annual budget for, and authorize such
(iv) If the member does not meet the standards for expenditures by the Corporation, as are in the interest of
performance based on the evaluation by the Governance the effective administration and operation of the
Commission for Government-Owned or -Controlled Corporation;
Corporations under Republic Act No. 10149.
(8) To approve the target level of the Deposit Insurance
The presence of four (4) members shall constitute a Fund (DIF) and the methodology for determining
quorum. All decisions of the Board of Directors shall reserves for insurance and financial assistance losses;
require the concurrence of at least four (4) members.
(9) To review the organizational set-up of the Corporation
The compensation, per diems, allowances, incentives, and and adopt a new or revised organizational structure as it
other benefits for board members shall be determined by may deem necessary for the Corporation to undertake its
the Governance Commission for Government-Owned or mandate and functions;
-Controlled Corporations.
(10) To design, adopt and revise, as it may deem
In addition to the requirements of Republic Act No. 6713, necessary, an early separation plan for employees of the
otherwise known as the ‘Code of Conduct and Ethical Corporation to ensure availability of a human resource
Standards for Public Officials and Employees’, any pool qualified and capable of implementing the
member of the Board of Directors with personal or Corporation’s authorities under this Charter in a manner
pecuniary interest in any matter in the agenda of the responsive and attuned to market developments, and to
Board of Directors shall disclose his or her interest to the provide incentives for all those who shall be separated
Board and shall recuse from the meeting when the from the service. Notwithstanding any law to the
matter is taken up. The minutes shall reflect the contrary, these incentives shall be in addition to all
disclosure made and the recusal of the member gratuities and benefits the employee is entitled to under
concerned. existing laws; and
(b) The Board of Directors shall have the authority: (11) To promote and sponsor the local or foreign training
(1) To approve and issue rules and regulations for banks or study of personnel in the fields of banking, finance,
and the depositing public as it considers necessary for management, information technology and law. Towards
the effective discharge of its responsibilities; this end, the Corporation is hereby authorized to defray
the costs of such training or study. The Board shall
(2) To act as the policy-making body of the Corporation prescribe rules and regulations to govern the training or
and constitute Board committees to oversee the study programs of the Corporation.”
management, operations and administration of the
Corporation; PRESIDENT OF THE CORPORATION
(3) To establish a human resource management system COMPENSATION, POWERS AND DUTIES
which shall govern the selection, hiring, appointment, SECTION 4. The President of the Corporation shall be its
transfer, promotion, or dismissal of personnel. Such Chief Executive Officer and the Vice Chairman of its
system shall aim to establish professionalism and Board of Directors and his or her salary shall be fixed by
excellence at all levels of the Corporation in accordance the President of the Philippines upon the
with sound principles of management; recommendation of the Governance Commission for
(4) To approve a compensation structure as an integral Government-Owned or -Controlled Corporations, at a
component of the Corporation’s human resource sum commensurate to the importance and responsibility
development program based on job evaluation studies attached to the position. The sum total of the salary,
and wage surveys, and revise the same as it may deem allowances, benefits and other emoluments of the
necessary: Provided, That all positions in the Corporation President of the Corporation shall be higher than the
shall be governed by a compensation package, position compensation package of the next highest ranking
classification system and qualification standards executive of the Corporation.
approved by the Board based on a comprehensive job The powers and duties of the President of the
analysis and audit of actual duties and responsibilities. Corporation are:
The compensation structure shall be comparable to that
of other financial institutions based on prevailing market (a) To prepare the agenda for the meeting of the Board
standards, and shall provide for yearly merit reviews or and to submit for the consideration of the Board the
increases based on productivity. The Corporation shall policies and measures which he believes to be necessary
therefore be exempt from existing laws, rules and to carry out the purposes and provisions of this Act;
regulations on compensation package, position (b) To execute and administer the policies and measures
classification and qualification standards. It shall however approved by the Board;
endeavor to make its system conform as closely as (c) To direct and supervise the operations and internal
possible with the principles under Republic Act No. 6758, administration of the Corporation in accordance with the
as amended; policies established by the Board. The President may
(5) To appoint, establish the rank, fix the remuneration, delegate certain of his administrative responsibilities to
benefits, including health care services through a Health other officers of the Corporation, subject to the rules and
Maintenance Organization (HMO) and medical benefits regulations of the Board;
other than those provided for under Republic Act No. (d) To represent the Corporation in all dealings with other
7875, as amended, and remove any officer or employee of offices, agencies and instrumentalities of the government
the Corporation, for cause, subject to pertinent civil and with all other persons or entities, public or private,
service laws: Provided, That the Board of Directors may whether domestic, foreign or international;
delegate this authority to the President subject to specific


(e) To authorize, with his signature, upon prior authority of the purposes of this Act or included as part of the total
the Board, contracts entered into by the Corporation, deposits or of insured deposit: Provided, further, That
notes and securities issued by the Corporation, and the subject to the approval of the Board of Directors, any
annual reports, balance sheets, profits and loss insured bank which is incorporated under the laws of the
statements, correspondence and other documents of the Philippines which maintains a branch outside the
Corporation. The signature of the President may be in Philippines may elect to include for insurance its deposit
facsimile wherever appropriate; obligations payable only at such branch.
(f) To represent the Corporation, either personally or The Corporation shall not pay deposit insurance for the
through counsel, including private counsel, as may be following accounts or transactions:
authorized by the PDIC Board, in any legal proceeding or (1) Investment products such as bonds and securities,
action; trust accounts, and other similar instruments;
(g) To delegate, with the prior approval of the Board of (2) Deposit accounts or transactions which are fictitious
Directors, his power to represent the Corporation, as or fraudulent as determined by the Corporation;
provided in subsections (d) and (f) of this Section, to other
officers of the Corporation; and (3) Deposit accounts or transactions constituting, and/or
emanating from, unsafe and unsound banking practice/s,
(h) To exercise such other powers as may be vested in him as determined by the Corporation, in consultation with
by the Board. the Bangko Sentral ng Pilipinas, after due notice and
The President shall be assisted by a Vice President and hearing, and publication of a directive to cease and desist
other officials whose appointment and removal for cause issued by the Corporation against such deposit accounts,
shall be approved and whose salary shall be fixed by the transactions or practices; and
Board of Directors upon recommendation of the (4) Deposits that are determined to be the proceeds of an
President of the Corporation. During the absence or unlawful activity as defined under Republic Act No. 9160,
temporary incapacity of the President, or in case of as amended.
vacancy or permanent incapacity and pending
appointment of a new President of the Corporation by The actions of the Corporation taken under Section 5(g)
the President of the Philippines, the Board of Directors shall be final and executory, and may only be restrained
shall designate the officer-in-charge of the Corporation. or set aside by the Court of Appeals, upon appropriate
petition for certiorari on the ground that the action was
taken in excess of jurisdiction or with such grave abuse of
DEFINITION OF TERMS discretion as to amount to a lack or excess of jurisdiction.
The petition for certiorari may only be filed within thirty
SECTION 5. As used in this Act – (30) days from notice of denial of claim for deposit
(a) The term asset refers to movable, immovable, tangible, insurance.
or intangible resources or properties over which a bank (h) The term disputed claim refers to a claim or suit
has an established or equitable interest, including the against the assets of a closed bank, or for specific
proceeds of the sale of its bank and branch licenses performance, or breach of contract, or damages, of
subject to the approval of the Bangko Sentral ng Pilipinas. whatever nature or character, whether for money or
(b) The term asset distribution plan refers to the plan of otherwise, liquidated or unliquidated, fixed or contingent,
distribution of the assets of a closed bank to its creditors, matured or current, denied by the receiver.
based on its estimated realizable value as of a certain (i) The term insured bank means any bank the deposits of
cut-off date, prepared in accordance with the Rules on which are insured in accordance with the provisions of
Concurrence and Preference of Credits under the Civil this Act.
Code or other laws.
(j) The term insured deposit means the amount due to
An asset distribution plan may be partial when it pertains any bonafide depositor for legitimate deposits in an
to the distribution of a portion or some of the assets of insured bank as of the date of closure but not to exceed
the closed bank, or final when it pertains to the Five hundred thousand pesos (P500,000.00). Such
distribution of all the assets of the closed bank. amount shall be determined according to such
(c) The term Board of Directors means the Board of regulations as the Board of Directors may prescribe. In
Directors of the Corporation. determining such amount due to any depositor, there
shall be added together all deposits in the bank
(d) The term bank and banking institution shall be
maintained in the same right and capacity for his or her
synonymous and interchangeable and shall include
benefit either in his or her own name or in the name of
banks, commercial banks, savings banks, mortgage
others. A joint account regardless of whether the
banks, rural banks, development banks, cooperative
conjunction ‘and’, ‘or’, ‘and/or’ is used, shall be insured
banks, stock savings and loan associations and branches
separately from any individually-owned deposit account:
and agencies in the Philippines of foreign banks and all
Provided, That (1) if the account is held jointly by two or
other corporations authorized to perform banking
more natural persons, or by two or more juridical persons
functions in the Philippines.
or entities, the maximum insured deposit shall be divided
(e) The term closed bank refers to a bank placed under into as many equal shares as there are individuals,
liquidation by the Monetary Board. juridical persons or entities, unless a different sharing is
(f) The term creditor refers to any individual or entity with stipulated in the document of deposit, and (2) if the
a valid claim against the assets of the closed bank. account is held by a juridical person or entity jointly with
one or more natural persons, the maximum insured
(g) The term deposit means the unpaid balance of money deposit shall be presumed to belong entirely to such
or its equivalent received by a bank in the usual course of juridical person or entity: Provided, further, That the
business and for which it has given or is obliged to give aggregate of the interest of each co-owner over several
credit to a commercial, checking, savings, time or thrift joint accounts, whether owned by the same or different
account, evidenced by a passbook, certificate of deposit, combinations of individuals, juridical persons or entities,
or other evidence of deposit issued in accordance with shall likewise be subject to the maximum insured deposit
Bangko Sentral ng Pilipinas rules and regulations and of Five hundred thousand pesos (P500,000.00): Provided,
other applicable laws, together with such other furthermore, That the provisions of any law to the
obligations of a bank, which, consistent with banking contrary notwithstanding, no owner/holder of any
usage and practices, the Board of Directors shall passbook, certificate of deposit, or other evidence of
determine and prescribe by regulations to be deposit deposit shall be recognized as a depositor entitled to the
liabilities of the bank: Provided, That any obligation of a rights provided in this Act unless the passbook, certificate
bank which is payable at the office of the bank located of deposit, or other evidence of deposit is determined by
outside of the Philippines shall not be a deposit for any of the Corporation to be an authentic document or record of



the issuing bank: Provided, finally, That in case of a creditors of the closed bank in accordance with the Rules
condition that threatens the monetary and financial on Concurrence and Preference of Credits under the Civil
stability of the banking system that may have systemic Code or other laws.
consequences, as defined in Section 22 hereof, as (w) The term takeover refers to the act of physically taking
determined by the Monetary Board, the maximum possession and control of the premises, assets and affairs
deposit insurance cover may be adjusted in such amount, of a closed bank for the purpose of liquidating the bank.
for such a period, and/or for such deposit products, as
may be determined by a unanimous vote of the Board of (x) The term transfer deposit means, a deposit in an
Directors in a meeting called for the purpose and chaired insured bank made available to a depositor by the
by the Secretary of Finance, subject to the approval of the Corporation as payment of insured deposit of such
President of the Philippines. depositor in a closed bank and assumed by another
insured bank.
(k) The term liquidation refers to the proceedings under
Sections 12 to 16 of this Act. (y) The term trust funds means funds held by an insured
bank in a fiduciary capacity and includes without being
(l) The term liquidation court refers to the Regional Trial limited to, funds held as trustee, executor, administrator,
Court (RTC) of general jurisdiction where the petition for guardian or agent.
assistance in the liquidation of a closed bank is filed and
given due course. (z) The term valid claim refers to the claim recognized by
the receiver or allowed by the liquidation court.
(m) The term payout refers to the payment of insured
deposits. (aa) The term winding up period refers to the period
provided in Section 16 of this Act.
(n) The term petition for assistance in the liquidation of a
closed bank refers to the petition filed by the receiver
with the RTC in accordance with Section 16 of this Act. DEPOSIT INSURANCE COVERAGE
(o) The term purchase of assets and assumption of
SECTION 6. The deposit liabilities of any bank which is
liabilities refers to a transaction where an insured bank
engaged in the business of receiving deposits as herein
purchases any or all assets and assumes any or all
defined on the effective date of this Act, or which
liabilities of another bank under resolution or liquidation,
thereafter may engage in the business of receiving
as provided in this Act.
deposits, shall be insured with the Corporation.
(p) The term receiver refers to the Corporation or any of its
Whenever a bank is determined by the Bangko Sentral
duly authorized agents acting as receiver of a closed
ng Pilipinas to be capital deficient, the Corporation may
bank.
conduct an insurance risk evaluation on the bank to
(q) The term records include all documents, titles, papers enable it to assess the risks to the DIF. Such evaluation
and electronic data of the closed bank, including those may include the determination of: (i) the fair market value
pertaining to deposit accounts of and with the closed of the assets and liabilities of a bank; or (ii) the risk
bank, its assets, transactions and corporate affairs. classification of a bank; or (iii) possible resolution modes
(r) The term residual assets refer to assets, in cash or in under Section 11 of this Act, subject to such terms and
kind, to be turned over to the closed bank’s stockholders conditions as the PDIC Board may prescribe.
of record, in proportion to their interest in the closed bank
as of date of closure, after payment in full of liquidation
costs, fees and expenses, and the valid claims and surplus ASSESSMENT OF MEMBER BANKS
dividends to all the creditors. SECTION 7. (a) The assessment rate shall be determined
(s) The term resolution refers to the actions undertaken by the Board of Directors: Provided, That the assessment
by the Corporation under Section 11 of this Act to: rate shall not exceed one-fifth (1/5) of one per centum (1%)
per annum. The semi-annual assessment for each insured
(1) Protect depositors, creditors and the DIF; bank shall be in the amount of the product of one-half
(2) Safeguard the continuity of essential banking services (1/2) the assessment rate multiplied by the assessment
or maintain financial stability; and base but in no case shall it be less than Five thousand
pesos (P5,000.00). The assessment base shall be the
(3) Prevent deterioration or dissipation of bank assets. amount of the liability of the bank for deposits as defined
(t) The term risk-based assessment system pertains to a under subsection (g) of Section 5 without any deduction
method for calculating an insured bank’s assessment on for indebtedness of depositors.
the probability that the DIF will incur a loss with respect In addition, the Board of Directors may establish a
to the bank, and the likely amount of any such loss, based risk-based assessment system and impose a risk-based
on its risk rating that takes into consideration the assessment rate which shall not exceed two-fifth (2/5) of
following: one per centum (1%) per annum multiplied by the
(1) Quality and concentration of assets; assessment base.
(2) Categories and concentration of liabilities, both The semi-annual assessment base for one semi-annual
insured and uninsured, contingent and noncontingent; period shall be the average of the assessment base of the
(3) Capital position; bank as of the close of business on March thirty-one and
June thirty and the semi-annual assessment base for the
(4) Liquidity position; other semi-annual period shall be the average of the
(5) Management and governance; and assessment base of the bank as of the close of business
on September thirty and December thirty-one: Provided,
(6) Other factors relevant to assessing such probability, as That when any of said days is a nonbusiness day or legal
may be determined by the Corporation: holiday, either national or provincial, the preceding
(u) The term statement of affairs refers to a report of business day shall be used. The certified statements
financial condition of the closed bank at a given date, required to be filed with the Corporation under
showing the: (1) estimated realizable value of assets; (2) subsections (b) and (c) of this section shall be in such
classification of credits; and (3) estimated liabilities to be form and set forth such supporting information as the
settled. Board of Directors shall prescribe. The assessment
payments required from the insured banks under
(v) The term surplus dividends refers to the remaining subsections (b) and (c) of this section shall be made in
assets of the closed bank after satisfaction in full of all the such manner and at such time or times as the Board of
liquidation costs, fees and expenses, and valid claims. The Directors shall prescribe.
surplus dividends shall be computed at the legal rate of
interest from the date of takeover to cut-off date of the (b) On or before the 31st of July of each year, each insured
distribution plan, and shall be paid, in cash or in kind, to bank shall file with the Corporation a certified statement



showing for the six months ending on the preceding Corporation that the certified statement is false or
June thirty the amount of the assessment base and the fraudulent.
amount of the semiannual assessment due to the (h) Should any insured bank fail or refuse to pay any
Corporation for the period ending on the following assessment required to be paid by such bank under any
December thirty-one, determined in accordance with provision of this Act, and should the bank not correct
subsection (a) of this section, which shall contain or be such failure or refusal within thirty (30) days after written
verified by a written declaration that it is made under the notice has been given by the Corporation to an officer of
penalties of perjury. Each insured bank shall pay to the the bank citing this subsection, and stating that the bank
Corporation the amount of the semiannual assessment it has failed or refused to pay as required by the law, the
is required to certify. On or before the 31st day of January Corporation may, at its discretion, file a case for collection
of each year, each insured bank shall file with the before the appropriate court without prejudice to the
Corporation a similar certified statement for the six imposition of administrative sanctions allowed under the
months ending on the preceding December thirty-one provisions of this law on the bank officials responsible for
and shall pay to the Corporation the amount of the the nonpayment of assessment fees.
semiannual assessment for the period ending in the
following June thirty which it is required to certify. (as (i) The Corporation shall have the authority to collect a
amended by PD No 1940) special assessment from any member bank and
prescribe the terms and conditions thereof to maintain
(c) Each bank which becomes an insured bank shall not the target level of the DIF set by the Board of Directors in
be required to file any certified statement or pay any accordance with this Act.
assessment for the semi-annual period in which it
becomes an insured bank. On the expiration of such
period, each such bank shall comply with the provisions SANCTIONS AGAINST UNSAFE AND UNSOUND
of subsection (b) of this section except that the
semi-annual assessment base for its first certified BANKING PRACTICES
statement shall be the assessment base of the bank as of SECTION 8. (a) Whenever upon examination by the
the close of business on the preceding June thirty or Corporation into the condition of any insured bank, it
December thirty-one, whichever is applicable, shall be disclosed that an insured bank or its directors or
determined in accordance with subsection (a) of this agents have committed, are committing or about to
section. If such bank has assumed the liabilities for commit unsafe or unsound practices in conducting the
deposits of another bank or banks, it shall include such business of the bank, or have violated, are violating or
liabilities in its assessment base. The first certified about to violate any provisions of any law or regulation to
statement shall show as the amount of the first which the insured bank is subject, the Board of Directors
semi-annual assessment due to the Corporation, an shall submit the report of the examination to the
amount equal to the product of one-half of the annual Monetary Board to secure corrective action thereon. If no
assessment rate multiplied by such assessment base. such corrective action is taken by the Monetary Board
(d) All assessment collections and income from within forty-five (45) days from the submission of the
operations after expenses and charges shall be added to report, the Board of Directors shall, motu proprio, institute
the DIF under Section 17 hereof. Such expenses and corrective action which it deems necessary. The Board of
charges are: (1) the operating costs and expenses of the Directors may thereafter issue a cease and desist order,
Corporation for the calendar year; (2) additions to reserve and require the bank or its directors or agents concerned
to provide for insurance and financial assistance losses, to correct the practices or violations within forty-five (45)
net of recoverable amounts from applicable assets and days. However, if the practice or violation is likely to cause
collaterals, during the calendar year; and (3) the net insolvency or substantial dissipation of assets or earnings
insurance and financial assistance losses sustained in said of the bank, or is likely to seriously weaken the condition
calendar year. of the bank or otherwise seriously prejudice the interests
of its depositors and the Corporation, the period to take
(e) The Corporation (1) may refund to an insured bank any
corrective action shall not be more than fifteen (15) days.
payment of assessment in excess of the amount due to
The order may also include the imposition of fines
the Corporation or (2) may credit such excess toward the
provided in Section 26(g) hereof. The Board of Directors
payment of the assessment next becoming due from
shall duly inform the Monetary Board of the Bangko
such bank and upon succeeding assessments until the
Sentral ng Pilipinas of action it has taken under this
credit is exhausted.
subsection with respect to such practices or violations.
(f) Any insured bank which fails to file any certified
(b) The actions and proceedings provided in the
statement required to be filed by it in connection with
preceding subsections may be undertaken by the
determining the amount of any assessment payable by
Corporation if, in its opinion, an insured bank or its
the bank to the Corporation may be compelled to file
directors or agents have violated, are violating or about to
such statement by mandatory injunction or other
violate any provision of this Act or any order, rule or
appropriate remedy in a suit brought for such purpose by
instruction issued by the Corporation or any written
the Corporation against the bank and any officer or
condition imposed by the Corporation in connection with
officers thereof in any court of the Philippines of
any transaction with or grant by the Corporation.
competent jurisdiction in which such bank is located.
(c) The Corporation may terminate the insured status of
(g) The Corporation, in a suit brought in any court of
any bank that fails or refuses to comply, within thirty (30)
competent jurisdiction, shall be entitled to recover from
days from notice, with any cease-and-desist order issued
any insured bank the amount of any unpaid assessment
by the Corporation, or with any corrective action imposed
lawfully payable by such insured bank to the Corporation,
by the Monetary Board, under this section pertaining to a
whether or not such bank shall have filed any such
deposit-related unsafe and/or unsound banking practice.
certified statement and whether or not suit shall have
been brought to compel the bank to file any such Such termination shall be final and executory, and shall
statement. No action or proceeding shall be brought for be effective upon publication of the notice of termination
recovery of any assessment due to the Corporation or for in a newspaper of general circulation.
the recovering of any amount paid to the Corporation in The deposits of each depositor in the bank on the
excess of the amount due to it, unless such action or effective date of the termination of insurance coverage,
proceeding shall have been brought within five years less all subsequent withdrawals, shall continue to be
after the right accrued for which the claim is made, insured up to the maximum deposit insurance coverage
except where the insured bank has made or filed with the for a period of one hundred eighty (180) days. Additions
Corporation a false or fraudulent certified statement with to, or renewal of, existing deposits and new deposits in
the intent to evade, in whole or in part, the payment of such bank after the effective date of termination of
assessment, in which case the claim shall not have been
deemed to have accrued until the discovery by the



insured status of the bank shall not be insured by the such terms and conditions as may be imposed by the
Corporation. Board of Directors to protect the interest of the
The bank shall not advertise or represent that additions Corporation, and to write off the Corporation’s receivables
to, or renewal of, existing deposits and new deposits and assets which are no longer recoverable or realizable;
made after the effective date of termination aye covered (as added by RA No 7400, amended by RA No 10846)
by deposit insurance. Thirteenth – To determine qualified interested acquirers
SECTION 9. The Corporation as a corporate body shall or investors for any of the modes of resolution or
have the powers: liquidation of banks;
First— To adopt and use a corporate seal; Fourteenth – To determine the appropriate resolution
method and to implement the same for a bank subject of
Second— To have succession until dissolved by an Act of resolution; and
Congress;
Fifteenth – To determine the appropriate mode of
Third— To make contracts; liquidation of a closed bank and to implement the same.
Fourth— To sue and be sued, complain and defend, in SECTION 10. (a) The Board of Directors shall administer
any court of law in the Philippines. All suits of a civil the affairs of the Corporation fairly and impartially and
nature to which the Corporation shall be a part shall be without discrimination. The Corporation shall be entitled
deemed to arise under the laws of the Philippines. No to the free use of Philippine mail in the same manner as
attachment or execution shall be issued against the the other offices of the national government.
Corporation or its property before final judgment in any
suit, action or proceeding in any court. The Board of (b) The Board of Directors shall appoint examiners who
Directors shall designate an agent upon whom service of shall have power, on behalf of the Corporation to examine
process may be made in any province or city or any insured bank. Each such examiner shall have the
jurisdiction in which the insured bank is located; power to make a through examination of all the affairs of
the bank and in doing so, he shall have the power to
Fifth— To appoint by its Board of Directors such officers administer oaths, to examine and take and preserve the
and employees as are not otherwise provided for in this testimony of any the officers and agents thereof, and, to
Act, to define their duties, fix their compensation, require compel the presentation of books, documents, papers or
bonds of them and fix penalty thereof and to dismiss records necessary in his judgment to ascertain the facts
such officers and employees for cause; relative to the condition of the bank; and shall make a full
Sixth— To prescribe, by its Board of Directors, by-laws not and detailed report of the condition of the bank to the
inconsistent with law, regulating the manner in which its Corporation. The Board of Directors in like manner shall
general business may be conducted, and the privileges appoint claim agents who shall have the power to
granted to it by law may be exercised and enjoyed; investigate and examine all claims for insured deposits
and transferred deposits. Each claim agent shall have the
Seventh— To exercise, by its Board of Directors, or duly power to administer oaths and examine under oath and
authorized officers or agents, all powers specifically take and preserve testimony of any person relating to
granted by the provisions of this Act, and such incidental such claim. (as amended by EO No 890, s. of 1983, RA No
powers as shall be necessary to carry on the powers so 7400)
granted;
(b-1) The investigators appointed by the Board of
Eighth — To conduct examination of banks with prior Directors shall have the power on behalf of the
approval of the Monetary Board: Provided, That no Corporation to conduct investigations on frauds,
examination can be conducted within twelve (12) months irregularities and anomalies committed in banks, based
from the last examination date: Provided, however, That on reports of examination conducted by the Corporation
the Corporation may, in coordination with the Bangko and Bangko Sentral ng Pilipinas or complaints from
Sentral, conduct a special examination as the Board of depositors or from other government agency. Each such
Directors, by an affirmative vote of a majority of all of its investigator shall have the power to administer oaths, and
members, if there is a threatened or impending closure of to examine and take and preserve the testimony of any
a bank: Provided, further, That notwithstanding the person relating to the subject of investigation. For this
provisions of Republic Act No. 1405, as amended, Republic purpose, the Corporation may appoint or hire persons or
Act No. 6426, as amended, Republic Act No. 8791, and entities of recognized competence in forensic and fraud
other laws, the Corporation and/or Bangko Sentral may investigations as its agents. (as added by RA No 9302)
inquire into or examine deposit accounts and all
information related thereto in case there is a finding of (c) Each insured bank shall make to the Corporation
unsafe or unsound banking practice: Provided, finally, reports of condition in such form and at such times as the
That to avoid overlapping of efforts, the examination shall Board of Directors may require such reports to be
maximize the efficient use of the relevant reports, published in such manner, not inconsistent with any
information, and findings of the Bangko Sentral, which it applicable law, as it may direct. Every such bank which
shall make available to the Corporation. (as amended by fails to make or publish any such report within such time,
RA No 7400, 9302, 9576) as the Board of Directors may require, shall be subject to
a penalty of not more than Ten thousand pesos
Ninth— To act as receiver; and (P10,000.00) for each day of such failure recoverable by
Tenth— To prescribe by its Board of Directors such rules the Corporation for its use.
and regulations as it may deem necessary to carry out the (d) The Corporation shall have access to reports of
provisions of this Act. (as amended by RA No 6037) examination made by, and reports of condition made to
Eleventh. — The Corporation may establish its own the Bangko Sentral ng Pilipinas or its appropriate
provident fund which shall consist of contributions made supervising departments, and the Bangko Sentral ng
both by the Corporation and by its officers and Pilipinas shall also have access to reports of examination
employees to a common fund for the payment of made by, and reports of condition made to the
benefits to such officers or employees or their heirs. The Corporation: Provided, That the provisions of any law to
Board of Directors shall prepare and issue rules and the contrary notwithstanding, the Corporation shall
regulations as it may deem necessary to make effective likewise have access to reports, findings and any other
the establishment and operation of the fund. (as added information derived from any special or general
by PD No 1940) examination or inquiry conducted by the Bangko Sentral
in respect to bank fraud or serious irregularity in an
Twelfth — The provisions of Presidential Decree No. 1445, insured bank: Provided, That, the Corporation shall use
as amended, Executive Order No. 292, and other similar such reports and findings under similar terms and
laws notwithstanding, to compromise, condone or conditions prescribed by applicable laws on the Bangko
release, in whole or in part, any claim or settled liability to
the Corporation, regardless of the amount involved, under



Sentral. (as amended by EO No 890, s. of 1983, RA No (i) Legal assistance shall include the grant or advance of
7400) reasonable legal fees as determined by the Board of
(d-1) Each insured bank shall keep and maintain a true Directors to enable the concerned director, officer,
and accurate record or statement of its daily deposit employee or agent to engage counsel of his choice,
transactions consistent with the standards set by the subject to approval by the Board of Directors. (as added
Bangko Sentral ng Pilipinas and the Corporation. by RA No 9302, renumbered by RA No 9576)
Compliance with such standards shall be duly certified by Notwithstanding the provisions of this section and
the president of the bank and the compliance officer: Section 3 of this Act, members of the Board of Directors
Provided, That refusal or willful failure to issue the and personnel of the Corporation may become directors
required certification shall constitute a violation of this and officers of any bank and banking institution and of
section and shall subject such officers of the bank to the any entity related to such institution in connection with
sanctions provided for under Section 26(f) of this Act. (as financial assistance extended by the Corporation to such
added by RA No 9302) institution and when, in the opinion of the Board, it is
(e) Personnel of the Corporation are hereby prohibited appropriate to make such designation to protect the
from: interest of the Corporation.
(1) being an officer, director, consultant, employee or Borrowing from any bank or banking institution by
stockholder, directly or indirectly, of any bank or banking examiners and other personnel of the examination
institution except as otherwise provided in this Act; departments of the Corporation shall be prohibited only
with respect to the particular institution in which they are
(2) receiving any gift or thing of value from any officer, assigned, or are conducting an examination. Personnel of
director or employee thereof; other departments, offices or units of the Corporation
(3) revealing in any manner, except as provided in this Act shall likewise be prohibited from borrowing from any
or under order of the court, information relating to the bank or banking institution during the period of time that
condition or business of any such institution. This a transaction of such institution with the Corporation is
prohibition shall not apply to the giving of information to being evaluated, processed or acted upon by such
the Board of Directors, the President of the Corporation, personnel: Provided, however, That the Board may, at its
Congress, any agency of government authorized by law, discretion, indicate the position levels or functional
or to any person authorized by either of them in writing groups to which the prohibition is applicable.
to receive such information. (as amended by RA No 9302) Borrowing by all full-time personnel of the Corporation
(f) The Corporation shall underwrite or advance all legal from any bank or banking institution shall be secured
costs and expenses, including legal fees and other and disclosed to the Board, and shall be subject to such
expenses of external counsel, or provide legal assistance further rules and regulations as the Board may prescribe.
to, directors, officers, employees or agents of the (as amended RA No 7400, 9302)
Corporation in connection with any civil, criminal,
administrative or any other action or proceeding, to
which such director, officer, employee or agent is made a BANK RESOLUTION
party by reason of, or in connection with, the exercise of
authority or performance of functions and duties under SECTION 11. (a) The Corporation, in coordination with the
this Act: Provided, That such legal protection shall not Bangko Sentral ng Pilipinas, may commence the
apply to any civil, criminal, administrative or any action or resolution of a bank under this section upon:
proceeding that may be initiated by the Corporation, in (1) Failure of prompt corrective action as declared by the
whatever capacity, against such director, officer, Monetary Board; or
employee or agent: Provided, further, That directors,
(2) Request by a bank to be placed under resolution.
officers, employees or agents who shall resign, retire,
transfer to another agency or be separated from the The Corporation shall inform the hank of its eligibility for
service, shall continue to be provided with such legal entry into resolution.
protection in connection with any act done or omitted to (b) The Bangko Sentral ng Pilipinas shall inform the
be done by them in good faith during their tenure or Corporation of the initiation of prompt corrective action
employment with the Corporation: Provided, finally, That on any bank and shall be authorized to share with the
in the event of a settlement or compromise, Corporation all information, agreements or documents,
indemnification shall be provided only in connection with including any order of the Monetary Board, in relation to
such matters covered by the settlement as to which the the prompt corrective action. The Corporation shall have
Corporation is advised by counsel that the persons to be the authority to inquire and monitor the status of banks
indemnified did not commit any negligence or under prompt corrective action.
misconduct. (as added by RA No 9302)
(c) When there is a failure of prompt corrective action as
(g) The costs and expenses incurred in defending the declared by the Monetary Board due to capital deficiency,
aforementioned action, suit or proceeding may be paid the Corporation, its duly authorized officers or employees,
by the Corporation in advance of the final disposition of may examine, inquire or look into the deposit records of a
such action, suit or proceeding upon receipt of an bank: Provided, That such authority may not be exercised
undertaking by or on behalf of the director, officer, when the failure of prompt corrective action is due to
employee or agent to repay the amount advanced should grounds other than capital deficiency. For this purpose,
it ultimately be determined by the Board of Directors that banks, their officers and employees are hereby mandated
he is not entitled to be indemnified as provided in this to disclose and report to the Corporation or its duly
subsection. (as added by RA No 9302) authorized officers and employees, deposit account
(h) Unless the actions of the Corporation or any of its information in said bank.
officers and employees are found to be in willful violation The Corporation, its duly authorized officers or employees
of this Act, performed in bad faith, with malice and/or are prohibited from disclosing information obtained
gross negligence, the Corporation, its directors, officers, under this section to any person, government official,
employees and agents are held free and harmless to the bureau or office. Any act done pursuant to this section
fullest extent permitted by law from any liability, and they shall not be deemed as a violation of Republic Act No.
shall be indemnified for any and all liabilities, losses, 1405, as amended, Republic Act No. 6426, as amended,
claims, demands, damages, deficiencies, costs and Republic Act No. 8791, and other similar laws protecting
expenses of whatsoever kind and nature that may arise in or safeguarding the secrecy or confidentiality of bank
connection with the performance of their functions, deposits: Provided, That any unauthorized disclosure of
without prejudice to any criminal liability under existing the information under this section shall be subject to the
laws. (as added by RA No 9576)


same penalty under the foregoing laws protecting the For this purpose, banks closed by the Monetary Board
secrecy or confidentiality of bank deposits. shall no longer be rehabilitated.
(d) The stockholders, directors, officers or employees of
the bank shall have the following obligations:
AUTHORITIES OF A RECEIVER AND EFFECTS OF
(1) Ensure bank compliance with the terms and
conditions prescribed by the Corporation for the
PLACEMENT OF A BANK UNDER LIQUIDATION
resolution of the bank; SECTION 13. (a) The receiver is authorized to adopt and
(2) Cause the engagement, with the consent of the implement, without need of consent of the stockholders,
Corporation, of an independent appraiser or auditor for board of directors, creditors or depositors of the closed
the purpose of determining the valuation of the bank bank, any or a combination of the following modes of
consistent with generally accepted valuation standards; liquidation:
(3) Ensure prudent management and administration of (1) Conventional liquidation; and
the bank’s assets, liabilities and records; and (2) Purchase of assets and/or assumption of liabilities.
(4) Cooperate with the Corporation in the conduct or (b) In addition to the powers of a receiver provided under
exercise of any or all of its authorities under this Act and existing laws, the Corporation, as receiver of a closed
honor in good faith its commitment or undertaking with bank, is empowered to:
the Corporation on the resolution of the bank.
(1) Represent and act for and on behalf of the closed bank;
(e) Within a period of one hundred eighty (180) days from
(2) Gather and take charge of all the assets, records and
a bank’s entry into resolution, the Corporation, through
affairs of the closed bank, and administer the same for
the affirmative vote of at least five (5) members of the
the benefit of its creditors;
PDIC Board, shall determine whether the bank may be
resolved through the purchase of all its assets and (3) Convert the assets of the closed bank to cash or other
assumption of all its liabilities, or merger or consolidation forms of liquid assets, as far as practicable;
with, or its acquisition, by a qualified investor. (4) Bring suits to enforce liabilities of the directors,
For this purpose, the Corporation may: officers, employees, agents of the closed bank and other
entities related or connected to the closed bank or to
(1) Determine a resolution package for the bank;
collect, recover, and preserve all assets, including assets
(2) Identify and, with the approval of the Monetary Board, over which the bank has equitable interest;
pre-qualify possible acquirers or investors;
(5) Appoint or hire persons or entities of recognized
(3) Authorize pre-qualified acquirers or investors to competence in banking, finance, asset management or
conduct due diligence on the bank, for purposes of remedial management, as its deputies, assistants or
determining the valuation of a bank through an objective agents, to perform such powers and functions of the
and thorough review and appraisal of its assets and Corporation as receiver of the closed bank, or assist in the
liabilities, and assessment of risks or events that may performance thereof;
affect its valuation; and
(6) Appoint or hire persons or entities of recognized
(4) Conduct a bidding to determine the acquirer of the competence in forensic and fraud investigations;
bank.
(7) Pay accrued utilities, rentals and salaries of personnel
(f) In determining the appropriate resolution method for of the closed bank for a period not exceeding three (3)
a bank, the Corporation shall consider the: months, from available funds of the closed bank;
(1) Fair market value of the assets of the bank, its (8) Collect loans and other claims of the closed bank and
franchise, as well as the amount of its liabilities; for this purpose, modify, compromise or restructure the
(2) Availability of a qualified investor; terms and conditions of such loans or claims as may be
deemed advantageous to the interests of the creditors of
(3) Least cost to the DIF; and the closed bank;
(4) Interest of the depositing public. (9) Hire or retain private counsel as may be necessary;
(g) The Corporation may appoint or hire persons or (10) Borrow or obtain a loan, or mortgage, pledge or
entities of recognized competence in banking, finance, encumber any asset of the closed bank, when necessary
asset management or remedial management, as its to preserve or prevent dissipation of the assets, or to
agents, to perform such powers and functions of the redeem foreclosed assets of the closed bank, or to
Corporation in the resolution of a bank, or assist in the minimize losses to its depositors and creditors;
performance thereof.
(11) If the stipulated interest rate on deposits is unusually
(h) The PDIC Board shall prescribe the guidelines or high compared with prevailing applicable interest rates,
criteria for a bank to be placed under resolution. the Corporation as receiver, may exercise such powers
(i) Upon a determination by the Corporation that the which may include a reduction of the interest rate to a
bank may not be resolved, the Monetary Board may act in reasonable rate: Provided, That any modifications or
accordance with Section 30 of Republic Act No. 7653 or reductions shall apply only to earned and unpaid interest;
the New Central Bank Act. (12) Utilize available funds of the bank, including funds
(j) Bank resolution involving the purchase of all assets and generated by the receiver from the conversion of assets
assumption of all liabilities of a bank shall be exempt to pay for reasonable costs and expenses incurred for the
from the provisions of Act No. 3952, otherwise known as preservation of the assets, and liquidation of, the closed
‘The Bulk Sales Law’. bank, without need for approval of the liquidation court;
(k) The provisions of this section are without prejudice to For banks with insufficient funds, the Corporation is
any action that the Monetary Board may take under authorized to advance the foregoing costs and expenses,
existing laws. and collect payment, as and when funds become
available.
(13) Charge reasonable fees for the liquidation of the bank
LIQUIDATION OF A CLOSED BANK from the assets of the bank: Provided, That payment of
SECTION 12. (a) Whenever a bank is ordered closed by the these fees, including any unpaid advances under the
Monetary Board, the Corporation shall be designated as immediately preceding paragraph, shall be subject to
receiver and it shall proceed with the takeover and approval by the liquidation court;
liquidation of the closed bank in accordance with this Act. (14) Distribute the available assets of the closed bank, in
cash or in kind, to its creditors in accordance with the



Rules on Concurrence and Preference of Credits under closure shall not give any preference to the attaching or
the Civil Code or other laws; garnishing party. Upon motion of the receiver, the
(15) Dispose records of the closed bank that are no longer preliminary attachment or garnishment shall be lifted
needed in the liquidation in accordance with guidelines and/or discharged.
set by the PDIC Board of Directors, notwithstanding the (4) On labor relations
laws on archival period and disposal of records; and Notwithstanding the provisions of the Labor Code, the
(16) Exercise such other powers as are inherent and employer-employee relationship between the closed
necessary for the effective discharge of the duties of the bank and its employees shall be deemed terminated
Corporation as receiver. upon service of the notice of closure of the bank in
The Board of Directors shall adopt such policies and accordance with this Act. Payment of separation pay or
guidelines as may be necessary for the performance of benefits provided for by law shall be made from available
the above powers by personnel, deputies, assistants and assets of the bank in accordance with the Rules on
agents of the Corporation. Concurrence and Preference of Credits under the Civil
Code or other laws.
(c) After the payment of all liabilities and claims against
the closed bank, the Corporation shall pay surplus, if any, (5) Contractual obligations
dividends at the legal rate of interest from date of The receiver may cancel, terminate, rescind or repudiate
takeover to date of distribution to creditors and claimants any contract of the closed bank that is not necessary for
of the closed bank in accordance with the Rules on the orderly liquidation of the bank, or is grossly
Concurrence and Preference of Credits under the Civil disadvantageous to the closed bank, or for any ground
Code or other laws before distribution to the shareholders provided by law.
of the closed bank. (6) On interest payments
(d) The officers, employees, deputies, assistants and The liability of a bank to pay interest on deposits and all
agents of the receiver shall have no liability and shall not other obligations as of closure shall cease upon its closure
be subject to any action, claim or demand in connection by the Monetary Board without prejudice to the first
with any act done or omitted to be done by them in good paragraph of Section 85 of Republic Act No. 7653 (the
faith in connection with the exercise of their powers and New Central Bank Act): Provided, That the receiver shall
functions under this Act and other applicable laws, or have the authority, without need for approval of the
other actions duly approved by the court. liquidation court, to assign, as payment to secured
(e) The placement of a bank under liquidation shall have creditors, the bank assets serving as collaterals to their
the following effects: respective loans up to the extent of the outstanding
(1) On the corporate franchise or existence obligations, including interest as of date of closure of the
hank, as validated by the receiver. The valuation of the
Upon placement by the Monetary Board of a bank under asset shall be based on the prevailing market value of the
liquidation, it shall continue as a body corporate until the collaterals as appraised by an independent appraiser on
termination of the winding-up period under Section 16 of an ‘as is where is’ basis.
this Act. Such continuation as a body corporate shall only
be for the purpose of liquidating, settling and closing its (7) Liability for penalties and surcharges for late payment
affairs and for the disposal, conveyance or distribution of and nonpayment of taxes
its assets pursuant to this Act. The receiver shall represent From the time of closure, the closed bank shall not be
the closed bank in all cases by or against the closed bank liable for the payment of penalties and surcharges arising
and prosecute and defend suits by or against it. In no from the late payment or nonpayment of real property
case shall the bank be reopened and permitted to tax, capital gains tax, transfer tax and similar charges.
resume banking business after being placed under (8) Bank charges and fees on services
liquidation.
The receiver may impose, on behalf of the closed bank,
(2) On the powers and functions of its directors, officers charges and fees for services rendered after bank closure,
and stockholders such as, but not limited to, the execution of pertinent
The powers, voting rights, functions and duties, as well as deeds and certifications.
the allowances, remuneration and perquisites of the (9) Actions pending for or against the closed bank
directors, officers, and stockholders of such bank are
terminated upon its closure. Accordingly, the directors, Except for actions pending before the Supreme Court,
officers, and stockholders shall be barred from interfering actions pending for or against the closed bank in any
in any way with the assets, records, and affairs of the court or quasi-judicial body shall, upon motion of the
bank. receiver, be suspended for a period not exceeding one
hundred eighty (180) days and referred to mandatory
The receiver shall exercise all authorities as may be mediation. Upon termination of the mediation, the case
required to facilitate the liquidation of the closed bank for shall be referred back to the court or quasi-judicial body
the benefit of all its creditors. for further proceedings.
(3) On the assets (10) Final decisions against the closed bank
Upon service of notice of closure as provided in Section 14 The execution and enforcement of a final decision of a
of this Act, all the assets of the closed bank shall he court other than the liquidation court against the assets
deemed in custodia legis in the hands of the receiver, and of a closed bank shall be stayed. The prevailing parly shall
as such, these assets may not be subject to attachment, file the final decision as a claim with the liquidation court
garnishment, execution, levy or any other court and settled in accordance with the Rules on Concurrence
processes. A’ judge, officer of the court or any person who and Preference of Credits under the Civil Code or other
shall issue, order, process or cause the issuance or laws.
implementation of the garnishment order, levy,
attachment or execution, shall be liable under Section 27 (11) Docket and other court fees
of this Act: Provided, however, That collaterals securing Payment of docket and other court fees relating to all
the loans and advances granted by the Bangko Sentral cases or actions filed by the receiver with any judicial or
ng Pilipinas shall not be included in the assets of the quasi-judicial bodies shall be deferred until the action is
closed bank for distribution to other creditors: Provided, terminated with finality. Any such fees shall constitute as
further, That the proceeds in excess of the amount a first Hen on any judgment in favor of the closed bank or
secured shall be returned by the Bangko Sentral ng in case of unfavorable judgment, such fees shall be paid
Pilipinas to the receiver. as liquidation costs and expenses during the distribution
Any preliminary attachment or garnishment on any of of the assets of the closed bank.
the assets of the closed bank existing at the time of



(12) All assets, records, and documents in the possession

of the closed bank at the time of its closure are presumed
held by the bank in the concept of an owner. CONVENTIONAL LIQUIDATION
(13) The exercise of authority, functions, and duties by the
receiver under this Act shall be presumed to have been A. ASSET MANAGEMENT AND CONVERSION
performed in the regular course of business. SECTION 16. (a) The assets gathered by the receiver shall
(14) Assets and documents of the closed bank shall retain be evaluated and verified as to their existence, ownership,
their private nature even if administered by the receiver. condition, and other factors to determine their realizable
Matters relating to the exercise by the receiver of the value. In the management, preservation and disposition
functions under this Act shall be subject to visitorial audit of assets, the receiver shall be guided by cost-benefit
only by the Commission on Audit. considerations, resources of the closed bank, and
potential asset recovery.
(b) The conversion of the assets of the closed bank shall
NOTICE OF CLOSURE AND TAKEOVER be carried out in a fair and transparent manner in
ACTIVITIES accordance with the rules and procedures as may be
determined by the receiver.
SECTION 14. (a) Upon the designation of the Corporation
as receiver of a closed bank, it shall serve a notice of (c) In the management and/or conversion of the assets of
closure to the highest-ranking officer of the bank present the closed bank, the receiver shall have the authority to:
in the bank premises, or in the absence of such officer, (1) Represent the closed bank before the Land
post the notice of closure in the bank premises or on its Registration Authority (LRA), the Bureau of Lands, the
main entrance. The closure of the bank shall be deemed Register of Deeds, the Land Transportation Office (LTO),
effective upon the service of the notice of closure. the Assessor’s Office or other appropriate office of the
Thereafter, the receiver shall takeover the bank and local government unit, the Securities and Exchange
exercise the powers of the receiver as provided in this Act. Commission (SEC), or such other similar government
(b) The receiver shall have authority to use reasonable agencies or private entities in:
force, including the authority to force open the premises (i) Verifying the authenticity of ownership documents;
of the bank, and exercise such acts necessary to take
actual physical possession and custody of the bank and (ii) Registering the interest of the closed bank on a
all its assets, records, documents, and take charge of its specific property;
affairs upon the service of the notice of closure. (iii) Consolidating ownership over an asset of the closed
(c) Directors, officers, employees or agents of a bank hold bank;
money and other assets of the bank in trust or under (iv) Securing certified true copies of documents held by
administration or management by them for the bank in the foregoing agencies/entities in relation to an asset of
their fiduciary capacity. the closed bank;
Upon service of the notice of closure to the bank, all (v) Securing the appropriate certification from the
directors, officers, employees or agents of the closed bank foregoing agencies/entities in relation to an asset of the
shall have the duty to immediately account for, surrender closed bank; and
and turn over to the receiver, and provide information
(vi) Performing other related activities;
relative to, the assets, records, and affairs of the closed
bank in their possession, custody, administration or (2) Conduct a physical or ocular inspection of the
management. properties owned by, or mortgaged to, the closed bank,
to determine their existence and present condition;
(d) When the circumstances so warrant, the local
government unit and law enforcement agencies (3) Determine the disposal price of assets in accordance
concerned shall, upon request, immediately provide with generally accepted valuation principles, standards
assistance to the receiver during the service of notice of and practices, subject to such guidelines as the receiver
closure and actual takeover operations to ensure the may determine;
orderly conduct thereof and the security and safety of the (4) Dispose real or personal properties of the closed bank
personnel of the receiver and the employees of the closed through bidding, negotiated sale or any other mode
bank. including lease with option to purchase, whether by piece
or by lot, as may be reasonably determined by the
receiver based on cost-benefit considerations and to
PURCHASE OF ASSETS AND ASSUMPTION OF allow efficient distribution of assets to creditors; and
LIABILITIES (5) Engage third parties to assist in the liquidation,
SECTION 15. (a) The receiver shall have the authority to manage and/or dispose the assets, handle cases filed
facilitate and implement the purchase of the assets of the against or by the closed bank, subject to such guidelines
closed bank and the assumption of its liabilities by as determined by the receiver.
another insured bank, without need for approval of the (d) Notwithstanding any provision of law to the contrary,
liquidation court. The exercise of this authority shall be in the following rules shall apply to the management and/or
accordance with the Rules on Concurrence and conversion by the receiver of the assets of the closed
Preference of Credits under the Civil Code or other laws, bank:
subject to such terms and conditions as the Corporation
may prescribe. The disposition of the branch licenses and (1) Upon notification of the closure of a bank, the LRA, the
other bank licenses of the closed bank shall be subject to Bureau of Lands, the Register of Deeds, the LTO, the
the approval of the Bangko Sentral ng Pilipinas. assessor’s office or other appropriate office of the local
government unit, or such other similar government
(b) Such action of the receiver to determine whether a agencies shall not allow any transaction affecting the
bank may be the subject of a purchase of assets and assets of the closed bank without the consent of the
assumption of liabilities transaction shall be final and receiver.
executory, and may not be set aside by any court.
(2) Upon issuance by the Monetary Board of the
resolution ordering the closure of a bank, any person or
entity in custody or possession of assets or records of the
closed bank, including, but not limited to, the closed
bank’s deposit accounts, titles to real property, collaterals,
promissory notes, evidence of indebtedness or
investments shall immediately turn over custody of said


assets and records to the receiver. Such obligation shall and the receiver, its officers, employees or agents, are
cover evidences of deposit such as passbooks or forever discharged from any and all claims and/or liability
certificates of deposit issued by the bank to its depositors. arising from or in connection with the liquidation of the
Pending turnover, all persons or entities in custody or closed bank.
possession of any asset or record of the closed bank shall (o) The receiver shall submit a final report on the
hold the said assets or records in trust for the receiver. implementation of the approved final asset distribution
(3) The persons or entities in custody or possession of plan to the Monetary Board and the SEC after the
such asset shall not allow, authorize or cause the expiration of the winding-up period provided in this Act.
withdrawal, transfer, disposition, removal, conversion, (p) The Supreme Court shall promulgate the appropriate
concealment, or other transaction involving or relating to procedural rules to implement this section.
the subject asset, unless otherwise directed by the
receiver.
(e) The receiver shall have the authority to invest funds C. WINDING-UP
received from the conversion of the assets of the closed (q) The creditors shall have a period of six (6) months from
bank in government securities, other the date of publication of notice of the approval by the
government-guaranteed marketable securities or court of the final asset distribution plan of the closed
investment-grade debt instruments. bank within which to claim payment of the principal
(f) The proceeds of the sale of the bank and branch obligations and surplus dividends. During this six-month
licenses shall be for the benefit of the creditors of the period, the receiver shall hold as trustee the assets
closed bank which shall be distributed in accordance allocated in the final asset distribution plan for said
with this Act and the Rules on Concurrence and creditors.
Preference of Credits under the Civil Code or other laws. Failure by the creditor to comply with the documentary
requirements within the prescribed period and/or refusal
to accept the asset as payment shall be deemed as
B. PETITION FOR ASSISTANCE IN THE abandonment or waiver of his or her right to payment.
LIQUIDATION OF A CLOSED BANK
(r) The individual stockholders of record or their
(g) A petition for assistance in the liquidation is a special duly-authorized representative or the court-appointed
proceeding for the liquidation of a closed bank, and stockholders’ representative shall have a period of six (6)
includes the declaration of the concomitant right of its months from publication of notice of the approval by the
creditors and the order of payment of their valid claims in court of the final asset distribution plan of the closed
the disposition of its assets. bank within which to claim the residual assets. During
Any proceeding initiated under this section shall be this six-month period, the receiver shall hold as trustee
considered in rem. Jurisdiction over all persons affected the assets allocated in the final asset distribution plan for
by the proceeding shall be considered as acquired upon said stockholders of record.
publication of the order setting the case for initial hearing Failure by the individual stockholders of record or their
in any newspaper of general circulation in the Philippines. duly-authorized representative or the court-appointed
(h) The liquidation court shall have exclusive jurisdiction stockholders’ representative to comply with the
to adjudicate disputed claims against the closed banks, documentary requirements within the prescribed period
assist in the enforcement of individual liabilities of the and/or refusal to accept the residual assets in kind shall
stockholders, directors and officers and decide on all be deemed as abandonment or waiver of right to receive
other issues as may be material to implement the the residual assets.
distribution plan adopted by the Corporation for general (s) After the lapse of the six-month period provided in
application to all closed banks. paragraphs (q) and (r) of this section, all assets which
(i) The provisions of Republic Act No. 8799, otherwise remain unclaimed by the creditors and/or stockholders of
known as ‘The Securities Regulation Code’, and Supreme record shall be turned over to the Bureau of Treasury.
Court Administrative Matter No. 00-8-10-SC, entitled, ‘The (t) The receiver shall continue to keep all the pertinent
Rules of Procedure on Corporate Rehabilitation’, shall not records of the closed bank for a period of six (6) months
be applicable to the petition for assistance in the from the date of publication of the approval of the final
liquidation of the closed bank. asset distribution plan.
(j) The petition shall be filed in the RTC which has After the lapse of this period, the receiver is authorized to
jurisdiction over the principal office of the closed bank or dispose of the same in accordance with the rules and
the principal office of the receiver, at the option of the regulations to be prescribed by the receiver.
latter.
SECTION 17. To carry out the purposes of this Act, the
(k) The petition shall be filed ex parte within a reasonable permanent insurance fund shall be Three billion pesos
period from receipt of the Monetary Board Resolution (P3,000,000,000.00).
placing the bank under liquidation.
The Deposit Insurance Fund shall be the capital account
(1) All persons or entities with claims against the assets of of the Corporation and shall principally consist of the
the closed bank shall file their claims with the receiver following: (i) the Permanent Insurance Fund; (ii)
within sixty (60) days from the date of publication of the assessment collections, subject to the charges
notice of closure. Claims filed outside the foregoing enumerated in Section 6 (d); (iii) reserves for insurance
prescribed period shall be disallowed. and financial assistance losses; and (iv) retained earnings:
Claims denied by the receiver shall be filed with the Provided: That the reserves for insurance and financial
liquidation court within sixty (60) days from receipt of the assistance losses and retained earnings shall be
final notice of denial of claim. maintained at a reasonable level to ensure capital
adequacy: Provided, further, That the Corporation may,
(m) A claim whose validity has not yet been determined within two (2) years from the passage of this Act, and
with finality at the time of the submission of the final every five (5) years thereafter, conduct a study on the
asset distribution plan, either by reason of a pending suit need to adjust the amount of the Permanent Insurance
or for whatever reason, shall be considered as contingent Fund, insurance cover, assessment rate and assessment
claim and shall not be paid under the proposed final base, and thereafter make the necessary
asset distribution plan. recommendation to Congress. For this purpose, the
(n) Upon finality of the order approving the final asset Corporation may hire the services of actuarial consultants
distribution plan, the petition for assistance in the to determine, among others, the affordability of
liquidation of a closed bank shall henceforth be, for all assessment rates, analysis and evaluation of insurance
intents and purposes, considered closed and terminated


risk, and advisability of imposing varying assessment appropriate, in a newspaper circulated in the community
rates or insurance cover of different bank categories. or communities where the closed bank or its branches
are located.
(b) Payment of an insured deposit to any person by the
DIVIDEND DECLARATION Corporation shall discharge the Corporation, and
SECTION 18. Consistent with the policy of the State to payment of a transferred deposit to any person by the
generate, preserve, maintain faith and confidence in the new bank or by an insured bank in which a transferred
country’s banking system, the Corporation shall build up deposit has been made available shall discharge the
and maintain the DIF at the target level set by the PDIC Corporation and such new bank or other insured bank, to
Board of Directors. Such target level shall be subject to the same extent that payment to such person by the
periodic review and may be adjusted as necessary. closed bank would have discharged it from liability for the
insured deposit.
The Corporation is exempt from Republic Act No. 7656;
instead, the Corporation shall remit dividends to the (c) Except as otherwise prescribed by the Board of
national government only if the target DIF level for the Directors, neither the Corporation nor such other insured
applicable year has been reached. For purposes of bank shall be required to recognize as the owner of any
computing the amount of dividends to be declared and portion of a deposit evidenced by a passbook, certificate
remitted to the national government, all assessment of deposit or other evidence of deposit determined by the
collections shall not be considered as income. The Corporation to be an authentic document or record of the
dividend rate shall be at least fifty percent (50%) of the closed bank under a name other than that of the
income from other sources only. claimant, any person whose name or interest as such
owner is not disclosed on the passbook, certificate of
deposit or other evidence of deposit of such closed bank
PAYMENT OF INSURED DEPOSITS as part owner of said deposit, if such recognition would
increase the aggregate amount of the insured deposits in
SECTION 19. Whenever an insured bank shall have been such closed bank.
closed by the Monetary Board pursuant to Section 30 of
Republic Act No. 7653, or upon expiration or revocation of (d) The Corporation may withhold payment of such
a bank’s corporate term, payment of the insured deposits portion of the insured deposit of any depositor in a closed
on such closed bank shall be made by the Corporation as bank as may be required to provide for the payment of
soon as possible either (1) by cash or (2) by making any liability of such depositor as a stockholder of the
available to each depositor a transferred deposit in closed bank, or of any liability of such depositor to the
another insured bank in an amount equal to insured closed bank or its receiver, which is not offset against a
deposit of such depositor: Provided, however, That the claim due from such bank, pending the determination
Corporation, in its discretion, may require proof of claims and payment of such liability by such depositor or any
to be filed before paying the insured deposits, and that in other liable therefor.
any case where the Corporation is not satisfied as to the (e) Unless otherwise waived by the Corporation, if the
validity of a claim for an insured deposit, it may require depositor in the closed bank shall fail to claim his insured
final determination of a court of competent jurisdiction deposits with the Corporation within two (2) years from
before paying such claim: Provided, further, That failure to actual takeover of the closed bank by the receiver, or does
settle the claim, within six (6) months from the date of not enforce his claim filed with the corporation within
filing of claim for insured deposit, where such failure was two (2) years after the two-year period to file a claim as
due to grave abuse of discretion, gross negligence, bad mentioned hereinabove, all rights of the depositor
faith, or malice, shall, upon conviction, subject the against the Corporation with respect to the insured
directors, officers or employees of the Corporation deposit shall be barred; however, all rights of the
responsible for the delay, to imprisonment from six (6) depositor against the closed bank and its shareholders or
months to one (1) year: Provided, furthermore, That the the receivership estate to which the Corporation may
period shall not apply if the validity of the claim requires have become subrogated, shall thereupon revert to the
the resolution of issues of facts and or law by another depositor. Thereafter, the Corporation shall be discharged
office, body or agency including the case mentioned in from any liability on the insured deposit.
the first proviso or by the Corporation together with such
other office, body or agency.
SECTION 20. The Corporation, upon payment of any CORPORATE FUNDS AND ASSETS
depositor as provided for in Section 19 of this Act, shall be SECTION 22. (a) Subject to guidelines and limits as
subrogated to all rights of the depositor against the approved by the Board of Directors, money of the
closed bank to the extent of such payment. Such Corporation denominated in the local currency, not
subrogation shall include the right on the part of the otherwise employed, shall be invested in obligations of
Corporation to receive the same dividends and payments the Republic of the Philippines or in obligations
from the proceeds of the assets of such closed bank and guaranteed as to principal and interest by the Republic of
recoveries on account of stockholders’ liability as would the Philippines.
have been payable to the depositor on a claim for the
insured deposits: Provided, That such depositor shall The Corporation may also invest in debt instruments
retain his or her claim for any uninsured portion of his or denominated in foreign currencies issued or guaranteed
her deposit, which legal preference shall be the same as by the Republic of the Philippines, or debt instruments
that of the subrogated claim of the Corporation for its denominated in freely convertible foreign currencies
payment of insured deposits. All payments by the issued by supranationals, multilateral agencies, or foreign
Corporation of insured deposits in closed banks partake governments with at least an investment grade credit
of the nature of public funds, and as such, must be rating.
considered a preferred credit in the order of preference The Corporation shall likewise be authorized to buy
under Article 2244 (9) of the New Civil Code. and/or sell debt instruments and foreign currencies from
SECTION 21. (a) The Corporation shall commence the any government securities eligible dealers or any
determination of insured deposits due the depositors of a counterparties or brokers, accredited by the PDIC Board.
closed bank upon its actual takeover of the closed bank. For this purpose, the Corporation shall be authorized to
The Corporation shall give notice to the depositors of the open securities custodianship and settlement accounts.
closed bank of the insured deposits due them by
whatever means deemed appropriate by the Board of (b) The banking or checking accounts of the Corporation
Directors: Provided, That the Corporation shall publish the shall be kept with the Bangko Sentral ng Pilipinas, or with
notice once a week for at least three (3) consecutive any other bank designated as depository or fiscal agent
weeks in a newspaper of general circulation or, when of the Philippine government.


(c) It is hereby declared to be the policy of the State that Corporation are from time to time required for insurance
the Deposit Insurance Fund of the Corporation shall be purposes and financial assistance provided for in Section
preserved and maintained at all times. Accordingly, all tax 22(e) of this Act: Provided, That any such loan as may be
obligations of the Corporation for a period of five (5) years granted by the Bangko Sentral ng Pilipinas shall be
reckoned from the date of effectivity of this Act shall be consistent with monetary policy: Provided, further, That
chargeable to the Tax Expenditure Fund (TEF) in the the rate of interest thereon shall be fixed by the Monetary
annual General Appropriation Act pursuant to the Board.
provisions of Executive Order No. 93, series of 1986: When in the judgment of the Board of Directors the
Provided, That, on the 6th year and thereafter, the funds of the Corporation are not sufficient to provide for
Corporation shall be exempt from income tax, final an emergency or urgent need to attain the purposes of
withholding tax, value-added tax on assessments this Act, the Corporation is likewise authorized to borrow
collected from member banks and local taxes. (as added money, obtain loans or arrange credit lines or other credit
by RA No 9576) accommodations from any bank: Provided, That such
(d) Assets of the Corporation shall be exempt from loan shall be of short-term duration: Provided, further,
attachment, garnishment or any other order or process of That no prior Monetary Board opinion shall be required
any court, agency or any other administrative body. for the Corporation and its counterparties on individual
drawdowns or borrowings within an approved borrowing
program where prior Monetary Board opinion has already
FINANCIAL ASSISTANCE been obtained, pursuant to Section 123 of Republic Act
No. 7653.
(e) In the exercise of its authorities under Section 11 of this
Act, the Corporation is authorized to make loans to, or
purchase the assets of, or assume liabilities of, or make
deposits in:
ISSUANCE OF BONDS, DEBENTURES AND OTHER
(1) A bank in danger of closing, upon its acquisition by a
OBLIGATIONS
qualified investor; or SECTION 24. With the approval of the President of the
(2) A qualified investor, upon its purchase of all assets and Philippines, upon the recommendation of the
assumption of all liabilities of a bank in danger of closing; Department of Finance, the Corporation is authorized to
or issue bonds, debentures, and other obligations, both local
or foreign, as may be necessary for purposes of providing
(3) A surviving or consolidated institution that has liquidity for settlement of insured deposits in closed
merged or consolidated with a bank in danger of closing; banks, to facilitate the implementation of bank resolution
upon such terms and conditions as the Board of Directors under Section 11 of this Act, as well as for financial
may prescribe, when in the opinion of the Board of assistance as provided herein: Provided, That the Board of
Directors, such acquisition, purchase of assets, Directors shall determine the interest rates, maturity and
assumption of liabilities, merger or consolidation, is other requirements of said obligations: Provided, further,
essential to provide adequate banking service in the That the Corporation may provide for appropriate
community or maintain financial stability in the economy. reserves for the redemption or retirement of said
The Corporation, prior to the exercise of the powers under obligation.
this section, shall determine that actual payoff and All notes, debentures, bonds, or such obligations issued
liquidation thereof will be more expensive than the by the Corporation shall be exempt from taxation both as
exercise of this power: Provided, That when the Monetary to principal and interest, and shall be fully guaranteed by
Board has determined that there are systemic the Government of the Republic of the Philippines. Such
consequences of a probable failure or closure of an guarantee, which in no case shall exceed two times the
insured bank, the Corporation may grant financial DIF as of date of the debt issuance, shall be expressed on
assistance to such insured bank in such amount as may the face thereof.
be necessary to prevent its failure or closure and/or
restore the insured bank to viable operations, under such The Corporation may issue notes, debentures, bonds, or
terms and conditions as may be deemed necessary by other debt instruments without the approval of the
the Board of Directors, subject to concurrence by the President of the Philippines, as long as these shall not be
Monetary Board and without additional cost to the DIF. guaranteed by the national government.
A systemic risk refers to the possibility that failure of one The Board of Directors shall have the power to prescribe
bank to settle net transactions with other banks will the terms and conditions, rules and regulations for the
trigger a chain reaction, depriving other banks of funds issuance, reissuance, servicing, placement and
leading to a general shutdown of normal clearing and redemption of the bonds herein authorized to be issued
settlement activity. Systemic risk also means the as well as the registration of such bonds at the request of
likelihood of a sudden, unexpected collapse of confidence the holders thereof.
in a significant portion of the banking or financial system SECTION 25. (a) The Corporation shall annually make a
with potentially large real economic effects. Finally, the report of its operations to the Congress as soon as
Corporation may not use its authority under this practicable after the 1st day of January in each year.
subsection to purchase the voting or common stock of an (b) The financial transactions of the Corporation shall be
insured bank but it can enter into and enforce audited by the Commission on Audit in accordance with
agreements that it determines to be necessary to protect the principles and procedures applicable to commercial
its financial interests: Provided, That the financial corporate transactions and under such rules and
assistance may take the form of equity or quasi-equity of regulations as may be prescribed by the Commission on
the insured bank as may be deemed necessary by the Audit. The audit shall be conducted at the place or places
Board of Directors with concurrence by the Monetary where accounts of the Corporation are normally kept.
Board: Provided, further, That the Corporation shall Except as to matters relating to the function of the
dispose of such equity as soon as practicable. Corporation as receiver which shall be subject to visitorial
audit only, the representatives of the Commission on
Audit shall have access to all books, accounts, records,
AUTHORITY TO BORROW reports, files and all other papers, things, or property
SECTION 23. The Corporation is authorized to borrow belonging to or in use by the Corporation pertaining to its
from the Bangko Sentral ng Pilipinas and the Bangko financial transactions and necessary to facilitate the
Sentral ng Pilipinas is authorized to lend to the audit, and they shall be afforded full facilities for verifying
Corporation on such terms as may be agreed upon by the transactions with the balances or securities held by
Corporation and the Bangko Sentral ng Pilipinas, such depositories, fiscal agents, and custodians. All such books,
funds as in the judgment of the Board of Directors of the accounts, records, reports, files, papers, and property of


the Corporation shall remain in possession and custody of Splitting of deposits occurs whenever a deposit account

the Corporation. with an outstanding balance of more than the statutory
SECTION 26. (a) Every insured bank shall display at each maximum amount of insured deposit maintained under
place of business maintained by it a sign or signs, and the name of natural or juridical persons is broken down
shall include a statement in all its advertisements to the and transferred into two (2) or more accounts in the
effect that its deposits are insured by the Corporation: name/s of natural or juridical persons or entities who have
Provided, That the Board of Directors may exempt from no beneficial ownership on transferred deposits in their
this requirement advertisements which do not relate to names within one hundred twenty (120) days
deposits or when it is impractical to include such immediately preceding or during a bank-declared bank
statement therein. The Board of Directors shall prescribe holiday, or immediately preceding a closure order issued
by regulations the forms of such signs and the manner of by the Monetary Board of the Bangko Sentral ng Pilipinas
use. for the purpose of availing of the maximum deposit
insurance coverage;
(b) No insured bank shall pay any dividend on its capital
stock or interest on its capital notes or debentures (if such (f) Refusal to receive the notice of closure as provided
interest is required to be paid only out of net profits) or under Section 14 of this Act;
distribute any of its capital assets while it remains in (g) Refusal to allow the Corporation to take over a closed
default in the payment of any assessment due to the bank or obstructing such action of the Corporation;
Corporation: Provided, That if such default is due to a (h) Refusal to turn over or destroying or tampering bank
dispute between the insured bank and the Corporation records;
over the amount of such assessment, this subsection
shall not apply if such bank shall deposit security (i) Fraudulent disposal, transfer or concealment of any
satisfactory to the Corporation for payment upon final asset, property or liability of the closed bank;
determination of the issue. (j) Violation of, or causing any person to violate, the
(c) Without prior written consent by the Corporation, no exemption from garnishment, levy, attachment or
insured bank shall (1) merge or consolidate with any bank execution provided under this Act and the New Central
or institution or (2) assume liability to pay any deposits Bank Act;
made in, or similar liabilities of, any bank or institution or (k) Any willful failure or refusal to comply with, or violation
(3) transfer assets to any bank or institution in of any provision of this Act, or commission of any other
consideration of the assumption of liabilities for any irregularities, and/or conducting business in an unsafe or
portion of the deposits made in such insured bank. unsound manner as may be determined by the Board of
(d) The Corporation may require an insured bank to Directors in relation to Section 56 of Republic Act No.
provide protection and indemnity against burglary, 8791, or ‘The General Banking Law of 2000’.
defalcation, losses arising from discharge of duties by, or Notwithstanding any law to the contrary, the foregoing
particular acts of defaults of its directors, officers, or acts of directors, officers, employees or agents of the
employees, and other similar insurable losses. The Board bank shall be considered as additional grounds for
of Directors in consultation with the Bangko Sentral, shall disqualification under the fit and proper rules of the
determine the bonding requirement as it refers to Bangko Sentral ng Pilipinas.
directors, officers and employers of the insured bank as
well as the form and amount of the bond. Whenever any (1) Other acts inimical to the interest of the bank or the
insured bank refuses to comply with any such Corporation, such as, but not limited to, conflict of
requirement the Corporation may contract for such interest, disloyalty, authorizing related party transactions
protection and add the cost thereof to the assessment with terms detrimental to the bank and its stakeholders,
otherwise payable by such bank. and unauthorized disclosure of confidential information,
as may be determined by the Corporation.
(e) Any assessment payable by an insured bank under
this Act shall be subject to payment of interest computed (2) Any person for:
from the date such assessment became due and payable (a) Refusal to disclose information, records or data
and at the legal rate for loans as prescribed by law or pertaining to the bank accounts of a closed bank to the
appropriate authority and in case of willful failure or receiver;
refusal to pay such assessment and interest thereon,
there shall be added a penalty equivalent to twice the (b) Refusal to turn over possession or custody of the asset
amount of interest payable as computed herein for each and record of the closed bank to the receiver,
day such violations continue, which the interest and notwithstanding any agreement to the contrary;
penalty the Corporation may recover for its use: Provided, (c) Refusal or delaying the:
That the penalty shall not be applicable under the (i) Verification of authenticity of the ownership
circumstances stated in the provisions of subsection (b) of documents;
this Section.
(ii) Registration of interest of the closed bank on a specific
(f) The penalty of imprisonment of not less than six (6) property;
years but not more than twelve (12) years or a fine of not
less than Fifty thousand pesos (P50,000.00) but not more (iii) Consolidation of ownership over an asset of the closed
than Ten million pesos (P10,000,000.00), or both, at the bank;
discretion of the court, shall be imposed upon: (iv) Act of securing certified true copies of documents in
(1) Any director, officer, employee or agent of a bank for: relation to an asset of the closed bank;
(a) Any willful refusal to submit reports as required by law, (v) Act of securing the appropriate certification from the
rules and regulations; agencies or entities stated in Section 16 of this Act in
relation to an asset of the closed bank;
(b) Any unjustified refusal to permit examination and
audit of the deposit records or the affairs of the (vi) Conduct of a physical or ocular inspection of the
institution; properties owned by, or mortgaged to, the closed bank,
to determine their existence and present condition; or
(c) Any willful making of a false statement or entry in any
bank report or document required by the Corporation; (vii) Other related activities of the receiver; or
(d) Submission of false material information in connection (d) Allowing the withdrawal from deposits or disposition
with or in relation to any financial assistance of the of any asset of the closed bank other than by the receiver;
Corporation extended to the bank; (e) Willfully violating any provision of this Act;
(e) Splitting of deposits or creation of fictitious or (f) Conspiring or willfully participating in any of the
fraudulent loans or deposit accounts. offenses enumerated in Paragraph 1 of this section;


(3) Any law enforcement officer or local government -Controlled Corporations, selection and nomination of
official who refuses or fails to assist the receiver in the appointive directors, and limitations on the creation of
service of the notice of closure, as provided under Section subsidiaries and the acquisition of affiliates except in the
14 of this Act. case of acquisition of shares in the grant of financial
(g) The Board of Directors is hereby authorized to impose assistance under this Act.
administrative fines for any act or omission enumerated SECTION 29. Transitory Provisions. — (a) The incumbent
in the preceding subsection, and for violation of any President of the Corporation and private sector members
order, instruction, rule or regulation issued by the of the Board of Directors shall continue to exercise their
Corporation, against a bank and/or any of its directors, respective duties and functions until replaced by the
officers or agents responsible for such act, omission, or President of the Philippines: Provided, That such new
violation, in amounts as it may be determined to be appointees shall be subject to the term of office provided
appropriate, but in no case to exceed three times the under Section 3 of this Act, as amended.
amount of the damages or costs caused by the (b) Payment of surplus dividends under Section 13(c) of
transaction for each day that the violation subsists, taking this Act, as amended, shall be applicable to banks
into consideration the attendant circumstances, such as without a court-approved final asset distribution plan at
the nature and gravity of the violation or irregularity and the time of the effectivity of this Act.
the size of the bank.
(c) The preference indicated under Section 15 of this Act,
(h) The penalty of imprisonment of not less than ten (10) as amended, shall be likewise effective upon liquidation
years but not more than twelve (12) years, or a fine of not proceedings already commenced and pending as of the
less than Five hundred thousand pesos (P500,000.00) but effectivity of this Act, where no distribution of assets has
not more than Ten million pesos (P 10,000,000.00), or been made.
both, at the discretion of the court, shall be imposed
upon: (d) The provisions in Section 10 of this Act, as amended,
on legal assistance, protection and indemnification shall
(1) Any depositor who files a fictitious and/or fraudulent apply to all cases pending before the effectivity of this
claim for deposit insurance; and Act.
(2) Any bank officer who certifies to the validity of the SECTION 30. The words "Central Bank" and the "Central
deposit liabilities which is subsequently verified to be Bank of the Philippines" wherever they appear in
fictitious and/or fraudulent. Republic Act No. 3591, as amended, is hereby replaced
(i) The penalty of imprisonment of not less than twelve with Bangko Sentral and/or Bangko Sentral ng Pilipinas,
(12) years but not more than fourteen (14) years shall be respectively.
imposed upon any person who participates, or attempts
to participate, in a scheme to defraud a bank. SECTION 50. The Corporation may be reorganized by its
Board of Directors by adopting if it so desires, an entirely
If the offense shall have been committed by a director or
new staffing pattern or organizational structure to suit
officer of the bank, the penalty of imprisonment of not
the operations of the Corporation under this Act. No
less than fifteen (15) years, but not more than seventeen
preferential or priority right shall be given to or enjoyed
(17) years shall be imposed.
by any personnel for appointment to any position in the
If the offense shall have resulted in systemic new staffing pattern nor shah any personnel be
consequences, as determined by the Bangko Sentral ng considered as having prior or vested rights with respect
Pilipinas, the penalty of imprisonment of not less than to retention in the Corporation or in any position which
eighteen (18) years but not more than twenty (20) years may be created in the new staffing pattern, even if he or
shall be imposed. she should be the incumbent of a similar position prior to
SECTION 27. No court, except the Court of Appeals, shall reorganization. The reorganization shall be completed
issue any temporary restraining order, preliminary within six (6) months after the effectivity of this Act.
injunction or preliminary mandatory injunction against Personnel who are not retained are deemed separated
the Corporation for any action under this Act. horn the service.
This prohibition shall apply in all cases, disputes or SECTION 51. The Board of Directors is hereby authorized
controversies instituted by a private party, the insured to provide separation incentives, and all those who shall
bank, or any shareholder of the insured bank. retire or be separated from the service on account of
The Supreme Court may issue a restraining order or reorganization under the preceding section shall be
injunction when the matter is of extreme urgency entitled to such incentives which may be in addition to all
involving a constitutional issue, such that unless a gratuities and benefits to which they may be entitled
temporary restraining order is issued, grave injustice and under existing laws.
irreparable injury will arise. The party applying for the SECTION 31 [52]. Separability Clause. – If any provision or
issuance of a restraining order or injunction shall file a section of this Act or the application thereof to any
bond in an amount to be fixed by the Supreme Court, person or circumstances is held invalid, the other
which bond shall accrue in favor of the Corporation if the provisions or sections of this Act, in the application of
court should finally decide that the applicant was not such provision or section to other persons or
entitled to the relief sought. circumstances, shall not be affected thereby.
Any restraining order or injunction issued in violation of SECTION 32 [53]. Repealing Clause. – All acts or parts of
this Section is void and of no force and effect and any acts and executive orders, administrative orders, or parts
judge who has issued the same shall suffer the penalty of thereof which are inconsistent with the provisions of this
suspension of at least sixty (60) days without pay. Act are hereby repealed.
SECTION 28. Exempting Clause. – The Corporation shall SECTION 33 [54]. Effectivity Clause. – This Act shall take
be exempt from Presidential Decree No. 985, Presidential effect fifteen (15) days following the completion of its
Decree No. 1597, Republic Act No. 6758, as amended, Joint publication in the Official Gazette or in two (2)
Resolution No. 4 (2009) and other laws on salary newspapers of general circulation.
standardization, Presidential Decree No. 1177, Executive
Order No. 248, as amended, Executive Order No. 298 and
the provisions of Republic Act No. 10149 with regard to
position classification, qualification standards, and the
PD No 114 | Pawnshop Regulation Act
compensation package of the employees of the
Corporation: Provided, That the PDIC shall be subject to January 29, 1973
all other policies under Republic Act No. 10149, including,
but not limited to, performance evaluation by the
Governance Commission for Government-Owned or



REGULATING THE ESTABLISHMENT AND OPERATION the Central Bank shall furnish pawnshops, upon request,
OF PAWNSHOPS with necessary copies of the prescribed information
WHEREAS, pawnshops provide an additional source of sheet.
credit especially for small borrowers left unserved by the Section 7. Capital. The minimum paid-in capital of any
banking and other financial institutions in the country; pawnshop which may be established after the effectivity
WHEREAS, there is no specific law in the Philippines that of this Decree shall be one hundred thousand pesos
governs pawnshop establishments, particularly providing (P100,000.00): Provided, however, That pawnshops
definite and uniform standards for their operation; established and in operation prior thereto shall comply
with the minimum capitalization required under the
WHEREAS, the recommendations contained in a report provisions of this section within such time as may be
on the financial system which have been accepted, with prescribed by the Monetary Board, which time shall, in no
modifications, by monetary authorities, strongly advocate case, be less than three years from the date of effectivity
the enactment of a law regulating pawnshops; of this Decree.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President Section 8. Citizenship requirement. Upon the effectivity
of the Philippines, by virtue of the powers vested in me by of this Decree, only Filipino citizens may establish and
the Constitution, as Commander-in-Chief of all the Armed own a pawnshop organized in the form of a single
Forces of the Philippines, and pursuant to Proclamation proprietorship: Provided, however, That in the case of a
No. 1081, dated September 21, 1972, and General Order No. partnership, at least seventy per cent (70%) of its capital
1, dated September 22, 1972, as amended, and in order to shall be owned by Filipino citizens: Provided, further, That
effect the desired changes and reforms in the social, in the case of a corporation, at least seventy per cent
economic, and political structure of our society, do hereby (70%) of the voting capital stock shall be owned by
order and decree and make as part of the law of the land citizens of the Philippines, or if there be no capital stock,
the following: at least seventy per cent (70%) of the members entitled to
Section 1. Short Title. This Decree may be cited as the vote, shall be citizens of the Philippines.
"Pawnshop Regulation Act". The percentage of foreign-owned voting stock or
Section 2. Declaration of policy. It is hereby declared the non-citizens entitled to vote in any domestic pawnshop
policy of the State to regulate the establishment of existing prior to the effectivity of this Decree, if such
pawnshops and to place their operation on a sound and percentage is in excess of thirty per cent (30%) of the
stable basis to derive the optimum advantages from voting stock or members entitled to vote of the
them as an additional source of credit; to prevent and pawnshop shall not be increased but may be reduced,
mitigate, as far as practicable, practices prejudicial to and once reduced, shall not be increased thereafter
public interest; and to lay down the minimum beyond thirty per cent (30%) of the voting stock, or
requirements and standards under which they may be number of members entitled to vote, of the pawnshop.
established and do business. The percentage of foreign-owned voting stocks in any
Section 3. Definitions. As used in this Decree, unless the pawnshop shall be determined by the citizenship of the
context otherwise requires, the following terms shall have individual stockholders in that pawnshop. In the case of
the following meanings: corporations owning shares in a pawnshop, the
citizenship of the individual owners of voting stock in
"Pawnshop" shall refer to a person or entity engaged in such corporations shall be the basis of computing the
the business of lending money on personal property percentage.
delivered as security for loans and shall be synonymous,
and may be used interchangeably, with pawnbroker or Section 9. Amount of loan. Pawnshops may grant such
pawnbrokerage. amount of loans as may be agreed upon between the
parties: Provided, That the amount of loan shall, in no
"Pawner" shall refer to the borrower from a pawnshop. case, be less than thirty per cent (30%) of the appraised
"Pawnee" shall refer to the pawnshop or pawnbroker. value of the security offered for the loan unless the
pawner manifests in writing the desire to borrow a lesser
"Pawn" is the personal property delivered by the pawner amount.
to the pawnee as security for a loan.
Section 10. Rates of interest. No pawnshop shall directly
"Pawn ticket" is the pawnbrokers' receipt for a pawn. It is or indirectly stipulate, charge, demand, take or receive
neither a security nor a printed evidence of indebtedness. any higher rate or greater sum or value for any loan or
"Property" shall include only such personal property as forbearance than the rate allowed by the Usury Law for
may actually be delivered to the control and possession of such transactions. It shall be unlawful for a pawnshop to
the pawnshop: Provided, however, That certain specified divide the pawn offered by a pawner in order to collect
chattels such as guns, knives and similar weapons whose greater interest and/or to require the pawner to pay an
reception in pawn is expressly prohibited by other laws or additional charge as insurance premium for the
regulations shall not be included. safekeeping and conservation of the article pawned.
Section 4. Form of organization. A pawnshop may be In addition to interest charges, pawnshops may impose a
established as a single proprietorship, partnership or maximum service charge of five pesos (P5.00), but in no
corporation. case to exceed one per cent (1%) of the principal loan.
Section 5. Registration and licensing. Any person or Section 11. Maintenance of records. Every pawnbroker
entity desiring to engage in the pawnshop business shall shall keep a memorandum book in which shall be
(a) register with the Bureau of Commerce in the case of entered, in ink, at the time of each loan or pledge, an
single proprietorship or the Securities and Exchange accurate account and description, in Pilipino or English
Commission in the case of a corporation or any other with corresponding translation in the local dialect of
association and (b) secure a license from the appropriate every pawn, the amount of money loaned thereon, the
city or municipality having territorial jurisdiction over the date of pawning or pledging the same, the rate of interest
place of establishment and operation. to be paid on the loan, and the name and residence of
Section 6. Requirement of registration with the Central each pawner, together with a particular description of
Bank. Any individual, corporation or association duly such pawner, including his or her nationality, sex, and
registered and licensed to engage in the pawnshop general appearance, and no pawnbroker or other person
business shall file an information sheet, under oath, with shall alter or erase any entry made in such book. Every
the Central Bank before commencement of actual person pawning or pledging any article or thing with a
operations: Provided, however, That pawnshops duly pawnbroker shall sign his name and give his address to
licensed and operating before the approval of this Decree said pawnbroker and such name and address shall be
shall, within six months from the date of effectivity of the made part of the record heretofore described in this
same, register with the Central Bank. For this purpose, section: Provided, That a person who is unable to write


shall imprint his thumbmark, and his name shall be Section 17. Grant of authority to the Central Bank. The
written by a competent person, who shall sign his own Central Bank is hereby authorized
name as witness to said thumbmark. (a) to issue rules and regulations to implement the
Section 12. Pawn ticket. Every pawnbroker shall, at the provisions contained herein:
time of every such loan or pledge, deliver to each person (b) to require from pawnshops reports of condition and
pawning or pledging any article or thing a memorandum such other reports necessary to determine compliance
or ticket signed by such pawnbroker and containing the with the provisions of this Decree:
substance of the record required to be kept in such
pawnbroker's memorandum book in section eleven (c) to exercise visitatorial powers whenever deemed
hereof, excluding the description of the person so necessary; and
pawning or pledging such article or thing, and no (d) to impose such administrative sanctions including the
compensation of any kind whatsoever shall be received imposition of fines for violations of this Decree and
by any pawnbroker for any such memorandum or ticket. regulations issued by the Central Bank in pursuance
Section 13. Redemption. The pawner who fails to pay his thereto.
obligation on the date it falls due may, within ninety days Section 18. Penalties. A fine of not less than one hundred
from the date of maturity of the obligation, redeem the pesos (P100.00) and not more than one thousand pesos
pawn by payment of the principal of the debt with (P1,000.00) or imprisonment for not less than thirty days
interest: Provided, however, That for the purpose of and not more than one year, or both, at the discretion of
computing interest due after maturity of the obligation, the court, shall be imposed for violations of the provisions
the basis shall be the sum of the principal of the of this Decree and its implementing rules and
obligation and interest earned at the time the obligation regulations: Provided, That if the violation is committed
matured. by a corporation, partnership or an association, the
Section 14. Disposition of pawn on default of pawner. In penalty provided for in this Decree shall be imposed upon
the event the pawner fails to redeem the pawn within the directors, officers, employees or persons therein
ninety days from the date of maturity of the obligation in responsible for the offense, without prejudice to civil
accordance with the preceding section, the pawnbroker liabilities arising from the criminal offense.
may sell or otherwise dispose of any article taken or Section 19. Matters not covered by this Decree. The
received by him in pawn: Provided, however, That the provisions of existing law, insofar as they are not in
pawner shall be duly notified of such sale on or before the conflict with any provision of this Decree, shall apply in
termination of the ninety- day period, the notice matters not otherwise specifically provided for in this
particularly stating the date, hour, and place of sale. Decree.
Section 15. Public auction of pawned articles. No Section 20. Separability clause. If any provision or section
pawnbroker shall sell or otherwise dispose of any article of this Decree, or the application thereof to any person or
or thing taken or received in pawn or pledge except at circumstance, is held invalid, the other provisions or
public auction in his place of business as such sections of this Decree, and the application of such
pawnbroker or in any other public place within the provisions or sections to other persons or circumstances,
territorial limits of the municipality or city where the shall not be affected thereby.
pawnshop has its place of business, under the control
and direction of an auctioneer with license duly issued by Section 21. Effectivity. This Decree shall take effect
the corresponding authorities, nor shall any such article immediately.
or thing be sold or disposed of unless said pawnbroker Done in the City of Manila, this 29th day of January, in the
has published a notice once in at least two daily year of Our Lord, nineteen hundred and seventy-three.
newspapers printed in the city or municipality during the
week preceding the date of such sale. In remote areas
where the newspapers are neither published nor
circulated notice by newspaper publication shall be
PD No 1034 | Authorizing the
substituted by posting notices in conspicuous public Establishment of an Offshore Banking
places within the territorial limits of the city or
municipality where the pawnshop has its place of System in the Philippines
business. Said notice, whether published or posted, shall
be in English, and either in Filipino or in the local dialect, September 30, 1976
and shall contain the name of the pawnshop, its owner,
address of the establishment, hour, and date of the AUTHORIZING THE ESTABLISHMENT OF AN OFFSHORE
auction sale. BANKING SYSTEM IN THE PHILIPPINES
Section 16. Closing and removal of business period. No WHEREAS, conditions conducive to the establishment of
pawnbroker shall close or transfer his place of business an offshore banking system, such as political stability, a
within three months after the expiration of the period for growing economy and adequate communication
which any article or thing shall have been taken or facilities, among others, exist in the Philippines;
received by him at his place of business in pawn or WHEREAS, it is in the interest of developing countries to
pledge, or before any such article or thing shall have been have as wide access as possible to the sources of capital
sold or otherwise disposed of in accordance with the funds for economic development;
provisions of this Decree: Provided, however, That removal
or transfer of a pawnbroker's place of business from one WHEREAS, an offshore banking system based in the
place to another within the territorial limits of the same Philippines will be advantageous and beneficial to the
city or municipality may be authorized on condition that country by increasing our links with foreign lenders,
the pawnbroker shall publish a notice of such removal in facilitating the flow of desired investments into the
two local daily papers, one in English, another in Pilipino Philippines, creating employment opportunities and
or in the local dialect, for a period of not less than three expertise in international finance, and contributing to the
days, the last day of which shall take place five days national development effort.
before the removal, stating in the notice the date of WHEREAS, the geographical location, physical and
removal, the address of the premises to be vacated and of human resources, and other positive factors provide the
the premises to which the pawnshop will transfer; and Philippines with the clear potential to develop as another
that he shall likewise post in a conspicuous place in both financial center in Asia;
premises one copy of the notice in English and another in
NOW, THEREFORE, I, FERDINAND E. MARCOS, President
either Pilipino or the local dialect during the period of its
of the Philippines, by virtue of the powers in me vested by
publication in the said local papers.
the Constitution, do hereby decree and make the
following part of the law of the land:



Section 1. Definition of Terms. As used in this Decree, unit shall be managed soundly and with prudence; (c) it
unless the context otherwise indicates: will train and continually educate a specific number of
(a) "Offshore Banking" shall refer to the conduct of Filipinos in international banking and foreign exchange
banking transactions in foreign currencies involving the trading with a view to reducing the number of
receipt of funds from external sources and the utilization expatriates; (d) it will provide and maintain in its offshore
of such funds as provided in this Decree. banking unit net office funds in the minimum amount of
US$ 1,000,000.00 and (e) it will start operations of its
(b) "Offshore Banking Unit" shall mean a branch, offshore banking unit within 180 days from receipt of its
subsidiary or affiliate of a foreign banking corporation certificate of authority to operate such unit.
which is duly authorized by the Central Bank of the
Philippines to transact offshore banking business in the Section 5. Supervision. The operations and activities of
Philippines. offshore banking units shall be conducted under the
supervision of the Central Bank of the Philippines.
(c) "Deposits" shall mean funds in foreign currencies
which are accepted and held by an offshore banking unit Section 6. Transactions of Offshore Banking Units:
in the regular course of business, with the obligation to Regulations. Transactions of offshore banking units with
return an equivalent amount to the owner thereof, with non-residents or with other offshore banking units shall
or without interest. be freely allowed: Provided, that the Central Bank of the
Philippines may establish such safeguards as may be
(d) "Resident" shall mean necessary to prevent circumvention of applicable foreign
1. an individual citizen of the Philippines residing therein; exchange regulations. Transactions of offshore banking
or units with resident of the Philippines, including those
with local commercial banks and local branches of
2. an individual who is not a citizen of the Philippines but foreign banks authorized to receive foreign currency
is permanently residing therein; or deposits under Republic Act No. 6426, shall be subject to
3. a corporation or other juridical person organized under applicable law and regulations.
the law of the Philippines. The Monetary Board of the Central Bank of the
(e) "Non-resident" shall mean an individual, corporation or Philippines shall promulgate such rules and regulations
other juridical person not included in the above definition as may be necessary to carry out and implement the
of "resident": Provided, however, that branches, provisions of this Decree.
subsidiaries, affiliates, extension offices or any other units Section 7. Tax and Other Incentives.
of corporation or juridical person organized under the
laws of any foreign country operating in the Philippines (a) The provisions of any law to the contrary
shall be considered residents of the Philippines. notwithstanding, the transactions of offshore banking
unit authorized hereunder with non-residents and other
"Branch" shall mean a separately managed department offshore banking units shall be subject to a five per cent
or unit of a foreign corporation. (5%) tax on the net, income from such transactions which
Section 2. Qualification Requirements. Subject to such shall be in lieu of all taxes on the said transactions:
regulatory guidelines as the Monetary Board may Provided, however, that transactions of offshore banking
prescribe, only banks which are organized under any law units with local commercial banks, including branches of
other than those of the Republic of the Philippines their foreign banks that may be authorized by the Central
branches, subsidiaries or affiliates, shall be qualified to Bank to transact business with offshore banking units,
operate offshore banking units in the Philippines. shall likewise be subject to the same tax, except net
However, local branches of foreign banks already income from such transactions as may be specified by
authorized to accept foreign currency deposits under the the Secretary of Finance, upon recommendation of the
provisions of R.A. No. 6426 may opt to apply for authority Monetary Board, to be subject to the usual income tax
to operate an offshore banking unit under the provisions payable by banks. Any income of non-residents from
of this Decree: Provided, that, upon their receipt of a transactions with said offshore banking units shall be
corresponding certificate of authority to operate as an exempt from any tax.
offshore banking unit, the license to transact business (b) In the case of transaction with residents (other than
under the provisions of R.A. No. 6426 shall be deemed other offshore banking units or local commercial banks
automatically withdrawn. including local branches of foreign banks that may be
Section 3. Certificate of Authority to Operate. The authorized by the Central Bank of the Philippines to
Monetary Board of the Central Bank of the Philippines is transact business with offshore banking units), interest
hereby authorized to issue certificates of authority to income from loans granted to such residents shall be
operate offshore banking units: Provided, however, that, subject only to a ten per cent (10%) withholding tax as
in issuing such certificates, the Monetary Board shall take final tax.
into consideration the applicant's liquidity and solvency (c) Notwithstanding the provision of any law to the
position, networth and resources, management, contrary, foreign personnel may be assigned by any
international banking expertise, contribution to the foreign bank to work in its offshore banking unit in the
Philippine economy, and other relevant factors such as Philippines. Such foreign personnel, their spouses and
participation in equity of local commercial banks and unmarried children under twenty-one years of age, shall
appropriate geographic representation. be issued a multiple entry special visa, valid for a period of
The Central Bank of the Philippines is hereby authorized one year, to enter the Philippines: Provided, however, that
to collect a fee of not less than US$ 20,000.00 upon a responsible officer of such foreign bank submits a
issuing any certificate of authority to operate and certificate of the effect that the person who seeks entry in
annually thereafter on the anniversary date of such the Philippines is an employee of the said foreign bank
certificate. and will work exclusively for its offshore banking unit in
the Philippines and that he will be paid by the foreign
Section 4. Corporate Undertaking. No application to bank in the Philippines compensation in foreign
operate as an offshore banking unit under the provisions currencies: Provided, further, that in the case of the
of this Decree shall be considered unless the applicant spouse and unmarried children mentioned herein the
shall have first submitted to the Central Bank of the certificate shall be to the effect that they are dependents
Philippines a sworn undertaking of its head office or of the foreign personnel working in the offshore banking
parent or holding company, duly supported by an unit.
appropriate resolution of its board of directors, that,
among other things: (a) it will, on demand, provide the The admission and stay of the foreign personnel and their
necessary specified currencies to cover liquidity needs dependents mentioned in the next preceding paragraph
that may arise or other shortfall that is offshore banking shall be co-terminous with the validity of the multiple
unit may incur; (b) the operations of its offshore banking entry special visa: Provided, however, that their stay may


be extended yearly upon submission to the Commission AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT
on Immigration and Deportation of a sworn certification SYSTEM IN THE PHILIPPINES, AND FOR OTHER
by a responsible officer of the offshore banking unit in the PURPOSES.
Philippines that such bank's authority to operate as an
offshore banking unit is valid and subsisting and that the
Section 1. Title.– This act shall be known as the "Foreign
personnel concerned has been paid in the Philippines,
Currency Deposit Act of the Philippines."
from the date of original admission, the compensation
mentioned in the next preceding paragraph, for which Section 2. Authority to deposit foreign currencies. – Any
that tax due thereon has been withheld and paid to the person, natural or juridical, may, in accordance with the
Bureau of Internal Revenue. provisions of this Act, deposit with such Philippine banks
in good standing, as may, upon application, be
The foreign personnel and their respective spouses and
designated by the Central Bank for the purpose, foreign
dependents mentioned in this Section shall be exempt
currencies which are acceptable as part of the
from: the Payment of all fees due under the immigration
international reserve, except those which are required by
and alien registration laws; securing alien certificates of
the Central Bank to be surrendered in accordance with
registration; and obtaining emigration clearance
the provisions of Republic Act Numbered two hundred
certificates, and all types of clearances required by any
sixty-five (Now Rep. Act No. 7653).
government department or agency, except that upon
their final departure from the Philippines, the employer Section 3. Authority of banks to accept foreign currency
of the said foreign personnel shall so advice in writing the deposits. – The banks designated by the Central Bank
Commission on Immigration and Deportation at least five under Section two hereof shall have the authority:
(5) working days prior to such departure, and the finally (1) To accept deposits and to accept foreign currencies in
departing personnel shall be required to submit to the trust Provided, That numbered accounts for recording
said office a tax clearance from the Bureau of Internal and servicing of said deposits shall be allowed;
Revenue.
(2) To issue certificates to evidence such deposits;
(d) Section 22 of Commonwealth Act No. 466, as
amended, is hereby amended to include an additional (3) To discount said certificates;
subsection (d) to read as follows: (4) To accept said deposits as collateral for loans subject
"(d) Aliens employed by offshore banking units. There to such rules and regulations as may be promulgated by
shall be levied, collected and paid for each taxable year the Central Bank from time to time; and
upon the gross income received by every alien individual (5) To pay interest in foreign currency on such deposits.
employed by offshore banking units established in the
Philippines as salaries, wages, annuities, compensations, Section 4. Foreign currency cover requirements. – Except
remunerations and emoluments from such offshore as the Monetary Board may otherwise prescribe or allow,
banking units a tax equal to fifteen per centum of such the depository banks shall maintain at all times a one
gross income." hundred percent foreign currency cover for their
liabilities, of which cover at least fifteen percent shall be in
(e) The alien executives of offshore banking units shall the form of foreign currency deposit with the Central
enjoy the privileges extended to foreigners coming to Bank, and the balance in the form of foreign currency
settle in the Philippines for the first time as provided for loans or securities, which loans or securities shall be of
under Section 105(h) of the Tariff and Customs Code, as short term maturities and readily marketable. Such
amended. foreign currency loans may include loans to domestic
(f) The offshore banking units shall be exempt from all enterprises which are export-oriented or registered with
forms of local licenses, fees, dues, imposts, or any other the Board of Investments, subject to the limitations to be
local taxes or burdens. prescribed by the Monetary Board on such loans. Except
as the Monetary Board may otherwise prescribe or allow,
Section 8. Effect of Certain Laws. The provisions of Act the foreign currency cover shall be in the same currency
No. 2566 (Usury Law), Republic Act No. 529, as amended as that of the corresponding foreign currency deposit
(Uniform Currency Law), and Republic Act No. 3591, as liability. The Central Bank may pay interest on the foreign
amended (Deposit Insurance Law), shall not apply to currency deposit, and if requested shall exchange the
transactions and/or deposits in offshore banking units in foreign currency notes and coins into foreign currency
the Philippines: Provided, however, that the provisions of instruments drawn on its depository banks. (As amended
R.A. No. 1405 (Secrecy of Bank Deposits Law) shall apply by PD No. 1453, June 11, 1978.)
to deposits in offshore banking units.
Depository banks which, on account of networth,
Section 9. Sanctions for Violations. Any willful violation by resources, past performance, or other pertinent criteria,
any bank authorized to engage in offshore banking in the have been qualified by the Monetary Board to function
Philippines of any of the provisions of this Decree, or its under an expanded foreign currency deposit system, shall
implementing rules and regulations, or other terms and be exempt from the requirements in the preceding
conditions of the authority to engage in offshore banking paragraph of maintaining fifteen percent (15%) of the
in the Philippines may be subject to the administrative cover in the form of foreign currency deposit with the
sanctions provided for in Section 34-A, as well as to other Central Bank. Subject to prior Central Bank approval
applicable provisions, of Republic Act No. 265, as when required by Central Bank regulations, said
amended. depository banks may extend foreign currency loans to
Section 10. Repealing Clause. Any provisions of existing any domestic enterprise, without the limitations
general or special laws inconsistent with the provisions of prescribed in the preceding paragraph regarding
this Decree shall be deemed modified, amended or maturity and marketability, and such loans shall be
repealed accordingly. eligible for purposes of the 100% foreign currency cover
prescribed in the preceding paragraph. (As added by PD
Section 11. Effectivity. This Decree shall take effect upon
No. 1035.)
approval.
Section 5. Withdrawability and transferability of
DONE in the City of Manila, this 30th day of September, in
deposits. – There shall be no restriction on the withdrawal
the year of Our Lord, nineteen hundred and seventy-six.
by the depositor of his deposit or on the transferability of
the same abroad except those arising from the contract
RA No 6426 | Foreign Currency Deposit between the depositor and the bank.
Act of the Philippines Section 6. Tax exemption. – All foreign currency deposits
As amended by PD Nos 1035, 1246, 1453 made under this Act, as amended by PD No. 1035, as well
as foreign currency deposits authorized under PD No.
1034, including interest and all other income or earnings


of such deposits, are hereby exempted from any and all
taxes whatsoever irrespective of whether or not these RA No 9829 | Pre-Need Code of the
deposits are made by residents or nonresidents so long as
the deposits are eligible or allowed under
Philippines
aforementioned laws and, in the case of nonresidents,
irrespective of whether or not they are engaged in trade AN ACT ESTABLISHING THE PRE-NEED CODE OF THE
or business in the Philippines. (As amended by PD No. PHILIPPINES
1246, prom. Nov. 21, 1977.)
Be it enacted by the Senate and House of
Section 7. Rules and regulations. – The Monetary Board Representatives of the Philippines in Congress
of the Central Bank shall promulgate such rules and assembled:
regulations as may be necessary to carry out the
provisions of this Act which shall take effect after the
publications in the Official Gazette and in a newspaper of CHAPTER I GENERAL PROVISIONS
national circulation for at least once a week for three
consecutive weeks. In case the Central Bank promulgates Section 1. Title. - This Act shall be known as the "Pre-need
new rules and regulations decreasing the rights of Code of the Philippines".
depositors, rules and regulations at the time the deposit Section 2. Declaration of Policy. - It is the policy of the
was made shall govern. State to regulate the establishment of pre-need
Section 8. Secrecy of foreign currency deposits. – All companies and to place their operation on sound,
foreign currency deposits authorized under this Act, as efficient and stable basis to derive the optimum
amended by PD No. 1035, as well as foreign currency advantage from them in the mobilization of savings and
deposits authorized under PD No. 1034, are hereby to prevent and mitigate, as far as practicable, practices
declared as and considered of an absolutely confidential prejudicial to public interest and the protection of
nature and, except upon the written permission of the planholders.
depositor, in no instance shall foreign currency deposits The State shall hereby regulate, through an empowered
be examined, inquired or looked into by any person, agency, pre-need companies based on prudential
government official, bureau or office whether judicial or principles to promote soundness, stability and
administrative or legislative, or any other entity whether sustainable growth of the pre-need industry.
public or private; Provided, however, That said foreign
currency deposits shall be exempt from attachment, Section 3. Construction. - Any doubt in the interpretation
garnishment, or any other order or process of any court, and implementation of any provision in this Code shall be
legislative body, government agency or any interpreted in favor of the rights and interests of the
administrative body whatsoever. (As amended by PD No. planholder.
1035, and further amended by PD No. 1246, prom. Nov. 21, Section 4. Definition of Terms. - Whenever used in this
1977.) Code, the following terms shall have their respective.
Section 9. Deposit insurance coverage. – The deposits meanings;
under this Act shall be insured under the provisions of (a) "Commission" "refers to the Insurance Commission.
Republic Act No. 3591, as amended (Philippine Deposit (b) "Pre-need plans" are contracts, agreements, deeds or
Insurance Corporation), as well as its implementing rules plans for the benefit of the planholders which provide for
and regulations: Provided, That insurance payment shall the performance of future service/s, payment of monetary
be in the same currency in which the insured deposits are considerations or delivery of other benefits at the time of
denominated. actual need or agreed maturity date, as specified therein,
Section 10. Penal provisions. – Any willful violation of this in exchange for cash or installment amounts with or
Act or any regulation duly promulgated by the Monetary without interest or insurance coverage and includes life,
Board pursuant hereto shall subject the offender upon pension, education, interment and other plans,
conviction to an imprisonment of not less than one year instruments contracts or deeds as may in the future he
nor more than five years or a fine of not less than five determined by the Commission.
thousand pesos nor more than twenty-five thousand (c) "Pre-need company" refers to any corporation
pesos, or both such fine and imprisonment at the registered with the Commission and authorized/licensed
discretion of the court. to sell or offer to sell pre-need plans. The term "pre-need
Section 11. Separability clause. – The provisions of this Act company" also refers to schools, memorial chapels, banks,
are hereby declared to be separable and in the event one nonbank financial institutions and other entities which
or more of such provisions are held unconstitutional, the have also been authorized/licensed to sell or offer to sell
validity of other provisions shall not be affected thereby. pre-need plans insofar as their pre-need activities or
Section 12. Repealing clause. – All acts, executive orders, business are concerned.
rules and regulations, or parts thereof, which are (d) "Planholder" refers to any natural or juridical person
inconsistent with any provisions of this Act are hereby who purchases pre-need plans from a pre-need company
repealed, amended or modified accordingly, without for whom or for whose beneficiaries' benefits are to be
prejudice, however, to deposits made thereunder. delivered, as stipulated and guaranteed by the pre-need
Section 12-A. Amendatory enactments and regulations. company. The term includes the assignee, transferee and
– In the event a new enactment or regulation is issued any successor - in - interest of the planholder.
decreasing the rights hereunder granted, such new (e) "Beneficiary" refers to the person designated by the
enactment or regulation shall not apply to foreign planholder as the recipient of the benefits in the
currency deposits already made or existing at the time of pre-need plan.
issuance of such new enactment or regulation, but such (f) "Contract price" refers to the stipulated price in the
new enactment or regulation shall apply only to foreign pre-need plan.
currency deposits made after its issuance. (As added by
PD No. 1246, prom. Nov. 21, 1977.) (g) "Benefits" refers to the payment of monetary
considerations and/or performance of future services
Section 13. Effectivity. – This Act shall take effect upon its which the pre-need company undertakes to deliver either
approval. to the planholder or his beneficiary at the time of actual
Approved, April 4, 1974 need or agreed maturity date, as specified in the_
pre-need plan.
(h) "Sales counselors" refers to natural persons who are
engaged in the sale of, or offer to sell, or counsel of
prospective planholders for the purpose of selling,


whether or not on commission basis, pre-need plans every two (2) years without prejudice to yearly merit
upon the authority of the pre-need company. reviews or increases based on productivity and efficiency.
(i) "Affiliate of, or affiliated with, a specified person" refers The Commission shall, therefore, be exempt from laws,
to a person that directly or indirectly, through one (1) or rules and regulations on compensation, position
more intermediaries, controls, or is controlled by, or is classification and qualification standards. The
under common control with, the person specified. Commission shall, however, endeavor to make its system
Exercising control over a legal entity shall mean any one conform as closely as possible with the principles under
of the following; (1) owning either solely or together with the Compensation and Position Classification Act of 1989
affiliated persons more than twenty - five percent (25%) of (Republic Act No. 6758, as amended).
the outstanding capital stock of a legal entity; and (2) The salary and allowances or personal services expense of
being an officer or director of such legal entity. the employees of the Insurance Commission shall be
(j) "Trust fund" refers to a fund set up from the sourced from the retained amount of the fees, charges
planholders' payments to pay for the cost of benefits and and other income derived from the regulation of
services, termination values payable to planholders and pre-need companies and from the Insurance Fund under
other costs necessary to ensure the delivery of benefits or Section 418 of the Insurance Code of the Philippines
services to planholders as provided for in the contracts. (Presidential Decree No. 612, as amended) and Section
286 of the National Internal Revenue Code. If the personal
(k) "Pre-need reserve liabilities" refers to the measure of services expense cannot be covered by the retained
the liabilities of the pre-need company for its in - force amount and the Insurance Fund, it shall be appropriated
plans or lapsed plans as of valuation date. in the General Appropriations Fund.
(l) "Liquidity reserve" refers to a portion of the trust fund Section 6. Powers and Functions of the Commission. -
set aside by the trustee to cover benefits due to The Commission shall, at all times, act with transparency
planholders for the ensuing year. and dispatch and shall have, among others, the following
(m) "Fixed value plans" refers to pre-need plans whose powers and functions;
'benefits and costs are fixed and predetermined at the (a) Approve, amend, renew or deny any license,
inception or purchase of the plan. registration or certificate issued under this Code;
(n) "In - force plan" refers to a plan for which the pre-need (b) Fix and assess fees and/or charges as it may find
company has an outstanding obligation for the delivery reasonable in the exercise of regulation;
of benefits or services or payment of termination value.
(c) Regulate, supervise and monitor the operations and
(o) "Lapsed plan" refers to a plan that is delinquent in management of pre-need companies to ensure
payment of installments provided for in the contract, the compliance with the provisions of this Code, existing laws,
delinquency, of which extends beyond the grace period rules and regulations including, but not limited to:
provided for in the plan or contract.
(1) Revoking or nullifying investments made and/or
(p) "Cancelled plan" refers to a plan that can no longer be entered into by a - pre-need company or a trustee which
reinstated by reason of delinquency in the payment of are contrary to existing laws, rules and regulations;
installments for more than two (2) years or a longer
period as provided in the contract, counted from the (2) Demanding for the conversion of the investments
expiry of the grace period provided for in the plan or made by the trustee to cash or other liquid assets to
contract. protect the interest of the planholders; and
(q) "Scheduled benefit plans" refers to plans the date of (3) Regulating, investigating or supervising activities of
availment of the benefits of which is set at the inception pre-need companies, their officers, employees, sales
or purchase of the plan. counselors, consultants or agents;
(r) "Contingent benefit plans" refers to plans the timing of (d) Issue cease and desist orders to prevent fraud and
the provision of the benefits of which is conditional on injury to the investing public;
the occurrence of the contingency. (e) Issue subpoena duces tecum and ad testificandum,
(s) "Risk - based capital" refers to a method to measure order the examination, search and seizure of documents,
the minimum amount of capital that a pre-need papers, files, tax returns, books of accounts and other
company needs to support its overall business operation. records, in whatever form, of any entity or person under
It is used to set capital requirements, considering the size investigation;
and degree of risk taken by the pre-need company. (f) Punish for contempt of the Commission, both direct
(t) "BSP" refers to "Bangko Sentral ng Pllipinas". and indirect, in accordance with the pertinent provisions
of and penalties prescribed by the Rules of Court;
The terms not otherwise defined under this Code shall be
construed in their usual and commonly understood (g) Impose sanctions, institute cases and/or prosecute
trade, business, commercial or investment meaning. offenders for violation of this Code, related laws, rules,
regulations and orders issued pursuant thereto;
CHAPTER II
(h) Suspend or revoke licenses
AUTHORITY OF THE COMMISSION
(i) Enlist the aid and support of and/or deputize any and
Section 5. Supervision. - All pre-need companies, as all enforcement agencies of the government in the
defined under this Act, shall be under the primary and implementation of its powers and in the exercise of its
exclusive supervision and regulation of the Insurance functions under this Code;
Commission. The Commission is hereby authorized to
provide for its reorganization, to streamline its structure (j) Take over pre-need companies which fail to comply
and operations, upgrade its human resource component with this Code, related laws, rules, regulations and orders
to enable it to effectively and efficiently perform its issued pursuant thereto, either through the appointment
functions and exercise its powers under this Code. of a conservator, receiver or liquidator;
All - positions of the - Commission shall be governed by (k) Prepare, approve, amend or repeal rules, regulations
compensation and position classification systems and and orders, and issue opinions and provide guidance on
qualification standards approved by the Commission and supervise compliance with such rules, regulations
based on a comprehensive job analysis and audit of and orders;
actual duties and responsibilities. The compensation plan (l) Formulate policies and recommendations on issues
shall be comparable with the prevailing compensation concerning the pre-need industry, including proposed
plan in the Bangko Sentral ng Pilipinas (BSP) and other legislations;
government financial institutions and shall be subject to (m) Retain and utilize, in addition to its annual budget, an
periodic review by the Commission no more than once amount up to One hundred million pesos (Pl00,



000,000.00) of the fees, charges and other income following persons, and those determined by the
derived from the regulation of the pre-need companies; Commission to be unfit, shall in no case be allowed to
and serve or act in the capacity of an officer, employee,
(n) Exercise such other powers as may be provided by law director, consultant or sales counselor of any pre-need
as well as those which may be implied from, or which are company:
necessary or incidental to carry out the express powers (a) Any person convicted of any crime involving any
granted the Commission to achieve the objectives and pre-need plan, security or financial product;
purposes of the law. (b) Any person convicted of an offense involving moral
turpitude or involving fraud or embezzlement, theft,
estafa or other fraudulent acts or transactions;
CHAPTER III ORGANIZATION, LICENSING AND
(c) Any person who, by reason of any misconduct, is
MANAGEMENT OF PRE-NEED COMPANIES enjoined by order, judgment or decree by any court, quasi
Section 7. Prerequisites to Incorporation. - Except upon - judicial body or administrative agency of competent
favorable recommendation of the Commission, the jurisdiction from acting as a director, officer, employee,
Securities and Exchange Commission (SEC) shall not consultant, agent or occupying any fiduciary position;
accept or approve the articles of incorporation and bylaws (d) Any person found by the Commission to have willfully
of any pre-need company. violated or willfully aided, abetted, counseled,
A foreign corporation may be allowed to engage in a commanded, induced or procured the violation of this
pre-need business in the Philippines: Provided, That it Code, the Insurance Code, the Securities Regulation Code
shall comply with the pertinent laws, rules and or any related laws and any rules or orders thereunder;
regulations. (e) Any person judicially declared to be insolvent or
Section 8. Amendment of the Articles of Incorporation incapacitated to contract; and
and Bylaws. - Amendments to the articles of (f) Any person found guilty by a foreign court, regulatory
incorporation and bylaws of a pre-need company, authority or government agency of the acts or violations
including merger, consolidation and dissolution, shall not similar to any of the acts or misconduct enumerated in
be approved by the SEC without the favorable the foregoing paragraphs: Provided, That conviction in
recommendation from the Commission. the first instance shall be considered as sufficient ground
Section 9. Paid-up Capital. - A pre-need company for disqualification.
incorporated after the effectivity of this Code shall have a Section 12. Independent Directors. – Pre-need companies
minimum paid - up capital of One hundred million pesos shall have at least two (2) independent directors or twenty
(P100, 000,000.00). Existing pre-need companies shall percent (20%) of the members of the board, whichever is
comply with the following minimum unimpaired paid - higher. For this purpose an "independent director" shall
up capital: refer to a person other than an officer, employee or any
(a) One Hundred million pesos (P100, 000,000.00) for person having a fiduciary relation to the pre-need
companies selling at least three(3) types of plan; company, its parent or subsidiaries, or any other
individual having a relationship therewith, which may
(b) Seventy - five million pesos (P75, 000,000.00) for
interfere with the exercise of independent judgment in
companies selling two (2) types of plan; and
carrying out the responsibilities of a director.
(c) Fifty million pesos (P50, 000,000.00) for companies
Section 13. Investment Restrictions of Directors and
selling a single type of plan.
Officers. – No director or officer of any pre-need company
Existing pre-need companies with traditional education shall, after his election or appointment as such, directly or
plans shall have a minimum unimpaired paid-up capital indirectly, for himself or as the representatives or agent of
of One hundred million pesos (P100, 000,000.00) others, have an investment in excess of Five million pesos
The Commission may adopt risk - based principles on (P5, 000,000.00) in any corporation or business
capital adequacy based on internationally accepted undertaking in which the pre-need company’s trust fund
standards. In the exercise of its authority under this has an investment in or has a financial interest with. No
paragraph, the Commission may prescribe a higher relatives of directors or officers of the pre-need company
minimum unimpaired paid - up capital for pre-need within the fourth degree of consanguinity or affinity shall,
companies. directly or indirectly, have an investment of more than
Five million pesos (P5, 000,000.00) in any corporation or
Section 10. Licensing of Pre-need Companies. – No business undertaking in which the pre-need company’s
person shall operate as a pre-need company or engage in trust fund has an investment in or has a financial interest
the business of a pre-need company unless licensed by with during the incumbency or term of the director or
the Commission in accordance with this Code. officer involved.
The license under this section shall expire one (1) year
from the time of the registration. It may be renewed
upon compliance with the prescribed requirements of CHAPTER IV REGISTRATION OF PRE-NEED
the Commission. Such renewal shall be deemed PLANS
approved if not acted upon within thirty (30) days from
the time of filing of the application for renewal. Section 14. Registration of Pre-need Contracts/Plans. –
Within a period of forty - five (45) days after the grant of a
Section 11. Qualification and Disqualification of Directors license to do business as a pre-need company, and for
and Officers. - To maintain the quality of management of every pre-need plan which the pre-need company
pre-need companies and afford better protection to intends to offer for sale to the public, the pre-need
planholders and beneficiaries, the Commission shall company shall file with the Commission a registration
prescribe, pass upon and review the qualifications and statement for the sale of pre-need plans pursuant to this
disqualifications of individuals elected or appointed Code. The Commission shall promulgate rules governing
directors or officers of pre-need companies, including its the registration of pre-need plans and the required
actuaries, and disqualify those found unfit. The documents which include, among others, the viability
Commission may disqualify, suspend or remove any study with certification, under oath, of a pre-need
director or officer who commits or omits an act which brochure, a copy of the pre-need plan, and information
renders him unfit for the position. and documents necessary to ensure the protection of
In determining whether an individual is fit and proper to planholders and the general public. Said rules shall
hold the position of a director or officer of a pre-need further set forth the conditions under which such
company, regard shall be given to his integrity, registration may be denied revoked, suspended or
experience, education, training and competence. The


withdrawn, and the remedies of pre-need companies in a statement that the planholder may avail of a default or
such instances. reinstatement period within which to reinstate his lapsed
Section 15. Registration Requirements. – The plan, and the conditions of the same and the rates of
Commission shall set forth the requirements for return for scheduled benefit plans and illustrative yields
registration of pre-need plans and shall require the for contingent benefit plans; and such other information
following documents, among others; that the Commission shall require by rule.
(a) Duly accomplished Registration Statements;

(b) Board resolution authorizing the registration of CHAPTER V LICENSING OF SALES COUNSELORS
applicant’s pre-need plans; AND GENERAL AGENTS
(c) Opinion of independent counsel on the legality of the Section 20. Licensing of Sales Counselors. - No sales
issue; counselor shall be allowed to solicit, sell or offer to sell
(d) Audited financial statements; pre-need plans under this Code without being licensed as
such by the Commission. No license shall be issued unless
(e) Viability study with certification, under oath, of the following qualifications have been complied with:
pre-need actuary accredited by the Commission;
(a) The applicant must be of good moral character and
(f) Copy of the proposed pre-need plan; and must not have been convicted of any crime involving
(g) Sample of sales materials. moral turpitude;
Such registration statements and sales materials required (b) The applicant has undergone a training program
under this section shall contain the appropriate risk approved by the Commission and such fact has been
factors as may be determined by the Commission. certified under oath by a duly authorized representative
of a pre-need company; and
Section 16. Accreditation of Actuary. - The Commission
shall have the power to set standards for the (c) The applicant has passed a written examination
accreditation of actuaries directly responsible for the administered by the. Commission: Provided, That the
preparation and certification of the viability study of the administration of the examination may be delegated to
pre-need plan submitted by the pre-need company for an independent organization under the supervision of
registration or amendment with the Commission. It shall the Commission.
further have the power to define the obligations and Such license shall automatically expire every thirtieth
liabilities of actuaries accredited by it. No actuary (30th) day of June or such date of every year as may be
engaged by a pre-need company shall at the same time fixed by the Commission and may be accordingly
be a stockholder or serve as a director of the board, chief renewed.
executive officer or chief financial officer of the company
or any such position that the Commission may determine Section 21. Denial, Suspension, Revocation of License. -
to have an inherent conflict of interest to the position of An application for the issuance or renewal of a license to
an actuary. act as sales counselor may be denied, or such license, if
already issued, shall be suspended or revoked based on
Section 17. Approval of Contract Forms. All forms, the following grounds:
including amendments thereto, relating to the pre-need
plans shall be approved by the Commission. No pre-need (a) Materially misrepresented statements in the
contracts or certificates shall be issued or delivered within application requirements;
the Philippines unless in the form previously approved by (b) Obtained or attempted to obtain a license by fraud or
the Commission. misrepresentation;
Section 18. Pre-need Advertising Rules. - Pre-need plans (c) Materially misrepresented the terms and conditions of
shall be advertised and sold in an appropriate non - pre-need plan which he sold or offered to sell;
misleading manner in accordance with the rules to be
prescribed by the Commission. (d) Solicited, sold or attempted to solicit or sell a pre-need
plan by means of false or misleading representation and
It shall be unlawful for any pre-need company to other fraudulent means;
advertise itself or its pre-need plans unless the
Commission has approved such advertising material. The (e) Terminated for cause from another pre-need
Commission shall have a period of ten (10) working days company;
to approve or deny the advertising material and failure to (f) Similar grounds found in Section II of this Code;
act within the said period shall cause the advertising
(g) Willfully allowing the use of one's license by a non -
material to be approved. For purposes hereof, the
licensed or barred individual; and
Commission shall have the power to define the scope of
its advertising rules to appropriately cover advertising or (h) Analogous circumstances.
other communications to the public. Section 22. Licensing of General Agents. - If the issuer
Any person who sells or offers to sell any pre-need plan or should contract the services of a general agent to
contract by any means or instruments of communication undertake the sales of its plans, such general agent shall
in violation of this section shall be liable to the person be required to be licensed as such with the Commission,
purchasing such pre-need contract who may sue to in accordance with the requirements imposed by the
recover the consideration paid for such pre-need contract Commission.
with interest thereon. In addition hereto, the Commission
shall have the power to pursue the erring pre-need
company in an administrative or criminal proceeding. CHAPTER VI DEFAULT AND TERMINATION BY
A fine of One hundred thousand pesos (P100, 000,000.00) PLANHOLDERS
shall be imposed on any pre-need company found to Section 23. Default; Reinstatement Period. - The
have violated this section: Provided, That a second pre-need company must provide in all contracts issued to
violation of this section shall, in addition to the fine planholders a grace period of at least sixty (60) days
imposed, result in the suspension of the license of the within which to pay accrued installments, counted from
pre-need company. the due date of the first unpaid installment. Nonpayment
Section 19. Disclosures to Prospective Planholders. - No of a plan within the grace period shall render the plan a
registered pre-need plan shall be sold to prospective lapsed plan. Any payment by the planholder after the
planholders unless an information brochure, which has grace period shall be reimbursed forthwith, unless the
been filed with the Commission, has been provided to planholder duly reinstates the plan. The planholder shall
the purchaser. The information brochure shall contain an be allowed a period of not less than two (2) years from the
explanation of the principal features of the pre-need plan, lapse of the grace period or a longer period as provided in



the contract within which to reinstate his plan. No Section 27. Recovery of Investment. – The planholder
cancellation of plans shall be made by the issuer during may institute the necessary legal action in court to
such period when reinstatement may be effected. recover his/her investment in the pre-need company
Within thirty (30) days from the expiration of the grace thirty (30) days upon submission of all necessary
period and within thirty (30) days from the expiration of documents.
the reinstatement period, which is two (2) years from the However, in case the insolvency or bankruptcy is a mere
lapse of the grace period, the pre-need company shall cover - up for fraud or illegality, the planholder may
give written notice to the planholder that his plan will be institute the legal action directly against the officers
cancelled if not reinstated within two (2) years. Failure to and/or controlling owners of the said pre-need company.
give either of the required notices shall preclude the Section 28. Consequences of Delay or Default. – In case
pre-need company from treating the plans as cancelled. of any litigation for the enforcement of any pre-need plan,
Section 24. Termination of Pre-need Plans. - A it shall be the duty of the Commission to determine
planholder may terminate his pre-need plan at any time whether the payment of the claim of the planholder has
by giving written notice to the issuer. been unreasonably denied or withheld. If found to have
A pre-need plan shall contain a schedule of termination unreasonably denied or withheld the claim, the pre-need
values to which the planholder is entitled to upon company shall be liable to pay damages, consisting of
termination. Such schedule of termination value shall be actual damages, attorney’s fees and legal interest, to be
required for all in - force pre-need plans and shall be fair, computed from the date the claim is made until it is fully
equitable and in compliance with the Commission satisfied: Provided, That the failure to pay any such claim
issuances. The termination value of the pre-need plan within the time prescribed in Section 26 hereof shall be
shall be predetermined by the actuary of the pre-need considered prima facie evidence of unreasonable delay in
company upon application for registration of the payment.
pre-need plans with the Commission and shall be Section 29. Distribution of Profits. – A pre-need company
disclosed in the contract. may declare divided: Provided, That the following shall
remain unimpaired, as certified under oath by the
president and the treasurer with respect to items (a) and
CHAPTER VII CLAIMS SETTLEMENT (b); and in the case of item (c), by the trust officer:
Section 25. Unfair Claims Settlement Practices. - (a) No (a) One hundred percent (100%) of the capital stock;
pre-need company shall refuse, without just cause, to pay (b) An amount sufficient to pay all net losses reported, or
or settle claims arising under coverages provided by its in the course of settlement, and all liabilities for expenses
plans nor shall any such company engage in unfair claim and taxes; and
settlement practices. Any of the following acts by a
pre-need company, if committed without just cause, shall (c) Trust fund.
constitute unfair claims settlement practices: Any dividend declared under the preceding paragraph
(1) Knowingly misrepresenting to claimants pertinent shall be reported to the Commission within thirty (30)
facts or plan provisions relating to coverages at issue; days after such declaration.
(2) Failing to acknowledge with reasonable promptness
pertinent communications with respect to claims arising CHAPTER VIII TRUST FUND
under its plan;
Section 30. Trust Fund. - To ensure the delivery of the
(3) Failing to adopt and implement reasonable standards guaranteed benefits and services provided under a
for the prompt investigation of claims arising under its pre-need plan contract, a trust fund per pre-need plan
plan; category shall be established. A portion of the installment
(4) Failing to provide prompt, fair and equitable payment collected shall be deposited by the pre-need
settlement of claims submitted in which liability has company in the trust fund, the amount of which will be as
become reasonably clear; or determined by the actuary based on the viability study of
(5) Compelling planholders to institute suits or recover the pre-need plan approved by the Commission. Assets in
amounts due under its plan by offering, without the trust fund shall at all times remain for the sole benefit
justifiable reason, substantially less than the amounts of the planholders. At no time shall any part of the trust
ultimately recovered in suits brought by them. fund be used for or diverted to any purpose other than for
the exclusive benefit of the planholders. In no case shall
(b) Evidence as to the number and types of valid and the trust fund assets be used to satisfy claims of other
justifiable complaints to the Commission against a creditors of the pre-need company. The provision of any
pre-need company shall be deemed admissible in an law to the contrary notwithstanding, in case of insolvency
administrative or judicial proceeding brought under this of the pre-need company, the general creditors shall not
section. be entitled to the trust fund.
(c) Any violation of this section shall be considered Except for the payment of the cost of benefits or services,
sufficient cause for the suspension or revocation of the the termination values payable to the planholders, the
company's certificate of authority. insurance premium payments for insurance - funded
Section 26. Payment of Plan Proceeds. - In the case of benefits of memorial life plans and other costs necessary
scheduled benefit plans, the proceeds of the plan shall be to ensure the delivery of benefits or services to
paid immediately upon maturity of the contract, unless planholders, no withdrawal shall be made from the trust
such proceeds are made payable in installments or as an fund unless approved by the Commission. The benefits
annuity, in which case the installments or annuities shall received by the planholders shall be exempt from all
be paid as they become due. Refusal or failure to pay the taxes and the trust fund shall not be held liable for
claim within fifteen (15) days from maturity or due date attachment, garnishment, levy or seizure by or under any
will entitle the beneficiary to collect interest on the legal or equitable processes except to pay for the debt of
proceeds of the plan for the duration of the delay at the the planholder to the benefit plan or that arising from
rate twice the legal interest unless such failure or refusal criminal liability imposed in a criminal action.
to pay is based on the ground that the claim is The trust fund shall at all times be sufficient to cover the
fraudulent: Provided, That the planholder has duly required pre-need reserve.
complied with the documentary requirements of the
pre-need company. Section 31. Deposits to the Trust Fund. (a) The pre-need
company shall make monthly deposits to the trust fund
In the case of contingent benefit plans, the benefits shall in an amount determined by the accredited actuary,
be paid by the pre-need company thirty (30) days upon sufficient to pay the benefits promised under the
submission of all necessary documents. contract. For plans paid for in full, the pre-need company



shall deposit into the trust fund at least forty - five (c) Not use the trust fund to invest in or extend any loan
percent (45%) for life plans and fifty - one percent (51%) for or credit accommodation to the pre-need company, its
education and pension plans of said full payment or such directors, officers, stockholders, and related interests as
higher amount as determine by the actuary. well as to persons or enterprises controlling, owned or
In case of installment payments, the minimum limits of controlled by, or under common control with said
the deposit contributions to the trust fund, unless the company, its directors, officers, stockholders and related
viability study done by the actuary requires otherwise, interests except for entities which are direct providers of
shall be in accordance with the following schedule: pre-need companies.
Contributions to the trust fund shall not form part of the Section 34. Investment of the Trust Fund. - To ensure the
income or gross receipts of the pre-need company and, liquidity of the trust fund to guarantee the delivery of the
therefore, shall not be available for dividend declaration benefits provided for under the plan contract and
or payment to creditors. likewise obtain sufficient capital growth to meet the
growing actuarial reserve liabilities, all investments of the
trust fund/s of a pre-need company shall be limited to the
(b) The deposits to the trust fund shall be made within following and subject to limitations, to wit:
twenty (20) days from the end of each reference month
(a) Fixed income instruments. - These may be classified
for payments received from plans whether paid for in full
into short - term and long - term instruments. The
or in installments. Failure to make the trust fund deposit
instrument is short - term if the maturity period is three
shall subject the pre-need company to administrative
hundred sixty - five (365) days or less. This category
liability as provided for under this Code.
includes:
(c) Should the Commission discover a deficiency in the
(1) Government securities which shall not be less than ten
trust fund, it shall give notice of the same to the pre-need
percent (10%) of the trust fund amount;
company and require the said company to make
additional deposits. The pre-need company shall have (2) Savings/time deposits and unit investment trust funds
thirty (30) days from receipt of notice to make the said maintained with and managed by a duly authorized bank
deposits and correct the deficiency. Failure to pay the with satisfactory examination rating as of the last
deficiency inspite of notice by the Commission shall examination by the BSP;
subject the pre-need company to the payment of a (3) Commercial papers duly registered with the SEC with
penalty, in addition to other sanctions imposable under a credit rating of "1" for short - term and "A.AA" for long -
this Code. term based on the rating scale of an accredited
(d) For plans sold prior to the effectivity of this law, the Philippine Rating Agency or its equivalent at the time of
minimum contributions to the trust fund shall be investment.
governed by rules and regulations in force at the time of The maximum exposure to long - term commercial
sale. papers shall not exceed fifteen percent (15%) of the total
Section 32. Terms and Conditions of a Trust Fund. - A trust fund amount while the exposure to each
trust fund must be established separately for each type of commercial paper issuer shall not exceed ten percent
pre-need plan with the trust department of a trust (10%) of the allocated amount; and
company, bank or investment house doing business in (4) Direct loans to corporations which are financially
the Philippines. No trust fund shall be established by a stable, profitable for the last three (3) years and have a
pre-need company with an affiliate trust entity subject to good track record of paying their previous loans.
Section 38 hereof.
These loans shall be fully secured by a real estate
The trust agreement shall be submitted to the mortgage up to the extent of sixty percent (60%) of the
Commission for approval before execution and shall zonal valuation of the property at the time the loan was
contain the following salient provisions, among others: granted.
(a) The manner in which the trust fund is to be operated; The property shall be covered by a transfer certificate of
(b) Investment powers of the trustee with respect to trust title registered in the name of the mortgagor and free
deposits, including the character and kind of investment; from liens and encumbrances.
(c) Auditing and settlement of accounts of the trustee The maximum amount to be allocated for direct loans
with respect to the trust fund; shall not exceed five percent (5%) of the total trust fund
amount while the amount to be granted to each
(d) Basis upon which the trust fund may be terminated;
corporate borrower shall not exceed ten percent (10%) of
(e) Provisions for withdrawals from the trust fund; the amount allocated.
(f) That the trustee shall submit to the power of the The maximum term of the loan should be no longer than
Commission to examine and verify the trust fund; four (4) years.
(g) An undertaking by the trustee that it shall abide by Direct loans to planholders are exempt from the
the rules and regulations of the Commission with respect limitations set forth under this section: Provided, That
to the trust fund; and such loans to planholders shall not exceed ten percent
(h) An undertaking by the trustee that it shall submit (10%) of the total trust fund amount.
such other data or information as may be prescribed by (b) Equities. - Investments in equities shall be limited to
the Commission. stocks listed on the main board of a local stock exchange.
Section 33. Responsibilities of the Trustee. - The trustee Investments in duly registered collective investment
shall: instruments such as mutual funds are allowed hereunder:
(a) Administer and manage the trust fund with utmost Provided, That such funds are invested only in fixed
good faith, care and prudence required by a fiduciary income instruments and blue chips securities, subject to
relationship; the limitations prescribed by laws, rules and regulations.
(b) The trustee shall have the exclusive management and These investments shall include stocks issued by
control over the funds and the right at any time to sell, companies that are financially stable, actively traded,
convert, invest, change, transfer or otherwise change or possess good track record of growth and have declared
dispose of the assets comprising the funds within the dividends for the past three (3) years. Notwithstanding
parameters prescribed, by the pre-need company and the prohibition against transactions with directors,
provided these parameters are compliant with the officers, stockholders and related interests, the trustee
Commission's regulations; and may invest in equities of companies related to the trustee
provided these companies comply with the foregoing
criteria provided in this paragraph for equity investments.


The amount to be allocated for this purpose shall not appropriate manner within the time required shall
exceed thirty percent (30%) of the total trust fund while subject the pre-need company to the payment of a
the investment in any particular issue shall not exceed penalty, in addition to other remedies exercisable by the
ten percent (10%) of the allocated amount. The Commission, as provided for in this Code. Any excess of
investment shall be recorded at the aggregate of the the trust fund over the actuarial reserve liabilities may be
lower of cost or market. credited to future deposit requirements.
Existing investments which are not in accordance Section 37. Liquidity Reserve. - The trustee shall at all
herewith shall be disposed of within three (3) years from times maintain a liquidity reserve which shall be
the effectivity of this Act. sufficient to cover at least fifteen percent (15%) of the
(c) Real Estate. - These shall include real estate properties trust fund but in no case less than one hundred twenty -
located in strategic areas of cities and first class five percent (125%) of the amount of the availing plans for
municipalities. The transfer certificate of title (TCT) shall the succeeding year. For this purpose, the pre-need
be in the name of the seller, free from liens and company shall timely submit to the trustee a summary of
encumbrances and shall be transferred in the name of benefits payable for the succeeding year.
the trustee in trust for the planholders unless the The following shall qualify as investments for the liquidity
seller/transferor is the pre-need company wherein an reserve:
annotation to the TCT relative to the sale/transfer may be (a) Loans secured by a hold - out on assignment or
allowed. It shall be recorded at acquisition cost. pledge deposits maintained either with the trustee or
However, the real estate shall be appraised every three (3) other banks, or of deposit substitute of the trustee itself or
years by a licensed real estate appraiser, accredited by the mortgage and chattel mortgage bonds issued by the
Philippine Association of Real Estate Appraisers, to reflect trustee;
the increase or decrease in the value of the property. In (b) Treasury notes or bills, other government securities or
case the appraisal would result in an increase in the value, bonds, and such other evidences or indebtedness or
only sixty percent (60%) of the appraisal increase is obligations the servicing and repayment of which are
allowed to be recorded in the books of the trust fund but fully guaranteed by the Republic of the Philippines;
in case of decline in value, the entire decline shall be
recorded. Appraisal increment should not be used to (c) Repurchase agreements with any of those mentioned
cover up the required monthly contribution to the trust in Item "b" above, as underlying instruments thereof; and
fund. (d) Savings or time deposits with government - owned
The total recorded value of the real estate investment banks or commercial banks.
shall not exceed ten percent (10%) of the total trust fund Section 38. Trustees. - Upon approval of the Commission
amount of the pre-need company. In the event that the or when the Commission requires for the protection of
existing real estate investment exceeds the aforesaid planholders, the pre-need company shall entrust the
limit, the same shall be leveled off to the prescribed limit management and administration of the trust fund to any
within three (3) years from the effectivity of this Code. I reputable bank's trust department, trust company or any
Investment of the trust fund, which is not in accordance entity - authorized to perform trust functions in the
with the preceding paragraphs, shall not be allowed Philippines: Provided, That no director and/or officer of
unless the prior written approval of the Commission had the affiliate or related trust entity: Provided, further, That
been secured: Provided, further, That no deposit or no trust fund shall be established by a pre-need company
investment in any single entity shall exceed fifteen with a subsidiary, affiliate or related trust entity. However,
percent (15%) of the total value of the trust fund: such may be allowed: Provided, That the following
Provided,finally, That the Commission is authorized to conditions are complied with:
adjust the percentage allocation per category set forth (a) A written approval of the Commission has been
herein not in excess of two percentage (2%) points previously obtained; and
upward or downward and no oftener than once every five
(5) years. The first adjustment hereunder may be made (b) Public disclosure of the affiliation with the trust entity
no earlier than five (5) years from the effectivity of this be included in all materials in whatever form.
Act. The pre-need company shall not use the trust fund to The Commission shall have the authority to prescribe
extend any loan to or to invest in its directors, appropriate rules that shall ensure that the yield of the
stockholders, officers or its affiliates. trust fund is maximized, consistent with the
Section 35. Valuation of Reserve Liabilities of the requirements of safety and liquidity.
Pre-need Company. - To determine the sufficiency and
adequacy of the fund, an annual pre-need reserve
valuation report establishing the reserve requirement CHAPTER IX ACTUARIES FOR PRE-NEED
and contractual liabilities of the pre-need company shall COMPANIES
be made and submitted to the Commission, within one
hundred twenty (120) days from end of the calendar year. Section 39. Required Actuarial Reports. - The following
The valuation report shall contain the assumptions, documents which are from time to time submitted to the
methodology, formulas used, a summary of the pre-need Commission by a pre-need company shall be duly
plans that were subject of valuation and the results of certified by an Insurance Commission accredited actuary:
such valuation. (a) Actuarial valuation of all Iiabilities pertaining to
The report shall be duly certified to by a professional as pre-need contracts;
may be determined by the Commission. Upon approval (b) Asset share studies when applying for approval of new
by the Commission of the reserve computation, any products or enhancement or repricing of existing
deficiency in the fund shall be covered by the pre-need products;
company, in the manner as may be prescribed by the
(c) Accounts in the financial statement of the pre-need
Commission. In case of an excess of the fund over the
company pertaining to actuarial reserve liabilities and
reserve liability, the excess shall be credited for future
other actuarial reserve items;
deposit requirements.
(d) Financial projections showing the probable income
Section 36. Trust Fund Deficiencies. - Upon approval by
and reserve requirements, enumerating the actuarial
the Commission of the pre-need reserve computation
assumptions and bases of projections; and
submitted in the preceding section, any deficiency in the
trust fund, when compared to the reserve liabilities as (e) Such other reports as may be required by the
reported in the pre-need reserve valuation report, shall be Commission.
funded by the pre-need company within sixty (60) days It shall be the duty of an actuary to immediately report to
from such approval. Failure to cover the deficiency in an the Commission any matter contained in arising out of or



in relation to the above reports requiring intervention of management with an appropriate consideration to
the Commission to protect the interests of planholders: materiality."
Provided, That the actuary shall not be liable to the "In this regard, management maintains a system of
pre-need company for any acts done under this accounting and reporting which provides for the
paragraph, unless there is a clear showing of bad faith, necessary internal controls to ensure that transactions are
malice or gross negligence. properly authorized and recorded, assets are safeguarded
Section 40. Disaccreditation of an Actuary. - An actuary against unauthorized use or disposition and liabilities are
shall be disaccredited by the Commission on the recognized. The management likewise discloses to the
following grounds: company's audit committee and to its external auditor: (i)
(a) Failure to adequately perform his required functions all significant deficiencies in the design or operation of
and duties under this Code; internal controls that could adversely affect its ability to
record, process, and report financial data; (ii) material
(b) Failure to meet the requirements of Section 11 of this weaknesses in the internal controls; and (iii) any fraud
Code; that involves management or other employees who
(c) Failure to disclose conflict of interest; exercise significant roles in internal controls."
(d) Failure to comply with the Code of Conduct of the "The board of directors reviews the financial statements
Actuarial Society of the Philippines; or before such statements are approved and submitted to
the stockholders of the company.
(e) Such other grounds that may be determined by the
Commission. "The (name of the auditing firm), the independent
auditors appointed by the stockholders, has examined
the financial statements of the company in accordance
CHAPTER X REPORTS AND EXAMINATION with generally accepted auditing standards in the
Philippines and has expressed its opinion on the fairness
Section 41. Annual Pre-need Reserve Valuation Report. of the presentation upon completion of such
Every pre-need company shall annually determine its examination, in its report to the board of directors and
reserve requirement and contractual liabilities, and stockholders."
submit to the Commission an annual pre-need reserve
valuation report within one hundred twenty (120) days Any material omission of disclosures, misstatement or
from the end of the fiscal year of the pre-need company. misleading information found in the financial statements,
The valuation report shall contain the assumptions, whether interim or annual, shall constitute a violation of
methodology, formulas used, a summary of the pre-need this Code and the officer signing such statement shall be
plans that were the subject of the valuation and the subject to the penalty provided for under this Code and
results of such valuation. The report should be duly such other sanctions as may be imposed by the
certified by an actuary accredited by the Commission in Commission.
the case of contingent plans such as memorial/life plans Section 43. Annual Statement of Trust Fund. - Every
and by the pre-need company's external auditors or by a pre-need company shall file with the Commission an
qualified actuary in the case of scheduled - benefit plans annual statement of its trust fund for each type of plan.
such as pre-need pension and education plans, the Such statement shall be in a form prescribed by .the
liabilities of which are not actuarial in nature. The Commission and shall include details as to all of the
reserving formula, bases and limits of the assumptions to income, disbursements, assets and liability items of and
be used in the valuation of reserves shall be prescribed by associated with the said trust fund accounts. Said
the Commission. statement shall be made under oath by two (2) officers of
The Commission may require any pre-need company to the company and shall be filed simultaneously with the
submit an interim pre-need reserve valuation report if annual statement required by the preceding section.
any of the following events occurred: Where the trust fund is managed and administered by a
(a) When there is sufficient evidence that a subsequent trustee as provided under Section 80 - of this Code, an
event or transaction occurred after the end of the fiscal annual statement of trust fund for each type of plan shall
year and such event would materially affect the instead be filed with the Commission. It shall include
computation of the pre-need reserve valuation report details such as the income, disbursements, assets and
submitted; and liability items, and shall be certified under oath by at least
two (2) of the highest ranking officers of the trustee.
(b) When the company ceased operation six (6) months
after the end of the fiscal year. Section 44. Publication of Annual Statement. - Within
thirty (30) days after receipt of the annual statement
Section 42. Annual Audited Financial Statements. - Every approved by the Commission, every pre-need company
pre-need company shall terminate its fiscal period on the shall publish in two (2) newspapers of general circulation
thirty - first (31") day of December every year. Within one a full synopsis of its annual financial statements,
hundred twenty (120) days after the calendar or fiscal including the trust fund annual statement showing fully
year, the pre-need company shall render to the the conditions of its business, and setting forth its
Commission annual financial statements signed and resources and liabilities in a standardized format to be
sworn to by its chief executive officer, chief finance officer designed by the Commission.
and external auditors in accordance with a uniform
accounting system that shall be prescribed by the The Commission may require pre-need companies to
Commission, showing in such form and details the exact create and maintain a website wherein its planholders
condition of its affairs. may readily access updated information pertaining to the
status of financial condition and results of information of
The audited financial statements should be accompanied the company. The sufficiency and truthfulness of the
by the Statement of Management's Responsibility signed contents of such website shall be the responsibility of the
under oath by the company’s chairman of the board, company.
chief executive officer and chief financial officer,
containing the following declaration: Section 45. Keeping of Records. - The Commission shall
require every pre-need company to keep its books,
"The management of (name of the pre-need company) is records, accounts and vouchers in such manner that the
responsible for all information and representations Commission's authorized representatives may readily
contained in the financial statements for the year(s) verify the company's annual statements and ascertain
ended (date). The financial statements have been whether the company is solvent and has complied with
prepared in conformity with rules and regulations of the the provisions of this Code or the circulars, instructions,
Commission on accounting and reflect amounts that are rulings or decisions of the Commission.
based on the best estimates and informed judgment of


Section 46. Examination. The Commission shall, at least not be subject to any action, claim or demand by, or
once a year and whenever it considers that the public liability to, any person in respect of anything done or
interest so demands, cause an examination to be made omitted to be done in good faith in the exercise, or in
into the affairs, financial condition and method of connection with the exercise, of the powers conferred on
business of every pre-need company, and of any other the conservator.
person, firm or corporation managing the fund or affairs The conservator appointed shall report and be
and/or property of such pre-need company. Such responsible to the Commission until such time as the
examination shall be carried in a manner prescribed by Commission is satisfied that the pre-need company can
the Commission by rule. continue to operate .on its own and the conservatorship
shall likewise be terminated should the Commission, on
the basis of the report of the conservator or of his own
CHAPTER XI FINANCIAL ACCOUNTING findings, determine that the continuance in business of
STANDARDS the pre-need company would be hazardous to
planholders and creditors, in which case the provisions of
Section 47. Accounting Rules and Regulations for
Chapter XVI shall apply.
Pre-need Plans. - The Commission shall have the
authority to make, amend and rescind such accounting Section 50. Proceedings upon Insolvency. - Whenever,
rules and regulations applicable for pre-need companies. upon examination or other evidence, it shall be disclosed
The Commission may prescribe, among other things, the that the condition of any pre-need company is one of
form or forms in which required information shall be set insolvency, or that its continuance in business would be
forth, the items or details to be shown in the components hazardous to its planholders and creditors, the
of the financial statements, and the recognition and Commission shall forthwith order the company to cease
measurement basis to be adopted for each account, after and desist from transacting business and shall designate
considering the nature of the operation of the pre-need a receiver to immediately take charge of its trust fund,
industry. Pre-need companies shall strictly comply with assets and liabilities, as expeditiously as possible collect
such accounting rules and regulations as prescribed by and gather all the assets and administer the same for the
the Commission. benefit of its planholders and creditors, and exercise all
the powers necessary for these purposes including, but
not limited to, bringing suits and foreclosing mortgages
CHAPTER XII SUSPENSION OR REVOCATION OF in the name of the pre-need company.
AUTHORITY The Commission shall thereupon determine within thirty
(30) days whether the pre-need company may be
Section 48. Suspension; Grounds. - If the Commission is reorganized or otherwise placed in such condition so that
of the opinion, upon examination or other evidence, that it may be permitted to resume business with safety to its
any pre-need company is in an unsound condition, or planholders and creditors and shall prescribe the
that it has failed to comply with the provisions of law or conditions under which such resumption of business
regulations, or that its condition or method of business is shall take place as well as the time for fulfillment of such
such as to render its proceedings hazardous to the public conditions. In such case, the expenses and fees in the
or to its planholders, or that its paid - up capital stock is collection and administration of the pre-need company
impaired or deficient, the Commission is authorized to shall be determined by the Commission and shall be paid
suspend or revoke all certificates of authority granted to out of the assets of such company. If the Commission
such pre-need company, its officers and agents, after due shall determine and confirm within the said period that
notice or hearing. No new business shall thereafter be the pre-need company is insolvent, as defined hereunder,
done by such company or for such company by its agent it shall, if the public interest so requires, order its
in the Philippines. liquidation, indicate the manner of its liquidation and
The Commission may not lift the order of suspension or approve a liquidation plan and implement it immediately.
revocation of the said authority until the concerned The Commission shall designate a competent and
pre-need company shall have submitted a viable business qualified person as liquidator who shall take over the
plan showing the company’s estimated receipts and functions of the receiver previously designated and, with
disbursements, as well as the basis therefor for the next all convenient speed, distribute the trust fund exclusively
succeeding three (3) years. to the planholders in proportion to termination values of
their respective pre-need plans, convert the assets of the
pre-need company to cash, or sell, assign or otherwise
CHAPTER XIII CONSERVATORSHIP AND dispose of the same to the planholders, creditors and
PROCEEDINGS UPON INSOLVENCY other parties for the purpose of settling the liabilities or
paying the debts of such company and he may, in the
Section 49. Appointment of Conservator. – If at any time name of the company. institute such actions as may be
before or after the suspension or revocation of the license necessary in the appropriate court to collect and recover
of a pre-need company as provided in Section 27 hereof, accounts and assets of the pre-need company, and to do
the Commission finds that such company is in a state of such other acts as may be necessary to complete the
continuing inability or unwillingness to comply with the liquidation as ordered by the Commission.
requirements of the Code and/or orders of the
The provisions of any law to the contrary notwithstanding
Commission, a conservator may be appointed to take
the actions of the Commission under this section shall be
charge of the assets, liabilities, and the management of
final and executory, and can be set aside by the court
such company, collect all moneys and debts due the
upon petition by the company and only if there is
company and exercise all powers necessary to preserve
convincing proof that the action is plainly arbitrary and
the assets of the company, reorganize its management,
made in bad faith. The Commission shall then file the
and restore its viability. The conservator shall have the
corresponding answer reciting the proceeding taken and
power to overrule or revoke the actions of the previous
praying for the assistance of the court in the liquidation of
management and board of directors of the said company,
the company. No restraining order or injunction shall be
any provision of law, or of the articles of incorporation or
issued by the court enjoining the Commission from
bylaws of the company, to the contrary notwithstanding,
implementing his actions under this section, unless there
and such other powers as the Commission shall deem
is convincing proof that the action of the Commission is
necessary. The conservator may be another pre-need
plainly arbitrary and made in bad faith and the petitioner
company, by officer or officers of such company, or any
files a bond in favor of the Commission with the court in
other competent and qualified person, firm or
an amount fixed by it. The restraining order or injunction
corporation. The remuneration of the conservator and
shall be refused or, if granted, shall be dissolved upon
other expenses attendant to the conservation shall be
filing by the Commission, if he so desires, of a bond in an
borne by the pre-need company. The conservator shall
amount twice the amount of the bond of the petitioner



conditioned that it will pay the damages which the affairs; and (4) any violation of this Code or its
petition may suffer by the refusal or the dissolution of the implementing rules and regulations.
injunction. (b) The imposition of the foregoing administrative
The court shall give preference to all proceedings under sanctions shall be without prejudice to the filing of
this chapter. The Commission shall not be required to pay criminal charges against the individual responsible for
any fee to any public officer for filing, recording or in any the violation:
manner authenticating any paper or instrument relating (1) Cease and Desist Order. - The Commission may, motu
to the proceedings. proprio or upon verified complaint by any party, issue a
As used in this title, the term "insolvency" shall refer to the cease and desist order (CDO) against any pre-need
financial condition of a pre-need company that is company upon proof, after due notice and hearing, of
generally unable to pay its liabilities as they fall due in the violation of any provision of this Code: Provided, That such
ordinary course of business or that has liabilities that are CDO may be issued ex parte if the violation is clearly
greater than its assets. apparent, injurious to a number of planholders and
In case of liquidation of a pre-need company, after requires immediate intervention by the Commission. The
payment of the cost of the proceedings, including CDO shall specifically enjoin the pre-need company from
reasonable expenses and fees incurred in the liquidation performing certain activities and shall impose fines and
to be allowed by the court, the Commission shall pay all state the required remedial actions. All proceedings
allowed claims against such company, under order of the before the issuance of the CDO shall be confidential;
court, in accordance with their legal priority. (2) Suspension of License. - The Commission shall issue a
The receiver or the liquidator, as the case may be, suspension order against the pre-need company if it fails
designated under the provisions of this title shall not be to comply with the CDO within thirty (30) days from
subject to any action, claim or demand by, or liability to, issuance thereof;
any person in respect of anything done or omitted to be (3) Revocation of License. - The Commission may issue a
done in good faith in the exercise, or in connection with revocation order of the license of the pre-need company
the exercise, of the powers conferred on such receiver or under suspension for a period of ninety (90) days;
liquidator. (4) A fine of not less than Ten thousand pesos (P10,
Section 51. Commission's Power to Assume Trustee 000.00) nor more than One million pesos (P1, 000,000.00)
Functions. - In cases where the Commission has ordered plus not more than Two thousand pesos (P2, 000.00) for
the liquidation of the pre-need company, the each day of continuing violation;
Commission may immediately take custody of the trust (5) Disqualification from being an officer, a member of
fund established by the pre-need company, and the the board of directors or principal stockholders of a
pre-need company shall forthwith deliver custody and an pre-need company; or
accounting of the same. Henceforth, the Commission
shall have the full power and control over the fund to (6) Other penalties within the power of the Commission
satisfy the pre-need company's obligations to under existing laws.
planholders. (c) The unauthorized sale of pre-need plans shall subject
Section 52. Liquidation. - (a) In cases where the the issuer to a fine as follows:
Commission determines that the pre-need company (1) First violation - thirty percent (30%) of the aggregate
shall be liquidated, it shall have the power to commence gross pre-need price of the plans sold;
insolvency proceedings in the appropriate court which
shall have jurisdiction over the assets of the pre-need (2) Second violation - forty percent (40%) of the aggregate
company, excluding trust fund assets that have been gross pre-need price of the plans sold; and
established exclusively for the benefit of planholders. (3) Third violation - suspension or revocation of license.
(b) Proceedings in court shall proceed independently of Failure to pay fines within three (3) months from receipt
proceedings in the Commission for the liquidation of of notice to pay will cause the Commission to issue a
claims, and creditors of the pre-need company shall have suspension order.
no personality whatsoever in the Commission
proceedings to litigate their claims against the trust Section 54. Criminal Penalties. - The following acts are
funds. criminal in nature:
(c) In liquidating claims of planholders, the Commission (a) Selling or offering to sell a pre-need plan by
shall ensure that all planholders receive an equitable unregistered persons shall be penalized by imprisonment
distribution of their claims, considering the amounts each of one (1) year and a fine equivalent to triple the contract
has paid into their plans, the termination values due each price;
planholder, the present value of their claims and other (b) Selling or offering to sell an unregistered pre-need
equitable considerations. The only other claims which plan or any product that has pre-need plan features shall
may be satisfied by the Commission out of the trust be penalized by imprisonment of one (1) year and a fine
funds are the claims for trustees’ fees which are equivalent to triple the indicated price;
reasonable and can be shown to have been incurred in (c) Soliciting, selling or offering to sell a pre-need plan by
the administration of the trust fund, and taxes incurred means of false or misleading representation and other
under trust. fraudulent means shall be penalized by imprisonment of
six (6) years and one (1) day to twelve (12) years and a fine
in the amount of Fifty thousand pesos (P50,000.00) to
CHAPTER XIV ADMINISTRATIVE SANCTIONS Five hundred thousand pesos (P500, 000.00);
AND CRIMINAL PENALTIES (d) Any negligent act or omission that is prejudicial or
Section 53. Administrative Sanctions. (a) The injurious to the planholder shall be penalized by
Commission, after proper notice and hearing, may imprisonment of one (1) year and one (1) day to six (6)
impose any or all of the sanctions provided in years and a fine in the amount of Fifty thousand pesos
subparagraph (b) of this section for the following (P50, 000.00) to Five hundred thousand pesos
offenses: (1) the making of any untrue statement of a (P500,000.00);
material fact in a registration statement, information (e) Any fraudulent act or omission that is prejudicial or
brochure and its supporting papers and other reports injurious to the planholder shall be penalized by
required to be filed with the Commission; (2) the failure to imprisonment of six (6) years and one (1) day to twelve (12)
disclose any material fact required to be stated therein; (3) years and a fine in the amount of One hundred thousand
the refusal to permit any lawful examination into its pesos (P100, 000.00) to One million pesos (P1,
000,000.00); and



(f) Willful violation of the provisions of this Code or orders under the provisions of this Code. Such person or plan
of the Commission: Provided, That repeated violations shall, unless otherwise herein provided, be given a period
shall constitute prima facie evidence against the offender of one (1) year from the effectivity of this Code within
and shall be penalized by imprisonment of six (6) years which to comply with the same. The rights and remedies
and one (1) day to twelve (12) years and a fine in the provided by this Code shall be in addition to any and all
amount of One hundred thousand pesos (P100, 000.00) other rights and remedies that exist under existing laws.
to One million pesos (P1, 000,000.00). Section 60. Separability Clause. - Should any provision of
Any person who violates any other provisions of this Code this Act or the application thereof to any person or
or rules and regulations promulgated by the Commission circumstance be held invalid, the other provisions or
under authority thereof shall, upon conviction, be sections of this Act shall not be affected thereby.
punished by a fine of not less than Fifty thousand pesos Section 61. Repealing Clause. - All acts, laws, executive
(P50, 000.00) nor more than Five million pesos orders and/or rules and regulations or any part thereof
(P5,000,000.00) or imprisonment of not less than one (1) that are inconsistent with the provisions of this Code are
year nor more than fourteen (14) years, or both, at the hereby repealed or modified accordingly.
discretion of the court. Should the offense be committed
by a juridical person, the penalty may, in the discretion .of Section 62. Effectivity. - This Act shall take effect upon its
the court, be imposed on such juridical entity and upon approval.
the officer or officers of the juridical entity responsible for
the violation. If such officer is an alien, he shall, in addition
to the penalties prescribed, be deported without further
proceedings after service of sentence.
CHAPTER XV MISCELLANEOUS PROVISIONS

Section 55. Claims. - The Commission shall have the
primary and exclusive power to adjudicate any and all
claims involving pre-need plans. If the amount of benefits
does not exceed One hundred thousand pesos (P100,
000.00), the decision of the Commission shall be final and
executory.
Section 56. Review of Commission Orders or Decisions. -
Any person aggrieved by an order or decision of the
Commission, whether in relation to its settlement of a
claim of a planholder or in the exercise of its regulatory
authority, may appeal the order or decision to the Court
of Appeals by petition for review in accordance with the
pertinent provisions of the Rules of Court.
Section 57. Transitory Provisions. - Any pre-need
company who, at the time of the effectivity of this Code
has been registered and licensed to sell pre-need plans
and similar contracts, shall be considered registered and
licensed under the provision of this Code and its
implementing rules and regulations and shall be subject
to and governed by the provisions hereof: Provided,
however, That compliance for all sections with the
exception of Section 21, may be deferred for such
reasonable time as the Commission may determine but
not to exceed one (1) year unless otherwise specifically
provided in this Code. With respect to Chapter IV,
compliance will cover all new plans sold one hundred
twenty (120) days after the effectivity of this law. Violations
committed prior to the effectivity of this Code shall be
punished in accordance with the provisions of the laws
then in force.
The Commission shall constitute forthwith a special team
of experts to handle all matters related to the pre-need
industry and shall secure and transfer all the files and
records of the SEC to the Insurance Commission within
ninety (90) days after the effectivity of this Code.
Notwithstanding any provision to the contrary, all
pending claims, complaints and cases filed with the SEC
shall be continued in its full and final conclusion. It shall
also assist the Department of Justice in criminal cases
involving matters related to the pre-need industry.
Section 58. Implementing Rules and Regulations. - The
Commission shall adopt such rules and regulations for
the proper and effective implementation of this Code
within sixty (60) days from approval hereof. The
Commission shall publish once a week for two (2)
consecutive weeks in two (2) newspapers of general
circulation the, rules and regulations promulgated
pursuant to the preceding section.
Section 59. Effect on Existing Law. Any person, natural or
juridical, or pre-need plan, authorized, licensed or
registered by the SEC under the Securities Regulation
Code shall be deemed to have been licensed or registered

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